Steve Rozenberg’s Recipe for Success: Know Your Numbers and Fail Often

October 3, 2022

Episode 118: Steve Rozenberg’s Recipe for Success: Know Your Numbers and Fail Often

The Profit First REI Podcast

October 1, 2022

David Richter

Summary:

Two of the most important resources a business owner needs are knowledge and mindset.

In this episode, we have Steve Rozenberg sharing the wisdom he’s developed over the years along his business journey.

A full-time pilot, investor, business owner, and now a business coach, Steve emphasizes how important knowing your numbers is and how getting a coach is one of the best decisions you can make in business.

But more than just managing your finances, he talks about how maintaining your mindset is just as important when thinking about money and making business decisions.

Catch all that and more on this episode of the Profit First Podcast!

Key Takeaways:
[0:49] Steve Rozenberg and His History

[5:52] Why Get a Business Coach

[9:48] Learning the Importance of Knowing Your Numbers

[13:07] On His Money Struggles

[19:45] Including the Spouses in the Business

[21:47] Implementing Profit First Into the Business

[28:50] On Action Being the Key to Success

Quotes:

[7:26] “We go to see this business coach to do a diagnostic, and we are going to walk out of here with a silver bullet.”

[10:39] “You grow exponentially, your gap gets bigger. At some point, you cannot fill that gap.”

[12:39] “The numbers are telling you a story, and we had no idea what that story was until we started becoming masters at reading that language.”

[16:28] “I think every business has money [struggles], but I think the mindset is what causes people to look at it differently.”

[17:46] “You can never shrink to profitability. You can never take a company and keep cutting expenses without growing the company.”

Links:

Steve’s Instagram – https://www.instagram.com/rozenbergsteve/

Steve’s Website – https://steverozenberg.com/

Steve’s Podcast – https://podcasts.apple.com/us/podcast/high-stakes-with-steven-rozenberg/id1618253812

Tired of living deal to deal?

If you are a real estate investor or business owner who is tired of living deal to deal, and want to double your profits, head over here to book your no-obligation discovery call with me. Either myself or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David

Transcript:

Steve Rozenberg:

If you’re going to bake a cake, you bake that cake with a certain recipe, it works every day. You can bake the same cake and it would work. But if one day you say, I’m gonna put the frosting on first and then put it in the oven, same ingredients, wrong recipe, wrong order cake doesn’t work right? That’s how many people do their businesses. They, they have the money coming in, but it’s the wrong recipe for success.

Intro:

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,

David Richter:

Everyone. This is David Richter with the Profit First REI podcast. Man, I have an awesome episode for you today with Steve Rosenberg. If you don’t know him, he is charismatic. He is going to keep you on the edge of your seat wherever you’re sitting. I don’t care if you’re in your car listening to this because he tells you that he’s a full-time pilot, but he’s exited real estate businesses. He has built real estate investing companies, property management companies. He tells The secret to a lot of his success as well. And it was incredible what his answer was. And then I also, he talks about an alignment meeting with his business partners and their spouses that you want to dig into that will, I believe, not only save marriages, but will give you more clarity than you’ve ever gotten from your business. And then also he tells how Profit First helped him turn around from losing 30 to $50,000 a month to making 30, 50, 60, a hundred

thousand the next month after he had started implementing. So I really want you to get a lot from this episode. So buckle up and have a great time listening to this one with Steve. Steve, it is great to have you on the show. Thank you for joining me today.

Steve Rozenberg:

Thanks for having me, man. Excited to be on.

David Richter:

Yeah. So I, I always love getting the bios of people and it said you grew one of the fastest growing property management companies in Texas. Maybe just start by giving people that snapshot of your life and how you did that. I know you were also an airline pilot too, so I like how did that translate to what you did with a property management company?

Steve Rozenberg:

Yeah. well I still am an airline pilot, so I fly a Boeing Triple seven aircraft for a major airline.

David Richter:

Very

Steve Rozenberg:

Cool. And I did that as we were building our business as well as being a real estate investor. You know, we started the management company back in 2012 after my business partner. We owned a lot of real estate and we needed somebody to manage the assets, mainly because we bought some horrible properties that nobody wanted to manage, which I’m sure many people can relate to. And we started this management company really not knowing what a management company did. We had owned apartment complexes, We had owned houses, and we thought that these properties basically should be, you know, these are Corona money, right? We’re gonna be be sitting on the beach drinking and the mailbox money’s just gonna come in. And what we realized very quickly is that getting the deals are easy, getting the returns out of those deals week after week, month after month, year after year.

