Unveiling the Path to Profitable Real Estate Entrepreneurship: From Shiny Objects to Financial Focus

August 8, 2023

Title: “Unveiling the Path to Profitable Real Estate Entrepreneurship: From Shiny Objects to Financial Focus”

Episode: 192

What are the differences between an entrepreneur and an investor?

Tony Castronovo clarified the differences between the two, and he has more to share in this another CFO Series of Profit First for REI podcast!

Tony tells his stories on how he went from owning a single family to a multi-family, his journey in real estate investing, and the ups and downs of the entrepreneurial world.

Listen and enjoy! You might see where you are right now and the areas you are struggling in real estate investing!

Key Takeaways:

[00:56] Introducing Tony Castronovo

[02:58] Journey of becoming a CFO

[07:44] Difference between investor and entrepreneur

[13:58] How Simple CFO helps in financial clarity

[15:40] Tony’s Profit First Journey

[19:20] Best lesson/s he learned for decades

[21:07] Good first step in the real estate investing journey

Quotes:

[06:47] “Going full-time just gave me a bit of a supercharged boost to really go after it.”

[07:44] “An investor is someone looking long-term to build wealth, and an entrepreneur is very much into a day-to-day income to have a business that will eventually produce wealth.”

[13:41] “If you are not wise about how you buy and operate those deals, it is just chasing your tail.”

Connect with Tony:

Website: https://simplecfo.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:

Speaker 1:

Revenue is obviously the driver in every business. So gotta look at really where to spend the time. And I think a lot of real estate entrepreneurs have that shiny object syndrome and just chase everything that looks like a deal. And you know, swinging hammers at nails everywhere and hope to hit one. And you really gotta focus on what you’re good at, what you’re passionate about, and what is most profitable.

Speaker 2:

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 R e I 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:

Thank you so much for twisting. We’re continuing the C F O series with Tony Castronova today. He has a crazy real estate background and he tells how he went from single family to multifamily. And yes, this is a C F O on our team, not just a real estate investor we’re working with or that I know of. This is someone that is working hard to make an impact on the people that want to get to where honestly where Tony is. He went from single family to multifamily, has lots of units and tells about his journey, but then also tells about a lot of the ups and downs that everyone faces in the entrepreneurial world and clarifies between entrepreneur and investor. And just gives a lot of great insight to where you might be right now and maybe some areas that you’re struggling. Thank you again for listening and this episode can definitely help you.

Thank you for being a faithful listener of the Prophet first r I podcast. Hey everyone, I am super excited because we’re continuing our C F O series and I have Tony cast Novo here with me and I’m really excited ’cause he’s got a crazy real estate background, which is incredible, but then also wants to help as a C F O too. Like he’s actively helping our clients and helping people there, but then has a big management consulting background as well too. And lots of good things. And I’m really excited for this episode because if you’ve listened to a lot of the ones in the past, it’s been about the potential people or the people that have been the profit first implementers or they’ve implemented in their business or it’s been clients or things like that, giving you hope. And I want you to also know there’s people here that care about you that wanna make an impact on your life, that want to be there for you if you need that accountability and guidance. So Tony, thank you so much for being on the show today.

Speaker 1:

Of course, this is exciting

Speaker 3:

And I’m excited too because I’m excited because I get to, I get to interview it a little differently now. It’s like, it’s not just all about the same questions and that it’s like, okay, like what got you into this side of the business because so many people have heard about the other side and why people got into real estate and then how profit versus helped them and all that. So I wanna hear like, what is your background from a high level, because I want them to know at least who we’re working with and dealing with here. And then we can go into more of like the what got you into being a C F O and that type of stuff and how you help people.

Speaker 1:

Yeah, of course, of course. You know, we all kind of have a journey and a pathway. Yeah. And you know, I always feel that there’s inflection points along the way and so I won’t go too far back, but I’ll say that I, I’ve got about 25 years of management consulting experience and I’ve worked for some large companies like Accenture, Ernst and Young, and I’ve also worked for smaller companies, more boutique boutique consulting firms. Along the way I got a little passion for what I call a side hustle in real estate. And so in 2014 I launched my first real estate company. I started working with buy and hold single family homes. I did a little bit of flipping in there and then in 2018 I decided I wanted to scale, I wanted to get bigger. And so I packaged everything up. I did a 10 31 exchange into my first multi-family.

