00;00;09;21 - 00;00;30;03

Unknown

Welcome to the Profit First for Real Estate Investing podcast. Every week we bring you top investors and experts sharing how they create clarity, cash flow and consistent profit. This episode is brought to you by simple CFO. Profit first. Profit always. Let's go. Hey, what's going on? This is David Richter, host of the Profit First for Real Estate Investing podcast.

00;00;30;05 - 00;00;50;18

Unknown

Today's episode is a little bit different. Instead of me hosting, the tables got turned and I got interviewed on Jason Lucas's No Flipping Excuses show. We dug into a lot of my favorite topics, including the time we did $25 a month while still going broke. The Golden Trio bank accounts every investor should set up this week. How to find your keep number and stop running on the Hope and pray plan.

00;00;50;18 - 00;01;12;29

Unknown

And while you're getting your finances dialed in, make you the kind of borrower lenders actually fight to lend over and why. Getting your finances dialed in makes you the kind of borrower lenders actually fight to lend to. If you've ever felt like you're closing deals but feel stuck, this episode is for you. I hope you enjoy.

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Unknown

Hey, what's going on? It's Jason Lucas with the No Flipping Excuses show. I am so excited that you're here with us today. I've got a special guest joining us. We're going to be diving into some very important topics. But before I do that, I want to thank those that are returning to this podcast to our YouTube channel. Thank you so much for being a supporter of everything that we're doing.

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Unknown

We want to provide as much to you as possible, so that you can see the profits that you want in your life. If you're brand new, make sure you hit that subscribe button below. We would love to have you as a subscriber, and we would love to make sure that you get notified of brand new content. So make sure you click on that little bell as well.

00;01;59;17 - 00;02;29;03

Unknown

Give us a thumbs up if you enjoy this video. You enjoy our channel and as always, you can always drop a comment below so we can continue the conversation here. So I've got a very special guest with us. He made a really great deal with the individual that wrote the book Profit First. Mike McCallum. It's I remember riding around on our lawnmower because it takes about three hours to mow, and I've gone through a lot of Mike's books.

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Unknown

But Profit First was one of the most profound books that I was like, oh man, this guy just simplified everything. And what my guest today, Mr. David Richter, did, is he took profit first and made it for real estate investing. Specific. So without further ado, David, how are you doing, man? And congratulations on the book, man. I'm doing incredible and thanks for having me on the show.

00;02;54;17 - 00;03;16;09

Unknown

And yeah, I appreciate that. That was that was definitely life changing for me. But I mean, profit first was life changing for me when I originally read the first book. So I'm like, got to get this message out to everyone, especially the the people that have been good to me. Absolutely, man. And so for people that, you know, may have seen your book, which I'm hoping they have, if they haven't, you should go check it out right now.

00;03;16;09 - 00;03;39;21

Unknown

But you're this author, you're a real estate investor. Tell people a little bit more about yourself so that they can be aware of how long you've been in the business, what type of deals you're doing, all that good stuff. So about ten years ago is when I got started in real estate and read Rich dad, Poor Dad like everyone else and their mother and you know, in college, good friend gave me that book, changed my life, changed my thinking, all that good stuff.

00;03;39;21 - 00;03;56;13

Unknown

So I actually started working with this was in my like I was 19, 20 at that point, did my first deal, then, you know, bought a fixer upper, fix it up. It was it was an incredible experience because then I got around other investors in my local market, started working with a group that was doing about five wholesale deals a month.

00;03;56;13 - 00;04;18;20

Unknown

So they had already started clicking along. So I got to see that business grow from $5 a month to 25 deals a month and grow to a bigger team, and I'm like, I got to be a part of it. About 800 deals while I was there between, you know, fixing flip wholesale turn keys like residential, you know, real estate, all anything you think about in that world we did at rentals lease options.

00;04;18;20 - 00;04;35;10

Unknown

And so I got a lot of different experience because I sat in a lot of the different seats, because once you're growing, you can actually have different seats in different departments. I was on the leadership team. The final seat I saddened was the finance seat because I did, I liked that, I mean, if you could see me now, if you're on YouTube and you see me, it looks like I like the finances.

00;04;35;10 - 00;04;59;07

Unknown

So I get that. But I love real estate. And that's where I sat in that seat. And I finally figured out because I had I have zero financial background, no accounting, no bookkeeping, no nothing. But I sat down with the CPA that at that time and said, okay, teach me what the hell means, what's profit and loss? The balance sheet like, teach me what you know, AR and AP me, you know, like tell me everything so I can have an understanding of what's really going on.

00;04;59;07 - 00;05;14;05

Unknown

Because if I'm going to sit in this seat, I want to know what's going on. So I got like a crash course then, and it really opened my eyes to the power of the numbers, because even though we were doing $25 a month and that sounds amazing, we were spending 26 worth out the door and I'm like, what?

00;05;14;05 - 00;05;29;15

Unknown

The freak is happening? But then we're going to mastermind events and all these different places and then like everyone standing up like, yeah, we're doing seven figures. And then at the bar, they're crying later because they're like, we're going bankrupt, though, because we have no money in our accounts. And I'm like, oh, you know what? This is probably an epidemic.

