Episode 148 | Sean Pan | Military Millionaire

00:00 - 05:00

David:

What's up military millionaires! I'm your host David Pere. I'm here with my friend Sean Pan, who is a real estate investor. He and his fiancee now, right Sharon are both real estate investors, entrepreneurs. And they're both in a YouTube mastermind group that I've been part of for probably close to two years now, year and a half, two years.

And so Sean is a real estate investor who lives in California and invests out of state. And I wanted to get him on the show, because that's what I like to talk about. But he's also a hard money lenders, we can talk about hard money, and some of the longer term financing that's available out there for investors, as well as some of the like YouTube and content marketing and online platform stuff because, well, they're both automatic factions, Tiktok is probably got more followers in the last like week than I've ever seen on my page. So, you know, they both have a pretty good presence, and they do a lot of stuff in the entrepreneurial space. It's not just real estate, they do a lot of different things. And so it's a lot of fun. We've gotten to know each other a little bit over the last couple years. And I thought it'd be fun to get them on the show. So Sean, thanks for joining us.

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 Perre. And together with my co host, Alex Felice. We're here to be your no BS guides along the most important mission, you'll ever embark on your finances.

David:

Hey, guys, I want to talk to you real quickly about PropStream, which is actually one of my favorite platforms that I've ever used for real estate investing. And I really wish I'd used it sooner. So PropStream is essentially if you combine list source with the MLS or multiple listing service with the ability to comp and pull tax records and all kinds of stuff. So you can pull super, super super niche lists like somebody who inherited a home and tried to sell it and has 70% equity and failed to sell the home. And then you can send them letters, you can pull all kinds of missing and just more data than I even know what to do with. But you can also if they have a property, you can see what else they own. And you can do all kinds of stuff. You can skip trace, you can send mailers, you can do everything through this platform.

And I recommend you check it out. There's like a two week free trial. If you use our code, which is frommilitarytomillionaire.com/propstream or down in the show notes slash description. You'll see it and I recommend you check it out because I've used it now for four months. And I've got four deals that were all pulled through Prop Stream lists, so it is incredible.

Sean:

Yeah. David, thank you so much for having me on the show today. Pleasure to be here.

David:

Absolutely.

I like your hashtag podcast shirt.

Sean:

Oh, yeah, I actually got this podcast movement over there about a month ago.

David:

How was that?

Sean:

It was a lot of fun.

You know, I think you would have gotten a lot of benefit from it, because it teaches a lot of best practices about having a good podcast.

David:

Hmm, yep. I don't have any best practices. They're just winging things. And they might work, they might not.

Sean:

I've been doing my show for like three years now. And it's all some basic, some basics in there.

David:

You're like, yeah, I got 150 episodes out. But I don't always remember to do an intro. Or I've recorded one not too long ago, where I didn't hit a record for like three minutes. And I was like, to go back to the beginning of this still happens.

But why don't you give the listeners a little bit of background on how you got into real estate and kind of what you guys have done so far.

Sean:

Yeah, so if you guys don't know who I am, my name is Sean Pan. I used to be an engineer in my past life, you know, so I went to high school, got good grades, and went to a good college. And then I figured I'd be an engineer and work until I retire at age 65.

But very quickly, after graduating from school, and getting my first job as an engineer, I realized that this is not where I want to be for the long run. And I started finding ways out basically, I started different businesses, I started selling products on Amazon, tried selling some, some like books online. And I even started a small quote unquote, tech company with my friends. But none of those things really panned out. It was really until I got into real estate investing that I finally saw a path to me being able to leave this full time job, aka the full time grind, and be able to do something on my own.

Honestly, one of the major downsides of having that full time job is that while it is like nice and safe, there's no real big potential for growth, you know, you're gonna be limited to what your boss is gonna pay you. And if you're not happy, you don't have any options. So you need to like to do whatever you can, especially when you're young. Take these risks. And that's basically what I did. And that's how I got into real estate investing.

David:

Yeah, I like it. I agree completely.

I tell people like the one of the biggest benefits and probably the most overlooked benefit of a W two is the ability to take massive risks because you can if you go out and buy 100 properties, and they all fall apart you know, whatever, like you, you still have a job. So you're not you're not gonna die, right? You buy your first property and you're like, oh my god, I'm going to lose everything. You can take a little bit of those risks but you have to take those risks. Otherwise, you're just gonna get stuck showing up nine to five for the rest of your life, which is, which is, you know, as much fun as that could be for like a year. It gets old and gets real old. So.

05:00 - 10:00

Sean:

No, I mean, the biggest and the saddest part, I guess, were people who are like my dad's age 30 years older than me, and they were still unsatisfied with their career choices. They were telling me, Sean, when I was your age, I should have jumped to different jobs, I should have tried new things. But now I'm old, I don't have the opportunity to try these things, or I have a family to take care of. I don't have the luxury of taking these risks. Whereas I was like, Okay, I have no excuse. Let's go and try different things.

So yeah, that'd be said, I didn't just go ahead and quit my job right away. I built the path. I was like, Okay, let's learn about real estate investing. Let's go to meetup groups. Let's try investing. And then once I have good, then I could feel comfortable enough to leave. And that's basically what I did.

David:

I like it.

So at what point did you decide that you were ready to leave your job? Like, what was that work? I'm in that groove right now. But, you know, what was the decision for you?

Sean:

Yeah, so I got really lucky. Okay, so I used to work for a defense contracting company down in Southern California, we were making these big billion dollar satellites for the government. And we had this one project that requires someone to go up to northern California to work with another company.

The thing is, most of the people already had families in SoCal. So they didn't want to move from Southern California to Northern California, and actually from Northern California. So they kind of went down the list of the most senior management positions and said no, no, no, got to me, I said, Yes, I volunteer, I'm going to go up to work up there. And when I went up there, because you are technically moving, they're going to pay for your per diem, right, they're gonna pay for your stay, they're gonna pay for your food. So actually, I was making a lot of income for a while, while moving and working up in Northern California. The thing is, there was a deadline, I knew that in two to three years, that opportunity would be done, they would tell me to come back to Southern California, and I'll be getting paid my regular wage.

