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Stop Trading Hours for Dollars with Monick Halm

 

Sometimes, a six-digit salary doesn’t mean anything if it requires you to work a crazy amount of time and has nothing left for yourself and the people around you. Monick Halm is here to teach you how you can stop trading your hours for money. She is the Founder of Real Estate Investor Goddesses, and has a goal to bring in more women into the industry. Monick shares her story about how a lawyer transitioned into real estate during the previous recession and how real estate became her family’s saving grace. Listen in as Monick talks about the different recession-resistant asset classes that can minimize the risk for your investments while providing quite a hefty return.

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Listen to the podcast here

 

Stop Trading Hours for Dollars with Monick Halm

I am excited to welcome to the show, Monick Halm. She is the Founder of Real Estate Investor Goddesses. She is an educator and advocate for female real estate investors and has a mission to help one million women achieve financial freedom through real estate. Monick herself is a real estate investor and syndicator. She owns together with her investors over 1,300 rental units across six states. She is also a number one bestselling author, podcast host, real estate strategy mentor, wife, and mother of three amazing kids. Monick, welcome to the show.

Thanks for having me. I’m happy to be here.

I’m happy you’re here too. Could you tell us a little bit about your story?

My story in real estate investing was completely by accident. I grew up a first-generation American. My parents are from Haiti and they always told me, “You can do anything you want as long as you’re a doctor, lawyer, professor, engineer.” I was not into math and sciences. I was like, “I’ll be a lawyer.” I went to law school, then I was in a big firm. The only thing that they ever taught me with regards to real estate was to buy your own home or buy a house. If I get a job, buy a house, put money in retirement, work until 65, get a gold watch, go for a few years, that was it.

I was miserable as a lawyer but that’s a whole other conversation. I was a lawyer for a few visible years and I thought it’s time to buy a house. Even though I had a six-figure income, I lived in Los Angeles. You’re in San Francisco. You understand expensive market values. This was in 2005, towards the top of the last bubble. A modest house in a modest neighborhood. I’m not talking about a mansion in Beverly Hills and Bel Air. It’s a modest house in a neighborhood where you’re not going to have drive-by shootings. It was upwards of $600,000, $700,000. I couldn’t do that by myself, but a friend of mine who was in a similar boat suggested that we buy a duplex together.

He would live on one side and I’d live on the other. I was like, “I can buy half a house. Let’s do that.” Instead of finding a house with two equal sides, we ended up finding this old craftsman. It’s a beautiful property that had a larger unit downstairs, a two-bedroom unit upstairs, and a converted garage in the back. Instead of each taking a unit, we each took a bedroom in the larger unit. We rented out the upstairs, the back house, and even the basement. We were house hacking before that was a thing. I was like, “This is awesome. It’s paying my mortgage. It was great.” I thought of it as free housing but I wasn’t thinking about it as a way to escape law, which I should have because I’m miserable. When I met my husband, he had a duplex. Now we’ve got a single-family together. It was in LA, barely cashflowed but we had it. At the time, I didn’t realize that you could invest out of state. I thought you had to invest where you live.

Then 2008 happened but before that, we got married in 2007 and I got pregnant. When I was about close to six months pregnant, my boss at the law firm I was working called me. I thought I’m going to get a bonus. I’ve been working hard, but instead of getting a bonus, I got fired, which was completely shocking and terrible. That week that I got fired was the week that I’d gone from looking fat to looking pregnant. I would never like that. My sister was pregnant at the same time. She had this cute baby bump from the get-go. I looked back and I had just gotten that bump. I was so excited until I got fired. I was like, “How am I going to get a job? I look so pregnant right now.” I thought, “Forget it. I’m not going to look for a job. I’m going to wait until I give birth, have a short maternity period, then I’ll find another job.” My baby was born in late August of 2008. Within a month, the market was in free fall. It’s giving me a lot of flashbacks of what it was like then. I’m grateful I’m in such a different place than I was at that time. I didn’t have my job and then my husband who is a self-employed graphic designer works in the music industry. His business went down 90% at the same time. It was tough.

Our real estate helped sustain us. It kept a roof over our head. It was still a struggle but we were able to sell one property and we started to flip when houses were on sale. We flipped until about 2015 and they were not quite on sale. It was competitive and flipping is a job. You get the house and hopefully, you make a profit. Knock on wood, we always made a profit but you have to start all over again. There’s got to have something a little more passive. I started looking for a fourplex in LA and it was so expensive, nothing cashflowed. It made no sense. I was frustrated. It was hard to flip and at that point, we were pretty much doing real estate full-time.

At that moment I met a mentor. Robert Helms is the host of the Real Estate Guys Radio podcast. I met him through a mutual friend. She said, “You should meet my friend, Robert. He’s done hundreds of thousands in real estate. He’s going to be in LA. You should come to meet him and maybe he can give you some advice.” I go and meet Robert. I’m telling him about the flipping and the fourplex. He goes, “LA is a tough market. I always say live where you want to live. Invest where the numbers make sense.” I’m nodding and I was like, “Until you said that, I had never thought of that. It hadn’t occurred to me that that was a possibility.” It was like, “What?” That opened up the whole world to me. The next thing he said was, “You can buy this fourplex by yourself if you limit your own capital credits. Alternatively, you could bring a group of investors together and buy a 100, 200-unit apartment building.”

He started telling me about the benefits of that. You could share the wealth and the risk. You can go much further faster. I was mind-blown, “What? I want to do that.” At that point, I thought that you needed Donald Trump’s bank account to do that stuff. I have no idea that was a possibility at all. I also realized that I want to be around people who think 200-units is normal. Up until then, everyone around me thought fourplex was a big deal. I went to learn how to do this thing called syndication, which is bringing groups of investors together. We got started in 2016 and that first year, we went from having our 2 units to over 1,000 by doing syndications. We’ve since sold them and bought more. It’s been an incredible and fun journey. That’s my story.

90% of millionaires get to be so through real estate. Share on X

I haven’t had anybody on the show that does their own syndication. I’ve had one other person. I’m interested to hear a little bit more about how you bring your investors together and what syndication looks like in your world.

When I went to that first conference, Robert Helms and his partner Russell Gray, they do a conference called Secrets of Successful Syndication and he told me about it. I met him on October of 2015 in LA and he was like, “We’re doing this thing. It’s going to be in January 2016 in Phoenix.” I went home that night and told my husband, “We’re going to do this. We’re going to learn how to do this.” We bought tickets that night. When I went there, they were talking about when you are building syndication and you like to get investors, you have to build a brand and build a network. That was important. Think about who do you want to work with. That was a Friday and Saturday conference.

Sunday morning, I’m in the hotel gym. I’m on the elliptical and going through my head is what they talked about. Who do I want to work with? Who am I going to build a brand and network? In between being a lawyer full-time, while I was doing the real estate, I became a life coach. I became an abundance coach for women. I was already coaching women around money and abundance. It’s something that I started to move away from because I was focusing more and more on the real estate, but I already had that thing with women and money. I’m thinking, “Who do I want to work with?” I started thinking about that room that I’d been at that conference. In a room of 120 people, maybe nine of us were women. It was much less than 10%. That’s typical. There were maybe fifteen speakers on their stage and one woman, something like that. All of a sudden it hit me. I was like, “There are no women. I want to work with women. I need to bring women. This is who I want to work with.”

I studied the Divine Feminine for a long time and I’ve been in groups of women. It came as this divine download like that’s what I meant to do. As we set out to start our syndication business, we started working with investors that we’d meet at different conferences. I was focused on how do I invite women into this real estate game knowing that I’ve been working with women around money, wealth, and abundance. This is the best way in my opinion that you’re going to build wealth and 90% of millionaires get to be so through real estate. Nobody’s talking to women about this. Now you are but I was googling and nobody’s doing this.

More of us women are talking to women about real estate, but there are still far too few of us. For the 50% of the population that we are, there is not enough. We still need more voices inviting women into this game. There’s this button-up world that women aren’t told or taught that this is an option for them, that this is something they can do. They’re often not seeing people that look like them. If you go to your typical conference, it’s all men. Mostly, they’re old white men.

It’s so true. You’re like, “I don’t belong here.”

I felt like a unicorn. I was so different from everybody in the room. In certain ways, that worked for me. It was memorable and that served me, but this needs to change. Focusing on women has been one of the main ways in which we have been able to grow our investor list. At first, most of our investors were men. Ninety percent were men on our first few deals. Now, it’s the opposite numbers. Ninety percent are women investors, which makes me happy. It’s letting them know that it’s out there and there are these passive investing opportunities for people that are often at least as abundant and at least has high ROI as a lot of the deals that you do yourself. Our passive investors are making way higher returns than I was making with my properties in LA or properties where I was doing all the work. It’s letting people know that this exists and that it’s possible.

What do your syndications look like? What properties do you offer? How do they work?

We get larger commercial projects, typical ones. We do a B-class commercial or apartment building. Our second to the last project that we did was a 250-unit in Atlanta, B-class, suburb of Atlanta, a nice building. We get bank financing for 75%. We then raised money with investors for 25%, the down payment plus some capital expenditure funds and cash reserves. That was a pretty big deal. We raised $8 million with that one. What we do is we buy these value-add properties. It’s still a nice building but the units could have been upgraded.

The rents were a little bit below market to these neighbors. Property management could have been improved. We brought in new property management. We started improving the units and increasing rents. How it works though is as we cashflow, we give distributions to our investors. They’re getting them every month. Monthly or quarterly, they’ll get distributions of the profit. When we raise the net operating income, we sell the property. The investors get a share of the equity rates.

 

Do you manage that whole thing or are you a partner with somebody else that manages that whole thing?

We’ve done some where we’ve done all of it. As I’ve gone I’ve realized, what do I love to do and what do I not love doing as much. What I love doing more is being on the investor side. I love talking to people. I love getting them to different opportunities. What we do is we vet deals. We have partners that we work a lot with and that have decades of experience, and we know, love, and trust them. They’ll bring different opportunities to us. If that makes sense for our investor, we’ll partner with them. We bring the money. We’re part of the team that’s managing, but we’re not as involved in the day-to-day management.

