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Syndication Series #1: How To Evaluate A Syndication Deal With Dr. Sam Giordano

REW 82 | Evaluating Syndication Deals

 

Everything starts with learning. You can excel really great in one thing if you are determined to know how it works. In real estate, it’s the same case. You have to strive for your goals. Moneeka Sawyer sits down for a conversation with Dr. Sam Giordano on evaluating syndication deals. Where should you be investing? How do you find the right process that works for you? How do you evaluate a syndication opportunity? Dr. Giordano answers these questions and more! Plus, he offers a spreadsheet that could just be the one to help you up your syndication game. So listen to this episode and enjoy the process of learning and growing.

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Syndication Series #1: How To Evaluate A Syndication Deal With Dr. Sam Giordano

Real Estate Investing For Women

I am so excited because we are going to do something a little bit different. One of the things that I’ve been thinking is that as we’ve gone through the years of this show, every single time I do a show, we record something new. There’s a new idea, a new strategy or a new opportunity, and I love that. It’s very exciting to me. I know many of you love that too. What concerns me a little bit is that I feel like I might be confusing you.

Instead of giving you an opportunity to go deep and to learn strategies so that you can make a decision whether that strategy is right for you or not, I just keep presenting new opportunities, which is confusing for me hearing them like I think, “That’s a good idea,” and I know that if I wasn’t already well implanted into some strategies that I’m already using, it could be confusing for me.

In order to support you, ladies, to actually start taking action and grow your portfolio and become super-wealthy and blissful, I’ve decided that I’m going to start doing some different series. Each series is going to be focused on a strategy that I’ve heard a lot about from you. You’ve asked many questions and you want more information. I’ve brought on several guests onto the show already about that topic because of your interest in it.

What I’m going to do is create some of the series that will be a deep dive into that particular topic. Sometimes, it’s hard to go back and re-listen to episodes that are hard to find on iTunes and a lot of the podcasting formats, and even on my website. There might be so many that you don’t know what to listen to.

What I’m going to do is go back and compile the best episodes into a series. If there are any missing parts or holes, then I’ll record a new episode or two to fill those holes. Either it’ll be a new person, maybe I’ll do something, but my strategy is it won’t always be a series and it won’t always be replays. This is to support you as we move forward from here to help you to start taking action and feel like you’re getting what you need to create success.

I’m not just here talking about real estate. I’m here to help you build the blissful life that you dream about. That’s my goal and that’s why I’m creating this series. I’m now starting the first series and I’m excited about it. We are going to be having some reruns and that may irritate some of you. If you don’t like this series idea, please email me and let me know. If you love this series idea, please email me and let me know because I’m here to serve you. I want to make sure you’re taken care of and that I’m providing what you want. I’ve got all my great ideas, but they don’t mean anything if you don’t love them. This is the time for you to tell me what you need so that I can be of service to you.

Here is the first series that we’re doing. Welcome to the Syndication Series. We’ve had many people on this show talking about syndication. Some of you are still a little bit confused about what syndication means. What it means is someone has a big project and they need to get money for that project. What they do is they go out there and find investors to invest in their project. That’s called syndication.

If it’s actual syndication that is legal, they have to file with the SEC. There are some definite legal things that they have to do, but the basic idea is they’re taking money to help invest in a project, either to buy the property, build the property or refurb the property. That is what that very complicated-sounding word is. Syndication means people are collecting money from lots of different individuals to fund a project.

In this series, we’re going to be talking to several syndicators. I’m also going to be starting this series with an education piece about how to evaluate projects. This is so exciting because it’s new in the market. I feel extremely excited that I met this person. It’s as if the universe sent him to us, so I can’t wait to share him with you. He’s going to be talking about how to evaluate syndication projects. We’ll start the series with that, and then we’ll move in so you can get to know some of the syndicators that I want you to hear more from. Maybe they’ve already been on the show and we’re doing a replay, or I’m re-recording something. We’ll see how it goes. I want to make sure that as we go, I’m providing the best value.

Welcome to the Syndication Series. I am excited to welcome to the show, Dr. Samuel Giordano. He is a practicing gastroenterologist, author, real estate investor, and Cofounder of PassiveAdvantage.com, a website designed to help physicians and other high-income professionals with passive real estate syndication deals. He and his partner, Terry Kipp, have designed tools specifically geared towards passive and limited partner investors to help objectify and bring to light the risk points of various real estate syndication deals before choosing to invest.

The tool also has built-in functionality for tracking investment performance versus proforma, as well as a separate tool for tracking your progress on the path to financial independence. He has been investing in passive syndication deals as a limited partner since 2017 and initially developed this tool for himself. Now, he is focused on helping other physicians and investors and bringing it to the masses. His ultimate goal for himself and others is financial freedom, and to be able to live a life of your choosing on your own terms. How are you, Sam?

