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Find Your Niche and Pay Yourself First: A Guide to Financial Success With Dave Rice

Episode 93: Find Your Niche And Pay Yourself First: A Guide To Financial Success with Dave Rice

The Profit First REI Podcast

June 27, 2022

David Richter

 

Summary:

With over thirty years of experience in the field, it’s a guarantee that Dave Rice gives unique and unmatched expertise when it comes to providing bookkeeping services. Dave’s business management background and a degree in pharmacy helped start-ups sharpen their business in the most profitable areas, maximizing their fullest potential.

With over thirty years of experience in the field, it’s a guarantee that Dave Rice gives unique and unmatched expertise when it comes to providing bookkeeping services. Dave’s business management background and a degree in pharmacy helped start-ups sharpen their business in the most profitable areas, maximizing their fullest potential.

Discover how he incorporates the Profit First system into his career while helping others build fast growth through actionable tactics. Tag along with us and learn more about his story in this week’s episode.

Key Takeaways:

[2:06] What got him into real estate and why real estate?

[6:06] What early lessons did he learn about money and what does he think about money today?

[9:20] How do they maintain their business and build their reputation?

[10:17] How did he get into the “Profit First” world?

[15:11] People are thrilled when they first see real financials and learn where they’re making money, where they’re spending money, and where it’s going.

[15:41] One of the most common mistakes made by investors on the financial side of the business

[18:08] Last minute advice that David wants to send to the audience

[18:14] You will want to have a handle on your finances and business. The key to success is having uncomfortable conversations.

Quotes:

[7:17] “Get paid first, and pay yourself first.”

[12:42] “It’s so rewarding to see that the business owner finally feels like a business owner and not just a slave to his business.”

[17:10] “I find it really fun to teach these investors who are visionary entrepreneurs but not necessarily ready to dig into the details. That’s the part of the plates that they hand out to us.”

Links:

REI Bookkeepers- http://reibookkeepers.com

Dave’s LinkedIn- https://www.linkedin.com/in/mrdaverice

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: 

Dave Rice:

Know, what’s yours know what’s not yours. If you’ve got employees, that’s a huge obligation. You need to be putting money into a payroll account to pay those employees and just keep your head on your shoulders about what’s going on here and just, just learn as much as you can about the, the numbers in your business.

Speaker 2:

Welcome to the 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. It is David Richter here again with the Profit First REI podcast, have another special guest today, Dave rice. And if you are in the real estate investing world, you may have heard of him cuz he is famous for his bookkeeping – REI Bookkeepers – and he does an incredible job. And right now I’m telling you, he’s one of the very few people that I recommend him and his company for the bookkeeping side. So he does incredible job with real estate investors, but he’s done fixed and flips. He’s been in the real estate investing world. He now focuses primarily on that bookkeeping business, but I’ll let him tell his story, but I’ve gotten to know him over the last year and it’s been, it’s just been a roller coaster, I think for both of us seeing, you know, where each other has gone and what we’ve done. So Dave, super excited to have you on thanks for being here today.

Dave Rice:

Thank you so much, David. It’s a, it’s a pleasure to be here, with you. I, I know when we met a year ago, I, I, I knew things were, I knew where things were going for you and I’m, I’m really proud to be a, a very small part of it.

David Richter:

Yeah. Well, I appreciate you and your support and Dave’s been a big support to me along this journey and a big encouragement. So I really do – Dave is just a good person. So you’re getting a treat here today of a businessman, someone who provides a ton of value and someone who’s very real. So Dave, let’s go, let’s go a little bit into your background. They’re like, tell me about your journey. You did real estate, but like what were you doing before that? What got you into real estate and you know, why real estate, so give, give to the listeners a little bit of the background?

Dave Rice:

Sure. Sure, sure thing. I’ve been, self-employed almost my entire working career. My background is actually pharmacy and over the course of about 25 years, my partner and I built a a veterinary pharmacy practice. And we worked with veterinarians all across the country. At, at one point we had 15,000 veterinarians buy from us and it was a great business but a great number of regulations in the pharmacy industry. And it just got to a point where it made sense to sell the business. We we sold it we’re boaters my wife Laurie and I disappeared on our boat for about five years which we’ve cruised the entire cari… Well, the entire Gulf coast, the entire east coast and all over The Bahamas. And, and frankly I highly recommended it if you wanna drop outta the world for a little while.

Dave Rice:

We, we got back, we got into real estate investing because it just made sense. We bought sold homes all over the place forever. And we got started and had a pretty good fix and flip business going in a couple of different states. And we were getting into wholesaling. I was working with well, I’ll, I’ll plug in Tom Krol. Who’s brilliant. And was really one of my early mentors. And we were just getting rolling and I was diagnosed with an oral cancer and it, it was pretty serious. The doctor said, get your affairs in order. We did, I had surgery and radiation. I’ve got a lot of scars left over and we went through two years of frankly, pure hell and everything kind of ran to a halt. We got our lives back together, got recovered. My wife helped me every inch of the way.

