00:00 - 05:00

David:

What's up military millionaires. I'm your host, David Pere. And I am here with my wonderful co host, Alexander Felice and our guest today, Darren Smith, who was in the army for six years and now has been investing in real estate for the past 18 years, including flipping, renting, wholesaling, and now moving into owning millions of dollars worth of industrial properties. And so we're gonna just kind of talk through some of that building the team and some of the things that Darren has done to achieve the success and be able to take real estate full time.

So, Darren, welcome to the show. \

Intro:

Welcome to the military millionaire podcast where we teach service members veterans and their families how to build wealth through personal finance, entrepreneurship, and real estate investing. I'm your host, David Pere, and together with my co host, Alex Felice. We're here to be your no BS guys along the most important mission you'll ever embark on your finances.

Vehicle one, you are clear to depart friendly lines. Roger Vic one Oscar Mike.

Darren:

Hey, thank you very much, David. I appreciate having me on.

David:

Yeah, absolutely! Tell us a little bit about your backstory.

Darren:

Sure.

As you mentioned the army for six years, so got to do quite a bit of traveling that had a good time. I did computers and networking type stuff in the service. So when I got out, I transitioned right into still doing that, for the private sector.

Fortunately, in one of those early jobs, I was able to sit next to somebody who was big into real estate, they, you know, were flipping a couple houses. I mean, for me, it was huge. At the time, they were flipping houses, and they had a couple of rental properties. And so it was, you know, for someone who was not exposed to that world at all, it was quite an eye opener, you know, my whole life had been taught to just you know, get a job and have a W two, that type of thing.

So, bottom line, right then and there, I just read every book, I possibly could within a couple months, purchased my first live in flip, and did that and then just proceeded to try and grow it up from there. I'll keep it short as possible. But I made, you know, some good money during the last run up back in the 2000s flipping houses. But then I got in over my head, I bought some mobile home parks out of state, where to catch a plane to even go see them, trust people I shouldn't have trusted, and just made a lot of bad decisions and ended up you know, getting hurt pretty bad during the crash.

So I went back and forth. And I still had a computer job to continue with that. Did that for a couple years, but really just want to get back in real estate. So 2012-2013 got back into real estate in Pennsylvania, moved to Colorado shortly thereafter, lived out there for four years, built up a flipping and wholesaling business and built a team up. And then I've since moved back to Pennsylvania a couple years ago. So I'm still running that team out there of awesome people. And they're running my business in Colorado and in Pennsylvania at this time.

Alex:

So easy.

Darren:

That's it. It's so easy. So yeah, that's that's summarizing 18 years in the optimizer.

Alex:

Okay, so you got smacked in O5 for buying out of state, which O7, I think is I'm currently actually in Indianapolis. And what's interesting about Indianapolis is the investor pool here is kind of small compared to the amount of out of state investors. And there's a lot of out of state investors in my market too. And they occasionally, you know, a lot of them are doing their due diligence. Occasionally, some people will buy stuff that I think they're crazy, but they don't really know the area, they just maybe know the numbers or what somebody told them.

So are you focused on markets that you know, really super well, this time? Because we're kind of coming? We're peaking in the market now, too. So what are you kind of doing differently between now and then?

Darren:

We certainly are peaking in the market, I would have to say, before somebody invests outside of their local area, they should just really know what the heck they're doing, like really know well, and have done it, you know, locally.

So I'm operating two markets at this point in time. But that is because I've done it so much back then I was just getting started. So anybody starting out, I would go in your area, find a community that you like, maybe pick a good demographic of lower middle class homes, and just stick to what you know, because we're probably talking to a lot of people, we're just getting into this. And you don't want to be, you know, doing all over the place, and lots of lots of different types of houses and lots of different cities.

So what we're doing right now, to have successes is just we said we're sticking with a couple of counties in Colorado, where my business was, and we're where my team is, and then what we're doing about 10 counties here in Southern Pennsylvania, but it is it's areas I know and we have, we now have the processes and the people and the resources to expand out a little bit but if I was just getting started, I wouldn't even leave my city.

Alex:

Yeah, I think some people have.. Oh sorry, David go ahead.

05:00 - 10:00

David:

I appreciate that. That might be a first I thank you..

Alex:

Make it make it snappy, make it snappy.

David:

Um, I think it's important to distinguish the fact that the two of you are in two different markets, right. And one of them is long distance, but you've lived in both locations.

