What You Need To Know Before Investing In Real Estate With Joe McCall

April 17, 2023

Episode 173: What You Need To Know Before Investing In Real Estate With Joe McCall

The Profit First REI Podcast

April 17, 2023

David Richter

For today’s episode of Profit First for REI, Joe McCall joined us to share his journey to financial freedom.

Joe is a down-to-earth Real Estate Guru that cares for people by helping them to make sure that everyone can make money in real estate investing. He is also helping people to improve their lives and reach ultimate financial freedom!

Listen as we share Joe’s story, from financial dependence to financial freedom, and how Profit First helped him get out of that!

Key Takeaways:

[0:55] Introducing Joe McCall

[2:33] More of Joe Before Getting Into Real Estate Investing!

[8:32] Struggles When He Is Starting His Investing Journey

[17:27] How He Used His First Paycheck From a Deal

[21:00] Trying Different Lease Options

[23:25] Reading The Books, “Pumpkin Plan” and “Profit First”

[34:52] Joe’s Advice to Real Estate Investors

[37:03] Connect with Joe McCall

Quotes:

[11:45] “When you get into real estate, it’s different because you deal with people.”

[20:15] “It’s important to understand to keep your expenses low to take on as little debt as possible.”

[22:19] “I guess I’m the case study of how to do things wrong, but not quit, not give up and learn the right ways to do it.”

Connect with Joe:

Website: https://joemccall.com/

Tired of living deal to deal?

If you are a real estate investor or business owner 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 I 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

Transcription:

Joe McCall:

<affirmative>, when you get into real estate, it’s different man, cuz you’re now, you’re dealing with people. There is no deal is ever the same, right? No seller is ever the same. There’s always gonna be things that come up. You can’t dot all your I and cross all your T’s like you could in college or looking in engineering, right? You can’t have answers to all of your what ifs.

Outro:

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:

We have Joe McCall on this episode. We talked to him about a hundred episodes ago about how he had a huge tax burden and how Profit First helped get it out. We only talk about that a little bit at the end, but we talk about his story going from a lack of freedom, feeling the cash crunch with his first few properties, almost going bankrupt and losing everything to being able to get out of that. And with the few things that helped him turn it completely around and how he’s helping today, just make sure that you know that you can make the money in real estate investing no matter what. He is a marketing genius as well too. Just follow him, follow him around. But I know you’re going to get a lot of value from this episode on the Profit First side and just as a business owner. Thank you so much again for listening. Hey, this is David Richter with the Prophet first REI podcast with the Joe McCall here. Really excited to have him back on. He was on an episode in the early days, but if you haven’t, if you’ve been listening for any length of time, it might be like a hundred episodes before, but Joe’s done a lot in real estate. I mean, if you haven’t heard of Joe McCall, you might be living under a rock. I feel like at this point, <laugh>, if you’re in the real estate investing world. But if you are one of those people who will make sure you know him and what he does, he helps a ton of people, has done a ton of deals himself. But Joe, thanks for being on the show.

Joe McCall:

Well, thank you David. Glad to be here, man.

David Richter:

Well, another reason he’s back too is if you’ve read Profit First for real estate investing, his story’s in there, just a little snippet of it, of the tax sides of which he talks about in the first podcast recording. So we might even go down that road again. But I want to get just a little bit in case people don’t know what you’re doing, what you’re about, can you give them just a couple minute overview of like, who is Joe McCall?

Joe McCall:

Yeah, so I have been investing in real estate full-time since 2009. I was a civil engineer by training, kind of working for a big electrical contractor, building a lot of power plants and traveling a lot. Didn’t like, I mean, I liked my job, but I didn’t like the lack of freedom. I, you know, I was kind of at their control doing whatever they wanted me to do. And I was always, I felt like I was stuck on a treadmill. So I started getting interested in real estate, started buying a lot of courses. I joke around, I was a professional student for three years buying course after course after course, and overanalyzing everything. Um, so I started, my back was against the wall. We were hemorrhaging cash. I had a bunch of properties and the market was crashing and I needed to figure out a way to make money. I thought I had equity, but you know, you can’t eat equities,

David Richter:

Right?

Joe McCall:

As they say, equity doesn’t pay the bills. So I was just in a really serious cash flow crunch. I knew I had to learn wholesaling and I always kind of, back then in 2008, seven and eight, I looked down on wholesalers. I looked down on wholesalers, okay. Because they’re kind of the bottom of the ladder. You know, they’re not real serious investors. So I didn’t wanna be a wholesaler. I wanted to be a more sophisticated investor. I knew I needed to figure something out. And, um, so I said, all right, I’m gonna do this. And then I started wholesaling. So I bought one more course and I bought tons and tons of courses. And I said, but I’m just not gonna change anything. I’m gonna do exactly what the guy says to do. I’m not gonna change anything. And then I started, even though I didn’t like it, the guy, I kind of liked him, but I didn’t like, I thought his postcard was too ugly. I thought he’s sending it to a list that everybody is already sending to. I didn’t like his script. I didn’t like his contract. I didn’t like the way he did. Cause I thought, this is Sue too easy. He’s charging way too much for this course. But I kept having to go back and say, all right, I’m just gonna do what he says. I’m not gonna change anything. And well then guess what? Sure enough, I did a deal and uh, my first deal, I made about 12 grand on it. Yes, it was a property about 30 minutes outside of the city in St. Louis at the time. So it was way out there in the sticks and it worked. And I couldn’t believe it. Like for the first time I had actually implemented something that I bought from a course and it actually worked. I couldn’t believe it. And so then I was, I was hooked. I started doing a lot of wholesaling at that time. And then a few years later, um, was able to quit my job.