00;05;29;15 - 00;05;51;03

Unknown

It's probably not just us. That made me feel a little bit more like, okay, it's not just me that's going through this. So that's where I got started in real estate. That's the like thing that kicked it all off. Then fast forward like a year later. From there, I moved across the country, stopped working at that place, started working with another investor in the Richmond, Virginia area, Rich Lennon.

00;05;51;03 - 00;06;04;22

Unknown

Love that guy, he said. And I told him, like, hey, show me your books if we're going to partner up together, like, I need to see your numbers, because now I know how to read it, and you can't just tell me the business is doing well, like I know what to look for. And then his his books were a mess, just like everyone else.

00;06;04;22 - 00;06;20;01

Unknown

And their mother, you know, like, who's a real estate investor? Business owner. I said, we got to clean this up. I said, if you don't know what you're making, spending and keeping, then why are we even doing real estate investing? Like, we got to get some groundwork here. So we did. We got it cleaned up. That's where he said like three months later.

00;06;20;03 - 00;06;34;09

Unknown

Like, this has been life changing because now he had the clarity. He had the clarity to affect those numbers like to keep more if he wanted to. Or did he need to go out and make more or spend it in the right place? But that's when I was also introduced to the book Profit First right at that time, because I had helped him.

00;06;34;09 - 00;06;49;05

Unknown

And once he said that, I'm like, I got to help other people. I got to create a company. Like there's probably a lot of people struggling with, you know, I'm doing deals or doing that inconsistently or, you know, like I'm just scared about what to do if you're doing your first deal. A lot of people ask, what do I do with this money?

00;06;49;06 - 00;07;07;22

Unknown

Like, you have the power usually in that first deal. Like if you do a fix and flip, you might have 12 months worth of W2 crammed into one check, right? What the freak do I do with that? So that's where I was like, okay, I want to help people on that side. So that's where I started. Simple CFO, but I got a call from one of my mentors, Gary Harper.

00;07;07;22 - 00;07;25;19

Unknown

He said, hey, you should read the book Profit First. So I read that book. I'm like, oh my gosh, if I would have just had this like seven years ago in this other business, like, we could have been so profitable in that company where we were doing a ton of deals because like, the more deals you're doing, if you can catch more of the money, like you have more money to catch.

00;07;25;19 - 00;07;46;28

Unknown

But like at that point, you know, I was just, okay, now that I have this knowledge, I want to get it to everyone. That's where like a year into it, after implementing Profit first in real estate investing companies, I went to Mike and said, I need to get this book out because I have a heavy real estate background and I really know that this could this is unique enough to the real estate space that I need to get this specific book out there.

00;07;46;28 - 00;08;15;03

Unknown

And then he agreed to that deal. And that's kind of how we ended up here today and what we're doing. But that's the high level background of real estate profit first. And like knowing that a lot of people make money or start to make money but don't know what to do with it. Yeah. No, you bring up some amazing points because when I was getting started and, you know, we were making these checks like 26 grand, 40 grand, you know, 18 grand, you know, you got all this money coming in, and a lot of people have no idea what to do with.

00;08;15;03 - 00;08;33;15

Unknown

It's like, you know, it's like an NFL or an NBA player. They come in, they make all this money right out of the bat. What do they do? They go buy houses. They buy every like their parents houses, siblings houses. They buy all these fancy cars. And then they might have a 3 to 5 year career and they're completely out of money.

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Unknown

I've seen it happen. I've had to do short sales for former athletes before because they didn't know how to manage their money properly. So why don't you kind of hop in the dynamics behind maybe even the systems of, hey, somebody that's watching this right now, maybe they get their first or next deal done and they rip a 20 to $30,000 check.

00;08;54;14 - 00;09;15;10

Unknown

What's some of the things that you think that they should be implementing, so that they can probably be secure from a tax side. And then also they're setting up their business for sustainability. And that's I love that you brought that up because I call real estate investors. They are like the athletes of business ownership because you can make so much money in a short amount of time.

00;09;15;15 - 00;09;31;02

Unknown

Like it is literally like you can make like what an athlete makes. I mean, if you really put your head down, you could be doing seven figures a year and some athletes don't even make that much, you know, like if unless you're just a superstar status up there. So it's like you have that power in your hand. So like, what do you do with it?

00;09;31;06 - 00;09;50;13

Unknown

That's where Profit first, like so many people have read Rich dad, Poor Dad. And he says, pay yourself first, or Napoleon Hill's books, or The Richest Man in Babylon, like they all say the same things of like a portion of all you have is yours to keep. Like make sure that you're paying yourself. Like, you know, successful people do this, you know, they make sure that they have money there.

00;09;50;14 - 00;10;13;04

Unknown

That's where I felt like those books ended, though. They were like, yeah, that's a good concept, but there was no system behind it. And that's where I want to put a system of like, here's a simple system that's built for the entrepreneur. Like, that's why I said as me with no financial background was able to implement this in our business and able to go out there and say, I have better clarity.