So the key there being knowing the market, because like, I got buddies out here in San Diego, that, I'll tell them some of the numbers, I'm running in Missouri, and they're like, Oh, my gosh, I'll buy that house cash all day. And I'm like, like, I'm passing on that one. And they're like, What do you mean, he's like, I understand it's a $100,000 house? And do you in California, that sounds amazing. But the rent doesn't make sense. It's not going to appreciate $100,000 is not worth it, you know. And it's like, if you don't know the actual market, you just focus on the numbers.

It's like, if you're coming in and buying a million dollar house at a six cap, maybe it doesn't matter as much as if you're buying small numbers, if you were paying two cap three cap for cap and your market, like, Okay, got it. But if you're taking on debt, and you're trying to compete in that market, you need to compare it to things in that market, not just I think that's a valid point, you are in two different markets right now. But you're intimately familiar with both of them and have lived in both of them, as opposed to just, you know, buying in Missouri, when you have only known California prices.

Darren:

Very true.

Alex:

Also, I think going out of state from the start adds a layer of complexity, for sure. And it's kind of easy to get scraped and bruised up, when you're close by I started out sort of close, and I did most of my investing out of state. And now that I'm back, especially in this market, where it's really competitive, it's like going out of state is starting to put people at a disadvantage. Where I think it used 2,3,4 years ago, I think there's a big advantage of going out of state, because you could leverage like David said, you could leverage your that region's money into a cheaper market. But now where I think it's so competitive, I think definitely sticking where they're at where you're at is gonna give you a high competitive advantage because you're competing face to face against somebody who's going to call in, like, I just have a speed advantage, if nothing else.

David:

Yeah.

Darren:

Yeah, sticking local in fact even to emphasize that point that I'd learned the lesson was what I'm doing with commercial real estate right now, I'm only doing local here in my local area. Whereas I bought houses in probably five or six other states just dabbling here and there, I'll take some risks. But for me, I need to be able to go and sit down and you know, in front of that person, I will, I will say one thing on the speed though, my entire Pennsylvania business is run by people in Colorado.

So it's actually kind of interesting, about twice a month, they may have me go pick up, you know, run an errand or something form at a house. But other than that, we've transitioned so much to phones, because of COVID really, that was we kind of been doing it a little bit before. But we were about 90% in person visits and 10% on the phone. And now, honestly, our first visit 100% of the time is a phone visit. And then maybe we'll follow it up with an in person. But that's maybe maybe 10% of the time. 15% time we need an in person other than that. It's all done. Just over the phone and with Adobe DocuSign.

Alex:

That's awesome.

David:

Yeah, I like that for sure.

Darren:

Yeah,

Alex:

Yeah. But I still think there's definitely I just think there's an advantage to being around local, like you said, If nothing else, it's like you get to use use that market, you know it, you start knowing the neighborhoods, one of the best things that I've done my partner every time I it's like a running joke. Every time I asked him about something right before he's like, Oh, yeah, I got a property in that neighborhood. It'll rent for this everywhere in town.

And that's invaluable. Now maybe you somebody else can find him out of state, but it's like I hang out with him four days a week, like you just can't beat that relationship. So being close to the ground. And having those relationships if nothing else is, is highly valuable.

David:

I think there's something to be said for just the speed, right. So I bought my first house in Missouri. And then I moved and I haven't lived back there since and I'm moving back there in like three months. But even with an I have a pretty, I would say a pretty solid team. I've got people who will look at a house for me, you know, and meet as soon as I can connect them with the seller, I've got a guy who clean houses out, I got maintenance guys, like a property manager, you know, you whatever, I've got a fairly good team at this point. And yet, I still feel like if I was there physically, even if it was whether it was me or like me and an acquisitions guy who sat next to me, things would just be able to move faster, because it would just be like, there are still times where I'm like yeah, hey, you and you link up and try to find a time to go to the house.

Whereas if the seller was like, Yeah, that sounds good. It'd be great. When are you free? Awesome, I'll meet you there and no matter what, like I'll be there at this time to look at the house. And I'm so there's still a little bit of a lag even with five years of having a good team that I'm just excited to be there in person where it's like, okay, yeah, I can drive by that house today in preparation for my call if I want to or I can, you know, instead of there's things that I have to do sequentially to make sense before I start wasting my teams time at this point that i'd be okay driving by house on the way home.

10:00 - 15:00

Alex:

Well what about your talk about team building darren what about team building not for hey I'm able to go to this house because i'm close but how about I can hang out with these people and have those conversations more often face to face and that develops deeper relationships can you talk about that that that side of it a little bit?

Darren:

So you mean me building a relationship with the team or the team building relationship with the sellers?