David Richter:

Awesome. And you’re into, you’ve done a lot of stuff in the real estate world. We’ll go down that road. I wanna focus on one thing. You said you got into a cash crunch, you know, like with your rentals and stuff, was that now you were a professional student too, so like you <laugh> three years as a professional student. So did you start buying, well then,

Joe McCall:

Yeah

David Richter:

You know, stuff while you were studying and like, how many, did you have a portfolio of like 10 properties, 20? Like how much did you have at that point?

Joe McCall:

Well, okay, that’s a good question cuz I was a professional student, but I was buying houses with traditional bank mortgage. I was going out and getting a mortgage and then putting a tenant buyer in the house. So I had very little equity

David Richter:

Yeah.

Joe McCall:

In the deal, very little cash flow. I thought a hundred, $200 a month was enough, right? That would pay, get a hundred, $200 a month. The cash flow, let’s see, I only need 200 of those to be able to quit my job. But that’s what I thought you had to do.

David Richter:

Yeah.

Joe McCall:

And I wasn’t setting aside any of that money for future vacancies, maintenance repairs. And so all of a sudden when the market crashed, we had a bunch of vacancies. I had, um, serious cash flow crunch and I had also bought a lot of properties at the time. Um, I had, uh, maybe five or six subject twos I was taking over existing mortgages.

David Richter:

Okay.

Joe McCall:

And then, um, again, I didn’t have much equity in those and I was, I borrowed some of my profits early from private lenders in those deals. Now, the property that I owed total from the original mortgage and my private investors, I owed more than the house was worth. And my payments to cover that mortgage when it was vacant was really hard to do. And you know, remember when you’re taking over somebody’s mortgage, you’re promising to make their mortgage payment.

David Richter:

Yeah.

Joe McCall:

And if you don’t make their mortgage payment, they’re gonna get a 30 day late on their credit, which is go is really bad. And so I had, I don’t know, six or seven subject twos at the time. I never did miss one mortgage payment of a sellers, but it got really close.

David Richter:

Okay.

Joe McCall:

And these sellers were getting calls from the bank saying, Hey, it’s day 15. You’ve not made any payments yet. What’s going on? And so then the sellers would call me and don’t worry about it. I got it. I’ll, and then I’ll pay the late fees or whatever. And so all of a sudden I got to the point where I had to either make my own mortgage payment or make these sellers mortgage payments. So I started making their payments and I started working harder to try to make up. And then my house got in into a foreclosure in a short sale situation. So this is where I was in a serious cash crunch. You know, I,

David Richter:

Yeah.

Joe McCall:

Any equity that I had was disappearing. The houses were falling. I didn’t buy any of these properties the smart way. I was counting on appreciation, I was counting on nothing to go wrong. I had only one exit strategy. And, um, I realized later that you make your profit when you buy, not when you sell. So anyway, I had a ton of courses. I knew I needed to learn wholesaling. Finally, it was Chris Chico, I think you know Chris Chico?

David Richter:

Yeah, yeah, I know Chris.

Joe McCall:

He had a course at the time called Absentee Owner Profits. And I bought it and, um, started doing what he said to do and did a deal. And then I started doing more and more deals.

David Richter:

So then, okay, you’re a professional student. At that point, was it that the people you were learning from just weren’t teaching you? Were they just teaching you how to get that house? Like the way that you were doing it? Or like, you know, or where do you think that the connection failed of, okay, I’m gonna buy this house, I’m gonna get the cash flow, or was it just that I bought these at the wrong time because we had the worst, you know, the worst real estate market in the history of

Joe McCall:

Yeah.

David Richter:

You know, the US market or whatever? Well,

Joe McCall:

It was a kind of combination of all the above.

David Richter:

Okay.

Joe McCall:

What I mean is, like, I spent, and this was maybe before I started buying houses, I bought a coaching program for like 13 grand and I put it on about three different credit cards

David Richter:

Wow.

Joe McCall:

With my wife and I made the decision together.

David Richter:

Yeah.

Joe McCall:

I remember going through the course and just thinking, this is so stupid. Like, and here I am, like I know better, but this is so dumb. I don’t like what they’re telling me to do. They’re making me put, they’re pushing me outta my comfort zone.

David Richter:

Mm.