Dave Rice:

And we got going again. We were, we were just getting rolling again in the getting back, going with our previous contacts with investors. And I was talking to other investors and bookkeeping came up and I just said, well, my wife, Lori’s an accountant and has done our books forever, really knows her stuff. And I just figure everybody has somebody like her. And the response was we definitely do not. And so Lori and I talked about it for a while and we’ve been home based business people for forever. And we said, let’s see what happens. So we put a note out on LinkedIn that we were available, and that was four and a half years ago. Our business has blown us out of the water. We we are no longer doing any fix of flips at the moment. Our, our bookkeeping business has really consumed us. We’ve got 13 bookkeepers working for us now and they’re virtual they’re spread across the country. We only hire us based people and the businesses is growing as fast as we can add good people. So we’re thrilled and blessed to be where we are. I feel like I have a real window into the, the lives and finances of real estate investors.

David Richter:

Yeah. Yeah. I understand that if there’s someone else on here that understands getting to see behind the scenes and getting to see what’s really going on. So, but that’s awesome. I’m, I’m glad that, you know, it’s, it is few and far between where you feel like that you get someone that’s done the real estate investing. That’s been a part of that world has incredible mentors like that to Tom Krol and then offers the service like that. So it’s awesome that you have that background and you know, that you are, you are making a difference in these people’s in people’s lives and in real estate investors’ lives. So cuz it’s one of those areas that no one likes to focus on, no one likes that side of the business. So it’s definitely something that is very, very much needed. So thank you for providing that and for helping people and thanks for sharing your journey. So let’s talk a little bit about money since this is the first REI podcast. I always like asking just some general, general deeper questions with people. One of the big ones I like asking is what early lessons did you learn about money and how does that compare to how you think about money today?

Dave Rice:

Well, it’s interesting. My, my parents were small business people and so that’s the world I’ve always lived in. They were savers, they were conservative. They didn’t spend money that they didn’t have. And I think we picked that up at an early age. Although I certainly am happy to I mean, I think there’s a balance we’ve made plenty of money over the years and we live a, we live a really good life, but we live it within our means. And as long as you live on a little bit less than you make you’re gonna be in good shape. And I’ll tell you when I had my, my, my cancer bout, we were, we didn’t earn a dime for two years, but we had done, we had done the right things up until then and it wasn’t a strain. We were, we were just fine. So that, that’s really the the first thing that I learned I’ve also learned a few other things, you know, get paid first and pay yourself first. And I mean really that strikes at the heart of Profit First, but that’s been our philosophy forever.

David Richter:

Awesome. Now I love that for sure. Cuz that is the heart of Profit First and making sure that you as the business owner are paid. And do you feel like that’s why you were able to take off maybe, you know, like those, some of those mentalities being able to have that money and sort away and saved up

Dave Rice:

Absolutely. It was because when we started this business, I speak to a lot of other bookkeepers and a lot of people are trying to get where we are and, and we’re happy to help all of them. Yeah. and the, the world is so big. The ocean is so big. It doesn’t matter. It, it took me a while to learn that mentality, but we understand that now. And one of the things that many bookkeepers when they get started, when they start think, thinking about “who do I wanna work with,” and they’re usually their answers, whoever is willing to pay me. And that’s a nice thought, but I’m telling you the two things that really helped us get rolling. A, we chose a niche. We chose to…we like small business and there’s no more definition of an entrepreneur than a small real estate investor.

Dave Rice:

And I don’t mean small in, in any kind of negative sense at all. I, I love small business and we said, you know what, we’re gonna wait for the right clients and see if they come along and see where this goes. And so that’s what we did. The second thing we did is doesn’t really matter to everybody here, but we pick QuickBooks online as our software. We don’t work in any other software and we’re experts in QuickBooks online and we’re experts with real estate investors. So we don’t have to reinvent the wheel every time we start with a new client. And those have been really, really beneficial to us. And the second thing, and I have to lecture a lot of bookkeepers about this as well is people will say, well, I, I took on a client and I did a whole bunch of work for three months, and then you didn’t pay me.

Dave Rice:

And I said you just learned the first rule of business, get paid then do the work. If they, if they need you and wanna hire you, they will prepay you and you’re gonna come through and do the work and then they’ll be happy, don’t work and then hope to get paid. And so we’ve, we’ve stuck with that. And it’s, it’s absolutely never been an issue because your, your reputation is all you have in this or any other business. Yeah. If you just do what you say, you’re gonna do, you’re gonna be ahead of almost everybody else,

David Richter:

Right?

Dave Rice:

Yeah. So that’s how, we’ve how we’ve operated.

David Richter:

Awesome. Yeah. And you guys do have a great reputation, so I love that because that’s all you do have in business. So what about Profit First, then you’ve talked about that, the pay yourself first mentality, and like, mm-hmm, let’s get into that. Where did you either first hear about it? Or like, was it from clients that you were working with or, you know, like how did you get into that world? The Profit First world?

