BiggerPockets Real Estate Podcast - 289: Using Other People's Money to Build Your Real Estate Empire with Matt Faircloth

Episode Date: July 26, 2018

Building a real estate business can be one of the best ways to achieve financial freedom. The problem for most, however, is money: There simply isn’t enough in your hands to get all the deals you want. That’s why today’s show might be the most impactful podcast episode you’ve ever heard. In today’s interview with Matt Faircloth, author of the new book Raising Private Capital, shares the steps needed to begin raising money from others to fund your real estate deals. You’ll discover the different types of private capital (and how to approach each), how Matt and his wife were able to grow from 30 units to over 300 (!) using other people’s money, and why talking about metrics to a private lender might not be a great idea at first. If you want to 10x your real estate portfolio or build your empire faster, this is one show you can’t afford to miss! In This Episode We Cover: Who Matt Faircloth is How they’ve reached 380 units to date Tips for building wealth by investing in business What you should know about opportunity cost Finding deals versus making good deals How to raise private money Tips for starting a business with friends and family A role-play call with David The number one question potential cash providers ask Why you should start with debt A new way to look at debt When the SEC gets involved About his book And SO much more! Links from the Show BiggerPockets Forums Brandon’s Instagram David’s Instagram BiggerPockets Instagram BiggerPockets Store BiggerPockets Podcast 203: Finding Deals, Funding, Contractors, and Mentors with Matt and Liz Faircloth BP Podcast 088: Investing with Your Spouse, Managing Financials, and Growing Your Team with Matt and Liz Faircloth BiggerPockets Webinar BNI BiggerPockets Pro Replay BiggerPockets Hard Money Lenders Books Mentioned in this Show Rich Dad, Poor Dad by Robert Kiyosaki Rich Dad’s Cashflow Quadrant by Robert Kiyosaki Raising Private Capital by Matt Faircloth Lifeonaire by by Steve Cook & Shaun McCloskey Fire Round Questions What kind of rates are investors getting from private lenders? What’s the holding period? Is there a serious, reliable source for PM lenders available? Would a loan from friends and family be considered private money? If you do pay for your coach, how does the fee work Whats up with the investors/mentors? Do I need a basic contract to use when raising private money, even from people I know and trust, even for family? Are there specific rules around raising the 20% down payment that most banks require? Tweetable Topics: “When it comes to raising money, you got to establish trust first.” (Tweet This!) “People should start with debt.” (Tweet This!) “It’s not about finding good deals, it’s about making good deals.” (Tweet This!) “You’ve got to squeeze the lemon and make something out of it.” (Tweet This!) Connect with Matt Matt’s BiggerPockets Profile Matt’s Company Website Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show. I don't even know that number of this is. No, we never do. We never do. 289. That's the first question is, can I trust you? Are you going to do the right thing with my money? And then the next question is, as you just said, David, am I going to get my money back?

And then it's your role as the deal provider to sit them down and say, okay, here's the nuts and bolts of the deal. Here's how you get it back. Here's how you're protected, you know, with this mortgage on a private loan. or if you're doing a private equity deal, this is how you have ownership in the property. Here's the operating agreement and here's your name. This is where you go right here

and you have ownership alongside that. So it's about explaining how they're protected. And then the deal is going to unwind like this. And this is when you're going to get your money back. And this is when we sell, you're going to get a check or you're going to get monthly dividends, whatever it looks like, explaining that in finite detail on where the money goes in and when it comes out,

how they get it back. And then once you've established their level of trust and their level of comfort, then beyond all that, then you can start talking about what kind of returns they're going to get. That should never be the lead because then you kind of look like a snake oil salesman talking about. Like, I got to get you 18% on your money in that. Once they like and trust you, then you can talk about that kind of stuff. But you've got to establish that kind of stuff first. You're listening to Bigger Pockets Radio. Simplifying real estate for investors large and small.

If you're here looking to learn about real estate investing without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. What's going on, everyone? This is Brandon Turner. Today's host of the Bigger Pockets podcast here with my co-host, as has been lately, Mr. David Green. David Green, how are you? What's up, BT?

I'm doing terrific. I just hired a second real estate assistant for my team here in Northern California. And this seems to be, yeah, beginning of her third week. I'm actually growing up and learning how to be a grown up and hiring people and trying to be a boss. Wow, look at you. You're the boss. Good job. Thanks, man. It's exciting, exciting. You made a comment to ones. I realized I just did it now to you. You once made a joke about how I never call you David. No one ever calls you David. They always call you David Green. I wonder why that is. Why is that? Can anyone out. there tell me what about my face makes you want to say David Green instead of just David. It must be there's a lot of Davids. In fact, we just hire another David at bigger pockets. So lots of David's around. That's okay. You know, David Green, you're a good guy. It's not sure what they say about you. Thanks, Brandon. All right. Well, today's show is a topical show. Normally, we do a lot of story stuff, but today we have a guest who's been on the show a couple

time before. We dive really, really, really deep into the topic of raising money. This is something then a lot of people wonder, how do you ask for private money lenders? How do you talk to them? How do you approach them? In fact, David, you and the guest even do kind of a role playing thing, which is kind of fun talking about how do you raise this private money. So that's what we're talking about today. But before we get to that, we got a few housekeeping things to do ahead of time.

So first of all, let's get to today's quick tip. All right. Today's quick tip is very, very simple. You should be following bigger pockets over on Instagram. Are you not on Instagram? well, then you're probably not an 18-year-old girl. But if you are on Instagram like I am, you should follow Bigger Pockets at Bigger Pockets.

And of course, follow David Green there as well at David Green 24. And you can follow me at Beardy Brandon. We're putting a lot of real estate stuff on there. But really, follow Bigger Pockets. It's a good site. It's a good Instagram page. Good stuff there. That was an easy quick tip, right?

Very easy. And a little self-serving, you know, whatever. I'll take it. Slightly. Let's see which one of us gets more follows on our Instagrams from what we had before. This is such a good idea. All right. Well, come follow me.

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Fast, simple, reliable. That's Dominion Financial. Check them out at biggerpockets.com slash dominion. That's biggerpockets.com slash dominion. And now, I think it's time to get to the show. I don't think we got anything else to really cover, except for one thing. If you're not subscribed to the Bigger Pockets podcast,

wherever you're listening or watching this, make sure you click that little subscribe button. Helps us out a lot. And then if you haven't left a rating and review, we would really, really appreciate that iTunes, Stitcher, Google Play. Wherever you're listening to that, leave us a rating and review. Let us know what you think and tell the internet

that this is a cool podcast. All right, so I do want to say one more thing I sort of disclaimer before we get into today's show. Please do not take anything we say today as legal advice. This applies to all Bigger Pockets podcast episodes. But today we're talking about something that actually does. There is some legal things involved. That's when you're raising money.

If you're going to go out there and start advertising that you're raising money for your apartment complex deal, know that there are rules and laws that govern this stuff. So this is not legal or tax advice. Just keep that in mind. But the advice is fantastic nonetheless. So definitely check it out. So with that, today we're sitting down with Matt Faircloth.

Again, we've had Matt on the show a couple times before. He's even a host of a webinar. He hosts live online classes every couple weeks over on BiggerPockets. You probably know him. He's also the author of a brand new book that BiggerPockets is publishing and launching today called Raising Private Private Capital. You can get it at BiggerPockets.com.com slash private money book. But we talk about that later in the show.

But honestly, you just just go pick it up. It's fantastic. only available on BiggerPockets.com slash store or BiggerPockets.com slash private money book. You can get it there. And with that, you know, Matt, he explains more about a story, so I won't do a long intro, but he's one of the investors I look up to a lot in the real estate space. He's really taking his business to the next level, owns over 300 units, and he talks a lot about how private money helped him to do that. So without further ado, let's get over to Matt Faircloth. All right, Mr. Matt Faircloth. Welcome back to

to the Bigger Pockets podcast. How you doing, man? Great, man. It was good to be with you guys. Yeah, it should be fun. So we're talking about raising money today, one of those topics that, you know, a lot of people struggle with, especially when you're new, you're not sure how to raise money, who to raise money from, you're insecure, you're saying, hey, you know, nobody's going to give me any money. But that really is a key to growth, as we'll talk about a little bit later. But before we get into that, I want to go back and kind of visit your story. A lot of people listen to this. I've heard your story before,

but for those who have not. Why don't you give us a quick rundown? Who are you? Where'd you come from? What do you do? Where'd you come from? Where'd you come from? Well, I grew up in Baltimore, but I got it.