Steve Rozenberg:

That is actually the challenge and the talent and the biggest reason investors fail, not getting a good deal, but making it come true fruition. And so we realized that there was a business model that had to be wrapped around our properties, and we started going to some property management companies. And nobody wanted them because they were low income properties. They made great sense on paper, but the reality was is they’re very time intensive and the amount of return that you would get did not make sense for a management company. So we started our own. And we started that in 2000 12th of June. We say December 1st is when we actually burned our boats. My business partner quit his job full time. We went all in and then we started managing other people’s assets. And one of the first things we did is we got a business coach and the business coach. We stuck with that coach for seven years every single week. Wow. We went to that coach and we learned how to run a business. And that, I, I would say that is the, I I would, if I had to pinpoint it, that’s how we were able to grow in scale, one of the fastest growing companies in Texas at the time, because we ran it like a business. And we understand the fundamentals of, you know, mathematics, of how businesses

David Richter:

Work. Oh man, that is really good. So you did that, You had the mentor, you started this company, you grew it and you were still flying planes, correct? Yeah,

Steve Rozenberg:

Yeah. Plus I was I was a full-time airline pilot. My business partner quit his job and we ran it without knowing it at the time. We ran it very much like the EOS system. I was the visionary. He was the integrator. And we really just, we just ran it that way. We stayed in each other’s lanes. We always made sure the company came first. Actually we made it more so that the company was a standalone. It had to live and breathe on its own. We were the ones that were feeding life into it myself by sales and marketing, my business partner through operations and accounting. And that’s basically how we ran our business. And we, we scaled exponentially fast, but I, we stayed in our lanes and we learned very much how to respect each other’s positions. Barring every, you know, argument here or there, you know, ego driven conversations. But other than that, we always made sure that it was always about the company. It was never about us. And, and that’s, we learned a lot about ourselves, our strengths, and more importantly our weaknesses. But we also learned how to run a business and how to run a business successfully because we sailed it, we, we scaled it and then we eventually sold it to a venture capital. Wow.

David Richter:

So that, that’s incredible. Which brings me to the next question of, you had that business coach for seven years. Like what even gave you the thought process of I need a business coach, I need this, And then how did it turn into such a good long term relationship?

Steve Rozenberg:

Well, it’s a, that’s a great question. And a lot of people, people don’t realize the value of, of having a coach or a business coach for that matter. And we didn’t either. We were sponsors at a local real estate investing group. They did a lot of apartment complexes. And my business partner and I actually owned an apartment complex through this group. But now we were there as a vendor contractor with the management company. And they put on this, you know, little happy hour thing and they said, Hey, for all the vendors, we’re doing this thing, a business coach is gonna come in and talk to you about how you guys run your businesses. And so we thought, okay, we go to this event. And I swear to God, it was like a light was shining directly on me and my business partner.

Steve Rozenberg:

And this guy was talking like, you would’ve thought he was in our lives. Like he was listening to everything we talked about. Cuz all the challenges that we had as business owners were basically, I mean, everything he said was us. And we’re like, Oh my God, this is our guy. Like this guy is going to be the silver bullet. Cuz as we are starting to scale our business, we realize, okay, there’s a lot more to this. You know, people want to, they want their, their account balances, They want some forecasting numbers, They want good customer service. All the things that we would want from a business. We realized we’re not doing any of this. And we started growing so fast, we started having so many people because we were investors ourselves. Everybody was giving us their properties, but we really had no idea how to service these properties.

Steve Rozenberg:

I’m a salesperson, I’m a, you know, I’m like a hunter, right? I’m just going out there hunting and killing and bringing in all these deals and my business partner’s like, what are we gonna do with all these? Like, we don’t even know what we’re doing. And I’m like, That’s alright, we’ll worry about it down the road. So what’s funny is we go to see this business coach to do a diagnostic and I’m thinking, Man, we are gonna walk outta here with the silver bullet, this guy. Like, we’re gonna have one conversation and we are off to the races man. So we go see this guy and we tell him everything that we did with our houses and we said, this is the market we’re in. He didn’t know anything about real estate or property management, He just coached businesses. Then he says, Okay. And we said, This is where we think this could go.

Steve Rozenberg:

We think there’s a business here. And he looks at it and he says, Well there, there definitely is a market. There is the ability to scale this business. And there is a way to make this, you know, generational. We’ll say, he says, However, you two guys are not the smartest people in the world and you will be bankrupt in six months cuz you’re already going out of business and you’re working for free. You just don’t realize it. So we’re like, What do you mean? Like, what do you mean we have business, we have things. And so he starts showing us the numbers of the business and he’s like, You guys are not in a profit business. You guys are in a non-for-profit basically. And he started explaining this. So we walk outta there like two inches tall, you know, thinking, Oh my God, like this is, we did not want to repeat the problems that we did with the properties that we bought.