You mentioned that the strategy has changed a little bit. You’ve gone from increasing rents to mitigating loss.

At least the NOI is the same. If you keep the NOI from going down, we’re like, “This is a win.”

That’s a perfect segue to this next piece that I wanted to talk to you about. I had a summit and you’re having a summit. The conversation is about asset classes that are recession-resistant. Could you talk to me a little bit about what those asset classes are and what that looks like?

I still think that B-class apartments are a recession-resistant investment. It’s one thing if the whole economy stops and nobody’s working at all. That doesn’t normally happen. It’s not going to happen long-term. Normally, it’s not like a full stop on the economy. Most things are not going to do very well in this type of environment. It hasn’t been as bad because a lot of our tenants are more white collar. They’re more able to work from home. It hasn’t been the blood bath we feared. April was okay. As it progresses, people’s ability to pay rent may go down. Generally speaking, in strong metro areas where we invest, whether it’s a diverse economy, you have different industries and corporations. Atlanta is not going to fully go under. They have many different corporations from Coca-Cola to CNN and the largest airport in the world. Eventually, the planes will fly again and people will drink Coke. There’s enough diversity and strong businesses there. Atlanta is not going to end as a city.

There’s always that need for middle-class housing as people might lose their homes. What are they going to do? They’re going to move into apartments. Baby Boomers have been downsizing from their houses to the apartments. Millennials who weren’t able to buy homes because it was too expensive. The prices might go down. They might be able to buy, but people are skittish about buying. They’re going to be in apartments. In most strong markets, there’s always that need for that level of housing. That’s a smart bet.

Mobile homes are poised to do well as well. They are low-income housing. People can buy mobile homes for $30,000. It’s quite a bit in the same area as a stick-built house that’s often 5, 10 times more than a mobile home would be. People can live in mobile homes. They pay a lot fee. They can buy their home for very little. You can invest like buy and sell mobile homes or we have a mobile home park. You own the land. They pay you a lot fee to have their home on the land. There’s the pride of ownership because they own their homes. It’s a low-cost point. There’s a growing need for that.

There are always people that can’t pay their property taxes. They will sell tax lien. There’s probably going to be more tax liens if not less, I would imagine, in the coming days and years. There’s always a need for tax liens. Another interesting asset class that most people don’t think about is land investing. I interviewed a woman on the summit who does that. She buys land and sells it mostly through seller financing. She’s cashflowing, seller financing on her land. She makes $70,000 a month selling land. You can often get it at pennies on the dollar through different strategies. Land investing, with strategies that she teaches, you could do that.

Other things that have the capacity is assisted living or senior housing because of the demographics. It’s a silver tsunami. You have 10,000 people a day turning 65. The Boomers are getting into this. We have a good 15, 20 years of this Boomer generation and there’s not enough supply already for those that are coming. It’s going to be even more every day. There’s a huge opportunity in assisted living facilities and senior housing.

When building a syndication to get investors, remember: build a brand, build a network. Share on X

Other things that have a lot of potentials. We bought a deal that we closed on. It was a cold storage facility for a frozen food manufacturer. We’re looking at a few similar projects that are essential businesses and industrial. Not so much office and retail. I don’t know how they’re going to do, but there’s a lot of demand for different types of industrial space. That isn’t an asset class that we’re looking for, but it’s going to depend on who the users are and how well that does.

Section 8 Housing is a government-subsidized housing. We have some Section 8 portfolio in Jackson, Mississippi. Those are the properties where we don’t know when we’re getting paid on those. Everywhere else we’re like, “Are we going to get paid this month? I don’t know,” but that’s good to go. Low-income housing like the C-class apartments, if it’s not Section 8, that’s a pretty fragile group. A lot of them are hourly. Those are the ones that are unemployed and lost their job. That’s a little more fragile than the B-class, but if it’s Section 8, then that’s a good market to look into.

I know that there are a lot of details around all of those things and people will want to hear more. Why don’t you tell everybody how they can get in touch with you and find out a little bit more about the summit. By the time everybody is reading this, the summit will have passed. Can they still get access to it later? How does that work for you?

They’ll be able to get the replay. They’ll be able to purchase that. You can find me at REIGoddesses.com and @REIGoddesses mostly on social, Instagram, Twitter, Facebook. Look at REI Goddesses and you’ll find me, but the website is the best place to head.

I liked that she says goddesses because she wants all of us to be the goddesses. She’s not the only real estate goddess out there. I know you have a free gift for my ladies. Could you tell us a little bit about that?

I have The Real Estate Success Blueprint guide that I created. It’s seven steps to take to successfully invest. These steps are foundational principles that you can use that will help you to be successful in any economic environment. It’s like the basics of real estate investing.

I want to dive a little bit deeper into the passive investing model. We’re going to do that in EXTRA. Ladies, what we’re going to talk about is how to create passive income with recession-proof assets.

It can also be recession-resistant.

That’s such a good point. There is no such thing as you can’t lose any money ever. Real estate is like any other investment. It has its cycles. It has its ups and downs and it has its risk. The thing is that you can make different decisions to help to protect yourself. There are higher risks that could have higher returns but are more likely to be susceptible and vulnerable to economic change. This is true in everything. If you’re looking at real estate, stocks and bonds, whatever it is that you’re looking at, there are assets that are going to be more recession-resistant.

 

I don’t want to say that high return equals high risk. Some of these recession-resistant investments or asset classes are quite high return. They’re not necessarily high risks. A lot of them are higher return because they’re not as sexy and not as many people are chasing after those asset classes. You can still have a lot of high returns, but the characteristics of those asset classes make it so even when the economy’s down. I remember the last one, self-storage is also a good recession-resistant asset class.

I’ve been hearing a lot about. Based on what you said, EXTRA got that much more interesting. We got recession-resistant, passive income asset opportunities that still have high returns. I want to hear all about that. We’re going to hear about that in EXTRA. For now, thank you so much, ladies, for joining Monick and me for this portion of the show. Monick, thank you so much for sharing everything that you’ve shared so far.

Thanks for having me.

It’s nice to finally chat. We are two voices out there floating in the wind. I’ve been so eager to meet you. This has been fantastic. Thank you. Stay tuned for EXTRA if you’re already a subscriber. If you’re not a subscriber but would like to be, go to RealEstateInvestingForWomenExtra.com. When you go there, you’ll notice that you get seven days for free. I’ve got 35 to 50 episodes up there. You can binge on a ton of those, get as much information as you like, then you can decide if you want to be a member or not. You’ve got seven days to check it out. Go over there and take a look. For those of you who are leaving us now, thank you so much for joining Monick and me for this conversation. I look forward to seeing you next time. Until then, remember that goals without action are just dreams. Get out there, take action and create the life your heart deeply desires. I’ll see you next time. Bye.

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Thank you for joining me. If you love this show, please subscribe, rate and review it on iTunes. As women, we need to support and empower each other to build wealth and live joyful lives. Your support of this show by subscribing, rating, and reviewing will help other women like you to learn about building blissful wealth through investing. Remember to download your free report so you can get started on your investing journey at BlissfulInvestor.com. I’ll see you next time.

 

 Important Links

• Real Estate Investor Goddesses
• Real Estate Guys Radio – podcast
• REIGoddesses.com
• @REIGoddesses – Instagram
• Twitter – REIGoddesses
• Facebook – REIGoddesses
• The Real Estate Success Blueprint
• RealEstateInvestingForWomenExtra.com
• iTunes – Real Estate Investing For Women podcast

 

About Monick Halm

Monick Halm is the founder of Real Estate Investor Goddesses.  She is an educator and advocate for women to create real wealth through real estate.  She is herself a real estate investor, syndicator, and developer with over 14 years of real estate investing experience in multi-family, mobile home parks, RV parks, flipping, commercial, vacation rentals, syndication, and ground-up development. Together with her husband Peter Halm, and her investors, she owns over 1300 rental units across 6 states.

Her mission is to assist 1 million women to achieve financial freedom through real estate.  She is the #1 bestselling author of The Real Estate Investor Goddess Handbook and Wealth for Women: Conversations with the Team That Creates the Dream, and host of the Real Estate Investor Goddesses Podcast.  She is also a Real Estate Strategy Mentor, a Huffington Post contributing author, keynote speaker, recovered attorney, certified interior designer, Feng Shui expert, avid world traveler, wife and mother of three amazing kids.

Grab Monick’s Real Estate Success Blueprint: 7 Crucial Steps to Be a Successful Real Estate Investor. realestateinvestorgoddesses.com/free-blueprint-ebook-1

 

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Solutions To Finding Money, Where To Go & How To Ask with Chris Naugle

 

Opportunities don’t just show up in your doorstep unless you make a way for it to do so. Here to teach strategies and solutions on finding money for your real estate investments is Chris Naugle, the Founder of The Money School. He explains why you need to reimagine the way you look at and understand how money works in real estate. Chris emphasizes the importance of setting up a strategy for achieving your goals before entering the industry as well as having a multi exit strategy in place for security. He goes into the details of how you can secure money by not asking for it, instead by solving people’s problems.

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Listen to the podcast here

Solutions To Finding Money, Where To Go & How To Ask with Chris Naugle

I’m excited to welcome to our show, Chris Naugle. Chris is an entrepreneur with high-level experience as a financial advisor, managing over $30 million in assets. Using his expert knowledge and finance, he has successfully bought, renovated and sold hundreds of properties with his work being featured on HGTV. Chris, how are you? Welcome to the show.

I’m doing great. I’m excited to be here.

I’m excited too. I can’t wait to hear about all of this private money stuff. It’s going to be fun. Why don’t you start by telling us your story?

The story starts when I was a kid, I grew up in a lower-middle-class family. My dad was an alcoholic. My mom and dad got divorced and mom had to raise me. It was that story you hear all the time, but that story is not the norm for everybody. I realize that, but that’s how I grew up. I was that kid who always wanted more. I’ll never forget I always was willing to go out there and do what everybody else was unwilling to do. By 2004, that landed me to be a pro snowboarder. I don’t know if any of your readers have ever been to Buffalo, but most people avoid this place like the plague, but it’s not exactly the iconic place where you breed pro snowboarders. We have hills, not mountains. In 2004, I’d accomplished that goal. All I wanted was to be a pro snowboarder. At that point, I also had co-founded a chain of skateboard and snowboard shops called Phatman Boardshop.