I started investing in real estate in 2005 when I quit my day job, just like many, many other folks in the show, read Rich Dad, Poor Dad. And it's like, oh, my goodness, is a whole other way to live life and to, you know, set goals and to something to strive for. So that inspired me to get into real estate. And so, you know, started. out on small stuff and built a small portfolio using mostly my money, but also like pretty much my parents did some investing in our business as well. And then grew it into getting into

multifamily and bigger fix and flips and really scaled up a business when we started raising money from outside investors in 2011. And now we're in apartment buildings. We own an office complex. We're diverse. We've got, you know, you know, fixing, we're building properties. We're fixing and flipping properties and we're also buying apartment buildings and doing some small onesy-to-sie stuff too. So we're on a lot of parts of the spectrum for real estate investing and a lot of it has to do with working with private money. Yeah, that's awesome. Okay.

So how many units total do you think you get right now? I believe it's somewhere in the 380 range. That's awesome. That's awesome. All right. So I bitch myself sometimes. Yeah, I know. That's cool.

And it's been fun because I've known you now for a number of years. It's fun to kind of see you like, you know, far surpassed my abilities and my. skill you're just crushing it so you know keep going so okay let's talk about raising money so first question I got for you is why like why is raising money so important like knowing how to do this like why is why are we dedicating an entire show today just to raising money well you know there's only so much money that I have I mean like I have money of my own and I put my own money into my deals but there's only but so much money that I have. And I can't, like, we bought a 49 unit apartment building. There's no, I could not at my capacity at that time, could I have bought that building on my own,

with my own capital. So raising money allows me and investors to, it allows them to access to deals. They wouldn't have access to. If they didn't have, you know, other people's money working alongside them. So just lets me control and take on bigger deals. In other words, all right. Yeah, you can grow more. Yeah. So you can grow more, and that makes sense because you're using capital to kind of fuel the skills that you already have.

Tell me how this is beneficial for the person who's actually letting you borrow their money. Well, it gives them exposure to, you know, to other forms of investment. It allows them to, it gives them a wealth building tool that they wouldn't have access to through a financial planner or through Wall Street. I'm not a huge fan of Wall Street as a place to invest. I mean, you know, and I think that it's just not a whole lot of control, but a passive investor has more control, has more collateral. You know, like if Microsoft goes down to zero tomorrow, I can't go take the CEO's house, you know. You try.

Yeah, right, I could try, you know, but I think I'd get past the gate. I don't think I'd get past the security gates and the Dobermans, you know. But if I loan someone money, and I have, if I loan someone money, then I could go and take the collateral. I have something that's tangible that's a just in case security safety net that's there on a loan in that. So it's such a better investment from a passive investment standpoint for investors because they've collateral. They have better rates of return. They can compound the interest and they can grow exponentially. So many different reasons why it's better for them too.

Well, so a lot of people ask me when I when I talk about how I raise money from people or I tell them examples or stories of how I've done it, they say, well, why wouldn't that person just go do their own deals then? Why are they going to be happy with, you know, X percent as a loan? You know, why don't they just go and, yeah, do it themselves. Right. I think they just go and they do it on my own. And some investors could and should. But most of the time, the folks that I've worked with, it's because of time and experience.

They don't have either one of those two things. Most of the people that invest with me that I've worked with for private investments, they're working their tail off or they just love what they do and they don't want to put the time in to go and run the fix and flip or to go and find the rental property or do whatever it is. But we as real estate investors have time. One thing that we're we need more money, but we have time to put that money to work. We also have experience that we can put forth, you know, experience relationships, contacts, deals, whatever it is, which that, you know, the doctor or the dentist or the person that's got or the school teacher, whatever it is that has a

profession, they might not have any of those things, especially the time is the biggest one. And And it takes time to run this business. And that's something people discount too much is that it takes time to run deals and to find opportunities and to make contacts and stuff. Yeah, I love that. I love it. All right. So I guess, yeah, I've told this story before here on the show, but I'll say it again.

Like I did my very first private note alone. I said this back when we launched the Dave Van Horn notebook. Right. So I did a private note to loan on somebody, a friend of mine. And yeah, I mean, I think I charged him because it was a friend. I charged him like 8% on a phone. on a flip that he was doing. And so it wasn't even that much.

Like, I feel like I gave him a really good deal. In fact, I usually pay a lot more than that to my private lenders. But, you know, it was my first time. That 8% was the best money I have ever made. Like, I loved getting that check because I did nothing for it at all. I could ever walk out to my mailbox and pick up a check. I mean, like, I've been like, I love that money. And as a private lender, I realize, like, that's like the top of the game as being a private lender.

And so, like, yeah, that's why when people are like, why would that person want to lend? Because it's the best money they can make. Like, it's really good money. Because it's easy. Yeah. It's easy. And there was collateral. Did you have a mortgage? Yes, I did. Yep.

Yeah, so you had a collateral. Right. You had collateral. You sleep easy and I know, knowing your money's protected. Exactly. You know, and you're getting this monthly check that's probably backed up through rents that he's getting or through, you know, other business ventures that he has going on is providing that monthly check to you. And it's your money at work. And so it is a great opportunity for Pat.

of investors. And I think that some active investors like us, I call them deal providers, because that's what we do. We provide deals to people that have money that want to put their cash into a deal. I call them cash providers. But deal providers tend to discount the fact that the cash provider needs us. They do. And it's really cool investing in deals with us. And I've met deal providers that are a little sheepish about asking for money or they just don't want to go out there and, you know, they look at it like their panhandling or something like that, but they're not. These people want the opportunities. And if you present them in the right way, you can build somebody's wealth through investing in your business, you know? So there, this is something I've

talked about before as well here on the, on the show. But it was like this fundamental shift in my mindset back, I don't know, it's probably happened like six years ago when all of a sudden I realized I was not begging, I was not begging for money. I was offering an opportunity. And when, And that, like, when I first thought of that, like, everything changed. I stopped getting worried and being all sheepish about asking people for money and raising money. It was like, no, I, like, I'm the hot girl at the bar. Like, I've got the deal.

You know, like, like, like, I always felt like I was the dude trying to pick up girls at the bar, but I wasn't. Like, I was the asset, right? Like, once I realized that, like, everything became easier in that regard because I just changed my attitude. You should probably in your book have a chapter called like the hot girl at the bar. Right. I should.

Yeah, I should add that in. The hot girl at the bar. That's just there. I love that. Anyway, it's funny, but it's true. Yeah.

Yeah. So yeah. I like to say there's something to bed about this, right? Like actually investing with somebody else and giving your money and not having to do the work, it not only gets you a return on your money, but when you're not working on a deal and you're not stressing on it and you're not putting your time and energy and resources into it, it also allows you to go out there and make money in,

other ways that the deal finder can't do because he's working on that deal. There's this, this term in economics called opportunity costs. And it basically speaks about anytime you choose option A, it's not just the money you're making or losing with option A. You have to consider what you could have made with option B. Right. Yeah. And in this deal that Brandon let his friend borrow money, he made eight percent interest on it. But how much money do you think you made during that same period of time doing other things? Because you didn't have to manage the contractor and manage the rehab and find the deal and deal with the problems that came up. And like, like, there's something to Instead, even though there isn't necessarily a monetary cost you can put on it,

there is absolutely an opportunity cost you can put on it when you take on a deal yourself. So there's some people that have learned enough about investing that they feel like they can choose the right operator and they can make the right decision. And they do way better letting somebody else invest for them and make money on the return. And then they put their time into other things. Absolutely. Absolutely. That's a great point.