It’s great to see you. Thank you so much for having me.

Did I do okay with your specialty?

You did outstanding. Perfect.

My mom’s a physician. I have a level of integrity around this. I want to be able to say it right.

It must be in the genes.

I am excited to have you on the show. I want to tell you a little bit about how I met Sam. I was on another show. Do you remember whose show it was? I want to mention it because it was so good.

It may have been Taylor Loht, The Passive Wealth Principles.

I was on that show and then Sam called me because I offered an opportunity for people to talk like I do with you ladies and see what happens if you call me. He set up an appointment and we started chatting about syndications. He’s like, “I want to figure out my next step. I’m not sure what I’m doing,” and he was so humble. I got on the phone with him and he is miles ahead of me in the syndication world. This is such an interesting thing that I want you to know. Many people can be successful. I’m successful in what I do and Sam’s successful in what he does.

[bctt tweet=”Many are interested in the passive growth opportunities of syndication, but sometimes, it’s hard to kind of figure it out. ” username=””]

You’ve heard many amazing people on this show that are successful, but we’re successful at what we do and there are other people that are so much more successful at what they do. This is one of those amazing synergistic things where he was like, “I wanted to find out about what you’re doing,” and I’m like, “I want to find out what you’re doing.” Once we started talking, I realized what a value he could be for you so I asked him to be on the show. This is his very first ever. Is that true?

It’s one of my first ones, so forgive me if I make any rookie mistakes.

We love rookie mistakes. We like the true, authentic deal. This is going to be fun. I’m excited for him to talk to you about this tool because many of you are interested in the passive growth opportunities of syndication. We’ve had several people on the show talk about syndication, but sometimes it’s hard to figure it out. Where should you be investing? What projects, what people, how do you find a facilitator? Is it called a facilitator?

Yeah. There’s a liaison. There are certain liaisons that put you in touch with syndicators. There are a lot of questions.

I’ll get all that information. When Sam presented this tool, I thought, “This would make it so much easier even for me,” so I wanted to share him with you. That is why Sam is on the show.

Thank you for having me. It’s my pleasure.

Tell us a little bit about your story. How did you get into this? I know you’re a doctor. Tell me a little bit about what happened.

REW 82 | Evaluating Syndication Deals

Evaluating Syndication Deals: If somebody is not performing adequately, then you can obviously not recommend them any longer.

 

I appreciate you giving me the opportunity. It’s great to talk with you again. I’m born and bred in New Jersey. I came from humble beginnings. My father only graduated 8th grade, and my mom only graduated 10th grade. I was the first person in my family to go to college. After college, I went on to work in the pharmaceutical industry research for a few years, and then not feeling fulfilled, I decided to go to medical school. I met my wife in between medical school and residency. She’s a California girl. I somehow convinced her to stay in New Jersey, although I fight that fight every day.

I finished my fellowship as a gastroenterologist back in 2012. I was doing all the traditional things you think about from a personal finance standpoint. I was maxing out my retirement accounts, paying off my student loans, investing in my children’s 529, all the classic personal finance things that are preached to us. Eventually, as loans got paid off, I was able to invest in post-tax accounts. There came a time where I wanted to look into more alternative investments.

That was around 2017, the same time when the Tax Cuts and Jobs Act was enacted. We lost the ability to deduct state and local income tax. In high taxes states like New Jersey and California, that can be a big hit on your taxes. Synergistically at that time, I started looking into alternative investments, and then I also started looking for ways to diversify some of my taxable income. That brought me into the real estate realm a little bit.

Why did you choose syndications?

Initially, I had dabbled in thinking about owning my own rental properties, single-family rentals, and looking into possible turnkey opportunities in most cases, out of state since New Jersey doesn’t have the best real estate investment opportunities for those types of things. I started to hear horror stories about people who bought these turnkey properties and that the property managers that were managing them out of state weren’t always truthful. It started to steer me off a little bit.

I talked to a few friends that had done some of these real estate syndication deals to where they invest in the deal passively. You give them a certain amount of money and you have fractional ownership in the deal. After you do the upfront vetting and due diligence of that deal to decide whether you want to invest, once you make the commitment financially, then you start receiving distributions either monthly or quarterly, depending on the structure of that deal. You don’t have to do anything anymore.

The great thing is you get a lot of the tax benefits, which is some of the stuff that I was looking into, where at least it doesn’t increase your taxable income. In some cases, you can use that depreciation from those deals to offset some of your other passive income or active income in somebody who’s a real estate professional.

Once I saw these deals and I saw that it was more hands-off because I still have my day job as a physician and I’m not looking to give that up. This looked like the perfect fit in terms of what I wanted to accomplish. It was like opening Pandora’s box when I learned about it, and then it just set off this year-long education process of learning more.