Joe McCall:

Um, they’re trying to get me to, you know, call realtors to make low ball offers to sellers. Um, there’s gotta be a better way to do this. And so I never did anything with that program. And looking back at the time, I was actually kind of blaming them for giving me a program. And I thought it was outdated information. It was too simple. You could get this for free from a book. And this is funny because people are still saying that today you could get it for free from a YouTube video. You can get it free from a podcast. This is too simple. So, and then I, you know, what would, I’d just go buy another course, buy another book, buy another program, go to another bootcamp. And so, and then all of a sudden I had a ton of courses and I was never doing what any one of them was saying to do. Like, I would take a little bit of this guy and a little bit of this gal and I would try, you know, I would mix and match their stuff. And then I just was never sticking to one thing. I was chasing short sales for a little while, then I was chasing fix and flip by, you know, re uh, fix and flip rehabs, then lease options, and then wholesaling a little bit. And I was all over the place. And really the houses I were buying, I was buying them all wrong. Bought maybe 12 of them.

David Richter:

Yeah.

Joe McCall:

And so I guess you could say I was taking some action, but I was always in this search for the next secret, the next magic pill.

David Richter:

Yeah.

Joe McCall:

The next, uh, little shiny object and not just sticking to one thing and mastering that.

David Richter:

No, that makes sense. So was that a product of like, the habits from the past? Did you have that a lot? Or was that, did that show up when you started to buy houses and like becoming an entrepreneur or, you know, I’m thinking of you as like the engineer, you know, and analysis paralysis. Like you had, you went out there and actually took action too. So there’s like a lot of different things where it’s like, where did, yeah. Where did that go?

Joe McCall:

Yeah, Well, here’s the problem that I think I had, and maybe a lot of people can relate because I have engineering back background. And so like, I like to, we were building large power plants and, and a lot of different projects. And you get a big stack of plans, blueprints, and you get a big, um, spec manual. And like you can see from beginning to end how everything’s gonna work. You see the underground utilities, you see the foundations, you see the steel structure. You see how, um, all of the exterior elements come in where the windows go. And then, you know, once inside you see all of the, uh, the m e p like the mechanical, electrical, plumbing and where all that goes. And, uh, you see how the interior finishes work and where the equipment. And so like you can see from beginning to end where it all is going to be. And like when you’re taking math in college and calculus, you know, there’s one problem and one solution and one way to get to that problem. There’s always this simple formula. It’s always black or white.

David Richter:

Yeah.

Joe McCall:

This is, these are the steps to get there. Now, when you get into real estate or any small business for that matter, it’s different man. Cuz you’re, now you’re dealing with people, there is no deal is ever the same,

David Richter:

Right

Joe McCall:

No seller is ever the same. There’s always gonna be things that come up. You can’t dot all your I and cross all your t’s like you could in college or looking in in engineering. Right. You can’t have answers to all of your what ifs. So that’s where I struggled. I was like, well, I can’t take action on this because what if this happens? What if that happens? And I had all these Yeah. Buts and these doubts and, um, it just got really frustrating for me, um, because I was stuck in a paralysis of analysis. I wanted to understand how step seven and eight worked before doing steps one and two.

David Richter:

Yeah.

Joe McCall:

Does that make sense?

David Richter:

Yeah, It makes a ton of sense. I think a lot of people get stuck there as well too, of just like, okay, I wanna know the whole process. Like just do the work. You know, like go.

Joe McCall:

So yeah. It wasn’t until I said, all right, I’m gonna trust the system. I’m gonna trust what Chris Chico says to do.

David Richter:

Yeah.

Joe McCall:

And I just did it. And I sent out his postcards to his lists. I made his offers. I used his one page contract. And sure enough, dang it worked. And I just, I was shocked. I remember so clearly how nervous I was like, oh my gosh, this actually worked. Now what do I do?, And so I started like, uh, I couldn’t just trust the system even then.

David Richter:

Yeah.

Joe McCall:

Just do what Chris said to do

David Richter:

<laugh>.

Joe McCall:

I had, I bought, I opened up about five or six other courses that I had, and I looked at all of their, uh, contracts and I pulled together like 20 different contingencies from all these other courses and put them all onto this one contract. Um, you know, I had so many contingencies in there, I must have canceled them out. And finally though, I spent hours pouring over this simple, simple contract. Um, I gave the seller earnest money in cash when she signed the contract, gave it to her in cash. You never do that. You gave it to the title company. Right. And, uh, I was so nervous. Um, and I was, she was elderly. So I made sure that she had her son with her when we signed the contract. Cause I didn’t wanna be accused of taking advantage of an old lady. And, um, she had been begging me to make an offer on her home. I pulled a number out of my butt and she said, yeah, fine. And now I’m freaking out. The son says, dude, yeah, it’s fine with me. No big deal, man. And then she signs the contract without even reading it. And I was nervous trying to, thinking that I had to explain to her every single sentence in that contract. And what did I, and I had to have an answer for everything. She just signed it. Now I’m freaking out. Like, what am I gonna do? Um, I thought whole wholesaling must be illegal. It can’t be this easy. So, um, I stuck a sign in the yard, had tons of people calling me. I bumped the price up 15 grand and it was a three family. And, uh, I had a ton of people start calling me from the sign. And then the first one that I talked to was a realtor. And I thought, oh no, it’s a realtor. He’s gonna, he’s gonna mess up this whole deal. And, uh, I said to the realtor, listen, I gotta be honest with you, um, I don’t own this house yet. I just have it under contract. I think it was for like 50 and I was trying to sell it for 65.