Funny thing is I had no idea how to buy a multifamily property. I just opened my checkbook and figured that’s how everybody does it. But it took me about a year to learn that there’s another method, which is pretty much what I do now around syndication and raising capital, bringing on investors into my deals. I did my first syndication in 2019 and that’s really what I’ve done ever since. Today actually looking at the calendar here, five days we’ll be closing on my ninth multifamily property and we’ll have been invested in about 1,150 units.

Speaker 3:

Yeah. Wow. That’s awesome. Because I, and if you are, if you’re just tuning into this podcast or like you skip the first part because you never liked the first part or whatever, it’s you’ve got your own quirks or what whatnot. That’s where Tony is actually one of the team members here that takes on clients with simple C F O. And he has the investing background as well too. That’s why we’re always looking for people that wanna make an impact, wanna make an impact on your life as the listener, but also if you wanna work with us too, that these people know what the heck they’re doing and what the heck they’re talking about. Because I mean, <laugh>, he’s done something that most investors aspire to going from the single family game to the multifamily game. And that’s where too, that’s where you could have someone like this on your team and potentially helping you get from that one level to the other.

You go, okay, let me ask this, Tony, let’s dig a little deeper there with your, because you said 20 14, 20 18, and then now you’re on your like 1,150 units. Like that’s what you’re gonna have. I’m wondering did it have, did it help that you had some of that management consultant experience or like, did you face any obstacles during that real estate investing time? And I love that you were open and were like, didn’t even know how to buy the multifamily. So it was like, how was that journey? You know, because I feel like you said it was that side hustle, but to turn into like a massive opportunity.

Speaker 1:

Yeah. I mean so many things to unpack there, but yes is the short answer to did I hit any challenges along the way? <Laugh> Okay. Still hitting challenges along the way. They’re just different. You’re always learning something. Right. Right. But I think a couple, a couple things that maybe made a difference. One was that in 2021 I decided to go full-time in the real estate business mm-hmm. <Affirmative>. And then in 2022 I added a coaching business on top of that just because I was finding that I was, I was in a mastermind and I was really working with so many people in a, in a large community and that’s a big part of my day. I was, I was on the phone working with other investors and entrepreneurs and I spent a lot of time coaching them and that was where I drew a lot of energy. Yeah. And I still do today, which is why I work with simple C F O because I love helping clients in the real estate space. But I think going full-time just gave me a bit of a supercharge boost to really go after it and kind of burn the, the boats a little bit as they say, or Yep. I think that’s the phrase, <laugh>, but basically saying, I gotta make this work. Yeah.

Speaker 3:

That’s awesome. No, I love that. And yeah, it sounds like you were able to be successful in this endeavor where a lot of people, I feel like they don’t make that switch from single family to multifamily or they don’t go as fast as they want to, but this was a pretty, a pretty cool journey that you’ve taken. I also want, because you mentioned working with simple C F O and helping people on that side too. Like let’s dive into a little bit. In your experience in the small business world, do you see that a lot of people struggle on the financial side of their business?

Speaker 1:

Totally. Totally. I mean, I, I wanna make a little bit of a bifurcation here Yeah. In that, you know, we talk about the word investor a lot. Yeah. And, and I want to introduce the word entrepreneur into the conversation because to me, an investor is somebody who’s looking long-term to build wealth. And an entrepreneur is very much in the day-to-day trying to drive income to have a business that will eventually produce wealth. Mm. Right? Yeah. And so you have to do both, right? Because you don’t wanna just trade time for money and never have anything to show for the day you decide to stop working. So that’s the investing part. But you also can’t just dump all your money into investments and not generate any cash off of it. You won’t have much of a runway there.

Speaker 3:

Yeah. Nah, that’s so good. That is so good. Because most people don’t make that distinction, especially in the real estate investing world because we call it real estate investing. And that’s a very broad term for a wholesaler flipper where most of those people are just like, you categorize them as an entrepreneur, they’re more just, okay, we get the income in, but do they turn it into investment money of long term? Like you were doing the buy and holds, it sounds like you started in a single family game and did some of the maybe wholesaling or flipping or something like that and turned that active income into the passive or the buy and hold type strategy. Was that correct too?