So can you tell me for people who are hearing this and then they're asking like, well, maybe this is something I should do, but I feel scared, right? Is using other people's money risky? So it can't, of course. So the short answer is yes. It can't, it can be unless you find the right deals. And I think that it's up to the deal provider to do that. I mean, their side of the bargain is to find, you know, safe investments and deals that have been vetted and to know what they're getting themselves into and not just go and take this of this cash provider's money and go put it on the roulette wheel of real estate, right? That's not what you want to do. You want to, you know, establish the right contacts and put the right property manager in place if that's what you're going to do or do, you know, property. manage yourself, whatever it is, but mitigate that risk to make sure the cash providers well taken care of because you know, you are, you as a deal provider are a steward of that cash provider's money. And I think that when you forget that is when it gets real risky. And, you know, you treat it even as if it's above your own money, that it's, it's super important.

And it's, and these, these are, you are a custodian. So. Yeah, that's super good. And that's why, like, that's why we, we stress so much, you know, on being able to find good deals. The better deal you have less risky the thing is. And as you guys are just going to make good deals. Yep. As you guys said, you got to make, find good deals, but really it's about making good deals. You guys, yeah, as you guys say a little time on the show, which I think is brilliant. Because in this marketplace, I think in general, you got to squeeze the lemon and

make something great out of it. And if you know how to do that, if you learn that, hopefully with your own money first or with some immediate, immediate circles money, then once you know how to do it, then I think that you're qualified to go out and raise money. I don't think that your very first deal should be with an extended circle of private money. I don't. I think that you've got to earn your stripes first and get you get some experience under your wings. And I know there's some folks out there, gurus or whatever.

I've even seen Facebook ads for somebody who's out there talking about like, you know, buy an apartment building with no experience and no money down and everything like that. And I'm like, you know, that's really about like buy my seminar, whatever it is he's got. But I think that it's really about like you've. got to learn how to operate this business and get, you know, proficient in this business first. And then you can go out and use other people's money. Yeah. You know, one thing I, that, that I did kind of accidentally, but maybe not. I mean, like, this is, I couldn't get private money. And in fact, we'll talk about that. Maybe we should actually go there first. Well,

I'll finish the thought and then we'll go back. So like, I was going to say, I couldn't get private money. I didn't know anybody who was an investor who would ever give me money. So my very first deal, I ended up doing a hard money lender, which was he charged 12% interest. And, 12 points, 12 points, which means for those people don't know, it means 12% of the loan. He charged me as a fee. So like it was, I think it was a, the very first one was like an $80,000 loan. So I think I paid him what's that like, nine grand or whatever that is. Did he put like a local anesthetic on before he did that or was that?

Well, it was, it was insane, right? And in fact, like that deal, I never really made a lot of money on that flip. But the point was like, I wonder why. I, yeah, exactly, right? Like he made so much more than I did. But I got into a deal. Like that's what I had to do. I had no experience.

I had no knowledge of what I was doing. And he knew that. So he like he was, it was an incredibly risky loan for him. And I had to pay that. Now, you know, I had to go and find a good enough deal that would make him happy to do it.

But that might be if you're just getting started, like you might have to pay a lot of, now hopefully you don't pay 12 and 12, but like you might have to pay a lot of money. That's what it takes to say that you've done a deal. And that's fine because the last thing I wanted anybody to do is is sit down in front of a potential private money partner that has potential, like, hundreds of thousands of dollars to put to work in your business.

Like game-changing, you know, money, or equity or whatever. And you sit down and you're like, well, I've never done anything of this before. I've never even, you know, never even been involved in a real estate transaction one way or another. They're most, unless they like and respect you because you're you, like, if this is like your Uncle Charlie, maybe they'll still do it. But if this is somebody who has real capital to put work in your business and also maybe a network of other people that are willing to do the same thing. Odds are they're not going to do it.

And so what? You pay 12 plus 12. You've done a flip. You've accomplished you. You've checked the box, right? And I was in the same boat. I've bought a lot of hard money when I first got started. And I did, I took out credit card loans and did all, did whatever it took to get going.

And then now that I've done that and I've established a track record for myself, then I'm able to, you know, reach out from more attractive capital. Yeah, that's so good. Okay. So let's take a step back now and maybe cover something I should have covered early on. what are we talking about when we say raising money? I mean, for those people who are like, are still like, what, what are they talking about? I mean, what are you thinking like, this is Uncle John who's going to give us some money?

Are we talking like going to put, you know, putting on a suit and going to a skyscraper to pitch people? Or what do you mean when you say private money? Right. So when I say raising private capital or raising private money, I mean going to folks that are in your circles. Then that you'll be immediate circle. It doesn't have to be like, you know, your parents or your siblings or whatever. or just people that you know in your greater circles and explaining to them what you do as a real estate investor,

showing them and understanding how real estate investors can benefit those that don't want to do it full time like we all do, right? Explaining all of that and then enrolling them in the possibility of working with us as a private money, as a private money partner in whatever fashion that looks like. Dad, when I see raising private capital,

I'm talking about doing it out of your own network. You know, could be your Facebook community, could be whatever it looks like in that. But it does not necessarily mean, like you said, putting on a suit and walking into a skyscraper and convincing a hedge fund to, you know, put $10 million to work in your business. That's probably not the first step.

The first step is probably going to the guy you went to high school with, you know that you're still friends with on Facebook that you have to know, has a good job that he loves, but, you know, it just doesn't have time and he wants to put it to work in the business. So that's a good segue.

So let's say I'm listening to this and I'm thinking, you know, I've done a dealer or two, I listen to Bigger Pockets every day, I know what I'm doing here. I have a good idea how to invest. I just need a little more capital to ramp this up. I don't want to go to a bunch of strangers that I don't know and put on a conference and

try to convince them. Like, I'm not at that level. I kind of want to dip my toe into the waters and get used to this. Yeah. Is it a good idea to start with family friends first? Can you answer that? So I think so. You've got to get beyond the, it's with your comfort level too.

That's how I got started. But that doesn't mean that's how you have to get started. If you're not comfortable talking to friends and family, you've got to look at other networks around you that you can go to. You know, I joined a BNI group, which is a networking group, you know, and everything like that. I was able to, you know, form some strategic alliances with money partners through a BNI group. And so there's other networking organizations you can go to that are outside of your local RIA group in that. But I do I do recommend talking to friends and family.

I think that there's someone, if a deal provider or an investor has that fear, they really need to examine why, they have that fear. Is it because that they're not confident in themselves or is it because they are worried that they're going to lose their friends and families money? You know, why, why do they feel that way first? Let's examine that and their confidence in their business in themselves. Before they go in completely discount, I won't talk to people that are my friends and family, you know? Yeah, maybe you, maybe you know in your heart, you're not ready yet. And that's why you don't want someone you know, to go into business with you. Right. Right. Right. Maybe that's what it is. Maybe that's why you're not comfortable, you know, putting people that you like and care about at work in your business.

But if you're not comfortable doing that, I would ask questions before I'd completely discount it. So why don't we try this? Why don't you approach me? I'll be your buddy from high school, who you know has done well and I have some money. And you approach me with this proposition that you want to use my money to earn more money and we'll role play that for people to hear so they can get an idea of how easy these conversations can be. Okay. Cool. So are you still David Green? Yeah, I'll be David. Okay. Okay, cool. Hey, David, what's up, man? How you do What's going? What's going on, bro? How are you? So what do you do these days? What are you up to? Last time I checked, you were in another job. What, what are you doing these days? Well, I was investing in real estate,

but I became a realtor and I started a team and I'm just, man, it's kicking my butt. I'm working 16 hour days selling a bunch of houses. I just don't have any time left to do anything with my money. Oh, that's crazy. So, well, I, you know, I'm really active in investing and I'm on the other side of it. I've got more deals than I have money. I'm out. We just bought an apartment building. I've got, you know, a bunch of fix and flips going and stuff like that. And it's really insane. I'm really excited. It's just the problem I'm having is, you know, I have all these deals and not a lot of money to put to put forth into it.

