Mike: Alright guys, welcome back to the Discount Property Investor podcast. Your host Mike Slane, joined with co-host David Dodge. How are ya, Dave?

David: I'm doing good, Mike, thanks for asking.

Mike: Good good, glad to hear it.

David: Looked at a house this morning.

Mike: Sweet, any good?

David: Made an offer on it.

Mike: Any good?

David: Offer was lower than they liked, but that's just the way--.

Mike: That's the way we like to make offers guys. Okay so Discount Property Investor, this podcast we primarily talk about wholesaling real estate. Today we are going to go a little off topic, not quite off topic, we are still talking real estate, but we are going to talk about transitioning from being a wholesaler to climbing up that real estate investing ladder.

David: Oww I like this topic!

Mike: Yeah, so we're going to talk about buying rental properties, or how we fund our purchases of rental properties, or rehabs. How you fund and purchase your rehabs or rentals, when you are ready to make that next step, because-- Dave, you say this very well, you talk about-- wholesaling is a really good way to make big chunks of money, but it's still a job.

David: Absolutely it's a job.

Mike: High paying job, relatively easy job-- relatively simple, not necessarily easy.

David: Not easy.

Mike: Well it become easier the more you know. Again, it's a high paying job, but it's still a job you don't necessarily want to do that-- I think we both fell in love with real estate because of the passive income that you could generate from it, and that comes through rental real estate. So one of our big things in our company for the past year, hey let's chase after some rental properties, and let's try and do it without using our money, without investing our company's money. We like those high paid checks we make from wholesaling.

David: Oh hell yeah!

Mike: Let's keep wholesaling.

David: I will probably never stop wholesaling, let's be clear, but it is a job.

Mike: I don't mean to say it like that-- we have this set up as a business, we all have different roles in that business, and we want to keep doing what we're doing, we enjoy doing it, so why not? Let's talk about how you fund a rental, okay? Let's say you don't have bankable--.

David: Let's back up real quick for a second. When you first start wholesaling you probably have no money. So you are telling people that you're a cash buyer because you have your investor partner's funds, or you make even have a transnational funder.

Mike: Uh huh.

David: Or, a hard money lender. That's how you start, right? Once you do some deals, then you may have your own money, or you may build some relationships with some private lenders who will lend you-- but typically as a wholesaler you are not dealing with banks.

Mike: Right.

David: That's really where you start. Once you start making money, or you start building contacts that have money, you want to get out of the wholesale space, but guess what? You are already doing it, and you're finding home run deals. So now you can say that you are going to cherry pick some of the best deals, you are going to rehab these if you feel like it, or keep them as rentals. That's really where you're going to transition--.

Mike: Yeah that's a really good point, that's if you have the credit ability to refinance, again, when you are using BRRRR you want to make sure that you can actually get that long term finance.

David: Absolutely.

Mike: We do a whole series, or had a series of podcasts about that, so you can go back and listen to some of those.

David: Look how red I go.

Mike: We also got a book coming out that talks about it. Why are you so red, man?

David: I laid out and got burnt yesterday, like fried. My wife was giving me shit this morning-- off topic.

Mike: Pretty funny. Yeah so you may be bankable, you may not. You want to find that out. If you are bankable, then yeah let's go hard after doing some rentals, let's try to rehab something to do a rental. It is going to increase your ability as a-- wholesaler too. You are going to learn-- oh I was estimating rehab costs a little bit low every time. A lot of wholesalers we get that flack. Or you say, people are crazy I can do this for half of that, what are they doing? So again, you are going to learn more about real estate by doing a little bit more of it. Very cool stuff. There are two ways that we fund most of our rentals; we started out using one of our partners, you can go check that out at DPIPodcast.com/funding. Off topic, personal topic, I had-- I don't know if I had a seizure or a mini stroke, but I am just like a step off.

David: You look good.

Mike: I'm not quite-- I feel fine, it's just every once and a while when I start thinking about things, I am not as quick to shift gears. Hopefully that goes away, a little brain fog I guess they call it. It's not good. I feel fine.

David: You look good.

Mike: I feel fine so who cares? Keep living carefully.

David: That's right.

Mike: Alright, back on topic, we are talking about wholesaling. Check out the URL, yeah you can learn who we are using there. We used-- it's like a fund and grow group, so click them, or you can learn the entire thing in a course we put together a long time ago.

David: Yeah we have a course.

Mike: It's called Savvy leverage.

David: -- Mr Gibson, I need to contact him, it's been a while.

Mike: Yeah we should reach out. Stop by, we should reach out again.