Speaker 1:

So if, if I’ll unpack a little bit of the finances here. Yeah. And I don’t necessarily advise this one step that I did, but maybe it was a little bit bold. In 2013, before I went full on into trying to build a real estate business, I made a decision with my wife to cash out my 4 0 1 k. Oh wow. And for some people who, you know, built up a 4 0 1 k after decades of working a, a corporate job, you know, thinking, wait a minute, I’m gonna pay taxes on that. I’m gonna pay the, the penalty on that. You know, why would I do that? But to me, I wanted to have a significant amount of money to just go for it. And I said, I’m gonna bet on myself. And I put the accountability on me to say, I’m gonna make that back up. I have to make that back up the penalty and the taxes that I paid.

And so it gave me enough capital that I didn’t have to go borrow capital. So maybe that’s one way to look at it. Yeah. But it gave me enough capital to get started and within four years I had already doubled and surpassed what my 4 0 1 K had in it. And so I just started putting pieces together to build not only a business, but to also build for retirement. And there’s a lot of strategies that, that I’ve incorporated and especially as kind of a solopreneur where you start thinking about, okay, I want to, I wanna launch a solo 4 0 1 k, I had some IRAs along the way and I, I moved money in there. But also thinking about health insurance, I have a, a health insurance plan that’s a high deductible plan on purpose so that I can actually move money into an H s A that’s self-directed that I can also put into real estate. Yeah. I bought a whole life insurance policy, so I can do what’s called the dual asset strategy, where I can basically borrow from the cash value in my account and go invest that into real estate. When you take the money out, you’re still earning dividends as if you never took it out. And you’re also able to, to earn profits in real estate. These are the things I started putting in place and still putting in place to kind of map out what my short term and long term looks like.

Speaker 3:

Yeah. <laugh>, that’s, that’s pretty cool. ’cause No, I love it. And then you wanted to then help and make an impact on other people to get them to this position as well too. So what appealed to you about Simple C F O and becoming a C F O and helping people on the financial side get their financial house in order?

Speaker 1:

I, I think the biggest thing is you see so many people out there, social media and, and other places where just talking about growing, growing, growing. Mm-Hmm. They don’t really talk about profitability. Right. Right. And so you can grow to be, you know, incredible size, but, but then what happens when you’ve got really thin margins and, and you can’t keep things going and you’ve just got this huge machine that needs to continue to get fed. Yep. And so I wanted to help clients to, to get time freedom first of all, because at some point, I mean, we all as entrepreneurs got into being an entrepreneur because we didn’t wanna work for the man. We wanted to control our time, spend some time with family, all those things. And a lot of us, you know, have been working the grindstone. And so I want to help clients to free some of that up to have more profitable businesses so they’re not always having to do one more deal, one more deal. They have better deals.

Speaker 3:

Yeah. Why do you think a lot of people live like that one deal at a time or like deal to deal or that, you know, the paycheck to paycheck lifestyle basically,

Speaker 1:

Because that, that’s what they know. They, they see that, you know, kind of looking like a gross margin perspective. Like, Hey, I could go buy this for X and, you know, add value to it and then sell it for y and that differential is, is ingrained in somebody’s head that, that that’s profit, not necessarily. Right. Right. There’s a lot of other things to account for there. You’ve got a lot of, unless you’re doing all the work yourself, you’ve got partners and vendors, contractors, there’s interest to pay unless you’ve got your own cash that you’re using to, to fully fund these deals, you know, maybe investors, there’s so many draws on, on that cash. So at the end of the day, if you’re not wise about how you, how you buy those deals, how you operate those deals, it it’s, it’s just chasing your tail.

Speaker 3:

Yeah. Yeah. That’s, that’s very true. And that’s where what you would say A C F O comes into play and to help them on that path. Correct.

