Leveraged Residual Income with Chris Guercio

On today’s episode of the FortuneBuilders Real Estate Investing Show, Jeff brings on Chris Guercio from eXp Realty to discuss a different form of passive income, known as leveraged residual income. Find out what Chris believes are the advantages of getting a real estate license, as well as the strategies he uses to build the brokerage team at eXp.

Listen to the Podcast Here:

Leveraged Residual Income with Chris Guercio

All right. Welcome, everyone to this week’s episode of the FortuneBuilders Real Estate Investing show. I’m excited about today’s episode. We have my man Chris Garcia in the booth. I’ll give him a formal introduction here in a moment. But we are going to get into a kind of interesting topic today. We have talked a lot about on this show around passive income. What we’re going to talk about today, we could put into that category. So I know you guys love passive income. We’ve talked about it in the context of rental properties, and commercial buildings, but I’m gonna hold that as a little secret right now. But you’ll learn during the show another way of generating passive income.

Word of the Week

Our Word of the Week this week is “leveraged residual income”, a fancy little phrase there. Like I said it’s a different form of passive income. It’s really when you have opportunities to build a team in different ways, shapes, or forms. Based on the efforts of those teams, you are making residual income off of their efforts. If you are a sales manager, for instance, and you’re managing a team of salespeople, and you have 10 salespeople that work for your report to you, they’re going out, they make sales, and you get a small percentage of that. We actually have a guest here today that does that in relation to real estate. We’re gonna get into that opportunity. So let’s get after it.

Advantage of Getting a Real Estate License

So from your perspective, what is the advantage to get getting licensed as an investor?

That’s actually what caused me to get my license in the first place. Number one, you’d like to be able to do your own research. You always hear people say “Trust”, but verify trust. When you’re able to have your own MLS access and you can actually run comps, you learn how to do that. That’s invaluable as people are bringing you potential deals to be able to help you with the evaluation process to determine whether or not it’s actually a deal.

Number one, that’s super critical. The other side of that is whether or not you’re looking to actually represent other clients. There are so many opportunities that get left on the table if you’re not licensed when you’re an investor. For example, in terms of if there’s a property that’s listed on the MLS, you can represent yourself as the agent as the investor. It gives you, a lot of flexibility in terms of waiving part of the commission that you’re due to end up lowering the price acquisition. Representing yourself on the back end of your property so that you can save money on commissions there as well.

Obviously, in doing that, you’re going to have a lot of other opportunities that get generated in terms of buyers coming to your rehab that they may not get or want that place. Now they’re looking for something else. You can pick up other clients there. One of the things that we see happen all the time (which we used to do quite a bit with CT Homes) was when they would show up at a seller appointment, especially in this crazy market now that houses are skyrocketing in value.

Ultimately, the numbers a lot of times don’t pencil out. You have your mail, and you say, “I don’t want to go above this and make an offer on this place”. But the seller says, “Well, I want this for my house”. Numbers don’t work for a flip. However, on the open market these days, who the heck knows. Houses out here, I’ve seen houses go for a million dollars over the asking price.

When you’re licensed, rather than just walking away empty-handed and saying, “Man, this is a flip that the numbers don’t work for me”, you walk away and now you can say, “Well, let me list the property for you on the open market and try and get you that price” if you’re not looking to actually be a listing agent I referred over to find out exactly.

“There are so many opportunities that come up just from having your license”

Leveraged Residual Income

I agree. I think that the first point you made was so key is just when we’re out there as investors. We see a listing coming up, call the listing agent directly, right? We could go make an offer on the property, we could collect a commission, or just say, “Hey, I’m licensed, but I’m not looking to get commission on this one”, giving us a better chance of getting that property under contract, and then and then the referral. That’s how I use it.

I’m not interested in listing properties, but typically, what’s the average 25% or 30% for most markets across the country for a referral fee? What Chris is saying is as investors, we invest in our marketing. Say you spending 1000 bucks a month or 100 bucks a month, it doesn’t matter. You’re investing money in your marketing. You’re generating leads. Some of those you’re going to buy as an investor. Many of them are going to be “no”s.

If those are the only two options, you’re only going to make money when you do a deal as an investor. Having your license gives three and four: list it yourself, or refer it. You guys are actually partnered with FortuneBuilders now. Yeah. So I know Randy Zim NACA, he’s, he’s been on the show before, but just, give us an overview of what your relationship is like with this company. Sure.

One of the biggest advantages of eXp is because it’s a cloud-based brokerage, they cut out all of the unnecessary overhead associated with running a brokerage, which typically gobbles up all the profitability. You’ll hear all the time, people say the operative word in brokerage typically is broke because they just don’t make a lot of money as a business entity.

What our founder did was come up with the idea to make it cloud-based. Get rid of the brick and mortar, get rid of all the mid-level management, supplies, and all the things that completely erode the profitability. What that enabled them to do then was now that they’re significantly more profitable. They want to share that wealth with the agents for helping the company grow. We have what they call a revenue share program.

When you end up bringing an agent into the company, rather than all of the money just going to corporate and the guys at the top getting rich, they share that wealth with us because we’re part of the reason why they’re making that money in the first place because you brought that agent in there. Not only can you share in the revenues from the agents, you directly bring in the agents and the agents bring in all the way up to seven levels removed from you.

So what I did was when we joined exp, JD was literally my first phone call and said to him, “Let’s go to lunch”. I sat him down and said, “Look, this is a way where you guys can eliminate a lot of the overhead associated with Realty National, essentially the back-office operations of a huge company behind you. Leverage all of their resources and training and staff and everything else that they have, and you’re able to expand into any state or country where exp is operating”.

Whereas Realty national used to be about 50 agents here and between San Diego and Orange County. I sponsored JD into eXp, he then in turn sponsored Randy Zimnoch and we’re constantly reaching out to members of the mastery community who are either already licensed, in the process of it, or just thinking about getting their licenses and bringing them into eXp as well.

Summary

There it is. Well, thank you everyone for tuning in. Looking forward to the next week actually, JD is going to be bringing Mr. Dan Wright and actually doing a case study of a recent deal that we just did here in San Diego and it’s a crazy one. You’re gonna love it: a great deal and great profit. I look forward to seeing you next week on the FortuneBuilders Real Estate Investing show. Take care.