Steve Rozenberg:

Yeah. and so we hired the guy and said, You know what, whatever, we couldn’t afford to hire him, but we couldn’t afford not to hire him, was the way we looked at it. And we just said, Okay, if we hire this guy, we are going to do everything he says, even if we don’t agree, even if we think it’s stupid, whatever, we’re doing it. And that’s how we took it. We, we, and we grew with this guy. It was a the, the coaching franchise was a franchise and he was there. It just so happened in Houston. He was one of the top coaching clients for this franchise. Fast forward to seven years later, we do a business deal with the head franchise or we bring him in as a partner to our business because we skilled so fast. We were looking to franchise our business not only here in the United States, but as well as Australia and Malaysia because we were so good at running our business. He was like, You guys have something here. We ended up selling to a venture capital, but if not, that was the path we were on. And I mean, we were, we were swinging for the fences and doing very well.

David Richter:

Wow. Well that’s incredible because a lot of people come on here say, get a mentor, get a coach. I what I love what you said about that was that he wasn’t in real estate, he just knew business. You know, like he helped you from the business aspect. Which leads me to this next question of, you said that one of the first things he pointed out was that you were basically going bankrupt and seeing those numbers. Was that the first time that you dove into the numbers like that? Or had anyone present it to you that, that you were going out of business or the, the clarity that he provided there?

Steve Rozenberg:

No, our measuring tool, our measuring stick, if you will at the time was how many, how many clients are we getting? We’re getting clients. And one of the things he looks at is he wants to see our numbers. And

you know, and, and I’ll give you my thoughts after this, but he looks at our numbers, he’s like, You guys have gap? And we’re like, Is that good or is that like, I don’t understand. He’s like, well, he is like, you have about a hundred thousand dollars that’s owed to you, that’s called Gap. And I’m like, I don’t, I don’t understand what you’re saying. Like I don’t, I don’t understand. He’s like, All these people owe you money for services rendered. And we’re like, Yeah, but they’re gonna pay us. And he’s like, Really? How long can you go out of bus?

Steve Rozenberg:

You know, you grow exponentially, your gap gets bigger at some point you cannot fill that gap. And so that was like all, you know, look, I’m, I’m not the smartest guy in the world, but I’m not the dumbest either being a pilot and other stuff. And I’m like, Okay, that’s a red flag, bing. And he starts asking us other questions. What’s your cost of goods? What’s your client acquisition cost? What’s your marketing start? And I’m like, I don’t even know the words that this guy’s saying. It’s like my business partner’s, like remember one day he goes, I feel like he’s speaking bare and we’re speaking English. He goes, I don’t even know what he’s asking us. Like, so we would go home and have to look up these definitions of business. Now I will say as we grew in this industry there’s an association called the National Association of Residential Property Managers.

Steve Rozenberg:

Nam Yeah. It’s kind of like NAR for realtors. But we started becoming very prominent in na Im only because everybody was like, How are you guys growing so fast? We weren’t doing any rollups, we weren’t acquiring any businesses. We were just organically growing. And everybody was like, How are you guys doing this? Like, what, You know. And we said, we just own a business. That business just happens to be property management. It could be dog food, it could be anything. And so now when I, I work with businesses and I coach businesses, I have learned the essentials, the, the undercarriage, if you will, of how a business works. And I’ll give you an example. We were one of the first, not the first, but one of the first companies to start learning how to put right people right seat and outsource in the property management industry.

Steve Rozenberg:

We got so good at it that 60% of our company was run and outsourced into Mexico. Mm. Because we were so good at right person, right seat that we were able to bring our, our our payroll per revenue from 59% to 33%. Well as you know, when you’re running a several million dollar company, that’s all profit, right? And so we started to really get micro into understanding the numbers. Cuz at the end of the day people don’t realize it. I I’m sure you do obviously cause your, your financial background is the numbers are telling you a story. And we had no idea what that story was until we started becoming masters at reading that language. And so everything to us was the numbers in the data.

David Richter:

That is definitely resonating with me because I am all about the numbers and how they tell this story because a lot of people don’t know whether it’s a horror story or if it’s a love story or if it’s a silly story or whatever story it is on paper. So that is, that is so good. So let’s dive into that a little bit on that. During your journey there, I ask a lot of our guests, did you have money struggles in your life or your business during, while you were growing and scaling during this time?

