00;00;00;04 - 00;00;30;09
Unknown
You're not asking for money. You're actually giving them your friends, your family or people in your network. An opportunity to make money. Why would we want to give money, pay interest to banks if we can help our friends grow their wealth as well. When you look at it from that perspective and you see that as an opportunity, it becomes so much easier to talk about.
00;00;30;11 - 00;00;50;13
Unknown
Welcome back to the Seven Figure Flipping Podcast. I'm your host, Adam Whitney, the CEO of seven Figure Flipping and Blackjack Real Estate. And I'm joined by my guest, Lindsay, aka my business partner and the CEO at blackjack. And she helps us in seven figure flipping. And today we're going to talk about how to raise private money for your real estate deals.
00;00;50;13 - 00;01;09;12
Unknown
So if you've ever asked yourself, I don't know anybody with money, how do I get money? Or if you've ever said to yourself, I don't like or want to ask for money, we're going to completely debunk that by the end of today's episode and tell you exactly how to talk to people, how to do this without ever being rejected.
00;01;09;17 - 00;01;34;04
Unknown
Here's the biggest issue that I see investors have. So let's start here. They first off, they don't have a deal yet. And they're not making action on getting a deal because they think they don't know if they can get the money. So they're doing nothing. They're not raising money and they're not going after deals. So sometimes people just get paralyzed because they're not sure.
00;01;34;04 - 00;01;49;15
Unknown
Should I get a deal first before I start raising money? Do I need to raise money in order to get a deal? What? What comes first? What should I do? I think this is a great topic. Before we go on, let's introduce our third partner here, who's on the show with us today. You may or may not be to see him.
00;01;49;15 - 00;02;12;27
Unknown
He's just off camera potentially. His name is George and he is a poodle. What kind of poodle? He's a he's a standard poodle. If you see our standard poodle walking through the door, the podcast studio, it's because he's part of the team. So yeah, they they that you're thinking, I need money, but I also need a deal. I can't get money without a deal, but I can't get a deal if I don't have money.
00;02;12;27 - 00;02;35;26
Unknown
And you're stuck in this perpetual state of doing nothing. And the worst thing you can do aside from by a bad deal, is do nothing. Okay, so let's talk about some of those things and how we over come them. Here's the problem. If you wait, you're already going to be weak. You're going to be in a position of disadvantage.
00;02;35;26 - 00;02;56;28
Unknown
And you want to operate from a position of advantage. So I think it's important to understand that there's $22 trillion sitting on the sideline right now waiting to be employed. And here's the thing. That money cannot just sit there. It has to get employed. The problem for the money is that you're not getting it a deal, and you're not bringing it.
00;02;57;01 - 00;03;26;14
Unknown
You're not bringing the deal to the money. So what should you do first? The truth is, is you should be hunting for deals all the time. You should be raising money all the time, always be raising and always be hunting. How would you give us an example? Like how how would somebody who's starting to raise money start to educate their friends, their family, their coworkers, whatever that they're, that they're interested in raising money?
00;03;26;20 - 00;03;52;11
Unknown
Yeah. First and foremost, you know, somebody might think my friends and coworkers, my family, nobody has money. The people I know don't have money. I come from like me. I come from Detroit like nobody has money. But that's an assumption you're making. And you have no idea who has money. I can't tell you how many. You know, administrative front desk people, teachers, people you think like they don't make a whole bunch of money, but they've saved.
00;03;52;11 - 00;04;11;00
Unknown
They have old 401 K's. There's capital out there that you don't know about, and you have to stop making assumptions. But the word that you said was, how do you start educating? First and foremost, I'd ask you right now, I want you to open up your phone and look into your contacts. How many people are sitting in your contact list right now?
00;04;11;02 - 00;04;31;24
Unknown
Okay. And if you just looked in there, how many of those people have you told that you're a real estate investor and there is an opportunity for them to invest with you? My guess is either nobody or maybe a few people. So if people don't even know that there's an opportunity to invest, how would they ever be able to invest?
00;04;31;26 - 00;05;01;00
Unknown
You don't need to go in with expectations thinking everybody I talked to is going to invest with me. Only a small percentage. Well, you just need to let people know what you're doing so that they start to come to you instead of you coming to them. Right. And one of the easiest ways to do that, something we're going to talk about more a little bit later, is by telling people every single day, leveraging your social media and talking about what you're actually doing specifically in real estate.
00;05;01;02 - 00;05;18;06
Unknown
And if you wait to raise capital, you're already too late. And what I see people do is let's say you do take action. You're going after that deal. You finally get something it underwrites. Well, the numbers look good. You're going to make money. You've never got money to buy this deal before. You're not sure? Do I go to hard money?