Dave Rice:

Well, of course I have Michael’s original book. Awesome. And I I’ve had that for a long time. And we certainly, we we’ve started to talk to our clients about it. I mean, for a, and, and even more in the last year, since I’ve gotten to know you and it’s, it’s really interesting. We such see such a large variation in clients. They’re all real estate investors, but their, their financial knowledge is all over the map. Mm-Hmm, I mean, we have new clients who do not know what a balance sheet is. Yep. And so we started at the basics there and depending on their level of, of where they wanna be, we, we can help them either implement all or part of Profit First. And because for some people, the whole system is just playing too much for them to absorb. So we start in, we start in baby stages if we, if we have to.

Dave Rice:

And so like for instance, we wanna get, as soon as a client has regular recurring income, we wanna get them on payroll. And I, because I believe that payroll and withholding is the first way to start making money, getting paid, pay your taxes and have it automatically recur. So that, that that’s to start. Then we start to split out into some of the other accounts that we can get them to. And I mean, I have clients who don’t use Profit First at all, because they’re super disciplined, but the majority are not. And we have a lot of clients using Profit First. We have a lot more of who needed and it’s hard as rewarding. Like I took on our clients a couple months ago and he said, most of my transactions are, are transfers.

Dave Rice:

And I said, well, I know what we’re looking at here. And he, he’s a large wholesaler takes in a lot of large wholesale fees. And he religiously to the penny with every dollar that comes in wholesale fee, he’s got distributions to all of the different accounts. So the owners pay account to the profit account, to the taxes account, to the operating expenses account. He’s really regimented about it. And yes, it’s extra work for us as bookkeepers, but we’re happy to do it. It’s fast. And it’s just so rewarding to see the money getting put aside,

David Richter:

Right. It’s, it’s rewarding to see that the business owner finally feels like the business owner and not just a slave to his business and, you know, being intentional with every dollar that comes through the door. So I absolutely love stories like that. Like yes, it’s, you know, you know, you know, if they’re coming to you saying we have transfers, I know what this means. They’re probably on profit verse. So that’s awesome. Absolutely love that. So have you seen it, I guess, during your, your time bookkeeping and what have you seen the transformation of people too, that are on Profit First, where like they may have started in the early stages, and now they’re seeing some of the fruits of what Profit First has done for them. Have you seen kind of that some of those transformations take place?

Dave Rice:

We absolutely have, and we see it in two ways. We see it in when you’re, when you’re speaking to them and they’re no longer apprehensive because I, I can tell you, our typical client comes to us. They do not, their, their books are a disaster. If they have anything, they have no idea if they, if even made or lost money in the last year. Right. They think they’ve made money, but they really have no idea. Yeah. And so that’s when we have to start talking about separating other people’s money and which, by the way, is one of the really great additions that you’ve come up with on top of Michael’s original Profit First other people’s money is a supremely important account. So we see that. But the other way we see it is pure financial. When I see a client that’s made, that’s got $200,000 of income over the last year, sitting on their books. And then I see 70 or $80,000 sitting in a tax account. I’m proud <laugh> yes. That’s,

Dave Rice:

I’m not gonna worry. I’m not gonna have them call me and say, you know what, I’ve gotta sell properties in December in order to raise money, to pay taxes, because we see that happen. Hmm. And when they can, when they can make business decisions based on the market and their abilities and not the desperation to raise money, to pay taxes, it’s super rewarding. I mean, I’ve had clients who have to go out and borrow money in December to pay property taxes on their rental properties. Hmm. And so then the first thing that we say is, okay, listen, if, if, if your mortgage companies are not escrowing property taxes, then we have to escrow it. Yeah. And that means we set up a separate account and you’re gonna start putting money and I’ll tell you how much needs to go in there every month. So we, we see it in two ways. We certainly see it in their demeanor and how they’re looking at things. And people are thrilled when they first can see real financials and learn and see where they’re making money, where they’re spending money and, and where it’s going.

David Richter:

No, I, I love that. That’s, that’s awesome. So that leads me to a question then, since you do have such a, a, such a behind the scenes, look of people with their finances in the real estate investing world, what would you say is one, or, or maybe a couple of the biggest mistakes that you see investors make on the financial side of their business?

Dave Rice:

Well, there’s two really obvious ones. When they have one bank account with a lot of money in it, and I’m talking a lot of money for small businesses they, they figure if there’s money in the account, we can, and we should be buying properties. Hmm. And we, we see this all the time and I, you know, I never wanna be doctor. No, but if they’ll take our advice, we always tell them, listen, we’ve got to think about, what’s going to happen down the road here. We’ve got to be able to pay the bills. We’ve got to be able to, to pay those quarterly taxes when they come up. And this is often something they haven’t, they haven’t thought about. So we see that. And then of course the other thing we see is they’ll have money in their tax account or their profit account, and they’ll move it back into the operating account.

