From BRRRR to Metal Boxes — How Scott Meyers went from King of Making Mistakes to King of Self-Storage

April 25, 2022

Episode 85: From BRRRR to Metal Boxes — How Scott Meyers went from King of Making Mistakes to King of Self-Storage

THE PROFIT FIRST PODCAST

April 25, 2022

David Richter

Summary:

The self-storage King is on the show today!

Scott Meyers, also known as the nation’s leading expert in the self-storage business, is here to bring value and share his side of the story. He’s been the architect of several extremely successful real estate transactions. He is always ready to teach others about the business and help them correct their mistakes to achieve a higher level of success. In this episode, he’ll uncover the mystery behind that. Let’s find out how Scott implemented a process plan that made him run his business and leverage his way to the top!

Key Takeaways::

[1:32] When did he first implement Profit First, and how was that journey?

[2:52] People who are passionate about their businesses have to reinvest

[5:02] Having a process and plan in place allows for making better decisions

[6:12] What are some of the benefits of implementing this system?

[10:39] How many storage units do he have, and how long has he been doing storage units?

[13:00] The hardest lesson that he’s learned in real estate?

[16:22] If you haven’t been on a personal journey of self-awareness, you don’t understand what it’s like to know your unique ability

[17:34] Talk to people about investing in self-storage

[19:44] Keep your ear to the ground and your eyes wide open

Quotes:

[3:10] “I am passionate about my business because I know that the leverage that it provides allows us to do more mission work and impact people’s lives.”

[8:50] “It’s also freeing from just a personal standpoint to have that cushion and everything in place, so we can have the mindset to serve.”

[15:36] “Getting an education, surrounding yourself with the right people allows you to move forward.”

Links:

The Self Storage Podcast- https://open.spotify.com/show/6l3jf0p0WT9jdEYZ90Q9kZ?si=71HgWYlaR2yj3nHXUg-tHA

Self Storage Investing Website: https://selfstorageinvesting.com/

Tired of living deal to deal?

If you are a real estate investor or business owner who is tired of living deal to deal, and want to double your profits, head over here to book your no-obligation discovery call with me. Either myself or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David

Transcript:

Scott Meyers:

Getting education, surrounding yourself with the right people, whether that’s partners in education, mentors, whatever that looks like, to allow you to move forward instead of letting fear, paranoia, or what other people say or think about you keep you from starting to begin this.

Speaker 2:

Welcome to Profit First REI Podcast where real estate investors master financial management, eradicate entrepreneurial poverty, and learn to be profitable from day one. Now for your host, David Richter.

David Richter:

Hey everyone, welcome back to the Profit First REI Podcast. I’m your host David Richter with another special guest Scott Meyers. You may have heard of him. He is the sales storage investing king. He has a lot of units out there. He teaches a lot of people, has helped a lot of people. He has the Self Storage Investing Podcast. He’s a big giver as well, too. I had the pleasure of being on his podcast and just talking about where he is and what he’s done and mission trips he’s taken. He’s implemented Profit First, so he’s a big Profit First believer, too. So, I wanted to have Scott on here. I know you’re going to learn a lot from him today. So Scott, thanks for being on the podcast today.

Scott Meyers:

David, good to be back together again and share some more time. How are you today?

David Richter:

Yeah, doing wonderful. Thanks for asking. Very excited to have you hear. I really enjoyed the last time we were together.

Scott Meyers:

I did as well. I did as well. Likewise.

David Richter:

Awesome. Let’s dive right into it, the jugular right away. When did you first implement Profit First and how was that journey of implementing Profit First inside your businesses?

Scott Meyers:

Yeah, it was first quarter of last year, first quarter of 2021, so big fan of Michael and the Pumpkin Plan is how I was introduced to him. Then it was really by a series of events that happened concurrently, I mean like one right after another. I heard him, Michael, on a podcast. I can’t remember whose it was and then shortly after that he came and spoke at one of the Masterminds that you and I are involved in. We had the opportunity, the pleasure, of being able to, at least I did. You had already known Michael and to be able to meet him and be able to learn from him in person. At that point it was just like, “All right, I recognize the signs when God tells me there’s an area of my business I need to focus on. There was never a better time.”

And so, bought his book, starting following the plan. I was extremely excited to share this, not only with my wife who’s our controller, but then also with our CPA and our bookkeeper. Once we began to put it in place, I can’t say it was tough and it was also at a time where my controller, who I just mentioned is my wife, also had to state it … We as entrepreneurs, and I hope it’s not just me, it’s other folks out there, but those of us that are passionate about our businesses, we just want to reinvest. Many times that is to our detriment. That’s what happens to many of us. We don’t spend lavishly. We just don’t. We have, as a matter of fact, a responsibility. We’re a socially responsible company that focuses on missions, so we don’t have fancy cars. We don’t have a big house, but I’m passionate about my business because I know that the leverage that that provides, which allows us to do more mission work and to impact more people’s lives.

We invest in self storage and teach people how to do it. I was just plowing everything back into the business. Then, if you do that too long, if there aren’t enough cash reserves or to cover either expenses or to pay yourself, or even to grow if there’s an opportunity that comes up and you don’t have the availability to perhaps dip into that fund just a little bit to pay it back. If there’s a way to be able to do that, the vehicle and a time horizon, then your dead in the water on all those fronts. It’s the same as if you weren’t doing well in your business.

Having that discipline being put in place, I was excited about it until we began to implement. Then when the clamps were put on me as the owner of the business, it was difficult. I’ll be honest with you, completely necessary, the tough love that was required of my staff and those in my inner circle and at the executive level to put the clamps on me. It’s been key. It was much needed and now we are at the place, I am one of the examples that Michael uses where I don’t see it and I don’t know. It’s probably best because at times when I want to do something, or if we need to do something, I don’t even ask anymore because I already know what the answer is and we’ve already committed to that. I’ve been given my marching orders and my parameters, and so it has now become easier because I’m basically ignorant of what the money is and where it goes.

For me, maybe not for everybody, that’s been best. I have to ask for permission. I literally say, “Here’s an expense. Here’s an opportunity, whatever that looks like, do we have the ability to do this?” I basically plead my case, build the business plan for this expenditure that I want to do, and having that process and the plan in place has allowed us to make a better decision and to keep me from just going off and doing things, which was part of the issue where the problems that we had in the past.

