Epic Real Estate Investing - Don Costa - Flip Talk | 463

Episode Date: September 6, 2018

On today's episode of Thought Leader Thursday, Matt Theriault speaks to Don Costa, a real estate investing entrepreneur and an author of Flip Talk podcast. Find out how he hit bottom and came back into the real estate business, his wisdom on how to attract potential investors, and why self-esteem is crucial for him. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. I had to come to grips with the fact that the one talent I had was identifying a deal, being able to put it together and make money, and I had to get off the sidelines and get back into it, or I was always going to be in this survival mode phase. And I did. I mean, long story short, I put it out on Craigslist looking for somebody to partner with me with money. And I got six phone calls, one of them I end up meeting with, and the rest is history.

Hey, I'm Matt Terrio, I'm Epic Real Estate Investing, and this is Thought Leader Thursday. Okay, so today I'm joined by a real estate investing entrepreneur in 2012. He was broke to the point where he had to choose between groceries for the week or the electric bill. And we're going to talk about that today. And that year, he mentally hit his lowest point in life. And then one day he looked in the mirror and had an honest conversation with himself, what is it I really want to be doing? And having had some experience with real estate, he decided to go all in

and build a true real estate investment company, and then four and a half years after that day, he looked up. I totally made a ways of what he had been able to that his company had become such a strong force in his market. So I invited him on the show today to discuss his client back. So please help me welcome to the show, Mr. Don Costa. Don, welcome back to the show.

Hey, thank you for having me on, man. You bet. I guess not welcome back. I was on your show. And now, so it's nice to welcome you back to communication, I guess, right? Absolutely. Absolutely. Don, before we get into your business and into real estate, and, you know, what were you doing

just prior to, you know, hitting this low point? What happened? So, you know, I actually have two lives in real estate, right? I started in 2003 knocking on doors, pre-foreclosure, going house to house for notice to default, notice trustee sale. And I got really good at talking people in the sale in their home. I made a lot of money before the market crash. It went to my head. I was a young guy. I had the BMW and the nice clothes, a fancy office and thought everything I touched turned to gold, started a restaurant and nightclub, was working on a sunglass line, you name it, I had my hands in it. I was fast as the money was coming in, it was going out. And when the market crashed, it took me down so fast it was

ridiculous. I went from my worst month being, you know, 30 grand in my pocket. You know, I think my best month at the time was like 120 grand at one month I'd earned to basically not being able to go to the grocery store without a calculator. So from about 08 to about 2000, 2010, I proceeded to lose everything and fear and anxiety and survival mode kicked in and I wasn't able to hold together and I went broke. So I had a restaurant in my club that I had opened. I focused on fighting for that because it was the last thing I had left to fight for. In the summer of 2011, we closed that down finally after going back and forth fighting with the city over permits and CUPs and everything else, all kinds of crazy stuff that I'm not going to get into. and I had nothing left to fight for.

I was at my lowest point. I'm playing Russian roulette with trying to keep the lights on, the water on, and the kids fed. And I had a Saturday where I just felt like I needed to take my family to go do something fun. We hadn't really done anything fun for a while. Looked at one of my credit cards, like the last one that hadn't been turned off.

And I had a $90 available, or it said $90 basically limit, right? And there's a difference between available and actual balance, right? So I had an insurance payment that was trying to hit that card. And so that money wasn't really there. I didn't know that. It took my family to Taco Bell, ordered food, had the humiliation of the card being declined in a packed Taco Bell restaurant.

And I had to collect my family and walk out of the restaurant. Now, I'm an entrepreneur. I've always been an entrepreneur. I'm sure you relate as an entrepreneur. We have thick skin. We pride ourselves and the arrows bouncing off. You know, I walked out with my head held high thinking this, I got this. no big deal. I'm a hustler. My son, my oldest son at the time, he's about six, tugged

down my hands or walking to the car. And he said, Daddy, how come the mean guy wouldn't give us their food? And that moment, it broke me. You know, I realized in that moment that it wasn't just about me being a hustler and holding it together and in everything. I was letting my fear and my anxiety rule me. I was failing my family. I was failing my children. I was setting a horrible example. And that's when I had that mirror moment where I had to look in the mirror and go, you are failing as a father. You are failing as a husband. You're failing as a person. You're failing yourself. You know, you have to do something to change this. And I was scared to get back into real estate. It was terrifying because I'd lost everything in real estate in my head, right? I really

lost everything because I wasn't running a real business. But I thought it was real estate. And just I had to come to grips with the fact that the one talent I had was identifying a deal, being able to put it together and make money and I had to get off the sidelines to get back into it or I was always going to be in this this survival mode phase and and I did I mean you know long story short I put it out on Craigslist looking for somebody to partner with me with money and I got six phone calls one of them I end up meeting with and the rest is history so wow well congratulations on your climb back I can painfully relate a lot of people can yeah Yeah, the one thing I said, I didn't lose my money in real estate.