Dave Rice:

And that’s another red flag where we say, listen, you’re violating the rules. <Laugh> right. We need to, we need to leave that money sequestered, where it is. It’s there for a really, really important reason. And even though we talk about the profit account as to go and blow on whatever you want, it’s not to put back into your business. That’s what the operating expense account is for. Yeah. We wanna keep that sequester. So we run into that once in a while, but Hey, we’re all teachers David. Right. And I, I find it really fun to teach these investors who, who are visionary entrepreneurs, but not necessarily ready to dig into the details. Well, that’s, that’s the part of their plate that they hand to us. Yeah. And so we can go back and say you know, we’ve gotta reign things in just a little bit here and make sure that we can pay for what we’ve already got on our plate.

David Richter:

Okay. No, I, I like that. That, yeah, that’s a, that would help so much if you just rewind that, listen to that, listen to that a couple times, if you’re listening to this podcast, you know, go back through, make sure that you’re not falling in some of those traps and make sure yet you can get where you can really understand those finances from your level and, you know, taking that action. And this has been awesome, Dave, so just a, I just have a couple last questions here. Do you have, do you have just general advice for the real estate investing community that’s listening to this podcast? What would you say? Here’s some last minute advice that I wanna give you before we end?

Dave Rice:

Well, I would say you really wanna, you really wanted to have a handle on your, on your finances for your business. I mean, I know it’s important. You need to be out buying properties. And what I often tell clients is your highest and best use of your abilities is to be out searching for discounted properties, having those uncomfortable conversations with with sellers. I’ve always said one of the keys of success is to be willing to have uncomfortable conversations. Mm yeah. And entrepreneurial people like real estate investors, they usually get that. But then at, at that point, just remember when you’ve got money sitting in your checking account, remember who it belongs to. Hmm. Know what’s yours. Know what’s not yours. If you’ve got employees, that’s a huge obligation. You need to be putting money into a payroll account to pay those employees and just keep your head on your shoulders about what’s what’s going on here and just, just learn as much as you can about the, the numbers in your business.

David Richter:

Yeah. Yeah. That’s so good. So there we go. That’s our advice there. Now, Dave has given a lot of value here. I mean, literally the, from where he was in his business to where he is now from Profit First and how that’s helped him see how it’s helped the people that he’s working with. So Dave, how can people provide the listers, provide value back to you? I know you’re probably slammed because you are in such high demand and so good at what you’re doing. So how could they connect with you? Or like, what do you need as well too? Maybe it’s not more clients, maybe it’s something else, or if they have a bookkeeper recommendation and could send your way or something like that too, like what could you, what could the listeners help you with?

Dave Rice:

Well if you, if you just would like more information about what we do, you could reach out to us at reibookkeepers.com and our contact information is there you can schedule a consult if you, if you’d like, of course those, those are free and we’re happy to, we’re happy to talk to people if you’re, if you’re real new in real estate investing and probably not raised to hire somebody like us, or you’re just not sure, I feel free to schedule a consult because we have a lot of advice for newbies who aren’t ready to hire us yet. I can help you set things up for the future so that when you are ready to maybe outsource your bookkeeping, whether it’s to us or to anybody else, I can give you a few pointers that will, that will have you ready to go so that it’s not a disaster when you do start.

Dave Rice:

And I can understand, I like to see like new wholesalers. I like to see them put a few deals under their belt and have some cash in their pocket before they hire us. And if you’re properly prepared, we can go back and clean up whatever we need to, as long as, as long as you followed a few a few simple rules. So we’re happy to help. We’re not taking any new clients until January of 2022 right now. We frankly just would like to regain a bit of our sanity the last six weeks of the year. But, and, and the other thing is we’re gearing up, we’re bringing on we’re bringing on people and we are not gonna take new clients until we can properly take care of them. Awesome. And, and that’s a, that’s a big responsibility on our end as well.

David Richter:

Yeah, yeah, it is. And don’t totally understand that. So there you go. It’s R E I bookkeepers with an s.com. So that’s where you can get that information. Dave, it’s been incredible having you on, thank you for sharing your knowledge, your wisdom around the finances. Something that we don’t talk about enough and giving people that giving people that, like you said, that confidence of being able to come to you and talk about it and what that gives to them once they start on these systems. So thank you so much. Great having you today.

Dave Rice:

Thank you. It’s been a pleasure.

Speaker 4:

Thank you so much for listening to today’s show. If you found this episode valuable, could you do me a quick favor? Could 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 a Profit First and a podcast. So we’d love to be ranked on there and that’s thanks to your help. So 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. So you can type in Profit First for real estate investors, and you’ll be able to find <laugh>, you’ll be able to find our Facebook group right there.

Speaker 4:

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. So if you wanna 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.com/apply, or just go right to simpleCFO.com. And there’s an apply button right on there. If you wanna 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 cash flow. Thanks again for joining us for another episode of the P first REI podcast. See you next episode.

