How to Live Off Rentals and Stress Less w/ Vacation Rental Expert Kirby Atwell

March 24, 2022

Episode 80: How to Live Off Rentals and Stress Less w/ Vacation Rental Expert Kirby Atwell

THE PROFIT FIRST REI PODCAST

MAR 24, 2022 EPISODE 80

DAVID RICHTER

“Start your business with an outcome in mind.”

These are rousing words from the master of rental property investment himself, Kirby Atwell. After serving in the US Army, he felt a calling to go all out and start venturing into real estate. Throughout his real estate career, he has faced a lot of lessons that became his pillar to fortune. Now Kirby is one of the hottest real estate investors in the country. He also runs his podcast show that has inspired many to dive headfirst into rental properties. With that being said, this episode revolves around Kirby’s journey towards success. And how he has overcome setbacks along the journey. Learn how he paved his way to financial freedom, earned massive profits, and achieved security by living off rentals.

Key Takeaways

[0:28] What is the most important and most challenging lesson he learned in real estate investing?

[1:48] How has profit first impacted his life?

[5:27] Using his investments to pay a debt

[8:50] Talking about his brand “Living Off Rentals.”

[10:33] Why did he decide to switch investing in rental properties, and how has he maximized the BRRRR method?

[13:08] How many rental properties do you need to walk away from your full-time job and feel secure?

[13:52] What have been his challenges while living off rentals?

[17:19] It’s essential to focus on what you’re good at

[18:36] Learn how to say no to the things that don’t serve you at the highest level

[20:57] The whole point is to start making profit a habit

[23:56] Figure out how your business is going to lead you to the lifestyle that you want

Quotes

[0:46] “I learned that you should start a business with an outcome.”

[14:16] “You’re always in that constant “crack addict rehab mindset” where you have to get another deal.”

[14:53] “There are just so many benefits to not thinking about how many deals you should make to pay your bills.”

Links:

Living Off Rentals Podcast – https://open.spotify.com/show/21uAWBRUnfaSw5VN7j4UUJ?si=HLlD8qoyR1maj2gYGDYFyg
Kirby Atwell’s LinkedIn – https://www.linkedin.com/in/kirbyatwell
Rich Dad Poor Dad by Robert Kiyosaki – https://www.amazon.com/Rich-Dad-Poor-Teach-Middle/dp/1612680194

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:

David Richter:

Kirby, tell me, you got to tell me what is the biggest or hardest lesson you’ve learned in real estate investing?

Kirby Atwell:

Well, there’s been a few, but I can say probably the biggest one for me was learning that I should always start my investing or really anything that I’m doing with the end in mind, with the outcome in mind. I spent five years of my life flipping properties to sit down with my financial statement at the end of that five years and realize that I was pretty much in the exact same spot, financially speaking, that I was when I had started.

From in 2011 to 2016, we flipped over 70 properties, but I had zero assets to show for it. We had plowed all that money back right back into our business, like you’ve talked about a lot not doing, and it was all gone. We’re really starting from scratch. Since that time, I’ve changed up that I do things a lot and I always start and have a vision of what I’m trying to accomplish at the end.

David Richter:

Awesome. I love that. That’s one of the seven habits of highly successful and effective people by Steven Covey, begin with the end in mind, which I think is an awesome way of saying that and a great introduction to Profit First. You got to tell me your story of how you got involved with it and how it’s impacted your life. Do you want to tell me a little bit about that? I’ve had the privilege of being on your podcast and you preach the Profit First message. Tell me how it’s impacted you.

Kirby Atwell:

Absolutely, yeah, and I always keep my book right by my side here.

David Richter:

There it is. Boom. Profit First for Real Estate Investing right there.

Kirby Atwell:

That’s right. Yeah. I read the original book that Mike wrote. Man, I don’t know how many years ago now, but it was shortly after it was released. And like so many other people, loved the concepts, agreed that they probably work, but didn’t set up my accounts. Since then, I’ve actually read it a few times. Finally, after a couple years later reading it again, I did set up the accounts somewhat and I struggled. Like you’ve talked about, I struggled reading that book and understanding, how does this apply to real estate investors?