Steve Rozenberg:

You know, the answer is yes. I I’d say struggle is a, is a relative term, right? We all have Yeah, for sure. Perception. So my business partner, he was very much a, I don’t wanna say Aran, but he was opposite of me, right? I was full throttle into seventh gear to grow. He was like in second going maybe to third. Not really sure, which honestly was a great combination because we, we always respected each other’s decisions and he’s, he was like, Steve, if it was you, we’d have 20,000 properties and it would be chaos. He’s like, but if it was me, I’d have five properties. Nobody would talk to anyone. The systems were perfect and it would, it wouldn’t make any money though. So we, we balanced each other out and we respected where we were coming. And he used to say, Steve, you come up with 10 ideas a week, nine of ’em are suck, but one of ’em is the money maker <laugh>.

Steve Rozenberg:

Like, it’s my job to go through them and figure out is this real? Does this work? And so that’s, we respected each other’s decision. And so to, to answer your question, if you asked me, I would say we had growing pains on the, on the sales side of growing and rolling into new markets. If you asked him, he was very debt averse. He didn’t want to take on debt. So we had this, you know, we were doing several million dollars a year in revenue in our company. He was very, he did not like that we had a equity line out there because we were starting to go into new markets. And so, you know, we had, it was, I don’t know, half a million dollars or something like that of, of an equity line. And so our business coach tells us, he goes, he’s like, Pete, what’s, what’s the problem?

Steve Rozenberg:

He’s like, I don’t like this debt on the company. And he’s like, Yeah, but if you don’t take the debt, you’re not gonna be able to grow at the speed cuz you’re bootstrapping it. And he said, So when we were going to a new city, and this is when we had the, the gentleman’s name is Brad Sugars who owned the franchise, we would do a forecast and he would say like, Okay, we would forecast the dip going into a new city. Mm-Hmm. <Affirmative>. So the dip was going to be, let’s just say $250,000 per city. And then we would forecast when we would get out. And I believe it was about a 14 month run until we were back out the other side with profitability. So we were running it per the numbers. Pete just did not like that feeling. And he had some, he had some issues with real estate before where he was in a deal that went he was a passive investor, ended up going sideways and he was called out for a lot of money that I don’t wanna say he wasn’t responsible for, he was, but he had nothing to do with it, so understandably so.

Steve Rozenberg:

He’s gotten burned. Yeah. And so I always respected that with Pete, but we also had to respect the fact that what happened before is not what’s happening now. We’re in growth mode. And when you’re in growth mode, you are going to be hitting up against money. And either we, we, we borrow it, we, we bootstrap it, or you know, we’ve gotta get a, a pitch jack and go get some real money. So to answer your question, yes, some of it I think is mental as to how much we consider debt. You know, he was not a big fan of the investing in marketing. He wanted to always see what is the return on the acquisition cost of that marketing. We, we had radio shows, we had other things. Some things were not exactly tangible to a certain strategy, which he didn’t like. He wanted to know if we’re doing a marketing event, how many clients did we set up meetings with? How many did we close? Are we doing that again? So he was very matter of fact to the point. So he and I would balance each other very well. So yes, I think every business has money, but I think the mindset is what causes people to look at it differently.

David Richter:

And do you think he looked at it differently because you had your full-time job still of being a pilot and he was dependent on this. Was he fully dependent on this business paying his bills?

Steve Rozenberg:

Yes. although we both lived a very debt free life personally. Okay. So, and they, they business paid him. He took a salary from the, and I always, we always made sure like, Look, you’re getting paid before me. Like it was never, it was never that. It was, it was a personal thing for him. And he had money. We had, he was fine in that regard, but it was just personal thing. He did not like debt on the business. And I respected that. But it, but it also, it, you know, I, he would would’ve a conversation. I’d say, Man, I feel like evil canal, I’m about to jump Snake River and you got your feet on the break and we’re just gonna go off the edge. Like we’re, we either gotta commit to this or we gotta not jump. It’s like, and I think a lot of business partner, a lot of people probably don’t talk about this or they would let the business implode from the partnership.

Steve Rozenberg:

And I think it’s important to talk about that. Mm-Hmm. <Affirmative>, when you have a business partnership, you’re going to have different points of views and you’ve gotta, I’ve gotta respect his, he has to respect mine and we kind of come to a happy medium. And so I’ve always learned, at least my experience in business as well as being in the airline industry, is that you could never shrink to profitability. Like you could never take a company and keep cutting expenses and cutting expenses without trying to grow the company because you’re either growing or dying. And from my perspective, and you know, he wanted to sh he didn’t necessarily wanna shrink to profitability, but he wanted to cut the fat on some things. If it was not a relatable, he could not pinpoint the win financially to it. So we were very in tune with our numbers because we got to a point before and you know, we talked beforehand where we implemented profit first. You know, we, we had a point where all of a sudden we’re like, went from being okay to like, we’re gonna lose $30,000 this month. Like, and next month’s gonna be 50. And we’re like, holy shit. Like, what’s going on? And all of a sudden, like the dam broke and we had to really dig in and it wasn’t our focus. So we had to turn around and make it our focus because we were kind of focused on growth and we let our eye off the ball on the money.