 

The Profit First REI Podcast

June 27, 2022

David Richter

 

Summary:

With over thirty years of experience in the field, it’s a guarantee that Dave Rice gives unique and unmatched expertise when it comes to providing bookkeeping services. Dave’s business management background and a degree in pharmacy helped start-ups sharpen their business in the most profitable areas, maximizing their fullest potential.

With over thirty years of experience in the field, it’s a guarantee that Dave Rice gives unique and unmatched expertise when it comes to providing bookkeeping services. Dave’s business management background and a degree in pharmacy helped start-ups sharpen their business in the most profitable areas, maximizing their fullest potential.

Discover how he incorporates the Profit First system into his career while helping others build fast growth through actionable tactics. Tag along with us and learn more about his story in this week’s episode.

Key Takeaways:

[2:06] What got him into real estate and why real estate?

[6:06] What early lessons did he learn about money and what does he think about money today?

[9:20] How do they maintain their business and build their reputation?

[10:17] How did he get into the “Profit First” world?

[15:11] People are thrilled when they first see real financials and learn where they’re making money, where they’re spending money, and where it’s going.

[15:41] One of the most common mistakes made by investors on the financial side of the business

[18:08] Last minute advice that David wants to send to the audience

[18:14] You will want to have a handle on your finances and business. The key to success is having uncomfortable conversations.

Quotes:

[7:17] “Get paid first, and pay yourself first.”

[12:42] “It’s so rewarding to see that the business owner finally feels like a business owner and not just a slave to his business.”

[17:10] “I find it really fun to teach these investors who are visionary entrepreneurs but not necessarily ready to dig into the details. That’s the part of the plates that they hand out to us.”

Links:

REI Bookkeepers- http://reibookkeepers.com

Dave’s LinkedIn- https://www.linkedin.com/in/mrdaverice

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: 

Dave Rice:

Know, what’s yours know what’s not yours. If you’ve got employees, that’s a huge obligation. You need to be putting money into a payroll account to pay those employees and just keep your head on your shoulders about what’s going on here and just, just learn as much as you can about the, the numbers in your business.

Speaker 2:

Welcome to the 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. It is David Richter here again with the Profit First REI podcast, have another special guest today, Dave rice. And if you are in the real estate investing world, you may have heard of him cuz he is famous for his bookkeeping – REI Bookkeepers – and he does an incredible job. And right now I’m telling you, he’s one of the very few people that I recommend him and his company for the bookkeeping side. So he does incredible job with real estate investors, but he’s done fixed and flips. He’s been in the real estate investing world. He now focuses primarily on that bookkeeping business, but I’ll let him tell his story, but I’ve gotten to know him over the last year and it’s been, it’s just been a roller coaster, I think for both of us seeing, you know, where each other has gone and what we’ve done. So Dave, super excited to have you on thanks for being here today.

Dave Rice:

Thank you so much, David. It’s a, it’s a pleasure to be here, with you. I, I know when we met a year ago, I, I, I knew things were, I knew where things were going for you and I’m, I’m really proud to be a, a very small part of it.

David Richter:

Yeah. Well, I appreciate you and your support and Dave’s been a big support to me along this journey and a big encouragement. So I really do – Dave is just a good person. So you’re getting a treat here today of a businessman, someone who provides a ton of value and someone who’s very real. So Dave, let’s go, let’s go a little bit into your background. They’re like, tell me about your journey. You did real estate, but like what were you doing before that? What got you into real estate and you know, why real estate, so give, give to the listeners a little bit of the background?

Dave Rice:

Sure. Sure, sure thing. I’ve been, self-employed almost my entire working career. My background is actually pharmacy and over the course of about 25 years, my partner and I built a a veterinary pharmacy practice. And we worked with veterinarians all across the country. At, at one point we had 15,000 veterinarians buy from us and it was a great business but a great number of regulations in the pharmacy industry. And it just got to a point where it made sense to sell the business. We we sold it we’re boaters my wife Laurie and I disappeared on our boat for about five years which we’ve cruised the entire cari… Well, the entire Gulf coast, the entire east coast and all over The Bahamas. And, and frankly I highly recommended it if you wanna drop outta the world for a little while.

Dave Rice:

We, we got back, we got into real estate investing because it just made sense. We bought sold homes all over the place forever. And we got started and had a pretty good fix and flip business going in a couple of different states. And we were getting into wholesaling. I was working with well, I’ll, I’ll plug in Tom Krol. Who’s brilliant. And was really one of my early mentors. And we were just getting rolling and I was diagnosed with an oral cancer and it, it was pretty serious. The doctor said, get your affairs in order. We did, I had surgery and radiation. I’ve got a lot of scars left over and we went through two years of frankly, pure hell and everything kind of ran to a halt. We got our lives back together, got recovered. My wife helped me every inch of the way.