Speaker 1:

Absolutely. Yeah. Absolutely. And I think the beginning part is always getting that, that financial clarity and try to really understand, you know, is my business profitable and maybe I have multiple businesses, maybe I have a wholesaling business, a flipping business, maybe a rental business, which one’s most, most profitable? And, and then you start going deeper and start to analyze the expenses and can we make some improvements over here? Revenue’s obviously the driver in, in every business. So gotta look at, you know, really where to spend the time. And I think a lot of, a lot of real estate entrepreneurs have that shiny object syndrome and just chase everything that looks like a deal. And, you know, swinging hammers at nails everywhere and hope to hit one. And I think you really gotta focus on what you’re good at, what you’re passionate about, and what is most profitable.

Speaker 3:

Yeah. Man, he knows this, doesn’t, he, if you’re listening to this, that describes the real estate investing community, just going out there, just running and gunning it, getting the deals under contract, swinging the hammers, just just one more deal and it’ll be all. Okay. So no, this is, this is good stuff. And you can tell Tony’s actually been out there and he’s actually been doing the real estate and that he is actually going out there and then now helping people on the other side, keeping more of what they make, which is incredible. So talk about too, because I believe a big component of success is getting a good framework for managing the dollars that come in. ’cause A lot of people don’t have that. And that’s where Profit First comes into play. And that’s why I wrote the book for real estate investors. And I guess just tell about your, you know, your journey there too, reading the book and then reading mine and some of the things that you were telling me beforehand.

Speaker 1:

Oh, yeah. Yeah. I mean, it’s always made sense and Profit First actually puts it into a method that can be repeated and, and you can build a business around. And, you know, just thinking about the basic concept that, that we have revenue that’s coming in and, you know, we talk about pass through revenue and and Profit First, and that really accounts for all those demands on, on the income that we talked about. Right. Right. The, the contractors and just all, everything that, some people might call it cost of goods sold. Right. And then we end up with, with a net from that. And, and really we need to start thinking about paying ourselves as owners. So profit first. That’s where that comes in. And that kind of comes in multiple flavors. You’ve got what we call owner’s benefit. So you’re, you’re saving for profit in the business, of course that is your time working on the business to grow the business, but then there’s compensation for the owner and that’s your, your benefit for working in the business.

’cause I don’t know too many entrepreneurs that don’t spend any time in the business. And then there’s this little thing called taxes that Uncle Sam wants his piece. And even though there are many strategies to reduce your tax liability as a real estate investor, there could be a chance that you’re still gonna pay some taxes. Yeah. Right. And so you don’t wanna be surprised at the end of the year. And so being able to save for that and your business should help you save for your taxes as the person running the business. So that is all what we call the owner’s benefit. And then we start talking about opex, operational expenses. And a lot of people kind of think the other way, right? They, they get the income, they pay all the bills, and then whatever’s left over is profit. But if we reverse that, then we can start looking at fine tuning and optimizing the operations of the business to have expenses that are in line with the profitability that we’re actually looking for in our business and the whole reason why we started our business.

Speaker 3:

Yeah, that’s good stuff. That’s, because that’s where I believe what you hit the nail on the head, it’s put a system around. It’s like something that we feel like, we feel like we’ve known this or that we’ve heard this, and then it’s just like this is a good package to be able to say, okay, this is how we actually put more money in our pocket and make sure that there is owner’s benefit. And that there, I like how you clarified that too, on versus in where like the profit account’s more like this is working on the business and the reward for that. And then the, in the owner’s comp is more like the, in the business, like you’re working in the business, you should be compensated for the time in there, which was, I I think that’s, that’s great. That’s a really good way of putting that.

So this has been awesome. I think that you’re doing a great job of helping the people along the way and on the journey. And I wanted to say thank you for helping and simple c F O and the clients that you work with there. Then also just wanting to make an impact. ’cause There’s a lot of people that are listening, and if you’re listening now, there’s a lot of people, and if you’re struggling on that side, a lot of people are there and like, they need someone, like a Tony in their life to hold, not only just hold them accountable, to make sure that they know where you’re, they’re going. Like, what does a win like look like to you? And like, are we actually getting there? So I guess to wrap up just a few final questions. What would you say is one of the, let’s just do a general question then I’ll narrow it down to real estate, but what’s a general business lesson, the hardest one or the best one you’ve learned in your experience over the last couple decades?