I started them when I was seventeen years old. I started it as a clothing line in mom’s basement, which is a whole other part of the story. My mom, who never had anything, as crazy as this sounds, she put her house up on the line. It was the only asset she had in the world. She put her house on the lines for a crazy punk seventeen-year-old skateboard-snowboard kid to chase his dream. That’s how Phatman Boardshop was founded. By 2004, even though I had become a pro snowboarder, even though I had this chain of four skateboard and snowboard shops. Everything in my life seemed like a fairytale, but I still wanted more. I’ll never forget, at that point in time, I was infatuated with the movie Wall Street. Do you remember the original Michael Douglas Wall Street movie? I remember that movie and I’ll never forget it. When I saw that movie, the first thing I thought is, “I want that.” The only thing I could think of is to get that I need to be a stockbroker.

I need to be a financial advisor, which is where that all began because, in 2004, I started diving in and studying and doing everything it took. I became a financial advisor right around that time. As an advisor, I excelled fast. I got all my licenses, got every single certification you could possibly get. If there was a cert, I went out there and I got it. It was because of that, I rose to be one of the top advisors in the firm I was at. That continued on. I was an advisor for a long time. By 2006, I’d been seeing some of these flip shows on TV. We’d be at the shop working and we’d have HGTV on or A&E. We’d see these flips. In a TV show, you see a flip getting done in 22 minutes. It’s entertaining. I said, “I can do that.” I had some money from being an advisor and I decided to start flipping houses.

My first one was in 2006. It was a complete disaster. It’s the only word I can call it, but I got my feet wet. I did that all the way up until 2008. By 2008, this is the pinnacle. I was crushing it. I was literally crushing it as an advisor. I had flipped a couple of houses. I was a pro snowboarder at the peak of my career. By that point in time, I got my retail stores. Everything was humming along with that and I then got my next big idea. This is one of those grandiose ideas because I’ve always been a big thinker. That idea was I was sick of paying rent to my landlord. He kept raising my rent.

Two buildings down, this dilapidated paint store came up for sale. I saw the sign and I’m like, “That could be my new home for my stores.” What I would do is I would convert it to a three-unit strip mall. I’d have the tenants pay for my rent because why should I pay rent when my tenants would pay it for me? That was my big idea. I dove in. I borrowed money from a hard money lender. I call them knuckles in my stories. This was in 2008. It’s perfect timing. I didn’t even see this coming as an advisor, which is a whole other story.

 

In 2008, the small thing called the Great Recession hit me like a Mack Truck. It brought me to my knees. It got so bad during that period of time that I was one payment away from being completely bankrupt. I literally didn’t know how I was going to make it to the next day. What happened is my girlfriend, she’s now my wife, Lorissa. She moved into my house and I had to come home one night. This is when everything was crashing all around me. When you think your life is going one way, all of a sudden, these things happen and then you’re going the complete opposite direction.

I came home and I looked Lorissa in the eye and I said, “Sweetie, I need your help. I need your help paying the mortgage and the utilities. Honey, you’re not going to like this. I have to rent that bedroom out to this guy named Pete. I know you don’t know him, but I can’t make it. This is what I need.” At this point, I threw it out there. I had no one else to ask. I thought, “This is a 50/50 shot,” because she could say, “I’m going to let myself out and good luck, buddy.” She liked me because she ended up marrying me and making it through that period of time with me. Those are exactly what we did. We rented out two bedrooms in my little house that I had back then. That’s how I made it through.

By 2009, Warren Buffett, who was my all-time hero, says three things. I repeat these all the time, “Buy low, sell high and don’t lose money.” In 2009, I understood one of those three things. I understood buy low. I also understood real estate was cheap because that’s what the whole recession was about. That’s what brought me to my knees. I was right in the middle of it. If everything’s low, let’s start buying. That’s what I did. From 2009 to 2014, that’s all I did. I bought dilapidated apartments one at a time. I borrowed money personally for each one of these. I wasn’t using commercial loans. I didn’t know how money works. I thought I knew how money worked because I was an advisor and I knew exactly what I was taught in all the teachings, classes and certifications. I learned exactly what everybody else knows about money, the traditional way of thinking about money.

By 2014, I got up to have 36 units. I was back to making good money in the advisory firm because the markets have rebounded. By that point, I had sold off my stores in 2010. Phatman was sold and I’ve even sold off my strip mall. Right at this point in time, I realized I was in trouble all over again. You would think everything was going well but what I didn’t realize is when you borrow money in your personal name, the banks look at you and they say you don’t fit in their little square box eventually. I got up to 36 units, which were six properties. I brought one more to the bank and the bank said, “You don’t qualify because you don’t fit in a little box called the debt to income ratio.”

I said, “I can’t buy this new six-unit, but I’ve got all my other ones.” They said, “All those lines of credits that we gave you, we have to freeze all those, Mr. Naugle. You can’t use those anymore.” I had a bunch of properties unfinished. At that point, I’d gone from having money back in 2008. I was crushing it to almost losing it all. I had made it back and here I was again, now I was losing it all again. It was getting so bad that I was living paycheck to paycheck trying to make ends meet with all these properties and all my obligations.

I and Lorissa had bought our dream house and that was a big expenditure. It got so bad again that we had to sell off all 36 units, which who cares, they’re investment properties. I had to sell that dream house. That’s when I started thinking about quitting. I was like Rocky Balboa with the towel ready to throw it in. I got in the mail a postcard and this is where everything started changing. It changed because of what I call a magic postcard. This postcard was nothing special. You’ve gotten them. I bet you your readers have gotten them. It said, “Come to this three-day seminar to learn how to flip houses.” When I tell people that, they’re always like, “You’re crazy. What is wrong with you?”

What was wrong with me is that at this point I was humbled by my failures that I had nothing to lose. By going to the seminar, I got a free iPod Shuffle. That’s exactly why I went. I didn’t have anything to lose. I had an iPod Shuffle to gain. Off I went. On day one, there was nothing special but by day two, everything changed. It wasn’t because I learned a whole bunch of new stuff. It was because I learned one new thing. That one new thing was that breakthrough for me. It’s the same with many of your readers and the people you’re around, we don’t need a ton of new things. We need one thing. One thing that will catapult us faster, smarter and more efficiently. That one new thing for me was I learned that with the successful real estate investors and there were two of them. Mike and Greg were their names. What they were doing and how they were using money in real estate was the complete opposite of everything I’d ever been taught in my entire life about money and about how to use money in real estate.

At that point, I realized that they don’t teach this stuff. This is the knowledge you need to seek out and you need to dive in and chase because it’s never going to come to you. No one’s ever going to teach it to you because they’ve got nothing to gain for teaching you. When I learned that, I started questioning everything. Everything I’d ever learned started being questioned. Do you know sometimes in life, when you got hard times, you blame everything else? I blamed the lack of money. I blamed the economy. I blamed everything I could possibly blame. I was in the blame game. At that point, I realized it wasn’t about the money. It wasn’t about the economy. It was about the misinformation that I’ve been given my whole life because these two guys, what they were doing was working and they were killing it and it was everything that I’d never been taught.

That’s the moment when I decided to get off what I call the financial hamster wheel and that’s when I learned how all this work. How I learned all this is I swiped my credit card for $27,000. I told you where I was in 2014. I was broke. I was barely making it. Here I did swipe my credit card. My wife killed me when I came home and told her, “I bought us this thing. Do you know that thing that you didn’t want to go to? I swiped my credit card for $27,000 because what we need is what these guys can teach us.” That’s what changed it all. When I swiped it, I wanted to throw up in my mouth. I did. One of those ones that you got to re-swallow. It was so overwhelming that I was broke and here I was going $27,000 in debt without a hope in hell in ever paying that money back. That’s where the TV show comes in.

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I want to point out some things, Chris. Your story is amazing and it highlights some of these things that people go through or are afraid of going through. What is the biggest reason people don’t get started in real estate? It’s fear. Their fear that they don’t know enough, that they’re going to fail, that they’re going to go bankrupt, that they’re going to end up homeless. There are a lot of things that go on through our mind that are not necessarily rational but are definitely there. What’s interesting is when someone comes on this show and they lived the nightmare. You were one paycheck away or one payment away from being homeless. You had to sell your dream home. You were crushing it and then you lost everything and then you’re crushing it and then you lost everything. This is the thing that I want the ladies to know. Success is there for the taking, but failure is a part of success. We learn through that failure. Failure is scary. Chris can tell you. I’m looking at his face and he gets choked up when he’s talking about this. It was hard. It sucked. He had to talk to the woman he loved and humble up and ask for help. He had to sell their dream home.

That almost cost us our relationship.

Things happen that sometimes we’re afraid, what if they leave? I know I’ve had this with David. What if he leaves me? I’ve made this huge mistake. I said this many times and I want to say this again. Don’t give up on yourself. Real estate is the single most consistent, proven way of building wealth in the United States. It’s safe in general as long as you do it the right way. We know real estate works, but if you get in it and you make some bad decisions, it’s not going to kill you. It will make you stronger. In the end, if you stick with it and you don’t give up on yourself, you will see success. Even if we see failure, even if we see economic crashes, no matter what we’re seeing out there, what’s going on in our own mind is going to determine how successful we are. Fortunately, we have control over our own minds. That’s an important thing. Chris, I love your story of this roller coaster ride because this is the thing that many women fear.

I would never advise people to do that. It’s painful. Jump in feet first without any mentor, without any knowledge, don’t do that. If you do your research and get started, you get a mentor who can help you sidestep a lot of those mistakes and you can see success. I wanted to point that out, Chris, because as people are reading this, we’re all emotionally involved. “I can’t believe he went through that.” I wanted to point out that this is what we fear. This is our worst case. Now, Chris is here talking about his successes. Thank you for that, Chris.

