\n<\/p>\n
Owning multiple <\/strong>properties with no money<\/strong><\/a>? While it might sound ludicrous, there are several ways to do it. Money shouldn\u2019t be the barrier preventing you from getting into the world of real estate investing<\/strong><\/a>. In fact, many people have been able to turn around their own fortunes by using other people\u2019s money (OPM)<\/strong>\u2014today\u2019s special guest is one of them!<\/p>\n In this episode, we chat with Mike Larson<\/strong>, who found himself in this type of situation only a few years ago. Trapped in over $40,000 of consumer debt<\/strong> and living paycheck to paycheck <\/strong>with zero savings, Mike decided that real estate<\/strong> was going to be his escape rope. Over the next year, he eliminated as many bills as possible, tracked all of his expenses, and worked tirelessly to supplement his W-2 income. Today, Mike owns four long-term properties<\/strong><\/a>, has amassed a multiple six-figure net worth, and lives the real estate rookie\u2019s dream by the beach.<\/p>\n Tune into this episode for a classic, feel-good, rags-to-riches<\/strong> story. Mike shares about his real estate investing journey<\/strong> and provides all kinds of helpful tips\u2014including the steps you need to take to fast-track your real estate career<\/strong>, how to use other people\u2019s money to secure your <\/strong>first investment property<\/strong><\/a>, and how to get private money lenders<\/strong><\/a> to come to you!<\/em><\/p>\n Ashley: Tony: Mike: Ashley: Tony: Ashley: Tony: Mike: Ashley: Mike: Tony: Ashley: Mike: Tony: Mike: Ashley: Mike: Ashley: Tony: Mike: Tony: Mike: Tony: Mike: Tony: Ashley: Tony: Mike: Tony: Ashley: Mike: Ashley: Mike: Ashley: Mike: Ashley: Mike: Tony: Mike: Tony: Mike: Tony: Mike: Ashley: Mike: Tony: Mike: Ashley: Mike: Tony: Mike: Ashley: Mike: Ashley: Mike: Ashley: Tony: Mike: Ashley: Tony: Mike: Ashley: Mike: Ashley: Mike: Ashley: Mike: Ashley: Mike: Tony: Mike: Tony: Mike: Ashley: Mike: Tony: Mike: Tony: Mike: Tony: Ashley: Mike: Ashley: Tony: Mike: Tony: Mike: Tony: Mike: Ashley: Mike: Tony: Mike: Tony: Mike: Tony: Mike: Tony: Mike: Tony: Ashley: Mike: Tony: Ashley: Tony: Ashley: Mike: Tony: Mike: Tony: Mike: Tony: Ashley: Mike: Ashley: Mike: Ashley: Mike: Ashley: \u00a0<\/p>\n<\/div>\n
This is Real Estate Rookie Episode 275.<\/p>\n
So you get this first deal, you seem to do really well with it, right? You have this amazing first deal using other people\u2019s capital. How many total investment deals have you done since that first one?<\/p>\n
So I owned four and I\u2019m under contract on two right now, one of which I have already assigned. I assigned it the same day. I went under contract at 1,236. This was last week. 1,236. At 932 or 925, I assigned it for a $50,000 profit.<\/p>\n
My name is Ashley Kehr and I\u2019m here with my co-host Tony Robinson.<\/p>\n
Welcome to the Real Estate Rookie Podcast, where every week, twice a week, we give you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And today I would love to shout out someone by the username of Mona Cici. Mona left us a five star review on Apple Podcast. She says, \u201cLove it! With an exclamation mark. Thank you for sharing all the great information. The stuff that you share is so down to earth and it makes real estate investing seem achievable. I\u2019m two years into my investment track and I don\u2019t miss an episode.\u201d She just says that she loves if we could do an episode about some spouse works and things like that. But she says, \u201cThanks again for the amazing podcast.\u201d So Mona, we appreciate you. And for all of our rookies that are listening, if you can, please take the 37 seconds that it takes to leave a review on Apple Podcasts or Spotify. The more reviews we get, the more folks we can reach. And the more folks we reach, the more folks we can help, which is what we love doing here.
But I\u2019m super excited for today\u2019s episode. Honestly, Ash, it\u2019s probably one of my more favorite episodes that we\u2019ve done. I loved Ava Yuergens\u2019. I don\u2019t know which episode she was, but she was such a young hustler. But Mike is like, he is the epitome of what is that saying? It\u2019s like, \u201cI find that the harder I work, the luckier I get.\u201d I don\u2019t know what the exact saying is, but there\u2019s a quote out there about people who work hard tend to get luckier. And Mike is the total epitome of that happening. He\u2019s found private money, he\u2019s found partners, he\u2019s found deals all because of he just happens to be at the right place at the right time, but it\u2019s all because of how hard he\u2019s working to make that thing happen.<\/p>\n
I think something that I realized from that was that these were all in scenarios where he was working. It wasn\u2019t like, \u201cOh, we love meetups. We love networking events too.\u201d Those are great and you\u2019re going to make connections that way. But it wasn\u2019t any of those scenarios. It was all him taking action and working on his business when these things happened. So I think it\u2019s really awesome to listen to those things too. And Ava\u2019s episode was episode 271. So if you guys missed it, you can go back.
So before we bring Mike on, I just want to highlight too that one of the great things about this episode is the private money and the OPM, using other people\u2019s money and how Mike unintentionally got somebody to offer to be his private moneylender. So listen to what he did to provide value to this person without even thinking that this person would offer him money in the end.
