Epic Real Estate Investing - When Your Expenses Are High But Your Profit Is Genius - David Richter | 1328

Episode Date: August 8, 2024

David Richter discusses the Profit First system for real estate investors, which helps them manage their cash flow and increase profitability. The system involves setting up different bank accounts to allocate funds for specific purposes, such as profit, taxes, and operating expenses. By automating the process and implementing good money habits, investors can avoid the cash flow roller coaster and have more control over their finances. Richter emphasizes the importance of having a CFO or financial advisor to provide guidance and help make informed decisions based on the numbers. He also highlights the need for a strong financial foundation and mindset of coachability and teachability to achieve success. P.S. Whenever you're ready to go deeper and further with your real estate investing, looking into my partner program to help you get your first deal might be the move... take the first step here for free 👉 https://epicearnwhileyoulearn.com/   Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. Hey, strap in. It's time for the epic real estate investing show. We'll be your guides as we navigate the housing market, the landscape of creative financing strategies, and everything you need to swap that office chair for a beach chair. If you're looking for some one-on-one help, meet us at rei-aise.com. Let's go, let's go, let's go, let's go, let's go, let's go.

Let's go. All righty. Help me welcome long time friend of the show. Mr. David Richter, David, welcome back to Epic Real Estate Investing. Well, I'm excited to be back, man. I love your content. I love you, good friends, and for a long time now. So just happy that I can come back on and provide value how I can.

Sweet. Super. Yeah, and congratulations on all the success with the whole profit first thing for real estate investors. That's an amazing message. And then to bring it out to just this community exclusively, I don't think that responsibility could have been in better hands. So congrats on what you've done with that. Yeah, I appreciate that. And I do. I feel like it's a calling at this point, just trying to get that message out there and helping people. So I appreciate that a lot.

Perfect. So for those that aren't familiar, can kind of give us a refill review of what it actually is and how it helps your clients. Right. So so many people that I feel like if you're in the real estate game, or just an entrepreneur, at some point you'd probably make money but feel broke. Like, I'm making all this money, but where's it going? You know, riding the cash full roller coaster, just all the cliche statements that people, say out there, but they're cliche because they're true because it's like, okay, if you're going to make the money, do you have the skill to keep it as well, too? And that's where profit first attacks it from a systematic level for the cash. If you're an entrepreneur, you're going to at least manage your cash. Like what comes in, what goes out, and that's where putting a system around it and making sure that all those things we've heard from other books, like Pay Yourself First in Robert Kiyosaki's book and the richest man in

Babylon, you know, like a portion of all you have is yours to keep. It's putting a system around. that to make sure that you are actually paid and that the business is healthy and that you do have profitability and you have the cash that you want. And I boiled it down to three words, like the three most important words that every entrepreneur should know and every business owner should know these three numbers in their business. It's what you make, spend and keep. It sounds real simple, but it's like what's coming in, what's going out, and what do you get to keep from the business? And that's where profit first puts a system around it. And the system is like the envelope system.

So it's really simple on the back end. You're setting up different bank accounts to name your dollars that come through the door. So that's the general overview of profit first and why I had to get it out there because I was in a company where we were doing 25 residential deals a month and spending 26 worth of those deals out the door. So it's like you make a million, but spend 1.1 to get there. So thankfully, this helped me get out of that and just that mindset and really wish I would have had this from day one in the real estate game.

Yeah. Can you imagine the difference if we had it? Yeah. Yeah. Oh, man, because now I get to see people on the other side of that that do have it from day one because I've been doing this long enough now. And like their habits around money and like what they're able to do with it, they have different problems than I did back then. Now they're like, okay, there's these one people. We've been working with them for only a couple years, but they never broke a hundred thousand in net profit for the year.