00;05;18;06 - 00;05;44;19
Unknown
What is private money? And you don't know what to do next? Well, the problem that I see is usually what happens is you start operating with this unnecessary urgency and you start speaking from a place of desperation. You start saying words like need. The truth is, I just told you, there's $22 trillion in the marketplace and there's not $22 trillion worth of deals.
00;05;44;21 - 00;06;17;00
Unknown
So does the money need you or do you need the money? Yeah. Yeah. And and you know something I think Bill taught us. And this really helped me when I started raising money, was that you're not asking for money. You are actually giving them your friends, your family, your people in your network, an opportunity to make money. Why would we want to give money, pay interest to banks if we can help our friends grow their wealth as well?
00;06;17;02 - 00;06;35;09
Unknown
When you look at it from that perspective and you see that as an opportunity, it becomes so much easier to talk about. And and I think you have to be comfortable knowing that it's not an opportunity for everybody. It's an opportunity for the right person. Your only job is to let people know what opportunities are available and the right people will surface.
00;06;35;15 - 00;06;56;24
Unknown
Right. And when we when we don't do this, when we don't start educating, when we don't build that foundation, most of the time we rely on using hard money, which is great. We have hard money lenders. They're they're amazing. We have great partnerships with them. But when you only rely on those partnerships, what happens is you become less flexible, right?
00;06;56;26 - 00;07;20;12
Unknown
You are having to work underneath those timelines. When the market changes and there's less money available, you're the amount of money that you could borrow might become less. The amount of opportunities out there might become less. And so you can't move quickly like you can if you have private lenders. And the thing is, is hard money has a utility.
00;07;20;12 - 00;07;40;29
Unknown
It certainly has a utility, but it's expensive. People don't understand the actual path to getting a hard money loan. Getting a hard money lender to lend you is not the hardest thing in the world, but once you go to get that hard money loan, after you go through all the paperwork, all the underwriting, they say, yes, we'll do a loan with you, then you get a deal.
00;07;41;02 - 00;07;59;17
Unknown
Now what? You didn't know was you have points and the points are due when you buy the house, not at the end, whereas private money, you can structure it to come at the end. If you have any points at all. What you also don't know is hard. Money always has some kind of fees involved with it that are due when you buy the house.
00;07;59;17 - 00;08;18;14
Unknown
So I see hard money lenders having a admin fee that's like a thousand bucks or 1500 bucks just to close on the house. And oh, by the way, hard money lender is going to require you to get additional things on the title that lenders title policy and all these additional things that can come with it. They call them exceptions and title.
00;08;18;17 - 00;08;38;17
Unknown
Those things all cost money. So there's a hidden cost with hard money. And look, it's it's it's useful. There's a utility to it, but it's not nearly as flexible as private money like you said. Well, and you still are going to have to come out of pocket at close because you're in addition to paying those points upfront, those fees you will need to pay your closing costs.
00;08;38;19 - 00;09;10;12
Unknown
If you're raising private money, you can raise enough money to cover those things so you don't have out-of-pocket costs, right when you go to close on the house. Yeah. So you have all those additional costs. And then there's the timeline associated with buying a deal because do you still move fast? You get a deal under contract with a wholesaler, with an agent, a lot of times you're closing in 21 days and 14 days and ten days and seven days, and it again creates, unnecessary degree of urgency and you will feel like you're not prepared for it.
00;09;10;12 - 00;09;34;26
Unknown
And it will be, create all this pressure. And anytime you have pressure, you start making bad decisions that are expensive. So you take the path of least resistance. You know, there's a Sharkey hard money lender who's at four, 10% and four points. And, instead of going through the more institutional lender or the private lender, you end up with some Sharkey market hard money lender, and you're paying way more than you should be paying for a flat rate.
00;09;34;28 - 00;09;58;11
Unknown
And it could also it can put you at a disadvantage when you're buying from wholesalers. So, if we are wholesaling a property and we have a buyer that has private money or cash versus a hard money lender, we would typically give preference to that cash buyer or private private money purchase because we know the likelihood of it closing on time is greater.
00;09;58;14 - 00;10;25;21
Unknown
When we talk to most investors about raising private money, one of the things that we hear a lot is that they're afraid of being told no. Afraid of damaging a relationship. They don't want to feel like they're pressuring people they know to, put their money into a project. And they sometimes they don't feel like they have enough experience to actually go and ask somebody if they're interested in investing.