You’re right with everything you said. You could even take and go back into my story and pull up the rest of the fear. The fear of being a pro snowboarder and what that was like, showing up places, and having to hit a jump that you thought was bigger than anything you’ve ever hit. That fear that engulfs you and that was part of life as a pro snowboarder. The fear of when my mom put her house on the line. Even though that was an exciting time, as a seventeen-year-old turning eighteen, my mom’s house was on my shoulders. If I failed, I’d lost my mom’s house. My whole life has been facing fear. Don’t think for a second it’s ever been easy. That whole roller coaster ride you heard there, there are many things in there where I literally want to quit.

I wanted to quit every time, but the only way to truly fail is to quit. I wasn’t willing to accept that even when things got bad in ‘14. Me and Lorissa, she was my fiancée then. We split when that house got sold. Things got hard and I didn’t know if that would ever come back. I had to take a month and go to Thailand to clear this head because I didn’t know how to get through to the next day. It all came back together because I never gave up. She never gave up on me either. When we came back and we went to this training that we spent all this money for.

At first, she was mad at me. She couldn’t believe I did what I did, but then when she saw it and she met Greg and Mike and she met all the other mentors that we were being coached by, she realized that this is what we needed. She realized that this is the stuff we were never, ever shown. I’m going to get right into the show because many people want to know how does one go about getting an HGTV show? How do you get that? That’s the likeliness of getting struck by lightning. A lot of people are misinformed on how you get a show. A lot of people think that they see you on Instagram or Facebook and they call you up and say, “We’d love to have you on HGTV.” No. Here’s how it started for us.

We were in a convention at this real estate training with our mentors and Tarek and Christina got up on the stage. They did a little dog and pony talk and it was great. My wife and I looked at each other and do you know what I said to her? I said, “Sweetie, if we’re ever going to get on that stage, we’ve got to have our own show.” Instead of going out and trying to find somebody to produce the show, I went back and I hired my friend, Kyle. He started going to one of the flips we were doing. He started filming us. I got this crazy idea as a snowboarder that we should do a show that mimics Jackass and Flip or Flop and bring it together. That’s where the first rendition of the show came up, which was Flip Out. How it started is we started filming and we were having so much fun.

 

It brought me and Lorissa closer. We brought one of my ex-pro snowboarders in, his name was Blair. That whole experience, that bonding experience of working toward this pie in the sky thing, which was scary. It’s like, “This may never happen,” but the thought that if you work toward it and you keep that idea strong in your mind, it can happen. It did happen. We sent that video out to all the networks and we got turned down by every one of them the first time. The producer that took us on dropped us because they couldn’t get it placed. We should have quit there. We’re like, “No, we got something.” We went to the next producer.

That producer took my little crazy pie in the sky idea and he made it into their little box. He said, “This is what HGTV is looking for. You guys are this close. We need to squish it together.” We filmed it a whole other flip. That flip is the one that got us on HGTV. It didn’t happen overnight. You’ve got to understand, in 2014 is when we started that dream of getting a show on HGTV. We didn’t air until 2018. Think about that. Sometimes your dreams are not going to happen overnight. There is no easy button in life. It is a marathon. If you want something so bad that you can taste it and so bad that you will never stop, you’ll get it. As Napoleon Hill says, “If you dream it and you believe it, you can achieve it.” That’s exactly what got us the show. Never giving up.

Our show aired in ‘18, HGTVs Risky Builders. You can look it up. It was a wild and exciting time, but that same thing, when the show aired and we aired six times, we didn’t move on to the next season. You think you got it. Your ratings are there. You’re the number two show out of green light and you think you got it and all of a sudden, one thing happens. That one thing that happened for us was discovered about HGTV when our show was airing and they decided to freeze all my shows. That door that we thought was going to open that was going to pave the way for the rest of our life slammed in our face.

Another thing that Chris said that I want to highlight. His dream took four years. We are conditioned to have a short-term vision and immediate gratification mentality is common now. There are many people out there promising us, “You can make $1 million in two years. You have to work ten hours a week for the next eighteen months.” The truth is that I’m not going to say bad things about anybody that’s making promises because I don’t know. What I do know is an assured way of success is to have a long-term vision, especially in real estate. Chris did flips. That’s more of a short-term thing. I have done a couple of flips. It’s not my favorite thing to do because the pressure is high, but you want to have a long-term vision. First of all, if you’re flipping, have deep pockets enough that you can recover from any mistakes. With flipping, you have to be right on target.

We are at 257 flips to date and it would be 258 soon. I can assure you, you better hope you’ve got a good plan for how cashflow is happening.

In the beginning, mistakes happen and that costs money and time. You need to make sure that you’ve got the backing to do that if you want to do flips. Regardless of whatever you’re doing, whether it’s flipping or wholesaling or buy and hold, which is what I do, have a long-term vision. Real estate is not a get rich quick scam or idea. It is a long-term business. Even though his TV show, we’re talking about that and it took four years or whatever, understand that real estate is that way too. You want to stick with the dream long-term because that’s how it’s going to pay off.

The other thing too that you said in there that I want to clarify that it’s vitally important is if you’re getting into real estate, I don’t care if you’re going to wholesale. I don’t care if you’re going to flip. I don’t care if you’re going to do BRRRRs and buy and holds, you should have a system and a strategy. My system and strategy are simple. Each and every single property I have goes through, I call it four, but we’ll focus on a three-step strategy. Number one, every deal we get, first, we try to assign that deal because the quick dollar is always the best dollar. Number two, if we can assign it, we don’t freak out. We don’t worry because you know what we figured out, we figured out how money works.

That’s what I’ve written a book about. It’s what I teach and talk about, money and how money works. We take the deal down. What we do is we look at, can we wholesale this deal? Can we do a quick sale without doing much work or any work at all? If we can’t, if we flip the deal, that’s strategy number 2.5, as I like to call it, because if we can’t pull it out, then we’ll look at flipping it. If we flip or we’re looking at that strategy, we have to be able to make 20% profit. If we’re not going to make a 20% profit, it moves on to step number three or strategy three, which is a BRRRR. What we’re going to do is renovate it like a flip. We’re going to basically get it ready.

We’re going to rent it. We’re going to take it to the bank and refinance it. We’re going to keep it as a long-term rental because once you own the asset and you control the asset, it’s now providing cashflow. It’s appreciating. What we’ve even been doing is taking a lot of our rentals, packaging them together in nice rental portfolios and selling them off to areas like California, Toronto, New York City, where they can’t touch rate of return like what we’re getting here. That’s what we’ve been doing. Because we have that system, we never have to worry about cashflow. There’s always a secondary strategy. That goes right into what you were saying. There’s not one or the other that’s better, just make sure you have multiple exit strategies in your strategy.

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Thank you for saying that, Chris. That is my big thing on how I have avoided my own disasters in my life in real estate is always having several exit strategies. Every business partner I go into business with, they have to understand that I’m not married to one particular exit strategy. I have my preference, but if that one doesn’t work, we are going to number two. In other words, if we’re trying to sell a flip or a construction project and the market has plummeted and we can’t sell it, I’m not going to chase the market down. I’m not going to do that. We are going to rent it. Understanding that you have many options with exiting a project is important. You don’t want to get married to a particular idea and you don’t want to get so bullheaded about it that you will make mistakes like chasing the market down. Instead of chasing the market down, chase rents up. You can do the opposite and succeed. Chris, nobody else talks about the multiple exit strategies. Thank you so much for that.

We did 257 flips and you might look at that and be like, “Wow.” We made a lot of mistakes in the early years. All we did was flip. I can tell you, there were times where I couldn’t even buy groceries because I had so much money out there, I didn’t have cashflow. We started getting smart. What we started doing is getting a rental and that rental cashflow, we’d roll it in. We created a spreadsheet. We had X amount of cashflow coming in and we wanted that cashflow to support the carry cost on the flips. It didn’t happen overnight, but we started figuring out, “If we can build a rental portfolio that cashflows, we can use that cashflow to determine how many flips we can do at one time because the cashflow carries the cost of the flip business.”

You make the big profits on the flips, but sometimes you’ve got to wait for that. We started saying, “If the house doesn’t sell and we don’t make 20%, no big deal. Let’s rent it and move it into the rental portfolio. If it didn’t sell now, it might sell next year or maybe down the line, we’ll keep cashflowing. We figured this out through mistakes. All these ladies that are trying to get into this business, if you take this knowledge and you apply this in your business, you will not go through these roller coasters that I had to. You won’t have to look fear in the face like I had too many times and say, “How am I going to get to the next thing?” You’ve learned from someone else’s mistakes. Although failure is a necessary part of success, you can minimize the number of failures by learning from other people’s failures and then applying what not to do in your practice.

It is why a mentor is so important. Could you tell us a little bit about how you started financing things? I know you started using private money rather than the banks. Could you tell us a little bit more about that?

It all came when I learned that the people that were crushing it in the business, I always thought it was because they had millions of dollars of their own money. I learned that they didn’t. They mimicked what the banks did. They used other people’s money. What the biggest thing I started doing, and I was good at this because I was an advisor, is I started going out and finding all these people that I thought had money. Whether it was in an IRA, hidden equity in their home or money that they had set aside in investments that maybe they weren’t comfortable with the risks. I found all of these different sources of money and the biggest source of money I found, to be honest, and this is going to blow you away, permanent life insurance. Do you know how much money is sitting in permanent whole life and universal life policies? These people don’t even know that they can access their cash value. I started going to these people and I started solving their problems. This is a massive takeaway.

One thing I got super good at is never asking for money. I never went to somebody and asked them for money. I went to somebody that I knew had money. I said I’ve learned what their problem was. Sometimes their problem was they didn’t like making their car payment. What I would do is teach them and I would say to them, “What if I could show you how to have your house pay for your car?” You see their problems, their car payment. The thing I know is they’ve got equity in their house. Instead of their house being a liability, I taught them how to turn their liabilities into assets by taking and using that hidden equity that was sitting in their house. That interest that I paid them on a monthly basis, the mailbox money, that paid for their car payment. I started learning that people’s problems weren’t wanting to become a multimillionaire.