And they do about 30, 40 flips a year. Well, last year they did the same amount of flips, but netted a million. they netted a million dollars, but it's because they were directing the money. And I was like, and they contributed it to that. And I'm like, this is so cool because like now they've built good money habits in. And it's like they have the same deal flow, but they're just putting way more in their pockets. So their issues now are, what do we do with the tax, you know, hit? Like, we got to make sure we've got some good tax strategies in place and, you know, mitigating this as much as as possible. But they're like, this is so much better problem than not having any money at the

end of the day. And it's amazing, like what you just said, like somebody in a year notices that type of a difference. Yeah. Because it does make a difference really, really quickly. And that's where I got super excited. And just to, I guess to be, to bring everyone up to speed, because I think we're still kind of, maybe they don't even know what we're talking about. Yeah, for sure. And I know you gave some great examples of some great books. And the principle has always been to pay yourself first, right? And then we'll take care of all the debts and everything. And that sounds great in theory. But if you leave it up to yourself to do it, none of us do it.

Right. We take care of all of our bills and, you know, all the expenses and the payroll. We take care of all of that stuff first. And then us as entrepreneurs get to keep what's left over. Yeah. And so what this does is it automates the process. So you, once you have it set up, you kind of take it out of your control. And you just kind of become accustomed to working with what you got.

And you don't really have to change your behavior or your habits or anything once you've got all set up and you just adapt. And I think I've told you before, I haven't followed it to a T just because it was too much CPA stuff in there for me. So I did kind of a different man's version of it, but it had the same impact to where I had a few bank accounts set up where I had automatic withdrawals from my primary operating account that just went into these other areas. And I did exactly, as the book said, to start really, really small. And I started just like with 20 bucks a week for each account. Didn't even notice it was gone. So I bumped it up to 40 bucks a week and didn't even notice it was gone. I just kept on slowly bumping it up.

And, you know, now there's a thousand bucks in each account. And I just learned to deal with a few thousand bucks less a week. And it would have been shocked if I did that right away. But over time, and it just grew that way. And it's amazing on how quickly all those little accounts, add up. Yeah. And you just wake up one day and you feel like you're broke because there's nothing in your

operating account, but then you check those other three accounts. Oh my God, look at everything I have. What is it? It's sure to help the sleeping at night. You know what I mean? Exactly. That's where most people just don't have clarity around their money. And it's like they lose sleep at night, not because they're losing money.

They don't know if they're losing money or not. You know, like where it is all that money going? So it's very, when you're intentional with every dollar, it just helps with that piece of mind. Totally. And again, the magic is just setting it up. automating it. And so now discipline isn't required. Yeah. Yeah, exactly. Especially, because it's like that's one thing he don't need to worry about is the cash in your business. You need to worry about going out there, getting the deals done, getting the, you know,

talking with people and like making the revenue happen. You need to have a good system on the back and to make sure that you get those dollars to come in. They're working for you. For sure. I'm noticing something right now. And I want to know what you're seeing like from your side and maybe through your clients. Sure. I can look at Cariously through, you know, and compare notes. Because for the longest time, I can remember how this gap between the rich and the poor is getting wider and wider. Yeah. And I hired this YouTube coach probably, what, seven or eight months ago.

And the channel has grown a lot since then. But when with that growth come many more comments. So it's giving me this insight as to what people are thinking out there and what's it? You know what I mean? Yeah. And a lot of thoughts and opinions that I would have never come across otherwise. So it seems like in those comments, a lot of people are really sad and broke and angry. And there's a lot of people playing the victim.

And oh, sure, it must be nice to buy a house. I had a dollar. I could buy a house too. Like I get a lot of that type of stuff for me, woes me. Life sucks. The economy sucks. Everything sucks. But then you go to the shopping mall on the weekend and you can't find a parking space.

And here in Vegas, I mean, building is going on like crazy. And they're all sold out of the premier lots on all of the exclusive golf courses. So somebody's making money, somebody's spending it, not everybody is hurting. And I'd have to think, I was thinking about this. I was driving to the office today that I knew was going to be talking to you. I was like, wow, if everyone just had something simple like this set up, a lot of that pain could be avoided. And maybe there could be a lot more people joining the ranks of the wealthy.

rather than sitting in there scratching their head, wondering what happened to all their money. Are you notice anything like that amongst your clients or either it's before and after story, stuff like that? Or is that just me? Well, I would say if they come to us to work with us, they're already a little bit different. They're ready to be vulnerable with their money. So it's like the people that we work with are already coming outside of the victim mentality and saying like, hey, I need the help. I am making money, but I don't know where it's going.