I was in the music business and when that whole industry started going towards the digital download rather than walking into a store and buying a compact disc, you know, that turned my whole life upside down. And I didn't have kids, thankfully, so I didn't have to deal with that. I was ever worried about myself. So I feel for you. And I commend you for the strength and the willingness and the fortitude, the climb back. So, Don, what does your business look like today? So today I run a real business. I have a 10 person team. We focus on our core competency,

which is real estate, you know, flipping, rehabbing. My team's made up. I have three lead managers answering phones. I have a dispositions guy. I have two acquisitions, people getting ready to bring on a third. I have two project managers, an office manager and a transaction coordinator. So we're very sophisticated and what we do. We're very systematized in what we do. And, you know, last year we did 122 projects, 106-7 of rehabs, two of them were wholesalers and the rest were hotels, which is a new big thing in a hot market right now. And this year, our goal is 200. We haven't traditionally been wholesalers up until this year.

I moved one of my old acquisitions guide to dispositions and we're putting the wholesale model together because the only way we're going to hit 200s that we start wholesaling a lot more and tying up more property. So that's the goal. That's on the radar. And it's a lot of fun. I mean, it's a good business. I'm actually not even, like, I couldn't tell you what cross street the houses are that we're flipping.

You know, I don't even have to see them anymore. I have such a phenomenal team. I'm in the office every day because I'm crazy like that. And I like tweaking on my business. But I don't actually, I don't deal with the properties anymore. Right. Got it. So that's quite a big difference from, you know, four and a half years ago getting rejected at Taco Bell to

what you've got going on right now. So there's a lot that obviously happened in between then and now. Absolutely. Once you had this decision that you were going to start this new investment company after you were still, I don't know, maybe the wounds were really fresh from the last one that you had lost. What does that starting point look like? You touched a little bit about it on Craigslist, but what did that, can we just get like a little practical and go into detail of what that actually looked like? Yeah, you know, I mean, I think like anything else, even when you're green brand new, you don't know anything about real estate, you know, you have to have this proof of concept that it works, right? And I needed my proof of concept that I could do it again.

and I put an out on Craigslist. I said, you know, hey, I'm a flipper. I know rehabbing. I'm looking for a private money partner that can partner with me on deals. You know, I was looking for a JV partner because I couldn't make payments or put a down payment. I was looking for somebody that. Which part of Craigslist did you post that add in?

Financial services, I think. I don't remember now. I think it was financial services. And the one thing I want to be clear is I said in the post, you need to be close enough for me to meet you for coffee. Like I didn't want some king of some country. telling me that my uncle died and there was a million dollars for me right that's not what I was looking for at six phone calls one of them I ended up meeting with and it's crazy because this guy

was a talker and I was I was scared at the time I I didn't want to go in for the clothes I wanted to but I didn't you know the fear right so we met and we talked like probably 10 times and he hadn't committed to funding me and the last time we met when he committed to funding me I was sitting there talking to him. I got a text and I looked at the message. My wife's like our water just got shut off. And I remember that I can still feel the anxiety. Like do I leave and go deal with this right now or do I close this guy? And I made it a point out if I was not leaving this meeting without this guy telling me that he was going to back me on a deal. And I got him to commit to backing me on a deal. And then I went home and because I had been in real estate before I knew how to turn my water back on, so I turned

it back on. And I've been to paying the bill anyway, but I went home and turned it back on and kind of half celebrated what I could for the night. Got it. Okay. So you met, I don't know, I think you said maybe five or six people responded to your Craigslist ad, right? And I want to focus on this because a lot of people, I think, are in this mindset like, how do we raise private money? And this is you raising private money at your lowest point without a whole lot of credibility on your side. You know, so what, go through that process of that conversation or that, that progression of conversations. What do you think was that happened that had that guy actually make the investment in you? You know, the secret to private money is not the deal. And I'll be straight out to tell

anybody the secret. It doesn't, don't bring a credibility packet. Don't bring the deal you're trying to fund right then and there. Don't bring any of that to the table because honestly, they're not there to evaluate the deal. How profitable a deal is is great. But if they, if they, don't believe you can get it to the finish line, it doesn't matter what the profitability deal is. You're the horse they're betting on. Right. And that's the one thing that I, even in that last meeting, I was able to muster up was, I was the man for the job, I was going to get it done.

I was going to see it through no matter what I was going to fight to make sure the project worked. And when I was able to communicate that, that's when he committed to me. And, you know, I'd learn something in that moment. And I enter every meeting the same way. I always, and this is the way I always tell people, you know, when you're raising private money, go in there with a conversation about what each of your goals are. and see if you're both on the same page. They're interviewing you. You're interviewing them.

