Ignite Your Real Estate Fortunes: Insider Strategies from Elite Investors

June 20, 2023

TITLE: “Ignite Your Real Estate Fortunes: Insider Strategies from Elite Investors”

EPISODE:185

“Unless you go out of your way and mess up, you’ll be okay; unless you go out of your way to find an amazing deal, you’ll probably still be okay.”

In this episode, John Errico and Ryan Goldfarb share their real estate investing journey from working in the corporate world to focusing on short-term rentals, single-family, multifamily apartments, and commercial investing.

Listen as they share their amazing partnership and journey through the ups and downs of real estate investing!

Key Takeaways:

[01:50] Introducing John Errico

[03:57] Introducing Ryan Goldfarb

[08:04] Most fun part of John and Ryan’s real estate investing journey!

[14:14] Focusing on short-term rentals and value-add construction projects

[21:26] Returns to expect when investing in Atlantic City

[27:52] Strategies John and Ryan have to make managing short-term rentals less stressful

[31:42] Their advice to aspiring real estate investors

[35:15] Connect with John Errico and Ryan Goldfarb

Quotes:

[13:27] “Trying out new things was an exercise in figuring out what I don’t like.”

[26:18] “Short-term rentals are like layering and operating business on top of real estate investment.”

[32:58] “There are always reasons not to do something, if you want to do it and if it’s something where you want to put your money… you just have to do it.”

Connect with John and Ryan:

Website: https://brickxbrick.podbean.com/e/ep-1-meet-the-partners/

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

Transript:

Speaker 1:

It’s very, very hard to make a ton of money in real estate on unlike a single deal. But in the same way, it’s very, very hard to lose a ton of money in real estate on a single deal. The sort of risk profile of any given deal is that unless you go out of your way to mess up, you’re gonna be okay. <Laugh>. Yeah. Unless you go out of your way to find an amazing deal, you’ll probably also still be, you know, okay. And, you know, okay, might be whatever metric you want. So people get sucked into analysis paralysis. They get sucked into like envying someone else’s deal or someone else’s project or whatever else. And I certainly have been a symptom, have had that, that problem too.

Speaker 2:

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

Speaker 3:

Hey everyone, this is David Richter of the Profit First, r e I podcast here with John, Erica and Ryan Goldfarb really excited today cuz they’re doing some awesome things in the real estate world, which I know can help you. And I’m excited to learn about their journey and then have them give their value and insight to you as well too. So John and Ryan, thanks so much for being on.

Speaker 1:

Thank you, David. Appreciate.

Speaker 3:

Yeah. Well then let’s jump into it, like, tell a little bit about your background, what you’re doing in real estate. Like, I know there’s, I, I could go into the bio, but I’d rather them here exactly like where you are now, where you’ve come from, you know, like we’ve got some like Ivy League degrees here, and we’ve also got some, like, just boots on the ground in the real estate and investing world. We’ve got millions of dollars of capital raise some lots of stuff across the board. So to just go into it, John or Ryan, you can Yeah. Take it and run.

Speaker 1:

First of all, thank you David, so much for having us on the podcast. We are very excited to be here and chat. I, so my background, I’m a, an attorney by education and experience. Okay. Although, when I say that, I usually say I’m a recovering attorney <laugh>. So I if you, if you mentioned Ivy League, I mean, not that it really matters, but I, I I went to Yale for undergrad in, in Cornell for law school. So that’s my like, academic background. But I left the practice of law some time ago to do technology startups. So I was in that world for a few years in California. And then in about, in 2014, I bought my first place here in New Jersey, but a two family in Union City. I was house hacking it before I really knew what what that meant.

I was living in the first floor, wrenching out the second floor, moved to the basement, rented out both floors and I, I just expanded that into a small portfolio in, in Hudson County here in New Jersey. Bought some stuff in New Haven, Connecticut. Started working with Ryan this is maybe now about maybe four years ago at this point. And ultimately sold almost all of the stuff that I had in north Jersey and in Connecticut to start investing in Atlantic City, New Jersey. That’s where I focus. Ryan and I both focus most, most of our efforts right now. We have a small fund, a private equity fund that we deploy in Atlantic City in the opportunity zone there. So it’s an opportunity zone fund, and primarily the focus is on redevelopment. So short term rentals single family, small multifamily, some commercial stuff. We’re doing some ground up development stuff pretty soon, although we haven’t broken ground on that yet. So yeah, it’s it, it’s you know, we’re, we, I think we have about it’s this is not a flex that, I don’t know this number, but I think we have several dozen properties that are operational in Atlantic City right now and, and more listings than that on Airbnb. And we have probably that same amount coming online within the next hopefully 12 months.