David Richter:

No, that makes sense. And I think what you brought up there about talking with your business partner, because he might, he had different needs than you did at that time. And when you implement Profit First, or if you’re listening to this as the listener, you might have a spouse or business partner or someone that you, that has a different need than you do at that time. Because I hear all the time just reinvest everything. We don’t need this. It’s like, well if that’s not realistic to the other people in your life, then that’s not going to help. That’s only going to put you further in your grave. You know, like, you gotta make sure that whoever’s there, cuz you might have a different partner than Steve did. Or you might have a spouse that really needs to make sure you bring home this amount every month or they’re gonna be going ballistic, you know, or whatever that might be. So you have to have those conversations. And I love it that you said that Steve, that I don’t think a lot of people do. A lot of people aren’t either comfortable or they don’t even think to have those conversations with that other person to make sure, like, I might need, I might be getting what I need, but are they getting what they need? And if you’re not

getting what you need, that needs to be a, one of the big things that you bring up with that business partner. So,

Steve Rozenberg:

And one, one thing I’ll say, just for your listeners, and I, I don’t know your opinion of this, but one thing that that Pete and I did that I think was, it was ingenious. We didn’t really, we took it from our coach and we would do alignments with our spouses. Awesome. And we, we took that and we turned it into a board of directors meetings. And so what we would do is when we, we did a, we did a monthly to get ourselves back on track, and then we delegated them out to quarterly, but we would, we would have BOD meetings with our spouses because Yeah, you said something that’s very important. It’s not necessarily always the partners that are not getting along. Sometimes it’s the spouses talking to the partners through them to each other. Mm-Hmm. <Affirmative>. So the bod, the first thing we did is we pulled out the, the, the p and l statement, the forecast, the balance sheets, you know, what, what the goals were for the quarter, what the goals are for the year on track, off track.

Steve Rozenberg:

And we, I mean, we told the story to our spouses through the numbers, so then if there were action items, we’d take those action items. But it wasn’t, it wasn’t a conversation to bitch at each other, it was the conversation to bring them into the loop. And if the spouse had an issue like, Hey, Pete’s spending a lot of time dealing with this or that or something, we’d have action items that we were now, we were accountable to the board, our spouses that we hadn’t yet stuff done. If we were, if our numbers were off in the business, it wasn’t like Pete just wouldn’t show me the numbers. Like we had to look at them because we had to have the meeting with the spouses and if they were, you know, So I don’t know if if your thoughts on that, but that was a huge benefit for Pete, myself and our spouses to be in this and the board of directors was, it really was helpful. Yeah,

David Richter:

That is really, really, really good. I mean, if you are listening to this right now, that is gold. I don’t care if you have a business partner or not having that spouse in alignment with where you are. Honestly, that’s why I love Profit First too, because it usually puts the money on the entrepreneur’s level so you can have those conversations intelligently without having, you know, like to feel dumb about the money. And that’s why I love it. So let’s go into that a little bit. I, the, you mentioned Profit First and that you implemented it. When did that come about on this journey? And what was the bene, you know, like, just tell me about that journey of implementing Profit First and what that meant for you.

Steve Rozenberg:

So it’s funny, I say funny, it wasn’t funny at the time. One of the things that that we started with the Profit first was when we were losing money in the business. Mm. And we, you know, again, it, it was not our focus. And I think because it was not our focus, because we were, we were kind of saying, well, we’re growing in multiple cities. We were expanding rapidly into new markets. And because we are expanding into new markets, that was kind of our excuse as to why we were not profitable Yep. And, and why we were losing money. But when you actually peeled back the numbers, it really wasn’t related to that. We didn’t have the proper controls on the business and nobody was watching it ba basically. And we are putting it in the category of that’s just growth. But once we actually started peeling back the numbers of

each market, we started taking each city and splitting it out and we’re like, Okay, these new cities are actually doing what they’re supposed to.

Steve Rozenberg:

The, the mother base at Houston, the, the, the one that had all the properties, the majority of them that’s not performing, we started digging deeper. There was a, there was no controls on credit cards, subscriptions on who was spending, I mean, nobody was taking accountability, which means, look, that’s us. We were the leaders. We were not being accountable to our managers to make them accountable. So, you know, we, hey, we, we stepped on the sword and said, this is on us, but we’re gonna start making some corrections like now. And we started making corrections seriously. And I mean literally within, I’m gonna say 60 days, we, we swung from like, we were losing 30, 40,000. And it was very odd because like I said, it was almost like a damn broke. Like we knew we were threading the needle, threading the needle. And then one month, I don’t know what happened, it just, and I’m trying to remember, but it was just something popped.