Sounds like you got a Lamborghini, but no gas. Yeah, I know. I need gas. So to put a pin in it here, what I find that you threw me up by saying that you're an active and that you weren't investing before because what I find, here's what I do. When I say that I'm active in investing, you know, what I do when I bring that up and I tell people, even if you're not a full-time investor, you should mention that you're a real estate investor. When you talk to people at the cocktail party or at the, you know, at wherever you are,

just say, I'm a real estate investor. Even put it on Facebook, whatever it is. Because you'll find that a lot of people say, man, geez, I sure wish I could invest in real estate too, but I just don't have the time. And that's the key phrase that the potential private money partner or the cash provider says. And when they do, you can easily turn it around and say, you know what, David Green, I understand you don't have the time, but guess what I do? And I have the network, the time, the resources, is the know how to help money to work in real estate. It could show you a way to make that happen. And that's when the light goes off in your head and everything like that.

It's like, you know what? He's right. I don't have money to put to work in real estate. And what you go further with is like, well, maybe I don't have a whole lot of cash. But what I talk about further in the book is the other means that people might not realize they even have to put to work in your real estate business. So these people don't need to have like a half million dollars in cash just sitting in their savings account that could go to work in your business. They could have a retirement

account. And, you know, there's a lot of different ways you can put retirement money to work in real estate. They could own their home free and clear or almost free and clear. And they can put that money to work in real estate. So they don't have to be independently wealthy with just millions sitting around waiting for somebody to come and pitch them on a real estate deal. As real estate investors, we need to get educated in different ways that money play in our business and then become educators to potential private money partners of, this is how your money can work for me, and this is how it's going to benefit you and how I can make you wealthy through means you didn't even know about. So I feel like the biggest concern that most people are going to have is how do I

know I'm going to get my money back? You know, like the return is important, but I don't think that people even listen to you about that until they feel safe with this proposition you have. How do you handle that objection from people when that's what they're concerned about? That's great. And I think that you're bringing up the number one question that a potential cash provider has when they're looking for the first time to invest with somebody. And so many deal providers I talk to want to get into the deal. They want to talk about how sexy this apartment building deal is or how much money this fix and flip is going to make and everything like that. But what the thing is is that the cash provider doesn't, they really, that's not their first second or third question. It's not. They

care more about can I, like, first question is like, can I trust you? And unless it is your uncle Charlie or your cousin, Joanna or whatever, right? That's the first question is, can I trust you? Are going to do the right thing with my money. And then the next question is, as you just said, David, am I going to get my money back? And then it's your role as the deal provider to sit them down and say, okay, here's the nuts and bolts of the deal. Here's how you get it back. Here's how you're protected, you know, with this mortgage on a private loan. Or if you're doing a private equity deal, this is how you have ownership in the property. Here's the operating agreement and here's your name, you know, this is where you go right here and you have ownership

alongside that. So it's about explaining how they're protected. And then, the deal is going to unwind like this, and this is when you're going to get your money back, and this is when we sell, you're going to get a check or you're going to get monthly dividends, whatever it looks like, explaining that in finite detail on where the money goes in and when it comes out,

how they get it back. And then once you've established their level of trust and their level of comfort, then beyond all that, then you can start talking about what kind of returns they're going to get. That should never be the lead, because then you kind of look like a snake oil salesman talking about, like I got and get you 18% on your money.

in that once they like and trust you, then you can talk about that kind of stuff. But you've got to establish that kind of stuff first. I love that you said that. Because again, I think a lot of people want to lead with, oh, you're going to get a 10% return. You're going to be 12% return. But like you said, like, that's not what they really care about. The question they want to answer is, can they trust you?

Yeah. Yeah, I love to start with when I'm talking to people, I love to start with stories or talk about things that I've done. Because then they get like a real good understanding. Like, yeah, I had a buddy, like, we bought a, you know, I needed money for a triplex. So he let me in the triplex. He was earning, you know, a good return on his money. And he made sure that he was safe.

So if I didn't, if I'm, you know, packed up and moved over to Mexico for, you know, go live on the beach and be a bum, he could take the property back and actually would make more money than what he was making from me lending. And like, by telling a story like that, it illustrates that they put themselves in that person's shoes without you trying to sell them anything. I mean, stories are just fantastic for reasons like that in general. Yeah. So, yeah.

No, it really is. I mean, there's there's a lot of great stories of that I can think of folks. And I've done, I've done business with probably over 100 private money partners in, in my career up till now. And looking at what they've been able to do with the money. I got people that got their kids going in college with the money they made through doing private money deals with us, with my company. I've got a guy who's halfway, he's halfway there. He's looking to do enough deals with my company to where you can have it a passive income. to where he can move back to his home country in Argentina and make enough to live in Argentina off a passive income.

And this guy's like 32 years old right now. And he's probably in the next three years, I'll bet he'll move back to Argentina through doing passive investments through my company. It's amazing. I'm so grateful I'm able to provide that to him. There's something about real estate I was thinking about as you were talking, Matt, where I was comparing it to other investment opportunities.

I don't know of anything else that you can buy and have collateral of the property you can take back if something goes wrong. If you buy Bitcoin and the price of Bitcoin drops, there's nothing you get in return for that. You know, if you buy stocks and the company goes like the stock drops, you get nothing in return. I can't think of probably any other. Even if you buy a bond, and a bond is a loan, but the company could easily just fall bankruptcy. Oh, that loan goes away. Bye-bye.

You know, I mean, there's very little things have true collateral aside from sticks and bricks and real estate. That's awesome. It really is. Yeah. Well, cool. So I want to shift gears a little bit here and talk about the couple different types of raising money. When people talk about debt money or equity, you know, what is the difference, which do you prefer? How should listeners kind of approach that? Can you talk about that for a little bit? Yeah. Well, I recommend that people start with debt because it's simpler. It's easier to understand. It's not complicated.

There's way less regulations around it and everything like that. And what is the difference there? Sure. Debt is like, you know, the simplest way to, it's, to explain that, it's just borrowing money. It's me going to David and say, David, can I borrow, you know, $10 to go buy my lunch over here or something like that? It was borrowing $100,000 from David from his self-directed IRA account, and then giving him collateral on a property that I'm going to be fixing up and everything like that. And he and I, because it's a private money deal, it's a, it's a,

I can go back and forth and negotiate the terms of that deal with him. Unlike, that's what's great of private money versus hard money or bank money or whatever, that David and I can sit down and say, you know what, David, listen, this is a fix and flip. It's not producing cash flow right now. I'd like to pay you at the end of the project when the property sells accrue until the property sells at the end. Then David might say something like, you know, Matt, that's great. I'm comfortable with that. Are you okay if I charge one more percent interest in exchange for letting the money pile up until the end of the deal? And it's, yeah, that's great. Let's do that. And we can have that conversation. It's hard to do that with a

bank or with a hard money lender or whatever. And so debt, that's what debt is. So it's just, you know, me borrowing money from David, giving him some sort of collateral on the property, and then me going forth and doing a burr or doing a flip or doing whatever it is with the money, you know, until the project's complete. So is it fair to say that debt is basically paying someone for the use of their money with your money. And equity is giving them a piece of the deal and paying them for their money with a percentage of the profit that comes out when you're done. Yeah. Yeah, they own a percentage of the property alongside you. That's perfectly.

That's a great way to explain it. Perfect. Okay. Awesome. Cool. All right. So another big question people want to know. They know now what, you know, what raising money is and kind of how to approach people,

but how do you find them? Like a lot of people just say, I don't know rich people. I don't hang out with rich people. I don't, like you said really, misconception. Yeah. You need rich people to put to work in your business. And I think that that's, that's probably something that I'd love to, that I'd love to just tell most real estate investors is these people do not need to be.

multi-millionaires. And if you're going to do debt, they don't even need to be accredited. And I know that that's this big misconception. We can talk about accredited investors real quick, but people think that you have to only be working with accredited investors to do debt deals. And you don't even need to be working with accredited investors to do equity deals either, but we can talk about that in a second. Do you want to cover what accredited is? I know that's something that, okay. It's just, it's a certain, like, stamp that an investor gets to say that they are. And that's if they earn over a certain dollar amount, per year. I think it's like 200,000 if they're a single, 300,000 if they're married.