So operating from this standpoint right now, it’s kind of freeing to be honest with you, David, if that makes any sense.

David Richter:

Yeah, and that makes a whole of sense, especially for me. I understand that because we’re working with lots of investors, which made me even think while you were saying that, you were like, “I hope I’m not in the same boat. I hope I’m not the only one out here.” It’s like, “Yeah, a lot of people were in that situation.” Just had a call today literally with an investor not paying himself consistently, feeling in the rat race, just spinning his wheels. I think a lot of us get there if we don’t put these in place.

Like you said, it was difficult. It was a new discipline and new habit to instill. At the beginning it feels not freeing, but now I love what you said, now you feel free. Now you’ve got the money. You’ve got to spend to give to do the thing that you love to do. I think it’s on the other side. I love hearing people’s stories.

What’s one of the things through this system that you’ve been able to do or to go on, and I know you go on mission trips and whatnot. What are some the benefits that you’ve reaped from implementing this system?

Scott Meyers:

That was one of the pieces that was a constant. It always has been a constant. When we made this commitment to our mission work it was to take 10% of our profits, so a little different. On the personal level, a tide is 10% off the top. We give that back to God by way of our church before we pay ourselves. That one is easy to do as well.

With the business, if you pay 10% off the top, there’s businesses out there that don’t have that much margin. They would go out of business. On the corporate side, on a quarterly basis we take 10% of our profits. We look at the net, net, net and then take 10% of that and funnel it over into National Christian Foundation. That is our giving arm. Then when we have enough money, or when we have. Depending on how well we have done that quarter, will dictate. We do two mission trips per year. We do house builds. That will determine how many houses we build, essentially. And so, God has blessed that and the more disciplined we get in that area the more houses we’ve been able to build. It started out, we were doing one a year and then we were doing two trips, one a year, and now we’re doing two trips, building three houses each time. So we’re doing six houses a year, roughly five to six.

How that effected? It’s kind of hard to measure to be honest with you, David, but I think the more that you get disciplined, and this is really kind of coming from a spiritual level as well. I think the more that you get disciplined and understand the numbers in your own business, I think the more your business will be blessed. If you’re giving and you have an open hand in your business, I haven’t known of any entrepreneur who has an open hand in their business that allows money to flow through it for the greater good of humanity in the world, that they haven’t prospered as a result of putting something like that in place and in process.

For us, it’s having that freedom, and even before, just knowing that even though there’s 10% net, net profit is setting aside for the mission work, we still didn’t have the Profit First piece in place. We didn’t have 100% confidence and the comfort level that, “Okay, we’re going to build three houses this quarter, but if we haven’t done a good enough job preparing for next quarter or the forecast saying next quarter, we may have funneled some money onto the mission field that we should have kept for our business itself.” That has never happened. Fortunately, that has never happened. There’s been months and quarters that were tight, but now there’s just completely no worry about that.

The minute that we head down the jet bridge to Mexico with our group, there’s absolutely no concern about anything in the business right now. If anything happens in five days while I’m gone, somebody can write a check or they’ll wait until I can come back and we just go and we’re able to be able to do that. It is also freeing from just a personal standpoint to have that cushion and everything in place so that we can go serve and really be in the mindset to be able to serve as well.

David Richter:

That’s awesome I love what you said there right at the very end. The mindset to go and serve, too. It’s one thing if you can scrape the money together to go on a missions trip and then you’re all worried about the stuff that’s happening back where you’ve come from. It’s like that’s where you can’t be fully present with why you even went to a place like that. That’s a great point, too, that not giving yourself that mindset and that freedom and that space to be able to really relish in whatever you’re doing, if it’s a missions trip or if you take that money, like your an entrepreneur, and you go out and do a vacation with your family. You want to be present with them. It’s like that freeing mindset.

Scott Meyers:

Yeah, and if I could just expand on that for a second, that is the leverage point in our business, is that we take 20 to 25 people per house on these trips and we pay for it. We open them up to the mission feel and the mission experience. Like your kids, you can take them to Disney World, but if your the parent that’s sitting on the park bench not riding the rides because you’re still doing emails and taking care of fires in your business, your kids see that.

The folks that we take on these mission trips, if they see that I’m not present or I’m handling fires or whatever, there’s just like, “At what expense is he doing this? Is his heart really in this?” It equally is important. Just want to make that point.

David Richter:

Oh, that is so good. It really is good. There’s a big lesson there for everyone because it’s not even on a trip. What about in your business? What if you’re worried about those fires all the time and can’t work on the higher level of your business? Just going to get stuck in that rat race and that’s what I love. I think the theme of this one, the freedom, that mind freedom, that financial freedom. That’s really that frame of mind space for what you can do. That’s incredible.

Why don’t you tell the listeners, too, just going away for profit just a little bit, but how many storage units do you have and how long have you been doing storage units?

Scott Meyers:

Yeah, we started in real estate business in ’93 and bought a bunch of single family rental house following the Carlton Sheets method, for those that are familiar with him. Buying and rehabbing and refinancing and then renting them. So, the BRRR Method before it was called the BRRR Method. We had about 75 houses and then didn’t have the cash flow and the freedom we wanted or expected, and so we got into apartments hoping to get that economy to scale and really be the springboard to having us achieve our goals of having financial freedom and time freedom to do what we wanted. For us all it did was just kind of compound the problems.

Even if we had management companies in place, there’s just a lot to manage when you have people living in rental spaces and carpeted drywall and heating and air and all that versus self storage, which is a metal box on a concrete slab with nobody living in it. Literally 90% of all our stress and the things that we did on a regular basis and the babysitting, and the issues were just gone. We eliminated the hassles of tenants and toilets and trash and all the employees that were involved in that.

Along about 2005, we sold all our houses and apartments and got into self storage acquiring facilities and then we got into developing from the ground up and then conversions. Taking industrial buildings and all types of grocery stores, old grocery stores and big boxes, and converting it into self storage. As we grew our education business and platform, the more opportunities came and landed on our plate. I speak for the trade shows and I write articles for Forbes Magazine and the trade show associations. They bring a lot of opportunities our way.

So really, in the past four or five years our business has really exploded on that end. By way of mainly development, but also acquisitions and joint ventures, we’re up to now two point five million square feet of storage nationwide. We’re in about 15 states and I think we’ve surpassed, I’m not exactly sure, but I think we’ve surpassed 15,000 doors nationwide as well, and do a lot of that through syndication in our fund in which we raise on private equity from the folks that we’ve met along the way as well.

