Epic Real Estate Investing - Where to Find the Cash to Get Started | HTH026 | 588

Episode Date: February 13, 2019

If you want to start building the wealth through the real estate but you don’t know where to find the funding to make the first step, stay with us! Today, we are talking about the different strategies that will help you get the money you need. Learn how we funded our first deals, why it is important to find the deal before looking for funding, and why you should always be upfront with your potential partners. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Don't wait for appreciation to buy real estate. Buy for cash flow and wait. In other words, Hold this. Your host's Matt Andrews and Matt Terrio. Hey, flipping houses can make you rich. Holding them will make you wealthy.

This is the Hold That House show. I am Matt Terrio. And over there is Mr. Matt Andrews. Like a while, Scoob. Where do you get this stuff from? Before we begin, we've got a free gift for you. Go to hold that house.com and download the four-hour work month, the 10 commandments to managing property managers.

It's the key ingredient to financial independence to real estate that they're not telling you about. And you can get that for free at hold that house.com. You think I'd know that by heart by now, but stumbled over the script there. You guys know where to go and you know what to get. Yes, just listen to one of the previous episodes for a better introduction. Much more smoothly read. I loved it. I think you did great.

Thank you. Thank you. That's why we work together. That's right. All the flattery going back and forth. So what are we in? Week six of our amazing Tampa vacation. Our Tampa Bay vacation. It doesn't seem like six weeks. It does not.

But we're looking out at beautiful Tampa Bay right now. I mean, it's just, you know, beautiful and hot and humid and muggy. But that's okay. That's all right. We're inside the air conditioning. That's right. And the bar is open. That's right.

Okay, so today we're going to talk about where do I find the cash to get started? Because as we were sitting out there talking, Matt, I was thinking about when I very first got started is I didn't have the cash. You know, I made this transition from being real estate agent to real estate investor, you know, and got somewhat of a slow start. I got a deal right away, but then it took me eight months to get my second deal. And that kind of just depleted all on my cash. And I started there and I was like, what do I do now? So I was very much attracted and drawn to the different strategies that don't require a whole lot of money. Sure.

But, you know, at the end of the day, you do need money. Absolutely. You do have to create it somehow. So I don't know, what did your beginnings look like? Were you already independently wealthy? I was not independently wealthy. I was working. I had a decent, you know, corporate job and certainly wasn't struggling to put food on

the table but didn't have any freedom at all. And that's when I started studying in real estate. And you guys have heard a little bit about my story and kind of studying after hours and on weekends and little by little, you know, figured out how to find some good properties and start doing some flips. But those initial properties, I actually used conventional financing. There was something in the early 2000s. And you may have heard, it might be a vague whisper that you might remember. It was called conventional lending for investors. And we could actually go to Bank of America in 2000, 2001, 2002, and say, hey, I want to to buy an investment property and they would just give you money. It was pretty unbelievable.

Now, the terms... And you had a job. And I had a job. That's right. That's right. Now, the terms weren't amazing. The loans still weren't really set up for investors, but it allowed me to get into at least my first couple house projects when I probably wouldn't have been able to do that. I had a couple thousand bucks, but certainly not enough to buy a house and do a rehab project. So I initially got in with conventional loans, but that ended up being a little bit of a kind of to my detriment because I thought that's how business worked. And just a couple of years later, when those kind of loans weren't around at all, when, you know, no dock loans and construction loans that were, you know,

the construction costs rolled into the, you know, loan and everything. When those went away, I was high and dry. I didn't know what to do. I was like, wow, you know, I've been flipping properties and putting a little bit of money away here and there, but I don't know how to find the money to do this anymore. So I had to start looking at other strategies. And that was when I got creative with private lenders and partnerships and some other things that we can talk about here too. But it started on conventional loans for me. What about you?

I started raising cash by wholesaling for other wholesalers. Okay. It was actually another turnkey provider. Co-wholesaling? Is that would? I guess so. Well, it was a turnkey provider. And I was able to create my own flyers from using his properties on my own flyers. I had my own contact information, my own website and everything.

And I just hit the Ria clubs and started looking for buyers and started networking that way. And so I think I made $3,500 a pop every time I wholesale one of those things. Fantastic. And so I did, I don't know, half a dozen of those a month. And so I started generating some money that way. Awesome. And then I got into, I met up with a guy where he had this group of properties under contract. And we had like 90 days to go ahead and liquidate this thing.