Speaker 3:

Cool. Ryan, you wanna give just a high level update where you’ve come from to where you are?

Speaker 4:

Sure. first and foremost, thank you David for, for having Yeah, for sure. It’s great to be here. So my, my real estate career started out of college. Kind of in parallel with starting my first job. I bought a turnkey rental out of state in Memphis, Tennessee. At the time I had just graduated college and was starting a job in commercial real estate on the debt side. So I was essentially doing underwriting of commercial mortgages on multifamily real estate. And a few months into that it was pretty obvious to me that that wasn’t what I wanted to do with the rest of my life. So I started kind of laying the groundwork for what would be next. So I ended up lasting about three years there, but during that time, I picked up a few flips, a few rentals, and kind of set the stage to do real estate investing on a full-time basis here in New Jersey. That’s about the time when John and I originally met. This was like 20 15, 20 16. We were doing similar things in a similar area. I was a little more focused on flipping at the beginning. That sort of evolved into doing rentals doing some taxing investing, doing some wholesaling and then ultimately with John doing short term rentals. And you know, fast forward to 2018, I think that was when we first started working together officially we started actually a construction business, which we quickly realized was not what

Speaker 1:

We wanted to. I do not advise

Speaker 4:

<Laugh>. That’s one thing John and I are certainly in agreement on. So that, but, but the construction business was the catalyst for doing property management management together and ultimately doing the real estate development together that we’ve been doing now for the last four or five years.

Speaker 3:

Okay. So why don’t do the construction tell, tell us your horror story or stories.

Speaker 4:

Honestly, I, I don’t think we lasted long enough doing it on a third party basis to even have the true horror stories. Oh, okay. But it was very, it was very evident from the get doing even a few third party jobs, that it was not a dynamic that we were excited to make part of our regular existence. Everyone has the highest expectations. Nobody wants to pay for, you know, nobody wants to pay despite those high expectations. And a lot of it is kind of a race to the bottom. You’re just generally competing on the basis of cost. Yeah. And most people want quality, but don’t want to pay for it. So unless you’re in a specific niche like you’re doing roofing or you’re doing larger commercial projects where people are, where your clients are businesses who are a little less price sensitive we quickly realized it was just not a market we wanted to

Speaker 1:

Be in. Yeah. The, the way that I think of it as like the line between doing construction as like a job for yourself and the line for a and it being like a business that you can operate. Mm. I, I think that if, if you’re like a mom and pop person where you’re just looking for a job and you say, I do roofing, you can make a fair, a fair living doing roofing as a construction, you know, in the construction business, if you wanna be a general contractor, you need the sort of scale and efficiency and operational expertise and all of that. That is way beyond our level of both expertise and interest <laugh>. Right. So you know, and, and we’re not we weren’t out there, you know, hanging our own drywall, you know, we were subbing that out basically. So yeah. I, I mean, we still operate the business in, in a sense to continue our, our, our projects. It’s, you know, like half business, but we don’t do it for third parties, you know, other people anymore.

Speaker 3:

Okay. Well that makes sense. That sounds like, yeah, the typical real estate investor wants these high expectations, but then yeah. Doesn’t want to pay for them. So I, if you’re listening to this, and you probably fit right into that group, because that’s how we all are, is I remember back in those days, just in making sure that, you know, you’re, you’re getting a third party contractor and you’re still trying to make the profit on your flip that you bought. It’s like, it’s just can become a nightmare. So that sounds like the mo the least fun part of your journey so far in real estate investing. What’s been the most fun part of what you, you’ve gone either one of you for, you know, the real estate investing world?

Speaker 4:

Yeah, I’d say over the last year or so, we’ve really tried to focus on not just property in Atlantic City, but a specific caliber of property in Atlantic City. So our, our mission has become that we want our projects to serve as a catalyst for redeveloping the neighborhoods in which we operate. And short-term rentals provide almost an excuse to do that because we can, we can achieve a higher, a high enough yield on a project that it justifies doing an amount of work that no standard investor or no flipper would, would ever undertake. So we’ve really tried to push the envelope on the design front. We actually have an in-house designer now who she’s remote, but she, she does some really incredible work and I would say the most fulfilling part of what we’ve been doing over the last years, at least to me, has been seeing some of her creative visions come to life and seeing our team kind of accomplish that, you know, with, with John and I at this point, just as a relatively small part of that.

Speaker 3:

Okay. Cool. John, would you agree with that? Or did you have a different, do you have something different on your journey that you were like, ah, this was my favorite part, or anything like that?