David Richter:

Yeah.

Joe McCall:

I have it under contract for 50 and I don’t know what I’m doing, but like, I don’t own it yet. I hope it’s okay. And the guy’s like, yeah, no big deal. Don’t worry about it. My client wants to buy it. I said, well, I can’t. How do the realtor commissions work? How do you get paid? And, well, I don’t own it yet. How does this work? He said, don’t worry about it. We’ll just do it as a cash transaction. He said, well, I don’t have a title company. How am I? He said, oh, well just use mine. So I said, okay. So he gave me the name and number to his title company in that little small town. And you know, I, so I called that title company up and I said, Hey, um, I just wanted you to know right up front, I don’t want any surprises. I don’t own this property. I’m a wholesaler. I have it under contract for 50. I wanna sell it for 65. I hope that’s okay. And they’re like, relax dude, this is fine.

David Richter:

<laugh>,

Joe McCall:

It’s a cash transaction. No, it’s not a big deal. And so at the end of the day, I got a check for like 12 and a half thousand dollars, 12,500 and something. And changed.

David Richter:

Yeah.

Joe McCall:

And I never went to go look at that property. I didn’t even put a sign in the yard. I had a friend do it. Um, I met the lady, the seller at a Y M C A, a local Y M C A where I knew she knew where it was. And um, yeah, I couldn’t believe it. I sold it, made 12,000 something in change. And, um, I became a believer in this business at that point that even though I had done deals before, they were like, they weren’t good deals. They were bad deal. And I didn’t listen to my coaches and the people who wrote the books and bought the courses from, I didn’t do exactly what they said to do

David Richter:

<laugh>. It still worked out. I love that. And that you’re able, everyone starts somewhere. So there, there was Joe, I could just picture you like, ah, is this, is this, uh, with the title company? Uh, is this okay? You know, like

Joe McCall:

Yeah.

David Richter:

Yeah. That’s great. I absolutely love that image cuz like now I know Joe years later and like the hundreds of people who’s helped, maybe even thousands at this point in like all the different deals that he’s done. And then we all start somewhere. So if you’re listening to this, you could start somewhere. Let me ask you, since the pro first REI podcast, what did you do with that 12,500? Do you remember?

Joe McCall:

Well, at the time I spent it all. I’m sure I didn’t. Yeah.

David Richter:

Yeah.

Joe McCall:

That was back in 2008.

David Richter:

And that was, did that cover some of the mortgages at that point? Cuz you had said like, Hey, we’re, did that cover your mortgage? Like,

Joe McCall:

That’s a good question.

David Richter:

Do you remember what that first check went to?

Joe McCall:

That’s a good question. I don’t remember, to be honest. You know, probably went back into some marketing, um,

David Richter:

marketing yeah

Joe McCall:

And, probably I, you know, at any, there was a period of two or three years where I owed so many people, so much money and I was behind on everything.

David Richter:

Oh, okay.

Joe McCall:

That any money I did make, I’d go to pay off some debts, some bills, student loan payments. Uh,

David Richter:

Was that all during this time? So you make that 12 five and you’re just trying to dig yourself out for the next few years it sounds like.

Joe McCall:

Yeah. The, my period of trial and tribulation was, uh, 2007 and eight when the market started.

David Richter:

Yeah.

Joe McCall:

Crashing, um, to 2011.

David Richter:

Okay.

Joe McCall:

Right during that window. Um, yeah, I had to, I never did miss a mortgage payment on my subject twos.

David Richter:

Yeah.

Joe McCall:

So I’m proud of that. And I paid all my private lenders back, every single penny. Really proud of that because I had borrowed, I mean, at the t knowing some knowing what some people these days borrow, I, um, I was, I had only borrowed maybe 75, 80 grand from private investors

David Richter:

Okay.

Joe McCall:

Over, um, five or six deals. Okay. But I paid them all back. And at the time that, that could have been $800,000, it was a lot of money.

David Richter:

Right.

Joe McCall:

And, uh, I didn’t have, there was no more equity in these houses. They were all upside down.

David Richter:

Yeah.

Joe McCall:

Um, I was getting threatening letters from attorneys and, you know, sellers and from attorneys of sellers and investors and tenant buyers that were threatening to sue me. Um, but I was able to, like some of the houses, I just deeded them back to the owners.

David Richter:

Yeah.