So right, then I knew I had three years to get all my things in order and leave my job when they tried to pull me back. Because there's no way I'm going to come back and effectively get half the pay, and I was getting ready, right? So I already knew, like I have a three year timeframe. Let's get everything done. So I can leave at that time.

David:

That's cool.

I didn't actually realize that that's a pretty sweet opportunity. I mean, don’t get me wrong. San Francisco is a little bit more expensive than San Diego, but it's not. It's not so much more expensive than, you know, half your wages would like that, that's a significant cut still.

Sean:

I mean, it's a per diem thing. That's why, like, they're gonna pay for your food, they pay for your car expenses, for some, you know, percentage of the mileage or whatever. And that's why your income is boosted right.

On top of that, I had a property, and I started the house hacking method. So I rented out the rooms to my friends, also from Southern California, who moved to NorCal. They're my friends, right? I'm used to living with roommates, so I said, Just come live with me. So it's less lonely for me. And I can, of course, lower my cost of living expenses there.

David:

That’s smart.

But House hacking is like my absolute favorite thing that you could ever do getting started in real estate. I think that's the best idea for really anyone starting real estate, I love just all different versions of it. But I also like the fact that you were able to do it to essentially subsidize your living costs in a more expensive market while you're getting paid extra for living there. And you're living with friends. Like that's, that's a win all the way around. Because I would also imagine, you probably let them stay for a little bit less than what they would have been paying just to stay at, you know, some, some other. I mean, that's not the cheapest market in the world. So you probably let them stay for a little bit of a discount because they're friends. So it's a massive win-win-win for everyone.

Sean:

Absolutely.

You know, and honestly, I hate dealing with nitpicky tenants. So I do charge them less for another reason to write if I'm charging them less than they're not gonna complain to me as much.

David:

Yeah.

Sean:

They know that. Hey, if I tell them you know what, it's not working now go find somewhere else. Their rents are gonna be a lot more than if you just stay with me.

David:

That's true. Yeah, that's a good point. Yeah.

We're in San Diego, I had a roommate, my buddy John. And yeah, the same thing charged him a little bit less good friend, but it was like we'd work out together, we keep each other in check. We drink a beer at the end of the day and talk about real estate. Like, don't really get any better than that. I mean, aside from actually living with my family, which is usually better than that, but you know, maybe John can come anyway. It was a good situation.

So alright, so your house hacking, you're on per diem? Three years is a pretty tight timeline. Did you own any real estate other than that before that three year mark? Or was this kind of when you were getting into it?

Sean:

That's basically what I was getting into it.

So this was 2016 ish. But you know, it wasn't like I didn't know about real estate investing before that. I have probably been following bigger pockets since around 2013. I always plan on buying properties here and there. Like even in Southern California. At the time, you could buy some condos or some for plexes for about $300,000 over in Compton and Inglewood. My girlfriend's dad at the time did not want me to buy those properties because he didn't want his daughter living with me incompetent. But in any case, I decided not to buy it. I focused on school and focused on my job, and it wasn't till 2016 when I really got into it. And it's funny. I was just scrolling through Quora, Quora, the app. And they said, Oh, what's the best way to get into real estate investing? Go to networking events. Go to your local RIAs, right real estate investment associations.

10:00 - 15:00

Sean:

So I did, you know, I went to meetup.com, I signed up for almost all the top real estate investment groups out there, and just showed up. So you know, the first few weeks you go there, no one knows who you are, they talk to you briefly. And then they walk away. And the next month, they see you again, if you're who you are, then you have the same conversation. So I did that for a whole year, you know, just showing up to groups, understanding the different types of real estate investing strategies, and where to invest if you want to invest out of state. And eventually I said, You know what, I can't just continue going to these meetup events, and not doing anything, right, I need to have something. So I had the funds, I just bought a property in Jacksonville, just to see how it was. And not gonna lie. I don't think it was an amazing homerun or anything, but I think it's a solid base hit. By buying that first property, I learned so much, you know, just when the whole process of finding the property, finding the right team members, like your agent and property manager, seeing what rehab really is like, and then seeing the checks come in, you realize, wow, they really wasn't that bad. So they could do another one. And another one. And that's basically how we got our portfolio started.

David:

Yeah, no, absolutely I love that you mentioned the fact that your first one wasn't necessarily a Grand Slam, just space hit. I think that's so crucial for people to realize people get wrapped around like, you know, not buying their first deal yet, because they want to make sure everything's perfect. Yeah, your first deal is not going to be perfect. My first deal wasn't my best deal. That's a good deal. But you know, it was not my best deal by any means. But you're never going to learn if you don't just pull the trigger, and go, like, you can read and learn and network all you want, but you really don't learn until you own a house, and you're like, oh, wow, this actually works. And holy crap, I can you you know, whatever.

So I think that's a really powerful point for people to understand is that, you know, doing your first deal is more important than like how good your first deal is, if that makes sense. I mean, obviously, you want to get the best deal you can. But even if it's not the education, you're gonna get out of that, as long as it's not a, you know, terrible deal, you're gonna be totally fine. And he's gonna pay you so much in the long run just from what you learn from that.

Sean:

Absolutely.

And I think the risk is also relatively low, too. Like, if you're buying a regular house, for long term rental, you're getting property for just 20% down. So for $100,000 property, you're really only risking $20,000 upfront. So even if you lose money, it's unlikely you're gonna lose all of your money, right? You're not gonna be $20,000. If you can hold it for long term, you can make the payments, then over the long run, you are most likely going to be better off than not doing anything. And of course, you learn so much from the experience. It's just it's really worth it. Just get started and try it.

