In high school, Logan Allec was a typical college-age student. He had his classes, played sports, and hung out with friends. However, working for his dad’s law firm on the side taught him all about how real estate investing works when he would observe how the properties were financed and so forth. This helped to give him an edge in finding good deals in multifamily properties that really paid off for him years later!
He became a licensed real estate agent at 22 and opened up his own brokerage company with just six employees. By 2010, he was the largest residential broker in Utah. In his early twenties, Allec had also started a real estate investment group and was one of the first investors in The District Real Estate Group, which is where his firm is now.
In the course of this article, Allec will share how he had an amazing experience with a company called New Century Financial Corporation (they went defunct later on) which helped him find some great deals that would change his life forever! New Century Financial Corporation: What was their mission?
We didn’t actually know what it was going to be doing. It just sort of popped up in Salt Lake City all of the sudden. I don’t know if anyone else knows the story, but this company came out with this deal called New Century. It wasn’t anything that we had seen before and I think it was probably a little bit more of an exit strategy for the Great Salt Lake Development Corp. Rather than try to build buildings and sell them for a profit, they wanted to do lease-purchase so you get a fee upfront from the buyer when they buy your building. You sell them a long-term lease, and then you get a fee every month plus the interest from your investors from the sale of the property. They’re able to say that they’re providing a service. In reality, they’re just financing this whole thing so it really is an interesting way to bring together land and buildings.
It was kind of complicated stuff but basically, they would go out and sell these deals to people by telling them that they could get into real estate investing in a year or two years instead of having to wait twenty years until they paid off their loan. These people would buy these buildings, and then after a certain period of time, they were going to be able to turn it into an investment property. They would have a team of experts that would make sure they did everything correctly so they could make a profit on it. It was pretty cool stuff!
At the time we went out and found this company, we were enjoying creating our real estate group from scratch, still in our early twenties. We had no idea what we were doing but we just went out and started advertising this program and having people buy-in. They’re not even necessarily good deals at that point! Some of them I pulled out because I didn’t think they were good deals. We were doing it for the sake of helping other people and to get them into real estate. It was a great deal for people that were just starting out who did not know anything about real estate, especially if they were $10,000 or $20,000 down or had no money at all. They could get in without having to come up with any money out of pocket.
After the program started to take off, I decided to go out and invest in them myself. I bought two deals from these guys that New Century Financial Corporation was selling. That’s how we got into it! We really liked the concept because we could help educate some people as well as still make some money on our side as well.
So we got involved with New Century Financial Corporation ourselves. We were doing it on our own and wanted to stay under the radar in a way. They would advertise that we were a real estate investment company, but people would look at our license and see that we were just an insurance company. We did not want them to know that we were actually investing in these properties. We were actually buying other companies and going in and doing a buyout. It wasn’t a bad thing, but it would have been even better if no one knew we were actually investing in these deals.
How did you decide on the properties you were going to invest in?
First of all, I didn’t even know what the properties were; I just knew that they had good deals. They would find them on Craigslist and maybe send us a couple of these right off the bat. We used to do that ourselves because we wanted to stay under the radar, which is why we didn’t want our names on them. The first deal that we went in on was in Sandy. We found one and we put $100,000 down on it. We were working with the largest account that we had then.
It ended up not working out quite like that, but it was still a good deal at the time for us. For some of the deals that we found, we would have to find a way to find financing. We would just go over and say, “Hey, I think this property is going to do well and it’s going to pay for itself.” We would see if they had an investor group in there already or if they were open to us possibly investing.
In Utah, the only way you can get into property is through a lease-purchase program. You cannot buy a property with your own money in Utah unless you are actually investing with someone else who has already done it as well. All the real estate agents in Utah have to be partnering up with investors who have already gone over and done it themselves. Basically, you cannot become a real estate agent in Utah unless you are investing in real estate. But, at the time, there weren’t that many opportunities out there. The only thing you had was this program that New Century Financial Corporation was promoting.
We got lucky I guess because New Century Financial Corporation was actually promoting the opportunity to become a landlord or invest in a property from other investors. We saw this as an opportunity to get out of this whole insurance company business and really start to buy properties and make money on our own instead of just paying our employees moving expenses or whatever else they need to do. We decided to look into that and started getting involved with some other real estate groups. We didn’t have a clue about what we were doing, but we knew it was the right time to make a switch.
Things started to fall apart when the economy went south and they didn’t make it as easy for us to get into these deals as they had originally said they would. The deal that I had put my money in, New Century Financial Corporation gave me an option period of five years and then evicted me out of there at the end of five years because of what was going on with the economy. The property went from being worth $100,000 down to about $40,000 in less than a year. We lost most of the money out of that.
We did not have any control over it but we felt like they could have given us an option period to take our money out of there at the beginning. Instead, by the time we realized that this was happening and we’re trying to get our money out, they had already evicted us. The owner wanted to keep it for himself. It ended up costing us a bunch of money and New Century Financial Corporation really dropped the ball on that one. We got involved with other deals after that and then called it quits on them because they were messing up on these deals as well.
After that one, we just decided to start investing our own money into these deals on the side. We were doing it on our own and then just started taking them over when they got bigger and knew more about the numbers. We did that for a year or two, not knowing what we were doing at all. In the end, looking back at it, it was actually pretty successful for us because we learned so much with each deal. Once we got comfortable with it, we started taking bigger bites out of them and making more money on our side instead of just helping people network into real estate or whatever else they were trying to do.
For more information, you can visit Real Estate Calculators.