Alex:

I mean you and them working together like face to face it's it's much in my experience and maybe you know people just different I mean I definitely think tele networking is going to have more value but after COVID since we're all doing a lot more telephone networkingIi actually think the value in face to face relationships is far more far higher than I had realized I think it'd be much harder to replace than I had thought before.

Darren:

Yeah, I think the value of it is it's only getting more and more valuable is because we're getting less and less of it so I agree with you having that face to face contact we just it's it's hard to do these days and hard to get in front of them so when you can do it people really going to appreciate that much more as far as me and my team I actually just past the one year mark of not going back out to colorado to visit and hang out with those guys which is mind blowing to me I was there I probably forgot about 10 times a year the first two years that I was doing it so back and forth all the time and the in person meetings are invaluable and the stuff we would come up with so we just had to find ways of working around it I can't say it's as good because it's not but we've been able to make it work and we've we've made some huge pivots and changes I think also because I had that relationship with him where we had hung out for so many times we had that build up but if I was doing it from scratch with somebody who I just only had met on the video yeah that would be that would be super tough.

Alex:

Yeah that's where I was gonna go next where it's one thing if you're I can go away now because my team and I you know we're super tight and hey I'll fly back a couple times a year and I maybe not fight back at all like we're friends for life we're bonded for life but that would never have happened if I had to do it over phone calls so you know I started a long time like I've been making content about long distance investing for a while and I think over the last 18 months it's definitely shifted to hey find the deals find the people who manage it you know just keep on giving shoving like giving them work and you'll build that relationship you know fly back once a while and now I think because the way the market is I definitely think there's value in being boots on the ground more more so than there was two or three years ago.

Darren:

Yeah I missed the heck out of it.

You touched on there you know finding the deals and I'm sure you have a lot of people kind of starting out in real estate trying to figure out you know how do we find these deals and we've bought you know a couple 100 houses at this point and I wish I had like some clear cut answer but you know as much as we set on focusing on your location I think the exact same thing applies to focusing on your marketing and so there's there's a lot of things that work out there and your listeners are probably you know read the list of you know dozens and dozens of ways of marketing and finding buyers there's really expensive ones and there's, ones that take a lot more time but you know are cheaper and one thing that I've learned on this and we're even getting back to like we've been so diverse on our marketing but we're coming back and we're trimming down and we're cutting out things and we're doing less and deeper marketing and so if people are trying to find these deals there's no one best way out there but but find find that neighborhood you like maybe it's a couple 1000 houses maybe it's a zip code maybe it's maybe a little city if it's small enough but like learn everything you possibly can about that area drive it around as you said and like knock doors, put up flyers like walk the streets at different times a day to learn you know what's hot talk to other investors and then pick your one type of marketing one.

Maybe you're doing probate maybe you doing foreclosures maybe you pick 100 you know 100% equity homes or however you're pulling your lists and then just really dive into that a lot you know call them, text them, mail them on on a small list so if you just get started stick small you know maybe it's maybe it's a couple dozen maybe a couple 100 maybe you can do 1000 if you have the budget for it but keep you know just do that one thing that one type of marketing to those people over and over and make that work before you branch out so just like location you want to stay in narrow I would say marketing do the same thing because it's so easy to outspend yourself and you could spend all your money in like two months and not get a deal and then you're done whereas if you stick small and narrow little drag last a bit longer better success.

Alex:

There's so much parallel to that advice as thursday the first thing you said is like hey look starting your market and so those two ideas are so similar it's like dude start with what you know you can get done and then as you get better expand, niche it down, start in your market start with a three, two that rents for 1000 bucks, you know, whatever the case is, like, start get that and then it's like, hey, look when your cup overfloweth then, you know, expand.

So I love that those ideas are parallel in the same overarching strategy.

15:00 - 20:00

David:

Yeah, it's crazy when you hear people say they're sending 12,15,20,000 mailers a month, right. And I compare that to what I'm doing right now, which is like one 2000. I'm basically sending like, 4000 a quarter right now. And then I talked to people and 4000 a quarter sounds crazy to them. And I'm like, Well, you know, when I first started mailing, like the first list I ever mailed, I hand wrote, like, 120 letters, because I was too cheap to pay for letters.

And then I basically dropped them in mailboxes, because I was like, I can buy stamps, but I'm a knock on a door. And if they don't answer, I'm gonna put this in their mailbox. And I didn't address the ad I just wrote, like, you know, the advert like, I'm like, standing outside, like writing the address on the letter as I'm like, sticky in a mailbox.

Darren:

I love it.