00;10;25;25 - 00;10;51;02
Unknown
Yeah. And here's the cool thing. Like, you can take all the pressure off. You don't even have to ask. You can literally just say, hey, Lindsey, thanks for showing interest in what I'm doing in real estate. I don't know if you know this or maybe you know somebody else who might be interested, but we actually allow people to invest in our deals with us who might have some cash or some 401 care IRA sitting on the side, and they don't even have to do any of the work.
00;10;51;02 - 00;11;08;29
Unknown
Would you know anybody else like that? It takes the pressure off completely. So I didn't ask them directly. So there's no way they can tell me no, I won't do that. And they don't feel asked. So only a couple things happen in that conversation when it's framed that way. And it's, you know, I don't know anybody, but I'll think about it.
00;11;08;29 - 00;11;28;28
Unknown
Or what about me? I would be interested in that. And you're indirectly asking the question which avoids rejection, which you don't have to feel like you're selling anybody because it's like raising capital isn't about selling anybody. It's not about selling the deal. The deal is second, they're they're investing with you because they trust you as the operator first.
00;11;28;28 - 00;11;49;24
Unknown
And then the deal mechanics have to make sense. Most of the time somebody is investing with you. It's because they know, like and trust you. The deal's important and you should have your facts and data, but you don't need to go into a conversation with a pitch deck and a credibility package. You're you're already talking with people who you have that with.
00;11;49;27 - 00;12;13;18
Unknown
So it's just about asking who might be interested and the the frame here that, you know, of course, I learned almost everything I know about raising capital from Bill. And one of the cool parts about this is it's not about us, it's not about our deal. It's about that investor, and it's about really knowing truly, genuinely if it's a good opportunity for them, and that you only know that if you start to ask great questions.
00;12;13;20 - 00;12;30;20
Unknown
What? Okay, I know, I see you're interested. What is your money doing right now? What kind of return is it getting? Like, when would you be ready to deploy that capital? If I had a deal tomorrow, would you be ready to deploy it? And then you start to learn, hey, my money is in a CD for 12 months.
00;12;30;20 - 00;12;48;01
Unknown
It's about to expire. It's getting 4%. And they tell you that, and this goes, okay, cool. Like, what kind of return after you after you're done with that CD, what kind of return would you be looking to get that would make you really happy? I want to keep doing this with the investor. I might say 6 or 7%.
00;12;48;03 - 00;13;14;05
Unknown
Right. Most people go into it and think, oh, I need to offer double digit returns or something really impressive without even we're just making assumptions. We're not even asking what somebody would be happy with. Yeah, and I love this analogy that, Bill explained to me. He said, look, if you go to my grandma and you tell her you're going to get her a 12% return, she's going to think you're a scam because she is getting 5 or 4% in a CD.
00;13;14;07 - 00;13;37;12
Unknown
Now, she would be like ecstatic. About 7%. But you start talking 12% and you start to make people feel like it's too good to be true, and that's you projecting what you think somebody should get or what somebody wants. Instead of asking great questions, you're shooting yourself in the foot and you're potentially pushing away really good investors and you're robbing them of an opportunity that they really want.
00;13;37;19 - 00;14;02;10
Unknown
Well, they they think it's too good to be true, but they also could associate something like that with it being a high risk investment, when really what what we offer is, is secured by real estate. It's secured by an asset. And so it's much safer than most other types of investments that they can, you know, get into. But we just have to know what it is that they really, really want.
00;14;02;12 - 00;14;24;25
Unknown
And that only comes through great questions. And I think the people who are committed and serious to what they're doing, even if you're brand new, you're you're going to take action, okay? If you're serious about this, you're you're raising capital all the time. And that doesn't mean you're putting out pitch decks. That just means you're literally telling people what you're doing.
00;14;24;25 - 00;14;46;20
Unknown
And I know me, you and Bill all just did this collective thing where we brought awareness. All we did was bring awareness around what we were doing. Can you talk a little bit about that? Yeah. So Bill created this this amazing challenge. It's 30 days to 500 K and it's it's part of the the challenges and the training that he he runs.
00;14;46;22 - 00;15;07;06
Unknown
And so there is an action that you will perform every day live on Facebook. It can be as short as 30s. It could, it could be longer. And just simply talk about what you're doing, who you are as a human. What projects are you working on? What are you doing in real estate? Why are you doing it?
00;15;07;08 - 00;15;25;05
Unknown
And you don't have to ask for money? It's not really about that. It's really at the beginning of just about educating people about what you're doing. And I love this too, because a new investor might think, but I'm not doing anything. Well, the investor, when we talk to new investors inside the seven figure flipping community, it's like, but you are doing it.