David:

Yeah, absolutely.

I also love, I want to key in on something you mentioned a minute ago. So just before this, I literally had just finished recording a video talking just through a couple limiting beliefs, one of which was imposter syndrome. And I said, Hey, the reason that or the way to get out of imposter syndrome. In my opinion, there's a couple of ways but the main one is to get around people who are doing what you want to do. And they will push you in the right direction, right? Because it's exactly what you just said, you can't like the mentality of I can't keep going to this meetup and not doing something. And like, that's, I think that's huge. It's just getting yourself around the right people. Because if you're around people who are doing the same thing you are, they're going to kind of poke holes in your excuses. They're going to really help point you in the right direction. But it's also going to give you that comfort that like, okay, yeah, I can do this, right. And I think a lot of investors get stuck with just never pulling the trigger, because of the what ifs and the fears. And the, you know, I think so much of that could be quelled if you just got around the right people.

Sean:

Yeah, absolutely.

I think about imposter syndrome too, maybe you're just not used to it yet, right? So for the first year, I was an engineer, right? I didn't feel like a real estate investor yet. I was an aspiring investor, I want to be one. But now that we've been in the field for a long time, we post real estate investing on our social media and stuff, it becomes a part of you. So you know, even for the people who are watching your content, and they feel like they're an imposter. Maybe just a time thing, like, over the next year. If you keep talking about my real estate investing, you keep investing yourself, you aren't going to be a real estate investor, right? You're gonna feel good about yourself.

David:

Yeah, absolutely.

I mean, I didn't know the first thing about podcasting, you know, and I was super like, who am I to even talk about real estate. So I just started interviewing people asking questions. Now I'm like, Well, I've done all right now. So I guess I can talk about real estate. So it's just got to grow into it. And you become what you focus on, right.

Alright, so you buy this first house out of state Jacksonville? Obviously, it doesn't go so bad because you're quit your job already. What was that timeline? Like? What was it you focused on over that three years to really make sure you were set up for exiting the military or the military? Sorry, that's my own life exiting the W two.

Sean:

Actually, it's kind of interesting, like my story has a lot of ups and downs. So after buying my first property, I bought a second property on auction. Again, pretty similar process except when I find asking I buy with all cash. My property manager came in and did the whole rehab for $15,000. So all day, I was in for about 55,000 and the rent was about $100 per month. So that's not a bad deal.

David:

Yeah.

15:00 - 20:00

Sean:

Then later on, I'm like, You know what, this whole single family business is cool and all, but for every property owner, I have a tax bill and insurance payment and a mortgage payment. That's three documents for one property. If I go for a FourPlex, that's three documents for four units. So that's why I decided, okay, let's scale up and go to multifamily. So then I bought a FourPlex. But then I rented the same issue that a lot of these buy and hold investors have, you run out of money, right. So, of course, I was still making money from a full time job. But it really wasn't at the pace that I wanted to quickly scale my you know, quote unquote, empire.

David:

Yeah.

Sean:

Ofcourse, during that time, I started looking into multifamily syndications, how to grow blah, blah, blah. But the thing is in the Bay Area, a lot of real estate investors here are actually big time flippers, and they're doing like seven figures a year. Like, wow, these guys can do it, I can do it, too. And so in 2017, you know, I continued to go to these events. And, you know, as a person who wants to provide more value I signed up to be like the checking guy, so I was checking the people at the meetup groups. Otherwise, they would remember my name, like, that was a real reality of it. People don't remember who you are, unless they see you all the time. So that's why I'm checking in everybody.

On the person next to me, she was also like a growing real estate investor, she is now actually a really big investor. She has her own YouTube channel. Her name is Lisa Cummington, with transform real estate.

David:

Okay.

Sean:

At the time, both of us were like just starting out. And she had already done a couple of projects, her money was kind of lent out to other flippers. But she came across an opportunity where she didn't have enough funds for herself. So she came to me and said, I know you've been looking for an opportunity. Do you want to partner with us on this one? And I said, Yeah, sounds great.

This property just happened to be like, one block down for one I usually like where I got lunch, like every day, so I knew the area very well. It was about two blocks from Lincoln's headquarters campus.

David:

Cool.

Sean:

Purchase price for $155,000. The contractor said it would be done for 50,000 to $75,000. And ARV at the time was 1.2 million. So I thought, oh, that's actually a pretty good spread.

David:

Yeah.

Sean:

Yeah. So that's when I got into my first flip. Of course, again, if you learn everything about how to get a flip project, which is very different from how to buy a long term rental property, like how do you deal with buying a property off market, how to deal with short timelines and how to deal with a hard money lender.

David:

Yup!

Sean:

But then, long story short, we did all that we have the project, and the property actually sold for $1.4 million. So we made a lot of money on that one deal. And I was thinking, dang, flipping is easy. I basically made like three times my base salary in one flip in three months. I'm like, why do people work full time jobs. I don't want to be anymore. Let's keep doing this.

So anyways, I started flipping more houses, some of them went really well. And then I got caught up with a big fat head, and I got too many properties over leveraged, and then I lost a lot of money on those. So that was not fun.

So there is basically an up and down roller coaster ride by new long term, this is still the way to go. There's more opportunity by doing it this path versus working that full time w two jobs. So that's why at year three, you know, I mean, I had been completely set up with a nice fat, you know, cushion. I was already making decent income from my rental properties, and other sources of income. And I thought, You know what, no matter what, I don't want to work full time, in an industry where I don't really get anything from it, right? Like me, being really good as an engineer only helps me be good as an engineer for this company. Like it's not transferable knowledge, right, I can start my own satellite company, or I don't have any aspirations to. Whereas if I work in real estate, there's so many avenues that can benefit from it. And that's why I decided to leave even though I didn't have this huge nest egg to just retire off of.

David:

I like it.