Well, let\u2019s give you the official welcome to the show, Mike.<\/p>\n
Yeah. Welcome to the Real Estate Rookie Podcast, brother.<\/p>\n
Thank you so much. I\u2019m truly honored.<\/p>\n
Well, we\u2019re so glad to have you here. Can you tell us just a little bit of your backstory and who you are?<\/p>\n
I am from Clayton, North Carolina, little town outside of Raleigh. I recently made the transition down to Myrtle Beach, South Carolina. I started in my investing journey in 2020.<\/p>\n
It\u2019s a great time to start.<\/p>\n
Yeah. And what made you start then? What was that kind of moment that happened for you?<\/p>\n
I\u2019m not sure if it was an epiphany or kind of like a come to Jesus talk with myself, but I hit that crossroad where I was like, \u201cOkay, I can keep going down this path that I\u2019ve been on and I\u2019m going to get the same results, or I can change the game up and see if I can better my life.\u201d I was not somebody who was big into finances. I honestly was a day by day type of guy, like paycheck to paycheck, I\u2019ll figure it out eventually. And then 2020 happened.
I think I can accredit a lot of it to a good buddy of mine, Caleb Kennedy. He was the first person that I ever had a finance talk with. He made being frugal look cool. Instead of going out and on the weekends and stuff, he\u2019s like, \u201cMike, nah.\u201d He showed me, I believe it was his Robinhood account, and it had a very significant amount of money in there. I knew at the time we made about the exact same money a year and my account didn\u2019t look anything like his. So I was like, \u201cMan, how\u2019d you do that?\u201d He\u2019s like, \u201cI\u2019m cheap. I don\u2019t spend money.\u201d<\/p>\n
Yeah. Mike, I love that story because you said he made being frugal look cool. And that is such an antithesis to what society kind of promotes. Me and a friend were talking the other day, and it\u2019s like there\u2019s so many people on social media who have these big followings. A big part of the reason that they\u2019re followings are so big is because they\u2019re posting wads of cash, and, \u201cI got this and I got that,\u201d and that\u2019s just not my personality. I\u2019m not a flashy person like that, but that\u2019s what a lot of people were drawn to for whatever reason.
But I think if we can all do a better job of normalizing frugality and making that the cool thing, and exactly what you said where it wasn\u2019t necessarily the car that he was driving. It wasn\u2019t necessarily him going out on the weekends, all these crazy things. What really impressed you the most about him was his Robinhood account. And imagine if all of us had to walk around with our net worth or our Robinhood account numbers floating on top of our head and people seeing that as opposed to the clothes we wear or the cars that we drive or the neighborhoods that we live in.<\/p>\n
100%. I mean, it was a game changer for me because I was one of those people. I drove a BMW. It was literally paycheck to paycheck. I never thought about my retirement. I never thought about, \u201cHey, if I have kids, it\u2019s going to cost 2,000, 3,000, $4,000 a month. I\u2019m not saving 2,000, 3,000, $4,000 a month. So what am I going to do?\u201d And so that was in February of 2020, I was like, \u201cWell, I\u2019m going to be cheap.\u201d And I eliminated as many bills as possible. I started tracking every single penny that I spent.<\/p>\n
How were you tracking that mic? Were you using Excel, an app or something like that?<\/p>\n
The good old-fashioned way, pen and paper.<\/p>\n
Yeah?<\/p>\n
No way.<\/p>\n
Yes, sir. Yep, I have books now. So I literally just started writing down everything that I spent. Each month I would try and improve it, \u201cOkay. I spent this much on gas. I spent this much on food. Let\u2019s see if I can knock a little bit of this off.\u201d And at the time, I was still body building, so my food was very basic. So I\u2019d go and try and find the cheapest chicken, I\u2019d try and find the cheapest rice, I\u2019d buy it in bulk. 20, 40 pound bags of rice. I cut vegetables out. I was like, \u201cMan, I just need protein and carbs and fats. Sorry, the greens ain\u2019t working no more\u201d and just made it as cheap as possible and I started paying off debt, because I did have some credit card debt.
I had that car, which I ended up selling, getting rid of when the economy went crazy and used car values went up. I didn\u2019t have to pay anything to get out of it because at the time, I think I owed 26,000, 27,000 on a car, which was, now I look back, I\u2019m like, \u201cJesus, Mike, if you just had the money you spent back then, you\u2019d never have to work a day in your life.\u201d
So that was at February. I did not own\u2026 I\u2019d never even thought about buying a house. As bad as this seems, I didn\u2019t think I\u2019d ever be able to because I didn\u2019t keep up with my credit. I used to be ashamed of all this. But now I look back and I\u2019m proud of it because it led me to where I am today.<\/p>\n
And Mike, just really quick. I don\u2019t think you should ever be ashamed of that, right? It\u2019s like every person has a backstory. None of us would be who we are today without that backstory. So there is a high possibility that you wouldn\u2019t be on this podcast with us right now having this conversation if it wasn\u2019t for those decisions that you made and what you feel were mistakes if those mistakes didn\u2019t happen. So I think there\u2019s always a lesson to be learned. But one thing I just want to ask before we keep moving. So you went on this journey to radically reduce your monthly spend. You don\u2019t have to tell us the exact numbers, but just were you able to cut it in half? Was it like a 25% decrease? How much were you able to bring down your expenses over that timeframe?<\/p>\n
Probably little over $2,500 a month.<\/p>\n
Wow.<\/p>\n
Yeah, that\u2019s what I was able to save per month after. So I reduced it by $2,500 a month.<\/p>\n
Let me ask another question. Ash, I want to ask this to you, and then Mike, we can go to you afterwards, but there\u2019s always this debate in the world of personal finance. You hear someone like Grant Cardone who says, \u201cDon\u2019t worry about saving money, just worry about exploding your income.\u201d And then there are people like Dave Ramsey on the opposite and the spectrum who say, \u201cStop buying that $5 coffee every day.\u201d Where do you fall, Ash? Where do you think is the right balance to strike between those two extremes?<\/p>\n
I think it\u2019s more of the mindset for that $5 coffee. It\u2019s not the $5 coffee that\u2019s going to make you save money and build wealth and have that financial freedom or to pay off debt. That\u2019s not going to make a huge impact on your debt. But it\u2019s that mindset that you\u2019re willing to be frugal, that you\u2019re willing to give up things, and giving up that $5 coffee will make you realize other things that you\u2019re able to give up to save money.