David:

And that didn't work at all. But, but it was I didn't have them. You know, you start out and I continued going back to them, I got some very interesting phone calls, that I was absolutely in the wrong neighborhood because I didn't know what I was doing. But put in perspective, I got a phone call from a $20 million homeowner who was like, Dude, are you like, you're in the military, you're not buying my house or like literally literally asked me if I was a front runner for Obama, this is out in Hawaii.

And so I was like, Okay, well, that's that's not probably not the people I need to be marketing to. So the two main phone calls, I remember out of this list of like, 100 people with someone who thought I was like the president, President Obama at the times, front runner and somebody who was Donald Rumsfeld son, and I was like, Okay, you know what, I'm doing this wrong.

But anyway, all that to say, like, I kept doing the small handwritten, cheap, affordable things back in my Missouri market. And it worked. Yeah, now I'm doing that on a bigger scale. Because it worked. I didn't I wasn't spending $4,000 every couple months on mailers, when I first started real estate investing, I wouldn't, I would never have made it if I didn't, if I didn't find a deal doing that in the first go, I would have been done, I would have been it.

Darren:

That's exactly that, that right there. The fact that you did that though. That's what it takes, that kind of drive, that kind of like motivation to get out there and do that, not just once, but over and over and over again. Those are the people you hear those stories who've been successful over and over again, because they did the hard stuff. When I was working computers every day on my way home, I would spend several hours putting door hangers on in different neighborhoods that I love.

And just like you, it didn't work. I don't I don't know if I got a single deal from those door hangers. But the fact that you know, I spent you know, starting out months doing that four hours a day and then going home handwritten bandit signs, driving my truck around town hammering them in you all those things you do when you're hungry. And you know, they're cheap. And they're things that you can do on your own. And you get used to being embarrassed about that kind of the thing, like, you think, Oh, I'm hanging on the door. I remember when I first did that or hammering in the sign. I don't do bandit signs anymore. I haven't in years. But you know, it was one of those things you had to get over people being embarrassed and just talk with people. And I think if you can do those things that are out of your comfort zone, put you in those places, you're more likely to go talk to a seller because let's be honest, guys, when you're getting started, just talking to a seller can be scary as heck. The first time that phone rings, you're like, Oh my gosh, what do I say? I love what you did.

David:

The phone rings and I'm like, Oh, I like I I'm I have a call center at this point that I use or be or people to take my calls because I even after three years of being a recruiter for the military, I'm just I got I just do not like, like when the phone rings and I'm like, is this gonna be another like screw you lose my number. Like, I just don't want to deal with this. And so I finally was like, yeah, this is not my strength.

Like I like making phone calls. Like if it's a motivated seller, like so I basically just want to screen them out and then set an appointment. I'm like, I like the motivated seller. Let me get on the phone and sell, build rapport, whatever. I don't like the like, Hey, this is Dave with freedompop. All right, and my day has started now like I don't do that. I don't do that very well. I kind of got over that in life. So you know, so..

Darren:

I put one point though, you just found if someone's getting started this, find the thing you hate the most and hire for that so we can get into hiring conversation. But yeah, if you don't like something, find that person first. You got a call center. I have a great lead manager that was on the first things offloaded to because answering that phone sucks.

Alex:

Hey, Darren, I don't like doing any work. Can I outsource everything?

Darren:

Not for a very long time. I'm in some masterminds and then one is a really good one where there are people who are running, you know, multiple 100 properties a year businesses that only work for a couple of hours a week. But that took years to achieve that level. And there those people are way smarter than me.

20:00 - 25:00

Alex:

Oh, I'm very smart. That's easy. So yes, yes is what you're saying?

Darren:

Not that this one was smarter than me, they are there so much. I would say they're much more dedicated than me like their work ethic. And I work very hard. But their work ethic is on another level like they are able to do...

Alex:

No, I don't want to do any work where you're missing the point here.

Darren:

You have to do it. So no.

David:

What's the Bill Gates quote about if you want to find an efficient way to do something, hire a lazy person, because they'll find the most efficient way to do it. I love that mentality. I used to joke on recruiting duty. I was like all the best recruiters are fat. They're like, What do you mean? Like, the guys who don't want to spend all this time doing all this extra work? Are the guys who will find the fastest way to get someone to enlist? They were like, yeah, okay, whatever. And then we did like an award ceremony, the end of year at all the best recruiters were fat. And I was like, Yeah, yeah, that's what that is like all the lazy dudes. Because I got to the point of recruiting duty, where is like, how do I do the least amount of work to still get three people to enlist?

Yeah, yeah, I want that answer, not how do I do the most amount of work and enlist the most out of people? Like how do I get the least, and meet what I'm supposed to meet? But then, of course, you know, anyway.