Yeah, and I've had some similar downs in my up journey. But you know, the ups always outweigh long term for sure. At least in my experience, so that's cool. I like it.

Alright, so you make it through year three. Tell us a little about what you're doing on the social platform and let's get into some hard money. So I know you've got YouTube, you got a podcast, you guys both do various different income streams through some stuff online. So can you kind of unravel that a little bit cuz you know, I personally just enjoy talking about those kinds of things.

20:00 - 25:00

Sean:

Absolutely.

So, I mean, like I mentioned a few years ago, I made this huge wind from my first flip project. And of course, I felt great because I made a lot of money in one shot just thinking about it. It kind of left me a little bit empty inside, you know, because I felt okay, who made like who really benefited from this transaction? I did for sure. I made a lot of money. My real estate agent, kind of you know, he did the work and he got his commissions but he only made you know his commission split. The sellers obviously didn't make that much money because they sold to me at a discount. And of course, like, long story short, I didn't feel like it fulfilled any kind of altruistic goal, right? I felt like the only person who wins from this transaction is me. So I want to find a way to like, bring more benefits to the world. And that's honestly why I started a podcast, I wanted to share the information with other people who were kind of just getting started as well. And just like you in the very beginning, I was kind of just sharing tips. But then later on, decided, you know, what, the podcast is actually a very powerful platform, because now you can bring on guests of your own, to come talk to you, and you get an hour of free consulting from some of the best minds in the industry.

You know, like, when I was, when I was first getting started, I was very nervous. So I would often just go to the meetup groups, and sit in the back, take notes, and then balanced throughout the meeting was over, because I didn't feel like I had anything to contribute to the people.

Now at the podcast, I can go up to the speaker and say, Hey, I love your presentation. Can you come on a podcast? And you know, share your knowledge with my audience? He's willing to drive, you know, an hour to come speak to me in a group with 100 people, why wouldn't he be able to come on my podcast, not even drive anywhere and be able to speak to hundreds of people who listened to my podcast? So it was a much better value prop versus Hey, man, I love your presentation. Can I take you out to lunch? You know? They're like, Yeah, but I don't want to drive an hour just for lunch with you. I don't I don't need 20 bucks for lunch, right?

David:

Yeah.

Sean:

Whereas a podcast was a better benefit to them. And, of course, increase my networking a lot. And of course, I can share that information with the world. So all those things were kind of the main reason why I started my podcast. And it's been going on for three years strong.

David:

Yeah, I actually agree completely. I learned, I guess, not the hard way. But that really hit home when I had this one gentleman on my podcast. I didn't even know who he was at the time. I saw him post something in my Facebook group. And I was like, Oh, this guy sounds cool to me. I will have him on the podcast. And lo and behold, he runs like this monstrous flipping network, his seven figure flipping and all this other stuff. And I'm like, holy crap, this dude's doing a ton. You know, exactly that. I got like, an hour of his time to ask the questions. I wanted to ask, learn, grow, whatever. But it's beneficial to them as well. In fact, now we co host a real estate invest event together for service members. I'm speaking it isn't like, you know, it's become a big thing. But you're exactly right. Like, if somebody reaches out to me, and they're like, hey, I want to pick your brain. Can I buy you food? It's like, well, there's got to be some reason there to do that. Because that's a lot of time that I can be spending focusing on something else. To, you know, essentially just give you information, right? You know, lunch isn't what I'm looking for. Whereas like a podcast invite like I've never turned to podcasting by now. It's like, well, never know how many people are gonna listen to that.

Sean:

And it’s fun, all you do is talk, right.

David:

Yeah.

Sean:

I don’t have to drive all the way to where you are to have this podcast, right. I guess you don't mind. So it's great.

David:

Yeah.

Sean:

So anyways, that was the podcast I've been doing again for three years straight. But then, let's see, maybe six months into the podcast, I actually had a call with Graham Steffen, right, the big YouTube celebrity guy. He told me straight up, he was like, Hey, man, podcasts are great and all, but they don't spread very much YouTube spreads because he has an algorithm. And I was like, Yeah, that makes sense. So that's how you hide on YouTube.

YouTube is also pretty interesting, too, because the content is a lot shorter, these podcasts last for like an hour. YouTube is like 10 minutes. As I condense information, you can like share these links, they're more visual. And of course, information spreads. So I've been doing that for about two years now. And it's been interesting, you know, again, similar ups and downs in terms of how I feel sometimes, especially when I see other people who are skyrocketing. But at the end of day, you have to remember, like, why are we doing this? Okay? It's like, yeah, the views are good. And all but you doing this? Because, like, honestly, it helps you learn better when you have to teach other people like a skill, right? You want to? You want to be really good at physics, try teaching physics, you'll have to learn a lot.

David:

Yeah.

Sean:

So same with real estate investing. Another value kind of add component that I created is I create a meetup group. So we were meeting up locally in San Jose twice a month. Then with the pandemic, we shut that down and made it to a virtual meetup. So I'm still doing virtual meetups. I had one yesterday, and usually get like 100 people or so to show up virtually. So those are all fun activities. And then the beauty is because I had this platform, and I wasn't working a full time job. My hard money lender who I was using, reached out and said, Shawn, you're referring to so much business? Why don't you just work for us? And so I did. And it's been great, because now I have a way to monetize, you know, yeah, but also like, my full time job is to talk to investors, even like yourself, and just say, hey, like, what are you up to? And how can we help? How can I help fund your dreams? So some of the projects I've helped fund are now these, like super amazing, beautiful homes, and I can like screenshot them post on Instagram. Oh, hey, we'll find it.

25:00 - 30:00

David:

Yeah, I love it.

I love synergistic things like that, right where it's like, you know, I was kicking myself earlier because I'm like, looking at my whiteboard. And I was like, I've been doing this for two years, and I could have monetized it so easily, or, you know, I could have made a little bit extra money doing it. So I'm gonna start doing that thing. But like, that's so cool, because it's like it just kind of flows, right? Like, as you grow your platform, it's kind of amazing how some of these opportunities come to you and you're like, Oh, you mean I can make money? Helping people the way that I'm already? Okay. You know, and it's like..