00;15;25;05 - 00;15;47;07
Unknown
You're in here, you're learning. You're listening to a podcast, you're watching training videos, your network, like you're doing a lot of stuff. You're not giving yourself enough credit. You don't have to talk about doing what I'm doing. You need to talk about what you're doing. You need to talk about I'm working. I'm finding my first deal. I'm working on refining how I analyze deals to make sure I buy the best deal possible.
00;15;47;12 - 00;16;22;19
Unknown
Here's what are my minimum profits going to be? All these things that you're learning are the things. Exact things you should be talking about every day to. As many people will listen to you. So they they start that because that starts to build trust. They start to see that you're serious. They start to see that you know what you're talking about, even if you're in your learning phase in our members have such a great advantage because they can talk about how they invested in themselves to educate themselves and learn from the best flippers and wholesalers in the country to make sure that they're doing things the right way.
00;16;22;21 - 00;16;49;11
Unknown
Okay, let's let's go into the market pulse and just talk about why raising private capital, true private capital, not institutional, not hard money, but like borrowing from friends and family and, and other people who are like really close to your circle that are watching you. But maybe you're not talking to him every day. In 2020, there was a global pandemic, which I'm sure many of you remember, if not all of you.
00;16;49;11 - 00;17;09;21
Unknown
I don't know unless you're living under a rock, potentially. But, when the pandemic hit, everybody freaked out. Literally. The hard money, the institutional money, it froze. It completely froze. They were not doing loans. People's businesses were basically shut off if they were only invest and they only had hard money. And we we talk about this a lot.
00;17;09;22 - 00;17;34;14
Unknown
Like I said, hard money's not bad, but you need multiple layers to your capital stack. You got to have hard money lined up. You got to start working on private money. You should have some business credit lined up, some lines of credit, like you don't need them all right now, but these are all different buckets of money that you have to start working towards to create liquidity in your business so that when a pandemic hits, everybody else is sidelined.
00;17;34;14 - 00;17;55;18
Unknown
You have a massive opportunity in front of you. The even during that time there was like a 30 day freeze where you couldn't get loans with hard money lenders. However, even after that period for, for a short period of time, the the amount of money that you could borrow was less than it was before because they were insulating.
00;17;55;18 - 00;18;14;03
Unknown
They were they were protecting their lenders. And so having private lenders gives you just so much more flexibility. If you had private money during that time, you didn't skip a beat. You just kept moving through your projects, good operators and where you should be growing to your you. You have a you don't want to be emotional or emotional.
00;18;14;03 - 00;18;37;28
Unknown
Operators go out and they get expensive money because they have all this urgency and desperation. A structured dialed in operator is building a bench of capital, whether it's private, whether it's hard, whether it's credit, whatever it may be, and they're going to have optionality that just regular investors who don't have the skill sets that they need in raising private money, they'll never have that.
00;18;37;28 - 00;19;04;21
Unknown
And I always say this, there's two skills that if you have these two skills, you can literally dominate any asset class. I don't care if it's residential flips, commercial multifamily, the ability to find good deals and the ability to raise private capital will get you heads and shoulders above anybody else in the marketplace. So with that said, do I need to go and get four different types of capital, or do I need a deep in certain types of capital?
00;19;04;27 - 00;19;22;24
Unknown
How would you approach it? I think you should always have, hard money available to you. You never know when you're going to need it, and it's good to have it available, but you want to keep building your bunch of private lenders. Here's why. You never know what your private lenders are investing in. They might have their own projects.
00;19;22;24 - 00;19;53;29
Unknown
They might also be investing with, you know, multifamily. They could be investing with other investors. And so at the time when you need money, just because you've borrowed from that person before doesn't mean that that money's available now. And so having consistent communication, giving project updates and asked them what their next project is, if they're willing to reinvest what their timelines look like, are all very important, because you need to have a bench of people who are willing and able to loan to you at any time.
00;19;54;02 - 00;20;19;03
Unknown
And I'm just looking at what we have right now for private money. And we currently employed right now I don't know if you know this, but we have $2.55 million of private money employed across 20 or so deals that we have active right now. Right. I just updated it this morning. So yeah. So anyway, so you do know that number.
00;20;19;03 - 00;20;39;11
Unknown
Yes. Yes. And that. But that didn't come from one person. That's not one lender. Right. It's you know, it's spread across 6 or 7 lenders of people who wanted the opportunity to invest with us. And by the way, there are a lot of people right now looking for an operator to invest with or looking even if they have capital and they want to do their own deals.