And so usually when they do that, they come up and they open up to us. But of course, I see that. I see it just like you do. Where the majority of people, I think this. Like, I go, okay, more when I go to big events, I would say. I was at a big event recently. And, you know, there's 500 people there. And then speaking in front of them, like, I heard so much feedback of when I said,

like, make money feel broke and all that. It really resonated with a lot of them. And they were somewhere business owners, somewhere in the W-2 world. And it's like they both could feel that pain. from either side. So I feel like that's a universal problem where just people don't know what to do with their money. So it's like, can you get something in place to help you like that? So I definitely resonate with that, that if they had a good system in place, whether it was on their personal side or the business side, like if they could just get one of them under control first, it would help them

with the second one, but it would also help them see that if you want to get into business, we need to have good money habits now and good systems in place, especially if you get into business, that as well too. But yeah, when they come. to us, they're already vulnerable and like, help. Like, please, we don't know what we're doing. Right. Well, there's that saying that all progress begins with the truth. Yeah.

And we got to be ready to be truthful. Yep. And I think, you know, whether you're an entrepreneur or not, which everybody should be to some degree, I think it's almost a necessity. But you know, if you just look at the tax strategy, that's probably the best tax strategy that is just to start a small business, even if it's a side of the soul. But anyway, everyone should have a CFO. finance, someone responsible for your finances that can look at stuff objectively that has

experience and can give you some direction because most people are just terrible managers of money. Yeah. If everybody is a good manager of money, we would have never probably heard of Dave Ramsey's name. Right. Exactly. And I wouldn't have written the book, you know, and like Mike wouldn't have written the original profit first book. So I definitely resonate with that.

If you're in business, a lot of people have CPA's bookkeepers and they think, like, this is the end all be all. I'll just give it to them. They'll do a good job. And then they try and force a CPA or bookkeeper with a CFO hat on more of that advisory role. And like, tell me what these numbers mean. Like, I don't know what I'm looking at.

And the bookkeeper and CPA says, yeah, right, that's not my job. You know, like, I don't do that. I just give you the numbers in good luck. You know, see you later. And that's where a lot of the owners think like, oh, my gosh, I'm not getting from them what I need. But it's like you're putting the wrong hat on them or you have that hat on. You're the CFO.

You have to be analyzing that stuff. and managing the bookkeeper. So that's why I even created what we have here with Simple CFO. My company is like making sure that if you're going to make the money and you're going to go out there, that you have someone that's helping you keep it, but then also managing those relationships and making sure we can make decisions from the actual numbers and you know what's going on because so many people just say here, just take the shoebox full of receipts and I'll see you next year. It's like that's not the greatest business plan to get to where you want to be in actually control your money.

Right. Typically it's a lot more expensive plan as well. Yeah. Yeah. Yeah. It's like people think, oh, I can't afford a CFO. It's like, wait a second. Well, do you want to have a $20,000 cleanup job when I see you two years from now and like someone's messed up your books royally because they don't know the real estate investing world? Yeah, I don't know how many times I've seen that where it's like, oh my gosh. Like if we could have helped you at an earlier stage, like you wouldn't have had to go through all this pain, trauma and like cleanup stuff. It's just a mess. It's all a mess. Yep, guilty right there. I went to the whole thing initially. If I were to start all over again, I would hire a bookkeeper. That would be the first person. Oh, yeah. That would add to my team, the very, very, very first person before I even spent the dime because the amount of pain to go back and fix all that was painful.

Oh, yeah. So bring up to speed. Like, what's going on? What new and exciting things have you done since you've taken on this mission? We keep growing. I think it's that the marketplace really wanted someone in that to fill that gap of I'm getting these numbers, and I don't even know if they're right, and I have no idea where my cash is going. So that's where we just keep growing the team, keep growing the CFO team.