Speaker 1:

Yeah, I, I, I think to echo Ryan’s sentiment you know, the, the motto that we’ve used with our business is rebuilding Atlantic City. Yeah. And obviously we’re, we’re a component of, you know, I like to think that we’re a component of that. So the changes that have happened in Atlantic City, you know, even in the time that we’ve been investing there, which I like to think that we, we’ve been a you know, hopefully a part of bringing about are really inspiring to me. And that’s really fun. I think one of the coolest things about real estate is that it is tangible, you know, coming from the startup world where everything is kind of intangible, right? It’s like a website or a concept or whatever to own like a brick and mortar property and then see that property change and then see that change cause other properties to change. Cause the perception of the street to change, cause the neighborhood to change that is really cool. So, and, and, and we’ve only been investing in Atlantic City really for about I’ve been investing for about four years and, and really seriously for about two years, maybe three years. So it’s it’s really, really fun to see that change happening.

Speaker 3:

Yeah. That’s cool. I like that a lot. You know, you’re not just not just out there making the money, but then in seeing the actual end product too, it’s very fulfilling. And seeing like, okay. And like, even like Ryan said, seeing something that a designer takes, and especially if you’ve got a high end designer or a designer who knows what they’re doing, some pretty cool things that can happen in absolute, in real estate space. So, yeah. No, that’s, that’s cool. Let me ask this, why, why’d you go from tech to real estate? You know, John, why did you go from like, the startup world too, the world of real estate investing?

Speaker 1:

Yeah, it’s a great question. So a couple reasons come to mind, but you know, that sort of more significantly, I think one the culture in, in tech investing, which I, I, you know, I, tech startups, tech investing, all that sort of stuff, which I think has now been coming to light, you know, maybe unfortunately a little bit through recent events with the startup world. But you know, I, I found it to be really not something I, I enjoyed. Okay. There’s a lot of toxic ness there. There’s a lot of just bravado and kind of like bs that eeks through a lot of startups and investors and whatever. And I, I didn’t wanna be a part of that. A and then b to my point before about tangible nature of real estate, okay. You know, it felt like a lot of startups, a lot of startups are, are having this big vision about, oh, we’re changing the world and we’re doing these amazing things and, you know, whatever.

And, and maybe some startups actually are doing that, you know, that have real impacts on people’s lives. But 99% of startups are like, you know, you’re not changing the world by making it more efficient for me to, you know, auto respond to my emails or whatever. Right. I mean, maybe in some very, very remote way or something. Sure. But with what, with what we do I like to think like, for example, again, in Atlantic City, like I can see the tangible changes. There’s no question that a property that we’ve renovated or redeveloped is better than what it was before. And that has a ripple effect on other properties. And so that is really, really gratifying. It’s sort of the entrepreneurial nature of being in the startup world combined with that. You know, I really feel as though my time is being spent in a significant way.

Speaker 3:

Yeah, no, I like that a lot because that’s, I think that speaks to a lot of people that are in the real estate investing world. Cuz if, especially if they’ve come from, from another industry to this, it’s, there’s so many different things, you know, the benefits of working in the real estate world. Right. So, Ryan, you jumped around from different exit strategies. Was that because you were trying to pinpoint what you were good at? Or like that you liked and enjoyed what made the most money? Like, cuz I heard flipping, I heard wholesale, I heard, you know, now the design stuff that you’re doing and construction, which was not a fun part. It sounded like, you know, of the journey. So like, were you trying to get like what, just different exit strategies under your belt? Or like what was the long term play there? Like what works in the real estate world?

Speaker 4:

Yeah, I, I think for me it was, I, I didn’t go into it with an explicit direction of where I wanted to go. I had a sense of where I wanted to end up, but didn’t know exactly how I was gonna get there. And I think a lot of trying out new things was an exercise in figuring out what I don’t like. Yeah. So I quickly realized I don’t like flipping. I’m okay with flipping as a small component of what I’m doing. Right. But to live and live and die by flipping is really tough because the, the results or the the outcome is binary. You either lose money or you don’t. I mean, you either make money or you don’t. Yeah. and I think,

Speaker 3:

I think you said it right the first time, but yeah. <Laugh> lose money or you don’t

Speaker 4:

Right. <Laugh>. and you know, like long-term rentals, we still do, we still have a handful of those. But it’s not exactly something that, that gets me excited. Yeah. similar with things like wholesaling and taxing investing. But with short term rentals and with doing the types of heavy value add construction projects that we’re doing I feel like there’s a, there’s more of a, there’s more of like a driving force than like a a, a bigger vision behind it all. It’s not just a means to a paycheck, it’s a means to something bigger.