And you want to make sure that you're both on the same page and your goals align. Don't go in there to pitch a project. Go in there to show them that you're the horse they can bet on. And if you can do that, you walk in there knowing that you're both bringing value to the table, because you're both bringing an opportunity to the table and you're there equal. You're not better than them and not better than you. And you have that conversation and you show them that you're the man or woman for the job. You're going to get the money every single time. my close on every meeting is let's do one and see how it goes and if we like each other we'll do more let me look at what I have in the pipeline and if I see something to fit your criteria I'll send it over and it didn't matter if I was desperate to fund the deal tomorrow or if I didn't need the money right then and there I close it the same way because they will they will sense desperation on you and that'll that'll be a turn off so if I had to close it tomorrow I'd go back to my desk I'd wait an hour and I'd send an email say oh this you know I notice this is in my pipeline it fits your criteria interested in funding you're interested in funding we can actually close tomorrow. And that's the way, that's, that's the way I've done it every

since. So there are two schools of thought on that. Okay. Yeah, there are two schools of thought on that. I actually come from a different school. But you could actually just finish up that what you just said there at the end was actually something that I've, that's how I've raised private money is I've had that conversation and I might not have had a deal or maybe I did. I just wasn't going to share with them right then. It asked how much would they want it for the return. What were their expectations for the return? How much would they have available for that type of investment?

And, you know, hey, if something comes up, I'll give you a call. I don't have anything right now. And sometimes it was an hour later when I made that call. So, right? So I get it. So, and again, I just want to get a little bit more practical and granular on this. So when you have this conversation, you have to convince that you're the jockey to bet on, right? Is it fake it till you make it at that point?

you know what were you thinking about fake it till you make it is a lot easier so than done on you in that situation fake it so you make it i think is the wrong way to look at it you know um owning your value and knowing what your goals are and knowing that you're the the man or woman to see it through even if i got to learn it i'm going to see it through um i'm not there yet but i'm the person to take you there it's it's it's you know i talk about i did a i talked to the ria last night that's one of the ways I raised private money is I go speak at Rias. So, um, and I was talking, I talked about this because one of the things I learned in my, my low point of the Taco Bell story, right? My failure point was, I needed to own my value. I needed to own who I was,

what I was going to become, what my goals were. And I needed to basically be that person. And it's not fake it because you can be that person. You may not have the money yet or the experience yet, but you can still be the person that's going to get it to the finish line. And I think it's just mustering that belief in yourself. You, you know how, you know, they kind of strip you down and build you back up. And before you get to your point of strength, you got to believe you can get there. You got to own who you're going to become. And that's, that's more what I'm talking about. There are people who will back you, even when you have no experience, if they believe that you're willing to get to that finish line, that you're willing to fight that

battle, you're willing to crawl through the mud if you have to see that project through. If they see that in you, that hearts, then there are people that go on that journey with you. You know? No, definitely. There definitely are. Thanks for sharing that, and I think that's a good point. There's really only two reasons that people do fail in real estate is one. They don't believe real estate actually works. Right.

They themselves are going to work. So, yeah, must bring that belief in yourself, I think, is key for sure. So you have a financial backer. So you know if you go find the deal, then you've got someone there that's going to vacuum and support you there. But I imagine there wasn't a whole lot there left for a marketing budget or lead generation. So how did you start finding those initial deals? So I basically networking was huge for me. Okay, so I was telling everybody what I was doing.

I run my mouth. I tell everybody I talked to when they asked me, how do you get started? I'm like riding your mouth, to everyone what you're doing. OPM is huge for me. And I'm not talking about the traditional OPM. I'm talking about other people's marketing.

So every bandit sign I saw I called, every Craigslist post I saw I called. I introduced myself. This is who I am. If you're a whole scholar, I'm looking for properties. I called the, at the time in 2012, there were still REO agents that were basically handling all bank ARIOs.

I was calling them, I was making friends. And I don't mean, I was calling saying, what are you going to give me? I was calling and saying, how can I add value to you? How can I add value to your business? Can I take you to lunch? Can I take you to coffee? Can I build a relationship with you? And my first deal in 2012 came from an agent.

It was something that's been listed on the MLS, just listed on the MLS. It was an REO. And actually, that agent was an agent. ended up working for me after that. So, because we have a little real estate arm at some, a few years later we set up and she came working for us. But she brought the deal and she was able to get it closed for me. And I used this gentleman's, you know, as a money partner and we did the deal.

My split, we did a split. My split was 10 grand. We made 20 grand on it, nothing sexy, but I got 10 grand and that money was gone before I got it, but it was proof of concept and I was back in business. Awesome. Congrats. Yeah. I think a lot of people underestimate the power of the relationships that you need to build in real estate to go far.