Their problem was they wanted to take one more family vacation. Maybe they wanted to take their whole family to Disney World on them and pay for the little thing. To someone, that’s a major problem in their life. To us, do you know how easy it is for a real estate investor to solve that person’s problem? Show them how to take their IRA, their 401(k) money, their hidden equity, either money sitting into the life insurance and how to then take that income from those vehicles that are not doing anything for them in terms of an income. Show how that income will make them have that vacation. The number one thing to raising private money is not asking for money. It’s not knowing a bunch of people with money. It’s going out there and finding the people that you liked, the people that trust you, and teach them how to solve their problems. Their problems are stinking easy to solve.

For you, it was easy because you were a financial advisor. You had access to this information. The layman, for instance, me, I would never have that information.

 

You do. How many people do you know that have employer-sponsored retirement plans, 401(k)s, 403 (b)s, 457s? Every person that’s working in a regular W-2 job probably is putting money into a retirement plan. They’ve been taught to do that their whole life. They’ve got this money sitting in their retirement plans, but do you know what their mindset tells them? “I can’t use that money. I would have to pay tax and penalties to take that money out.” That’s what they think. They don’t know that they can take a loan from that 401(k). When they take a loan from that 401(k), you being the borrower or the real estate investor, can pay that loan back for them and put some extra money in their pocket. If their loan costs them 5% and that interest that they’re paying on the loan goes back into their account, but that’s a cost to them. Why don’t you pay them 10%? They’re making a spread of 5% on that money. Everybody’s got one of these things.

A lot of people have old 401(k)s move into IRAs. Show them how to take those IRAs and move them to a self-directed IRA. You don’t even need to be the expert to say, “I know a person that could basically help you do this.” Everybody wants to think that I’m different because I was an advisor. Maybe it was a little easier because I knew how to identify these things, but everybody knows somebody that has money. Most people will tell you that they don’t have any money because they don’t know how money works. If you get a little bit of knowledge on how money works and you learn how to position your opportunity, which is your real estate deal, your opportunity, you can be positioned to solve their problem. All of a sudden, you start figuring out that the people that you don’t think having money are the biggest ones you can help and the biggest ones that can give you money for your deals. It’s a misconception of where the money lies and how people can use that money.

I don’t know if this happens for you, but someone starts talking about something and then something grabs your attention and you don’t hear anything else. This happened to me while you were talking, Chris. I was going to backtrack a little bit. You talked about they’ve got their 401(k). You can take a loan. You get 5% and then you, Chris, are going to pay them 10%. Ladies, the only reason I am focusing on this is to give you an idea of the paradigm shift that Chris can create for you. There’s one example. Based on what he said, there are probably many opportunities based on what you’ve got, but here’s the paradigm shift that happened for me. You take out a loan from your 401(k) at 5%. I don’t know if you caught this, but do you know that 5% is getting paid back to you? You’re paying interest back to yourself. You’re making 5% and he’s giving you 10%. A lot of people would look at this and say, “I’m getting a loan at 5% and I’m getting paid 10%. This is arbitrage. I’m only making 5%.” How much are they making?

It’s more than 5% because you are paying them 10% and the 5% they’re paying back to their 401(k) is their money. They’re paying themselves back with interest. What they’re doing is the same thing the bank does. You are literally mimicking what the bank does every single day because you learned one new thing that you can change. Everything I teach people is only changing one thing in your life. That is it. It’s applying basic banking principles, the simplest things that are on for hundreds of years to your everyday life. It will change your life. It will completely transform your life if you learn that one new thing.

There are many of those new things that we can learn. Once we focus on one and we start to utilize that, we create a plan like you’re talking about. Now, we have a business.

It’s about the home equity line of credit. It doesn’t cost anyone anything to get a home equity line of credit. Most banks will dish things out and they don’t even charge for the appraisal. It costs nothing to use or to get a home equity line of credit if you’re not using that money. You now got this home equity line and that home equity line taps into the equity in your house. People get excited about having equity in their house, but why? What is your equity in your house doing to change your life? Nothing. Do you know what your equity in your house is doing? I want you to visualize this.

Picture that you come home from work and on your couch is your money sitting there and your money is holding the soda from your fridge. The Lay’s potato chips from your cupboard and there are crumbs and everything all around your couch and your money is sitting there watching TV. Kick back. You worked a hard day and your money looks at you and says, “Did you have a hard day at work?” That’s what your money is doing every day. It’s sitting on your couch being lazy while you’re off hustling because you’ve been taught to go out there and work hard, work long, and you’ll get ahead. Your money needs to work hard. The best thing about your money is you can be a slave driver. You can make your money work hard and it will never ask for a break. It will never ask for a vacation. It will never even get mad at you, but you have to teach it and send it to work.

Your money is sitting there being lazy. Teach your money on how to go to work. Remember my mom. I told that example where she put her house on the line. After she did that, we learned something. After I paid off that store’s loan, what we started doing is mom had this line of credit. We started using mom’s line of credit to buy real estate. My mom’s line of credit was 5%. I would pay my mom usually 8% to 10% on the loan. I’d take a loan and I would pay mom back. That amount that I paid my mom above and beyond her payment to her home equity line of credit was enough to pay for a car. That’s where I came up with that whole idea of having your house pay for your car. That’s what people want. People want their car payment paid for by their house. They just don’t know how. The answer is so simple. Every one of you reading this has the answer to their problem. That answer is in the form of a real estate opportunity. Don’t ask for money, solve problems.

I’ve got one million things that I feel like I could add and we’re already out of time. We’re going to have EXTRA after this and we’ll do a deeper dive on some of this stuff. If you’re subscribed to EXTRA, you’re going to get a lot more. If you’re not subscribed to EXTRA, do it because you’re going to want a lot more. We’re going to talk about more of this stuff then. Before we close out this portion of the show, Chris, could you tell people how they can get in touch with you?

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The best way to get in touch with me is my website. It’s ChrisNaugle.com. They can go on there and that’s the best way. They can also check me out. A lot of people love social media. I am all over Instagram. It’s @TheChrisNaugle and Chris Naugle on Facebook. You can’t not find me. I answer every single direct message individually.

I knew that you wanted to give my readers a free gift, which is the eBook of your bestselling book, The Private Money Guide: Real Estate Edition. He’s going to be giving you that free eBook. Chris also wanted to make another generous offer. Could you talk a little bit about the membership offer you wanted to make to my audience?

I do because we’re talking about money and a lot of times, I can teach people where all the money is and they still don’t want to look for it. What I’ve created is a community of lenders and borrowers. Picture eharmony, the dating site. I’ve created that for lenders and borrowers. It’s a community that you can come into where all the lenders in there communicate with all the borrowers and the borrowers can submit their deals through a standard operating procedure. We do all the work for you. You fill in the blanks and your deal goes on. Literally, you can have all the lenders looking at your deal and they will do that. It’s called The Money School community. What I wanted to do is basically make a special offer and give it to everybody in your community at a very reduced price over what we normally charge. You can test it out. It’s a monthly subscription. You can try it. If it didn’t work, you stopped the subscription, no big deal, but it has literally provided funding for I don’t even know how many at this point. I don’t keep track of all the deals, but that’s what I wanted to do.

The URL is ChrisNaugle.Teachable.com. You’re going to look at the membership. It will show you the regular price, but then when you get an opportunity to put in the coupon code 50OFF and you’ll get $50 off of the monthly membership. It’s month to month. You can try it for one month at this reduced rate and continue at that rate if it seems to be something that is going to work for you. That’s generous and it’s an ongoing gift. It’s not like $50 off the first month. It’s an ongoing monthly gift. That was generous. Thank you, Chris.

You’re welcome.

Are you ready for our three rapid-fire questions?

I’m always ready.

Give us one super tip on getting started investing in real estate.

The super tip to getting started is easy. It’s get started and find one person that is doing what you want to do and latch onto them and learn from them. That would be my super tip to getting started. Stop trying to think you need to know everything and take that leaping start.

What is one strategy on being successful in real estate investing?

One strategy on being successful in real estate investing is to come up with a strategy before you get started. Lay out or map out where you want to be and come up with the plan to get there. If you want to have five properties, come up with that plan of how many offers do you have to make versus how many houses you have to get. Write the plan down. Don’t dive in without a plan. Do the plan first.

What would you say is one daily strategy or daily practice that you use that contributes to your personal success?

Every morning, the first thing I do when I wake up is I get down on my knees and I thank God for what I have.

Chris, this has been amazing. Thank you for everything you’ve offered in this portion of the show.

You’re welcome. It’s been an honor.

Thank you for joining, Chris and I. We are going to be talking about more of this stuff in EXTRA. The question that I am going to be asking Chris is, how do you build wealth through debts and expenses? How do you come out ahead? That’s juicy. We’ll probably be doing a deeper dive on the private money piece also. If you’re not subscribed to EXTRA but would like to be, I know this sounds a little bit confusing, but here’s the thing. You go to RealEstateInvestingForWomenEXTRA.com. You get the first seven days for free so you can test it out. You sign up for the subscription. After that, it’s a monthly subscription that’s super cheap. It’s $5 a month and you can get your EXTRA episodes.

If you are on Apple Podcasts, you’ll be able to see it on Apple Podcasts. If you’re on Podbean or anything else, you’ll be able to see it on the device that you’re using. You don’t have to have another subscription to any other device or apps. I want to explain that. I know that was a little bit long-winded, but I get many questions on how do you do this. It’s RealEstateInvestingForWomenEXTRA.com and then it’s self-explanatory from there. Thank you for joining Chris and me on this portion of the show. I look forward to seeing you next time and until then, remember, goals without action are just dreams so get out there, take action, and create the life your heart deeply desires. We’ll see you next time.

 

Important Links

• Chris Naugle
• @TheChrisNaugle – Instagram
• Chris Naugle – Facebook
• The Private Money Guide: Real Estate Edition
• ChrisNaugle.Teachable.com
• RealEstateInvestingForWomenEXTRA.com

 

About Chris Naugle

Chris Naugle has dedicated his life to being America’s #1 Money Mentor. His success includes managing over 30 million dollars in assets in the financial services and advisory industry and tens of millions in real estate business, with over 200 transactions and an HGTV pilot show since 2014.

In 20 years, Chris has built and owned 16 companies, with his businesses being featured in Forbes, ABC and House Hunters. He is currently the co-founder and CEO of FlipOut Academy™, founder of The Money School™, and Money Mentor for The Money Multiplier.