They have to have a net worth over a million, not including their primary residence. And there's some other stipulations in there too. But that is one of those stamps that investors think that the real estate investors like deal providers think that their cash providers need to have to do business with them. But they don't. You can be dealing business with your with a sibling or something like that just happens to have 200,000 sitting in an IRA account. They're qualified to loan money. to you and the sibling doesn't have to have over a net war over a million in that worth whatever it is they just have to have the money and they're willing that they're willing to put to work in your business yep you know on that topic go ahead Brandon well I was going to say like yeah I I

partnered or worked with a lender who just had money in a home equity line of credit like they you know they didn't have a lot of cash sitting around but in talking with them they're like oh yeah well our house is paid off the house is worth 200,000 so you have 200,000 dollars just sitting there like and they're like oh yeah we have a line of credit on it too we just haven't used it. So they had like a hundred, I think it was like a $150,000 line of credit just sitting there. So yeah. Yeah. It's it's well, there's so many misconceptions on what what it takes to invest in real estate. And I think that that's that's one thing that you know, I, I, I, I did like deeply educated on myself because a lot of people were asking me stuff like that. And I wanted to make

sure that I was checking all the right boxes and maintaining a legal status for myself. So I learned a lot about those kinds of things. And, you know, I, I put it out there. Uh, wouldn't, when I wrote the book about what you need to, you know, what it takes to cover yourself from a legal standpoint, especially when you do equity deals, because that's like this whole big gray area that a lot of people think that they're stepping into and into the Great Unknown when they start assembling people to invest on the ownership side with them. But it's way simpler than people are making it. And there's a lot of misconceptions out there around it too. Yeah, that's so true. If you own a short-term rental, here's something worth knowing.

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The SEC gets involved during the, in the sale of a security. Okay. So if I sell you a security, that is a, that's a, that's, something the SEC, well, this what the S stands for, by the way, you know. Security is an exchange commission for. That's right. It's as for security as an exchange commission. And so they get involved if in the sale of securities. But if I borrow money from you, I did not sell you a security. Because for me to sell you a security, you have to be on the same side of the transaction as me. And believe it or not, it's viewed to be, you borrowing, me borrowing money from you is viewed to

be an adversarial transaction where you could come and take my property and I have to pay you interest and everything like that. And so we're not on the same side of the deal. We could become adversaries because you could come and take the asset that I'm working on and everything like that. But so it has to be an investment of equity. So that's the first. And that's why people, like, all the SEC gets involved in private loans. They actually don't. If it's me borrowing money from you directly, the SEC doesn't get involved in that. There's four other things that qualify it as security. Number one is it has to be an investment of money. So if David and I decide he and I are going to partner up and link arms and start up a real estate brokerage and both put in sweat,

that's not a security because we didn't both put in money. We put in sweat into the deal. The second thing is there has to be an expectation of profit, meaning Brandon can't just say, more like not like Brandon, but somebody like my uncle Charlie can't say, hey Matt, I see you're investing in real estate.

I'm just going to give you 10 grand as a, you know, hope you get going or this is also like things like Kickstarter where people just put money up into your business as a, you know, good luck with that, you know, kind of thing. that's not an expectation of profit. They're just giving it to you. So those things discounted from being a security. And the other thing is I just said, you have to be on the same side of the transaction.

And there's another one. And geez, I'm on the spot here and I'm forgetting it. So I'll remember in a second. But this is the point to say I'm not a lawyer. And so you should consult with a lawyer on these kinds of things when you do security transactions because I'm definitely not, as you can tell. That makes sense. So you talk a lot of more about this legal stuff within the book.

but you also, I believe, did like a bonus video. Isn't that right with an attorney? Tell us about that. Yeah, and that's where I've ever met. That's where he covers all four of these prongs. Maybe we'll leave it as a secret or whatever, but there's four prongs you have covered for something to be a security. I've covered three of them right here.

But as a bonus item for the book, I sit down with my attorney, Gene Trowbridge, who is an absolute brainiac when it comes to the legal side of securities and what is legal and what's not legal when assembling transactions. And I do in, I think it's like an hour and a half interview with him And we just do an absolute, like, deep dive to the bottom in the Marinara trench together and talk about all the SEC regs and what is legal, what's not legal. And that's one of the four bonus items that are available with the book.

That's awesome. Well, that's probably a good transition. Let's talk about the book real quick because it's launching today here with this podcast. It's launching. So congratulations. How's it feel to be a published author? Awesome. I have to pinch myself.

I literally have to pinch myself. But yeah. That's awesome. Well, welcome to the club. It's a lot of fun. So, all right. The book is called what? It's called Raising Private Capital.

And what's it about? Yeah, I know, right? Bigger Pockets is not like to get creative with the book. No, we keep our titles. This is what it's about. Yeah, pretty simple. All right, so it's called Raising Private Capital, subtitle, building your real estate empire using other people's money.

Yes. Which is awesome. Of course, people can go pick it up at biggerpockets.com slash private money book. And if there's like one thing you wanted people to know, like, hey, you should get this book because what? Because it's a, the book talks about how to create win-win scenarios. And it's about how we as deal providers can win big and get ourselves into way larger

transactions and 10 times your portfolio and everything like that through working with private capital and how we working with other with folks that are investing with us as cash providers that don't have the time or the wherewithal of the network to invest in real estate, but have the capital one way or another. how they can just absolutely exponentially build their wealth through working with us. So it's about how private capital arrangements are absolutely win-win scenarios that we can assemble and benefit both sides. That's so true.

That's awesome. Just reading off kind of the back of the book here or a little bit of information, it says inside to discover private money partners and places you didn't know existed, the prerequisites, prerequisites, am I saying that right? Prerequisites for needed to start raising money. How to structure debt and equity deals when using, and when to use each strategy. The best way to provide win-win deals,

how to protect all parties involved, using in a private money transaction, proper private equity, exit strategies, and so much more. So I know this book looks amazing. I'm waiting for Katie to send me my actual car. We're recording this here, you know, a month and some ahead of time.

But, you know, I'm excited for this book. So, yeah, super cool. So people can get it at biggerpockets.com slash private money. book. Again, biggerpockets.com slash private money book. And that is all you can get it right now. That's the only place we're selling it right now is on bigger pockets. We will eventually, hopefully, get it over on Audible and Amazon and all that. But right now we're only launching it and selling it on bigger pockets. It's kind of a special treat to our members here at BP.

And when you actually get it, as we like to do, we like to overwhelm people with value with bonuses. That's how we operate at bigger pockets. So when you get it, you're going to get four bonus content things. First of all, is that thing we just talked about, the protector sells from SEC violations interview with syndication attorney Gene Trowbridge. Next, you had an ebook called 10 steps to analyzing an apartment building deal. That sounds amazing. And you and an apartment guy and like there's some special things about analyzing apartments that I know you're really good at, Matt. Yeah. So I'm assuming you go into all that stuff there. The reason why we provided that was because a lot of people that put private money to work

in somewhere or another eventually want to do it in apartment buildings. It's, it's, it's kind of hot right now, but also it's a great place to, you know, put cash providers and that's a good way for deal providers to win too. So I thought it was a valid conversation. So I pretty much wrote an e-book on finding and putting together and destruction department building deals. That's awesome. And then we got a worksheet fail-proof action plan to secure your first private money deal. What is that? That's a roadmap to the, so people read, people will read this book and they'll say, She's where do I start? What should I do now? And so the like that that action plan is really just like to follow this. Here is your roadmap to go through your first deal. So it's taking someone who's done a few transactions and has done some sort of, you know, dip their toe in real estate a bit. But okay, I'm ready to start raising private money. What should I do now? Well, that action plan, that roadmap is it. Like that's follow this. And this will pretty much talk you through the action steps of the book. And it's like a like an interactive workbook that they can just fill out. And. it'll take them through their first transaction. Perfect, perfect. And then of course,

we want to encourage, we like to encourage people to take action quick. And because, like, again, if you don't jump at stuff, life passes you by, right? So we are offering a exclusive launch only online class with you. It's a live class. So this encourages people, we want you to pick up the book and want you to start changing your life right away. So for those people who buy in the first two weeks of this launch, before August 10th, you're going to get invited to a special live online class with Matt. What are you going to be talking about in that class? We're going to talk about structuring your first equity deal.