Steve Rozenberg:

And so we were like, were like, okay, this should now just became a must. And we are, we are p ripping the bandaids off of everything and we are gonna see where, what is going on. And I mean, we had, I’ll give you an example. We probably had about somewhere between 10 to $15,000 a month in subscriptions. Somebody get a subscription, they would just let it expire and then it would be turned into a monthly subscription. And nobody, nobody knew paid attention. Our sales people were going out buying like nice clothes on the company credit card so that they’d go to a nice lunch with the potential that never got business. But nobody was tracking that. Mm. And so we, so all of a sudden we just basically what, what Pete my business partner did, he basically canceled everything, every credit card, everything canceled, and he was like, anything that wants to be paid has to be approved by me.

Steve Rozenberg:

Like we’re going back to zero. And so we, we started putting those and then we did the, the different accounts and we started really being diligent with it. And within 60 60 days we went back to 30 50,000 a month in profit because of the controls. And the scary thing is, is we thought, how long has this been going on that we chose to ignore this and did not do anything about it because we didn’t want to really rip that bandaid off. And that’s, that’s a leadership, I take ownership of that. That was a mean thing. That was a Pete thing. But we did take ownership, we implemented it and, and we ran with it and we used the profit first and it, it, it worked. I mean, look, it’s not, it’s not magic, it’s not rocket science. It’s just a matter of putting things in a certain order. And the way I I relate it is if you’re going to bake a cake, you bake that cake with a certain recipe, it works every day. You can bake the same cake and it would work. But if one day you say, I’m gonna put the frosting on first and then put it in the oven, same ingredients, wrong recipe, wrong order cake doesn’t work. Right. That’s how many people do their businesses. They, they have the money coming in, but it’s the wrong recipe for success.

David Richter:

Man, that’s, there’s so much to unpack there. That’s really good because you said you started this when you were losing money, which is funny to, because that’s one of the things we get is can I start profit first? If I’m losing money, how can I have profit if I’m negative? And it’s like, that’s when you need it the most. <Laugh> you know, like to turn this ship around. So I thought that was interesting what you said.

And then I thought that was really great. You know, like just getting those, the recipe in the proper order, getting those controls, ripping that bandaid off because it made me think that if someone is listening to this now and getting, starting out and you’re doing one property, two properties, it’s way easier now to start baking the cake properly than if you have to go down the road where you’re losing 30, $50,000 a month, rip the bandaid off and then start from there. You know, like, like Steve just said, how many months did they lose out on what they could have had if they would’ve had something like this in place at that time? So just really good points.

Steve Rozenberg:

And you know, one, one thing I’ll say from a personal perspective that a lot of people think it’s like, Oh, once I start making money then I’ll worry about money. But the problem is, is it never works that way. And you know, it just, it just doesn’t, it doesn’t magically like, you know, look, I’ve been doing real estate for 20 years, I know how it works. It’s not like all of a sudden someone’s gonna come running up to you and go here, Would you take this 50% cash on cash deal? And I’m just gonna hand it to you because I don’t know what I’m doing. And you look like a smart guy. But the problem is, is you’ve never done a deal. So, you know, it’s, it goes into the someday, which is the only day that’s not on the calendar and it never happens.

Steve Rozenberg:

And so I always tell people, the one thing I will tell you from experience is that if you wait, the stress and headache and frustration and ultimately the cost that you will pay by delaying the implementation of a system is far greater. That it’s kind of like learning how to run the wrong way and then having to relearn how to do this. It’s, it’s, it, it is much more painful. I can tell. Trust me, I could tell you, I mean seeing those zeros go out makes you feel sick because you’re like, I’ve got this successful company, what the f just happened? Like I don’t understand where we went wrong. And the problem with this is there’s no one there to tell you, you guys are messing up. And that’s the one thing I remember. It’s like there’s no one there to go, Hey Steve, Pete, you guys know that you guys are heading down the wrong path.

Steve Rozenberg:

Nobody tells us cuz nobody cares. That’s our business. That’s on us to be better leaders. And we should have implemented a system like Profit First earlier because we would’ve been more cognizant of it. But you know what we chose to say, we’ll do it later. It’s going okay, we’ll do it later. And that to me was one of the biggest lessons of the “someday” lesson that I would say for people watching. It doesn’t matter how big you are because you’re not building it for how you are today. You’re building it for how big the business is going to be. Mm-Hmm <affirmative>. So build it to last, build it with a finished mark, don’t build it. It’s like skate to where the puck’s going to be, not where it’s at.