00;20;39;11 - 00;20;57;07
Unknown
Sometimes what happens is it's it's it's really great experience for them to come in with an experienced operator like us or somebody who's even just a little ahead of them, be able to invest in their deals, see the mechanics of it, see how the lending goes, see how the money moves, and then sets them up later to potentially just run their own deals.
00;20;57;10 - 00;21;24;09
Unknown
And there's a lot of people like that that would just love to to be a part of what you're doing. Like you said earlier, inside of what we do, there's things that are designed to help you do this in a structured way. There's a blueprint. What to say? Like what to talk about. And we just went through this and I would just be curious to know from your experience, like, did you just love getting live on Facebook every day for 30 straight days?
00;21;24;09 - 00;21;43;04
Unknown
Like, what did that feel like for you? I was really nervous. As a matter of fact, I kind of been avoiding doing it for a little while. I, I just, I was afraid, like, what if I say the wrong thing? Like, I can't delete it, I can't redo it, it won't be perfect. And I was I was pretty nervous.
00;21;43;04 - 00;22;06;25
Unknown
So like my first week, I it cut out on me and I had to restart it. I actually said the wrong words, I, I called it a flip funding challenge instead of 30 days to 500 K. So but after that first week, it was really it was okay. And you know, what's interesting is that I had a lot of great questions about seven figure flipping what we do, from that.
00;22;06;25 - 00;22;24;15
Unknown
And so I was able to educate, I was able to talk about our projects where we have these scrape and replaced mobile homes, and a lot of people didn't know that's what we were looking for. So we have more deals now coming to us because of that. And I had I had some people just asking us how, how can we invest with you?
00;22;24;19 - 00;22;43;20
Unknown
And so by the time I was done the last couple, I, I felt really confident it wasn't something I had to work hard at doing. It's just that consistency every every day. What I, what I look, I was nervous too, by the way. Like, I'm like, what am I going to say? Even though it tells me kind of what I should be talking about.
00;22;43;23 - 00;22;58;21
Unknown
But what I found was there were people who I knew on the fringes, and they, I and I would always invite them, hey, I will have a call with you. I will look at what you're doing. I'm happy to talk to you about real estate. And I would get on these calls every week that I would do this.
00;22;58;21 - 00;23;14;14
Unknown
And sometimes somebody would tell me their position, where their capital is at, what kind of return it's getting. And I would I would say you know, I don't know if this is the right thing for you, but I would start looking at X and sometimes people would be like, hey, I've been watching what you're doing. I want to get involved.
00;23;14;14 - 00;23;32;19
Unknown
What's the best thing to get involved with? I'd say, hey, if you're really interested, I'll send you some information on this or we can have a deeper conversation. We'd have a conversation and then people would invest with us or they would get the information they needed to go on and do something else. Either way, it was a win for me because I got to help somebody in the process right.
00;23;32;21 - 00;23;55;23
Unknown
Okay, let's let's go into the field report. So you and I, we have a myriad of projects going on right now, but we just went out to a project about was that a week ago? That was. Yeah. And we bought five acres of land, two, two and a half acre plots. We tore down the existing structures and we had brand new manufactured home delivered there.
00;23;55;25 - 00;24;18;20
Unknown
You want to talk about that deal? And like, what's that experience been like? Yeah. This is this has been a new experience for us. We we flipped mobile homes. That's that's been pretty straightforward and easy. But this is different because we are working now with getting permits, removing existing structures, putting new mobile homes on an existing lot.
00;24;18;20 - 00;24;39;00
Unknown
But we have to replace subjects, we have to put in wells, we have to replace electrical, all these things where we have to figure out the schedule of what order are we actually going to do this then? And how do we do it most efficiently? And so, it's it's been a new and interesting process for us. What would you say has been maybe the most challenging part of this?
00;24;39;03 - 00;24;58;01
Unknown
I think any time you go into something new, there are no knowns or things. We know there are unknown knowns or things we know we don't know. But then there are the unknown unknowns, and a lot of times it rears its head in terms of different types of cost. Or you make cost assumptions so that you can continue with the deal.
00;24;58;04 - 00;25;15;01
Unknown
And then when the rubber meets the road, you find out what the true costs are sometimes or hire sometimes a surprise you and there are lower. And then sometimes there are things that you didn't plan for at all and you go, crap, I how do we not know that? That was going to be an additional thing? We assumed it was part of this.