And as far as the exploding your income part of it, when I was paying off my personal debt, which was student loans and farm equipment basically, and a line of credit on my house, what we did was invest in rental properties and use the cash flow. And for years, my cash flow just went to paying off of that, and I never took any money out of the rental properties. So I think that there is that other huge debate as to, \u201cDo you pay off your debt first and then invest? Or do you invest simultaneously? How does that work?\u201d So I think it\u2019s very different for every person, but that\u2019s what worked for me, is using other people\u2019s money to buy the properties and just using the cash flow to pay off debt.<\/p>\n
Mike, what about for you? You went on this radical journey to reduce your expenses. Did you also focus on\u2026 I mean, obviously you did, right? That\u2019s why you\u2019re on the podcast. But how did you make the transition from saving everything to now pouring that into building your income?<\/p>\n
Well, I knew real estate was the way out. It was about that time in\u2026 Actually, it hadn\u2019t gotten till the end of the year because I set a goal that February, I said, \u201cBy the end of this year, I\u2019m going to buy a house.\u201d So I was eliminating debt, improving my credit score, saving money. I paid off all those credit cards, paid off a ton of debt. And December 30th of 2020 is when I closed on my first ever house. I utilized the first time homeowner\u2019s loan. So 0% down, just paid closing costs. And I already had that mindset of, \u201cOkay, what am I going to do with this property to make me money?\u201d I\u2019d heard of flipping houses. I have friends that had rental properties and stuff, but I still hadn\u2019t started digging into it.
But the house was built in 1998. It was outdated. So I was like, \u201cLook, I know I can add some value to this. I could do new floors, new paint, new everything, and it\u2019ll make it worth more property.\u201d And the neighborhood that it\u2019s in is immaculate. Golf course neighborhood. When I was growing up, I called it the rich kid neighborhood. So I was proud of that. I knew I was going to do something with it after, but it was during that process that I started learning about real estate. When I was closing on that house, I stumbled upon BiggerPockets and I was like, \u201cOh, financial freedom.\u201d Because I started saving money and everything, paying off debt, but I\u2019d never heard the term financial freedom before and the thought of something else paying for my bills, it just resonated. I was like, \u201cOkay.\u201d I took every bit of energy that I had that I was putting into bodybuilding and focused it on real estate.
It was a complete\u2026 \u201cWell, see you later. I\u2019m going down this path now.\u201d Because I\u2019m the type that if I like something, I want to learn as much as I can about it. I just obsess about it. I just started learning so much. And I knew right then, I was like, \u201cOkay, this is what I want to do. This is how I want to get to that place in life. I want to buy real estate.\u201d So 2020 got closed of my house December 30th. 2021 starts, and that is when I was like, I still didn\u2019t know a lot about real estate. I didn\u2019t know about private money. I didn\u2019t know how to structure deals, do creative finance, wholesaling, any of that stuff yet. So that\u2019s when I was like, \u201cAll right, how can I save more money faster?\u201d And I stumbled upon the vending machines. I was looking at different asset classes. I looked at ATMs, vending machines, online businesses. Vending machines stuck out because of the cash-on-cash return.
I met a guy. So I bought my first location at a car dealership from a friend of mine. It made like 300, $400 a month, and I paid $4,200 for it. So about a 10% return on your money. So I\u2019d do that for three months or so. But these were really old machines and they couldn\u2019t utilize credit card readers. So I flipped those, ended up selling that location for $5,000. Took that 5,000, I was like, \u201cOkay, I\u2019m going to buy a couple more machines, but cheaper.\u201d And so I ended up meeting this guy, older guy that lived in town, and that was what he did full time. He had 110 machines running at the time. He was making really good money off of it. And he\u2019s like, \u201cMike, I got one location that does $800 a day.\u201d<\/p>\n
What?<\/p>\n
Wow.<\/p>\n
And I was like, \u201cWhat? $800 a day for a vending machine.\u201d So I check out this setup. This was incredible. He found a farm that was 15 miles away from anything, no gas stations, anything like that. So all the farm hands that would get shipped in there to work on the farm, they lived off the vending machines. I think he had six or seven out there.<\/p>\n
Wow, that\u2019s so interesting. Yeah, I\u2019ve thought about vending machines. You see people post about them on social media. It might be a great thing for my kids to get involved with, but that\u2019s what I\u2019ve always struggled with is finding the location of the vending machine. So I love this strategy that you\u2019ve got your first property and then you\u2019re also looking for other ways to supplement your income. Were you working at this time and did you have a W2? What were you doing besides the body building><\/p>\n
Yes, ma\u2019am. I was working full time. So I\u2019ve been in the pharmaceutical industry since 2014. I was a, what\u2019s called quality investigator, but basically it\u2019s a glorified technical rider. When they had any systemic issues or product issues, I had to justify to the FDA that we had our standards in place, that our SOPs were good and that it would not affect the product in any way. So I\u2019ve been doing that since 2014. And then, yeah, on top of that, I was coaching wrestling too. So I was investing, coaching, body building, doing all this stuff at once.<\/p>\n
Let me ask you this question because this is out of my own curiosity, because I think sometimes people struggle to make this connection. So I want to ask you, are there skills that you acquired from your W2 job that translated over to real estate, that you think because\u2026 The word that stuck out to me was SOPs. That can really help you in your real estate business, is creating those standard operating procedures, building those systems and processes. So did something like that or other things from your pharmaceutical job, which you would not think has anything to do with real estate, were there some things, some tasks that you would do or skills that you had learned that have helped you with your real estate business?<\/p>\n