You know, I mean, you can buy your lead generation and go fast, but really is the relationships that help you go far, right? Absolutely. My business is built on relationships. Networking was huge for me. I didn't have any money. I didn't have a choice. And I still get deals today from those relationships I built, you know, six years ago. I call them follow my lap deals.

They call me up. And they're like, this one's falling out of escrow. You know, if you can make this offer, it's yours. you know, I get those kind of things all the time. I think you're the first person. Like I just, I just wrapped up, of course on this very thing,

because this is a, you and I have very similar stories. This is how I started. Like, I had no marketing budget. Like, so you have to go out and create relationships. You have to run your mouth.

Like, that's the only other option. Like, you buy your way in or you earn your way in, right? And I think you're the only person that I've ever had on the show that actually kind of supported that.

I felt like I was kind of out of all alone and everyone out there is, you know, supporting or advocating the newest shiny lead generation activity or the system or the technology. And I'm just like, you guys are just getting it all wrong. It helps. It absolutely helps. It does. But you're going to have to do that forever if you rely on that.

But if you build the relationships, you get to rely on that forever. And it pays you back. Donna, that's why I got you on the show. I knew I liked you when we first started talking. We're almost out of time. But let me ask you, now that you've gone through this. process and you have a podcast of your own called FlipTalk around iTunes. You can check that out there. I mean, I don't know if you're educating, but I imagine once you reach that level of

success, you can't help but educate in some capacity because people ask you for advice. They ask you for your opinions. What's the biggest mistake you see people make investing in real estate when they're getting started? I, you know, I mean, the biggest, there can be a lot of I think that if I had to really pinpoint it, you know, not taking a time to understand the numbers, you know, getting ahead of themselves. I mean, real estate, when you really think about this is, this is, this is, this can be one of the hardest businesses you're in, you know, if you let your fear and different things get in your way. But at the same time, the fundamentals are so easy. It's not complicated, right? You know, the numbers are the numbers.

The numbers are the numbers. The ARV is the ARV. The rehab budget is going to be the rehab budget. You can get it down if you have relationships. have been in the business for a while, you get those numbers down a little bit. You know, so you know, you can't, you can't fudge that ARV. And I see people sometimes trying to square peg round hole. I think is really, I think the mistake at the end of the day.

If you get your numbers right, you get your numbers dialed in and you execute properly and, you know, you plan and you execute and you get it to the finish line properly, you're always going to be successful. I haven't lost money on a deal, knock on wood, because I just, the numbers are the numbers. And I don't deviate from those. And so that's trying to make something a deal that isn't a deal, I think is the mistake. And then that can happen to people to get excited, you know, and they want to make something happen or they get, you know, maybe they get too ahead of themselves.

So they just they're willing to plug anything in to make it work. You know, that and that and then letting fear, you know, get in their way, I think is the other thing. You know, not getting out there and talking to people, not getting out there and taking action. You know, those are the two things I see really are issues. Yep. Yeah. So trying to force a deal, right? Compromising your minimum deal standards, doing a lot of what ifs, if I can get this or if I can do that, it's going to be a home run. So that's just hope and pray, that type of thing. Absolutely, totally agree. And then the fear, right? Right. Once you get that first deal under your belt, it's like you look back like,

what was I afraid of? That wasn't rocket science. It was no big deal, right? So I couldn't agree more. You know, I can always tell when I'm talking to somebody that they're, if, they're the real deal or not. And you, Don, you're the real deal. It's a pleasure to have you on the show. If someone wanted to reach out to you and get in contact with you, learn more about what you do in your business, what would be the best way for them to do that? Yeah, you can reach out to me, Don at FlipTalk.com. I do answer those emails. We have the podcast, like you mentioned, it's on iTunes, I heart radio, lips in it's everywhere. I actually am not selling a course. I'm not, I'm just, I'm at a point in my business where I don't have to be here every day.

So I'm more in give back mode. I actually enjoy the podcast and the audience interaction. So I love getting those emails from people that say, you know, I listen to your show. And I was about ready to give up on real estate. Guess what? I just did my first deal, you know, and thanks, thank you. That means a lot. Like, I'm sure you get those.

And it's, that's better than any dollar anybody can give you. Right. Change somebody's life. So I do get a thrill out of that and enjoy it. And, yeah, so email me. I'm on Facebook a lot. Hit me up, you know. I'm really easy to get a hold of.

Fantastic. All right. So yeah, that's it for today. Thanks for tuning in to Epic Real Estate Investing. God bless to your success. I'll see you next week on another episode of Fought Leader Thursday. Take care. This podcast is a part of the C-suite Radio Network.

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