Sean:

Basically, everything that we're doing right now for free. We cannot get paid for it and not even like a sleazy way. I don't feel bad about Gable loans. I'm funding their dreams, dude. I'm Santa Claus. You know, and how you're getting people money.

David:

Santa Claus. I love it.

Sean:

Yeah.

David:

Yeah that's exactly right. I think that's a great model. Because you're exactly right, right. You're not, somebody is paying you to like for a service that is actually going to benefit them and right, as long as they did all their numbers, right? They're gonna make so much money on that deal that yeah, or even if they're gonna, you know, hold a lot like, whatever, they're gonna make a killing on it. So yeah, it's a great deal.

Sean:

One of my clients just made $650,000 on it. I funded you know, so I'm like, Alright..

David:

Awesome.

Yeah, man I haven't made that much on the deal yet. That'd be pretty sweet. Next year, next year, that'll be, yeah.

Sean:

Easy money..

David:

Oh, my goodness. That's incredible.

Alright. So you get into hard money lending with this company. So what does that look like? Like? I'm curious, just from like, because you've been an investor, right? Or you are an investor? What are some things about the hard money side that you wish you'd known when you first get into lending from hard money?

Sponsor:

Whoooo! we'll be back with the show in just a minute. But I wanted to take a brief second and say that, look, you're already obviously investing in yourself by listening to this podcast. But if you can't figure out how to get past all that daunting crap that you just don't know how to sort through and you're trying to get started in real estate investing, and you're just stuck. I mean, it happens to all of us. It's daunting, you don't know what you don't know, you don't know everything there is to know and you don't really know where to find all the information. So that is why I created the real estate investing for beginners, zero to one course, which is solely designed to get you from, I want to invest in real estate to Holy crap, I have a rental and it's cash flowing. And this course is not going to be anything super complicated that you won't be able to understand. It is just designed to teach you how to build a team, find investments, finance investments, conduct due diligence, close on the investment, and then operate it so that you can enter the real estate investing world smoothly.

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Sean:

Yeah, I mean, that's a pretty good question.

So I guess before we get into that, let's go into like, I guess hard money itself. So for those who don't know, hard money loans are a loan that's based on the asset more so than your personal credit worthiness. So we can just compare it to, like, a traditional loan, like you went to Wells Fargo or Chase, like, why wouldn't you go to Wells Fargo Chase in the first place? Well, with those like big banks, they are going to look at you to check your credit score, they'll look at your W two or your tax returns. And they'll see how much you can qualify based on that income that you get. So that qualifier is usually called a debt to income ratio. But if you already have a property, for your own personal residence, or you already have a lot of rental properties, there's a good chance that your debt to income ratio is already kind of tapped out, and there's not enough room to get another loan for another flip. So in my personal example, I had a property here in the Bay Area, and other rental properties in Florida, there was no way that I was going to be able to fund this $865,000 flip project over in the bay area as well, like that opportunity where I made a few 1000 or so would have been impossible to get right.

But with the hard money, they say, Okay, you have the reserves for the down payment, you have the reserves for the construction, all you need is the financing, then sure we'll give it to you.

Now, of course, because we're not looking at our debt to income ratios, hard money loans are often a lot higher than conventional financing. So for a typical loan right now, you can maybe get an investor loan for maybe 3.5 or 4%. For hard money loans, these are going to be the you know, 8.5 to 10% range, and usually short term only 12 months, and usually interest only payments. So like that's the main difference of hard money, okay, enables you to do deals that you otherwise wouldn't be able to do in the first place.

So again, you have to be careful, right? Because if you're buying a deal that's not the best it's really thin and you're getting a hard money on it, then there's a good chance that you're going to be paying your lender all the profit and you're going to get nothing or you might lose money.

So now in terms of what I wish I knew now that I'm in it and the good thing is because I was a client before I had these other hard money lenders I know what investors like and what they don't like so I feel like I'm pretty good at being a loan officer for my job.

David:

Yeah.

30:00 - 35:00

Sean:

Cuz I’ve seen both sides of it right?

Here's the thing. Money is like a utility like your internet, your water right? It's money. Doesn't matter comes from you, comes from them. It's because cash is good, no, but when it comes to using the right hard money lenders, it's not always that simple. Because every hard money lender has a different process. Maybe there are different ways to operate too. So some lenders will tease you with a really, really low rate upfront. But then when it comes to actually closing, they'll be like, ooh, like, listen, like these things came up. And our rates are actually a lot higher now than we promised you. Sometimes also promised, like a really short timeline, like will close in five days. Turns out, we actually need 15 days. You know, sometimes it's, it's not like their fault. Maybe you took too long to get the papers or whatever. But sometimes it happens. Yeah, but long story short, you need to like talk to other people who've used these lenders, and understand like, their reputation, because sometimes it's worth it to pay a little bit more to work with someone who's, like reliable, you know, I mean, because if you lose on a deal where you couldn't make $20,000, who cares about paying an extra point, right?

David:

Yeah.

Sean:

It doesn't make sense. If working with another lender will kill your deal, then go with the one who is more flexible, who's easier and more reliable. And I think really, the only way to do that is talk to your own local network. And kind of understand, like, are these people trustworthy?

David:

Yep.

Sean:

And that's what I wish I do. Yeah.

David:

Yeah.

And I think talking with your local network is important too. For someone like my standpoint, right, like we were talking before, we, before we started the show, there were two or three deals I would use hard money on when I first started out here, and nobody would touch them, because they're so low, like such a low amount of money to lend that it wasn't worth the hard money lenders time, right? There's only like, only tying up like $30,000, it's not really worth the effort for them to loan on that. And they wouldn't touch anything under I think 75. And, you know, I had some deals out here that were cheaper than that. And so what I was able to do, though, is go and find local guys who would touch that, because they're used to that market, they're used to those spreads, and they, you know, have worked it into their values.