You talked a little bit about turnkey. We are probably going to be doing a series on turnkey also because it’s a strategy that I love. What is interesting is you’re talking about all these horror stories of the scam artists out there that create a dodgy products. The properties aren’t right and the management company that they put in isn’t right. There’s a lot out there that doesn’t work, but there is also a lot out there that does work. One of the values that I provide in this show is vetting and getting to know these different people and operators. My ladies go and invest with them and I hear feedback.

We’re able to put together a network of operators in the turnkey area that my ladies can invest in. The syndication area is not that much different. It’s interesting that you said they were opposites because in the syndication area also, there are a lot of scam artists and operators. There are people that are taking people’s money. In anything in real estate, if the market goes down, you lose money. Not to scare you off, it’s significantly more secure than other investments but it is an investment. There are a lot of operators, even in the syndication world, that are scamming people, unfortunately.

I wish that wasn’t the case but you’re right.

The big difference with the syndicators is that they have to file with the SEC. These guys are being tracked by the government. There are ways to find out about their reputation. If they start to scam people, they’ll be shut down. There’s a little bit more security as far as finding operators this way, but it still doesn’t mean that they’re perfect. If they say you have a ROR of 34%, and then they give you 9%, at least you didn’t lose money. It’s very important to find syndicators that have a good reputation, which is why I’m doing this series because I personally have invested with several people.

Interestingly, Sam has invested with some of the same people, and I’ve developed relationships with some of these syndicators. That’s why we’re doing this series. We want to educate you on how to evaluate projects so that as we go through talking about syndication, you can look at each one of those operators.

If you like what you hear, you like what kinds of projects they’re in, you can get information from them, and then when they start sending you projects or opportunities, then you can go through those opportunities with this tool that Sam’s going to be talking about. There is meaning to my madness. There’s a reason I’m doing it this way. I wanted to point out that it is true that out there in every industry, whether it’s education, real estate, turnkey, REITS, syndication, whatever it is, there are risks. The operator is going to be the key. Wouldn’t you say?

[bctt tweet=”Start looking at alternative investments and ways to diversify some of your taxable income. ” username=””]

I do. The service that you provide to your readers is huge because you have a go-between where if somebody is not performing adequately, then you can not recommend them any longer. That’s a cost to them so they then would have to treat your readers and the people that you referred to them well. As far as if you don’t have those associations available to you, the only way that you can combat that uncertainty or to differentiate which syndicators are good and which are not is through your own education.

The first year that I started to learn about these syndications was in 2016 or 2017 because of the fact that some of these syndications require a pretty significant upfront financial commitment, I’ve made a promise to myself to spend an entire year just to educate myself. That was in the form of podcasts like your own, reading as many books as I could get my hands on, looking at different real estate forums. Anywhere I could get the information in regards to the real estate syndications, I was taking that all in.

As I was going through that year-long timeframe, I used a note sheet to take notes on some key points, or if I heard something interesting on a podcast, I’d put it on that note sheet. Eventually, that note sheet morphed into an Excel sheet where it had parameters that I was looking for in these syndicators. That first year, in addition to the education, if I heard of a syndicator or there was a recommendation of a syndicator through a friend, I would reach out to them, try to have a discussion, and see if it was a fit. What you tend to do if it’s a fit is to get on their investor list.

At that point is when you start receiving these deals through what they call an investment summary or a pitch deck. When you first see those, it’s overwhelming. Some of them are 40 or 50 pages and you don’t know what you’re looking at but over time, when you combine some of the education components into what metrics you need to look at and after looking at some of those investment summaries multiple times, you start to pretty quickly pick out what the metrics are that you’re looking for and what’s in the investment summary.

Over that year, I formed this sheet and it’s what I still use now. It’s gone through many iterations but it gives me the confidence that there’s not one clear risk point or red flag in the deal. If there is, then I’m aware of it and I can then decide if I want to invest in that deal, or I want to move on and invest in another deal. Getting back to the question, the one way to combat that uncertainty and not knowing whether someone you’re dealing with is scrupulous or truthful is to educate yourself as best as you can. The whole process of forming the sheet is to try to truncate or shorten that education process that I had to do so that people can more quickly be pointed out to certain areas that they need to look at.

That’s the education process that you went through. What is it that you actually go through when you are evaluating a syndication opportunity? We’re going to do an awesome deep dive in EXTRA. Give us a high level and then we can go much deeper. We’re going to have more time in EXTRA to do that.

When you look at a deal, the three main components would be the sponsor, the market and the deal, and in that order. Meaning that the sponsor is clearly the most important component of the evaluation, but that’s the trickiest because there are a few objective things that we look at, but it’s not as many clear quantitative objective parameters that you can look at when you’re evaluating the sponsor.