00;10;13;04 - 00;10;33;00

Unknown

When I first started, like our business and doing those things like, I know where we stand and could help other people to just have clarity around the cash. Because no matter what, even if you're the person where you're still doing your first couple of deals and you have like a bin full of receipts, or you're doing a thousand deals and you're still doing that wherever you are, if you're still doing that, you're still going to manage the cash.

00;10;33;00 - 00;10;55;06

Unknown

Even if you don't have QuickBooks, you don't have software or whatever, you're still going to manage the cash that comes in between your fingers. Most people don't do what the what the all stars and the, you know, the sports and athletes those people do. They don't go out and buy the cars. What they do is they pour it into marketing because they just think that as long as I pour enough fuel in the fire, well, I'll get enough deals that'll come back.

00;10;55;06 - 00;11;18;14

Unknown

And that's where people just don't have a plan. They don't have a plan for. Okay, how much should I put into marketing? How much should I do this. So laying that groundwork there, if you're in your first couple deals, this stuff that I'm telling you here can help you make decisions from numbers and purpose rather than fear. A lot of people make their decisions in the real estate game, just hoping the next deal comes their living deal to deal.

00;11;18;15 - 00;11;33;10

Unknown

Literally. Like if this deal doesn't close or if it doesn't close next week, I don't know how we're going to run payroll. I don't know how I'm going to put food on the table. Like a lot of people live like that. I've gone to enough events now, talk to people behind the scenes where they really open up. Everyone is living like this.

00;11;33;10 - 00;11;50;15

Unknown

Everyone at some point has lived like this in the real estate space. That's where if you are at the beginning, like you're at the beginning of your real estate game, you have the best opportunity to start good habits before you become a seven figure entrepreneur. Because if you have six figure problems, then you add a zero to it.

00;11;50;16 - 00;12;08;27

Unknown

Now you have seven figure problems. Like if you don't take care of the root issues, that's what's going to hurt you. So profit first, let's just dive into the simple system and I'll just tell you one, one step. Like you don't even have to do a bunch of steps, just one step that you could do from this podcast because like, I want this to be as simple as possible.

00;12;09;01 - 00;12;27;12

Unknown

One of the biggest mistakes people make if you're getting into real estate now, you might be falling into this. You have one big bank account. All money comes in, all money goes out. I like to call it the black hole account. You know, it's like it just gets sucked in and you never see it again. Right. And that's very easy to make that mistake of.

00;12;27;12 - 00;12;45;15

Unknown

I have this one big account. And that's literally how 95% of entrepreneurs manage their entire business and their finances is they look at that account and say, do I have money in it? Great, I'll do the deal or I'll spend the marketing, I'll run payroll or I'll hire this person. Then they don't have money. I'm going to be frugal.

00;12;45;17 - 00;13;01;18

Unknown

Now's not the time. Can I push things off? Can I wait, wait, wait, you know, like, what do I do right now? I'm running. I'm just making all the decisions based on the bank account balance. What I want to do is. And what profit first does is leverage what you're doing. You're already going to look at the bank accounts.

00;13;01;18 - 00;13;19;20

Unknown

I promise you, if you are not a numbers person, you're not going to be consistently pulling up QuickBooks and running the numbers like on a daily basis. You're just not going to do that. As the entrepreneur, the deal maker, you're going to say, let me look at my account. What I want you to do is just like the envelope method, this is basically the envelope method.

00;13;19;20 - 00;13;39;07

Unknown

This is finance 101 for businesses. Like if you love Dave Ramsey or not. He's got some good concepts there of telling every dollar where to go. That's what we want to do in your business. Set up some bank accounts and name them, because your business is your thing that you're going to pass on to someone someday. Like, this is your legacy.

00;13;39;07 - 00;13;52;13

Unknown

I like to compare it to, like, the first accounts that you should set up. I call it the Golden Trio. These three help you keep more of the money you're making. I call it the Golden Trio because I like Harry Potter and Star Wars, and they've got like, the three epic, you know, the three main heroes, right? Lucan, Leah.

00;13;52;14 - 00;14;11;19

Unknown

They're making sure good wins in the end. Well, you need to make sure in your story that's happening in your business that you're setting up, you're doing these deals. You have three main heroes making sure you win in the end, making sure that at the end of the day, the purpose of this business is to be profitable, is not to bring you more stress is not to just to fund all the expenses.

00;14;11;19 - 00;14;32;08

Unknown

It's not to suck your time away and like, work the 100 hour a week for the rest of your life. It's to give you financial freedom. But no one ever focuses on that. They always focus on the think that that more deals and more income solves the problem. It solves one problem. But if you have a bigger problem of I let every dollar go out of the back end of my business, then who cares?

00;14;32;08 - 00;14;47;12

Unknown

How many deals do you do? We were doing 25 deals a month, but spending 26 worth that is worse than some of the people we work with that are doing five deals a month, but keeping like four of those in their pocket. You know, it's like, that's what I want for you. So that's how do you start to focus on that?