Speaker 3:

Yeah. No, that’s good. I like that cuz it’s not just about the dollars and cents at the end of the day, it’s about feeling fulfilled, like you both said a couple times here and how real estate’s a tangible and tangible stuff that you could see that gives you that as well too. It’s not just some website, no, the

Speaker 4:

Dollars and cents don’t

Speaker 3:

Hurt. The dollars and cents do not hurt. That’s for sure. So let’s talk about dollars cents since it’s the Pro first RIA podcast. Have you ever had it either one of you a time where you’re like, oh my gosh, there’s more going out that’s coming in. Maybe that was during your flipping years, Ryan, or that flipping time or like other times, but, you know, did you ever feel like, what the heck is happening? I thought real estate was the path of freedom, not to headaches, probably in the construction world, but I’ll let you guys take it from here.

Speaker 1:

Yeah, absolutely. I mean, I, I think, I think it’s something that Ryan and I talk about a lot in, in almost every context. So certainly the construction context was not a particularly profitable endeavor for us <laugh>. Yeah. but you know, I I, I think where we are in our business right now just for context is that, you know, we have the construction company, we have a full-time construction manager who runs that. And so obviously we pay that person’s salary. We, you know, we pay subs and everyone else. Ultimately it’s from the project itself flowing through the construction business. But, you know, we, we paid at the construction level, we have our property management company where again, we have a full-time operations person who runs that. And then we have cleaners, we have handy men and people, we have all the other, you know, ACC Mazda that come with running a property management company.

And then we have sort of our holding business or company, which is where we own the assets that we manage or do construction on. And so we have a lot of different pockets where money flows in and out. And it’s very common for us in any given week or month or whatever to look at some of those entities and be like, well, there’s not any money in this pocket. Right? Like, there maybe there’s some money, some money in some other pocket. Maybe there’s money that’s owed here or there or whatever else. But, you know, I, the dynamic that Ryan and I talk a lot about is that, you know, we’re, we’re sort of for us in a transition phase between that stage where it was Ryan and I doing everything, or we were the construction manager, we were the property manager, we whatever, to running a business where we hire people, but we’re not yet at a point where a lot of these businesses where it’s like, well there’s so much free cash flow where we can hire someone to do kind of our job and still also make a lot of money from doing it.

And there’s that too. And then the seasonality element is, is another element too for us because we, we do short term rentals in, in Atlantic City that’s in the summer, right? So this is our slow season. We’re, we’re just ramping up into a time period where people are going to Atlantic City. But like February is I think our very slowest month. So, you know, it’s just just a time where there’s no money coming in and our expenses are very comparable. We self to pay the mortgage, pay the taxes, pay insurance, you know, every month. So yeah, it doesn’t matter if we don’t even there,

Speaker 3:

How do you get through it? Do you plan in advance or is that like most investors who just like, oh, it’s a low time, we’ll do something else or get a loan or whatever. Like how do you get through those more difficult times or the slower times of the season? Do you plan for those?

Speaker 1:

Yeah, I mean we, we try to, I, I think the, the what in our, again, because we do short term rentals right? We can benchmark our performance in every, any year with a prior year we’ve been and expanding, expanding our business. So, you know, the, the, the hardest stuff for us is not necessarily that it’s a slow time period, it’s that, well, you know, we, we have this construction project for example, and we thought it would be done in November, but now it’s, it’s February and it’s still not done. And so the expenses that we thought we would bear in November, were now bearing in February and March. And the carrying costs, you know, maybe we have construction loan or whatever that we thought we would’ve, you know, we would’ve refinanced it by December or whatever. We’re now not even yet in the process of financing it.

Right. So that’s the hardest stuff I think for us is that, well we have this like overage basically we didn’t account for that because all of our planning was, you know, like at, at latest would be done by November, maybe December. Right. But now we’re still in February and maybe March and it’s still not done. Right. And so that, that’s the sort of stuff that I think drives us insane. So yeah, we’ve gotten loans and we have to get extensions on loan, on on construction loans, all sorts of stuff. And that, that is very stressful. Yeah. Particularly in a high interest rate environment. Like Yeah. If we have to like get an extension and a, a loan that we got maybe a year ago, which is much more favor of interest rate than today. Yeah, that sucks. That really hurts. Yeah. Right.

Speaker 4:

Yeah. And, and to piggyback off that, one of the major cha or another major challenge that we have is that our operations are all incredibly co-mingled with one another. Mm. So even if on paper they are separate and even if we, we try our best to kind of operate them as separate businesses, at the end of the day they all kind of sink and swim together. So one example of that is, as the owner of a given vacation rental property in Atlantic City, the sum when the summer is great and revenue is high because we get compensated through the management company based off of a percentage of rent, the revenue for the management company is also similarly high. Whereas in the winter, in a month like February, it’s the flip side of that. Yeah. the revenue is low for the owner of the property, which is us and the revenue is also lower for the management company, which is also us.