00;25;15;04 - 00;25;36;16
Unknown
So we kind of learned all of the nuance and doing that you could never learn. And when we have people, friends like people in our world that can literally tell us step by step what to do. But maybe they're in a different county and the requirements were different for them. So in our county, we found things out that we either have to do that, cost more money or things that we don't have to do at all.
00;25;36;18 - 00;26;02;21
Unknown
And what that did for us, at least for me, was it helped me to refine our deal analysis model, how much we could pay for certain things. It helped me to refine our buy box. What what are we willing to buy and where and, that's going to go into future deals and literally just make us better margins and be way faster at our next like 3 or 4 deals, and then we'll be humming.
00;26;02;24 - 00;26;30;03
Unknown
Absolutely. I think for me, it was also seeing sequence sequencing, figuring out what order do we do this in. Because every day we use private money lenders for our projects. But every day that we don't get something done on our properties, it costs us money and that takes away from our profitability. And so really figuring out the sequencing is has been a really valuable part of this project, because future projects will go more smoothly.
00;26;30;10 - 00;26;51;18
Unknown
Yeah. And and I think it's important to know that this is why time in this type of industry matters so much. So let's say you take out a $100,000 loan and somebody lends that money to you for 10% over 12 months. Over the entirety of that 12 months, that's going to cost you $10,000. So that's 100 grand times 10%, okay.
00;26;51;18 - 00;27;15;12
Unknown
And that's over 12 months. So then you divide that 10%, that 10,000 by 365 days. And that's what your daily cost is. Not just to hold the loan doesn't mean doesn't count utilities and has conscience. So you have to become really efficient as an operator because the faster you're in and out of deals, the bigger the margin you're going to have, the safer your lenders are in that deal.
00;27;15;12 - 00;27;36;24
Unknown
So it's really important to us as operators to be super dialed in in our process. On the job layers and sequencing like you talked about, to be in and out of these deals as fast as possible, return the capital as fast as possible, and then turn it over again on the next deal. Right. And then we have this other project where we're really still deciding what our exit is going to be, whether it's going to be, a flip.
00;27;36;27 - 00;27;58;11
Unknown
And we're going to do some work there, or we're going to demo it out and we're going to put a new mobile home on the lot. And one thing this week, we were a little surprised by. Turns out we have a rattlesnake living inside the unit. I was wondering if you are going to go remove it. I'm probably not going to be the one to remove it.
00;27;58;11 - 00;28;21;06
Unknown
Oh, it would make for great content. I also could potentially end up in the hospital. Which brings me to the point of risk. Rattlesnake risk usually doesn't go into my calculation, but I look at all these deals through the lens of the risk and what I like to do is I like to model the different worst case scenarios for every exit strategy.
00;28;21;06 - 00;28;38;24
Unknown
And when you talked about we're looking. So we bought a deal with a plan and it was a good plan. And then we start to learn new things and we go, is it the best plan? What are the different worst case scenarios for this plan? So you and I, even over the last few days, went through every scenario, all the different cost.
00;28;38;25 - 00;28;59;07
Unknown
We had our contractors pricing different things out, and then we start to get clarity on the numbers and we go, you know what, let's explore this other avenue. So the upside might be less, but the speed will be faster. And then risk could be less. Risk would go down. We get rid of that deal. We make a little bit of money and then we go in and we reset.
00;28;59;07 - 00;29;21;24
Unknown
We buy the next deal, including all the new things we've learned. And now we increase our margin. Yeah. That's why it's really important, though, to when you're underwriting a deal to have more than one exit strategy. If you can, because then you have options. And when things don't go the way you plan and you need to pivot, you can write.
00;29;21;29 - 00;29;40;26
Unknown
If you're if you're betting on everything to go perfect and only one exit, that's a recipe for disaster for sure. And I think our investors love that we are modeling these worst case scenarios. It gives them confidence in the deals that we're doing, even though we openly will talk to them about it. Hey, we're either going to do this, this or this.
00;29;40;26 - 00;30;00;23
Unknown
Here's where we see the upside, here's where we see the downside. And it just instills confidence in our investors. And they know we don't. We work really hard to be effective. We are rule number one is don't lose money. So as long as we never lose money and we play the game enough times and long enough, we're going to be way up, right?
00;30;00;26 - 00;30;18;15
Unknown
So if you if you were to go to the roulette table or the poker table and you lose 40% of the time, but you win 60% of the time, you just keep playing more, you keep playing more, and you're always going to be up because you're winning. Most of the time. We're winning way more than 60% of the time, like 98%.