David: We put together a great course. It actually talks about how you can go out and approach other individuals that have money, and you can turn the, into private lenders.

Mike: Simplest terms.

David We have some agreements in there that we use with out own private lenders, and we are happy to share that with you guys. Nick-- has--.

Mike: They do something even cooler, they like--.

David: They have PPM. Personal-- I can't even remember--. Basically you can put together your own fund legally, and get people's money legally to pool together for bigger projects. Man, it has just been so long since I put that course together--.

Mike: It's been over a year.

David: All the terminology. We have private lenders and that's what we use. We talk about that, we teach that in the course as well. If you want to take it to the next step and put together a big fund, we teach that as well too. Yeah, Savvy Leverage is the name of that course. You know what? We are going to give that away for free.

Mike: Sweet.

David: On the website, so go to DPIPodcast.com/Funding. You can get access to that free course we're putting together, private funds from a private lender, all the documents you might need, and basically the process; what you do when you approach them, how you present and how you pitch them being a private lender to you with them being backed by the real estate. All kinds of good stuff. So guys check it out, free course, it's called Savvy Leverage. I did it with my good buddy. You can find it at DPIPodcast.com/Funding.

Mike: You don't necessarily need to combine money and all that. Simplest terms is you approach private individuals. You don't have to think of private lenders, think of someone you might know who might have money to lend. Someone you might know who might want to make a higher return than they can get in the stock market right now. Someone you might know who would be willing to help you get started in buying rental properties. Again, that may be family members, maybe good friends, maybe whatever. It is just really gathering up enough confidence in yourself and your ability to do this business to approach them and say, hey I would like to borrow money. Or, here is what I'm doing; I'm buying properties, I am fixing them up, refinancing them, and then I am paying individuals like you money, a decent return, 10 or 12%.

David: Yeah. Even 14 or 15%. I had a guy the other day, one of our students, Mike, he reached out and said, what about paying 14 or 15%? That just seems so crazy. My response to him is, yeah I think you were on the call actually. My response to him was, yeah that might seem crazy if it's a 30 year loan. But, typically you are borrowing money for anywhere for two to six months. So it's not like you are locking in at this crazy high rate. Why would these lenders charge a high rate? Let's put ourselves in their shoes for a minute. It's because there is a some risk involved, and they also know this is a short term loan. So they are going to need to make more money on this short term than they would if they did at a longer term, because then they are going to get it back and they are going to have to redeploy it. There is a lot of work involved in them underwriting you and or the property, which by the way can be very helpful to you, to help you do your own due diligence. Does your lender like the deal? Well if they don't like the deal, then maybe it's not a deal, right? They can actually help you and do some due diligence and figuring out if it's a deal.

Mike: My comment whenever somebody says-- I am not even trying to sell private lenders or sell the fact you are going to be paying more money. My comment, or just thoughts on that in general are-- yeah but what would you have made without paying that 14%? Nothing.

David: I love it.

Mike: You're not going to make anything, so forget about the 10-12% up to a point, guys. But if you factor in, when you are ding the BRRRR, or you are doing a rehab, your money cost, the cost of buying the property, which you need to be doing.

David: If you get it cheap enough, it doesn't matter how much interest you pay, because it's all factored in.

Mike: Exactly. As long as you're paying attention to the numbers, you factor in, hey I have a $50'000 loan on a house that is going to be worth 100, 20'000 in rehab, and it's going to cost me five grand for the money for whatever amount of time. Well you are still going to make the 20'000, so get out there and borrow the money. The whole point of-- again, OPM, other people's money, that's a thing that's been around forever since the first real estate courses. So don't be scared to borrow money if you have thought through the numbers, if you are looking at everything correctly. If you know you have a deal that you can buy, fix and either refinance and get all of your money back, or a deal that you can buy and fix and-- sell for $20'000, 30'000 or 40'000 profit--.

David: Yeah, who cares if you are paying 5, 6, 7, 8 or even ten grand? Who cares if you paid ten grand to a lender if you can go make twenty or thirty? You need him to be able to get into that situation in the first place.

Mike: So-- bringing it back to wholesaling kind of is like when you are trying to sell a deal, and a buyer is going to pay you five grand to buy that contract, or if you flip them that deal, or ten grand. Why do they care? What business is it of theirs if you are selling them a smoking hot deal? It's not. Don't worry about paying the interest, guys.

David: The cost of doing business.

Mike: We should add up the amount of interest that we spend last year. Probably paid a hundred? Two hundred thousand dollars interest?

David: That's okay though. Multiple millions of dollars in revenues. It was worth it.