Speaker 3:

Yeah. So do you plan for that as well too? Cuz it sounds like you take the hit on the personal side, so it’s like gotta even that out a little bit throughout the years to do you, what do you do there? Do you set aside some for the slower times for yourselves or like, cuz obviously that’s the, that’s the ups and downs of real estate it sounds like. Yeah, a lot of people have.

Speaker 4:

Yeah. We, we definitely keep aside some cash to, to account for the seasonality and the, I mean we, we like to have cash around just for worst case scenarios anyway. I think towards the end of that period, like if our slowest months are probably October through no through February and by the time February gets around, oftentimes depending on how weak or how strong the winter was, we may or may not have depleted those reserves. Sure. So we generally try to have a plan B and a plan plan C for additional liquidity if in the event that that comes up, whether it’s a line of credit or the ability to borrow against something else or to float cash from another, another vehicle or from our own finances.

Speaker 1:

Yes.

Speaker 3:

Do you mind me asking, what do you, so during a typical year, even with the slow months, what do you typically gross on a property in an Atlantic city for a short term rental? Or are they so different? Cuz it sounds like you’re doing a lot of customized houses too, you know, like with these designs and like the actual going above and beyond. But is it like a hundred K in gross or 200 or like 50? Or like what does it, like if someone was thinking about investing in Atlantic City Yeah. In short term rentals, what kind of returns or at least gross rent could they get?

Speaker 1:

Yeah, I mean, as you said David, that there’s a huge range depending on the type of asset that you have. But like, so the smallest stuff that we have are small one bedroom type of bargain. And the largest that we have is we have an eight bedroom. Oh wow. Ha like a mansion. Yeah. <laugh>. So, you know, I I think that the range rank, and correct me if I’m significantly off, but I would say at the very, very low end, you’re probably gonna get, you know, 30,000 or something like that, 25,000, 30,000 from the smallest place. The biggest places that we get are, you know, 160 k plus you know, we could even get to like 200 k depending on Wow. On the year or the seasonality. So, and obviously the, you know, the basis the cost of those assets is similarly all over the place. And you know, again that’s, that’s gross, right? So we have, yeah. We have expenses and whatever else I, you know, I I think typically we say that our expense ratios may like 50% on average. Right. Okay. So if you just look at that and you say, okay, well 50% of that is gonna be operating expenses and caring costs, whatever else the other 50% is, is money that we could take home. In reality. Yeah. You know, there are capital expenses and other things that Right. That come up every year, but Yeah.

Speaker 3:

Yeah, exactly. But it sounds like if you’re able to do that, you’re still biding out the long-term rental that you could do even for the mansion. Is that right? Would you say?

Speaker 1:

Yeah, absolutely. Yeah. Okay. Yeah, in Atlantic City for for sure. That, that, that’s the appeal of doing it in Atlantic City is that oftentimes, or at least, you know, besides recently when, when, now that people know what Airbnb is, it’s prices have adjusted somewhat, but you know, you’re buying basically at prices that anticipated more or less that, you know, you could rent it at a certain amount and if you could rent it for triple that, then that’s your arbitrage. Right? Yeah. That’s, that’s the advantage.

Speaker 3:

Good. So it sounds like you’re actually doing that with, if you can get 50% opex that it’s pretty good, you know, like being able to have that left over and, and do that and actually cash flow it. So I’m sure some years are better, some years are not. So it’s just depending on where it is right then, but no, I like that. It sounds like it’s been a good journey. And how many units do you have in Atlantic City now, did you say? Understanding,

Speaker 4:

I think our total, our total listing count I think is 30. Oh wow. Seven or something like that. That’s across New Jersey. Yeah. We have maybe about nine of those in North Jersey. And then we have another I have a number somewhere. I think we have another like 78 units in some stage of renovation, 48 of which are in a single building that we own.

Speaker 3:

Okay. Is that gonna be a short term place or is that gonna be

Speaker 4:

It’s gonna be a short term rental hotel. Hotel more, more akin to a hotel.

Speaker 1:

More can do like a boutique hotel. Yeah, yeah. Yeah. But it’s, so that’s big. Like our big, big project we’re, we’re minority owners of that project. Okay. but we’ll, we’ll ultimately be, you know, managing and sort of responsible over the execution of it,

Speaker 3:

But 37 others that you own now that’s where it sounds like it’s cut becoming more <laugh> where you have to step out and have other people take over. Cuz that’s a lot of units, you know, like I managed I think 18 at one point with a guy I was working with and that was a lot cuz it was just us internally.