Joe McCall:

Um, but I gave them a tenant that was paying rent. So I just told the owners, listen, I can’t make next month’s mortgage payment, so I’m gonna deed the house back to you with a quick claim deed. I’m sorry, here’s the tenant. And the tenant is just gonna send you the rent to you next month. Um, and they’re like, okay. They weren’t mad. I thought they were gonna be really mad at me, but my private investors, I kept on, I had to have those uncomfortable conversations so many times. It was really hard.

David Richter:

Yeah.

Joe McCall:

Sorry, I can’t pay you, but I will. Um, I remember one time my, uh, dispositions manager <laugh>, this is such a disaster. Um, I won’t go into all the details, but like, I had to come up with only like 12 or $15,000. And again, that time, that could have been $150,000.

David Richter:

Yeah.

Joe McCall:

I had to come up with $15,000 to pay back this private investor, or the private investor was gonna sue me, and the seller was gonna sue me. And, um, I was so my dispositions manager who, um, I dunno at the time wasn’t making that much money. She lent me like that money and I was able to get out of that and then pay her back. So anyway, at the end of the day, um, I learned the importance of cash flow.

David Richter:

Yeah.

Joe McCall:

Like, uh, it’s important to understand and to keep your expenses low, to take on as little debt as possible. And, uh, this is why, um, at the time I remember saying, I don’t want to own another deed ever again. I never want to be responsible for a mortgage payment.

David Richter:

Yeah.

Joe McCall:

On my investment properties. Um, no, I have had some mortgage payments since then, but what I started doing was wholesaling and then I started wholesaling lease options. I started getting, you know, lease options where you control a property without owning it. And I got really interested in that. Like, how can I, how can I get the same benefits of owning a rental property without owning it?

David Richter:

Yeah.

Joe McCall:

Just controlling it. So I started doing a lot of lease options at that point. Um, and this, so then when I started flipping lease options, like what I call wholesaling lease options, I was able to quit my job in the spring of 2009.

David Richter:

Okay. So that helped you, I’m assuming that helped you during those dark times. Cuz you said up to 2011

Joe McCall:

yeah

David Richter:

was just basically <laugh>.

Joe McCall:

So I still had another two years of digging me

David Richter:

Yeah.

Joe McCall:

Digging out of a hole. But now I had more time to do it. Okay. Because now I didn’t have a full-time job, you know, I was working 50, 60 hours a week back.

David Richter:

Yeah.

Joe McCall:

But I was wholesaling, um, these lease options and making more money doing that part-time than I was in my full-time job. So

David Richter:

Then you were like, see ya. Like, I’m gonna do

Joe McCall:

Yeah.

David Richter:

Full-time.

Joe McCall:

But then, you know, also, I made so many mistakes. I mean, God’s been really helpful and good to me. Um, like I didn’t even think about insurance. So my insurance home ins, uh, health insurance costs, you know, doubled.

David Richter:

Oh, wow.

Joe McCall:

And then it was also hard to get. So there were a lot of these little things. And then I, you don’t realize this, but um, and we’ve talked about this in the last one, taxes. Like when I was working for an employer, um, you, uh, they take your taxes out every, every two weeks and usually you get a refund at the end of the year.

David Richter:

Yeah.

Joe McCall:

Um, and so when you’re now working for yourself, you have to set aside that money. So eventually that cut up with me too. But, um, yeah, I, you know, I’m, I guess I’m the case study of how to do things wrong. <laugh> but not quit, not give up and learn the right ways to do it.

David Richter:

Yeah.

Joe McCall:

And so now maybe I’ve, I can help other people.

David Richter:

Right, exactly. You actually took that and did probably the best thing possible you could do is number one, stick with it. And then number two, help people avoid that and be, you know, and really help them in their life and their journey. Let me ask this, so you’re on that 2009 to 2011, kinda like just a, not the greatest period of time. When did it click or when did you read um, pumpkin plan? Because I remember from the

Joe McCall:

Yeah

David Richter:

First one that was the one that kind of changed the mindset. Was that the first book that kind of helped you with the business aspect of real estate? Or like what was the, what made it go from I’m doing these deals and I’m get, and I’m paying all this off to where now I can actually focus on making my business better?

Joe McCall:

I think pumpkin plan, I read that in 2012. So

David Richter:

Okay.

Joe McCall:

I quit my job for after a couple, three years.

David Richter:

Yeah.

Joe McCall:

And, um, I needed, I felt like I was still trying to be a jack of all trades and a master of none I was doing, I was doing well.

David Richter:

Yeah.

Joe McCall:

But I really felt like I needed to focus. I remember the one thing came out about that time.

David Richter:

Okay.

Joe McCall:

The book, the one thing from Gary, Gary Keller. And yeah. And I started reading that and I had a hard time finishing it for some reason. Not that it’s a bad book. I just had a hard time finishing it. And then the pumpkin plan, somebody said, Hey, this is like the one thing, but it’s better. So I read it and I, I’ve really liked it because he talked about, um, and I haven’t looked at it in a while, but there’s three consent, there’s three circles, you know, so if you wanna find your, um, your best business, like the one thing you should be focusing on, it’s a combination of these three things. I think it’s your best customer. So knowing who your best customer is. Second thing is, do you have something that can be automated and repeated like a system?