00;14;47;13 - 00;15;09;13

Unknown

Don't have one account where it's just confusion. There's no clarity. What's yours? What's the IRS is what's for payroll. What's for marketing. Is there any for me to actually have fun with. Spread out some of those accounts. The first three, the golden trio I would set up for any business. This is why I'm giving you just the first little thing that you could go out and do three accounts so you could set a profit owner's comp and owner's tax.

00;15;09;13 - 00;15;31;19

Unknown

Like if you could set up those three, they help you focus on the profitability of the business and help you start to build a buffer in your business because they help you keep more. Those three accounts, you could go out and honestly, you could go use relay or an online bank because a lot of people say, well, I don't know if my bank will help, you know, set up three accounts and like all these different things, that's where there's a lot.

00;15;31;20 - 00;15;48;15

Unknown

There's no excuse because they're now they've made it really easy. Relay even partnered with profit first. If you go to relay Com they partnered with Profit First to do this. So they'll let you open multiple accounts for free I think up to 20 accounts for free. So it's like yeah. So you could go there right now and open these three.

00;15;48;16 - 00;16;03;21

Unknown

Like even if you're on your first deal and people ask all the time, I come on first deal or like, you know, or I'm not profitable, will this work for me? It's because we haven't focused on the right things. That's where, if you can start it now, this is a good habit because from every deal that closes now, guess what?

00;16;03;22 - 00;16;24;05

Unknown

Put a couple percent into those first three accounts profit owners comp owners tax. Because if you put some money away first here's the magic. You're just not spending everything you're making. That's how simple this is. You know this is finance 101. But I would say it's in the high 90s that most people don't even have that in their business, because most people don't know how to manage their personal finances.

00;16;24;05 - 00;16;51;24

Unknown

And then they think, as a business owner, if I just have more money come in, that solves the problem, right? And it doesn't. We actually have to know what to do with it. So if you just set up those accounts, that would be a great place to start and start funneling money in there. I could tell you the difference between the counts and all that, but it's really if I could just get you to do one, that one thing, you'll be light years ahead of other people, even, that are doing ten, 20, 30 deals if they don't have a system to catch the money and to make sure that there's actually accounts dedicated and focused

00;16;51;24 - 00;17;11;22

Unknown

to the profitability of the business. All right. I have to pause the episode real quick. If you're a real estate investor who's tired of wanting where your money is going or why you're closing deals but still feeling broke, you need to talk to simple CFO. Simple CFO is profit first certified and fully endorsed by Mike McCall. It's the creator of Profit First himself.

00;17;11;23 - 00;17;37;11

Unknown

Our team specializes in helping real estate investors finally get control of their cash flow. So you keep more money, you pay yourself consistently and build a business that doesn't run on chaos. We'll help you implement the profit first system the right way. Set the financial processes you've been missing and give you a dedicated fractional CFO who actually understands investing in keeping track of your numbers on flips, wholesales, rentals, private lending, all of it.

00;17;37;11 - 00;18;00;20

Unknown

So if you want predictable profit instead of living, deal to deal, head over to simple CFO and book your financial clarity call today. That's simple CFO. Stop living in confusion and start keeping the money you work so hard to earn. Now back to the episode. Yeah, and you know, you bring up some really good points. And I remember listening to the Mike's copy of the book.

00;18;00;20 - 00;18;25;23

Unknown

I need to read yours. I know PNC, the bank that we use, they allow for multiple accounts. They're free as long as you have, like certain balances in there. But I've seen other people and you described it as well. I've seen folks that are closing 50 plus deals and their margins are so thin because they're not managing the business the right way.

00;18;25;23 - 00;18;46;12

Unknown

They're not managing it like a business. It's more like a hobby. It's like, hey, I'm closing 50 deals. It sounds good, like internet wise, but then like, well, how much are you really making? Like, you're spending it more than you are making it. And you know, that's not going to be something for longevity. So I believe in this 100% with what you're saying.

00;18;46;12 - 00;19;05;29

Unknown

You need to be able to manage your numbers. You need to be able to have this stuff in place. And I think the three accounts that you said are a great way to to start this. And, you know, coming back to the marketing thing, a lot of people do the spray and pray marketing. They think, hey, I'm going to, you know, I just made $20,000 off of this one deal.

00;19;06;00 - 00;19;26;01

Unknown

Now I'm going to spend even more and do the spray and pray and hope that, you know, we get some more deals from it without an actual strategic marketing plan behind it, because we with what we do with tax lingual blueprint and some of our other stuff is we we like to filter and pare down and get the list like 2 or 300.

00;19;26;01 - 00;19;52;25

Unknown

We don't do ten, 20,000 mailings. It's just it's the spray and pray approach. And you're going to lose out on a ton of money. Yeah, you might get 1 or 2 deals, but the marketing eats up a ton of that. So when somebody, you know getting started with this, they have their three accounts. What some of the things that you recommend for them, like money wise to to kind of be on the lookout for like some of the big things that could cause the account to start going down.

00;19;52;27 - 00;20;13;16

Unknown

What's some of the recommendations I know Mike recommended in the book, like certain percentages that you keep for yourself, but what would you recommend for a brand new person that's kind of getting started? What kind of percentages? And I know I'm just rolling off the cuff here with you, but I would just like to know, like just a rough idea for, for like the just a person getting started.