Speaker 1:

So Yeah, the hard part for us is that, you know, it’s, as Ryan said, it’s 37 and, and those are pretty dispersed. So it, you know, it might be, you know, there’s a house that’s one listing, there’s maybe a two family that’s two listings. There’s another one family. So, you know, you’re, if you had 30 say, you know, 37 apartments and they’re all under one roof, right. You have one literal roof, you might have one HVAC system or whatever, you have one waterline coming your house. So for us it’s like, you know, when you have 37 Indi, it’s not exactly 37, but just say 37 individual roofs and water heaters and furnaces and, you know, all that sort of stuff. That is where a lot of the, the, the thing that drives us crazy comes in because it’s like, you know, for, to have every clock chiming and and synchronize at the same time is really hard when you have 37 separate assets. So there’s always something, you know, going wrong in some manner of, of speaking. And that that’s what makes it like a full-time job for someone to manage it. Yeah.

Speaker 4:

Yeah. And, and beyond that, we we’re located in the northeast where housing stock is, is older, so mm-hmm. <Affirmative>, these are, you know, 37 different units in buildings that were built a hundred years ago and have probably undergone a half a dozen, mostly terrible low quality renovations. Renovations. Yeah. So the, the properties that have been the least operationally intensive for us are the ones where we’ve obviously gone in and done a full gut renovation after buying it. But the majority of the other one or the other ones where we’ve done less work there’s always some kind of lingering issue. Yeah. and then on top of that, because we’re doing short term rentals, it’s not frankly in, I think our experiences has wor this out. Short term rentals is like layering an operating business on top of a real estate investment. I, I find it somewhat misleading to even consider short term rentals a real estate investing strategy because it really is, is running a business outta Right.

Piece of real estate. Yeah. And there are a host of other operational concerns that come with that because if you, I was even, I was listening to someone or reading the other day from another SDR operator talking about home warranties and like if you, if you buy your house and you buy a home warranty kind of insulates you from the downside risk of hot water heater going or an appliance braking or, or whatever. But with a short term rental, even if you have a home warranty, your guest who’s paying $3,000 to be there for three nights doesn’t care if the home warranty company can have someone come out in a week to fix it. Right. And fix while they’re there. Yeah. So you, you just, you have to, you have to like build in that premium across the board. Everything is more expensive when you need it done well and you need it done fast.

Speaker 3:

Yeah. When it’s a business, when it’s actually a business and not just a, not just a place of, you know someone’s house in someone’s living quarters, it’s someone that’s coming in and on a short term basis. So. Okay. Last couple questions here. What what would you say to someone that’s getting this, the short term rental? Like, do you use some of these systems to help automate some of this? Cuz like you said, this is a business, so like what pieces have you connected that’s made it more of a business and made it a little bit less stressful for you? Do you have anything set up right now? Like Right. Connections or automation or whatever? Yeah,

Speaker 1:

Yeah. I mean, we’re, we, I I think that that question is something that we, we are obsessed with <laugh> because you know, we only have so much time and obviously we wanna, you know, we’re expanding, right? We’re, we’re gonna have more stuff that’s coming online. So we, yeah, we’re big advocates of technology. We have a pretty developed tech stack at this point that helps us manage our short term rentals. You know, everything, we use Slack for team communication. We have guesty, which is a channel management software essentially coordinates bookings through Airbnb and VRBO and direct bookings and all of that. We use a bunch of different analytics tools. We have VAs and the Philippines that help us with guest communications. Oh, good. Copywriting, social media, all sorts of stuff like that. The designer that Ryan mentioned, yeah.

Is, is a, is a VA in essence. But we, you know, it, it’s we’re, we’ve taken the opinion to sort of speak to the, like, you know, where does the money go? Kind of profit first mentality of you. Yeah. saying, you know, we’re, we’re, we’re really putting a lot of our potential profits from the business back into the business right now under the hopes that we can scale with our current infrastructure without really adding a lot more headcount. Hr, which is really kind of where our costs are for our business, right. So we, we think that we have a team right now that could maybe accommodate double the amount of, say, properties or listings that we have in Atlantic City. But obviously right now we have half of that total. So, you know, we’re sort of paying the, the operational costs for that team when we have half the properties that that team is kind of can, can can accommodate. So we’re hoping that within the next 12 months when that stuff comes online, it’s like, okay, well, you know, we’re able, now we have this kind of, you know, everything is kind of you know, every incremental property that we got in is just profit to us. There’s, there are fewer expenses per se. So that, that’s our, our goal right now as a business. We’ll let you know in 12 months how that worked out. <Laugh>, right? Yeah. That’s where we’re shooting. Yeah. Yeah. Need

Speaker 3:

To redo it in 12 months and see where you are because yeah, that’s I get where you’re coming from and then I gets fun when you can add those. So what about all those units that are coming on the line? Is that gonna double it or is that just gonna get you to where it’s more breakeven

Speaker 4:

That Yeah. That, that scale should get us, that should disproportionately impact the bottom line. If, if that, you know, when we get to that scale, the sort of marginal cost of each listing or the, the expenses per listing should go down tremendously. Which means that for each successive booking that we add, there’s even more profit in there. Yeah. I was talking to someone the other day about this, but I, I, I feel like we have the tech stack of a company that has like 500 listings under management, right? So we can, I think, scale it pretty quickly and pretty efficiently. Obviously there’s some, there are some personnel issues to account for in doing it, and then we’ll probably need to hire at least another person to do guest communications and we’ll certainly need reinforcement on the maintenance side, but the hope is that the infrastructure is there and it’s scalable.