Now, I have over 20 CFOs on the team, working with over 100 clients on a regular basis. Just making sure that they have someone there that's focused on their profitability. I've started another book. It's kind of like on the lawn, slow burner. I'm just trying to get more of the general concept of what I'm trying to teach out there because so many people, even if they get a system in place, is that system really? pointing you toward where you want to go. Like, did you even make the conscientious decision? Like, this is what I want from my business. What do I want from it? And like, if I do have all the money in the world, like those people like that have the tax issue now, like, because they made so

much money, what would you do with it? Like, now that if you had all that cash, because it's like, now I've seen that enough on the other side where I want to make sure that I'm pointing people in the direction they want to go. And sometimes they don't even know how to get there. So it's just some of the things that we're working on and just some of the things that I'm trying, but honestly, I still beat this drum. This is where I feel like it connects with people because so many people just haven't heard a good, solid financial foundation and how to set that up. It sounds so generic, right?

They have the stuff that we talk about it. I was like a lot of common sense. And it was for me too because someone had told me about the book Profit First for years before I actually bought it and listened to it. And who knows, I might not have ever discovered if I wasn't, I was on an eight-hour drive to my mom's house for Christmas one year. And I just downloaded the book and I listened to it the whole way. And I got it all. And I was like, okay, I get it now.

And I was thinking like, well, why didn't anyone ever else explain it to me like this before? Right. And I kind of thought back, well, they had a lot of times. I just wasn't listening. But the real magic was when I just implemented a couple small little steps and saw the results so quick that I just wasn't expected. Yeah. It's so many people just don't have a good foundation laid, even though they might have heard it or like they might have it in their personal life. But it's like just translating that to simple steps in business and the first key pieces. Like that's why I tell people three most important numbers. Do you know what's coming in going out and what you get to keep? It's like just simple stuff. It's like the fundamentals of baseball, right? You still got to practice those and make sure you're good on like the ground balls and hitting the ball and like just the very, very key things. And it's like a lot of people just haven't been taught that. They need to go back to. and hit off the tea at first.

And like, here, let's set up a bank account and let's get some of this stuff. So that way you can hit the home runs and you can do that. And when you do, you capitalize on that. You don't just sit there and say, oh, yeah, that was great. On to the next one. You know, it's like because I need to because that one deal maybe helped me eat for the next month. So just getting people to the good foundation. Now that you've helped so many people and you're doing this somewhat before the book.

It was ever released also. So you have years and years of experience on this. but now we've got kind of a real framework and structure around it and along with the book. Now that you've done this for a while, who are the people that you see the common denominators of the people that you've been able to help the most? To that I can help the most. It's those people that are truly coachable and teachable. There's not a subset and it's not a revenue point.

It's really the mindset of the person when they come in and are they open to? Okay, we're going to open some bank accounts. Like, we're going to do this. we're going to analyze the cash and we're going to go through these numbers and they get on the calls and they actually listen to the advice and they participate and they're coachable. And like when we tell them like, hey, there's a different perspective here. They actually utilize the tools and the systems and those types of things. It all comes back to just the core fundamentals of being a human being that's willing to learn,

have a growth mindset. And like you had mentioned even before, like not being that victim mentality, not always looking for someone to blame, but to say, what can I do? What are the steps I can take and really being able to lean into that? Because that's where we see the magic happen. The magic is we tell you, here's some of the key foundational things to do. They actually implement. And then they see the results.

It's crazy. It's like it's a principle of life. It's those people that actually go out there and implement that type of stuff. I've even done it where even if I haven't worked with them directly through our company, where I've spoken to their group and they come back and they say, hey, we did some of these first steps. And it's like, one guy said, this saved my business last quarter because I had some extra cash saved up that I wouldn't have had saved before. And like two properties got pushed back like a whole quarter that were supposed to close and like float me. And he was like, because I had that money, I didn't have to shut down or like go back to my job or whatever.

I'm like, that's why. It's like those types of things that people will just implement and get it started. Yeah. I mean, you have to participate in your own success, right? Yes. Yes, indeed. And I was just on the phone with somebody. They referred someone over to me that was a real estate agent.

And I was like, hmm, you know, real estate agents are probably my worst students, my worst partners. Really very much for everything that you just kind of said. Yeah. Because a lot of them are very smart. A lot of them are tons of experience. But they lack the coachability, right? Yeah. They lack the flexibility.