And I talked about how people should start with debt. But once people are ready to move into equity or thinking about doing equity in the future, I talk about this step-by-step process that you need to do to structure an equity deal. And I'll talk about the four prongs that I just mentioned that makes something a security and ways you can either mitigate those to make it

so the deal you're doing is not a security that takes the SEC out of the equation. And if you want to do an SEC, you know, qualify deal, I'll talk you through how to do that as well. So it's going to be a really shock full of lots of, you know, lots of goodness and it really helped people get going on on the next level to take, to do equity stuff. That's awesome. And of course, like, we will record that webinar. So if you buy in the first, you know, during the launch, the first two weeks, but before it was it August 10th, if you buy in that and you can't make it to the live class,

you'll still be able to get access to the webinar recording. But again, that's only if you purchase before August 10th. So don't delay. And if you're listening to this podcast way in the future at some point after the launch is over. Still, go to biggerpockets.com slash private money book, pick up a copy, get all this cool stuff. And the book really is like going to change lives. I mean, really like you said earlier, it took you, I think you mentioned earlier before we said recording that it took you like six years, right, to get to 30 units and then it took another six years to get 300. Like this literally helped you 10x your business once you learn how to harness other people's money. It's been incredible. It's been, I mean, raising private

capital has been a game changer for us. And if I look at the lives of the people that have worked with us as well, it's been a game changer for them, too, in investing in our business. Super cool. And, you know, one reason I'm excited to read this is because, you know, like, I have not raised a lot of money. If it raised some money, but I'm nervous every time. Like, it always kind of is a scary sort of thing.

But the truth about anything, when you're scared of doing anything, the more you educate yourself, the less fear you have, typically of that. And so I'm, I'm excited, you know, more than usual for this book because I want to learn, like, I want to get over that fear of asking people and to work with people. to raise my money for my deals. So anyway, super excited. So anyway, you guys check that out. Again, biggerpockets.com slash private money book.

Now, we're going to move on here and talk about the deal deep dive, which we're going to do here next. Then we're going to do the fire round and the famous four. So let's go first to a new segment of the show, which we are just now introducing called the deal deep dive. This new segment of the show where we're going to go deep into one particular deal to really like get people, make them feel like they're there, right? We're going to go into detail on this thing.

So, Matt, what is the deal you want to talk about today with your in today's deal deep dive? He says, we're talking about private capital today. I thought it would be interesting to talk about my very first private money deal that wasn't like with immediate family. It was someone who was a third party that came in, not related to us. This was through an investor that was through an alumni association with my wife through her grad school. And again, same thing.

Like she mentioned, they were doing some real estate stuff. And he said the key words of, geez, I sure wish I can invest in real estate, but I don't I just don't have the time. And it's like, thing. And my wife said, you should talk to my husband. And so I went up and had breakfast with this guy. We talked about deals. He was willing to, you know, I've got about 50,000 bucks that I'm willing to put to work in real estate.

I just don't know where to put it. And I said, great, good to know. Let me get back to you. And so about a month later, this was like post crash and a lot of things were cheap and stuff like that. But everything needed a bunch of work and needed a bunch of hair plucked off of it. So a local wholesaler approached me with two townhomes that were for sale for, for, I mean, this is, you know, right here in Trenton, New Jersey, two, two bedroom, one bad town homes for sale for like 45,000 combined.

They needed work. Simultaneously, somebody that was like a local family friend had approached this and said, hey, I've got some IRA capital, and he had done real estate investing with another guy's IRA. So he actually sat me down and showed me what he had been doing with IRA capital. and I talked to my attorney and researched it and put together a proposition to this to this other investor and working with my friend's IRA, like friend of the family's IRA,

because you can't take the IRA money and put it to work in your own business. You can't take IRA money put to work with these. People ask me that all the time, can I take my IRA money and give it to myself? No, you can't. Stop right there. You have to work with somebody else in that.

So he offered up his IRA money. He also had 50 grand. And so I took this private equity guy who was, you know, my wife's alumni friend, he put up 50. And then I borrowed 50 from this IRA from this, you know, friend of our family. And we put together 100 grand, none of my own money and bought these two townhomes and then bought them for, you know, 45 grand. And then put in another 50 gram worth of renovation money into them, right? So full investment of $100,000. So 50 in equity and then 50 in a loan.

So $100,000 investment, renovated them, filled them up full of tenants. Once we were done that, they appraised for $150,000. That's awesome. Combined. So, yes, so it was a Burr property, it was a Burr deal, which was awesome because, you know, they appraised for a good bit more than we had invested in equity and debt. So we were able to refinance them. We paid off the private lender in the refinance.

It was also able to pull out some of my equity guys capital. And we took that, that, like, seed capital he had in, and we did more deals with it. And so we were left with these two townhomes that were at least cash flowing nicely and everything like that. We had that. And then we took the equity and put it forth into other and to other opportunities, which was awesome. We then, we held the properties for about six years and then just sold them about a year ago as a turnkey because I had another investor that came to me that said, hey, I'm looking to buy investment properties. I qualify for bank money. I've got some my own money to put forth and do a deal. And I'd like to start buying some rentals. And so we

sold those two properties to him, made a nice profit. And, and, you know, he was, he was very happy. He, the turnkey buyer was making, is making a great return on his money as well. And me and this equity guy from years ago now got another check. We, you know, he got a check. We got a check from the refinance that we were able to put forward in new deals. We made passive income monthly, you know, for years and years. And then we got a nice check at the end when we sold the property. So a phenomenal opportunity. And the private lender that lent a, us at as of his IRA did business with us for years and years from there on forward too. That's awesome.

Do you remember what did it rent for? Remember that? So let's see. We appraged each property appraised for $750,000 or $75,000 apiece. Rents were when we first did the work, rents were at $9.50. So a little more than 1% rule, like the 1.3% rule. And so cash flow came in around $350 a month per property. That's cool.

Did the tenants pay their own water sewer garbage in there? It's what's great about single family homes. I have a theory that there's no, there's no better investment than a single family home with a tenant that pays a rent on time and doesn't move. They're fantastic. You know? Yeah, but then they move out at some point.

And then you get crushed when the tenant moves out and you get a pay to renovate it and everything like that, which is, which is where it hurts. But once the tenant's in there, they pay all the utilities. They shovel the snow. They do everything. Yeah, it's great. You know, in fact, I'm actually talking today. I'm doing it actually like in an hour from now or two hours from now. from when we're recording this anyway, not when this goes live,

but I'm actually doing a webinar for BiggerPockets on single family houses. Because I agree, there are some fantastic benefits to owning single family houses. So that's what I'm talking about. So if you guys want to see what's going on, I'll do that webinar. I try to do every three or four months. So it's probably coming up again sometime soon. But to see what webinar is going on this week. Go to BiggerPockets.com slash webinar to see a list.

Or if you are a BiggerPockets Pro member, you can watch replays of all the past webinars. So go to BiggerPockets.com slash pro replay and check out the replay. on the financial freedom through single family houses webinar. That was back a few months ago. So, or a month ago, whatever it was. All right. So with that, that's cool. So last question of the deal deep dive, what did you learn from that?

If you had to pick out like a lesson or two that you learned from that experience of that property, looking back, both good or bad. Well, that was my first burr or deal. Okay. And that's, before I was, before I knew bigger pockets and knew of that, I learned the power of buying, adding value and then recouping some of that value through a refinance. I learned that. I learned how to structure an equity deal because me and this equity investor put together like a big partnership where I did most of the work. He did some work, but I did most of the work in that,

which was a great arrangement there. And I also learned how structured private loans. And so I had learned a ton. It was a very small project in the grand scheme of things. But I learned a ton, you know, a million times over to grow our portfolio from there. Awesome. Awesome. I love it. All right. Well, cool.