Because especially when we were flipping, there was a point where we had over a million dollars in our checking count and the vast majority of that was not our money. It was like, how do I figure this out? I can’t just separate it. It’s not all income. It didn’t seem to fit until once you wrote your book that clarified a few things. I was kind of following the Profit First system prior to that, but the two big things I didn’t have or didn’t understand I needed was the other people’s money account, which was kind of a game-changer.

Once you brought that up, I was like, oh, well, if you take that out of the equation, now it is really just your own income for the business. And then the income account I never set up because I always had this thought in the back of my mind, I have all these automatic payments coming in and out of one account, so I’ll just leave the income account as my operating expense account. And that just doesn’t work. You got to separate out that income account.

Once I did that, things changed quite a bit. Also, it opened my eyes quite a bit. That’s kind of how I initially got started and how it evolved over time.

David Richter:

Awesome. Well, I appreciate that. I appreciate you taking action too. So many people read or don’t read and don’t take the action. It’s encouraging and a breath of fresh air when someone does that and then seize the actual benefits of that. Because that’s what we want for people is that clarity that gives confidence to make those decisions. Let me ask you this.

I don’t know if you have anything crazy or not, but have you bought anything good with your profit account over the course of these years that you’ve been implementing Profit First?

Kirby Atwell:

I haven’t. Nothing like crazy. I’ve been mostly focused on paying off debt. We’re at a position now where neither my wife and I work a job. We’re supported by the income from our investments. The more debt we can pay down and the bigger the spread we can create there, it’s just more security for us. That’s really been where I’ve been for focused, but this year I did set up an additional sort of 10% of the profit account that’s going to be a staff profit sharing.

David Richter:

Awesome!

Kirby Atwell:

I think I’m blessed with a really great team and they act as if it’s their company already, but I want them to have that ownership, and I think it’ll take it up even a bigger notch if they can feel sort of the benefits of all the work that they’re putting in.

David Richter:

Oh man. I could park there for a while. It’s the people. It’s the right people on your team and it’s showing them that appreciation. First of all, there are several things there that I want to unpack. Number one, that you’re using it to pay down that debt. I mean, if you’re listening to this now and you have good debt, like on your properties, like to purchase the properties, or bad debt, I mean, that profit account is there for that if you want to do that, if that is your goal to have free and clear properties.

We have several clients doing that where they’re paying down. It is just like you said, Kirby, like just that peace of mind and more cash flow. You’re going to have more cash at the end of the day, which is amazing. But if you have bad debt too that’s keeping you up at night, that specific account, the profit account, can help you wipe that out. I love what you’re doing with the profit account.

I’ve seen this with other people too, where they set that up and then they set up a portion of the profit account to go to their employees. Because come on, I mean, like you said, it’s those people that are the best aspects of the business. From I get to interact with them. They’re the ones actually helping me build the business. They’re the ones that are doing a lot of the work, and they’re the ones that I enjoy going to work with. Having something like that set up for them is going to be huge.

I’ve seen the people that do that and guess what? Their people are happier and they know that the owner is taking care of them, and that it’s also tied to the profit. We think there’s this big expense coming up or whatnot, then everyone’s thinking, do we really need this? It gives them some buy-in as well too if they know it’s tied to that profit account. I’ve just seen that with several of the people we work with. We do that too, and it’s great. I love that you said that.

I think that’ll bring a lot of, especially as you’re growing a company, keeping that in mind. If you just starting out and you’re just getting Profit First implemented, that profit account can eventually become too, what can I do with my team, or what that margin that I’m able to make sure that my team feels taken care of. Yeah, that’s amazing. Love that.

Kirby Atwell:

We establish right from the beginning that we’re going to do 10% of the profit before I even implemented Profit First. When I started the company, 10% of the profit to support a veteran cause. That’s always been a part of the company. Just like you said, it’s just super motivating. It gives you something beyond just flipping houses or getting another rental.