They lack the participation. They might try it here or there. But then as soon as it doesn't, they don't get the immediate result that they're looking for. They go back to their old ways. And so I'm very, very cautious on taking on real estate agencies, clients, and students and partners. Do you have anybody like that that that you see?

And maybe that's the same answer. I don't know just in a different way. But do you have anybody like that who makes a bad client for you? We've worked with some lawyers in the past. Sometimes they can be like that. No more. a little bit. But it really does come down with the people because we've had, I would say, more bad than good when it came to the lawyer field, but like a couple of the lawyers actually

have been like on board and they were like, yes, teach me. And it comes down to that. But I would say that one in general. Yeah, agents too that have come through our door and they've got some real estate investing experience, but they've got the broker and they've got the team and they've got everything going on. It's like, that's good. But man, it's that mindset still. Like, hey, I'm smarter than this. Like, this is too simple. This is true. This is. too simple. Can it be more complicated? It's like, no, it shouldn't be, not to run in your business and run automatically. So sometimes getting over that hurdle too, like you said, people that think they're smarter than the system or smarter than, you know, what it should be.

You said lawyers right away. That's not my worst client. That's Mercedes' worst client. There you go. When the turnkey properties, the doctors and the lawyers, she's just like, oh, my goodness, either they don't get it or they get it too well. And for that reason, they get in their way, right? Super. So the book is profit first for real estate investors. Everywhere, books are soul. I know you came with some free gifts. And so if you'd like to dip your toll in the water and take David up on his generosity, you can get the cash flow multiplier, the profit list. This is a hidden list of profit first. Banks in your town, the wealthy don't want you to know about. The target maximizer, a free copy of the book and two free chapters of the new book,

profit first for real estate investors. The free copy of the book, Less Stress, More Profit. So I actually even updated that too where it's, I've got a cheat sheet now too. Like, here's the first steps for profit first. So it has that stuff in it. But it's like organized now into like do this first, do this second, do this third. And then I give you the copy of my book too. Because no one's getting this stuff out there. So sorry to interrupt. I just want to give them like a little bit of that, a taste of what's out there now. Super. Yeah. So there's lots of steps you can take. on your own. So you can go to true profit.net,

true profit.net. And then that'll let, you can grab all the free stuff there. That'll let David know that you came through us. And if you need some additional help, which I highly recommend, then there'll be a clear path on how to get that there too. All right.

So, David, anything new and exciting? I forgot to mention. What are you excited most about the future right now? Oh, man. Excite the most about? Well, that I get to keep spreading this message? I'm a very one-track mind. So I'm just got a lot of speak engagements from now to the end of the year.

I'm excited to just keep helping people because I do. I see the light bulb turn on. When I'm speaking just like, here's the simple steps. And they finally, I can see kind of that sigh of relief of like, he understands. So I'm just excited to get this out there more. And honestly, thanks for having me on. I feel like I said, this is my calling. So anytime I get to speak on it, just open people's eyes.

I really, I really am thankful for that. Perfect. Can I say that no business too big or too small is an ideal candidate for this type of system for their... Right, especially for the cash flow framework. It's like if you're a small business, it's like get good habits when you're small so you grow. And if you're already like in your rat race and you're like thousands of deals into it or wherever you are, it's like now we need to pivot to profitability and that being the focus inside your company. So yeah, it's just a good system to get you wherever you are.

Perfect. Well, David, it's been great catching up. And if you want to get in touch with David, go to true profit.net, grab all the freebies. And then if you want to take the next step, there'll be instructions on how to do that. All right, buddy, let's stay in touch and I'll see you again soon. That's good. Thanks, Matt. You bet.

Take care. And that wraps up the epic show. If you found this episode valuable, who else do you know that might too? There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them and ask them to click the subscribe button when they get here. and I'll take great care of them. God loves you, and so do I.

Health, peace, blessings, and success to you. I'm Matt Terrio. Living the dream. Yeah, yeah, we got the cash flow. You didn't know home for us. We got the cash flow. This podcast is a part of the C-suite Radio Network.

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