A big thing is when you do have that phone conversation with them, what’s the feel you get? Do they seem like nice people that you’d want to go have a beer with or hang out with? Do you feel like as soon as you get off the phone, you’re like, “I don’t want to talk to that person again?” You got to trust your gut. Even though that’s not quantitative, that’s one of the more important things that you can have when you’re evaluating these sponsors.

The market looks at parameters where people are generally moving like the Sun Belt area, Southeastern Florida, Atlanta, Texas, Arizona, and moving out of states like our state, New Jersey, California, New York, and moving to places where the weather is good and taxes are better. Most of the investments I look at have what they call population migration into those areas. You look at job growth and education in those areas. You look at the average salary in the particular community that the apartment is going into.

Evaluating Syndication Deals: One way to combat that uncertainty and not knowing whether someone you’re dealing with is scrupulous or truthful is to educate yourself as best as you can.

 

The third part is the deal itself. You can get granular in the deal metrics because those get quantitative, but the three main breakdowns of the deal itself would be property metrics, the debt structure, which is extremely important what kind of debt is on the deal. That’s one of the higher risk points of the deal, and then the rent growth projections. That’s a high-level overview of the main things that you look at in a deal.

As the limited partner investor, one of the best things you can do is think about what your end game is like what you’re doing this for, and where you see yourself in whatever time horizon you set out if it’s 5, 10, 15 years. I did that early on and that has made all the difference because then I can see where the goalpost is and how close I am to getting it. If you don’t know where that goalpost is, it makes it a little harder to see what you need to do to get there.

That was one of the very first things that we talked about, you and I in our first conversation. This is one of those things that I bring up for everybody. You need to know where you’re headed. There are a few things that we need to know, where am I headed, why and what my resources are. That sounds easy but it’s so much deeper than that. Once you know those things, picking a strategy, whether it’s syndication or anything else, becomes easier. Setting the goals and the path of that strategy is so much easier.

You want to pick a strategy that is aligned with who you are, all of it. I was talking to somebody about what your resources are and his wife wasn’t on board, but she’s one of his resources. If she’s not on board, that’s going to be a hard journey for you. Your relationships are a part of your resources, personal, as well as network. I go off on these tangents but I love what you were talking about.

My wife wasn’t on board initially either. It took her a little bit of time. I started to show her the numbers, she started to learn a bit more, and now she’s more involved. It takes some time to take a little transition.

Maybe we can talk in EXTRA too about how you helped her to make that transition because I’m getting a lot of those questions lately. Having a goalpost to know where you’re going is going to make a huge difference for you. The cold bolt is your first goalpost. Once you get to that goalpost, there will be another. Don’t worry about limiting or whatever it is. That goalpost will eventually change once you reach it too.

The biggest thing with these investments and when it’s something new like there’s some complicated variable to it where it’s not super intuitive to understand, I found that the hardest part is taking that first step. At least for me and I’m sure it is for others. Sometimes I feel like education conquers the fear, whether it’s a miss or in other things, when you feel like you’re fully prepared and you’ve done all you can, then it brings you closer to taking that first step.

Knowing the things to look for and having a tool as we have discussed helps take the first step. Once that happens, then it becomes easier. The next thing you know, three years later, I’ve done over ten syndication deals. I can still remember my first deal a couple of years ago. It’s amazing how quickly it can happen.

I also believe that education helps to mitigate fear, but there is such a thing as analysis paralysis. Don’t overeducate. There is a point where you have to actually take that step. Talk to us a little bit about how you took those first steps to invest in your first deal.

Believe it or not, the criteria I look for now are different from the criteria that I used on that first deal. That’s the nature of the economy as your education evolves. That first deal, I was primarily focused 80% on the sponsor because even though I had done all the research and my analysis on what to look for in deals, I wasn’t sure that I wasn’t missing anything. That’s that same thing, paralysis by analysis. I was at the point where I was like, “Do I know enough? Do I not know enough?” The way for me to mitigate that is to put even more of a weight on that sponsor.

The sponsor I invested in that first deal, my interactions with them and their organization, I’m like, “These guys are first-class. They seem like they’re doing things the right way. I have confidence in what they’re doing. I’m going to take a leap and go with them,” and I did. Thankfully, it worked out. They had what’s called a fund structure, where it involves multiple investments in one vehicle. Nowadays, I look for more of the single asset deals as opposed to the fund deals, just because some of the times with the fund deals, it’s a little harder.

There are nuances between the funds and the single asset deals, but the single asset deals allow me, now that I’m more comfortable with the vetting, to actually vet more of the deal. Whereas when it’s a fund, they may not have even bought the properties before you’ve invested, so you are 100% looking at the sponsor. At that point, I was comfortable to work with. Whereas now, since I’m more comfortable in what I’m looking at, I’m more interested in the single syndication deals, but that’s what allowed me to take that first leap. I had the most confidence in the sponsor. That’s where I was comfortable with at that point.