Oh, 100%. Besides the standard operating procedures, I think it was the way that I had to write and talk throughout my drafts that transferred over to how I talk to people like sellers when I\u2019m trying to buy a property. And then I systemize how I go after these properties also. And the structure, I think the structure of it all, I\u2019m very quality mindset. So my business is run that way. I want to be able to provide the best. And then pharma, you have to do the same thing. You have to provide\u2026 Everything has to be identical. So I try and emulate that with my business. So it transferred very well.<\/p>\n
I want everyone listening now that maybe thinks that their job doing whatever won\u2019t translate to real estate in any reason, look at Mike as an example. He took his pharmaceutical job and has taken skills from that for his real estate. So just take the time after this episode to write down maybe three things that you do now in your day job that can help you with real estate investing. One of those things might even be that it\u2019s just a W2 that can help you get that first loan, that first mortgage. So Mike, you had mentioned that you did a first time home buyer loan. Can you maybe talk about that a little bit? We hear a lot about an FHA loan where it\u2019s three and a half percent down. What was kind of different about your loan that you did 0% down?<\/p>\n
It was 0% down, and they just offered a\u2026 I think you had to pay a prince or a mortgage insurance on it. So every month is like 80, $90 extra a month. But if you can compare it, yeah, long term it might be a little bit more expensive, but instead of putting that three and a half percent down or 10% or 20% down for a conventional loan, that saved me a ton of capital up front. And I used whatever I had left to buy vending machines to create more capital.<\/p>\n
Yeah, Mike, you\u2019ve done a great job of, and this is what we\u2019re talking about, of kind of attacking it from both sides where you went after this kind of debt reduction journey to kind of bring down and save more money, but then you also focus on, \u201cOkay, how can I create more income?\u201d So you got the first property, you got into it for a relatively small amount, then you go into the vending machine business. So just for clarity\u2019s sake, Mike, that first property, since it was owner-occupied, were you able to generate revenue from that property or was that one just as your own primary residence?<\/p>\n
That was my primary residence. I had thought about doing some house hacking and renting it out, but I was like, \u201cI don\u2019t know.\u201d I was making pretty decent money. At the time I was in a relationship, so she was living there also and we didn\u2019t want roommates.<\/p>\n
Yeah, no, totally understand. Yeah, I got a wife and kids too. I don\u2019t know if I want roommates either. So at what point did you say, \u201cOkay, let\u2019s get that first investment property,\u201d and what did that journey look like?<\/p>\n
So 2021 was basically my education year. I don\u2019t know, I might have had a little bit of analysis paralysis, but I wanted to learn as much as possible. And I knew getting into it, I was going to hire a coach that I was going to spend the money to find somebody that\u2019s been in the game and kind of get underneath their wing and learn as much as possible so I don\u2019t make a ton of mistakes. And I was watching the podcast. It was a 45-minute drive to work for me one way. So in the mornings I would watch the BiggerPockets podcast, and then I stumbled upon the Rookie Podcast and it changed my life completely. So that was an hour and a half I was spending a day educating myself.
One of the podcasts, a guy by the name of Pace Morby was on there and he spoke to me. I knew right then I wanted to hire him as a coach and get into his mentoring program, and I did. So that was on November 14th that I heard the podcast because I listened to it that morning. I listened to it all the way home that afternoon. And then two days later I joined up on his SubTo community. That really skyrocketed my education. I felt confident in my skills from everything I learned in there. So that was November of 2021. Well, April. So at that point I started telling people, \u201cOkay, I\u2019m getting into the real estate game.\u201d I\u2019d got my real estate license during that time because I thought that that would help me find investments and stuff, which is a completely different game that I have now realized.
I just started having the conversations. Everybody I knew that had rental properties, I was blowing them up. \u201cOkay, how\u2019d you find this? How did you finance it? How do you find off market deals? How do you tell how much equity\u2019s in the property? What\u2019s an ARV? What\u2019s a comp?\u201d I\u2019m trying to learn as much as possible in talking to these people that have already done it.
I think it was April 15th. April 16th, I get a text. It\u2019s from my buddy Seth Brown, \u201cHey, check this out\u201d with an address. And I look at it and it\u2019s a little duplex built in the 1960s. I was like, \u201cOkay, what\u2019s up?\u201d He goes, \u201cI think this lady might sell.\u201d I was like, \u201cWell, ask her if I can call her.\u201d That was on a Wednesday. Picked up the phone, called her, she said she was willing to sell. I said, \u201cOkay, Friday, I\u2019m going to come check out the property. If it\u2019s indecent shape, I would love to buy it from you. We could discuss the price.\u201d She goes, \u201cYeah, that\u2019s fine.\u201d So that Friday I drive to Lexington. It\u2019s about two hours away from where I was living, and I picked up my first property.<\/p>\n
So Mike, we got to pause here, man, because there\u2019s a lot of good things that we got to dive into. So first, I don\u2019t even know if you realized this, but one of the things you said really stuck out to me is that you started telling everyone around you that you were a real estate investor. You didn\u2019t have any deals yet, right? You hadn\u2019t closed in anything, but you started to identify as a real estate investor. I think that mental switch is one of the most important things that our rookie audience can kind of take away from what you just said, is that until you adopt the mindset, until you adopt the identity that you are a real estate investor, it\u2019s hard to really step into those shoes. And lo and behold, Mike, as soon as you made that mental transition to say, \u201cAll right, I am a real estate investor,\u201d now you\u2019ve got your friends reaching out to you saying, \u201cOh wait, Mike\u2019s looking for deals. Let me share this to Mike.\u201d That one little interaction leads to your first deal.