And so since I was already wholesaling properties for someone else, I had this opportunity to basically come in as a partner and start wholesaling for myself. And we decided to kind of add an extra tier to that strategy. So we started raising money. Okay. Yeah. So we went and raised money to purchase all the properties. And then we resold all those properties using a seller financing vehicle.

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that will show you how you can take control of your financial future and accelerate its arrival. Go to turnkeyallies.com. More building, less waiting. Turnkeyallies.com. So going to raise that money, what did that look like, showing potential investors, a track record, showing them the plan,

showing the numbers? I mean, how did that process? Actually, it was more just based off of this is the deal we have. This is what we're going to do. This is how much money you're going to get back. This is when you're going to get it back. And these are the chances that you might not get it back. So just being very clear and open with this is the upside.

This is the downside. Sure. Do you want in? So all that initial money really came off of our own, not my credit score, but my, my credibility with my network and my friends, family and associates and my friends, friends and my family's family and my associates associates and all those combinations. So working two or three degrees away from the center. Well, and that's really where I went when I told you I had to start looking at other sources because, you know, Bank of America wasn't taking my phone

calls anymore for investor loans. And I thought, okay, I still need money, still need to do deals. And at that point, I knew what I was doing flip-wise. You know, I had done a number of successful flips so I could go to somebody and say, hey, look, here's what I'm doing on average. I'm buying them for this. I'm usually putting about this much into them and I'm selling them for this. I got two or three coming up and quite frankly, I don't have the capital. Right. I've got the know-how. I've got the cruise. I've got the, I've got everything else except for the money to make it happen. And if you have a track record like that, especially, you can go to somebody and offer an opportunity for them to invest with you as a funding partner, private lender, whatever you want to

call it. But they're going to make more money doing that with a good house flipper than they would doing whatever they would do with that money normally, which is sitting in a, a bank or under their mattress or, you know, some of the other places that people put their money where it does nothing, you know. So, so that became very big to me at that point, was kind of doing what you did and not so much raising funds from multiple people, but going to individuals and saying, you know, look, I've got this project and this project. Do you see yourself fitting into that? And here's the opportunity I can offer. And always tried to make it the type of transaction where it wasn't like I was going to ask them for money or going to make this request. It was, hey, I've got this

opportunity. Here's what I'm doing with this property. And, you know, quite, frankly, I have so many opportunities that I can't fund them all. And so every once in a while, I've got to let some good opportunities go. But if you would like to come in on this with me and provide this and this and this, something we could do together, be really simple for you. And then, of course, you with integrity, say, here's where it could go right. Here's where it could go wrong and make sure that they understand that. Right.

But that became huge for me in my business then when I really kind of turned more towards wholesaling, like you're talking about, but needed to keep those flips going, you know, to sustain what I was doing. So just one at a time going to private lenders was big. But I love the idea of going to multiple people and raising that money and having a project or a package of properties and then putting together multiple investors. Really the same thing just on a bigger scale is what you did. So I love it. It's great.

So I'm just listening to you. And I think even though we both did it differently, there's three commonalities that we share of how we did it. And I think these are really worth pointing out. I think this is valuable. first is the best way and the easiest way to find the cash is to have the deal first. Exactly. You know, when you have the deal locked up under contract, you can demonstrate this is what we're going to do. This is what it's going to look like.

This is how much I need. This is the return on that. This is how much you get in. This is how you're protected. This is how you're secured. Once you have the deal, it's much easier to convince, not, I don't know if convince is the right word. It's much easier for that person. to see themselves actively participating because there's a real deal there.

Absolutely. And so that just opens up everything. And that's probably the most valuable skill in all of real estate anyway. People think you need the money to get involved in real estate or to be successful in real estate. No, you need to find the deal. Right. The person with the deal controls the deal. The person with the deal runs the show.

The person with the deal can shop for their money. Sure. You know, the person with all the money can go out and just buy real estate. But they're not going to be good deals. They end up just buying retail. That's right. is if you got the money. Absolutely.

That kind of reminds me of, you know, we talked about Shark Tank on some of the other episodes, and I love that show. You know, and I love watching people pitch their ideas or businesses. And some of those people come with fully formed plans, and you can see exactly why Omar Kuban or one of those guys would say yes. So I'll give you this for this much equity. Then other people come with, you know, an idea and no plan at all, you know.