David Richter:

Okay. That’s incredible, because I want to make sure people knew where you’re coming from and that you are definitely the self storage king here and have a lot of square feet and do a lot of great stuff. Now that they kind of have that background, what would you say is the hardest lesson you’ve learned in real estate up to this point with all your experience and the different types that you’ve done in the past?

Scott Meyers:

Yeah well, I appreciate you recognizing me as the nation’s expert or the king of self storage, but what I’m the king at is making mistakes in relationship along the way. I’d say the king of learning from them. There’s been a lot of lessons learned along the way. Hard lessons are I think, early on, doing it too much and not paying somebody 10 to 15 bucks an hour to do some of the rehabs and some of the work that we had done. Too many people are stuck feeling like they can’t and they have to do all the work themselves. While you’re doing, somebody else is eating your lunch because they found the deals because they were doing marketing and the things they should have been doing. That was lesson number one.

Second was over leveraging. Even though our portfolio was at, maybe, 75% LTB, I think in this game whether the economic cycles from a recession to an inflationary period and everything in between, I think you really need to keep an eye on setting those budgets in place, Profit First being one of them. Obviously at the core, but also just managing that debt level and that debt ratio. That is what caught people off guard, is we lived through the last recession.

Third lesson is partnering. I know you asked for one, but early on I had … doing well on my own and just loved doing things on my own. That’s just my nature, kind of the way I grew up, but then I got into a partnership and it didn’t go so well. It was one of my first and so I just swore off partners and then many years later meeting other folks that were doing successful partnerships by way of syndication and joint ventures and just bringing people in and having solid set of legal documents, operating agreements, that lined out the roles and responsibilities of the partners and what they did. If anybody stepped out of line or out of their lane, it was okay for the other partners to say, “Hey, get back in your lane and here’s your roles and responsibilities. Here’s mine. Let’s keep on going down the path.” I probably could have grown a little bit larger and sooner, and be better suited to bring in people to fill in my many blind spots had I just been open to partners along the way and not just let this one bad experience taint that.

I think those are the areas primarily, and maybe even going back to the very beginning. We teach and we train a lot of people that have come to our self storage academies and our organization. I think fear stops more would-be successful entrepreneurs and investors than all factors combined. So, before people get out of the gate, they’re unsure of themselves because they don’t know what they don’t know or they’ve got a circle of folks that really don’t want them to succeed because it makes them feel worse about themselves.

And so, I think getting education, surrounding yourself with the right people, whether that’s partners and education, mentors, whatever that looks like, to allow you to move forward instead of letting fear, paranoia, or what other people say or think about you keep you from starting to begin with. There’s at least four. I guess I’ll stop there, David.

David Richter:

No, those are great. That’s incredible. Lots of great lessons there. Lots of things that the listeners can take away from. You’ve grown a good size team. You have a lot of units. You’ve got a lot of experience in this area. What would you say right now in your business is the highest and best use of your time, that you get the highest return from personally?

Scott Meyers:

I think that is kind of the question within itself, within the question, David. That is if you haven’t been, and I’m speaking to everyone out there, if you haven’t been on a personal journey of self awareness, to really understand what that looks like to know what is your unique ability, then it starts there. Many, many years ago I went through Dan Sullivan’s program Strategic Coach and just read his book on unique ability and finding out what that is. Everybody knows what it is. It’s what fires you up. What do you like best about your business in the business that you’re doing? If you can figure out a way to make 80% of your time in your business doing that then most likely you’re going to succeed, and then finding the people around you to delegate the rest, the things that you’re not good at, the things that you’ve just been putting off doing or the things that you just don’t know how to do that you can hire somebody to do better than you.

It’s really finding that sweet spot and it’s roughly an 80/20 ratio of if you know what your unique ability is to be able to grow and drive your business, then finding a way to create an organizational structure that allows you to do that 80% of the time, knowing that 20% of the time is the stuff that you just aren’t good at and you have to do and you have to have meetings, and you have to train your people to do those types of things. That’s just inevitable. I think it’s that.

For me, that is, believe it or not, just talking to people investing in self storage, whether it be students, but mostly in our syndications are passive investors, the folks, the individuals, the funds, the hedge funds, other folks that have significant amounts of capital to tell our story and share what we’re doing. They catch the excitement and why we’re so passionate about self storage. If you can get passionate about metal boxes on concrete slabs, but passionate about the industry and the business model and why it works so well, and why we’re the team to work with because we’ve been at it for awhile and our success and the team that we’ve built, and just being able to share that. I think that’s my unique ability. That’s our superpower in the business, so if I could do that all day long I’d never get tired of it. That is just my sweet spot and where I’d like to spend all my time.

David Richter:

Awesome. I love that, just going into you have to have kind of a personal self discovery there. You might like real estate investing, but what’s your super power in the business and what do you like to do? That was really good.

Then, just a few, couple last questions here. What last parting advice would you give to a real estate investors listening to this podcast and any other advice that you want to leave them here?

Scott Meyers:

Yeah. Well, go back and listen to this again, everything that I just mentioned. We’ve been at this awhile. We’ve been at this since ’93 heading into the third recession. I think if you stick to those basics that I give you, that’s one of them.

But as we head into this next economic cycle, there’s a lot of people that have had a lot of success and there’s a whole lot of folks that are proportion to have a lot of success. You see them everyone on TikTok, on Facebook, and everywhere else. Many of these successful folks, and they’re also the gurus, the educators if you will, that have had the wind in their sale of economy like we’ve never seen before and exiting properties and projects at record profits. We’re going to head into a recession. We’re heading into an inflationary period this year. Feds already stated three rate increases. We’ll see a slow down. We’ll see some evaluations in real estate go down and the market’s going to change and shift.

If you’ve got your head in the sand or you feel that you’re better than everybody else and you’re going to whether this better than anybody else, the tide goes up and down and all ships go up and down with it. Keep your ear to the ground. Keep your eyes open. Watch what the economists are saying. Look at the news. Look at all the data and the stats on what’s going on and the particular asset class in real estate that you are involved in and what your business model is and talk to those other folks that are doing the same business model, especially those that have been through at least the last recession, if not two others. Then ask them what they’re doing. Follow them. Reverse engineer what they’re doing. Look at what they’re doing. Talk to them. Ask what they’re doing if you have access to them and do likewise. You’re not immune to the economic cycles because it effects real estate no matter how good you are and no matter how good you think you are and the successes you’ve had in the past several years.