00;20;13;17 - 00;20;32;12

Unknown

Oh, I've been asked this question many, many, many times. So that's where I say, especially if you're just getting started out. Usually you have another job. You don't fully rely on real estate yet. So people are like, how much should I be putting in the owner's comp account? The owner's comp account is to pay yourself consistently. I even love what you said.

00;20;32;12 - 00;20;48;26

Unknown

The you know, like they're hoping for deals and like going down that road. I tell people the number one mistake even more than the bank account is running your business on the Hope and pray plan. You're hoping you get enough deals and you pray there's some money left over. And it's like, that's not a way to live. We need to know what we need from our business.

00;20;48;26 - 00;21;04;22

Unknown

The owner's comp account helps you clarify. Am I putting enough in there one to quit my job? Because if I get enough in there on a consistent basis, I know that, hey, I've got six months of reserves in there. Is that enough for me? Like to walk away? That's just an account you can start stuffing with as honestly as much as you can.

00;21;04;24 - 00;21;23;10

Unknown

But I tell people, if you set those first three accounts up, the profit owner's comp owner's tax, they're all for the owner's benefit. Those golden trio of accounts put at least 1% into each of those and you say, well, that's not the percentage that they recommend. That's what I'm telling you. Start. Start somewhere that is reasonable for you.

00;21;23;10 - 00;21;42;09

Unknown

If you're like, I need to put as much money back into it to get this up and rolling. I get that, especially if you got W2, but you can't put zero in those accounts. You have to put something to get into the habit. But then if you're like, you know what, I don't need as much because I now I've dialed in my marketing and if I get a 20 grand check in, I know I don't need to spend 19 on marketing.

00;21;42;09 - 00;22;04;05

Unknown

So it's like, okay, can we do then not just 97% to opex? Can we start going towards the percentages that the book recommends? Because at the beginning, the book recommends you take like 50% of that deal and put it into the owner's comp account. So that way you can have 10-K there, and you're starting to build up a faster reserve, because if a deal doesn't close now, you don't go back to zero.

00;22;04;05 - 00;22;18;20

Unknown

If you're one bit, you know, if you had that one big account, it goes to zero. Game over. But if your op account, your operational expense account goes to zero and you've got money in your other places, you're not out of the game. That's another bonus of this is like that's why you put stuff there. But that's where I would start.

00;22;18;21 - 00;22;35;20

Unknown

Start where you can then pick up the book depending on the size business that and I put in mind if you're if the end goal is to sell it or to buy and hold it, there's different percentages based on the size of your business. So that's where it's like I can tell you that, you know, from 0 to 250, the percentages are much different than the person.

00;22;35;20 - 00;22;54;27

Unknown

That's 1 to 5 million, you know, in revenue. So it's like that's where at the beginning a lot of people can you do 5% the profit 50% to owners comp, 15% to tax. That's the target. But if you can't do that, start where you are. The rest of it, 30% goes to the but start where you can. That's why I tell people, start with 1%.

00;22;54;28 - 00;23;14;21

Unknown

Get in the habit and start ramping up those percentages as fast as feels comfortable for you. They then get in line with the targets of a healthy business for the size that you are, and that's why it breaks it down very clearly in the books, depending on where you are in your business journey. So dude, I'm so from hearing you, you're obviously extremely intelligent when it comes to this.

00;23;14;22 - 00;23;40;13

Unknown

You obviously wrote the wrote a book on it, and Mike was okay with you writing it specifically for real estate investors. I'm curious, I think I know the answer, but I would rather hear it from you. By having all of this strategically in place, does this kind of make things much more sexier for an investor that maybe down the road and we all have to think like, you know, long term, right.

00;23;40;15 - 00;24;10;04

Unknown

We want to build up portfolios. We want to have that passive cash flow coming in every month. When you go and maybe get financing from a lender. Does the lender love seeing this type of setup and would that possibly help somebody get get financing especially? Obviously credits can play a factor as well, but by a bank seeing this properly set up and having tax returns properly set up, what do you think?

00;24;10;04 - 00;24;35;08

Unknown

This would help increase the probability of them getting financing, maybe on a rental property? My last chapter of the book I said the profit first, other benefits, and that's one of the big ones, is now you have cash sitting in an account and you look very sexy to a lender because now you're not living deal to deal. And they know it and they are much more when you don't need the money is when they come out of the woodwork, no matter where you are in the cycle.

00;24;35;08 - 00;24;53;07

Unknown

Really. Like if you know that you're okay and you've got a good base and they know you're okay and can see the money in the accounts, and because they'll total up everything that you have. So to see what reserves you have, it's much more appealing to them. There's even now people in the real estate space who have read this book and they're like, do you run on profit first?