As an innovator and visionary in wealth-building and real estate, he empowers entrepreneurs, business owners, and real estate investors with the knowledge of how money works. Innovating what it takes to break the chains of financial slavery, Chris is driven to deliver the financial knowledge that fuels lasting freedom. To date, he has spoken to and taught over ten thousand Americans.

 

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Deferred Sales Trust is the Debt Free Plan with Brett P. Swarts

 

Are you looking to overcome your capital gains tax deferred limitations? In this episode, Brett P. Swarts, Founder of Capital Gains Tax Solutions, joins Moneeka Sawyer to discuss what a deferred sales trust is and how you can take advantage of this. Brett talks about helping people escape feeling trapped from capital gains tax and to never have to overpay for a property via 1031 exchange. Brett and Moneeka dive into the difference between a deferred sales trust and a 1031 exchange. Brett also gets into detail on how you can sell your property high and take advantage of a deferred sales trust and ultimately defer capital gains tax for your transaction.

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Listen to the podcast here

 

Deferred Sales Trust is the Debt Free Plan with Brett P. Swarts

I’m excited to welcome to our show our guest, Brett Swarts. He is the Founder of Capital Gains Tax Solutions. Each year, he equips hundreds of business professionals with the Deferred Sales Trust tool to help their high net worth clients solve capital gains tax-deferred limitations when selling their highly appreciated business or real estate. The Deferred Tax Trust offers an exit strategy that helps business owners escape feeling hostage to capital gains tax and venture capital to fund their next business deals by deferring capital gains tax and depreciation recapture of 30% to 50% of the gain on the sale of their businesses. That was a lot of cool words. We are going to go into it. Brett, welcome to the show.

Moneeka, thanks for having me. It’s such a pleasure to be here.

This is such a hot topic. Could you first start by talking a little bit about your story? Tell us where you came from.

Many commercial real estate owners struggle with capital gains tax. I started at a company called Marcus & Millichap back in 2006 where we help people defer capital gains tax using a 1031 exchange. We were focused on helping them create and preserve more wealth in particular through multifamily. It was my specialty here in Northern California. We learned about the 1031 exchange on day three. The 1031 exchange is a way to defer tax when you sell an investment real estate, as long as you buy a like-kind investment real estate.

Something happened during what’s called the 2008 crash where the marketplace shifted and people got hurt quite a bit. I had friends, family and clients, everyone lost something, some lost everything, all of their net worth because, in particular, we found that they were forced to overpay for properties via a 1031 exchange. They felt trapped. They felt pressured in this 180-day window to take on equal or greater debt for an equal or greater property. I set out on a mission saying, “How do we help all my friends, family, and clients to never have to face this again?”

At the right time, my manager brought in a gentleman to speak on this topic called a Deferred Sales Trust. I sat in an office, probably a lot of your readers are sitting somewhere reading for the first time saying, “What is this? You’re telling me you can defer capital gains taxes not using 1031, not have to go back into real estate immediately? You can do it for a business or a primary home. It’s got to be too good to be true,” but I kept digging in. I kept learning and kept being open-minded to what it could be. Fast forward, several years later, after countless deals of 1031 exchanges, Delaware Statutory Trust, Deferred Sales Trust, we’re helping a lot of people escape feeling trapped from capital gains tax and the best part about it is they never have to overpay for a property ever again via a 1031 exchange.

Why don’t you tell us the difference between a 1031 exchange and the DST, which is what you used?

Sell high and buy low, not sell high and buy higher. Share on X

The premise is this, most business owners or commercial real estate owners are high-end primary homeowners. They struggle with capital gains tax somewhere between 30% and 50% of their gain when they go to sell their highly appreciated assets. We use a Deferred Sales Trust to replace the 1031 exchange to give liquidity, diversification, flexibility and then the ability to go back into real estate at optimal timing. That’s the premise here so that high-net-worth individuals can create and preserve more wealth. Optimal timing is the key here. Most of us know when it’s a seller’s market for real estate and when it’s a buyer’s market. Most would agree, especially here in California and even in most states that prices are through the roof. They’re ultra-high. It’s hard to make sense of any deals right now with cap rates and interest rates being so low. Rents have appreciated such a great deal over the last number of years.

You couple that with, “I’m going to sell high.” That’s great, but our parents taught us to sell high and buy low, not sell high and buy higher, which is not optimal. The 1031 exchange, the first thing is you sell a piece of property. You need to buy something of equal or greater value. You need to identify potential properties within 45 days and then close within 180 days. We call that the sell high, buy higher 180 days later, which is not what you want to do. That’s the first thing. It’s timing. Do you want to buy at an optimal time? Do you want to sell high and buy low? That’s the intention. How could I sell high now, sit on the sidelines, be debt-free and park until I see a deal?

The intent is to have timing. The challenge is the 1031 doesn’t allow you to have that timing. The solution is the Deferred Sales Trust. We can sell high now, sit on the sidelines all tax-deferred, out of debt, and you can wait for a deal. That could be tomorrow, that could be day 181 or that could be five years from now. The key is, what is the best timing for you when you find a deal? I’ll tell you about a quick deal story. I had a gentleman who did this in 2006. He’s one of the top Deferred Sales Trust clients. We called this the Monday morning quarterback. He dropped back and he threw the perfect pass at the perfect time. He sold at the peak, moved all of his funds to the Deferred Sales Trust. This is a large transaction. He was able to defer all the tax.

Five years later, that same property that he sold, the buyer was foreclosed on by the bank. He bought that property back through his trust, all tax-deferred, not using a 1031 at $0.60 on the dollar. We call that buying at an optimal timing, sold high and bought low. That’s the first thing about the 1031 exchange. It doesn’t allow you to do that. The second thing about the 1031 exchange is it forces you to buy equal or greater value, which often means equal or greater debt. Let’s say you sold a $10 million property and you had $4 million in debt. Now, you need to buy equal or greater value, $10 million or more, which most people end up buying more.

Now, you’re not only taking on that $4 million in debt. You’re taking maybe $5 million or $6 million of debt. You couple that with not buying at an optimal time, you’re putting yourself in a risky position. We call that dumb debt, taking on too much debt for a property that doesn’t make sense because you want to defer the tax. That’s where most people live in the commercial real estate world. They buy and sell via 1031 exchanges and overpay, or they get a bit smart. They buy and then they sell and pay the tax. We would say, “No, there’s a better solution. It’s the third one. It’s called the Deferred Sales Trust.” Put it into the trust. You get the best of both worlds.

The next thing to consider is what’s called the depreciation schedules. For any of your readers and have owned for a long time, specifically 27.5 years if you have multifamily or 39 years if it’s commercial, you go to zero depreciation. Depreciation is the number one reason or the top two reasons to own commercial real estate in my book because it offsets the income that’s coming in. The only thing that does this is business or commercial real estate, therefore, you pay less in taxes.

However, if you own long enough, you depreciate out. If you’ve done multiple 1031 exchanges, you also depreciate out. The depreciation schedule travels with a 1031 exchange, which is not good. You want more depreciation. You don’t want the same schedule. The intent is to get more depreciation. The problem is the 1031 exchange travels. It doesn’t give you more unless you buy a bigger property. The solution is the Deferred Sales Trust. You can sell through the funds into the Deferred Sales Trust and then use those funds like a self-directed IRA to go purchase new real estate via a new LLC where you’re the managing member of it. You’re running that deal the same way you would be. Except now, you’ve got a brand-new depreciation schedule, which is powerful for creating and preserving more wealth.

My question is, does the property need to be in the trust when you sell it? I know that’s a little bit technical, but you said that he sold the property and then he moved all that money into the trust. Give me a little bit more clarity on what that cashflow looks like.

 

Let’s walk through how this whole thing works. That’s probably what your readers are thinking. How does this thing work? What is this trust? How is this all going down? Where’s the money flowing? Moneeka, we’re going to start with this premise first. It’s the premise of what is the actual receipt or constructive receipt? Actual receipt for your readers is when you receive the cash. If you get paid or you close a real estate deal or whatever, when you receive that cash, the IRS says you owe some tax on that. This is the first concept.

If I come to you and I said, “I want to buy your $10 million apartment complex.” Let’s imagine you own it free and clear. This is a zero basis. You’ve owned it for 27.5 years. You’re fully depreciated. If you were to sell, you owe about $4 million in tax, about 40%. It’s a good number with the depreciation recapture. You’re thinking about a tax deferral strategy. You’re not sure about a 1031, but let’s say you’re considering a traditional seller carryback, which is the foundation of our structure. If I give you a $2 million down payment and you carry a note for $8 million, how much actual receipt did you receive?

$2 million.

The other amount is in a deferral state. You haven’t received it yet. You don’t owe the tax on what you haven’t received. Let’s call it traditional seller carryback. It’s very well-known. Your readers probably know about it. If not, their CPA definitely does and their broker does. It goes back to the 1920s. Let’s adjust that a little bit. Let’s imagine, I came to you with a zero downpayment. I said, “Moneeka, I’m going to buy a property from you. I want to give you a zero downpayment.” Let’s say you did that deal. That scenario, if you took 100% financing and a zero downpayment, how much tax is triggered now? Zero because you haven’t received any funds yet. It’s in a deferral state.

You’ve got a carryback. You could do a 100-year carryback and live off those interest payments for as long as you would want to. In a traditional seller carryback, you would never do that deal for a couple of reasons. One, you’re putting a lot of faith in the buyer. You may have to foreclose. They could run your property into the ground. Most of those deals are structured at 2 to 5 years. Therefore, they’re paid back and the seller owes the tax anyway. They don’t decide to do that. All your eggs are in that one deal. It’s part of why you’re selling your deal is because you’re trying to get away from that but the law works.

Enter the Deferred Sales Trust, this is the difference. We’re going find that cash buyer for $10 million. A broker’s going to find him. You’re going to find him. You’re going to be selling it for $10 million. You’re all ready to go. He’s coming with the full amount of cash at the close of escrow. Instead of doing directly to him, receiving that $10 million and therefore owing all of that tax, you decide you want to use the Deferred Sales Trust. The trust jumps in writing before the close of escrow. It buys your position for the full $10 million, but it gives you a zero downpayment.