It’s like there’s a cause behind it, but it was a much harder to track that as kind of like guesstimating 10% of what I thought the profit was going to be prior to setting up Profit First. Now I know exactly the amount that I can pay my employees at the end of the year or quarterly, and then the 10% of the profit account for the veteran causes.

David Richter:

That is awesome. Not only because you do that, but because of what that really returns to you as well too. I mean, it’s a great aspect of like, hey, we’re actually giving back here. We’ve got a system for it. Like you said, now, it doesn’t have to be just like random. It can be, well, here’s our profit, our cash profit. Here’s 10% of that going to this cause. We have other people that set that up. That was a big part of us, Simple CFO Solutions, from day one.

One of the reasons I started the business was I didn’t like the cap I had on my giving. It’s like for this, now it’s percent based. The more people we help, the more we can help others. I love the veteran cause too. We give to several different things. One of them Operation Underground Railroad. There’s just a lot of things that we like to invest in. Whenever someone brings that up, giving, that definitely has a special place in my heart. Appreciate you sharing that as well too.

Let’s talk about living off rentals, because that is your brand. That is what you do. It’s also, I believe, gotten you to the place where you said you and your wife don’t have to work anymore. Tell me about that from when was that point? How many rentals did you have? When was the key aspect of being able to actually live off the rentals?

Kirby Atwell:

Yeah, great question. I don’t know how far back you want me to go, but like I mentioned, lots of lessons has learned along the way. I served in the army first. Went to West Point, served as an officer in the army. Got out in 2011. I read Rich Dad, Poor Dad when I was in the army. Just kind of fell in love with the concept of financial freedom and how you can leverage real estate to get there. When I got out though, I no longer had the W-2 income to get loans for rental properties. I bought a few while I was in the army.

Decided it seems like a logical choice to start flipping properties. Like I mentioned, I did that for five years. Got really nowhere financially. That was the point that I sat down and said, okay, why am I doing this? It was financial freedom. I had subscribed to all these vanity metrics throughout the five years where it was like the sexy before and after pictures and the big checks at the end of the project that the vast majority of it wasn’t profit. A lot of times it was negative profit, depending on how the project ago.

But in 2016, I realized none of that stuff matters. What matters is the income that can support my family at the end of the day, because you can’t do anything unless you’re able to provide for yourself along the way. I decided I was going to switch into rental properties and pretty quickly built up a portfolio of 26 long-term rentals through the BRRRR type model. And that just changed my financial situation drastically. But in end of 2017-2018, I discovered short-term rentals.

We set up our first one in our basement and just tested it out, because we were buying a new house and rehabbing it anyway. We turned our walkout basement that was unfinished into a one bedroom apartment. It produced over that first summer, just over the first three, four months, it produced just over $20,000 of income. I was like, this is crazy. I mean, this is a one bedroom basement apartment. If I can scale this into other homes, there’s a lot of potential here.

I decided to switch fully from long-term rentals into short-term rentals. I’ve since sold off all 26 of my long-term rentals and just focused on short-term, and I started building up a portfolio of short-term rentals. When we sat down and ran the numbers, I mean, the first one was, again, kind of an experiment, figuring out what the numbers would be. But then once we started figuring out the projections, I realized once I have eight of these, it more than pays for my salary.

I mean, it’s more than I’m making in my salary, and I would feel very comfortable leaving. And obviously that would free up more capacity for me to continue to buy more. That was it. Over the last year, about a year ago, I left my full-time role. I was a CFO of a nonprofit while I was running my long-term rental business and decided to leave. And now we live off the income from our vacation rentals. We have a portfolio of 10 of them now in Michigan City, Indiana.

We have two more that were we’re rehabbing, and we also bought a 45 acre farm that I live on here in Valparaiso, Indiana. We’re planning to build out more here. We just rehabbed the barn and we’ve got a unit there. We’ve got a couple air streams that we’re rehabbing. We love it. It’s a lot of fun. Gives us so much more flexibility in life, lower stress. I was driving downtown to Chicago a few times a week for my previous job. I don’t have to do that anymore. I mean, it’s life changing.