00;30;18;17 - 00;30;38;21
Unknown
So if you take all this stuff that we've talked about today, the different risk modeling, like how important money is, the different buckets of money, and then our own lessons learned. Right. So we're very experienced, but we start a new kind of asset class with manufactured homes. And it's similar but it's not the same. And we learn the unknown unknowns.
00;30;38;23 - 00;30;57;08
Unknown
And I think to if we go back and say, what did you do to mitigate that? So if you're a new investor, there's a lot of unknown unknowns, I'm sure. Well, first and foremost, we did the thing. We didn't sit on it. We executed the strategy ASAP. We knew we knew as much as we were going to know and needed to know to go.
00;30;57;08 - 00;31;17;04
Unknown
So we went. Then as we learn new things and maybe costs went up on stuff we didn't just like wallow in that, we went back. We're pulled comps, we looked at pricing. We said, where do we really think we can sell this right now? What if we sold that as it sits today? That's one thing we thought about.
00;31;17;04 - 00;31;37;17
Unknown
That's something you should be thinking about for every deal you hold. If I had to sell this today, what can I sell it for? So we looked at that. If I still look at comps, I think that's important. Like we didn't just look at comps before we bought it and then stop doing that. We consistently have looked at comps since we bought it because other properties have closed, and that may influence our decision.
00;31;37;17 - 00;31;58;08
Unknown
And so that's really important for everybody to do too, for sure. And you buy it. You think you're going to make a thousand, $1 million. And then you start to see comps selling for 800,000 totally changes your decision lens. Right. And that's an extreme example. But an example. And or you might see like, holy crap, we got a really good comp that we didn't have before it sold for 310.
00;31;58;08 - 00;32;12;13
Unknown
We thought it was going to be 280, where now we have 30 more potential room. And then what do you do? You look at that comp, you go, why did it sell for that much? Where is it? What school district is it and how much land does it have? Like what makes this one different than the other ones?
00;32;12;19 - 00;32;31;19
Unknown
And then if you're a real pro, you go a step further. You call the agent who sold. There you go. What were your showings like? It's shows you were on market for 55 days. Like how many offers did you get? Was this just one lucky buyer? Was this there was a genuine interest in this deal. And that gets you to get clarity on where the exit strategy should be.
00;32;31;19 - 00;32;54;17
Unknown
And this is like the process we are going through on these deals. Here's another thing to tracking what you're spending as the project is going on. Don't wait till the end to get surprised by how much you've spent, and then figure out if you want or lost in the deal, right? Like, actively track how much money you're putting in the deal and track that against your profitability so that you can pivot and make different decisions if you need to.
00;32;54;18 - 00;33;17;16
Unknown
We literally looked at our deal today and said, how much money do we currently have in the deal? What have we already paid for in this deal? From interest cost surveys to inspections to everything we've spent on one deal, add that up with what we bought it for. Plus all the closing costs, all this money we put in to understand what is in the deal today to to say, can we just sell it right now?
00;33;17;16 - 00;33;34;08
Unknown
If we sold it, what would we have to sell it at to make it make sense? And not that we're even going to do that. Well, we could just still go with plan A, the original plan we had, it might be the best plan. But even today we look at our deals and we go, what is the most optimized thing that we can do?
00;33;34;08 - 00;33;58;17
Unknown
And going through all these different scenarios that could happen or have happened already because we we track everything because we plan out for worst case scenarios, because we have that communication with our investors. It's it builds a lot of trust. And what is that for us like? So we do all that stuff. We continue to optimize. We continue to count, count the pennies and make sure everything is optimized.
00;33;58;20 - 00;34;29;17
Unknown
What does that do for our investors with confidence. And then because they build confidence, what does that what does that allow us to get? Well it builds confidence. It builds trust. And we are very transparent. I mean, we just talked about the exact decisions we're making in our business and it goes out online. And so our investors know the process, the due diligence that we go through, the fact that we're on top of our numbers throughout the entire project so that we can make good decisions, which also protects them.
00;34;29;20 - 00;34;49;10
Unknown
So that gives us more credibility. It allows us to continue to invest with these these individuals on multiple deals. And not only that, they will recommend us to other investors. So we raise more money. But what if you don't have a track record like we didn't necessarily have a big track record in this asset class? What if you don't have a track record?
00;34;49;12 - 00;35;12;16
Unknown
I think you you start with talking about the things that will give you credibility. I give an example a little bit earlier about if you're if you're new to the community and you're investing in yourself and you're learning from the best flippers in the country, getting direct assistance, learning the right way to raise money and take really good care of your investors, talk about that.