David Richter:

Yeah.

Joe McCall:

Do you have a repeatable system? And then the third thing I think was, um, is a high profit, you know, does, so if you have the combination of your best customer, you, and it’s something that you, somebody that you like working with, it’s repeatable and it’s high profit. Or maybe the third thing is it’s something you really love to do, you’re passionate about, I forget. But, uh, when it’s a combination of those three things. And so I looked at the different businesses that I was doing and, um, at the time in 20 12, 20 13, the market started rebounding a little bit and um, a lot of money was coming back into the market.

David Richter:

Okay.

Joe McCall:

A lot of investors were starting to buy houses. And, um, so I saw all this cash coming into the market and um, so I thought, and I got kind of tired of doing lease options at the time. I wanted to do something different. So I started doing a lot more cash wholesaling again. At that point, I wish I would’ve started buying houses and holding onto them. But, um, I was still afraid of taking on any deeds I wanted a quick nickel rather than a slow dime. So, um, I changed kind of my strategy and started focusing on finding the buyers first cuz they were my best customers. I realized from reading the pumpkin plan, my best customer is the guy with the money or the gal, the lady, the company with the money. They’re my customers. Not the sellers that I was trying to go after. The buyers with the money were my customers. And then, uh, so we started, stopped all of our marketing for sellers and started marketing for buyers, cash buyers. And they were easy to find. We, they were already buying properties outside of St. Louis and other markets. And then, um, we started then getting other people to bring us their deals. Other wholesalers would, we became known in the area as the best the buyers with the money. Um, so we started just networking with every realtor, property manager wholesaler in the market and saying, Hey, give us your deals. We’ve got money, we’re looking for deals right now. So people started bringing us their deals and then we would then turn around and flip them to our buyers and, um, became a lot easier because, um, it was just so much easier. We’ve got the buyers with money, other people have the deals, they bring ’em to us and we’re in the middle and we wholesale ’em. Um, so that book helped me because I was doing like, again, I said three or four different things, different strategies.

David Richter:

Yeah.

Joe McCall:

And it helped me really focus on my giant pumpkin. And at the time my giant pumpkin was wholesaling deals to cash buyers. Um, and when I started focusing on that, we went from doing couple deals, three, four deals a month to doing three or four deals a week.

David Richter:

Yeah, that’s great. Cuz then it sounds like starting to become a real business. You know, that’s repeat

Joe McCall:

Right

David Richter:

About that and you’re focusing on that. Is that, and then that’s probably what got you into Profit first too. Correct. Like, you had already been a fan of Mike Macau, it’s cuz he wrote Pumpkin Plan, but then read Profit.

Joe McCall:

Yeah. You know, so what’s funny is I read, uh, profit First shortly after that, but I didn’t finish it.

David Richter:

Mm-hmm. <affirmative>,

Joe McCall:

I don’t remember why. Not that it was bad. I just, maybe I have a bad habit of not finishing books.

David Richter:

<laugh>

Joe McCall:

And I, well, I thought, I get it. I know it. I’ll do that. That’s a good idea.

David Richter:

Yeah.

Joe McCall:

But I didn’t do anything with it. And then until it was, you know, a few years probably after that um, when I, all of a sudden now I’m making a lot of money and I’m not paying my taxes and I’m filing my taxes late. And we talked about this in the last episode

David Richter:

mm-hmm. <affirmative>

Joe McCall:

That I did with you. And, uh, all of a sudden I got this huge tax bill. I’m like, oh crap. And after I’d filed two extensions, so I, here I am in late summer, right,

David Richter:

right.

Joe McCall:

And, uh, I owe 60 grand to the irs. Like, oh shoot, so what do I do now? Well, I start paying off those old taxes, but I’m not setting aside any money for my new taxes. So then the next tax bill comes around and I file a couple, three extensions,

David Richter:

<laugh>,

Joe McCall:

You know, and, uh, that’s just a mess, you know. And then I’d give my shoebox of receipts to my accountant at the end of the year, figure this out. Um, and dang it, I owe another a hundred thousand dollars in new taxes. And so it just, I kept on, I was making a lot of money, but I wasn’t taking, I wasn’t writing enough off. I didn’t because I wasn’t buying houses either at the time. I was just wholesaling them.

David Richter:

Yep.

Joe McCall:

So I didn’t have any write-offs. I ran out of all the write-offs that I had from my losses before, from before. We’ve adopted four kids. So we ran out of, we had, there’s adoption tax credits we ran out of those. So yeah, now I gotta start paying taxes. Um, and that kept on snowballing until, um, I forget the year. But, um, you know, I got a, I’d been kind of working with the I R S I was getting a bunch of letters. Um, I was on these plans, these payment plans, um, and I was keeping up with them for the most part. I might miss a month here or there. Um, but then I wasn’t setting aside any money for new taxes that were gonna be coming next year. And I kept on getting into a bigger and bigger hole. And then the penalties, the interest, I just kept on compounding a bigger, I owe the IRS about 520 grand.