Again, and a little bit of self awareness, you need to be aware of how much of that was attributable to your own personal and best business practices versus an economy that’s done very well. Then prepare accordingly. Have cash. Don’t get over leveraged because through all this, for us personally, we’re selling a lot of facilities off at the top of the market right now. We’re heading into this year that is going to produce a downturn. There’s going to be people that are going to have to get out of their facilities because they can’t refinance at the new rates and the new evaluations and this environment. We want to have the cash and the lender relationships available to buy those properties when other folks are exiting and they can’t make a profit. We want to be that solution and this is going to be the biggest land grab probably in our career in terms of sheer numbers of units and projects this year and next and in this down cycle, is going to be the retirement maker for our organization and those that come along with us.

How’s that? So, I think it’s just being hyper aware of what’s going on around you is the best advice that I can have right now.

David Richter:

Awesome. I love that. That’s incredible. You’ve shared a ton of great things. You gave us four lessons. You gave us what Profit First has done for you. You just gave us that great advice there and a lot around the freedom and the mindset. Now, how can the listeners give back to you? How can they give you some value back? Because there’s been a ton of value here. I know you have selfstorageinvesting.com. You’ve got the courses that you teach and you’re helping people get out of their rat race. So, how can people connect with you?

Scott Meyers:

Yeah, selfstorageinvesting.com is for all things self storage for those that are interested in the business both actively. If you want to learn about the business and how to invest on your own as well as passively through our syndications, that is the place to go do it. As far as giving back to me, we’re in that legacy building phase right now where we just love to see people go out there and implement our best business practices. We share our best business practices and then they go out and implement that and put it in their own, that’s fantastic. Then you layer on top of that, Profit First. Just as educators, the educators and us, when we see people take that information and go out and do that, that’s why we continue to do what we do. Our business is our mission field.

On a larger scale David, how could people give back to me? No matter what you’re doing out there … We’re in a different time right now, and not to get all woo woo and fluffy and foofy, but we all need to get back to a place where we’re just respecting each other. There is in business, and at a personal level, and just to me, personally, just kind of shocking the place that we’ve come as a society and how in business, in real estate, that we just don’t give people their due, their time, the attention and operate from a manner of integrity and also just openness and helping each other out. So, getting back to the place where everybody’s helping out, creating win win situations in business, and just taking time to look at the people around you. We haven’t done that in the past couple of years and there’s just been too much of an excuse not to.

I would like to see, and into the way that we have been treating each other over the past couple of years in light of the pandemic and the lockdown and everybody behind masks, that we just get to a place where we need to stop being negative and stop throwing bombs out on social media and hiding behind a screen in doing so and get back to the place where we’re going to make an intentional effort to get back to loving our brothers and sisters and treating everybody in the way that they deserve to be treated, period.

David Richter:

Preach and stay there for awhile. That was good stuff. I wish, yeah … Could go on and on about that all day. That was really, really good. You can connect with Scott at selfstorageinvesting.com for all his stuff, and then please go out there, just be nice to someone. Don’t throw your issues out on Facebook or whatnot. Go out there and see how you can help someone. That’s how Scott has gotten to where he is. He’s helped a ton of people with their storage, with getting their storage set up like in different areas. So, lots of good stuff here. Thank you so much for being on today, Scott. It was an honor to have you.

Scott Meyers:

Oh, my pleasure David. Always a pleasure and looking forward to seeing you again soon.

David Richter:

Thank you so much for listening to today’s show. If you found this episode valuable could you do me a quick favor? Can you give us an honest rating within iTunes? And be honest. You could say whether you liked it or not, and obviously with iTunes, the more reviews and ratings we have, the better it is for other people that are searching for Profit First in the podcasts. We’d love to be ranked on there and that’s thanks to your help. We would really appreciate that if you would like to go give us a rating.

Also, if you’re looking to connect with us further, I would highly recommend checking out our Facebook group, Profit First for Real Estate Investors, and that’s literally what it’s called. You can type Profit First for Real Estate Investors and you’ll be able to find our Facebook group right there. So, come join active real estate investors who are supporting each other and growing their businesses and profits together. That’s what that group is all about. The link should be in the description below.

And if you’re interested in working with us and implementing Profit First in your real estate business, we offer coaching and guidance. If you want to work with someone who’s actually Profit First certified and who works right now currently with real estate businesses. You can actually go start your application process by going to simplecfo.wpengine.com/apply or just go right to simplecfo.wpengine.com and there’s an apply button right on there if you want to actually start your Profit First journey with someone who can actually walk you through those step by step and help you know and grow your cashflow.

Thanks again for joining us for another episode on the Profit First REI Podcast. See you next episode.

If you Want HELP
implementing Profit First...

Our team of experts would love to help you

make and keep more money in your business!

Click below to book a
no-obligation discovery call:

Title: “Profit First Strategies with Jay Conner: The Power of Private Money”

Episode: 242

There are 15 reasons to love about borrowing private money over traditional money. One of them is making your own rules for your private money.

In this episode of Profit First for REI podcast, Jay Conner, a nationally renowned real estate investor and the king of private money. He talks about how private money works.

Jay helps you get your money from private lenders and will share with you the mindset that will get you money in the door without you ever having to worry about it.

Listen and enjoy the show!

Key Takeaways:

[01:01] Introducing Jay Conner

[05:00] Introduction to private money

[08:30] The Great News Phone Call

[11:23] Why don’t you use your own money?

[13:18] Maintaining relationships with private lenders

[15:40] Private money vs traditional money

[22:05] Things that make them want to recommend you

[25:18] Advice for real estate investors

[29:01] Connect with Jay Conner

Quotes:

[07:34] “If you are talking about private money and raising private money with an individual and you got a deal for them to fund, you already sounded desperate.”

[12:07] “If you want to scale your business, private money is the way to go.”

[16:05] “In this world of private money, we make the rules. We set the interest rate, we sent the length and all of that.”

Connect with Jay:

Website: https://www.jayconner.com/book-details/

Tired of living deal to deal?