Sponsor:

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So you know if this is the service that sounds good to you for free 99 then reach out and if not, then enjoy the show right now.

David:

So I guess on that note, like what, uh, you know, you're talking about building a team and hiring some of the sounds like what are some of the things I'm actually gearing up to hire. I just read the book who and I've read who not how and I'm, I've got a phone call next week with someone that I respect, and this regard but I'm gearing up to hire my first full time I guess you'd say admin like basically just handle all this stuff that I'm really bad at that involves like the uploading of content and sending stuff to my editor and replying to emails and all that junk. I guess I would just ask like, what are your thoughts on you're gearing up for like your first hire? What are some things you wish you'd known when you first started building out a team and genuinely going from people who helped me because they're involved in the process to like, okay, now I need to bring in like actual dedicated full time to help.

Darren:

Yeah, there's so many ways you can go about that question and that is an amazing book. So I love that you've read that before you got started. I'll give you a great start.

The two main things talked about is one, like how you hire the people and then build those people as like, you know, pour yourself into them, make sure that you're helping them you know, achieve their goals and stuff through that side of it. And then there's just making sure they're actually doing the stuff that you need to get done and have a you know, processes and you know, and systems behind that.

So, from the hiring side, I I love automating that as much as possible for me. So I've used a system called Wise Hire. I think it's 200 bucks a month. So that is a little bit pricey, but you don't have to use that but something where you can screen that has the people screen themselves automatically. So if you post a Craigslist ad or Facebook ad, make sure they have to do something you know they have to, I like to have them go to a disc test. Disc test it takes you know a couple of minutes and then email it to me and then book something on my calendly link here and what that does is that makes them jump through a few hoops so you're not just getting 50,000 people you know sending a resume and saying you know here hire me and then it's carpet so that's kind of step one.

25:00 - 30:00

Darren:

Going through the interview process there's some great books out there I could I could dive into that a bit but just make sure you really you know what have they done that they've been really successful at what is excited them what is driven them and doesn't matter if it's in the same field or not I don't really care if they have the knowledge but what what are they done that they've that they've just crushed maybe it was maybe it was high school sports you're hiring somebody out of school maybe they were you know salutatory in or whatever but I want to I want to know that they were they've been successful and driven at something.

Once you have them on your team and you've got them there you're working with them you really just want to know what are their goals like like do they have what are they trying to achieve and does the role that you are putting them in help them get there so if their goal you know is they want to be a salesperson well if you're hiring from admin job that's probably not a good fit just because you know you're not helping them learn the skills and get to where they want to be you know one of my employees his goal is on a bunch of rentals so he's my lead manager he is doing great he's actually flipped I think two or three properties in the last year that he's bought through the company and so we're helping him achieve his goals not just in the role but in life in general.

So there's a whole lot more to that but that's that side of it as far as what you're having them do you want to make sure I go through the list of eliminate was eliminate automate delegate I think that's that's the order that I use so go through what you're doing and your admin tasks write down what you what you've what you do every day for like a week or two just all those little things and then what do you hate oh my is hate answering the phone okay that's the job you want to hire.

For an admin person you know write all those things down and then you figure what am I doing that I don't need to be doing I can just stop doing it get rid of those what can I automate maybe there's a system I can make this easier maybe i can automatically had that list sent somewhere to you know to be uploaded okay if I can't do that well now we need to delegate this but when you're delegating you want to make sure that you have an actual process that they can follow if you just said hey download that list and put it in there you know put it in the system well there's there's there's about 50 steps probably in there that you don't really think about that they can mess up so the system we use is, it's a it's a free chrome plugin called Loom and what it does it's a video capture and it's it you can make five minute videos for free and so we just make a little screen capture of what you're doing and your little videos on there and you talk through it and it shows them the process of what it is you do step by step and then we take that we put into a software called Asana it's just a project tracking software and you lay out the high level steps so we don't get into super detail because it takes forever and if you're going to be delegating them you know 30 tasks to do you can't spend all your time tracking that.

So that's just it we when you're having to do something make a little quick video of what it is put it in that Asana and then in the beginning with people I don't do this later on it's a weekly or monthly report but in the beginning I want them letting me know every day what is it I got done that day and then what am I plans for the next day just to make sure we're on the right track so for an admin that's a excellent thing you want to have them do just because it is so many little things so I know that was a lot but that's that's kind of the high level for how you bring someone on and then have them doing the right stuff.