David Richter:

And that is so good that, that right there sounds like one of the biggest mistakes you see people making is waiting to implement whatever it might be, that system, that person, the, the bandaid that they need to rip off whatever it might be is one of the greatest costs of business. How about the other side of that? What would you say is one of the biggest indicators of either the success you’ve seen or that you see other people be successful with? You know, like because they implement this or what is the opposite of that for you? Like a key to success?

Steve Rozenberg:

You know, for me the key is number one, not being afraid to fail and look dumb. Cuz we all have this, it’s so funny, we all have this ego and pride thinking like, I don’t wanna look dumb. I’m like, how important do you really think you are? Like, nobody even know who you are and nobody cares. I’m like, who is it that you’re trying to impress? Because no one cares. And they’re like, you know, I talk to people all the time. They’re like, for example, I talk to people about doing private money, right? They’re like, they’re asking me, what’s your take on private money? And I’m like, Well you, you know, you, you present it and you present the conversation. And they’re, I’m like, So, but you would take money from a bank, right? And they’re like, Yeah. I’m like, why don’t you wanna take private money?

Steve Rozenberg:

They’re like, Well I don’t want to, you know, look bad in front of these other people and make a mistake. I’m like, well first of all, if you’re doing this knowing that you’re gonna look bad in front of a bank, I think that that is ethically wrong and it’s immoral. And you’re basically saying you’re going to fail, but you don’t care about owing a bank, number one. And number two, how important do you think you are to these people that you, they’re gonna, all of a sudden your your glamorous reputation that you think you have is tarnished because you did something and maybe it didn’t work out. And do you, you know, my next question is, is when you go into a business venture to buy a piece of real estate or do a deal, do you think you’re going to fail? No. I’m like, so then if you don’t think you’re gonna fail, then why are we even having this conversation?

Steve Rozenberg:

You build it to succeed. Don’t build it to fail anybody who gets involved in real estate and they give you money, I would be very clear on what are the expectations, but also what are the potential hazards? If they don’t like that, I wouldn’t sugar coat it, but I wouldn’t paint the worst picture all either. You know, I would paint a realistic picture. So my biggest, going back to what your question was, the biggest challenge I feel is number one, people are afraid to fail. And they will not get in that once they, they just, they don’t wanna put themselves in that position cuz they don’t wanna look dumb, but nobody cares. So they’re, they’re really fooling themselves. So they’re like, I’m gonna stand on the sideline so I don’t look dumb. It’s like, the game’s over, man, it, it’s over. You’re good. Like you missed the window.

Steve Rozenberg:

So I think action, it, it, I guess if I had to boil it down, it’s lack of action and lack of willing to fail. So one of, I’ve had a lot of mentors, I’ve invested a lot of self development in myself over the years and one of the guys I asked him, and he was a very, very successful, I said, What would you say? Like what, what’s the, what could I do like to be successful? Like, I wanna be like you, I mean this guy has private jets and that he said, Do you wanna know the answer? And I’m like, Yeah. And I thought it was gonna be this like mystical, you know, clouds are gonna part kind of conversation and he is like, fail fast, fail often and get back up as quick as you can and go hit it again. That was his answer. He’s like, you are no different than everyone else that you see on stages speaking all the stuff. He goes, you know what the thing is? He goes, they failed at bigger things, they failed faster and they failed at bigger things than you could ever imagine, man. I thought, Wow, that’s interesting.

David Richter:

That is interesting. That’s really good too. I mean, this whole episode has been just chalk full of stuff like that. This has been incredible. So one of the last questions I always ask, we’re gonna wrap up here, is you’ve provided a ton of value on this podcast. I believe that anyone could listen to this and honestly have a better business from just listening to this one episode. So is there any way our listeners can provide value back to you? Like how do they get in touch with you? Where, what are you working on right now? Tell a little bit about what you’re doing.

Steve Rozenberg:

Yeah, so they can find me on, I’m all over social media. It’s, you know, Instagram is Rosenberg Steve, it’s r o z e n b e r g Steve. And my, my website is steverozenberg.com. You can find me anywhere. I’ve got YouTube videos, I have a podcast, Higher High Stakes with Steve Rosenberg. So I’ve got all that right. And so that’s one way, if you really wanted me to take your business, whether you’re a real estate investor, a business owner, it doesn’t matter, and take it to the next level. I work with people that wanna go to the next level. So I do one OnOne, I don’t even wanna say coaching because really what it is is, you know, it it’s me getting in your head and making you become that person that you want to be to be that successful person. So if they wanna reach out to me, they can go to my website, find me. If you just have questions, I’m very approachable. People send me messages all the time, all day long and I always answer ’em personally cuz I just feel it’s respectful of somebody asks me a question I was taught you answer. So if you do reach out, I will be the one answering it. Happy to help any way I can.