You don't necessarily have to be local by any means. But definitely talk to local investors and ask who they're using that's working in their area, right? Or even if you talk to investors online, but you want to get I think that's valuable. And I always want to talk about hard money, I always say, make sure you don't wire the money. You send it to escrow.

Sean:

Oh, yeah.

David:

I almost got scammed by that once when I was a young man, like, oh, yeah, just send the money straight to me.

Sean:

The only money that you should be sending to the hard money lender directly is if they have an appraisal fee, or some kind of like survey fee?

David:

Yeah.

Sean:

lLike, that's fine. But everything else is usually paid at close. Like the origination fees, the processing fees, that usually goes to escrow, and then they get paid out at close.

David:

Yeah.

Sean:

Yeah. You mentioned something that I want to get back to. But I forgot.

David:

Crap. I was talking about local investors and local...

Sean:

Oh, I guess for that point. Yeah. I guess one of the reasons too that, you know, hard money lenders won't deal with those low price points because it takes the same amount of work and processing power to fund, you know, a $70,000 deal, and a million dollar deal. But the lender gets paid a lot more on that million dollar project.

So really, I mean, from my own experience, too, if a deal is usually under $100,000, usually, we've been able to self fund that, or we find a private investor who can fund it. Because like $100,000, isn't out of the realm of reality for most people, some people have that kind of savings to just do that money. But when it comes to funding, like a million dollars, 2 million dollars, or you have multiple deals, and you need basically an unlimited source of capital, that's when you use a hard money lender, that's when you need like, this person who will always be there for you, and we won't run out of cash. Because he's a private money lender, then yeah, as a two or three deals, they're gonna be tapped out. They're not gonna want to over expose their funds for you.

David:

Yep, absolutely. I agree.

And, and I mean, it all goes back to relationships, right? If you do, you do more volume with them, right? If you've done, you know, for half a million dollar deals with someone, and then you're like, Hey, I got this one. But it's 90. Like you, they might work with you. But if it's your first deal ever.

Another question. So for you like, what kind of experience are you guys looking for when you're looking for hard money? What do you take, like a first time house flipper? And if so, like, are there additional buffers in there for you know, I mean, obviously, it's a little bit riskier for a hard money lender than for a bank lender, which is why you guys are able to charge more interest because it's you're taking a little bit bigger risk by just lending on the asset and not really understanding the client's financials.

So what kind of protections are you guys put in there for like, experience level like, how does that work?

Sean:

Yeah, so I would say in general, the biggest offense for any lender is the amount of leverage they put out. So like the points, the origination fees, like the rates, that's all the profit, but the protection is the LTV.

So for newer investors, we'd like to see that they're not going any higher than 80% of LTV, so 80% of purchase price and maybe 80% of the rehab budget. For more experienced investors. We can go higher to like 90% of purchase, maybe even 100% of rehab on top of that. And that's kind of different that we have. And of course, pricing changes, too. So if you're a more experienced investor, and you've done a lot of repeat business with us, then we can lower your rate as well.

35:00 - 40:00

David:

Yeah, yeah. And that makes sense, right? It's all about volume. And I mean, everything plays into risk. So the less risky you are as a borrower, the more experience you are, then, you know, the better, better, it'll be.

You mentioned before we started recording that you do long term stuff as well. What is that? What do you guys do with that? And kind of what's the difference through that stuff?

Sean:

Yeah, so the long term rental loan program is super exciting, actually, it's a relatively new product for basically, many disheartening vendors out there that came out like kind of right before the pandemic started. So within one or two years, essentially, it solves the problem of scaling your rental portfolio.

So in the past, a lot of big time real estate investors in the single family or the one to four unit space, you know, they would buy a property, they would refinance or finance it, and then they would get to 10 different loans. And then they were capped out. So maybe they would have 10 loans, their name 10 loans in their spouse's name, and then they're capped out too.

Another issue that they came across was the debt to income ratio that we mentioned before, where they have this huge property that they like in the bay area of San Diego, and he has some rentals out there. But they can only get more rental properties because their debt is too high relative to their income.

So this long term rental program solves those issues, because we base the loan on the income that the property itself generates instead of on the borrower's individual income.

David:

I like it.

Sean:

Yeah, and there's no limit, right? So you can have 10,20, we don't care. There are some protections in place, like, I think they don't want to have, you know, more than, like $5 million of loan exposure to one particular borrower. But, you know, no one has gotten there yet. But the thing is, back then, before this project existed, big time investors would cap out on their, you know, conventional financing. And then they would go to private money lenders, and say, hey, you know, we're gonna buy this property, I'm going to finance it with you, and the private money lender to make it worthwhile are probably going to charge them 8, maybe 6 to 8%, right.

8% is what I've been seeing usually. So now we could do these same loans for let's say, 4%. And to them, that's an amazing deal. So that's where most of my business comes in, like, we come to talk about it, no ideas product exists, and we can refinance their 8% loan down to 4%, for a 30 year fixed loan, right.

David:

Wow!

Sean:

Most commercial loans are 25, or maybe even five years, their five year loans, or, I guess, five year loans, but they're spread out across 25 years, right. To 25 am, straight up 30 year fixed loans at you know, 4 or 5%. So it's actually pretty good.

David:

Yeah! That’s solid.

Sean:

We've even had a 10 year interest only program where it's still a 30 year fixed loan, but your first 10 years are interest only. And then you cut the loan in the next 20 years.

David:

Wow.

Sean:

Yeah.