Speaker 3:

Yeah. Yeah. Awesome. It sounds like you’re on, on your way now. We just have to interview you again 12 months from now and see if it was worth it or if this is gonna be another construction call and it’s like, oh my gosh, that was horrible. Just kidding. <Laugh> sounds like you’re on, like you said, you, you come from the tech world, so it’s like more of like, you’ve got a lot of the stuff that I feel like a lot of people struggle to get upfront that takes away their time from like, being able to actually do the things to grow the business side of it. Sounds like you’ve got some of those systems in place. We used Guesty, which was a great platform. Yeah. So I like that recommendation. You know, just things like that to just really help you get a handle on what else is going on. So this has been awesome. Thanks for being here today. I just wanna ask one last thing. If you were to going to talk to a real estate investor right now in today’s market, what advice would you give them?

Speaker 1:

Well, you know, my, my general piece of advice to everybody that, to anyone that wants to become a real estate investor is just to do it. I was having a conversation over lunch with somebody yesterday that was thinking about going into real estate investing. And you know what I, what I said to ’em about real estate investing was, it’s very, very hard to make a ton of money in real estate on like a single deal, but in the same way, it’s very, very hard to lose a ton of money in real estate on a single deal, right? Yeah. Like the, the, the sort of risk profile of any given deal is that unless you go out of your way to mess up, you’re gonna be okay. <Laugh>. Yeah. Unless you go outta your way to find an amazing deal, you’ll probably also still be, you know, okay.

And, you know, okay, might be you know, whatever metric you want. So people get sucked into analysis paralysis. They get sucked into like, you know, envying someone else’s deal or someone else’s project or whatever else. And I certainly have been a symptom have had that, that problem too. So you know, there, there are many reasons not to do something, right? Like, you look at the interest rate environment and you say, oh, interest rates are really high, man, I should have bought 12 months ago, or I’m gonna, I’m gonna wait another 12 months. And, you know, okay, like, maybe that that’s fair, but like in 12 months from now, is there gonna be something else? Right? Maybe 12 months from now, there’s some other issue, right? The economy’s not doing great. This and that, whatever else, you know, if you don’t short term rentals, maybe there’s, the bus has really exploded or, you know, I don’t know, whatever.

So there’s always reasons not to do something. I mean, if you wanna do it, if it’s something where you wanna put your money, if it’s what you wanna do as a, as a even career or whatever, like, you just have to do it. You can’t, you can listen to the podcasts are great, you know, we have our podcast, you know, these are great sources of information and I listen to podcasts too all the time, but like, the learning that I got from doing it is not comparable to what I would listen or read about or whatever you like have to do. And this is coming from someone with like a lot of education. Like, you have to do it. You know, I, I’m a big proponent of

Speaker 3:

That. No, that’s great. Ryan, you got anything? Last remarks?

Speaker 4:

Yeah, I, I think my answer to that question will say a lot about the working dynamic between John and I. John’s response was essentially just do it. Yes. And my, my response was going to be underwrite the absolute worst case scenario and then ask yourself if you can live with that. And if you can live with that, then go ahead with it. I think that’s especially true in times like this when interest rates are high and the, the health and outlook of the economy are a little more suspect than they’ve been in the last few years. If you are okay with that downside, if you have the, the means to weather a little bit of a storm or you just are kind of willing to, to suck it up then go for it.

Speaker 3:

There you go. We, that’s why you have to have the yin and the yang here. Like, you got, John needs Orion and Orion needs a John, you know, like it’s a, it sounds like this is a really good fit. So no, that’s great and that’s great advice on both ends. Make sure you do take action and make sure that the action you’re taking is the best action, so you don’t have to go backwards as well too. And that’s what we wanna make sure we’re helping you here on the Profit First r i podcast, making sure that you know where all your dollars are going so that way you don’t have to start all over again or maybe in the hole like some of the people that we’ve interviewed, but have caught out in that hole with Profit First. So just wanna make sure you have that.

Thank you so much. If you’re listening to this episode for tuning in, again, if you’re needing help on the financial side and wanna make sure you can underwrite the worst case scenarios, but also take action on it as well too, and make sure you’re getting out there, head over to simple cfo.com. We can help you get those numbers in order to make the best decisions possible and actually take the action. So go to simple cfo.com, book a call there. Then last question here, is there any way to get connected with you guys, like either a website or social media or however they, you know, can get in touch with you?

Speaker 1:

Yeah, so we we have our own podcast that David will be appearing on not sure temporally when that will be relative to when this comes out, but yeah. It’s called The Brick by Brick Podcast, brick X Brick podcast. The easiest way to contact at least me generally, is through email. So my email is john jhn liberty hudson.com. And I, I love, I, you know, we have our own podcasts and whatever. I love talking to people about real estate investing or any advice Atlantic City specifically, so definitely don’t hesitate to reach out.

Speaker 4:

Awesome. Yeah. And you can find, if you’re interested in, in traveling to Atlantic City you can find any of our listings at our direct booking website, which is atlantic city vacation rentals.com. I can also be reached via email. Mine is ryan, r y a n liberty hudson com. You’re not

Speaker 1:

Gonna throw the Twitter feed, Ryan, the, the, the Twitter account.

Speaker 4:

<Laugh>, no, <laugh>, we don’t know another 10 minutes for

Speaker 1:

Me to explain. Ryan has a Twitter Twitter handle that is very difficult. If you, if you heard it, you would be like, what? You have to spell it out, so, okay.

Speaker 3:

Okay. Well then maybe we could put in the show notes or something so that way it doesn’t have to try and try get

Speaker 1:

Speaker 3:

Out on here. But that’s so they gave the contact info, they gave the direct booking sites, so if you’re going there, check out there Airbnbs and their short-term rentals, the case rentals out there. Good stuff. Thank you so much guys for being on today and providing the value that you did. And if you’re listening, remember, make Profit a Habit in your business. Thanks so much again, guys.

Speaker 1:

Thanks. Thank you, David.

Speaker 2:

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

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

Episode: 242

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

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

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

Listen and enjoy the show!

Key Takeaways:

[01:01] Introducing Jay Conner

[05:00] Introduction to private money

[08:30] The Great News Phone Call

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

[13:18] Maintaining relationships with private lenders

[15:40] Private money vs traditional money

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

[25:18] Advice for real estate investors

[29:01] Connect with Jay Conner

Quotes:

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

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

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

Connect with Jay:

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

Tired of living deal to deal?

Transcript:

Speaker 1 (00:00):

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

Speaker 2 (00:34):

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

Speaker 3 (01:01):

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

Speaker 1 (02:07):

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

Speaker 3 (02:24):

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

Speaker 1 (02:43):

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

(03:38):

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

(04:27):

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

(05:18):

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

(06:10):

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

(07:02):

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

(08:11):

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

(09:06):

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

(10:04):

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

Speaker 3 (10:38):

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

Speaker 1 (11:17):

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

Speaker 3 (12:22):

Right? Yep.

Speaker 1 (12:24):

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

Speaker 3 (12:33):

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

Speaker 1 (13:22):

I mail ’em checks.

Speaker 3 (13:25):

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

Speaker 1 (13:33):

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

Speaker 3 (13:41):

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

Speaker 1 (13:50):

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

Speaker 3 (14:00):

Yep.

Speaker 1 (14:01):

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

Speaker 3 (15:27):

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

Speaker 1 (15:32):

Options. Does that make sense?

Speaker 3 (15:34):

Yeah, that makes sense. A hundred percent.

Speaker 1 (15:37):

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

Speaker 3 (16:14):

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

Speaker 1 (16:33):

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

Speaker 3 (17:33):

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

Speaker 1 (18:04):

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

Speaker 3 (18:20):

Yeah, me either.

Speaker 1 (18:22):

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

Speaker 3 (18:53):

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

Speaker 1 (19:12):

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

Speaker 3 (19:17):

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

Speaker 1 (19:20):

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

Speaker 3 (20:25):

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

Speaker 1 (20:50):

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

Speaker 3 (21:53):

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

Speaker 1 (22:07):

Well pay ’em on time.

Speaker 3 (22:08):

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

Speaker 1 (22:12):

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

Speaker 3 (22:42):

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

Speaker 1 (23:03):

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

Speaker 3 (23:06):

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

Speaker 1 (23:10):

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

(23:37):

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

Speaker 3 (24:31):

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

Speaker 1 (25:18):

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

(25:26):

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

Speaker 3 (26:11):

That’s so good.

Speaker 1 (26:13):

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

Speaker 3 (27:08):

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

(27:55):

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

Speaker 1 (29:01):

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

Speaker 3 (30:31):

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

(31:13):

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

Speaker 1 (31:51):

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

Speaker 2 (31:54):

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