David Richter:

Oh, that’s awesome. I love that journey as well too. It sounds like, like you said at the very beginning, beginning with the end in mind. How many rentals do we need? How many do I need in order to walk away and feel secure? When is that magic day going to be? It’s like asking yourself those better questions. Once you start to be that business owner mindset, even if you’re not the business owner yet, but just asking yourself, getting you in that frame of mind, I think that’s where you eventually got to that point.

It was like, yes, we’re here. We’re done. I can quit my job. I can do what we set out to. It’s like, hey, that eight? It came true, and really preparing for that. What would you say during that time was the biggest challenge? Was it mindset? Was it actually acquiring the deals? Was it like with Airbnbs, was it the management? What was the most challenging during those times of being able to live off the rentals and ramping up to that point?

Kirby Atwell:

Yeah, yeah. Well, just one comment too on what you just mentioned before I jump into it. You talked about flipping that switch to where all of a sudden you realized we have enough income from our assets to live off of. That’s a strange transition, especially for someone who’s done a lot of rehab projects, did a lot of flips. You’re always in that constant like… I call it like the crack addict rehab mindset where you have to get another deal.

It’s like you’re constantly anxious because you don’t have a deal going or enough deals going or you feel like you need to do another one. All of a sudden, there’s this point where you’re like, I don’t have to go find another deal. I can do deals because I want to do deals. I can do better deals. I can take my time finding deals. I can pick the cream of the crop. When that becomes the case, the types of deals you do, the stress level goes down, there’s just so many benefits to not having to do four deals this month to pay my bills.

It’s now the bills are taken care of. Now I get to do the work I want. That was when I started… I started the podcast a little before then, but that was when I started helping others get their first vacation rentals as well. There’s just so many benefits that came with that. But in terms of the biggest challenges along the way, I’d say there’s a lot of tactical challenges obviously like contractors, the right types of financing.

Those are really common I think across the board. Anyone who’s in real estate is going to come across those challenges. You figure out how to overcome those challenges. But I think the big thing for me was when I got… It’s like my income was directly related to my organization level. When we were flipping, it was chaos all the time because we had… At one point, we had 22 different projects going. There’s a lot of contractors, a lot of money all over the place. It was just like you’re just trying to hold on.

After I left, I realized I needed just to get super organized and size scale wasn’t the answer. It was more about better deals, less deals, but better. I’m a big fan of that book Essentialism, which is all about less but better that Greg McKeown wrote. Once I started to get really around what I was doing, I had a streamlined process, I blocked out… Like if somebody sends me a multifamily deal right now or a flip that’s not right in my direct market, I won’t even take the time to even analyze the deal or even read the email.

I just respond and say not interested, because you’ll go down these… Because everyone’s like, “I just want a deal,” and you’ll analyze this multifamily, go visit the property, spend a week of your life going down this road that you don’t have a system around and trying to pursue this deal when somebody else is an expert in that thing. And that is what their system is around. They’re going to beat you out. They’re always going to do it better than you.

I think it’s so much more important to focus on what you’re good at and figure out, this is my market. This is what I do. This is my contractor team. We have a great cleaning team now, a handyman, a guest relations person. These people are all in place and there’s economies at scale around it, because all our properties are within a five minute drive of each other. We just stamp out the same thing and we’re the best at doing that very specific thing. That was kind of I think a big lesson for me.

David Richter:

Man, that is so good. Less deals, better deals, focus, that is the mark of a truly successful person, I believe, in a truly successful company, the ability to focus, the ability to say no to things. That is so…

Kirby Atwell:

It’s hard.