00;24;53;08 - 00;25;23;00

Unknown

Like, and they know like they see in different accounts set up or whatever for them and they're like, okay, I understand what they're doing. So some private lenders have caught on to that. But if you're going to a big bank or something, they want to see this like they only run by the numbers. That's why it's like that's what I don't think hits the real estate investor, the business owner, until they walk into a bank or something like how important something like this is, you know, like to actually growing the business because it's obviously they they feel it when it starts to pinch them, when it starts to be like, okay, I can't pay for

00;25;23;00 - 00;25;49;07

Unknown

this thing because I don't have the money. So this is one way to combat that. But it's also a big benefit of, do I want to grow the business without using my cash all the time? And by being appealing to a lender and having this cash be there that I can pay myself, I can actually have reserves, and I can be very sexy to a lender to be able to lend money to me, and I don't have to dip into any of that money now, you know, like I can go out there and do these deals without having to use a lot of my own cash.

00;25;49;07 - 00;26;15;11

Unknown

So yes, is the short answer. No, I like that because a lot of people, you have to you have to think like, you know, I'm going to start doing deals here. You know, I'm going to start making some money. And if you set things aside properly and you allocate to those accounts that, you know, David just strategically laid out for you, it's going to be a big factor for you down the road, especially if you do want to go to a bank or a private lender or a hard money lender.

00;26;15;11 - 00;26;35;09

Unknown

They want to see these types of things set up. And it just from a paper standpoint and data because, you know, that's what it is. It's data. If you have the right data in place, it's going to your profile is going to be absolutely sexy, and they're going to want to lend you money because like, let me ask you this, David.

00;26;35;09 - 00;26;56;17

Unknown

So if somebody comes across let's just role play here for a second. You're the banker and you have Mr. A here he comes in sloppy, doesn't really have everything in place. He could show that, you know there's decent funds. But you know, you could see that there's also some allocations on there that, you know, he's just not the best at.

00;26;56;17 - 00;27;22;23

Unknown

And then you have Mr. B comes in. He has everything set up profit first style really clean on paper. Looks like he knows how to manage money really well out of A and B. Who do you think's going to get a loan from you before one or the other. Well B is going to get way better terms. If the first guy can prove he's got funds, he might still get a loan, but I'm going to put him through the wringer a lot more and be like, you got to clean this up.

00;27;22;23 - 00;27;39;09

Unknown

It's going to take more time, more effort, and you might not get as favorable terms if you're if you're letter A, if your letter B and you come in and it's all nice, your ducks are in a row, you have cash reserves, it's like, oh wow. You've got everything for me. Okay. Like here, this is the max that we can lend on.

00;27;39;11 - 00;27;54;13

Unknown

These are the best terms that I can provide for you. Like, even if you haven't done a bunch of business with that bank, there's still going to be more inclined to do business with you. That's where, if you're just starting out, that's why it's so powerful, because you don't have a lot of the the credibility behind you yet of actually doing the deal.

00;27;54;13 - 00;28;23;15

Unknown

But if you show financial stability and financial management and that you know how to make sure where the dollar should go in your business, that is very appealing to a banker, I would 100% agree. And, you know, having the mortgage banker lifestyle that I used to have in my former life, having somebody that comes across like that on paper and it just looks so much more cleaner, it's going to go through underwriting like, you know, fast.

00;28;23;15 - 00;28;49;24

Unknown

And then, you know, if you have somebody that comes across real sloppy. Yeah, like you said, we're going to need this, this, this and this, and it's going to take a lot longer. And the terms might not be as favorable for you. So you bring up some extremely valid points that people you know need to start thinking long term wise, because your business owner, you know, you're not going to just be up and out within 30 days unless that's your exit plan.

00;28;49;24 - 00;29;10;20

Unknown

But for most of you, 99% of you, you know, you're you're wanting to do more than one deal and you're wanting to build a portfolio for yourself. So let's talk about, you know, as we transition here and we're, you know, getting to the tail end of the show, why don't we kind of talk about, you know, some of the things like what would somebody need to do?

00;29;10;23 - 00;29;33;12

Unknown

You know, David, you've been doing this for a while now, ten years. You're still a young dude. What what are some of the things that you recommend for somebody to get started? Other than the bank accounts and those three things so that they can have some confidence moving forward? Yeah, man. If you are at the beginning, I will say that you are in such a great position because and even if you're not, it's fine.

00;29;33;14 - 00;29;49;21

Unknown

There's still hope to get to where you want to be, but you kind of have an edge if you're just starting out. Because one of the first things, like I said, the biggest mistake, you build your business on the hope and pray plan. How do you counteract that? The biggest step you could take is knowing what you need from the business, what you need.

00;29;49;24 - 00;30;07;04

Unknown

That's where you listen to a podcast like this and you hear me say, we were doing 25 deals a month and you're like, oh, that sounds awesome. I want to do 25 deals a month. Do not take what I've said and just latch on to it. You need to know what is good for me and my family. That's where one guy came to us.

00;30;07;05 - 00;30;24;08

Unknown

He was $70,000 in the hole 2019. He lost 70,000 in real estate. Then next year we were like, okay. Obviously, do you want to stay in real estate? Because he told me, like at that time, I hate real estate and like fixing and flipping, but it's because I wasn't providing the financial freedom and why he even started his business.