So again, if there\u2019s one piece of advice for our rookie audience, it\u2019s even if you don\u2019t have that first deal, share with everyone you know that you are a real estate investor now, that you are looking for deals, that you are looking to invest. Because you never know who they may know and you don\u2019t know who the people that they know who they know. So there\u2019s this large community that you end up tying yourself into. So tell us about that first deal, Mike. I don\u2019t want to brush past this. Were you able to use creative financing to secure that deal? Was it something else? Walk us through how you kind of funded and put that deal together.<\/p>\n
So I got extremely lucky because this was a home run. I\u2019m talking Mark McGuire 1998 home run. Out the park, okay? So I go talk to the lady. Super sweet, it was great. I cut to the chase, I said, \u201cMa\u2019am, how much would you like for this property? What do you think is a fair price for this property?\u201d She goes, \u201cMike, I\u2019d take 60,000.\u201d She paid 30,000 for it 20 years ago.
But I guess we got to backtrack for a second. The reason he called me, my buddy Seth who is my business partner on that deal, he works for a company that they go in and fix foundations, crawlspaces and foundations. So he was there giving her a quote on how much it would cost to get the foundation because it was sagging a little bit, it needed a decent amount of work. And she\u2019s like, \u201cI don\u2019t have that kind of money for that.\u201d And he goes, \u201cWell, I know somebody that might buy this as is.\u201d And he sends me the text, we go from there. So I ended up getting it under contract for 65,000 because I purchased an easement to the right of the property that she also owned.
We put $17,000 into the foundation, which we were able to finance out over a year because he worked for the company. So we didn\u2019t have to come out of pocket with that. We also put $5,200 into just update in one of the units. Painting it, fixing some of the minor stuff in there. We split that 50\/50. Everything on this property we split 50\/50. And then I went about finding the money to pay for it because I wanted to do a BRRRR on the property.
So me talking to everybody about I\u2019m a real estate investor even though I hadn\u2019t done a deal, a friend of mine\u2019s dad reached out to me one day. He\u2019s extremely successful. He\u2019s now a mentor to me. Extremely successful. Owns, I think he\u2019s right at 30 doors. So he\u2019s the guy I see myself wanting to emulate. He calls me out of the blue one Saturday, \u201cHey, Mike, meet me at this coffee shop.\u201d I was like, \u201cYes, sir.\u201d I show up and he goes, \u201cLook, look man, I\u2019ve seen what you\u2019ve been doing.\u201d He goes, \u201cI\u2019m going to loan you $100,000.\u201d He\u2019s like, \u201cYou\u2019re going to pay me 6% and use that to get started.\u201d So it was awesome. That was a game changer for me.<\/p>\n
Was this a handshake deal? Did you guys actually put together a loan agreement or anything like that? Maybe give us an insight of to that conversation of talking about doing the lending? Were there certain requirements he had or was this the easiest thing you\u2019ve ever done?<\/p>\n
No, it was really easy. He already had paperwork drawn up for it. So he wanted 6% on it. And then it was just, I think I put him in first position on the note so that in case something happened and I wasn\u2019t able to get the money out, then I wanted to back him because he\u2019s a friend also. He wasn\u2019t just a private moneylender. But it was extremely easy. It kind of came out of left field and-<\/p>\n
Hold on, Mike. I want to give you a little bit more credit because maybe that conversation was easy, but everything up until that point wasn\u2019t, right? I just don\u2019t want our rookie audience to get stuck on the fact and say, \u201cOh, well Mike had a friend who gave him $100,000. He\u2019s special.\u201d But no, it\u2019s like everything you did to get you to that point is the hard work that most people aren\u2019t willing to do, right? This person saw you hustling to reduce your expenses. This person saw you hustling to build relationships. This person saw you find a really great deal, which takes hard work and work out the numbers so that it\u2019s a home run. So there\u2019s a lot that goes into, so I don\u2019t want you to shortchange yourself there.<\/p>\n
Yeah. There was a lot that happened up to that point also. When I was getting my real estate license, I called him out of the blue and I was like, \u201cHey, do you mind if we meet for lunch?\u201d
\u201cYep.\u201d We meet. And I was like, \u201cI want to do business with you. Any way that I can help market you, I\u2019m going to do it. Teach me what you need to teach me. Every deal that I get from my real estate license, you\u2019re my mortgage guy.\u201d Because that\u2019s what he does, is mortgages. We had a lot of conversations in between those points. I also went out and found deals for him. So I would shoot him a deal, \u201cHey, what do you think about this?\u201d
\u201cIt\u2019s not for me,\u201d but then, well a couple of them are ones he wanted to pick up. So I provided value to his life.<\/p>\n
That right there, that was before he offered you the money, correct? Yeah? So that is such a great key element to our listeners and just showing how you went and you provided value first. It wasn\u2019t you asking for money for him to lend to. You taking those steps led up to that moment where he came to you to lend you money. I think that\u2019s a very important to mention and just a awesome strategy to make a connection with someone and to make it genuine. You honestly wanted to provide value to him by sending him deals, doing moans with him, things like that. I think that\u2019s probably a big reason as to why he did want to lend to you.<\/p>\n
I agree. And he knew I respected him a lot. Like I said, he is a mentor to me. He\u2019s just somebody that I want to be like. Every time I saw him, I was asking him questions, \u201cOkay, how does this happen? How do I do this?\u201d He\u2019s just taught me a lot. That day he really skyrocketed my real estate career.<\/p>\n
Isn\u2019t it crazy how one conversation can have that impact and kind of change everything? I want to go back to the deal, Mike, because\u2026 This is something I\u2019ve never really thought about doing Ash, I don\u2019t know if you have, but you guys found this deal because the current owner didn\u2019t have the capital, didn\u2019t have the know-how to solve the foundation issues. And to them it was easier to just give the property away as opposed to them doing it themselves. It\u2019s like Ash, I wonder what if we just started a campaign where we just looked for all the houses across America that have foundation issues. How many off-market great deals do you think we could find if we were able to go to a seller and say, \u201cHey, don\u2019t worry about fixing the foundation. We\u2019re going to buy it from you as is.\u201d You could probably get a ton of off market deals that way.<\/p>\n
Oh, definitely. See, we didn\u2019t have to pay full price either because he worked for the company. So we got it at about 50% of what is the quote to the general public. So that saved us a ton. So right now that\u2019s $17,000, 65,000 purchase price, and then 5,000 in minor stuff. So ARV on that property, 140,000. So at 70%, that\u2019s 98,000. I hit a full BRRRR, 100% clean BRRRR.<\/p>\n
Awesome.<\/p>\n
So that\u2019s what we did. I went and I borrowed the purchase price from my investor friend. I paid him 6% up upfront. Even though it was an annual 6%, I was like, \u201cNope, I want you to have this up upfront.\u201d<\/p>\n
So you prepaid him for a year of interest?<\/p>\n
Yes, ma\u2019am. Yep.<\/p>\n
Wow, interesting. I don\u2019t think we\u2019ve had anyone talk about that just to make it more secure or more advantageous than saying, \u201cI\u2019ll make the payments to you,\u201d it\u2019s kind of we always talk about how to sweeten the deal with a seller to get them to accept your offer, but that\u2019s a different unique strategy with a private moneylender too.<\/p>\n
Was it prepaid interest, Mike, or was it points that you paid up upfront? Was it separate from your ongoing interest payments or was it actually just the interest and you said, \u201cHere it is upfront\u201d?<\/p>\n
Just the interest here upfront, yeah. I wanted to provide value to him up front too and show, \u201cHey, I\u2019m here to do good business. I want all of us to win.\u201d And that\u2019s how I am with all of my private moneylenders now. I was able to get one private moneylender literally off of Snapchat. He was a friend of mine. I posted one of the deals and he\u2019s like, \u201cAre you doing that now?\u201d I was like, \u201cYeah.\u201d He\u2019s like, \u201cMan, I\u2019ve got a ton of cash that I need to invest. Let me know if you have any deals.\u201d Two days later I give him a call, \u201cHey, I got a deal.\u201d He sends me a check for $90,000 right after.<\/p>\n
That\u2019s it. I\u2019m downloading Snapchat.<\/p>\n
Yeah. That\u2019s where all the private moneylenders are hanging out. I\u2019ve been on the wrong platform this whole time.<\/p>\n
Yep. I gave him a good deal.<\/p>\n
I\u2019m deleting Instagram. I\u2019m going to Snapchat.<\/p>\n
And I gave him a great deal. I gave him 40% of our net profit on that deal.<\/p>\n
Wow.<\/p>\n
So it was like a one-month turnaround. I think he\u2019s going to make like $8,500 or something like that for a one-month turnaround. So where are you going to find something paying that well?<\/p>\n
Mike, I want to talk about the rehab, about doing the rehab on these properties. Did you have any experience in construction at all? Maybe talk us through what you do for rehabs. Are you hiring general contractors? Are you using friends? Are you doing some of the work yourself? You just said you did turned over a house in one month, that\u2019s pretty efficient. So what are some of the things that you\u2019re doing for rehabs?<\/p>\n
It depends on the property. So that was the only one we\u2019ve had foundation issues with and that\u2019s how we got in the door there. I have made some mistakes along this journey. I\u2019ll be the first to say it.<\/p>\n
So have we all, especially with rehabs.<\/p>\n
Very expensive. Very expensive mistakes. I made the mistake of thinking just because someone was a friend, that they would do good business. I had a couple GCs that I at the time considered friends and they came in, did horrible work, and it set me backwards a lot. I think if you\u2019re going to do it, you have to keep friendships and business completely separate and you have to treat them\u2026 For me, it\u2019s been hard to find very reliable GCs. I don\u2019t know how you guys\u2019 markets are, but where I\u2019m at is just nobody takes pride in that work anymore, I feel like. And they can charge top dollar and I\u2019ll pay top dollar. I want quality work. That\u2019s my mindset. I want my properties to look incredible because they will never look like something I wouldn\u2019t live in. And I expect that from anyone that works with me to give 100%. I\u2019ve had a couple situations where it cost me a lot of money. They came in. I paid up front. That\u2019s something I\u2019ll never do again for general contractors. Twice I paid up front and they disappeared.<\/p>\n
Yeah, that\u2019s unfortunate. We talk about this all the time. It\u2019s like the entrepreneur in me wants to start a GC company that focuses on real estate investors. Literally, if I\u2019m just the one GC that picks up the phone when the client calls, I\u2019ll already be in the top 1% of the 1% of all general contracting companies.<\/p>\n
Amen.<\/p>\n
Mike, so you get this first deal, you seem to do really well with it, right? You have this amazing first deal using other people\u2019s capital. It seems like now you\u2019re kind of building a relationship with private moneylenders. So if we can just pause really quickly, how many deals have you done since that? You did the primary residence in 2020, then you did the first duplex. How many total investment deals have you done since that first one?<\/p>\n
So I owned four and I\u2019m under contract on two right now. One of which I have already assigned. I assigned it the same day. I went under contract at 1,236.This was last week, 1236 at 932 or 925, I assigned it for $50,000 profit.<\/p>\n
That\u2019s amazing.<\/p>\n
Thank you.<\/p>\n
Yeah. So your wholesaling now as well then, Mike. So you\u2019re finding deals for yourself, but you\u2019re wholesaling. So of those four deals that you\u2019ve kept so far, two of those I know you used private capital to fund. What about the other two? How did you fund those two?<\/p>\n
Private money. Yeah, so the two I have under contract right now, we\u2019re just going to turn and BRRRR. We\u2019re just going to wholesale those out because we\u2019ll make a good chunk of change like that one $50,000 profit. The other one\u2019s not as lucrative. It\u2019s only like 10,000. But we\u2019re trying to stack it up right now because we don\u2019t want to continue to have to go out to private moneylenders. We feel like in the next six months to a year, we\u2019re going to just stick in the wholesale realm and then maybe do a couple flips, then next year get into a little more flips because we want to transition away from single family homes and duplexes and stuff. We want to get into the storage facility asset class. I personally want to buy a couple oceanfront condos for Airbnb for my own portfolio, but right now it\u2019s just about stacking up capital. I made the decision this past week that I was going into investing full time, so I\u2019ve left my W2.<\/p>\n
Congratulations, man.<\/p>\n
Thank you.<\/p>\n
We got to get like a little bell that we can ring for our guests when they quit their job. You got that on the soundboard?<\/p>\n
I have my little soundboard. I don\u2019t know what any of the buttons are, so this is going to be a surprise as to what sound it makes.<\/p>\n
[inaudible 00:38:29] it.<\/p>\n
Hand clap. There we go.<\/p>\n
There we go.<\/p>\n
I act like I\u2019m super happy, but guys, I\u2019m so scared. This is the first time since I was like 16 about having a full-time job, you know?<\/p>\n
Yeah, it definitely is a scary moment, right? Ash and I have both gone through that transition of the last couple of years. And it definitely is, I think, a scary moment. But once you realize that you\u2019re able to provide for yourself and provide for your family with your own\u2026 Not your own two hands, but it\u2019s like with your own work, it\u2019s almost this relieving sense because now you\u2019re not tied to what someone else thinks of your value, right?<\/p>\n
Exactly.<\/p>\n
Now you\u2019re not tied to what someone else wants to pay you. The upper limit of what you\u2019re able to earn is squarely on Mike\u2019s shoulders, or it\u2019s on Tony\u2019s shoulders, or it\u2019s on Ashley\u2019s shoulders and it\u2019s not on XYZ corporation for them to say, \u201cI feel like Mike is worth this much money. I feel like Ashley\u2019s worth this much money.\u201d Or, \u201cTony, you\u2019re going to get this much more money.\u201d It\u2019s 100% on you. So there is this fear, Mike. But dude, once you kind of break through that fear, it\u2019s almost this liberating feeling because you realize you\u2019re in control.<\/p>\n
I can\u2019t wait. I mean, I just recently moved down here to the beach too, and this is something I\u2019ve wanted my entire life. Since I was a kid, I was like, \u201cI have to live at the beach.\u201d And then back in December I was like, \u201cYou know what? I had a talk with a friend of mine, very successful.\u201d He reminds me a lot of you guys how positive and just uplifting type guys, the ones that you just want to be around all the time. Well, we had a talk and he\u2019s like, \u201cMike, I see where you\u2019re going. I know you want more in life. You got to get away. You have to just go somewhere, start over and just focus on this new life.\u201d So back in December I made the jump and it\u2019s just been incredible since. I\u2019ve met some absolutely fantastic people here that are super successful in the real estate world and they\u2019ve taught me so much.
I\u2019m like Luke Rotvold off the phones now. That guy is an animal, so I\u2019m just chasing him so hard right now. This is coming from a guy that I used to hate cold calling with a passion. Now I blast it few hours a day just going. And it\u2019s from being around people that I\u2019ve seen utilize that that are\u2026 My good friends, Kevin and Lance down here, Lance is over a hundred deals a year. So that\u2019s something that I want in my life. I want those kind of numbers. It\u2019s just building that confidence. When you\u2019ve got the right circle, they\u2019ll help you build that confidence.<\/p>\n
Mike, I want to ask, what are some of the steps that you did to decide that now was the right time to quit your job? Is there anything that you have to prepare for now as to, like the first thing I always think of is health insurance. What are people going to do for health insurance? So can you talk us through some of the things that made you decide now is the time to quit?<\/p>\n
I think that deal I did last week. It was literally a nine-hour deal. I got it under contract. Nine hours later I [inaudible 00:41:41] it for 50,000 profit. I was like, \u201cMike, if you were able to do this 40, 50, 60 hours a week, there\u2019s no telling how much you can make.\u201d I loved what I did. I worked for some good people, but it wasn\u2019t my passion. I just don\u2019t want to be 65 years old and look back and go, \u201cMan, I wish I\u2019d have just chased, give everything I could to real estate, to something I was passionate about.\u201d But with health insurance and stuff, I\u2019ve got a good amount of money saved up now. So I guess I\u2019m going to have to find a good policy to jump on. I haven\u2019t really thought about it yet.<\/p>\n
Now you\u2019re scared of it, right?<\/p>\n
Yeah, no.<\/p>\n
Mike, I wanted take us to our Rookie Request line, but before we do, I just wanted to ask one final question about the private money piece. I guess two questions. First, what kind of rates are you offering to your private moneylenders today and has that shifted as the inflation has played an impact and the feds been raising interest rates? Have you seen your private moneylenders asking for higher rates? And then the second question is, what documents do you typically use to formalize that relationship?<\/p>\n
So we actually had a lawyer draft up something for the loan and all the money. One of our deals, we didn\u2019t have any paperwork at all. It was just purely a handshake. But I try and pay them as well as I possibly can because I want to establish the trust, the loyalty and show like, \u201cHey, Mike knows what he is talking about. He just gave me a 15% return on my money in 60 days.\u201d We do something where we\u2019ll guarantee six months. So okay, say we got the money loan for 10% on $100,000 or whatever the amount is. We\u2019ll go, \u201cEven if we turn this around in two to three months, you\u2019re getting paid for six months no matter what.\u201d So it\u2019s beneficial to them. And it just all really depends on the deal, I feel like. My private money guys have not tried to stiff me or tried to go higher on the rates. I think they see that I\u2019m going to pay them well.
So there\u2019s enough food on this table for everybody to eat and I want to make sure my guys are taken care of because then if I need something I\u2019m taken care of. So we\u2019ve got really lucky with that. We got one private moneylender through another friend. It was all because my business partner, Josh Cotton, was sitting at a coffee shop on his lunch break cold calling, okay? This lady walks up to him and goes, \u201cSir, are you a wholesaler or an investor?\u201d He goes, \u201cYes ma\u2019am, I am.\u201d She goes, \u201cThat\u2019s funny because my husband does the exact same thing every night. You guys should meet.\u201d Well, we meet and just hit it off. It was awesome.<\/p>\n
Mike, your story is so crazy, man. It\u2019s like there\u2019s all these kind of serendipitous moments where it\u2019s literally the byproduct of you guys working hard. Who goes on their lunch break to cold call? It\u2019s a very special type of person that does that, but that single action kind of creates this domino effect. It\u2019s the wildest thing, man. So if there\u2019s one thing that I would want the rookie audience to take away from your episode, Mike, it\u2019s that if you work hard enough, good things tend to happen. And you\u2019ve proven that just over and over and over again, man. So I want to take us to the rookie request line here. So for all of our rookies that are listening, you guys can always phone in your question, just give us a call at 888-5-ROOKIE. If your questions are good enough, we might just use it on the show. So Mike, are you ready for today\u2019s question?<\/p>\n
Yes sir.<\/p>\n
All right. So today\u2019s question comes from Andrew and his question is, \u201cMy name\u2019s Andrew. I\u2019m calling from New Jersey. The question I have for you all basically is how you differentiate your entities? I work with two partners and we have one specific entity that is carry almost everything. Everything is under one entity when investing people\u2019s money, private moneylenders, or investing in off-market properties. I\u2019m wanting to know if you guys differentiate those. Do you have two different types of entities? How do you handle that? Hope to your answers. Thank you so much for taking my call.\u201d So I guess the basic premise of that question is Mike, so you have properties that you\u2019re holding, you have your wholesaling arm, you have partnerships. How are you structuring between your entity, your partner\u2019s entities, and then the different activities in your business?<\/p>\n
I set them up in different LLCs. Every one of them is in a different LLCs. So I\u2019ve got the property with Seth that\u2019s in one LLC. I\u2019ve got our actual business that\u2019s an LLC. And then I\u2019ve got what we hold because I\u2019ve got properties with Josh, my one business partner, then with Seth. So we have different LLCs for that too. I just separate everything completely. And then with my own personal portfolio that will go into its own LLC.<\/p>\n
Ash, it look pretty similar for you too, right?<\/p>\n
Yeah. Each partner has a different LLC, each business has a different LLC. The development in the rehab has its own business, even though it works on the properties that are owned in one of the rental LLCs.<\/p>\n
It keeps the numbers easier I feel like.<\/p>\n
Oh, totally. We separate all of our active income from our passive incomes. All of our rentals are in one set of LLCs. All of our active income from our flips and our events and our coaching program and all the other active things that we do is in a separate LLC. So yeah, it can get pretty crazy with the entity stuff. So Andrew from New Jersey, if I had one piece of advice to you, I would go talk to a good CPA and go talk to a good attorney in your estate and kind of give them the layout and the breakdown of your business and the different things that you do. They should be able to help you set things up in the right way.<\/p>\n
And I would get them, if you can, on the same call too.<\/p>\n
Totally.<\/p>\n
That\u2019s the best, yeah. Okay. So Mike, we are moving on to our Rookie Exam. The first question is, what is one actionable thing rookie should do after listening to this episode?<\/p>\n
Go out and talk about it. Have those conversations. Tell your friends, tell your family, \u201cI want to get into this, I want to become a real estate investor.\u201d And then the next thing is hire a coach. Save yourself a ton of time and hire a coach. There\u2019s always going to be somebody that\u2019s better than you at everything in life no matter what. So why waste the time making all of these mistakes when you can just go hire a coach and eliminate it?<\/p>\n
Question number two, Mike, what\u2019s one tool, software, app or system that you use in your business?<\/p>\n
Mojo Dialer. That is my bread and butter.<\/p>\n
I love Mojo. Can you explain what Mojo is, Mike, for folks that aren\u2019t familiar with that software?<\/p>\n
It\u2019s the system that you use to cold call. I\u2019ve got a triple line dialer on there, so I\u2019m able to call three numbers at once. And then if one picks up, that hangs up the other two. Just so you can get as many calls in as possible.<\/p>\n
Yeah, Mojo\u2019s fantastic. I was trying to set up a wholesaling arm early last year, so we had Mojo for a little while. Yeah, the way that you\u2019re able to run through all those numbers in a relatively quick period of time is pretty crazy.<\/p>\n
Okay. Our last question for the Rookie exam is, where do you plan on being in five years?<\/p>\n
I want to be on the beach all day long, relaxing, letting my passive income pay for everything. My goal is to personally at 40, I want to say I\u2019m getting up, I\u2019m going to work because I want to, not because I have to.<\/p>\n
I think that right there is something that will resonate with a lot of people. And that really does change your life. There\u2019s the fire community where it\u2019s Financial Independence Retire Early, but when most people get to that point, they don\u2019t actually want to retire because they want to work at some passion project or keep working at something that excites them and fills them with joy and passions.
Okay. Well Mike, thank you so much for coming on with us. Can you let everyone know where they can reach out to you and find some more information about you?<\/p>\n
Yeah, so we have a small Instagram page called Valiant Acquisitions LLC. And then I have my personal page, it\u2019s larson910 on Instagram.<\/p>\n
Okay, cool. Well we really appreciate you coming on sharing all of your information. Definitely added a lot of value, so we appreciate it. Thank you, Mike.<\/p>\n
Thank you, guys. This means a lot to me.<\/p>\n
I\u2019m Ashley, @wealthfromrentals. He\u2019s Tony, @tonyjrobinson and we will be back on Saturday with the Rookie Reply.<\/p>\n