David:

I really like that and I actually I really liked the fact that you the what have they been successful at and not that it matters if they've been successful in your specific field but just that there's been something that they've exceeded and i've noticed that in life and I kind of clicked while you were saying that like the people who do well in life seem to be some so like I have a bunch of buddies from high school that are all eagle scouts right I was an eagle scout whatever but like when i think back to high school and I’m like what are the people who I think of that are like they made it like they did something worthwhile like man of all the guys I know who were eagle scouts like they're all doing something really successful and it has nothing to do with being a boy scout I think it just has something to do with like if you're doing like the ability to like if you're doing something do it well and I think that's like a i mean that just makes sense right like it doesn't have to be pursuant to any specific skill set but if you're that kind of person like you're not going to want to do anything anything you're what's the phrase anything worth doing is worth doing well or worth doing right or whatever and people with that mentality will succeed and I think that's a cool point that I hadn't really thought of in the hiring process but makes absolute sense to me.

Darren:

Yeah, that's probably the most important thing that's out of all of that so you keyed on the best that was that was the cream.

30:00 - 35:00

David:

That's cool.

Alright let's see there was one other we're gonna talk about Some private lending and how you've been able to use some, some when the lending side to kind of scale your business a little bit.

Darren:

Yes that and this is something that I want to be, I tell people to be a bit cautious on, especially in the beginning because, you know, private lending, it's a tool, but it's something that can be dangerous as well, you know, if used the wrong way, or if you if you're getting no bit over your head, you know, I, for me personally, and what I would recommend anybody is if you are working with private lenders, I only use that money for buying and rehabbing houses.

And that can be once I'm holding or it could be once I'm flipping whatever it is, I don't want to touch anybody else's money for anything that's operational in a business. So I'm gonna put that caveat and right up front, you know, if you're borrowing money to pay for your marketing, that you may never see back, you know, that could be dangerous, because now you're you're you may just end up with no money and you're working your job to pay somebody back for something that is there's nothing equity tied behind it.

So I always, I tie mine with the deeds of trust to a property.

Alex:

Does that specifically have to do with collateral? Or does it have to do with exit strategy?

Darren:

It has to do with collateral.

So that's it. I mean, I'm, I know, people that have borrowed for operations. But for me, it's I want to know, if I'm using somebody else's money, that that money is secure, and it's secured against something, and maybe I have a tie with the deed of trust, maybe it's just, I they're lending it to me on a personal or a private note. But I have it earmarked as rehab for this property. I know what or where it is, what it's going towards, and I have plenty of equity in that property. So if something went badly, I know my private lenders are getting paid back. You know, that's, that's just paramount to me to make sure that happens. So.

Alex:

Yeah, so I spent a long time not a long time, I spent some time in commercial underwriting. And from a bank's perspective, that's the first and most important thing and I think people under appreciate it from the outside, like from me from a banker's perspective. I'm like, dude, collateral is one first and only, that's the biggest risk mitigator that's the number one thing that the banks care about, they don't care how your track record, it's like is the money secured against, you know, non depreciating asset.

Yeah, cash we do, like SBA will do cash loans for cash flow businesses, but it's a smaller percentage than, and it's much harder, right? It's like, Oh, you just want to do Ops, you just want to do a cash flow business, we have nothing to sell if you default. So that line of thinking and I think people the advice I'm trying to make for listeners is if you're going out there and looking for private lending money, or you're trying to be a private lender, collateralization is kind of what you said. And then I know that from the bank side is like, paramount number one.

Darren:

I love hearing that from the banker side, I don't know much about banking, I don't have a couple of bank loans, but most of it is private money. So it's nice to hear that I'm on the right track there.

David:

Yeah, I just signed my first deed of trust and mailed it in tonight. For my first like, 100% private money, buy and flip. So I've done things like promissory notes with like friends, where it's like a piece of the money or you know, whatever. And like on the lender side, but this is my first my first like completely 100% private money, I'm not going to have any cash in the deal. It's not like a large pool of investors or anything. So kind of cool. Kind of exciting. So kind of glad that you mentioned that that was the document you use. So I'm on the right path here.

Darren:

Congratulations. That's a huge step like your, your first no money deal. Like where you bought a property with zero dollar. I mean, actually, I bought a property earlier this year where I got a check for like 50,000 at closing. Now granted, it went towards some of the rehab and stuff like that, but it was, you know, when you do stuff like that, you're like, wow, this, this really can work. Now, again, back to making sure you have the collateral, make sure you have the equity in the property to do something like that. Don't just go borrow willy nilly. I'm sure you didn't.