David Richter:

It’s hard, especially when you’re first starting. Like you said, especially in the fix and flip, it gets addictive too like, I need the next deal. It’s very easy to see like, I want every deal that comes across my plate. Okay, it’s a little bit outside. That’s okay. Then it turns out to be the worst rehab of all time, and it’s the furthest from you. You’re just like, what the heck is going on? Been there, done that. I love that. That message out there, just the focus and really being able to say no to the things that don’t serve you at the highest level.

I get it when you’re first starting. If you’re just first starting now, you might take any deal that comes across your plate. But there has to come a time when that flip switches and it’s like, hey, no. Now I get to choose. Because like you say, Kirby, it puts that power back into your hands. I feel like that’s what Profit First does too with the money side, because it’s like, we can be doing all these deals and we can be buying the houses and renting. But if we don’t manage the money, then where’s it all going?

That’s where it’s very important if you’re going to take the time to focus on the best deals, that you get the best bang for your buck and actually have a few bucks at the end of the day too. Could I ask that then, where in this process did you implement Profit First? Was it near the beginning, the middle, or when you first were able to jump full-time last year? When was the official time that you were starting to implement that to get you that clarity?

Kirby Atwell:

I wish it was like I really dove in to it fully because then I’d know exactly. I mean, I read it the first time when I was flipping, it was toward the end of flipping. I think it was somewhere around that 2016 mark and realized things new needed to change. And then I implemented separate bank accounts shortly after I started with the long-term rentals. But it was still not where it is today by any means.

I think the biggest benefit once I got it to where it is today, where you have the income account, all the other expense accounts set up and the other people’s money account, which was key, now the decision making is just so much better because I’m not kind of guesstimating where I think we are. It’s like, no, I’m pretty clear on where we’re at, and I’m clear on how much we need to do and what the margins need to be on each deal to make it a deal in order to sustain the business.

David Richter:

Awesome. If you’re listening to this, listen to what Kirby said. He did. He started implementing it and it’s nowhere near where it is today, but that’s the journey. That’s the process. The whole point is to start making profit a habit, even if it’s $10 at a time or whatever it might be. Just starting that process. Then you could be like Kirby today where he’s like, “Hey! Now I’ve got all this clarity. I’ve got actual money in these accounts. I’m paying down the good debt. I have the OPM, other people’s money, separated out.”

You’ll get to that point too if you’re listening. I just want that to be an encouragement to you if you’re just starting out at the very beginning, because Kirby, do you wish at the beginning of flipping, at the beginning of buying rentals that you had the system you have right now?

Kirby Atwell:

Oh my gosh, absolutely. You talked about it in your book. Mike talked about it in the original book. The main thing is just go set up the accounts right now. If you’re listening to this, just set up the accounts because that’s the key. And then on the first and 15th is typically when I move the money because that’s when I pay all our cleaners who clean the vacation rentals for us. I distribute all the funds that are in the income account from the bookings that we got.

And then from the expense, the operating expense account, I can pay all the cleaners and a couple other contractors that work with us. It’s all just so much clearer now.

David Richter:

Awesome. I love that. I just need to keep beating this in people’s heads. That’s why I wrote the book. That’s why we have the podcast. That’s why there’s Facebook group. That message there, what you’re saying, if we could get that started as soon as possible with people, that is the good habit start as soon as you implement, as you start implementing it and using the system. Just please listen to Kirby. Listen to all these people here on this podcast that are begging you to start this.

I really appreciate that, Kirby. That’s been some great info here today. I’ve just got a couple last questions here. Number one, what advice would you give to the audience right now that are real estate investors? It could be on anything real estate investing or outside of real estate investing.

Kirby Atwell:

I think going back to what I talked about was the biggest game changer for me, just stop what you’re doing right now and take a day and plot out what you want your life to look like five years down the road or 10 years down the road. I’d say as far horizon as you can, but it’s hard to wrap your mind around once you get beyond a certain point. What is it that you want life to look like at that point? That’s your starting point then, and then backwards plan from there.