If you are a real estate investor or business owner who is tired of living deal to deal and want to double your profits, head over here to book your no-obligation discovery call with me. Either myself or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David

Transcript:

Speaker 1 (00:00):

I got 15 reasons I love private money over traditional money. I won’t share all 15, but the biggest one is it puts you in the driver’s seat. The traditional way to borrow money is you go to the bank and get on your hands and knees and you’re begging and chasing. Well, they are making the rules right? Like the lender is making the rules. But in this world of private money, we make the rules, we set the interest rate, we set the length of the note and all that.

Speaker 2 (00:34):

If you’re a real estate investor who’s sick and tired of living deal to deal, then welcome home. Hear from everyday real estate investors just like you, and discover how they’ve completely transformed their business by taking a profit First approach. This is the profit first for REI podcast, where we believe revenue is vanity. Profit is sanity. It’s time to start making profit a habit in your business. So here’s your host, David Richter.

Speaker 3 (01:01):

We have Jay Connor back on the podcast. I love Jay Connor. He helps you get your money, the money from private lenders and that whole framework and process, but he does it from a passion and a place of heart. And servant Teachership. I feel like he goes out there and is a servant teacher of how private money works. Listen to this episode. He gives the magic question he tells about desperation and private lending, and I thought his perspective was so good, and then ultimately the mindset that will get you money in the door without you ever having to worry about it. So listen to this episode. Can’t wait for you to get value from it. Thank you for being a listener of the Profit First. RII podcast. Have a great episode. Hey, here’s the profit first RI podcast. Really excited to have Jay Connor back because he’s the came of private money. And this is where I love to go into this topic because I don’t care what kind of business you’re in, you probably need help with this, but especially if you’re in the real estate world, this comes up all the time at every event I’m at with every conversation I have. So we’re having the cane here talk about private money today. So Jay, thanks for being on the show.

Speaker 1 (02:07):

Hey David, thank you so much for having me come on here to talk about my most favorite topic. Of course, that being private money. And why is that? Because private money’s had a bigger impact on our real estate investing business than any other strategy that we’ve implemented in our business.

Speaker 3 (02:24):

Why did you go down that road though? I mean, you teach this all the time. You’re helping a ton of people, like anyone I’ve ever talked to that works with you is like he taught me how to do and I got money and it actually works. So I mean, how did you even go down that road where it made a difference on you and then you wanted to get it to others?

Speaker 1 (02:43):

Well, I actually backed into it. I didn’t do it on purpose. So here’s what happened. So my wife, Carol, joy and I, we’ve been investing in real estate, single family houses, other real estate full time here in eastern North Carolina since 2003. And here’s what happened. From 2003 until 2009, David, all I knew to do in my real estate investing business was rely on the local banks to fund my deals. I mean, all I knew to do was go to the bank, get on my hands and knees, put my hand underneath my chin, raise my skirt up so they could look at all my personal financial statements and stuff and actually beg to get my deals funded. That’s all I knew to do. And so I had a big wake up call in January of 2009 after being in this business here in Eastern North Carolina. I called up my banker.

(03:38):

I told him about these two deals I had under contract in Newport, these two single family houses. And David, I learned like that over the telephone that my line of credit had been shut down with no notice. My banker, his name was Steve, and the bank was bb and t at the time. I said, Steve, what in the world are you telling me? My line of credit is shut down. I got two deals under contract. You gave me no notice. Why is the bank closing my line of credit? He said, Jay, don’t. There’s a global financial crisis going on right now. I said, no, but now you just gave me a global financial crisis. Financial crisis, yeah, I ain’t got no way to fund my deals. And I got ’em under contract. So I hung up the phone and here’s what happened, David. I sat here and I asked myself a very important question.

(04:27):

And so I’m going to share this question with your audience right now. This question I’m going to share with you will help you solve any problem you’ve got. I don’t care if it’s business, financial, career, health, relationships. I don’t care what your problem is. By the way, David, these people going around and saying, any problem, you got some opportunity I want to throw up. I didn’t have no opportunity. I had a problem of not funding my deal. So here’s the question I asked myself. The question I asked myself was, Jay, who do you know that can help you with your problem? And when I asked myself that question, I immediately thought of my good friend Jeff, who lived in Greensboro, North Carolina at the time, and he was investing in real estate. And so I called him up and I told him what happened. And he said, well, Jay, welcome to the club.

(05:18):

I said, what club? He said, the club of the bank shutting you down and losing amount of credit. They shut me down last week. I said, well, how are you funding your deals, Jeff? He says, well, have you ever heard of private money? And I hadn’t. So Jeff told me about private money. He told me about self-directed IRAs and how people can use their retirement accounts and funds that they currently have and move them over to a self-directed IRA company and then loan that money out to us real estate investors, either tax deferred or tax free depending on the type of account they’ve got. Well, that just opened up my whole world. I’d never heard of that. And so what did I do? How did raise $2,150,000 in less than 90 days after being cut off from the bank? Well, here’s what I did, and here’s the secret sauce I put on my teacher hat.

(06:10):

So I put on my teacher cap, which is my private money teacher cap, and I just started teaching people in my own network what private money is, how they can earn high rates of returns safely and securely. And what’s interesting, Carol, joy and I, we got 47 private lenders right now. Not one of them had ever heard of private money and private lending. Not one of them had ever heard of self-directed IRA companies and what a third party custodian is. That’s important by the way, to establish a relationship with a self-directed IRA company because over half of my private lenders are using their retirement funds. And if I didn’t have that relationship to introduce them to move their retirement funds over, I’d be missing out on over half of my private money. So how did I go about raising all this money when I was cut off from the banks?

(07:02):

I led with a servant’s heart. I led with education. And here’s a really, really important point. I separated the activity. I separated the conversations of telling people what private money is and how they can earn high rates of return safely and securely and having a deal for them to fund. You see, desperation has got a smell to it. And when you talk about is that not true, David? Yeah, very true. So if you’re talking about private money and raising private money with an individual and you got a deal for them to fund, you’re already sounding desperate and you’re not even trying to sound desperate. So we don’t talk about deals and when we’re first exposing somebody to how they can earn high rates of return, we talk about private money. So how do we separate those conversations? Well, when someone has told me that they’ve got, let’s say they’ve got $150,000 they want to invest and get high rates of return conservatively, I’ll say, great, I’ll put your money to work for you just as soon as possible.