What is it that’s changed? You said that you don’t look at the same things. Back then, it was all about the sponsor. Tell me a little bit more about now.

The sponsor is still the most important. At the stage I’m at now, my overall goal was to try within 10 to 12 years to get to a point where I could create enough income to cover my expenses. I had an idea of how much I would have to invest in these real estate syndication deals looking at average or conservative returns to where I would get there in 10 to 12 years. In order to do that, a portion of me is focused on what’s called the velocity of money. I’m looking for deals that may not have a ten-year hold time to where it’s taken time to get my money back.

[bctt tweet=”Some of these syndications require a pretty significant upfront financial commitment. ” username=””]

I’m looking for deals where they may have a five-year hold time. Hold time is just the amount of time that the deal is projected before they sell the property and do any business plan or value add to sell it. I’m looking for deals that may say that it’s a five-year hold but in reality, they’re looking to fix it up and sell it in three or refinance it in three. You then get all your money back during those refinances, then I can deploy it in other deals.

Back then, I was more focused on security, whereas now, I’m more focused on trying to not take extra risks. Just do deals where there’s more of a chance to get in and get out in a quicker time period, so then I can redeploy it because then you could capitalize those gains quicker and then that 10 or 12-year horizon, I could potentially achieve in 7 to 8 years if things work outright. One of the things is that the deals I look for have a shorter hold time. I’m less interested in the fund structure at this point.

Ten, twelve years from now, I may then switch back and want the security, and not want to have to continue to redeploy deals. The markets I’ve looked at have changed a little bit in that period of time. As well as the economic exchange, rent control states, and different things like that affect what you can do in terms of increasing the rents after you do renovations on some of these investments. All those things have changed, believe it or not, in the short years since I started investing. It’s a constant thing you have to keep up with a little bit.

Most of my ladies know what syndication is. I’ve mentioned this a couple of times. What we’re talking about is an operator who has a big project who is looking for money. He’s registered with the SEC, and you have an opportunity to invest in that project. That’s the real simple way of saying it. However, Sam just mentioned a bunch of little things that I don’t think we’ve mentioned on this show. I’d like to break it down just a little bit.

What happens is when you find an operator, you’ll get a project, and then you evaluate that project. You then have an opportunity to either be a preferred investor. Sometimes, they have two different levels of investors and sometimes they don’t. They’ve got preferred and standard. The preferred is usually the people that get in first and they get a higher rate of return that’s paid to them. They’re basically borrowing money from you to start this project. You might get 10% if you’re preferred and 8% if you’re not preferred. Those are just examples.

What happens is the syndicator takes all that money. They either buy the property and start the refurb, or they already have the property and it’s just being used for refurb. They’ll tell you what it’s for. They’ll do a forced value add. A forced value add is they’re fixing it up. They’re doing a remodel. Their goal is to be able to raise rents because when you get a loan on a property like a multiunit, your loan is based on the income of the property. It’s not based on your personal finances but it’s based on the income of the property.

The property is getting a certain amount of income. They refurb it with your money, and then they raise rents. They’ll clear everybody out and put in a bunch of new people. Most of the time, they’ll do it piecemeal. As people leave, they’ll put in people at higher rents. As leases come due, they’ll raise the rents. There are a couple of things that they can do. They can sell the property and do it again or now they’ve got cashflow and they want to keep it.

Evaluating Syndication Deals: There’s a liberating feeling when you have the ability to cover some of your expenses and not have to worry about what’s going on in your job life.

 

Often what they’ll do is they’ll refinance it. They’ll take some cash out, and that cash out is now paid to all of the investors. This is tax-free income because it’s out of a refinance, so you get this income. A few years down the line, they might sell the property. At that point, you get a portion of the equity in that sale. Before that, you’re getting a portion of the rent every single month.

Not every syndicator will pay on every one of those pieces. Not every syndicator has the same plan or way that they run a project or pay their people. In general, those are the different opportunities. There are a few more opportunities but that’s a base level of what you can get. You’ll hear things like ROR. People will say, “I got a rate of return of 34%.” What does that mean over five years?

What happened was, they got 10% every year. During the refinance, they got another percentage, then they got all this rent, and then at the end, they got another percentage. Some of it’s taxable and some of it’s not. That’s when you hear the ROR. They’re taking all of those ways of being paid and they’re adding that into, “Over five years, this is what it averaged out to.” That’s when you hear that term. That’s what you’re looking at. Did I miss anything, Sam?