David Richter:

Whoa.

Joe McCall:

And I had liens on my, on everything. And, um, it really had affected my credit. Now, um, I, you know, I wanted to buy a house and I couldn’t cuz of these federal tax and stuff like that. Um, so finally I got serious about it and I picked up the book again, prophet first I picked it up again. And this time I said, all right, I’m just gonna do what the guy says to do. I guess I have this problem,

David Richter:

<laugh>,

Joe McCall:

this is,

David Richter:

it’s recurring. Yeah.

Joe McCall:

I’m just gonna do what he says to do. I’m gonna stop questioning it, I’m gonna do it. And then I, um, I hired, uh, an assistant who was gonna also be my bookkeeper. And I just told her, your number one job is to implement profit first.

David Richter:

Yeah.

Joe McCall:

For me. And, um, I said, I don’t know how it works if I try to get into the weeds and try because it’s not my strength, it’s not my

David Richter:

Right.

Joe McCall:

I became smart enough I think, to figure out, I need to find somebody else who’s good at this. Let them do it for me. And, uh, I can focus on how to make money cuz I’m good at that. I can make money. I’m not good at saving the money, paying taxes and all of that stuff.

David Richter:

Right.

Joe McCall:

So she took it and, um, did really well. She, and then the irs, I had a good come to Jesus meeting with them and, uh, they scared the living JIS outta me. And, uh, basically said, you know, we could send you to jail. We could take your house, put your everything, sell it, put your family on the street. Um, you need to start taking this seriously. And I said, yes sir. <laugh>, yes sir. Um, and uh, they said, listen, stop, don’t worry about your previous taxes. Get current on your current taxes. And so I did within a few months, maybe four months, maybe more, four to six months, I got current on my current taxes, started filing them quarterly and, um, put myself on payroll. So I’m starting to get a paycheck every two weeks. And, um, they were taken, I set up the payroll where they were taking the taxes every two weeks.

David Richter:

Okay.

Joe McCall:

Out of my check.

David Richter:

Yeah.

Joe McCall:

In the past I’d just been doing owner draws.

David Richter:

Yeah.

Joe McCall:

Um, so now they’re taking the taxes out and then I’m setting aside a little bit every, every two weeks as well for my quarterly taxes.

David Richter:

Yeah.

Joe McCall:

So that’s taken care of. And then I, then they put me on an installment plan to pay off my old taxes. And it would’ve taken me about 10 years on this plan that they had. And I was like, this too depressing. I can’t do this for 10 years. So I just started paying triple four times what I was supposed minimum

David Richter:

O sure

Joe McCall:

And when I’d have, you know, a, when I make a lot of money or something, did a big deal, I would pour more money into that to pay it off. And, um, yeah, it was a couple years it took me to pay all of that off. It the plan that I was on was like, I don’t remember 10 years, but man, what a relief. Right. And once that was paid off, I was able to get a mortgage and buy a really nice house. And, uh, dang. <laugh>.

David Richter:

Yeah. <laugh>.

Joe McCall:

I would, I’ve never met Mike Mcz, but I’d love to meet him someday. And, uh, his those two books were some of the biggest influences in my business. Um, uh, understanding the power of focus, focusing on your giant pumpkin, cuz we all have one. And, uh, there’s what do I always say there, um, focus will make you rich.

David Richter:

Mm-hmm.

Joe McCall:

Right. Focus will make you rich. So when you focus on that one thing, your giant pumpkin, you will start having success.

David Richter:

Yeah.

Joe McCall:

You will start doing, you will start making my money. But then when you start making money, what do you do with it?

David Richter:

<laugh>,

Joe McCall:

Right?

David Richter:

<laugh> right.

Joe McCall:

You’ve got to know your numbers, you need to manage your numbers, you need to, um, get somebody else to do it because, you know, some of us think that, well, I can do it or I can learn how to do it. I don’t wanna spend the money on a bookkeeper or an accountant. I can do it myself. Man. That’s the recipe for disaster,

David Richter:

Right

Joe McCall:

Like when you can’t do everything, you’ve got to get somebody who can, who’s better at it than you are, who is not involved in the emotions of everything that’s going on, could look at it from an outside perspective and have a better view of it and just give them the authority to do it. Tell them, all right here, read this book, go implement it. Or there’s companies you can hire like yours that can do it for them. Right. So

David Richter:

Yep.

Joe McCall:

Just stop asking how do I do it? And just ask who, who can I get to do it? And that’s finally when things started turning around for me.