Speaker 1:

Man, great question. Great question. I, I have to admit, and this is maybe a little less of entrepreneurial, it’s more corporate, but yeah, it was for years, it was always a little less about where I worked, what I did, and more about who I was working with mm-hmm. <Affirmative>. And to me it’s always the people and, and I draw a lot of energy from people that I enjoy working with, whether that’s my peers or maybe a boss or maybe it’s clients. But the nice thing is as an entrepreneur, I get to choose my clients. Right. So that, that’s always good. And, and I don’t have a boss other than my wife, <laugh>. Right.

Speaker 3:

<Laugh>.

Speaker 1:

But you know, to me it’s, it’s just always about the people. And if you’re just chasing after a dollar, there’s always somebody who’s gonna wave a, a bigger dollar, you know, a higher salary or, or you know, right. Something like that. Yeah, right.

Speaker 3:

There you go. So there’s, that’s a good one. The people you work with, because you spend, I, it’s like that statistic, you spend more time with them, with your family, especially during the early working years, you’re worth, you’re with them a lot with that working family and those people that you’re with. And the, it’s really about the people that you align with culturally, values, you know, the values that you have, your beliefs. It’s just a lot of different things there. And make your life more full too. It’s not that one is right and one is wrong, it’s more just like, how do you, how do you know what’s right for you? I think that’s a great, a great point. Then the other one I wanna ask before we jump off here is, for a real estate investor who’s wanting to get started with the Profit First Journey, what would you say is a good first step? Or like, how would they start to set that up?

Speaker 1:

I think a good first step is, is really to start looking at your financials. Look at your books and, and just see if it makes sense. And a lot of times, you know, we’re, we’re so transactional and we’re recording something one way and just moving on close the books. Okay, I got work to do. We don’t really take the time to look at the story that our financials are telling us about the business. And every p and l every balance sheet tells a story. Mm-Hmm. <affirmative>. And so read it because it, it’s gonna, if you don’t get that story by reading your financials that says your financials need a little work and we’ve gotta get those organized and transactions recategorized so that it does tell you the story and you might be shocked at what it tells you. Yeah. And could be in a good way, but, but it also could be a little bit of a wake up call to say, okay, I’ve gotta gotta get my button gear and, and make some changes.

Speaker 3:

Yeah. No, that’s good. It’s like, can you even read your story and, or is there any story at all? I, I’ve heard someone put it for like you open the storybook and it’s blank, well you got nothing set up. It’s like, that’s gonna be hard to read that story. So make sure you have something in place. And if you don’t, if it’s a mess, and if you don’t know it’s a mess, you might need someone like Tony in your life to help make sure that it gets to where it needs to be. But now this has been awesome, Tony. Thank you so much. I also wanted to say, if you’re listening to this and you do feel stuck and you’re living deal to deal and you’re, you, you’ve heard some of the things that Tony’s talked about and you’re like, I, I a hundred percent agree with where he is coming from and that I’ve felt that, or I’m feeling that now and you want outta that rat race and outta that cycle, go to simple cfo.com and just book a call with us.

It doesn’t mean that you’ll work with us, we’ll just point you in the right direction. We’re here to make an impact. Whether that’s to make sure that you get the first steps right or whether that’s like you need someone like Tony in your life holding you accountable and helping you play the money game to win and making sure that you know the rules and that you know that this is how you set up profit first. This is how you go and get clarity and how you make sure the books are in order. Like all that. And since Tony came on and volunteered to be one of the people on here, if you wanna request Tony too, you could request him to be your C F O. Once you go through that process, once you get on that call and if you want to move forward, you can request Tony as your C F O if he has availability after this episode.

He might not have availability ’cause he told you his background in the real estate investing world. And people will probably be clamoring to work with him because he is a wealth of knowledge, not only in real estate, but then the money game and really winning. And he is doing it in his personal life and he is also done it in the business world. So Tony, again, this has been incredible. Thank you so much for being here today. I just wanted to say this has been an awesome episode. Oh, thanks for having me, David. It’s been a pleasure. Awesome. And remember, if you’re listening, make Profit a habit in your life and win that money game. Thank you so much.

Speaker 2:

This episode of The Profit First for R e I 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 r e I podcast with David Richter.

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?

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.