You took 100% financing. It turns around immediately and sells to this cash buyer for $10 million. The $10 million goes into the trust. This is where the funds flow like your question. The funds are sitting in the trust. If the trust bought it for $10 million and sold it for $10 million, how much gain does the trust have? The trust doesn’t owe any tax. It bought and sold for the same price, no gain. Moneeka, if you took a $10 million note and you carryback a 100% financing, how much tax is triggered now? Zero. The smoke clears. The deal closes. The funds are sitting in the trust. This is the best part about it. You’re not in a 1031 exchange, the whole blue ocean opens up to you rather than the red ocean. The red ocean is where all the sharks are at. It’s where all the 1031 exchange deals. There are people chasing deals overpaying for properties, feeling rushed and forced. It’s a lot of blood in the water.

Find a mentor and/or join an amazing company that can train you. Share on X

Instead, all of a sudden, you’re in this blue ocean. This blue ocean is wide open. What can you do? You can invest it into stocks, bonds, or mutual funds. How long can the note go? As long as you want, we structure the notes as ten-year notes. At the end of ten years, you can renew for ten. You can put it into investment real estate. You can put it into another business. You can do hard money lending. It’s this big blue ocean also you’re completely out of debt. This scenario, if you owe debt on that property, that debt would be paid off. The difference would go into the trust. That’s also powerful too. A lot of clients, especially Baby Boomers, and this is a stat for maybe some of your readers.

According to the American Bankers Association, there’s about $17 trillion that’s passing from one generation to the next in the next twenty years. This is known as the largest wealth transfer in the history of the planet that we know of. There are about 10,000 Baby Boomers every single day turning 65 in the US alone. There are about 77 million in the US alone. Every day these Baby Boomers are stuck in properties or stuck in businesses or ready to retire or have income needs or different challenges. They’re ready to get some solutions to this. Too often, it’s not to buy another property.

I closed a deal in Sacramento for a gentleman named Peter. He’s a Baby Boomer. He sold eighteen units and he’s been a real estate broker all of his life. He had never heard of the Deferred Sales Trust. He had heard of a Delaware Statutory Trust. He’s done 1031 exchanges but had never heard of the Deferred Sales Trust. He goes, “Brett, I felt trapped before I met you because I had eighteen problems. These are eighteen units.” He was driving every other day to Sacramento to bang on doors, to try to collect rents, to try to get evictions, and do all of this stuff.

He’s looking to retire. He’s going, “Brett, I have eighteen problems right now. I don’t want a 1031 exchange and have 36 problems. I’d rather be out of debt.” He paid off all of his debt. He sold his building for about $1.8 million. He paid off about $500,000 of debt. He also said, “Brett, I remember debt in 2008 before the crash. I got overpaid for properties. I almost lost everything. I held on, but it was very stressful. I don’t want to ever want to go through that again. If I can get out of debt, that’s a beautiful thing. If I can defer all my taxes,” his tax was about $550,000, “That’s a beautiful thing. I can put it into conservative allocations.

I’m not a big stock market guy, but if I can put it in conservative stuff and wait for the market to shift, that’s exactly what I’ve been looking for. Where’s this been all my life?” I go, “I know. I learned about it several years ago. I’ve done more and more deals now.” He’s since become a member with us. He’s out educating his clients too because it works for the primary homes, which has mainly been his focus. That being said, that’s the power of the Deferred Sales Trust.

When the money goes into the trust and you can sit on it, do you have limitations on what you can invest that money in? Does it have to be real estate again or can it be other things?

It can be stocks, bonds, mutual funds. It can be insurance products. It can be an investment real estate of your own or with partners. It can be multiple syndications. That’s part of the beauty of the Deferred Sales Trust especially for me. We talked about diversification as a way to reduce risk, but too often with real estate, you’re trading one asset and one location for another single asset and one other single location. Oftentimes in the same product type and oftentimes in the same geographical location, because let’s face it, if you’re the owner of that property, that’s what you know.

You don’t know anything else. By definition, you’re not diversified. What can you do? You can sell a multifamily property. That’s highly appreciated especially in California. Maybe there are some multifamily properties in other states with some proven track record operators who are doing it for 10, 20, 30 years. You can put a portion of that fund with them. You don’t have to put all of it. In Peter’s example and another client right now, we’re interviewing multiple syndicators. One is a senior housing syndicator. One of them is multifamily. One of them is a mobile home park.

 

Think about diversifying not only product types but also geographical locations and also your dollar amount. Here’s the cool part. None of the debt is in our client’s names if they don’t want it to be. It could be in everyone else’s name. You get some diversification there. Let say, “Brett, I want to do it myself.” You can do that too. Up to 80% of the funds is the limitation. Let’s imagine it was $10 million in the trust. $8 million can be used to form to go purchase a new property or go into syndication deals.

We call those alternative investments. The other 20% is going to stay in stocks, bonds, mutual funds. It’s still earning interest. Most of our notes earn around 8% over any ten-year period of time. Net cashflow is around about 6.5% on cashflow to the client. They’re going to pay ordinary income tax on that cashflow that’s coming off the trust. Some of our clients will say, “I don’t need any of the income. Let it compound and let me pull it out on a different date,” which is called the net income tax advantage especially for our very wealthy clients who are still pretty young and still have a big income over here. They can sell an asset and let the interest compound on top of it over here and keep all of that interest also deferred as well as the capital gains tax. There are lots of nuances to this Deferred Sales Trust. The key is creating a plan and getting connected with your trusted advisors, with us so that we can all make sense of what’s best for you.

That was a lot of information. I’m sure my ladies have questions for you. How can they get in touch with you to find out more?

We have a YouTube channel. They can search Capital Gains Tax Solutions, YouTube, LinkedIn, as well as CapitalGainsTaxSolutions.com. We have our podcast, the Capital Gains Tax Solutions Podcast. You’ll search Capital Gains Tax Solutions and that’s the key here. It works for businesses and private practices. We’ve done dentists, veterinarians and optometrists. We’ve done trucking companies, tech companies, you name it. We’re also doing a Bitcoin case right now too, which is interesting because it’s subject to capital gains tax. Unlike a 1031 exchange, we can work with about any asset type, which is powerful. We also did a house in Cupertino. We helped an individual who is selling a high-end primary home. As your readers may know, a primary home qualifies for what’s called the 121 exclusion, where if you lived there for the last five years, you get that $250,000 if you’re single and $500,000 if you’re married. That’s a beautiful structure. I did that for myself, my family already and it’s wonderful.

Above and beyond that, you owe capital gains tax and you cannot do a 1031. We helped her. She sold a $3.1 million house. She’d been there for over twenty years. She is a couple of miles from Apple headquarters. We helped her defer another $350,000 in tax. What’s neat about that is not the external things that we’re solving, but it’s the internal things. I’m able to move from my house. I’m able to relocate. Maybe live near next to my grandkids. I have an income stream from an asset. I paid off all my debt. There is an income stream that’s coming off these different assets versus sitting in a house, the kids are gone and it’s empty where you feel real estate rich and cashflow poor. We escaped the capital gains tax, provided a whole new opportunity for income. It works for the primary home. I would encourage your readers to consider those different avenues too.

You have a webinar that my readers can watch to get a little bit more information, correct?

Yes. You go to my website and request free access to that. We’ll send it to you as well as a free gift of the brochure, an overview. It’s like a five-pager about escape feeling trapped by capital gains tax. That’ll give you a great introduction to what we do and what we’re about.

That’s going to be at CapitalGainsTaxSolutions.com. Thank you.

Dive in and not only consume the information, but then go apply it. Share on X

You’re welcome. Thanks for having me.

Are you ready for our three rapid-fire questions?

I am.

Brett, tell us one super tip on getting started investing in real estate.

Find a mentor and/or join an amazing company that can train you. For me, it was Marcus & Millichap. I had multiple mentors and some of the best training on investment real estate. You may not have to be brokerage full-time. There are tons of conferences, tons of podcasts like Moneeka’s podcasts. Dive in and not only consume the information, but then go apply it. You have got to learn, but you’ve got to apply. If you do those two things and you look at it as a long-term game, not a sprint, you’ll do fine.

What would you say is a strategy for being successful in real estate investing?

Once maybe you’ve established the basics and have a good understanding, it’s investing yourself. Putting money into deals, whether you’re buying the deals yourself and/or partnering, figuring out what your strengths are. You might be good at raising money or you may not be good at managing a property. You might be good at finding deals or connecting networks with brokers. Finding your niche within a team. People aren’t good at all five things, but they might be good at 1 or 2. For me, in my strategy right now, I’m married with five kids and have two businesses. I don’t own my own real estate by myself. I go with partners who are operators, senior housing, multifamily, retail, and mixed-use. That’s what they’re doing every single day. They’re the brain surgeons there, but I also raise money for those deals.

 

I roll my fees into those deals or I may find a deal, broker the deal and roll my fee into it. The key is to take all of the wealth. For me, it’s completely passive. I put it there and I get the check coming in, which is great. Defining what your strengths are and realize getting into real estate may mean one or two of those things. It’s not all five figuring out what your strengths are, what you most enjoy, and then figure out a way to connect with the team and add value to other people, to help them achieve their goals as well.

It’s all about networking too. It’s finding those people that can fill the holes. What’s blissful for you? What are you good at? Instead of you having to learn every single piece along the way, which can be very unblissful.

We put it like this. Hire the who or find the who instead of being in the how. You have a vision that you set. Too often, we want to try to be the how. We’re entrepreneurs. We’re hard-charging investors. We want to figure this thing out. That’s good to have that fire but too often, we get stuck in the how. We do this circle of procrastination and frustration, to save a buck or to figure it out rather than saying, “Here’s my vision. Let me hire the who or team up with the who and I can achieve that so much faster.” It’s so much more enjoyable because now you’re in your sweet spot. You’re in your strengths. You’re focused on the highest and best use of your energy and your time versus being in the how and getting frustrated or doing it too slow.

Tell us one strategy that you would say you use every day that contributes to your personal success.