David Richter:

Yeah. So it sounds like what a journey there of going

Joe McCall:

Yeah

David Richter:

Through lots of different learning points from, you know, the cash crunch at the beginning to then focusing on, you know, the wholesaling lease option. But you’re still focused on several things but then finding the pumpkin plan and like focusing on what you’re really good at. And then I like how you said like your best customers were your buyers at that point. Just fulfilling their orders, really honing in and then making sure if I’m gonna make all this money I need to make sure that the tax people don’t come knocking on my door anymore. So like getting that outta the way. So yeah, that’s a incredible journey. I’m really glad you were able to share your story here. One, just one, two last questions. One, the before I ended and you know, where do people go for you, but is there any, if someone was going to implement profit first or do that, what would be your biggest advice for them? You know, like, I know you said use someone else, but like is there anything else that you wanna get out there? If someone was going to actually implement it?

Joe McCall:

Uh, well you gotta read the book, that’s number one. But then read it all the way through to and then, uh, just implement it. Stop asking what if, start asking what next? And for me something like that’s really important. I’m too busy to worry about it. I am not good at saving money. I’m good at making money.

David Richter:

Yeah.

Joe McCall:

Um, I’m not good at managing my expenses. I’m not good at counting calories for my diet. Like there’s certain things I’m just not good at, but I am good at making money so I can hire people to do that stuff for me. Right.

David Richter:

Yeah.

Joe McCall:

And um, I think, you know, one of the first one or two or three people that you hire in your business better be some kind of bookkeeper, an accountant or somebody that can manage your books for you because you’re probably not good at it. You’re probably not like, and you gotta be honest with yourself and swallow your pride and just say, this is, I need help with this.

David Richter:

Yeah.

Joe McCall:

I this is that important that you can’t just put it off to the end of the year and worry about it later. Um, you can’t just once a month try to do all the books yourself.

David Richter:

Right.

Joe McCall:

Uh, when you get the time to do it, um, I would say don’t even get your spouse. Maybe your spouse can help you do it, but like you need somebody outside third party who can do it for you, who can look at your stuff and say, um, yeah this goes here, this goes there. And uh, these are the three buckets. And so every dollar that comes in, certain percent goes here, certain percent goes there and uh, just get it done.

David Richter:

Yeah. No, that’s good stuff. So then Joe, lots of value here. I think just hearing your story, your journey, your personal journey and then how overcoming some of those things, what uh, how can people reach out to you now if they want to get involved with you? Cuz like I said, Joe can teach you how to make the money. He’s very, very good.

Joe McCall:

<laugh>

David Richter:

On the make the money side, he’s a marketing expert. There’s a lot that stuff to learn from Joe. So how can they find you?

Joe McCall:

Yeah, thanks man. I guess, uh, I’m on YouTube. I’m on um, podcast. I have a podcast, the Real Estate Investing Mastery. I guess you can see my logo, but it’s backwards on the video. It’s flipped my image. But anyway, I have a podcast called the Real Estate Investing Mastery Show. Um, I have a YouTube channel just search for Joe McCall on YouTube. Um, I have just a lot of things you can go to joemccall.com. I have, my main thing I’m doing now is flipping vacant land. There you go. Uh, that for me is my giant pumpkin right now. Flipping vacant land. And it’s okay if your pumpkin changes.

David Richter:

Yeah,

Joe McCall:

You can have, you know, one year you can have this giant pumpkin, you know, maybe you shouldn’t switch pumpkins every single year, but right now my giant pumpkin is vacant land. I love vacant land. I used to do a lot of houses, now I’m doing land. They’re just easier to do. Um, and you can great, you can make great money. Uh, you can make great cash flow with just a few thousand bucks buying a vacant land and selling it on owner financing. Um, so I’ve been doing that and a lot of people, I’ve been teaching people how to do vacant land flips as well. And if you’re interested, I’ve got a book, Uh, Sorry I had a book. I swear I did it. I’ll tell you it looks like this, but this isn’t it. Um, and you can get the book for free if you go to simplelandclass.com, simplelandclass.com and that’s the webinar that I do. And then at the end of that webinar is, uh, I give you the option to get the book a PDF for free simplelandclass com.

David Richter:

So that’s what his big pumpkin right now and how it can help you if you’re looking to, if you’re already in real estate and looking to add another stream or another exit strategy, or if you’re like, Hey, real estate sounds great, go to Simple Land. What was it again? Simple Land Class, simplelandclass.com. We’ll make sure we put that in the show notes. Then if you’re also listening to this and you resonated with Joe and you’re like, I do not wanna go down that path and I do not wanna be accosted by the IRS and almost taken away, please go to simplecfo.com if we can be your who, uh, at least for getting on the phone and seeing if we’re the right fit or if we’ve got someone for you, you know, like in our network. So that way you don’t have to be struggling on the financial side of your business. Know where every dollar is going. Be very intentional with it, making sure that you’re keeping more of it. So please go to simplecfo.com if we can help, but we just wanna make sure that we’re helping you make profit a habit in your business. Joe, thank you so much again for coming on the Profit First REI podcast.

Joe McCall:

Yeah, thank you David.

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 at simplecfo.com right now. We’ll see you next time on the Profit First for REI podcast with David Richter.

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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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