00;30;24;08 - 00;30;46;29

Unknown

But then the year after that, like once he started laying this groundwork, the first thing we had him do was say, okay, how much do you need from your business on a monthly basis? Like to make your wife happy, to make you happy, like to make sure that you're covered? Once he found that number, he realized instead of doing what he was trying in 2019, he tried to scale up doing 4 or 5 deals a month, like from 1 to 2 that he was doing the year before.

00;30;47;01 - 00;31;03;21

Unknown

Like just try to go bigger and better because that's what everyone else was telling him, right? Well, then once he knew, like, how much do I need to do? How much on a monthly basis do I need to bring home physically to put in my bank account to make sure we're okay? He got that number. And then he came back to me and said, David, guess how many deals I need to do in 2020?

00;31;03;22 - 00;31;20;10

Unknown

And I was like, well, back to 1 to 2 a month. He said, no, five. I was like, what? He's like, yeah, I only need to do five to get to my number based on our average profit, and I have rentals. I can stop stealing from our rental portfolio to fund the fixing flip business. You know, he's like, I can stop doing that.

00;31;20;10 - 00;31;34;14

Unknown

And he's like, if I only do five, I can have the life that I really want. I'm like, doesn't that feel good? Like just to have that, to know the peace of mind of, I don't have to kill myself. I don't have to work the 80 900 hour weeks to be able to get to where we really want.

00;31;34;16 - 00;31;55;29

Unknown

So that would be the first step. Like, what do I need to keep from my business? Sit down. Especially if you have a significant other like sit down with that person and say, what would feel good for us to bring home? Like, this is the first number that will get us out of our rat race of like, I don't have to worry about the business provide for us anymore, like it's at least bringing in 5 or 10 like your baseline.

00;31;56;00 - 00;32;14;01

Unknown

Then from there, once you have that baseline, you could probably start ramping up of what do we really want? How do we start incorporating more financial freedom stuff into our take home number two? So it's like it gets fun, more fun from there. But if most people build their business on the Hope and pray plan, I want you to build it on your key plan.

00;32;14;02 - 00;32;30;12

Unknown

What do I need to keep from the business? So many people skip that and then they're ten years into it. I talk with a guy a couple months ago and he was like, I'm 20 years into the game, but I still feel like I'm running. I'm chasing my tail. I'm like, here's the real here's, okay, you know what the secret is?

00;32;30;13 - 00;32;46;25

Unknown

The secret is you think you're wearing the real estate game, but that's just the vehicle for your game. You're playing the money game, right? You're really playing the money game, but you don't know the rules and you don't know how to play profit first. And everything I'm teaching you here is how once you start doing deals, the deals are a means to an end.

00;32;46;26 - 00;33;03;26

Unknown

That money is the end result. What do I do with the money? To be able to make sure we keep having a business? How do I make sure that I'm playing the game right, so I can keep playing it and then get to what I say it all the time? Profit unlocks your purpose, so if you know you're keeping what you want to, the business purpose is to be profitable.

00;33;03;26 - 00;33;17;14

Unknown

But you take those profits and do what you want with them. So if you're not feeling that way, or if you're like jumping into it and you're scared, you've got fear, like, will this really provide for me? This is going to give you a clear system to know, am I getting what I really want to keep from it?

00;33;17;14 - 00;33;37;00

Unknown

And here's some bank accounts. Here's just a practical step to say, I'm going to keep a portion of every deal that I do. So I'm just not living deal to deal. And just throwing every single dollar back in. That would be a couple other steps to think about and to be thinking that, you know what, I need to learn more about just money in general and like how to play this game.

00;33;37;00 - 00;34;01;02

Unknown

Because the smarter I get around that, the better I'm able to take, you know, the tax advantages, you know, that real estate affords, like being able to be just smarter with the dollars that flow through your account, is how you really win the game at the end, whatever that means to you. Absolutely, fully, 100% agree with you. That's you've made some amazing points on today's show.

00;34;01;02 - 00;34;23;09

Unknown

And, you know, I'm extremely thankful that you were able to give all of that to our folks today to really kind of set and propel them for not just today, but for down the road as well. So I know you've kind of referenced three books on today's show Rich dad, Poor Dad, profit. First, your edition of Profit First.

00;34;23;10 - 00;34;46;10

Unknown

One of the things that I'm going to I want to make sure people know about your book here in just a second. But what's been an amazing book, kind of like an inspirational motivational book that's kind of been like an amazing book that's kind of helped you get to where you are today without using those other books, because I love being able to share with people.

00;34;46;10 - 00;35;10;01

Unknown

I don't sit down and read, but I'm an audible type guy, so I love audiobooks. So so either written book, audiobook, or both. What do you have one in mind that that you could think of? I'm trying to narrow it down to one. I know it's difficult whenever I ask that question like, you know, it's hard for somebody to just come up with one right out of the gate.

00;35;10;03 - 00;35;28;21

Unknown

And especially like, I want this to be practical for where people are today, I want to. Oh, man. Let me what can I give to let me give to let me give you go ahead. Thank you. First one crucial conversations. If you've never read that book, it was life changing for my marriage, for my business, as a leader, as a dad.

00;35;28;23 - 00;35;50;22

Unknown

You know, like that one just taught me how to have emotional conversations with people and to have a framework. Any difficulty you're going through in your life has a solution. And it's just like a lot of them, based around our and how we talk to each other. And like when something goes emotional, that's also the one where I give in presentations, find your keep number like I tell that to people.

00;35;50;22 - 00;36;08;27

Unknown

But then I also say I got that a lot from Crucial conversations. Chapter ten retaking your pen. Your pen is your self-worth. Like metaphorically, when you're born, you're born with the pen in your hand, but then you go to a real estate event and someone's doing $1 million. You're like, oh, I want to do that. You give up your pen, you give up your self worth, you're going after their number instead of yours.

00;36;08;28 - 00;36;31;01

Unknown

You need to get your pen back and write your story. So they're crucial. Conversations has had a profound impact on me, and I tell that to everywhere I go. The second one that is, that's this one is super practical in the business world, because Crucial Conversations is like a life book. I feel like the other book, Fix This Next by Mike McCown, is a great framework for where are you in the business cycle of where you are right now?

00;36;31;01 - 00;36;50;26

Unknown

Because it's like the pyramid, like the hierarchy of needs, you know, the Maslow's personal hierarchy of needs and, you know, food and shelter and on the bottom and going up to significance and legacy. But then for the business, Mike McCall, it's created one for business. And at the bottom, the bottom three, you cycle through all the time. It's sales, profit and order making sure.

00;36;50;27 - 00;37;09;27

Unknown

Do I have enough sales coming in? Am I actually profitable enough to invest in the order from chaos? And do I want to grow the team and grow the systems to. But because then if I do that, I have to go back down to the sales level and get more sales coming in in a better sales process. So that's just a great framework for what am I struggling with in the business.

00;37;09;27 - 00;37;26;15

Unknown

And this is what I need to fix next. It's literally why I called it Fix This next because it's like if I don't have enough sales, here's the things I need to focus on. Here's some areas, some questions to ask than profit and orders. So those are the two books I would recommend Crucial Conversations and fix this. Next I'm going to have to I'm going to have to check out Crucial Conversations.

00;37;26;15 - 00;37;46;27

Unknown

Man, that one sounds like a great book. I always love that type of stuff. Yeah, and Mike's books are all good. I've read most of them. I haven't read the one that you just said, so I'll have to get that one too. I love listening to books. So your book, you know, this is exciting. I'm going to grab a copy of myself here as soon as we get done.

00;37;46;27 - 00;38;05;01

Unknown

I'll go on Amazon or wherever you have it at. How can people get a hold of it? Yeah. How can people get Ahold of your book? Well, if you want a free copy the book, though, go to simple CFO Combat Gift. I'll give you the book if you want to buy the book or the audible book, it's on Audible or Amazon.

00;38;05;01 - 00;38;26;02

Unknown

You could go there. That's fine. You know, go straight to the source. But I'm like, no one is teaching this stuff I was in contact with. If I said his name is a very one of the most famous people in the real estate investing world. Was literally talking with him last week and he was like, yeah, no one's teaching this stuff and no one wants to know because it's like the marketing, the sales, that side is sexy, but like the financial side.

00;38;26;02 - 00;38;40;00

Unknown

So it's like, I want to put something in your hands that is written by an entrepreneur for entrepreneurs. So at least get the book, get the book, get some of the points. Like it goes deeper. If you're like, what are the percentages that gives you all of that there? I also give you the keep number on that page too.

00;38;40;01 - 00;38;59;26

Unknown

Like how to find your keep number six questions. It's a one page thing. So if you go there you can get the book for free. If you go to just the regular site, we've got the link to the books, the podcast, all the stuff there. So if you're wanting more info or want to actually hear some other stories of people that have actually walked down this road and seeing that that they didn't have to live deal to deal, you can listen to that stuff too.

00;38;59;27 - 00;39;18;19

Unknown

Okay. So simple CFO. Com and then you said where to get the book then simple CFO gift. Okay. So to get the book absolutely for free, which I appreciate you offering that for our folks as a gift here. Simple CFO.

00;39;18;21 - 00;39;37;09

Unknown

You go ahead and grab that at your convenience. We'll have a description below so that you can click on that. Go grab that for free. David, it's today's been an amazing show. I super appreciate you taking the time to be on here. Do you have any parting words for our folks that are with us right now? You do not have to live deal to deal.

00;39;37;09 - 00;39;57;12

Unknown

If you ever get to that point, don't feel alone. Literally. In a room full of entrepreneurs. Last week, one person opened up the whole room, flooded with like, oh my gosh, I'm feeling the same way. I'm feeling like I'm doing the deals or they're inconsistent. I don't know what to do with the cash. And one guy said this has been cathartic, that other people are opening up.

00;39;57;12 - 00;40;14;28

Unknown

So that's where I want you to feel like if you're just starting out, get a head start by getting good habits from your first few deals. And if you're down the road, start those habits now. So if you don't grow the business more and create bigger headaches in your life, that's it for today's show. Be sure to subscribe, review and share this episode.

00;40;14;28 - 00;40;23;12

Unknown

If you're serious about financial systems and keeping more of your profit, visit simple CFO to take your free discovery call today.