I have to continue to remind myself to learn to work harder on myself than I do on my job. This is a quote by Jim Rohn. He says, “If you work hard on your job, you’ll make a living. There’s nothing wrong with it. That’s fine. If you work harder on yourself, you’ll make a fortune.” The first idea we think about is money and that is a part of it, but that’s a small part of it. The real big value to this is who you become along the journey. If I want to become a millionaire, if I want to invest in real estate, if I want to do all of these successful things, what is it going to make of me to become that person? That’s the value to our family, our community, our country, our world, is the people we can become, the character we can grow. The legacy we can leave from that point on is working harder on yourself.

What does that mean? That’s your health. That’s your finances. That’s your personal development, your leadership, your spiritual walk, that’s your relationship with your friends and your family, your intellectual goals. It’s 5, 7, 8 top major things. Learning to major in the majors instead of minoring on the majors. Having those priorities, but it’s a continual learning process. It’s so easy to get caught up in the noise and the distractions. Even the discussion we had before about focusing on our weaknesses or working on things that we’re not naturally gifted at. We’re not all made to be brain surgeons or attorneys or tax people or real estate people or whatever your profession is. Figure out what your strength is, set your vision and then work in your strengths to make that vision work by connecting with people but also growing yourself and your character.

It’s so well said. Thank you so much for that. Brett, this has been truly amazing. I’m looking forward to the EXTRA portion of the show where we’re going to be talking about mitigating estate taxes because a lot of us are fortunate enough to get an estate or be there to inherit but we worry about those taxes. Brett has got an answer for us on that too. I’m so excited to hear that. For those of you, ladies, who are subscribed to EXTRA, stay tuned. We’ve got that coming. If you’re not subscribed to EXTRA, but would like to be, it’s easy. This is what you do. You go to RealEstateInvestingForWomenEXTRA.com. There you can subscribe. You get the first seven days for free so you can test it out and then you subscribe. Once you subscribe, the EXTRA shows will come to the exact same device that you’re listening to your normal podcast on. You don’t have anything extra there. You get extra content. For those of you who are leaving us now, thank you so much for joining Brett and I for this portion of the show. I look forward to seeing you next time. Until then remember, goals without action are just dreams. Get out there, take action and create the life your heart deeply desires. I’ll see you next time.

 

Important Links

• Capital Gains Tax Solutions
• Capital Gains Tax Solutions – YouTube
• LinkedIn – Capital Gains Tax Solutions
• Capital Gains Tax Solutions Podcast
• CapitalGainsTaxSolutions.com
• RealEstateInvestingForWomenEXTRA.com

 

About Brett Swarts

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Real Estate Investing For Pennies On The Dollar With Danielle Pierce

 

Some think that you need a hefty sum in order to start investing in real estate. To break that notion, Danielle Pierce joins Moneeka Sawyer in this episode. Danielle is the founder of Real Estate Profit Lab, which focuses on tax liens and property preservation. Here, she talks about her strategies on how you can start investing in real estate with minimum capital the way she’s always been doing it. Danielle also shares her wisdom and insight on what you need to identify when thinking of starting your own entrepreneurial journey in order to maximize your chances of success.

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Listen to the podcast here

 

Real Estate Investing For Pennies on the Dollar with Danielle Pierce

I am excited to talk to Danielle Pierce. She is a graduate of the University of Illinois at Urbana-Champaign. Danielle has an Accounting degree, which she has not utilized in over twelve years. She began her entrepreneurial career after a sudden layoff from her corporate audit position. This is one of those things that happen so often. We think our jobs are stable and then we get laid off or something happens. This is a great story for you, ladies, to take in. Danielle took this as a sign from the heavens that she was meant to be a full-time entrepreneur. Although she did look back at a time or two, she has held onto the reins of entrepreneurship and never plans to let go. Danielle’s online courses and group training programs teach aspiring business owners how to establish and grow profitable six-figure enterprises within the real estate industry outside of sales. Danielle is a proud member of the Forbes Real Estate Council. Danielle, welcome to the show. How are you?

Moneeka, it’s awesome to be here and thank you for having me.

I’ve been ready for this conversation because your topic is so awesome. We’re finally chatting. Tell us a little bit about your story. How did you get into this?

The quick and dirty version of my backstory was like a lot of people, I had the idea that I was going to go to college, get a job and break the glass ceiling. I wanted to be a partner in a public accounting firm at the time, which when I was doing my accounting degree was the big six. Now there are only four. That shows you how old I am. I started working and I did not like it. I hated it very early on. I would go to work and people would be there complaining about how much they didn’t like their job, their bosses, and their coworkers. They’d been there for years. I said to myself, “This is not going to work for you.” Long story short, after I left one position, I went to another job thinking it would be even better or somewhat less boring. I left public accounting to go into internal audit and it was the worst thing ever. I was like, “This is so boring. I hate it here.”

It’s funny because your personality is so vibrant. I can’t even imagine you in accounting or auditing.

I was working at Equity Office at the time, which was owned by Sam Zell, who used to own a bunch of stuff in Chicago. He’s a famous Chicago billionaire and they were doing layoffs. I was like, “I want to be laid off from this job. I want to get in that pile and get the severance package because I’m ready to be an entrepreneur.” I got what I asked for and then I wasn’t ready. It was awful for the next five years as I struggled to try to figure out what being an entrepreneur even looks on a day-to-day life. I had these ideas in my head. They were far out of alignment with reality that it wasn’t even funny. It took me a lot to figure that out. When I finally did start to figure it out, I would never go back to being in corporate. That’s why I say I’ve held onto the reins for many years. That’s my plan.

It’s interesting because it is true that once you’re out, no matter what you go through, the entrepreneurial journey is not an easy one. I always say it’s the best personal development program in the world. It asks you to step forward to be your very best self. You have to grow. Even so, no matter what challenges you go through, it’s gratifying. You never want to go back.

I agree with that wholeheartedly. It’s hard to go back. Once you have freedom, you can’t go back to asking for permission to go on vacation. I’m not there anymore.

The other thing is when I have tried to go back, I wasn’t able to grow as much in the position when I was under somebody else with their expectations. Their expectations are very different than my expectations of myself. It felt very limiting also. I always tell my ladies there are a million ways to make $1 million in real estate. Talk to me a little bit about tax liens versus flipping versus wholesaling and what your favorite is and why.

I’ve been in real estate for many years. I’ve tried a bunch of different things. Initially, I did like a lot of people. I had an idea and I would say, “I’m going to do that.” I would start it, it got hard and then I would stop and do something different. I did that for the first four years or so. I was like, “I’m going to do short sales. I’m going to be working with buyers. I like helping first-time buyers.” That definitely was not my ministry because for me, buying a home is very transactional and straightforward. For most people, there’s a lot of emotion involved.

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As a real estate agent, you’re like a marriage counselor/social worker and all these different hats you have to wear in order to close. If you don’t close, you don’t get paid. I was like, “This whole model is not working for me at all.” I stopped working with buyers and I said, “I wanted to work with sellers and help them sell their home.” It’s also very emotional because people think their home always is worth more money than what it’s worth. I got tired of that. I tried to do loan modifications. I partnered with a company that helped people do loan modification. I was a dabbler and now I look back and I’ve realized that dabbling is not the way to go. Not just in real estate but in anything. You have to focus on one thing. I tried all those things and I had mediocre results at best. I finally decided that I was going to stick with the repairing and maintaining the bank-owned properties. Also, tax lien investing came a couple of years after that. That’s been my path. It’s always in real estate but I never focused until about 2013 or so.

How do you find the bank-owned properties?

In order to do that particular business, you have to have a business of your own setup. There’s a background check that you need to complete. It’s the criminal background check. It’s not credit-based. There are 3 or 4 different types of insurance that you may need. The fourth one is workman’s comp insurance, which you may or may not need depending upon where you live and depending upon the company that you choose to partner with. From there, you’re applying. There are about ten national companies that are pretty solid, pay on time, no issues with dealing with their contractors and pretty straightforward companies. There are dozens if not hundreds of other smaller local mom and pop companies where you’ve got to stay away from. You want to get a contract with a national company. From there, you select a covered area that you want to cover. It can be a specific county, a set of zip codes or the entire state. All the work that those properties need in your assigned area is work that you can do if you’re well-versed in working in the field or you can hire a team to do it for you.

The companies that you are working with, they’re the people that have access to the REOs?

That’s correct. It used to be back in the day that you would work directly with say Bank of America, Wells Fargo or Chase. As you know, this is the outsource, information, digital age/economy and all of the above. What those big banks have done, they outsource everything to what’s called servicing companies. My contracts are with servicing companies. The people that I help and work with also get their own contracts with the servicing company. That company has the authority to handle everything for that property, including the sale of the property. For what I do, we don’t do the selling part but we get it ready for sale. Once it sells, it moves over and then we find another property, and rinse and repeat.

I’ve never heard that strategy before. Is that one your favorites or is the tax lien one your favorite?

The property preservation is my favorite. Tax lien investing is my favorite too though. The thing that I love and hate about tax lien investing is that there’s a lot of hurry up and wait. For tax lien investing, you pick the areas where you want to invest, and then you say, “The auction is on this day. I’m going to Chicago to register for a sale that’s happening in Indiana in April.” Now I’m going to go register. The list is out. I’ll search for properties and then I’m waiting until the sale. The sale comes and everything’s supercharged and all this adrenaline. You then win a bid or if you don’t, then you’re waiting again for the redemption period to pass. There’s all this excitement and then wait. At the end of the day, you’ll either have a property free and clear or you won’t have the property, but you’ll receive back the money that you paid, plus whatever the statutory interest is, plus attorney’s fees as well.

Is it possible that houses go on sale for auction for $500?

It is. The one that I’m going to in Indiana, the starting bid is $500 and that sale is April 7th through the 9th. There are only about 700 properties on the list and probably 10,000 what are repeat properties that have been through multiple auctions. When you start digging into some of these auctions that take place, you’ll find that some properties run through the auction over and over, which means that no one wants the property. The highest I’ve seen is nine times it has been up for sale and nine times, no one has bid on it.

In the EXTRA portion of the show, we’re going to do a real deep dive on the specific steps on how to get started. Can you give us a high level on what’s the best way to get started in real estate, doing what you’re doing?

 

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