Well, that was the end of the first deal deep dive. Everybody, I would encourage you. If you enjoyed that segment, you like that segment, let us know, hit us up on social at bigger pockets and let us know if you like the deal deep dive. We're going to be, you know, tweaking that testing. It kind of come up with. But I really love that idea of just going deep into a topic. So let's know your feedback again.

Any of the social media networks at bigger pockets. And you can let us know there. With that, let's head over to the world. famous fire round. It's time for the fire round. These questions come direct out of the bigger pockets forums, the world's greatest, largest, most important forum for real estate investors on the internet. These are real questions that people are asking,

and we thought you'd be a good one to answer them, helping out the community, as I know you already do, Matt. Number one, what kind of rates are investors getting from private lenders? and what kind of holding periods? And are they getting interest only or are they paying, you know, amortized for private lenders? Okay. So I rarely amortized a private loan to an investor

because I recommend doing private loans for short-term projects because if it's a long-term project, you can get better loans from a bank. Whether if you're not bankable, there's people you can work with that can be your sponsor, it can help you get a loan. So I rarely do any alone longer than say like six to 12 months to answer the time thing.

And that's why I don't amortize because why would I amortize a loan over like six to 12 months? You're just not going to get the benefits of it. Right. With regards to rates, I typically pay somewhere between like seven to nine, maybe 10 percent. I try and avoid points at all cost in that. And if you're just getting started in raising and borrowing private money, that's what I pay. You may have to pay more than that. You may have to pay some more to what you paid for your first deal like that, you know, like 12 plus 12 or whatever.

Just you can get your foot in the door and do a deal and that. But I think that as you've got more seasoning and you've done more and more projects, you can start commanding what the rates are as you move forward. Very nice. Next question. I am interested in working with private money lenders, but I see that many of the sites out there are scams. Is there a serious, reliable source for private money lenders available? Yeah. See, I don't recommend those online sites for finding private money lenders.

I recommend you, you know, in the book I talk about how to find them right around you, even though you might not. think you know private money folks. I talk about how to look for them in places that you didn't think to look and what the signs that like the the signs that hints of private money leaves and everything like that and how to look for it. So I don't recommend looking for it online for those very reasons because I think a lot of those sites are either scams or it's a hard money lender or disguise. Yep.

That's exactly. That's a really good point. People want things handed to them on a silver platter and not have to work for it. They're like, well, there should be a website of people who just want to give me money for free and then they can decide my fee. Give me money for free.com. Yeah, exactly. Right.

You just go to give me money.com and just go and I can borrow money at 4.5% Yeah, all day. Collateral, no terms, you know. Exactly what. Then I would invest in real estate. But, you know, yeah, it's people looking at it. Now, if you are looking for a hard money lender, of course, there is, there's a lot of websites out there for hard money lenders.

In fact, bigger pockets, I believe has the largest directory of hard money lenders. And it's free to go and peruse. So bigger pockets. com slash hard money lenders. And again, if you're just getting started, that might be where you have to get started. And that's fine. Just budgeted. You know, I mentioned, I meant to mention this earlier.

people might be surprised when they hear how much I paid for hard money at the beginning or how much you're paying for private money because they're used to hearing 3%, 4% right? And people are talking, but the one thing, I still remember the day I read it. I read it in some early real estate book back when I was very getting, like just getting started with real estate. And the person just mentioned kind of offhand, like, yes, certain types of financing is expensive, hard money is expensive. But just put it into your numbers when you run the math on your deal.

And if it works out, then great, who cares how much it is. I mean, technically a lender can charge you 100. grand, but if you're still making the profit you want, yeah, then it's worth it, right? So don't worry so much about how much they're making and oh, that's unfair or that's a lot of money. Like, can you still make your money? Just plug it into your math when you do your numbers. And if you're using the bigger pockets calculators like the flipping or the rental calculator

or the burr calculator, you can actually put those fees and points right into the calculator themselves. Yeah. Run the numbers. Find out. So. Yeah. Yeah.

Yeah. And how dare they make money? Yeah. I mean, that's why I talk about win-win. I mean, it's like it's their right to make money too. And they deserve to do that because they are taking a risk. And so and everything like that, and they deserve to get compensated for that risk as well.

But like you said, as long as your deal makes money, as long as you hit your profit points that you want to make, that's why I keep talking about win-win because they should make money and so should you. Both sides should. And that's the love private can because it's questionable. You can discuss that until you hit a point that both sides see as a win. Yeah, that's awesome.

That's awesome. All right, cool. That's a good one. So can I combine private money with an actual conventional loan? Like can I get a conventional loan on the purchase and then private money on the rehabs? How would that work? How could I structure something like that? Absolutely.

It's very hard to do that as a loan. Like if I go and borrow money from ABC Bank down the street and then go to David Green and have him loan me money as a set, like for the other part of it, like the down money or whatever, it's going to be very hard to do because David is going to want, I'm going to want to give him some sort of collateral, a mortgage on the property. So it's going to be very hard to do with that bank in first because they're not going to want to see a second sitting behind them, right? So you're going to need to do that through an equity arrangement. And you can do it.

It's done all the time. We do it through Venture, David, you know, shows up as a lender on the books of the deal, but he doesn't have collateral. So we give him a percentage of the profit too. So he has an interest. He gets an interest rate on his money, but then he gets the percentage of profit. It's called a joint venture, and we do that all the time. I talk about that in depth in the book.

Super cool. Yeah. All right. Next question. I've heard many people say that you need a mentor as you're starting out. I've also heard people say that some people pay for these mentors or coaches. That's different than other areas of life where you don't have to pay for a mentor. What have people done?

And if you do pay for your coach, how does the fee work? I rarely, you know, I have paid for coaching. It didn't work out for me. I'd rather either do like an apprenticeship type of thing where I, you know, find a way to add value to somebody's business and that they can, like, I can learn alongside them and every, and that kind of thing. So I give them time in exchange for, for the education, but real stuff. Not just like, let me follow you around and ask you a million and a half questions and

call that an apprenticeship. No, like, let me find a pain in your business and add value to it. And then, you know, like, let me, like, help you raise your game as, as an investor. call that an apprenticeship. But for mentorships, we've found that like giving some sort of equity is the best way to do it. Like I had a guy mentor me through my very first apartment building deal. And, you know, he got a small percentage ownership of that apartment building deal and everything like that. So we were able to negotiate that way in that. So minority stake, but we still got the lion's share, but in exchange for helping us, he was attached to the success of the deal.

That's great. Yeah. Yeah. Yeah. The, the, Mentor thing is interesting because a lot of the terms are kind of convoluted too. So some people call them as a mentor when they're really a coach and some people are a coach. And does that mean they're all bad? Are they all good? Like it's such a broad thing. We always advise people to be careful. You know,

like be careful with what you do. I mean, there are national mentors who you will never even step foot in the same room or talk with that you might pay 50 grand to or there might be the guy that lives next door who owns three properties that will do it for free. Now is one better than the other? depends on what you're trying to do or how much money you've got to throw around. Everybody's different.

You've got to be able to speak to maybe the mentor that you're talking to just has an altruistic, you know, vein in their bladder in their arm or whatever. Like I just want to help somebody. I want to feel like I'm giving back. Maybe that speaks to them. Maybe they're looking to expand their portfolio or maybe they've got a pain that you can help them address. But I think that in getting to know them and getting to know why they would help you

is how you can address that. Yeah, you know, I was actually when I were looking for questions for the fire on, another one that we were looking at, it was very similar. Basically said, I mean, what's with all these investors wanting money? If I was a veteran investor, I would kindly take on students and mentor them through deals. But like, would you? Like, I don't like, I. That's what you say before you've ever had to do deals or got busy.

Yeah, exactly. That's what people like, like, so I understand. It's the board person. Exactly. Right. So like, I understand people wanting to charge money for mentoring. But I also know that that is a lot of people. That is their business.