(08:11):

I don’t talk about a deal upfront. If they’ve got retirement funds that they want to get higher rates of return on, I’ll introduce ’em to the self-directed IRA company that I recommend. They’ll get their funds moved over. And so here’s what happens and here’s the magic sauce, David, I give ’em and I call ’em up with what I call the great news phone call. What in the world is the great news phone call? Well, the great news phone call is not a pitch. I’ve never pitched a deal in my life ever since I started raising private money in 2009. I pick up my handset with my cord attached to it here in North Carolina and I call some of your, don’t even know what that is. And let’s say, David, let’s say you’re one of my private lenders. So I’ll put my phone right up here and you’ll answer the phone and we’ll have a little chitchat and I’ll say, Dave, I got great news for you.

(09:06):

I can now put your money to work. I got a house in Newport with an after repaired value of $200,000. The funding requires 150. Closing is next Tuesday. You’ll need to have your funds wired to my real estate attorney next Monday. I’m going to have my real estate attorney email you the wiring instructions end of conversation. Notice I didn’t ask If you want to fund the deal, of course you want to fund the deal. You’ve been waiting for the phone call. I’ve told you the program. I’ve taught you the program, you know what kind of rate you get, what the maximum loan to value is, the program that I’ve taught you. And so now you’re waiting for the good news phone call, which I just gave you. And in addition to that, if you as my private lender, if you’ve moved your retirement funds over to a self-directed IRA company, you ain’t earning any money until I put your money to work.

(10:04):

You moved it at my recommendation. Now I’m ethically bound to put your money to work. You ain’t earning any money until you actually put her to work. So again, we separate conversations, we leave with a servant’s heart, we educate, and by the way, David, these people going around saying don’t just get the deal under contract. The money is show up. I want to throw up where is the money going to show up? Is it just going to rain out of clouds or something? No, get the money lined up and you can get it lined up fast. Just like me. There’s always going to be deals.

Speaker 3 (10:38):

Yeah. Oh man, that’s really good stuff. I love how you went down that road and it helped you personally. Now you’re just teaching a lot of people. I love that magic question. Who do you know that can help me with my problem? It’s that who, it’s not always the how. It’s the who did I know, and in that point it really helped you. I also run into a lot of times, I don’t know if you see this, where there’s someone who’s like, I could save a couple interest points if I just use my own money versus a private lender’s funds. What are your thoughts on that of always taking down your own deals versus going out there and putting the work into getting a private lender?

Speaker 1 (11:17):

Sure, I get that question all the time. They say, Jay, you making all that money? Why don’t you use your own money to invest in real estate? Why are you still borrowing private money? Well, here’s the answer. If you’re just going to do one deal, that’s a great use of your money. That’s a fantastic use of your money. But do you want to scale your business? I mean, right now we’ve got seven different projects going on, single family houses simultaneously. Well, I don’t want my money buried in seven houses or projects simultaneously, which here in our local market can easily be over 3 million with the prices of our homes. So if you want to scale and really, I mean most people have got a bottom of the bucket in their checkbook. So if you want to scale your business, then private money is the way to go. Another answer to that question is, do I want to pay myself 8% or do I want to use my money for something else,

Speaker 3 (12:22):

Right? Yep.

Speaker 1 (12:24):

So that’s a couple of answers to why I use private lending and why I’m still using 47 private lenders,

Speaker 3 (12:33):

Which is great. I love what you said. If you want to scale, it can run out of cash real quick. If you just keep using your own money where a lot of people have to choose between, okay, paying some percentage points or sleeping at night, and it’s like, I think I like your option a whole lot better, especially if you’re looking to grow. But I like how you said that one deal. That’s okay, but if you are looking to be a real estate investor, this is something you’re going to have to go down that road. Now, last time I asked you some questions about the private lending process. I don’t think I asked this one though, is how do you maintain a relationship with that many private lenders? You’ve got 47 people in your network that you call up with the good news call. So is it like how do you maintain a relationship with all those people?

Speaker 1 (13:22):

I mail ’em checks.

Speaker 3 (13:25):

I love that. That’s a great answer. Oh man. No better way to keep a relationship there.

Speaker 1 (13:33):

I mean, they love getting money in the mail, right? Yeah. They love mailbox money, so I mail ’em checks.

Speaker 3 (13:41):

So you mail ’em checks. So you’ve built a good enough business where you can keep 47 lenders busy and their money active.

Speaker 1 (13:50):

Well, to be totally transparent, I mean, it is a juggling act to tell you the truth. I mean, there’s more money than there is deals.

Speaker 3 (14:00):

Yep.

Speaker 1 (14:01):

There’s more money than there is deals. And so we got 47 private lenders. Some of them have got $30,000 with us, some of ’em have got a million dollars with us. I can’t buy a house for 30,000, but I can use 30,000 for rehab money. You can use private money, borrow private money in a junior position, you’ve got to disclose that. But I can put private money in a junior lien. But what comes into play there is what we call total loan to value. So I’m not going to be borrowing more than 75% of the after repaired value. I didn’t say the purchase price 75% of the after repaired value. But let’s say back to that example that we just talked about, David, where if I’ve got a after repaired value on a home of 200,000 for easy figuring, I can borrow up to 150,000. That’s 75% of the after repaired value. But if I buy it for a hundred thousand, which I do all the time, 50% of the after repaired value, I can have a private lender in first position at a hundred grand. I could have another private lender in second position at 50 grand. So add a hundred to the 50, now one 50 divided by 200,000 after repaired value, I got a total loan to value of still 75%.

Speaker 3 (15:27):

Yeah, I love that. And it seems like private money gives you flexibility and

Speaker 1 (15:32):

Options. Does that make sense?

Speaker 3 (15:34):

Yeah, that makes sense. A hundred percent.

Speaker 1 (15:37):

Oh, absolutely. Flexibility is where it’s all at. I got 15 reasons. I love private money over traditional money. I won’t share all 15, but the biggest one is it puts you in the driver’s seat. The traditional way to borrow money is you go to the bank and get on your hands and knees and you’re begging and chasing, well, they are making the rules, right? The lender is making the rules. But in this world of private money, we make the rules, we set the interest rate, we set the length of the node and all that.

Speaker 3 (16:14):

I love that. Flexibility is the ultimate play in real estate. You want to have flexibility and you want to be able to have that. So I love what you teach. Who is the person that you’re trying to teach out there? Is it the person that’s done one deal a thousand deals? Who are you trying to help the most with your business?