Now, ofcourse, there's some downsides to this loan, like there's a prepayment penalty period. So with a regular loan, you can refinance the very next day, who cares? With this loan, they typically once you hold it for at least three years, you can even go up to seven years if you want to lower your overall rate. But these are just some of the little like knit things here that I make YouTube videos on. And they're pretty popular because they have a new product. And it makes me really excited because it's like, I can see the future, right? Like this is how we're going to scale more and more and more properties.

David:

What kind of loan to value are you doing on a, you know, like a 30 year fixed at 4%?

Sean:

Yeah, so again, this is kind of where this product has its pros and cons. Realistically to get to 4%, you're going to be at 65% LTV. So it's pretty low. But most people who are doing this kind of like refinance are for their whole portfolio. And they're doing it on properties they own for a long time.

David:

Yeah.

Sean:

So it does work for the brrrr strategy where you're going to buy a property and a refinance later, but usually your LTV won't be that low as 65%. So you're going to have a higher rate.

Yeah. 65%. That's kind of like where I've seen the rates go at 4%.

David:

Yeah, I mean, it's still scalable, right? So if you have a little bit higher, even if you were paying 6% interest on it at 30 year fixed first, first off, I think, fixed 6% interest rate. Everyone's like, Oh my God, that's terrible. But give it 10 years, that'll be amazing. So you're not gonna be complaining about a 6% fixed in 10 years when rates are where they were in the 80s, or whatever the economy does. But also..

Sean:

Actually, right now I have several properties that I bought back in 2017, right, my first Jacksonville ones. My rate there is 5.125. And I was okay with that.

David:

Yeah.

Sean:

For me, I'm like, Okay, well, I'm making a lot more money from cash flow anyway. 5.25, 4% like, it's not that big of a difference. I might refi in the future, but it's not like something that's on my mind all the time. Like, oh my God, I need to save $100 Here. You know, it's good, but not that great.

40:00 - 45:00

David:

Yeah, my first property was five and a half percent interest, my first like 10 unit And then I dropped it to five and a quarter now it's four most, yeah, yeah, that one's four, you know, but at the end of the day, like, it's really not that big of a difference. So it's like, if I was able to get by had to pay 6% interest, but I was able to do a brrrr, after I've already got 20 properties under my belt, no one else is gonna lend me like, 6% interest isn't the end of the world for me to get loans and scale. I mean, that's, that's lower than I'm paying, you know, private money. I mean, I'm paying, I'm doing a deal. I closed in two weeks, and I'm not putting a penny into it. So I'm, it's going to be purchased by private money, and I'm gonna roll it into my bank. And you know, I'll only have it under private money for a few months. But even that I'm paying one point 10%, right, because it's, you know, the price, I gotta pay to move it quickly. I mean, I send an email I get, you know, I get funding, it's a great deal, because I'm not putting any money of my own into it. So my return is great. I'm gonna have equity and all these other great things that you're walking into. But it's definitely not a four to 6% fix, like a long term, 30 year loan on the private money on the buy side. And I'm gonna have transactional fees on both of those, you know, both the closing and the refi. So it adds up for sure. So that's really not a bad deal, you know.

Sean:

It's also like when you refinance, then you can pay back your other lender, so they can give you more loans. Yeah, the problem comes like..

David:

I’m gonna hit that wall soon.
Sean:

Exactly.

He's gonna run out of money. S

David:

Kind of surprised, I haven't.

Sean:

I'm sorry. You must be a really rich guy.

David:

I'm, I'm thinking about it right now. And I'm like, I should actually have already hit that wall. I think it's just because some of them are, you know, like, actual, like business or commercial loans that don't. They're not, they're not the same realm. I don't know. I should be over that limit. Maybe I just have a really cool I mean, he has portfolios, so maybe I've just got most of my stuff in Portfolio stuff where it's in house. I don't know. Yeah, he's, he's amazing. But he's not gonna be able to do everything that I do. That's for sure. So eventually, eventually, he's gonna come, it's gonna come back. And he's gonna be like, Alright, you got off. Can't keep doing this for years.

Sean:

Yeah.

I mean, I think it's good to just have a bunch of different lenders, right? For all different types of scenarios.

David:

Yeah.

Sean:

And then here's for your smaller deals, have hard money loans, lenders for your medium deals, and then have these large commercial lenders for your big multifamily projects.

David:

Yeah, it's funny, the longer I'm in real estate, the more I'm realizing that the answer to almost every problem that you can possibly find, as an investor, is just find another good deal. Right? Like, for the longest time, I was convinced I don't have money for this, I won't be able to buy that. And, like, it's crazy to think back to five years ago, when I first started, and I was like, There's no way I'll have money to buy another part. Like, I was able to walk into this guy's house, walk around, like say, give me 90 cash. Well, I said, 85, he came back with 90 cash, and then I had three weeks to be like, Alright, I gotta find somebody money to buy this, right. And, and it happened, it worked. And it's like, it happened because I've got a good deal. The person knows me, they like, you know, they trust me, whatever. But also, because it's a deal where, like, there's a, it's a good place, there's 50,000 in equity, when I buy it, it's gonna be refinanced out in a couple of weeks, a couple of months, maybe.

You know, it's a very short play, but it's a quick hit, you know, it makes sense for them. It's a win, win, win win, I got a tracker whatever. But like, all of that just stems from finding a good deal, right? If you find a good deal, you can find financing. But through all of these programs.

Sean:

Yeah, I agree.

And I think some of the best real estate investors do just that, like they find the good deal first, and then they figure it out later, and always tend to work out.

David:

Yeah, absolutely!

Because the alternative is you go around asking people like, Hey, would you lend to me? Would you lend to me? Would you lend to me, you know, and you find out all these terms, that's all well and good. And then you're like, never have a deal.

Alright. It's a yin yang thing, obviously, you gotta do it all but and the better I get at finding my own deals, the better everything seems to work out for me. So it's good.

So alright, so what's next? Right, so what's the future look like for Sean?