They don't even do real estate. They just mentor people in real estate. They don't even do real estate. That's a thing. But you got to be careful of that. And the people that are just charging money for their time. You know, and that's,

and I don't want to make money for my time. I want to, I want to create equity, you know, and everything like that for myself and create more wealth and all. So I've rarely taken compensation for my time for just talking to somebody

getting paid by the hour. I'd rather, you know, do a win-win where I get a small percentage of the asset or something like that in exchange for helping them win. Or just helping somebody

because I care about them and doing like a, a couple of phone calls or whatever just because it makes me feel good or it helps me give back or whatever, you know. Yeah, that's great. All right, well, let's move on to the last segment of the show, our famous four. All right, these are the last four questions of the day or the last four for me. Anyway, four questions we ask every guest every week.

And we want to see what you got to say. And I know you've answered these a couple times before, Matt, but maybe they've changed and maybe not. So number one, do you have a favorite real estate related book other than your own, of course? I can say that. Now I can say that. I know. Yeah, I couldn't say that before.

Hmm. There are quite a few real estate related books. You know, I had the book lined up for the second question. But I'll, you know, I may have said this on the other podcast, but the book that really helped me understand private money before I knew about it and whatnot was Rich Dad's Cashflow Quadrant. Because he talks about the ESBI quadrants. And I think that in the cash providers that invest in our businesses are in the eye. quadrant. That's where we all want to be. Like you said, the guy just said he just walking out to your mailbox and getting that check. You were in the eye quadrant. And that's a

phenomenal place to be because your money is what's making you money. And I think we all strive for that. But I think that in seeing my path, starting out as an E, working through being self-employed and being S and now in the B quadrant and working my way towards just becoming just an eye where my money's making money for me is phenomenal. And he talks a lot about how real estate provides that path. So rich dad's cash flow quadrant, I would have to say. All right, cool. All right, Matt, what is your favorite business book? So my favorite business book is, I guess we call this a business book. It's really like a life book, but it's life and air. And I heard you talk about it a lot on the podcast, Brandon, but I read it,

and it's phenomenal. It made me think about just, I'm going to make decisions based on time now, not based on like, how much money can I make? No, this is how much time can I create with these decisions and stuff like and that. So that book's phenomenal. I recommended it to others too. And that's a recent book that I read. So thank you for plugging that. Yeah, no problem. Yeah, that's one of my favorite books. I've been bugging David Green here to read that for quite some time.

I'm still working on him. He'll get there. Yeah, they'll get there. All right, number three, David. What are your favorite hobbies? I have a four-year-old and a one-year-old that keep me very, very busy. So I sound like a typical, you know, dad who's in love with his kids, but just hanging out with my kids. I make wine.

That's another hobby of mine. and just travel. I've been doing more and more travel. I took my son for my four-year-old son. I took him for his first roller coaster ride a couple weeks ago. And I sat him down and I was like, son, the only way to ride a roller coasters is sit up front, just so you know.

And so he had had, we went in a little longer line to sit at the very, very front of the roller coaster. So just enjoying life and traveling and creating memories with my family is probably my absolute number one hobby. And, you know, making pretty good wine is a second one. Awesome. Awesome.

All right, Matt. What do you think separates successful real estate investors from those who give up, fail, or never get started? Today, I'll say the other two podcasts had about it and I said something different, I believe, but this one I'll say, and this has to do with raising private money, but mitigating fear and if you let fear stop you, it will and fear can absolutely be immobilizing emotion,

but if you can get through it and keep moving even though you're afraid and getting to the point where I'm at, like you said, you know, like this new person's giving me money that's a little scary. It still is and everything like that. I've never, just the dirty little secret is the fear doesn't go away. And I think that people expect that, well, when the fear stops, then I'll start taking action. But the secret is that fear never goes away.

You just learn to act in spite of it. And I think that that's the key to success. It's just moving forward, even though you're a little scared, a little unsure and just being confident enough in yourself that will just keep putting one foot in front of the other and, you know, keep walking until I get to success. That's a great answer. Yeah. All right. Where can people find out more about you?

So my obviously bigger pockets, you know, I'm out there on BP, so you can check me out, you know, teaching webinars for BP and you can check out the book. And you can also check me out on my company website, which is derosa group.com. That's D-E-R-O-S-A-G-R-U-P.com. They can hear all about what we're up to. Perfect. All right, Matt. Well, like we said earlier, make sure you guys pick up a copy of the book.

This is one of those books that, I mean, clearly if it pays for itself, if you can help help, you know, get one more private lending deal somewhere in your future, or get a little bit clear understanding on SEC rules or on, you know, equity, debt, all that stuff. It's one of those no-brainer books. I think this is going to sell a billion and one copies because it helps every single investor out there. I just want to provide value. I just want to provide value to people and help them avoid making mistakes that I did when I first got started. So I talk about a lot of my personal story and a lot of mistakes that I made in hopes that not to like out myself, but in hopes to help people avoid doing that and they can have a clear, cleaner path to success from themselves.

So that that's my hope. Super cool. All right. Well, Matt, thank you very much. We'll see you around Bigger Pockets. And also, I will say this, you do an amazing job at teaching webinars here on Bigger Pockets. So make sure you guys sign up for one of Matt's webinars. You do it every other week, right? Yes. And oddly enough, Brandon, we talk about raising money. No way. No way. We talk about doing deals with other people with other people's money and how to make that happen and how to find it and how to, you know, how to assemble it and everything like that. So they should come join us for those two. They should.

BiggerPockets.com. That's webinar. Check it out there and you'll see Matt's upcoming webinars there. And I believe David Green here is going to start doing some webinars, teaching some classes as well. So, you know, we're teaching the world how to do this stuff, one investor at a time. So thank you all. All right, Matt, get out of here. We'll see you later.

Cool. Thanks, guys. Thanks, Matt. All right. Now was the interview with Matt Faircloth. Fantastic. Like, you know, I know a lot about raising private money because I've done it, but I still like, my mind is exploding with information and excitement.

Like I'm, I'm ready to go out and have some conversations about private money raising. Are you going to start raising some money yet, Greenie? I know we've been talking about it. If anything, Matt has me more intrigued with this than what I was before. You know, like, you think you know something, then you hear someone who doesn't, you realize how much you don't know. And yeah, that's definitely, this is something that's going to happen in the future. I'm absolutely going to start raising money and making an effort to do that.

kind of add some gasoline to my own Lamborghini over here. There you go. That was a nice analogy there. Well, good deal. Good deal. Well, I don't know. What else you got? Anything for us?

Yeah, I want to make one last point. This is something I was thinking about while we were recording, but I didn't say it. This might be the absolute best time in all of our lifetimes to raise private money. Interest rates being stupid low and real estate being such a safe investment compared to other things has created an environment where people need to lend their money to get a return because they cannot get a return at the bank. They cannot get a return with CDs, like all the typical ways that people look to earn a return. The interest rates are just stupid low.

So you can raise money easier now than ever. If you've been thinking about doing this, I would highly recommend that you take the jump by the book, learn how to do it and start doing it just like I need to do myself because we all may look back 20 or 30 years and say, what the heck were we thinking not raising money when it was that easy? Yeah, that's so true. So true. So get out there, do it. Don't be afraid.

you know, we'll see you next week on the Bigger Pockets podcast. We got some fun shows coming up here. We've got planned out. So you guys are in for some treats, especially David and I are going to be doing a solo show pretty soon, talking to you guys about some cool stuff on financial independence. And got some news coming up on where Josh Dorkin has been and what the future of Josh Dorkin is looking like, some kind of cool stuff going on there. So hang tight for that.

And we'll see you all next week for the Bigger Pockets podcast. My name is Brandon. And this is David. You want to take us out? Yeah. This is David. Don't need a last name. No last name. And Brandon doesn't know the show number, Turner. Signing off. Signing off. Good job. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and

small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Be sure to join the millions of others who have benefited from BiggerPockets.com. home for real estate investing online. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calicoe content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit W.com.

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