Speaker 1 (16:33):

Yeah, that’s interesting. At my live events, which is called the private money conference, and my live events, we have about 60% or so have already done deals. They’ve already done deals. They want to scale their business. They are real estate investors wanting to scale their business, and about 40% are looking to get their very first deal. So I’m helping everybody. I mean Stu and Harriet Baldwin from New York State, they enrolled and joined my mastermind membership community and they already had a portfolio of a hundred houses. They’d already raised over $2 million in private money, but they wanted to see how I went about it. Well, just one webinar that I recorded with them brought in 1.2 million in additional private private money. So I’ve worked with real estate investors that are brand new and those that are also seasoned to help them get more private money ready to go for their business.

Speaker 3 (17:33):

I love that. It sounds like a lot of people out there need private money, and even if you’re just getting started, if you don’t have the funds to do that first deal, like you mentioned, you do that first deal, that one deal at a time, it might be okay, but this sounds like a great spot where if you’re getting into it or if you’ve got lots of stuff going on, this could be another way to make sure your company can keep running without what you ran into with the banks back in 2007, eight or oh nine. Would you say that’s true as well?

Speaker 1 (18:04):

Absolutely. Absolutely. I mean, I’ve met very, very few people. In fact, I can’t even think of one. I haven’t met any real estate investor that says, I got enough money.

Speaker 3 (18:20):

Yeah, me either.

Speaker 1 (18:22):

I can’t use any more private money. However, David, you are looking at one right now. I got about almost $2 million right now, what I call sitting on the shelf waiting to be deployed. And I tell you what, I’ve had new private lenders come into my world that want to invest and just to prove to them that I can perform. I’ll take the new private lender’s money and pay off a current private lender, refinance the deal so I can get their money to work for ’em, right?

Speaker 3 (18:53):

Ah, yep, that makes sense. I like that. As you grow and scale, you might run into that issue and you make one lender a little bit happy. I mean, at least they’re getting paid off, but then they probably come back to you and say, I want you to put my money to work again. Do you have that come up a lot?

Speaker 1 (19:12):

Quite frankly, when I pay ’em off, they’re not happy.

Speaker 3 (19:17):

That’s why I said just a little happy, maybe a little bit.

Speaker 1 (19:20):

But when I pay ’em off, they’re not making any money on that money. In fact, with a new private lender, I’ll get ready to pay ’em off cashing out on a deal and I’ll call ’em up and say, Hey, just want you to know that you’re going to have a check coming in the mail from a real estate attorney’s trust account. We’re paying off this house. And they’ll say, Jay, can’t you just keep the money? And I’ll go, no, I can’t keep the money unless I’ve got your money secured by a property because we do not borrow unsecured funds. Now, here’s maybe a little advanced strategy for some folks, but I do substitutions of collateral or loan modifications all the time. If it’s a small amount of money that a private lender’s invested 30, 40, $50,000, and we use it for rehabbing a property. So when I’ve got another property I’m getting ready to start on, I’ll substitute the collateral and keep that 30 or $50,000 note in play. So they keep earning money on that money, but we will substitute the collateral just to a different project that we’re moving to.

Speaker 3 (20:25):

That’s awesome. So then sounds like you have a good problem. It’s like, I want that. Well, I think a lot of real estate investors would rather the problem, I have too much money versus I’ve got these deals and I can’t fund them. So I really like how you teach people that and where it could snowball into this, where it’s like, I’ve got 47 private lenders, I’ve got to go out there and get the deals for ’em. Absolutely. And I really like that. And

Speaker 1 (20:50):

For goodness sakes, you don’t start out with 47 private lenders. I started out with one, right? I started out with one and then that quickly became two and three and four and five because private lenders tell other people what’s going on. So I haven’t actively attracted private money for years because our current private lenders just keep sending us people. In fact, day before yesterday, day before yesterday, I got a phone call from the mother of a good friend of mine, his name’s Craig, lives in Newburg, North Carolina. Craig had told his mother about this investment thing that I got going on and she had never heard of it, which is really funny. I’ve been doing it now private money since 2009. So she calls me up and she says, Hey, my son’s been telling me about this investment thing you got going on. Tell me about it. So word of mouth gets around very, very quickly when you start doing business with private lenders the way I do.

Speaker 3 (21:53):

Yeah, I like that a lot. So in order to get people to talk like that, what are the biggest things that you do for your current private lenders that makes them want to recommend you?

Speaker 1 (22:07):

Well pay ’em on time.

Speaker 3 (22:08):

There you go. That’s a big one. Sounds like that would be a really great place to start.

Speaker 1 (22:12):

Pay ’em on time. But I also have three times a year I put on a party for our private lenders at the Dunes Club. So we have three times a year a VIP reception over at the Dunes Club on the beach, and it’s just an evening of private lenders getting together and we have a good old time and I feed them and give them all the soft shell crabs they want, and I tell ’em to bring their friends with them.

Speaker 3 (22:42):

Yeah, that’s awesome. So number one though, that anyone can do at any stage is pay people on time. So actually pay, would you say, what about communication? I hear that come up sometimes too. How do you do a good job on the communication with your private lenders as well?

Speaker 1 (23:03):

Well, it must be good enough. They never go away,

Speaker 3 (23:06):

Right? Yeah, that’s the big things I hear.

Speaker 1 (23:10):

Here’s one thing I have not delegated as far as communication. I personally, I mean my relationships with my private lenders are very, very important. So I personally pick up the phone, pick up the phone, and call my private lenders when I have got a deal for them to fund. I do not delegate that out. I could

(23:37):

Delegate that out, but I don’t, when I got a deal for them to fund, I’m the person on the phone keeping that relationship When I’m getting ready to pay them off. I don’t have a check just show up in the mail. Of course they got to sign a payoff instruction letter if a different closing agent is closing it for a buyer. But before any of that happens, I personally call ’em up and I tell ’em that we’ve got that property sold. We’re getting ready to pay you off. Or I’ll call ’em up and I’ll say, Hey, we’re getting ready to pay this property off, but I will keep your note open so you can keep earning money. I’m just going to substitute the collateral. We got some documents we’re going to email to you for you to sign and send back the communication. I’m personally involved in putting their money to work and letting them know when we’re cashing out and where they are on the deal.