Dave Rice:

And we got going again. We were, we were just getting rolling again in the getting back, going with our previous contacts with investors. And I was talking to other investors and bookkeeping came up and I just said, well, my wife, Lori’s an accountant and has done our books forever, really knows her stuff. And I just figure everybody has somebody like her. And the response was we definitely do not. And so Lori and I talked about it for a while and we’ve been home based business people for forever. And we said, let’s see what happens. So we put a note out on LinkedIn that we were available, and that was four and a half years ago. Our business has blown us out of the water. We we are no longer doing any fix of flips at the moment. Our, our bookkeeping business has really consumed us. We’ve got 13 bookkeepers working for us now and they’re virtual they’re spread across the country. We only hire us based people and the businesses is growing as fast as we can add good people. So we’re thrilled and blessed to be where we are. I feel like I have a real window into the, the lives and finances of real estate investors.

David Richter:

Yeah. Yeah. I understand that if there’s someone else on here that understands getting to see behind the scenes and getting to see what’s really going on. So, but that’s awesome. I’m, I’m glad that, you know, it’s, it is few and far between where you feel like that you get someone that’s done the real estate investing. That’s been a part of that world has incredible mentors like that to Tom Krol and then offers the service like that. So it’s awesome that you have that background and you know, that you are, you are making a difference in these people’s in people’s lives and in real estate investors’ lives. So cuz it’s one of those areas that no one likes to focus on, no one likes that side of the business. So it’s definitely something that is very, very much needed. So thank you for providing that and for helping people and thanks for sharing your journey. So let’s talk a little bit about money since this is the first REI podcast. I always like asking just some general, general deeper questions with people. One of the big ones I like asking is what early lessons did you learn about money and how does that compare to how you think about money today?

Dave Rice:

Well, it’s interesting. My, my parents were small business people and so that’s the world I’ve always lived in. They were savers, they were conservative. They didn’t spend money that they didn’t have. And I think we picked that up at an early age. Although I certainly am happy to I mean, I think there’s a balance we’ve made plenty of money over the years and we live a, we live a really good life, but we live it within our means. And as long as you live on a little bit less than you make you’re gonna be in good shape. And I’ll tell you when I had my, my, my cancer bout, we were, we didn’t earn a dime for two years, but we had done, we had done the right things up until then and it wasn’t a strain. We were, we were just fine. So that, that’s really the the first thing that I learned I’ve also learned a few other things, you know, get paid first and pay yourself first. And I mean really that strikes at the heart of Profit First, but that’s been our philosophy forever.

David Richter:

Awesome. Now I love that for sure. Cuz that is the heart of Profit First and making sure that you as the business owner are paid. And do you feel like that’s why you were able to take off maybe, you know, like those, some of those mentalities being able to have that money and sort away and saved up

Dave Rice:

Absolutely. It was because when we started this business, I speak to a lot of other bookkeepers and a lot of people are trying to get where we are and, and we’re happy to help all of them. Yeah. and the, the world is so big. The ocean is so big. It doesn’t matter. It, it took me a while to learn that mentality, but we understand that now. And one of the things that many bookkeepers when they get started, when they start think, thinking about “who do I wanna work with,” and they’re usually their answers, whoever is willing to pay me. And that’s a nice thought, but I’m telling you the two things that really helped us get rolling. A, we chose a niche. We chose to…we like small business and there’s no more definition of an entrepreneur than a small real estate investor.

Dave Rice:

And I don’t mean small in, in any kind of negative sense at all. I, I love small business and we said, you know what, we’re gonna wait for the right clients and see if they come along and see where this goes. And so that’s what we did. The second thing we did is doesn’t really matter to everybody here, but we pick QuickBooks online as our software. We don’t work in any other software and we’re experts in QuickBooks online and we’re experts with real estate investors. So we don’t have to reinvent the wheel every time we start with a new client. And those have been really, really beneficial to us. And the second thing, and I have to lecture a lot of bookkeepers about this as well is people will say, well, I, I took on a client and I did a whole bunch of work for three months, and then you didn’t pay me.

Dave Rice:

And I said you just learned the first rule of business, get paid then do the work. If they, if they need you and wanna hire you, they will prepay you and you’re gonna come through and do the work and then they’ll be happy, don’t work and then hope to get paid. And so we’ve, we’ve stuck with that. And it’s, it’s absolutely never been an issue because your, your reputation is all you have in this or any other business. Yeah. If you just do what you say, you’re gonna do, you’re gonna be ahead of almost everybody else,

David Richter:

Right?

Dave Rice:

Yeah. So that’s how, we’ve how we’ve operated.

David Richter:

Awesome. Yeah. And you guys do have a great reputation, so I love that because that’s all you do have in business. So what about Profit First, then you’ve talked about that, the pay yourself first mentality, and like, mm-hmm, let’s get into that. Where did you either first hear about it? Or like, was it from clients that you were working with or, you know, like how did you get into that world? The Profit First world?