So it's almost like if you went to a private lender or you went to some of those investors that you went to fund that deal and said, hey, real estate's a way to make money. Can you give me some? It's just kind of like, well, it's true. Real estate is a way you can make money and real estate investing does work, but that's not a plan. You know, it's like, hey, when you went and said, hey, we've got these 10 properties and here's the deal, we're going to put this much in to them, and here's the return, and here's the liability, and here's the deal. Does that make sense to you? That's a whole different thing because you've got an actual plan in place. So I think about those people on Shark Tank, the ones that

get funded are the ones who not just have a decent idea, but they've got that whole plan built out to where the person can say or Mark Cuban can say, okay, I see that. Right. And I see that you just need this piece or you need more marketing or you need this or whatever. Exactly the same thing. It is. I mean, even if let's take creative financing out of it, let's take private lenders out of it, let's take your mom and your network out of it. Let's just go to the bank for a traditional conventional loan speak on everybody's terms. Sure. What do you have to have first? You got to have the property under contract. Right.

You have to have the deal first. They might pre-qualify you based on your job and your credit score, but they're going to say, come back in when you got the deal, then we'll finalize it. Sure. But nothing's getting finalized. No money's getting handed over. I think I might like to buy property. What can you give me?

Right. Nothing. Yeah, right. Sounds like a great plan. You know, thumbs up. Exactly. No, you're right. You've got to actually have the deal, and you don't do that unless you take action.

So I think you're absolutely right. Having the deal, knowing the numbers, having the plan, all of that, then creates the ability to go to others, you know, and offer that and get creative with it, you know, whether that's asking your mom or whether that's, you know, getting together a group of investors, creating a small investment club of four or five friends. I mean, there are so many different ways creatively that you can put together funds, but it doesn't happen if there's not a deal to talk about how the funds would be used and how it worked, right? So, absolutely. So deal is number one. Number two that I heard you say, which was very much part of my

strategy is when you're talking to people about using their funds is don't act like you need it. Oh, yeah. If you show up drooling at the mouth with your wolf fangs out or the desperation eyes out, you're never going to get it. The shaky voice. The shaky voice. The limp-risted handshake that's sweaty, you know, all that stuff, you know. Yeah, the trembling lack of confidence voice.

It's just, if you come from that place, it's not going to happen for it for you. because that's coming from fear. And when we're operating out of fear, we're never projecting the right thing, right? And I don't want to get to psychology, you know, based on you, but that's true. Right. You know, if we don't,

and what that really shows to those people is, look, I don't really know if this is going to work. I don't really believe this is going to work. I don't really think that you would give me this money, but when you give me this money? So you're asking for something and you're saying one thing, but really your nonverbal communication, which is 75% of all communication, if not more,

everything else they're seeing is saying, this guy didn't know what he's doing, or he's scared to ask for this. This is a pensive, tense situation. And it just frames everything wrong. And so offering the opportunity, like you said, not selling somebody on something, not pitching something, but offering an opportunity with the competence behind it to say,

here's how it works. Here's the plan, right? Well, you know where a lot of the confidence will come from. It'll come from naturally. It's not a mind game you have to play with yourself. You don't have to fake it until you make it. You know where the confidence comes from is when you have a deal in a plan. Doing deals.

Yeah, exactly. You know what I mean? Yeah, it's amazing. what happens. Exactly. So it goes back to number one. When you got the deal and you know you have a real deal and there's a difference there too. Because if you still have a deal and you don't have the confidence to go and, you know, look for a

partner or look for an investor, maybe it's not a deal. Right? Right. So there's a lot of people out there that have properties under contract that aren't really real deals. There's not enough return in it for everybody to share. So once you've got the deal and you can approach. someone from an aspect that you know you have a real deal, that you don't need their money.

You need someone's money, but you don't need any one person's money. And there's a lot more money out there than there are deals. Sure. Right? There's abundance of both, but there's more people out there with money that are looking for places to put it, things to do with it. They don't know how to. Exactly.