David:

Yeah, yeah, no, I think this one will be a really quick move. But I also have a property with, you know, three times the equity of this deal closing on the first of April. So I'm like, yeah, if the world ends, I just pay him out of that. Like, I'm not. I'm just..

Darren:

That's it.

David:

Whatever it takes to make sure my first legit private lending deal goes well enough that he will be a good reference for me.

Darren:

And you set it right there. I've lost money on several deals. And not that I was hiding anything, but my lenders didn't even know they still got their interest. They still got their return everything at the closing, and it was all completely transparent to them. So making sure they are whole even if you have to take it out of something else, or whatever you got to do.

I love that you're, you can do that your reputation is everything.

David:

Yes, I've learned well, not that my reputation, it sounds it sounds really weird to say that yourself. Right? Like my reputation but the reality is like I've had conversations with people over the last year where it's like, yeah, sorry, man. Like my reputation is not worth that risk.

35:00 - 40:00

David:

And I've realized I've come to realize that like in the Real Estate world, it's like you saw what was his name? The, the turnkey operator who went down like a year and a half ago? No, I don't want to say went down. But like the reputation went out the window and all of a sudden was like everybody, and their mother stayed clear. Like realistically I mean, that's it right people will lend to you, the guy who's lending on those deals me. Prior to talking terms on this land, we had never had a phone call. It was just I sent out an email and he was like yeah man I wanted. Okay, well, that's, that's only reputation, right? So you know, who am I to thank that and then now, I’m screwed.

Darren:

It’s interesting.

David:

It’s gonna sue Alex for the wonderful WiFi just cut out on us.

Darren:

He's on the phone there. But that's right, we can go into the private lending part a little bit more.

So that's, that's how you secure the money. And then just my general philosophy about it. As far as raising it, I'll be honest, I am not that good at raising private money. It's taken me years to do it. I still do it. It's part of my regular process, where I have tasks several times a week of calling people who have expressed interest or who have returned an email or something that said, Yeah, I might be interested in something like that.

So I'm still at something I'm constantly working on. Because you're always trying to get more money and then try and get, you know, lower rates. So it promotes another, you know, somebody else who has been following their system for a while and I've gotten some success out of it. It's a seven figure flipping, and it was 30 days to $500,000.

So yeah, it's like the bucks for this 30 day video series. And if you Google that, I recommend I mean, I could I could sit here and you know, talking talk for an hour on it. He's gonna tell you way more.

Alex:

Bill was a good friend of ours.

David:

Yeah, I was gonna say Bill, Bill, we co hosted a veterans event last year with Bill so big, big fans, for sure.

Darren:

Bill Allen is awesome.

He certainly is. Yeah, I've learned an absolute ton from that guy. So yeah, he again, he's one of the ones who are way smarter and way more driven. You know, he spends a couple hours a week and his business and they're doing millions a year so that's just in his in his wholesaling flipping business.

David:

He was he was actually who came to mind when you were saying that and I was like, Yeah, but he's been like he's got well I mean, realistically, let's be honest, he's got one guy on his team who looks like a professional football player and that's that's really wise.

Darren:

That's totally it's how he looks.

David:

Anyway Oh man, that's awesome. That's good stuff. But you're right I think it is like well, oh shoot I'm paying you mentioned that the more people you talk to about private money the lower you can get as far as the money you're having to pay them.

I am 100% overpaying on this as far as what people want when they do private money I mean, this is more expensive to me than hard money would be this is because the deal is gonna work I'm gonna make money like he's gonna make a lot of money on it too. But I just wanted to make it worthwhile on my first one to make sure like, okay, cool, everything goes well, happy investor happy life happy, whatever.

But going forward, I'm not going to be offering the same kind of terms to people and I think that that's kind of the key is like okay, now that I'm good now this is a proven system. Now I need to build this up to where I can have more desirable terms with people.

Alex:

When I flipped my I started just flipping houses. I've only done a few. But when the first few are like, I paid a lot to the borrowers or to the lenders, because I was like, Look, take a risk take a chance on me even though I've rehabbed a bunch of houses, I've never exited one as a flip. So take a chance on me, I'll pay you a high cut way more than way more than I need to. So that you know to build some of that goodwill, and then now even only a few flips in, it's like, now I have the cheapest I have money that's so cheap. Not on a lot of volume. But you know, some people they'll find my flips where it's like, I can have to pay you more than you asked because you undercharged me.

Darren:

But see what you just answer this then how was the rate set on those people who are paying too little?

Alex:

They offered it

Darren:

Exactly.