00;35;12;18 - 00;35;34;23
Unknown
That will start to develop credibility and trust. And then as you get your first project, put that out into the world. Tell everybody what you're doing, show everybody how you're responsible, how you're tracking it. Talk about all the things that we talked about today, and that alone will build a ton of trust and credibility. And that is literally building the track record that you say you don't have.
00;35;34;23 - 00;36;06;08
Unknown
I don't have a track record, right. You have to go build it. And that's the point. So let's say right now, one of our funding sources dried up, and we didn't have access to the money that we we thought we would. What would we do? What our business stall. Yeah. I think it's such a great question. The action steps that I would take, like immediately is I would open up my phone and I would start reaching out to people telling them what I'm doing.
00;36;06;08 - 00;36;28;18
Unknown
Hey, I'm doing this in real estate. I have great opportunities. Do you know anybody else who might be interested in potentially investing in something like this? And you just have to just go do that for ten people. But in reality, you probably have a thousand or more people in your phone. If you really wanted it, you would start reaching out, not feel any shame about it because you understand it's an opportunity.
00;36;28;25 - 00;36;53;20
Unknown
And then pro tip how do you prevent that from happening? Prevent the stall. You do this proactively before you need it. And you you are constantly a ABR. Maybe always be raising. And I would say there's just like a couple there's a couple things you're trying to do when you do that. Reach out. Now your phone is one medium.
00;36;53;27 - 00;37;15;15
Unknown
You all have a social media account. You go on to social media, click the go Live button. And again you should start talking about what you're doing. I know everybody wants to overcomplicate this. They want to think, I gotta have a track record. I gotta have a fancy deal deck and a PowerPoint presentation. And I have to understand every bit of the process before I touch anything.
00;37;15;18 - 00;37;37;01
Unknown
Well, if you do that, you'll never understand any of the process because you don't gain understanding just from watching and learning. You gain understanding from watching, learning and doing. And then once you do, you learn again in the loop goes around. But if you just do learning, learning, learning, learning, you're stuck in a learning loop and in a learning loop.
00;37;37;01 - 00;37;58;29
Unknown
You don't make money and you don't get freedom. I just remember to people who want to work with you are doing that because they know they like you and they trust you. It's not because you put together a fancy presentation. So I mean, there's a lot to unpack there. And obviously in 30 minutes we can't like give every detail exactly how to do this.
00;37;58;29 - 00;38;25;06
Unknown
But good news, we run a challenge. My partner, our partner, Bill Allen, runs a challenge where he teaches his entire playbook literally step by step on how he does everything we just talked about. He also goes into how the paperwork works, how the transaction works. He goes in exactly what to say. Like you can't mess it up when you go do this training because you get the exact step by step playbook.
00;38;25;06 - 00;38;54;23
Unknown
So I would encourage you guys to check out the flip funding masterclass that Bill is doing. There'll be a link in the description. Like always you can sign up. I think it cost the amount of a coffee from Starbucks. I think it's like seven bucks or something. And the reason there's a cost to it is because if it's free, a bunch of people who are interested but not serious will sign up because while we love to provide value, we love for you to actually do the thing and be successful.
00;38;54;23 - 00;39;12;11
Unknown
It's more important to us that you're successful than it is that you just sign up for a course. So it's seven bucks to come. If you spend seven bucks, you're way more likely to show up. You're way more likely to do the thing that Bill is going to tell you exactly how to do it. So check that out at the link in the description for the full funding masterclass that Bill Bill's doing.
00;39;12;14 - 00;39;43;26
Unknown
And I think that alone will give you the playbook you need to master. One of the two skills, which is having private capital available, and the next skill you can work on is finding great deals. Okay, so look, I love doing this podcast. I love providing value to you guys. I only have one favor to ask you, and that is, I would like you to send us an email or put a comment if you're watching this on YouTube or in a place where you can put a comment, put a comment below and tell us, hey, this was awesome and tell us what else you want us to go into.
00;39;43;26 - 00;40;02;05
Unknown
We do so many amazing things in our business and there's so many amazing investors in our community that are doing really incredible stuff that we could totally come on here and give that value to you, but I'd like for you to tell me what it is that you want the most or need the most in your business today, and then I'll bring that to the podcast and future podcast.
00;40;02;11 - 00;40;18;06
Unknown
So if you like this episode, two things for you to do right now. Number one, if you need capital for your deals, sign up for the Flip Funding Masterclass with Bill Allen. And number two, tell us what you want to hear on the future podcast and we'll make sure we bring it to you. Thanks for listening and I'll see you on the next one.
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