Mike: We added forty new rentals, maybe thirty last year, I don't know, something like that.

David: Thirty five.

Mike: Get after it, borrow money, make money, keep playing the game, guys.

David: Yeah, as you get better and better, it's just like the banking relationship. You want to build those relationships. Over time the banks are going to get more and more lenient with you, because they see that you're a professional, you know what you're doing. You are prepared and so on and so forth. What I mean by that is, the amount of seasoning over time will decrease, and so will your interest rates.

Mike: That's a really good point.

David: Start with a hard money lender at 14-16%, then go to a private money with 18-14%, then go to a bank and they are anywhere from 4-7%.

Mike: Here is something to think about, your family members might be the only people you know with money that would feel comfortable approaching. They may say no. Guess what? Like David mentioned, find a hard money lender. Hard money lenders are going to be a little bit more expensive, maybe 14-15% when you add in the back end fees or points, or whatever they call it. But, you are able to do the deal. After you have a track record of doing one, two, three deals, five deals, ten deals, you can kind of approach your family, hey look what I did, I did this.

David: This is the cool thing about this business, is that it truly snowballs. Once you start doing deals, you get confidence, you start doing more deals, snowball, right? Once you start doing deals, you start cherry picking deals, you start rehabbing those or keeping them for yourself. Once you start doing those and you're successful, then go to other banks and other lenders, then they will start begging you for your business, right? Or they will start getting competitive and reaching out to you for your business, because they see you are doing it elsewhere. Snowball, so that's the cool thing about this business is-- everything will get easier over time, and it will also snowball for you. At this point, whenever we go get a property, most of the banks that work with us, they don't require a ton of seasoning. If they do it is maybe one or two months. But, when we started it was six, right? So that got easier. Also now we have other bank sales people reaching out for on behalf of their bank saying, hey I see that you guys are doing a lot of deals over here, we would love to get a piece of that pie on those mortgages. We say, great, here's what we're paying, can you beat it? Sometimes they can, sometimes they can't. So it's always going to help. Keep going, guys. Don't fret. The message here is don't fret if you are using a private lender or even a hard money lender in the beginning and you're paying 14 or 15% or even 16%. We didn't even mention points at all in this episode. We have to pay points on the front and or the back end. That's basically a whole interest rate, like a whole point, a whole percent, but it's paid up front, or in the rears. But, it's the whole year's worth of interest. So we like to avoid points, because again, if you calculate a 14% spread over a whole year and you only borrow that money for let's say three or four months, you are only paying 40% of that 14, whereas a point is the whole year's worth of interest for each percent, 1, 2%, one point, two point. That's an example of how that works. We like to avoid paying points, but if you're new and your hard money lender requires points, so what? Pay the points. The interest that is payed in the long run is going to be very minimal, and you are going to be able to acquire an asset like a piece of real estate that is going to be a lot more than you could ever afford with your own cash, right? So many reasons for using lenders, private lenders, hard money lenders in the beginning, then working your way into lines of credit which we didn't mention, but now we use our own personal lines of credit along with hard money and private lenders to purchase, whenever you can build up some assets like rentals, you can then go borrow against the equity in there, now you have a line of credit, and that rate if somewhere between 5 and 7%. So it's a little bit cheaper.

Mike: More of that snowballing.

David: You have more assets to then leverage and borrow against. Be careful, you don't want to over leverage yourself by any means. However, you have that ability to. The final game would be a bank. The bank rates are basically going to be the cheapest, but it's going to be the biggest pain in the butt. Dealing with the banks is going to take time, going to be a lot of paperwork. But, you are going to get the best rate. You are going to have some pros and cons with any and all types of money. Go over to DPIPodcast.com/Funding, we are going to throw information in there on how you can access the free Savvy Leverage course. We usually charge several hundred dollars for this course, but we are just getting so many inquiries lately with people asking about private funders and lenders-- I just figure, hey, it's a couple of years old at this point, but the information is still the exact same as it was when we built it. So let's give it out for free. We are going to give that out for free, and we also have some information over at that link for you guys to find information about Fund and Grow. It's great, we used them in the beginning to buy houses on credit cards. They offer zero percent credit cards which is awesome. I actually bought a four family one time, Mike, on credit cards.

Mike: I know, it's crazy.

David: Payed the credit cards off in five or six months, and I still own that four family to this day. It pays me like $1200 a month, it cash flows like crazy. So check it out, guys. Mike, anything you want to say before we sign off today?

Mike: No, thank you guys for listening, truly appreciate it, and we look forward to talking with you guys again.

David: Awesome, signing off, guys.