So David, I want to. You should watch that 30 day video that series we haven't and that was when you said I shouldn't offer rates that high. That's so you're not offering rates at all. You're talking to them about what they need it's just it's just like buying a house that's the exact same thing you're you're providing a service that person when you buy their house, it's the same thing with with with big getting private money.

You're providing a service to that person by allowing them to earn interest on their money. Granted, we want that money. We need that money to run our businesses, the grease, but, but you're helping them out and find out what they need, find out what interest they want. But yeah, it's a good series.

David:

That's awesome.

All right, Darren, we got a few questions that we ask every guest.

Darren:

Okay, good ahead.

40:00 - 44:46

David:

All right. So the first one is if 18-19 year old, E one E two walked up to you asking you for advice, what would be the one thing that you feel like you'd have to tell them about whether it's like for real estate or, you know, whatever.

Darren:

Gosh, I think on the spot, I'd have to go back to what we talked about before on that, on that focus that that narrow and deep when you're first starting out, and if I'm, if I'm an 18 year old, I'm just getting started, I'm going to, I'm going to pick one small area and pick one one thing that I really like, that I want to do, and just and just dive in deep and then be consistent about it, you know, success. It's, it's being narrow, focused. And then success is doing that over and over and over again.

I mean, it's really boring a lot of stuff we do, it's being able to do the tedious, boring things over and over are what eventually, you know, lead, you don't have to do those anymore and to be successful. So this focus go narrow and focus.

David:

I like it.

Alex;

Excessive boring, I like you said that. I know that's not a universal truth. But I think some people get in this. You know, it's like, they hate their jobs, because it's so monotonous. So they want to start their own business, and then they start wondering, like, it's monotonous. And it's like, okay, like, some of this is monotonous stuff. It's like, especially, you know, I do rentals, it's like, dude, I don't do anything, you know, the money comes in. Everything. Everything I have to do with rentals is something new. But I just love that you said that, because I know it resonates with me personally, I guess.

David:

Yep. Yeah, I agree.

Alright, question number two is what is a resource that you would recommend to anybody looking to get started in real estate?

Darren:

So, you know, everybody thinks of, you know, books and software and all other things. But for me, the biggest resource is networking with other people. And so, you know, joining some type of mastermind, even if it's at an entry level, you know, getting out and just be able to talk to as many who, again, maybe there's a local Ria group that you can follow, you know, follow someone around and work with them.

But networking, that's, that's, I know, it's a stupid resource. But like, talk with me, people, you can, you know, the seven figure flipping group I'm in, I think they have like an entry level one, you know, like, we're on a Facebook group, and you can ask questions, and they can respond. BiggerPockets is another great, great one.

So these are all resources they've probably heard of, but that's where you're gonna get more out of, whereas I've read almost every real estate book out there, but you know, they're always on like, one specific thing, and they're not going to give you kind of the breath you need. So you know, people.

Alex:

I'd like to plug David's Mastermind The War Room, because he won't do it enough. To be honest, I bought a 52 unit in December and I there's no way there's no way I was even on a trajectory to close that kind of deal without that War Room. So there are a lot of mastermind group masterminds out there. But this guy runs one, or wherever it is on the screen.

Darren:

Join the war room. I mean, yeah, well, people in their closing 52 unit deals if you're looking to get into multifamily, or, you know, flipping houses. Sounds like that's the place.

David:

I appreciate the shout out Alex.

Oh man. Yeah, no, I agree completely, that people are probably my only we don't even wanna say probably they're, they're the best resource, the best investment that I've made, and, and they've given the best return. And it's amazing how much they'll surprise you in life, right? You never know who's gonna come out of left field.

And I mean, like, we were just talking about, right, someone's lending me $50,000 on a deal that. I mean, that's, as far as the Marine Corps goes, That's more than my W two taxable salary. And they're just like, hey, yeah, sure. We talked on the phone. I trust you. Here's the money, like, Oh, well, that's cool. Yeah, so it's crazy. Yeah it's people for sure. I agree.

Darren this has been a lot of fun. This is good. I feel like we could talk for a long time about a lot of things.

Where can people get a hold of you if they'd like to reach out? Where's the best place to point people?

Darren:

Yeah, they could shoot me an email my collar businesses Sell My House to Smith. So it's [email protected] Shoot me an email and I'd be happy to help anybody or talk about whatever they want.

David:

I love it.

Easy. That’s easy to remember and I will absolutely link to it in the show notes. Make sure we point people in your direction, brother.

Darren:

All right. Well, thank you so much, David. Alex, y'all have a great night. I had a great time. Thank you.

Alex:

Darren, you're a good man.

Darren:

Thanks. Bye.

End:

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