Dave Rice:

Well, of course I have Michael’s original book. Awesome. And I I’ve had that for a long time. And we certainly, we we’ve started to talk to our clients about it. I mean, for a, and, and even more in the last year, since I’ve gotten to know you and it’s, it’s really interesting. We such see such a large variation in clients. They’re all real estate investors, but their, their financial knowledge is all over the map. Mm-Hmm, I mean, we have new clients who do not know what a balance sheet is. Yep. And so we started at the basics there and depending on their level of, of where they wanna be, we, we can help them either implement all or part of Profit First. And because for some people, the whole system is just playing too much for them to absorb. So we start in, we start in baby stages if we, if we have to.

Dave Rice:

And so like for instance, we wanna get, as soon as a client has regular recurring income, we wanna get them on payroll. And I, because I believe that payroll and withholding is the first way to start making money, getting paid, pay your taxes and have it automatically recur. So that, that that’s to start. Then we start to split out into some of the other accounts that we can get them to. And I mean, I have clients who don’t use Profit First at all, because they’re super disciplined, but the majority are not. And we have a lot of clients using Profit First. We have a lot more of who needed and it’s hard as rewarding. Like I took on our clients a couple months ago and he said, most of my transactions are, are transfers.

Dave Rice:

And I said, well, I know what we’re looking at here. And he, he’s a large wholesaler takes in a lot of large wholesale fees. And he religiously to the penny with every dollar that comes in wholesale fee, he’s got distributions to all of the different accounts. So the owners pay account to the profit account, to the taxes account, to the operating expenses account. He’s really regimented about it. And yes, it’s extra work for us as bookkeepers, but we’re happy to do it. It’s fast. And it’s just so rewarding to see the money getting put aside,

David Richter:

Right. It’s, it’s rewarding to see that the business owner finally feels like the business owner and not just a slave to his business and, you know, being intentional with every dollar that comes through the door. So I absolutely love stories like that. Like yes, it’s, you know, you know, you know, if they’re coming to you saying we have transfers, I know what this means. They’re probably on profit verse. So that’s awesome. Absolutely love that. So have you seen it, I guess, during your, your time bookkeeping and what have you seen the transformation of people too, that are on Profit First, where like they may have started in the early stages, and now they’re seeing some of the fruits of what Profit First has done for them. Have you seen kind of that some of those transformations take place?

Dave Rice:

We absolutely have, and we see it in two ways. We see it in when you’re, when you’re speaking to them and they’re no longer apprehensive because I, I can tell you, our typical client comes to us. They do not, their, their books are a disaster. If they have anything, they have no idea if they, if even made or lost money in the last year. Right. They think they’ve made money, but they really have no idea. Yeah. And so that’s when we have to start talking about separating other people’s money and which, by the way, is one of the really great additions that you’ve come up with on top of Michael’s original Profit First other people’s money is a supremely important account. So we see that. But the other way we see it is pure financial. When I see a client that’s made, that’s got $200,000 of income over the last year, sitting on their books. And then I see 70 or $80,000 sitting in a tax account. I’m proud <laugh> yes. That’s,

Dave Rice:

I’m not gonna worry. I’m not gonna have them call me and say, you know what, I’ve gotta sell properties in December in order to raise money, to pay taxes, because we see that happen. Hmm. And when they can, when they can make business decisions based on the market and their abilities and not the desperation to raise money, to pay taxes, it’s super rewarding. I mean, I’ve had clients who have to go out and borrow money in December to pay property taxes on their rental properties. Hmm. And so then the first thing that we say is, okay, listen, if, if, if your mortgage companies are not escrowing property taxes, then we have to escrow it. Yeah. And that means we set up a separate account and you’re gonna start putting money and I’ll tell you how much needs to go in there every month. So we, we see it in two ways. We certainly see it in their demeanor and how they’re looking at things. And people are thrilled when they first can see real financials and learn and see where they’re making money, where they’re spending money and, and where it’s going.

David Richter:

No, I, I love that. That’s, that’s awesome. So that leads me to a question then, since you do have such a, a, such a behind the scenes, look of people with their finances in the real estate investing world, what would you say is one, or, or maybe a couple of the biggest mistakes that you see investors make on the financial side of their business?

Dave Rice:

Well, there’s two really obvious ones. When they have one bank account with a lot of money in it, and I’m talking a lot of money for small businesses they, they figure if there’s money in the account, we can, and we should be buying properties. Hmm. And we, we see this all the time and I, you know, I never wanna be doctor. No, but if they’ll take our advice, we always tell them, listen, we’ve got to think about, what’s going to happen down the road here. We’ve got to be able to pay the bills. We’ve got to be able to, to pay those quarterly taxes when they come up. And this is often something they haven’t, they haven’t thought about. So we see that. And then of course the other thing we see is they’ll have money in their tax account or their profit account, and they’ll move it back into the operating account.