If the actions you’re taking today aren’t going to get you to that place, we could have flipped the way we were flipping forever, and we thought more deals and bigger deals was the answer, but more deals and bigger deals brought us more staff, more marketing, all of the overhead expenses, slimmer margins, because we couldn’t manage that many, that wasn’t the answer for us. I realized that, and that’s what caused me to make the shift.

Figure out, again, how your business is going to lead you to the lifestyle that you want and what that looks like. And that will, I think, change your life the most of anything.

David Richter:

Awesome. I absolutely love that. Begin with that end in mind. I mean, it’s been said here several times today. I think that is one of the key things of being able to reverse engineer that. Kirby, thank you for not only telling us that, but living it out and showing people that you can get out of that rat race and actually live off rentals and do that. That brings me to my final question here.

You’ve provided a ton of value on this podcast. How can people connect with you? He has a podcast as well too. I highly recommend it. Kirby, why don’t you tell people how they can get in touch with you?

Kirby Atwell:

Yeah, yeah. You can listen to the David Richter episode. It was a great one, and the ‎Living Off Rentals Podcast. But I think the best place to go is livingoffrentals.com/start. We really lay out the steps to get started, especially if you want to go down the road of vacation rentals, which is obviously something I’m really passionate about. I think that’s a great place to connect with me and start.

David Richter:

It’s livingoffrentals.com/start. There you go. That’s where you can get started with him. If you’re at that place where you’ve never done a deal, that’d be a great place to start. If you’re doing the fix and flip or the wholesale side and you want to start building your passive side, go there. See the information that he has. This is someone who’s living it currently. This is not someone who’s just telling you theories of what he’s heard from other people. He’s actually living that today.

He’s implemented Profit First, so there’s a big plug for him, because I know anyone who’s implementing Profit First has that system down and they’re doing it right. They’re not just spinning their wheels. They’re getting to be actually profitable. We love what you said too about the giving account and paying down the debt and just all those different things that you brought today. Kirby, it was great having you on the show today and really enjoyed having you on.

Kirby Atwell:

Well, thank you for writing the book. I really appreciate it. It’s benefited me a lot, so I appreciate being here.

David Richter:

Awesome! Thank you so much. If you’re a real estate investor or business owner and you want to double your profit, or if you want to keep more of that profit, head over to simplecfo.wpengine.com. Thank you so much for listening and have a great day.

——————–

David Richter:

Hey, everyone. It’s David Richter, the Profit First REI podcast with Kirby Atwell today. We have a special guest, Kirby Atwell, where in this episode, we’re going to talk about how Profit First has transformed his business, because what he uses the profit account for, some amazing ideas and tips to actually move the needle inside of your business and to pay down debt and how he does that.

David Richter:

Also, he talks about less deals and better deals, of how when his mindset shifted to that, how that exploded his business, how to live off of rentals, and some of the biggest challenges that he’s faced because he has Airbnbs and rentals and whatnot. And then he tells how he was able to actually quit his job over a year ago and fully be supported by the rental income and also how Profit First has affected that and given him intense clarity and confidence to make those decisions. Here’s another exciting episode of the Profit First REI podcast.

David Richter:

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

David Richter:

We would really appreciate that if you would like to go give us a rating. Also, if you’re looking to connect with us further, I would highly recommend checking out our Facebook group, Profit First for Real Estate Investors, and that’s literally what it’s called. You can type in Profit First for Real Estate Investors, and you’ll be able to find our Facebook group right there. Come join active real estate investors who are supporting each other and growing their businesses and profits together.

David Richter:

That’s what that group is all about. The links should be in the description below. If you’re interested in working with us and implementing Profit First in your real estate business, we offer coaching and guidance.

David Richter:

If you want to work with someone who’s actually Profit First certified and who works right now currently really with real estate businesses, you can actually go start your application process by going to simplecfo.wpengine.com/apply, or just go right to simplecfo.wpengine.com, there’s an applied button right on there, if you want to actually start your Profit First journey with someone who can actually walk you through those step by step and help you know and grow your cash flow. Thanks again for joining us for another episode of the Profit First REI podcast. See you next episode.

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.