Sean:

Well, as you mentioned, you know, Sharon and I got engaged recently, we've been doing a lot of social content, you know, we're in the same mastermind group as you.

So I think in the near future, you know, we're gonna continue building up this like content creation side, because it's very nice to be able to document the process. I am still working very hard as a hard money lender, I talked to investors all day every day and gave them loans. And that business is going pretty well as well.

We're actually planning on converting this house here into an airbnb possibly moving out of state for a year or two. And to like, you know, set up operations in another state. You know, we recently got hooked up like no prop stream, and, you know, you like you mentioned, ballpoint marketing, and even are you simply, and you're using those tools to create more of like a wholesale slash flipping business as well.

And, yeah, those are all exciting. For us personally, for our own investment portfolio.

45:00 - 50:10

David:

Yeah, that is very exciting. If you decide to come out to the Midwest let me know. You know I mean none of your I was to say none of your properties are out here so I can't imagine you want to start setting up shop here but all my friends who visited so far we're impressed and not just because I took them in the backyard and let them shoot long rifles and drive four wheelers. But anyway, so.

Alright, well, that's, that's exciting. But again, congratulations to you guys. And I look forward to seeing your platform grow. I don't know if there's anything we missed?

Sean:

No, I think we covered everything from the show.

David:

Where can people get a hold of you?

Sean:

Yeah, I mean, if you guys want to reach out to me directly.

David:

Where do they get to watch you dance on Tik Tok?

Sean:

Yeah, if you want to see me dance on Tik Tok, that's Sharon's Tik Tok, okay.

She has like 480,000 Tik Tok followers. She forces me.

Yeah, she forced me to dance sometimes. And I'm just like, oh my god, you can see the pain in my face during those dances.

David:

I remember we were like on a YouTube chat. And I think it was Chris was like, Oh my gosh, she had that one video do well, and all of a sudden, she was like, everything just, I was like, Holy crap. And then Instagram reels and everything. I mean, she just blew past me on every platform that could possibly be a vertical video. And I was like, must be nice.

Sean:

115,000 on Instagram now. It's crazy. She gets DMS all the time from random people.

David:

Yeah, yeah. And I mean, and the cool thing with that, not that this really I mean, people don't think this ties into real estate. But like, man, the opportunities you get out of that. It's crazy.

Sean:

People take you a lot more seriously when you have a big social presence. That's for damn sure.

David:

Yeah.

Sean:

Like before we move, send out like, you know, email blasts other agents like, Hey, you want to work with us? You know, sometimes she’s nice, sometimes she just ignores us now with her profile and her links. They're like, Oh, wow. Okay, yeah, we'll meet. So yeah, it's easier getting meetings basically with that.

David:

Yeah, absolutely.

Alright, so what's the best way to get a hold of you? If anybody wants to reach out?

Sean:

So if you guys want to reach out to me and talk about hard money, loans or questions about you know, investing, possibly investing out of state, then you can reach out to me directly. My email is Sean#everythingrei.com. If you want to check out the YouTube channel. That's youtube.com/seanpaninvest. And then my podcast is The Everything Real Estate Investing Show with Sean Pan. You can find that on Apple podcasts, or on the Spotify app.

David:

Absolutely.

And we will link to all of that in the show notes of course, anything you want to any parting words of wisdom you would like to leave the audience with before I have like two or three questions that I always ask my guests, but they are all like, very specific to service and military and would not apply.

So okay. I guess I could ask you what your favorite book is, or what resource you would recommend to anyone looking to get started in real estate? There we go. We'll wrap up that way.

Sean:

Yeah.

So I mean, you know, we do have a course that's really affordable, only like $350 or so that teaches you guys how to buy your first out of state rental property.

So it's really good for people who are kind of on the fence and not sure how they can scale and buy properties in places they've never even heard of. I know that's a big challenge with many of my friends and even Sharon herself when she first got started with us in investing.

So the course is called remote rental riches, if you want I can even give a discount code to your listeners.

David:

Yeah!

Sean:

What code would you like me to put down on that?

David:

I don’t know, just the military?

Sean:

Military, okay.

Just pick up the course remote rental riches, and then use the code military for a 20% off coupon. I did that just for you.

David:

Thank you.

Sean:

Yeah, no problem.

David:

Appreciate that.

Sean:

And ofcourse, like, there's log books out there that I've read to just get started to kind of understand what's, what's going on.

One of my favorite books was the ABCs of real estate investing. I think it's one of the, you know, Rich Dad series. But at the end of the day, I think the best way to get started is to network in the very beginning. So go to your local areas, kind of find out like, what type of investing Do you like to do? Are you more into multifamily? Or are you into single family long term stuff? Do you like short term rentals, fun to kind of understand the different types, different pros and cons, and then follow someone that does that exact same strategy as you. And I'll see, like you said, In the beginning, you are not going to learn as much from reading a book or listening to a podcast or watching a video, then just actually doing it yourself. Like doing yourself you're going to become a master after like one or two tries. So, you know, try to do it ASAP, if you can.

David:

Right on.

Well, hey, Seann, thanks so much for joining us today. It's been a lot of fun, and I'll talk to you, I guess in a week and a half on our YouTube chat.

Sean:

Oh, I'm gonna see you in person at Fincon.

David:

Oh that's right! That's right. We're gonna have a drink. I'm gonna get with Sharon. I'm gonna be like, Yo, come dance on my Tiktok and help me grow up, please. And it's not gonna work because they're just gonna see me and they're gonna be like, Who's this asshole?

Oh, man.

Awesome. Yeah, I look forward to it. We're gonna have to hang out there. That's a good time.

Sean:

Yep, we'll do.

David:

Absolutely brother. Have a great day.

End:

Thank you for listening to another episode about my journey from military to millionaire. If you liked it, be sure to visit frommilitarytomillionaire.com/podcast to subscribe to future podcasts. While you're there we'd love for you to rate the show give us a review on iTunes now get out there and take action.