Speaker 3 (24:31):

That’s awesome. Then since it’s the profit first I podcast here, I love this concept of the private money because you need your cash in your accounts. So to be able to run your business, do those things, and then setting up a separate account just for your private money lenders, so it makes it easier to do what Jay just told you to pay them back, to pay them back on time to be in good communication with them. So now this has been really good. Do you have any other advice before I ask you? How could they work with you? How can they get in touch with, because I know this is something that is needed desperately, that I send people your way all the time. I know I trust you to help people, but any other last minute advice here that you would give to the real estate investors listening to the podcast?

Speaker 1 (25:18):

Sure. I appreciate you asking that question. It’s going to be very hard to own a lot of real estate

(25:26):

Until you own the real estate between your ears. So what do I mean by that? People ask me, how do I start? How do I start raising money? I can tell you how you start raising private money. You get your heart right, you get your mindset right. So what do I mean by that? Well, what do you do? You lead with a servant’s heart, you lead with education, you put your private lender money hat on, you private lender, teacher hat on, and you leave with education, don’t pitch deals, and you really, really are concerned about the other person and realize, part of this mindset is realize you’ve got an opportunity to change people’s lives, right?

Speaker 3 (26:11):

That’s so good.

Speaker 1 (26:13):

We’ve got countless people that are particularly in their retirement years, that have thanked me and Carol Joy for making a difference in their retirement years to where they can, I mean, they don’t want to touch their principal. They want to live off of their principal investment. So they’ve been able to travel, go see grandkids, do all this stuff that they couldn’t do otherwise until they got involved in our program. So just know that you’ve got a way to really make an impact on other people’s lives. And lemme tell you another part of mindset. It ain’t about reaping. It’s not about reaping. It’s all about sowing. It’s all about sowing. I can’t be reaping all that private money and deals until I have sown and given and led with value first. So how you sow is how you’re going to reap.

Speaker 3 (27:08):

Yeah. Oh man, this is so good. I’m glad I asked that question because I hear the passion in your voice and I hear that you really care about the people you work with, the people that have private money lenders out there, you care about that relationship. I love what you said. Get your heart right, get your head right. I also think, like you said too, that if they don’t have that desperation has a smell. So if you’re out there, you’re desperate and you’re just going out there, then you won’t have people like you have that want to keep coming back, that want to continuously invest in you. So that was, I think, the best advice that you could give right there. Get it between your ears and get your heart right. I absolutely love that. And just to recap too, I love your magic question.

(27:55):

Who do you know that can help me with my problem? Then one day you’re going to wake up and you’re going to be like Jay, and you’re going to be helping other people with their problem. I’ve got money. I want to put it somewhere, and you’re the able to get them to where they can be. Desperation has a smell. I love that. And then honestly, I love that pivot. You are like, it’s not about the reaping, it’s not about the interest that I’m making or the profit I’m making for the deal. It’s more about sowing those seeds and ultimately you’re changing lives. That’s why you get private money, and it’s like that interest that you’re paying them is twofold. It’s like you get to sleep at night, you’re not using all your money and you’re getting to help someone else get a return that they wouldn’t be able to get anywhere else or in someone that they trust as well too, and that’s a little bit more tangible than the stock markets or all this other Bitcoin, some of that stuff that’s floating around out there. So this has been awesome. So how do people then, Jay, take that next step with you? Do you have a book? You talked about an event. What can people do?

Speaker 1 (29:01):

Absolutely. Well for your audience, David, I’ve got two gifts. First of all, I finished writing my book Where to Get the Money. Now, this is not a ebook. This is a book book that we actually send in the mail Autographic where to get the money. Now the subtitle is How and Where to Get Money for Your Real Estate Deals Without Relying on Hard Money Lenders or Traditional Lenders. It’ll walk you through step by step how to get all the private money you would want. Very, very easy to read. It’s $20 on Amazon, but you can get it for free. Being David’s audience, just cover shipping. You can go to www dot j Connor, J-A-Y-C-O-N-N-E r.com/book. So I’m an er, not an or. So that’s j Connor, J-A-Y-C-O-N-N-E r.com/book, and we’ll three day priority mail it out to you. Now, in addition to that, I’ve got an upcoming $3,000 per ticket live event right around the corner. But for your audience, Dave, I’m going to let everybody come for free with a measly $97 registration fee. This private money event. You can check it out at www.theprivatemoneyconference.com. The private money conference.com. That’s coming up right around the corner in June. Get on over there. Registrations are open, and I’d love to meet you in person at the private money conference.com.

Speaker 3 (30:31):

Awesome. I’m excited about that too. I love what you’re doing and you’re solving a big need that we hear all the time. Just like all people always needing to sharpen their acts when it comes to private money, you graciously have also invited me there to speak about Profit First. So I’m excited to get to tell people about that so they can get more private money and be more confident and not be desperate when they go and ask for people. So I’m really excited about that as well. So make sure we’re going to put those links there, but make sure either get his book or go to that event. I cannot endorse Jay Moore because I know how many people he helps, but then he also has the heart. You heard it right here. That’s how he wants to help you too. It’s very much a heart and a mission and a passion for him.

(31:13):

So Jay, thank you for coming on, for sharing your wisdom, your knowledge today. If you are listening to this episode and you feel stuck like, what the heck is going on? Where is my money? I don’t know what to do. I’m a little bit nervous to go out there and get private money. I can’t keep my own house in order. That’s where you could go to simple cfo.com where we can help you walk you through that process. We’ll link you up to Jay too. If you need private money or need to learn about private money, this is who we recommend. I recommend Jay to many people, so make sure that if you need that help you go to simple cfo.com. But Jay, again, thank you for being on the show and sharing your wisdom here today.

Speaker 1 (31:51):

David, thank you so much for having me. God bless you.

Speaker 2 (31:54):

This episode of the Profit First for REI podcast is over, but there are plenty more where that came from. Are you ready to learn how David and his team can help implement the Profit First system in your business? Schedule a discovery call@simplecfo.com right now. We’ll see you next time on The Profit First for REI podcast with David Richter.

From BRRRR to Metal Boxes — How Scott Meyers went from King of Making Mistakes to King of Self-Storage

If you Want HELP implementing Profit First...

Click below to book a no-obligation discovery call:

If you Want HELP
implementing Profit First...

Click below to book a
no-obligation discovery call: