The Game with Alex Hormozi - Make $3000 A Day With Hard Money Lending | Ep 341

Episode Date: November 2, 2021

Trust is the most valuable thing. Today, Alex (@AlexHormozi) talks about what hard money lending is, how this worked for him, and how investing almost $3000 per day gave him a lot of profit.Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.Timestamps:(0:40) - The art of hard money lending: a lucrative strategy explained(1:23) - Breaking down the deal: a $2.5 million investment unveiled(5:38) - The power of trust in business: a valuable lesson learned(9:06) - Reflections and tax implications: the true value of trust(10:24) - Building a community of trusted partnersFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

I made an investment that pays me $3,300 per day in profit off of a single deal that was struck. Welcome to the game where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe. A hundred days ago, I made an investment that pays me $3,300 per day in profit off of a single deal that was struck. And I told you about this at the beginning of the deal, what was going to happen. And so I wanted to do this as kind of a part two of what, actually happen in actuality. For those of you don't know me, my name's Alex Ramozeoenacquisition.com.

It's a portfolio of companies does about $85 million a year. The reason for this channel is because I know a lot of people are broke and I don't want you to be one of them. All right. So one of the things that I like a lot is hard money lending. A big fan of it. It's private lending, which is basically like you are the bank. And the reason I like this is because you can determine the deal structure, which means that you can create the upside and the downside and then it's up to the other party of whether or not they want to accept that. And that's valuable because if you can control a lot of the variables and you can mitigate downside risk, which if you've heard any of my stuff, the ultra wealthy out there,

it's not about trying to hit their upside. Like everybody who's poor buys lottery tickets because they only think about upside, but they don't think about downside. Everybody who's rich who doesn't do that because they understand downside risk and how getting rich is about really just making fewer mistakes and letting time become an ally rather than a liability, using time as an asset rather than something that is working against you. What I'm going to do is I'm going to outline the deal structure of what we agreed on,

And then what happened? And then there was one really curious thing that happened. That was actually awesome. And I think was probably the biggest takeaway from me and hopefully for you in this process. Big picture here. This was a two and a half million dollar note. All right. So I wired two and a half million dollars in cash to a buyer. All right. And the buyer went to buy a building out of foreclosure. All right. So they had a three hundred and thirty four unit, which if you're like, holy cow, how is a three hundred and thirty four unit building two and a half million? hence the reason I was happy to do the deal. It was also in a war zone, like the police officer don't even go here. This was a deal in Memphis. And so it's 34-unit building, all right?

It was basically condemned. There's squatters, drug dealers, you know, all sorts of stuff, right? And so here are the risk factors, right? Which is, what if I don't get the money back, right? Which means that I would have a building. And then how can I make sure that I get the money back? All right? So the first layer of defense here is guarantees.

All right? So both of the buyers, there's two people, personally guaranteed. the money. All right. And they had net worths in excess of two and a half million. All right. So we had that going for us times two. Next, the building itself, we have the value, right? Which the question is, well, if it was condemned and all that kind of stuff, do we know what the value is? Like, is it really worth $2.5 million? Would you ever be able to sell it? Good question. So we had three offers already on the building for between $5 million and $5.6 million. So an offer is one thing. thing, right? But is there another level we can have? There was actually somebody put earnest money down,

meaning that they had made the offer and it was accepted and they were going to put money in the deal. So there's earnest money of 300k. So they had said, we want to buy it. It was these guys, the 5.6 guys, right? Ernest money of 300,000 in the deal saying that as soon as you guys can transfer the title over to us, then great. All right. And the last thing was, was to make sure that we were actually, and this sounds minor, but this is how a lot of deals get messed up, that we were actually on the title, right? So that means that if for some reason we do not, we do not get repaid, we are the first, the first, you know, the first people who have ownership or entitlement, rather, you know, title to the property. All right. So that there's no other liens against the property that we are the only ones who are going to be receiving the property if something went in default, right? And so our cash was used to pay off the last person who had a lien on the home, sorry, on the homes of the building.

and then we took over that position as preferred. And so this was kind of the deal structure, all right? Now, this is how we got paid. All right. So these are the payment terms. So it was 4% per month. All right. Now, 4% times 2.5 million, if you're curious, right, do to do is $100,000 per month.

All right? So I was making $100,000 per month for the last three and a half months for them to hold this money. Now, after the fourth month, so for some reason, they hadn't done this deal in four months, which it was supposed to be done in 60 days, which it wasn't. So I'll talk about that in a second. So if it was done in, if it took four plus months, the interest rate would double. All right.

So then it would go to 200,000 per month. All right? Because then it starts to reflect that there might be more risk here. Right. So I need to start getting compensated more for this. All right. On top of that, what we did was a two month minimum carry, which basically just means that even if they do the deal in 20 seconds,

I still get two months of carry, which means minimum of 200K. I'm going to get back for just risking the two and a half million, which means I'm getting 8% or whatever, no matter what just for doing this deal. So that's a minimum of 200K because there's a minimum two-month carry. That's the key point here. Hey guys, real quick, for those of you guys who are $100 million offers fans, I love you.

I added in a lost chapter that has never been released. I'm releasing it now. Transparently, I'm doing that to build hype for $100 million leads, but you will have the unreleased chapter. It talks about your first avatar and how-to segment customers to make more money. you can get it by going to acquisition.com forward slash leads. It's so free in exchange for your email so that I can email you when we launch a $100 million leads and so that you cannot miss out on it because last time I sold out for like

eight straight weeks really fast. So that is my way of making sure that y'all get first dips. Beyond that, what happened is after this deal ended up closing, here's what happened. So the individuals who did the deal, they flew out to see us and have a kind of like a celebratory dinner. This is kind of interesting. So they were like, hey, your lawyer sent over the note, and it looked a little light. And I was like, what do you mean?

They were like, well, you know, we've had the property for 100 plus days now, right? And the note said, 275K. And I was like, huh? And they were like, yeah, I mean, that wasn't what we agreed on. We agreed on paying you more than that. And so this was, so here's what happened, right? So our lawyers messed up. For lack of a better term, they just messed up on the,

they sent the loan invoice for repayment at the end of this. And what was interesting is that this individual, because he's long-term minded as well and also a high, ultra high net worth individual, and this is why I think this is probably more valuable than the deal itself was like, yeah, my lawyer saw it. He was saying his lawyer saw it and said, yeah, let's just send the money. And they made a mistake. Let's move on, right? And save ourselves, you know, almost 100 grand, which I'll show you in a second what the actual amount was. And he said, oh, man. He's like, now you can't be my lawyer anymore. And he was telling me this story over dinner. And it was so funny because we both had this kind of same. So the more deals you do with someone, there's a big

five-letter word that starts to occur, which is trust. Right. The more times you lend someone money, the more times they pay it back as agreed upon, right? And especially if you have an instance where they have the opportunity to screw you over where most people would, especially if they think that they, that you won't find out, which we might not have found out. But the thing is, I might have also looked at these notes a while later and been like, like if I had free time and been like, this is off. What is this? Right.

And so anyways, he caught it. His lawyer caught it. His lawyer said to go forward with it anyways. He chose not to and to bring it to our attention. And so we obviously are not going to use our lawyer anymore. He's not going to use his lawyer anymore because our guys made a stupid boneheaded mistake and that's what we pay them for is to not make these mistakes and double check these things. Right.

And his made an ethical error. Right. So mine was an error on skill. His was an error on ethics. And if you remember my how I pick mentors. and vendors video, I talk about the three circles, right? You have the skill, you have the ethical component, and then you have the hardworking component. And so both these guys worked hard, but they didn't have this. One of them didn't have the skill and the other one didn't have

the ethics. So this is what ended up happening. All right. So 275 was the deal. Instead, we did the, we had, it was a hundred and something days or whatever. So we had 300K plus 33, 33, 33, 33, per day until the deal was closed. All right. And so it didn't. And so it, it didn't, ended up being like 350k or something like that with decimals, right, that we got paid back plus the $2.5 million. All right. So we got to check back for $2.85 million. And we have trust, which is the most valuable thing that you can have. Right. And so this is ultimately one of those currencies that people do not understand who are new to business is that trust is the most valuable thing. I mean, we were talking about this over dinner and he was like, you only get one name.

You know what I mean? You only get one. You only get one name. You only get one. You only get one. reputation so if I can not get the son of my eyes here you only get one and you know we're obviously you know hoping to do bigger and bigger deals with you guys is you know we earn more and more trust and we can do you know 10 million dollar deals 50 million dollar deals and we'd rather have partners that we know we can rely on and so it goes both ways and so anywho this was a very valuable experience for me in two ways one obviously because the the whole deal worked out and for those you who were like why don't you run a mastermind it's like

because I could just move the money and not do anything and and make almost 400 That is why I'm just being transparent with you guys. Like that's why I don't sell anything on the channel. That's why the the the trainings we have on acquisition.com are free for all entrepreneurs and the book is 99 cents. You can get it on Amazon because I just want everyone to win. So anyways, this is the deal. A lot of people like no one taught me how to do this stuff. So it was me just trying to figure this out as I go. So hopefully you can think through some of these variables if you ever get in that situation. And then also, just a side note here, I do have to pay 50% in taxes on this. And so that's why you need for me. I have to have really high returns on any kind of private lending because, uh, the the I have to realize those gains right and they're not capital gains the regular income and so when you have that I'm actually only making 175 after after taxes on this deal which you know in terms of percentages on on on my original I still would have loan that money out again you know again this year so that I can still get at least you know 10 or 20% return on it that's the big deal in terms of the money stuff the bigger deal was the trust and the value of having trusted partners because they are worth their weight in

gold and you know we should only be so lucky to have a handful of people that you can trust throughout your business career and you know my hope is that from this channel that you are one of them in terms of in terms of yourself and then also maybe you know you grow your business to three or five or ten million a year and then you let us invest with you so we can help you grow up more so anyways uh keep being awesome mosey nation love you uh if you enjoyed this video hit the subscribe button if you didn't enjoy the video love you anyways and i'll see you guys the next bid, keep being awesome, lots of love. Bye.