David Richter:

Man, that’s good stuff. So take him up on that. Go to his website. We’ll have that in the show notes too. But Steve, this has been great. I mean, just a recap here that you know, the returns are the challenge. You know, biggest reasons investors fail because they don’t look at what those returns are. I mean, we got that at the very beginning. The business coach and mentorship, just not, not only that meant to you personally, but what it did for your business and how you were able to exit. I love what you said, those alignment meetings with the board of directors and having your spouses involved and making sure that everyone was on that same page too, gave us the biggest keys to your success of the biggest failures that people can do is don’t be afraid to look dumb. That was incredible. Loved that.

David Richter:

And then how Profit First helped you, helped you get into the proper place and stop bleeding the money and start actually making a profit at the end of the day too. So this has been Chockful and what Steve was saying at the beginning too, if you remember, he was talking about his business coach who just was, who knew about business and could help them and he helped them see those things that they weren’t able to see at that time because they felt like he was speaking a different language. If you want that help, that’s what Simple CFO Solutions is all about. Our company, Simple CFO solutions.com. If you wanna book a call over there with us and our team, we’d love to help you too because we’ve got those CFOs that are readily available to help. You know, those numbers. Get that clarity, double your profit, get out of the, get outta that rat race that you’re circled in like Steve was talking about at the beginning too. So Steve, this has been incredible. Thank you so much for being here today. Really appreciate all the insight that you gave.

Steve Rozenberg:

Thanks for having me and appreciate you having me on.

Outro:

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.Outro

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

Episode: 242

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

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

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

Listen and enjoy the show!

Key Takeaways:

[01:01] Introducing Jay Conner

[05:00] Introduction to private money

[08:30] The Great News Phone Call

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

[13:18] Maintaining relationships with private lenders

[15:40] Private money vs traditional money

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

[25:18] Advice for real estate investors

[29:01] Connect with Jay Conner

Quotes:

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

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

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

Connect with Jay:

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

Tired of living deal to deal?

If you are a real estate investor or business owner who is tired of living deal to deal and want to double your profits, head over here to book your no-obligation discovery call with me. Either myself or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David

Transcript:

Speaker 1 (00:00):

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

Speaker 2 (00:34):

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

Speaker 3 (01:01):

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

Speaker 1 (02:07):

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

Speaker 3 (02:24):

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

Speaker 1 (02:43):

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

(03:38):

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

(04:27):

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

(05:18):

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

(06:10):

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

(07:02):

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

(08:11):

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

(09:06):

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

(10:04):

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

Speaker 3 (10:38):

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

Speaker 1 (11:17):

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

Speaker 3 (12:22):

Right? Yep.

Speaker 1 (12:24):

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

Speaker 3 (12:33):

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

Speaker 1 (13:22):

I mail ’em checks.

Speaker 3 (13:25):

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

Speaker 1 (13:33):

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

Speaker 3 (13:41):

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

Speaker 1 (13:50):

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

Speaker 3 (14:00):

Yep.

Speaker 1 (14:01):

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

Speaker 3 (15:27):

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

Speaker 1 (15:32):

Options. Does that make sense?

Speaker 3 (15:34):

Yeah, that makes sense. A hundred percent.

Speaker 1 (15:37):

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

Speaker 3 (16:14):

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

Speaker 1 (16:33):

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

Speaker 3 (17:33):

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

Speaker 1 (18:04):

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

Speaker 3 (18:20):

Yeah, me either.

Speaker 1 (18:22):

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

Speaker 3 (18:53):

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

Speaker 1 (19:12):

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

Speaker 3 (19:17):

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

Speaker 1 (19:20):

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

Speaker 3 (20:25):

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

Speaker 1 (20:50):

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

Speaker 3 (21:53):

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

Speaker 1 (22:07):

Well pay ’em on time.

Speaker 3 (22:08):

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

Speaker 1 (22:12):

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

Speaker 3 (22:42):

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

Speaker 1 (23:03):

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

Speaker 3 (23:06):

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

Speaker 1 (23:10):

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

(23:37):

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

Speaker 3 (24:31):

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

Speaker 1 (25:18):

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

(25:26):

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

Speaker 3 (26:11):

That’s so good.

Speaker 1 (26:13):

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

Speaker 3 (27:08):

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

(27:55):

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

Speaker 1 (29:01):

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

Speaker 3 (30:31):

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

(31:13):

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

Speaker 1 (31:51):

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

Speaker 2 (31:54):

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

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