So they need people that know how to do that. Absolutely. So find the deal number one. Number two, you don't need it. Right. Okay, you don't need the money. Don't show up like that or else you're never going to. I think about the dating relationship like that too, you know, like that if you ever gone

on a blind date or when you were dating and the person was desperate, that's the most unattractive thing, you know, like either way, you know, like I'm sure I've turned off girls back when I was in college by really liking them and they didn't like me that much. Oh, so unattractive, right? Nobody wants the desperate person. So think about it like that. We've all been on a bad date, right? Think about it like that, you know? Yep. So my favorite opening line was, Hey, Matt, would you be open to a 10% return on your investment? Would you be open to a 10% return on your money? Right.

I never got a no answer to that question. Never got a no answer to that question. Great. If I came across something like that, how much would you have available for something like that? Oh, you'd have $100,000. Perfect. Something comes up, can I give you a call? Would it make sense for me to give you a call?

Yeah. That is my whole approach. Absolutely. So there's an example of not needing it. Absolutely. And also projecting and showing them that, hey, this is what I'm doing, not, hey, I'll do this if you've got the money, it can give it to me. It's, let me show you what I'm putting together here. Let me show you what the plan is. Let me show you what we're doing with these kind of properties. Let me show you what I'm doing with this package of properties. I know when you had that package of properties and put together those investors, you were saying, hey, here's the project we've got. Here's how we're putting it together. Here's the projection. And this is how it works. It wasn't like, hey, can I have money so I can go get this project or whatever it is. This is what's happening. this is what you're doing. And then it just feels like a natural offer to offer them the opportunity. You know, and it's just such a different position.

It seems subtle, but it makes all the difference. You know, and it seems small, but it really does make all the difference. Positioning, frame control, as we sometimes call it, having the correct tone from the beginning of the deal. It just means everything. And it's the difference between the people that get deals done and bring in a lot of partners and a lot of money to do deals with. creatively and the ones that don't. So absolutely huge. Totally agree. So there's that. Oh, then the second part of that was I was asking permission to call them once the deal does come. Right. So would it make sense for me to call you and get together so I can show you what that

that would look like? Yep. Getting the buy-in, getting them to say yes. And then the conversation is, hey, we talked a couple weeks ago. You said this. And so, hey, I'm doing this because you said, you know, because you told me that and you said you would like this. Right. And then it's kind of like, they want to stay congruent with what they already told you. You've just reminded. them what they already told you. And now here's the opportunity. Boom. So that's good. The third thing that I think you and I have in common with our approach of how we got started. And we were on the opposite sides of the country. And did not know each other and different strategies, but still raised money to conduct our business, was just being transparent. Yeah. I think transparent is one of the most valuable currencies that you can have. It is. And being just straight with people. Yep. And it's a long-term strategy, integrity and transparency. Right. It's sometimes it can work for you well now, but it pays off even better on down the road as you've established that for sure. Absolutely. Yeah. So when someone says, well, what's the risk? Don't say, no, it's guaranteed. This is a can't miss deal. It's a no fail. It'll be great. Yeah. Just push this button.

No, say, hey, you know, gosh, sometimes there are hurricanes in Florida. Sometimes. Yeah. Sometimes levies do. break in Louisiana. Sure. Sometimes we do have earthquakes in California. Right. Those are examples. Like, you know, nothing is risk-free. And let them know that.

And then just kind of let them know what this is what we've done. We've purchased a double earthquake insurance to prevent from that. We went and got the regular hazard insurance plus the flood insurance plus the wind insurance. Sure. You know, like whatever it may be, there's always something that you can do to mitigate that loss. And if you do that, say, hey, you could lose your money this way.

But this is how we're going to prevent it from happening. Right. All of a sudden, that comes across so much more clear and so much more straightforward. And it's just doing the right thing. Absolutely. Right? But it's also, by doing the right thing is probably the best way to go ahead and form that relationship. That will bring trust like nothing else.

You know, if you are straight with people, and like I said, it builds on itself too. You know, people will appreciate it right up front, but they'll really appreciate it, the more they deal with other people that may not have that same level of integrity. That's, you know, in real estate, and this is trust-based. These are trust-based transactions. If you're going to someone to partner with them, or they're partnering with lending, you're basically limited business partners. There's trust involved there and transparency and honesty and being up front and saying,

hey, here's the most likely scenario. Here's the worst case scenario. I've done this, this, and this, and I've done deals like this, this and this. Usually they work like this, this and this. But every once in a while, you get a stinker and it happens like this. And I used to tell that, you know, especially when I was selling terms of, turnkey properties to a lot of Europeans and selling them, you know, five or ten at a time, these little packages, I would say this is a great way to do it because when you buy 10 properties,

one or two of them, it's going to have a stinky year. You know, like you're going to have a year where it sucks, you know, and so you hedge against that by having these other good ones. So let me just show you, here's a couple of bad deals, and here's how that works, and then here's, you know, good deals, and this is the reality of the situation. People just appreciate that and it builds a trust because then you're like, almost like a consultant that's a true value to them. Right.

You know, so that's gigantic. I can't say enough about that. Absolutely. So once you found that first person to get you the cash to get started, this is how you get the second person, much easier. Exactly. There it is. Write that down.

Right? Much easier for so many reasons. This is how you do it. You pay the first person back, the money you said you were going to pay them when you said you were going to pay them. You do that. That check comes right back to you. Absolutely.

That money comes right back to you. Yeah, and get them to say nice things about you. But even with that first person, that first person will probably be the second person that gives you the money. Yeah. And have that check in hand to give to the person that gave you the money up front initially. And as you're handing that over, they're going to push it right back to you and say, let's do it again. Let's roll. Yep, that's the best way.

And I don't think I've ever had anyone take their money back from me and run. Never. No, that's it, man. Once you do it right, it just opens up the possibility of doing more and more and more. And especially with some of my best lenders, and I know this is the same way for you or best lending partners or best buyers. The best ones are the ones who are going to test the waters with one or two deals with you. Get a level of comfort and then they're going to open up the floodgates. You know, and I think about, you know, the most I've ever sold to one individual, not even a hedge fund.

One dude bought 75 properties from me. And but it didn't start with 75. He started with two. Right. You know, he liked it and did another couple. And he really, really liked it. got him up to like five or six and he was like, and I didn't even know at the time what a big fish he was.

And he said, okay, Matt, I sold a software company. I made some money and I just want to make sure we were on the level here. Let's do this. 75 properties. That was a busy 2011 or whatever it was, you know. But it wouldn't have happened if I hadn't have painted the reality of it up front. Let him test the water. So sometimes your best buyers, guys, you don't know.

Sometimes that buyer or that lender is somebody that, you know, might kind of be sitting back watching you, making sure things are. going well. And you might be on a little bit of an interview and don't even know it. And then all of a sudden, because you've performed right, because you've been honest, because you've had that integrity. Boom. The opportunity opens up big time. So that's certainly been true in my life. And I've never been in business with anybody where that wasn't true either in that way or in the opposite way. So absolutely. Love it. So that's where you find the cash to get started. There's probably other ways to do it. I'm sure there's countless ways to do it. But that's the way I

I did it. That's the way Matt Andrews did it. You could steal it. Bank robbery is a good one. Well, we talked to what, I think a couple episodes ago we talked, you can marry into it. Yes, you can marry into it. You could do the John Kerry method. He married into it twice. That's right. Yeah, you could become a chic, an oil baron. Of course, that's harder. Right. But yeah, no, that's what you just talked about is really using creativity, using your network and operating the right way. When you do those things and you're really taking action, you really have the deals. these things are going to fall into place. And then it becomes, guys, then it becomes a problem in a good way

because then it's all about, okay, I've got too many opportunities, which ones are the best ones? And then it goes back to what's the best use of my time? What's the best, what's the best partnership? And those are great questions, aren't they? Those are growth problems right there. And that's good stuff.

But I guess really in a nutshell, find the deal and the money will find you. That's it. Absolutely. And you don't do that if you don't take action. You got it. Yep. That's it for today.

Fliping houses can make you rich, holding them will make you wealthy. We'll be back next week. Until then, remember, don't wait to buy real estate. Buy real estate and wait. Hold that house. Contrary to popular belief, a lack of funding is not the biggest barrier to starting a business. It's excuses. But don't let a lack of funding be your excuse. We are epic fast funding, and we'd like to fund your business with up to $150,000 in revolving credit lines. If you've got 60 seconds on a solid credit score, you could have access to your funds in as little as seven days. Go to Epicfastfunding.com to fill out our 60 second application.

It's fast, it's simple, up to $150,000 in as little as seven days. Go to Epicfastfunding.com. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com. Thank you.