Dave Rice:

And that’s another red flag where we say, listen, you’re violating the rules. <Laugh> right. We need to, we need to leave that money sequestered, where it is. It’s there for a really, really important reason. And even though we talk about the profit account as to go and blow on whatever you want, it’s not to put back into your business. That’s what the operating expense account is for. Yeah. We wanna keep that sequester. So we run into that once in a while, but Hey, we’re all teachers David. Right. And I, I find it really fun to teach these investors who, who are visionary entrepreneurs, but not necessarily ready to dig into the details. Well, that’s, that’s the part of their plate that they hand to us. Yeah. And so we can go back and say you know, we’ve gotta reign things in just a little bit here and make sure that we can pay for what we’ve already got on our plate.

David Richter:

Okay. No, I, I like that. That, yeah, that’s a, that would help so much if you just rewind that, listen to that, listen to that a couple times, if you’re listening to this podcast, you know, go back through, make sure that you’re not falling in some of those traps and make sure yet you can get where you can really understand those finances from your level and, you know, taking that action. And this has been awesome, Dave, so just a, I just have a couple last questions here. Do you have, do you have just general advice for the real estate investing community that’s listening to this podcast? What would you say? Here’s some last minute advice that I wanna give you before we end?

Dave Rice:

Well, I would say you really wanna, you really wanted to have a handle on your, on your finances for your business. I mean, I know it’s important. You need to be out buying properties. And what I often tell clients is your highest and best use of your abilities is to be out searching for discounted properties, having those uncomfortable conversations with with sellers. I’ve always said one of the keys of success is to be willing to have uncomfortable conversations. Mm yeah. And entrepreneurial people like real estate investors, they usually get that. But then at, at that point, just remember when you’ve got money sitting in your checking account, remember who it belongs to. Hmm. Know what’s yours. Know what’s not yours. If you’ve got employees, that’s a huge obligation. You need to be putting money into a payroll account to pay those employees and just keep your head on your shoulders about what’s what’s going on here and just, just learn as much as you can about the, the numbers in your business.

David Richter:

Yeah. Yeah. That’s so good. So there we go. That’s our advice there. Now, Dave has given a lot of value here. I mean, literally the, from where he was in his business to where he is now from Profit First and how that’s helped him see how it’s helped the people that he’s working with. So Dave, how can people provide the listers, provide value back to you? I know you’re probably slammed because you are in such high demand and so good at what you’re doing. So how could they connect with you? Or like, what do you need as well too? Maybe it’s not more clients, maybe it’s something else, or if they have a bookkeeper recommendation and could send your way or something like that too, like what could you, what could the listeners help you with?

Dave Rice:

Well if you, if you just would like more information about what we do, you could reach out to us at reibookkeepers.com and our contact information is there you can schedule a consult if you, if you’d like, of course those, those are free and we’re happy to, we’re happy to talk to people if you’re, if you’re real new in real estate investing and probably not raised to hire somebody like us, or you’re just not sure, I feel free to schedule a consult because we have a lot of advice for newbies who aren’t ready to hire us yet. I can help you set things up for the future so that when you are ready to maybe outsource your bookkeeping, whether it’s to us or to anybody else, I can give you a few pointers that will, that will have you ready to go so that it’s not a disaster when you do start.

Dave Rice:

And I can understand, I like to see like new wholesalers. I like to see them put a few deals under their belt and have some cash in their pocket before they hire us. And if you’re properly prepared, we can go back and clean up whatever we need to, as long as, as long as you followed a few a few simple rules. So we’re happy to help. We’re not taking any new clients until January of 2022 right now. We frankly just would like to regain a bit of our sanity the last six weeks of the year. But, and, and the other thing is we’re gearing up, we’re bringing on we’re bringing on people and we are not gonna take new clients until we can properly take care of them. Awesome. And, and that’s a, that’s a big responsibility on our end as well.

David Richter:

Yeah, yeah, it is. And don’t totally understand that. So there you go. It’s R E I bookkeepers with an s.com. So that’s where you can get that information. Dave, it’s been incredible having you on, thank you for sharing your knowledge, your wisdom around the finances. Something that we don’t talk about enough and giving people that giving people that, like you said, that confidence of being able to come to you and talk about it and what that gives to them once they start on these systems. So thank you so much. Great having you today.

Dave Rice:

Thank you. It’s been a pleasure.

Speaker 4:

Thank you so much for listening to today’s show. If you found this episode valuable, could you do me a quick favor? Could 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 a Profit First and a podcast. So we’d love to be ranked on there and that’s thanks to your help. So 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. So you can type in Profit First for real estate investors, and you’ll be able to find <laugh>, you’ll be able to find our Facebook group right there.

Speaker 4:

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. So if you wanna 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.com/apply, or just go right to simpleCFO.com. And there’s an apply button right on there. If you wanna 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 cash flow. Thanks again for joining us for another episode of the P first REI podcast. See you next episode.

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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.

 

 





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