No, I think that’s great. You’ve explains it perfectly. With these multifamilies that are more than four units, the value, instead of it being a single-family home where the values are based on comps, or if somebody wants the house down the street and sold it for X amount, so my house is worth X amount. The multifamily, when it’s four units or more based on that net operating income, if it’s a 200-unit property and you increase the rent in each of those units $100 a month, that all of a sudden kicks up the value of that property a significant amount.

The difference between what they paid and what it’s now worth is based on the operating income, they could get some of that cash back, sell it and get some. The nice thing about multifamily units is that there are clear numbers based on what you can collect and what the value is. It’s not like, “I’ll pay you $600,000 for your house.”

When they can increase those rents, then it’s clear data as to what the value of that property is, and then they can use the benefit. It can benefit the investors and the syndicators. Even though it doesn’t seem like $100 a month rent is a lot in increase, when you add in all the months and you add in all the units, it becomes a pretty significant amount of money. You explained it perfectly.

Thank you for that additional input. You’re not doing this on smaller properties. You’re doing this on larger ones. I’ve done a few syndications. I’ve done one in a 252-unit property, I did one in a 550-unit property, I did one in a storage development ground up, and I did another one in a mobile home park that was being refurbed. That’s how I’ve invested in a lot of different areas that I know nothing about, but I want to get in on the action or on the opportunities there. It’s a way for me to go to an expert. Just like we’re talking to a doctor, you wouldn’t do what he does at home. You’re going to go to him. I believe in going to the pros.

If someone’s doing this and doing it well, I want to invest with that person. A lot of these things, I want the advantages that those markets give us without having to learn about them myself. I’m so busy myself. I don’t have the bandwidth to learn all that stuff, so it’s given me an opportunity to invest in places that I can’t learn enough about, but I can learn about the operator. I don’t want to be responsible for myself for a multi-million dollar project, in something that I don’t know, so it’s better to have a team.

That’s one of the examples that you used in relation to the unit size. One of the criteria we have in the sheet is we look for properties that are at least 100 units or more. There are a couple of reasons for that. One is that you can have economies of scale. You can afford to hire an onsite property manager as opposed to if you have a 40-unit or 50-unit. In addition, at the time of sale, if you want to sell to an institutional buyer or private equity, they generally don’t want to look at complexes or apartment complexes that are less than 100 units, so it just gives you more opportunities. One of the criteria we look at in the sheet in terms of the deal-specific criteria, is it 100 units or more? Is it 150 or more? They get assigned scores based on that. That’s good that you said that because that does affect the growth opportunity and the risk profile of the deal. That’s a good example.

Thank you. Talk to us about the kind of people that should be investing in syndications. Who is this for?

It depends at what level you want to get into it. There are crowdfunding websites like CrowdStreet, RealCrowd, and Yieldstreet. A lot of what they do is they aggregate earlier syndicators that have a hard time getting investors, and they then have deal minimums that are smaller. If you go to those main sites, you can see some of the deals that have smaller minimum investments. It’s not always the case but sometimes the deals, they’re newer syndicators so there may be a slightly higher risk profile to some of those deals versus what they call private placements.

In private placement deals, there are two criteria. One looks specifically at accredited investors where you have to meet certain financial criteria in terms of your net worth and your income, and then there are some that don’t require you to be an accredited investor. In some of those deals, the minimums could be as much as $10,000, $20,000. In some cases, even $50,000. The way I look at it is people who have some disposable income and they want to get into real estate but they don’t necessarily want to earn things on their own. That’s one category of people.

The second category of people are those who start with active investing or active rental. They may start with a few single-family, then they have maybe a quadplex or an eight-unit, but they want to get out of the active involvement. There are some syndications that take what’s called a 1031, where they could take that portfolio of eight units investment and then transfer it into these limited partner syndication deals. You see people that either haven’t invested a while or were a little more mature in their career, or have a little more disposable income that gets right in, and go around that active stage.

There are some who start in the active stage that eventually work up to having more units and having more disposable income and cashflow from those units, and then get in syndications that way. One of the barriers to entry in these private placements is that some of the minimum investment sometimes can be a little higher. Once you meet that criteria, syndications are good for everybody.

[bctt tweet=”When you look at a deal, the three main components would be the sponsor, the market, and the deal, and in that order.” username=””]

Everyone should have a key component of real estate in their portfolio. You can do it through REIT investing and equities investing. If you’ve seen the market back in March of 2020, when the market goes down, the REITs go down. There’s not a lot of diversity in that case, but in times like now where the market’s very high and inflation is a concern, you’d want to hold onto the hard assets. Real estate is a great investment. That’s why we’re seeing things become more and more competitive. It’s a long-winded way to say it. It’s right for most people, the syndication investing. It’s just a matter of where you’re coming from and what angle you want to take.

My understanding is that for most of the syndications that I’ve looked at, the minimum I’ve ever seen is $25,000 but usually, each unit is about $100,000. Did you say that you can get in for less? Talk to me a little bit more about that.

In the crowdfunding platforms like the CrowdStreet and those kinds of platforms that have similar investments to syndications, some of those minimums may be as little as $1,000, $2,000, $3,000, anywhere in that lower range. You don’t have as much control over the vetting process of the syndicator because that’s done by that particular website.

In some cases, not always, it’s newer syndicators. A lot of the more mature syndicators don’t always go through those websites if they can raise the capital on their own. Whereas if a newer indicator doesn’t have a track record and is looking for some help from aggregating some of these investors on these websites, then the cost of that is the websites may take a fee, but they also decrease the investment minimum.

Those are the examples where you would be able to get in at a lower minimum. In the private placements like some of the stuff that we’re talking about, you’re right. Most of those are in the $25,000, $10,000, $50,000. Believe it or not, if you ask syndicators, even if the minimum is $50,000, especially if it’s your first investment and you say, “I like what you have to offer. I’m comfortable with you but with my first investment, can I maybe go half of that? After that, we’ll go to the minimum.” If the minimum’s $50,000 and you offer $25,000, most syndicators, especially if it’s your first investment, won’t say no to you.

You just have to ask. Sometimes it can be a little weird to ask, but it’s a lot of money, so you want to be comfortable with that, and they realize that too. If it works out, then going forward, you can then stick to the minimum. There is a little bit of a negotiation within reason that you can negotiate that minimum down a little bit to make yourself more comfortable.

We are running out of time but I want you to talk a little bit about how to use syndications to achieve financial freedom.

The way I look at it is you often see two different mindsets. Some people are either entirely based on investing in the stock market and going that route, especially if you’re not aware of syndication investing. Some people that have had their eyes opened to real estate are completely taking all their money out of their 401(k) and outside the stock market. You find people that are strongly on either side. I find myself right in the middle. I still do my traditional pretax retirement accounts. I am an employee as a physician so I max out those.

If you take syndication out of it and you think about the classic personal finance education, people use a 4% rule in that. The first thing you do is calculate your annual expenses, for example, $100,000 a year. If you want to have an idea of how much of a nest egg you need to save in order to retire, you would then times that by 25, which gives you a 4% withdrawal rate of your money. Let’s say your annual expenses is $100,000, then you would have to save $2.5 million in order to cover that $100,000. That may take a decent amount of time. That’s based on the 4% withdrawal rate.

When you add in syndication investing, where a lot of these investments are somewhere in the 8% to 10% cash on cash, if you’re doubling or in some cases even tripling the return, then that may be a twenty-year time horizon. If you just invested in the stock market, that can be truncated down to somewhere in the 8 to 10-year range, if assuming typical investment returns using syndications.

I wanted to invest somewhere in the $50,000 to $100,000 a year into syndications. Over a ten-year period of time, taking all the returns from those deals and then reinvesting it back into new deals, that would give me somewhere in that $1.2 million to $1.5 million range. If you then take 10% annually from using that cashflow as a rough estimate, even 8%, if my expenses were $120,000 a year, that’s what I wanted to cover. That’s how I came at that number

The beauty is that that would cover my entire expenses without taking into consideration any of my stock market investing. I realized that seems like a lot of money and not everyone can do that, but further along in my career, I wanted to invest. That’s what I allowed myself to allocate to that and what I wanted to achieve in the period of time that I had. That’s the way that I looked at it. I wanted to invest a set amount, assuming a specific return and to cover my expenses within a ten-year period.

That was a good breakdown. How he set his goals, how he decided to achieve them, and set his timeframe on when he wanted to achieve that. He set his goalpost and then set a path to get there. It’s a good example of that. Some of what Sam is doing is helping other people to achieve goals in a very similar way, so he’s created this spreadsheet which is I’m having him on the show. It’s more than a spreadsheet, this tool that helps people to evaluate syndications. Could you tell us a little bit about the spreadsheet specifically?

It started as what I created for myself back in that 2017 timeframe. As I was going through creating the spreadsheet, I started to speak with other real estate investors and other people in the space that are doing similar limited partner investing like myself. They’re like, “Can I get a copy of that? I would pay you for it.” At the time, I’m using it for myself and I don’t feel comfortable giving it to somebody else. I shared it with many friends in the beginning to take that first step and I’m like, “This can break that barrier to entry and break that fear hurdle that people have to get them to take that first step.”

We created a spreadsheet. There are three components to it. One looks at the deal itself to where you are analyzing the deal, going through more specifics in relation to the sponsor, the market and the deal. The other components are a deal tracker, which looks at when you have made the investments. It allows you to track the investments based on the distributions that you’re getting from it versus what they said they were going to pay you, and gives you a side-by-side comparison for all the investments you have. The third component is tracking your path to financial independence. For some of the numbers we just talked about, you could plug in your own numbers.

If the annual amount you can do is not $100,000 but $50,000, then it shows you how long it would take you to reach your desired expenses that people can plug in there. We try to make it like a one-stop-shop for people who are interested in passive investing. For most of the tools, you would need to both vet the deal and monitor your progress, both on the path to financial independence and then the deal performance so that people would take that step.

For some people, that can change your life, having the liberating ability to cover a lot of your expenses with your investments. You may choose to continue to work every day just like you do. I love my job. I’m not looking to quit, but there’s a liberating feeling when you have the ability to cover some of your expenses and not have to worry about what’s going on in your job life.

Someone asked me, “Why are you looking at retiring in two years? Are you unhappy, or is David unhappy?” We’re not, but our priorities are changing, our parents are more elderly, there are things that we want to be able to do, and it’s nice to be able to say, “I don’t have to worry about money so much that I have to be so committed to any particular job.” If Dave and I wanted to take six months around the world and his company said, “You can’t do that.” He can say, “That’s okay.” He comes back and finds another position but he’s not freaked out about, “How are we going to pay the bills?” You’re living in choice rather than in need. It’s a different way to live life.

It changes your whole mentality. I’m not quite at the point yet, but even just getting the passive income that I get in now, then I’m like, “I only need to bring in X amount for my job if I did want to change things.” It goes to, “I want to work,” from where it was, “I have to work.” You feel more control. In this COVID environment where people are getting more stress at jobs and physician burnout, many more people are looking into these things because of that reason. They want flexibility. If there are environmental changes, if there are job changes that they still can feel like they can cover the bills and it’s not as if you’re worried about that. That’s part of the reason we did this. It’s to try to get more people to that place because it’s a different place to be versus the typical.

Evaluating Syndication Deals: Take care of yourself. There’s something that happens when you realize that you’re on a path to a better life.

 

The other thing is that it’s not that you have to get there to feel that liberation and the comfort. When I started investing in real estate, I was making very little. I was putting away $100 a month type of thing, but the thing is that once you start taking that action, you suddenly feel like, “I’m going to be able to take care of myself.” There’s something that happens when you realize that you’re on a path to a better life and that you’re going to be able to take care of yourself. You’ve figured this piece out. You can figure stuff out. You don’t have to be at the goal to feel that feeling of liberation. It’s getting on that path that opens you up.

There’s something about seeing the checks come in the account that I use for syndications and I’m not doing anything. Even as a physician, if I stop choosing to go to work, I’m not going to get paid. My income as a physician or as anyone who does labor that requires themselves requires me to go to work to do that. I don’t make money while I sleep as a physician, whereas with this kind of investment, it’s unlimited in terms of it doesn’t have any limit to my time.

I only have the same amount of hours in a week that you have and everyone else has, whereas, with this kind of investment, the limit is basically for your financial means to do it. From there, it makes money without you having to do anything, which is a different place to be. It’s the classic passive income as opposed to the active income of your day job.

Here’s the cool news. He’s offering this to the public for the very first time. You get this price and he’s going to quote, but just understand that the price will go up, so if you’re reading this 1 or 5 years from now, the price is going to be a little bit different. They want to know how much it is for this tool.

What we have offered is I wrote a free eBook that goes over in more detail. It’s in a book format and an 80-page eBook on How to Passively Invest and Vet a Real Estate Deals. That’s free and there’s no price. You can just download that at PassiveAdvantage.com. There, you can also find the tool that we’re talking about that goes through all of the different metrics to look at, to track the deals you have invested in, as well as your path to financial independence tracker.

You can purchase the tool. The price of the tool is $199 but we’re giving your audience a 10% coupon discount. At purchase, you put in the words BLISS10, and that will give you 10% off. It’s the least we can do. Hopefully, you guys find the value of it and it’ll help with your education or help to see what’s important when looking at these deals, as well as see where you are on the path to financial independence.

Ladies, I do have a special web URL for you to go get the product or the tool and then put in the coupon code. That URL is BlissfulInvestor.com/syndicationws. When you go in there and you select the product, then you can put in the BLISS10. That’s how you get your 10% discount. This pricing is already incredible, but it’s nice to get an extra discount, so go check that out. The other thing that I’m super excited about is Sam has agreed to do a webinar for us where he actually goes through the worksheet. For those of you that want it, you know how to get it.

To me, it seems like a little bit of a nobrainer. If you’re interested in syndication, this is a no-brainer price so go do it. I don’t want you to stall, but if you want to know more or you’re more interested now in syndication and you want to know what the numbers look like, Sam and I are going to be doing a webinar together. He’s going to do a breakdown of a deal.

That is going to be on Thursday, November 18th, 2021, at 5:00 PM Pacific time and 8:00 PM, Eastern time. If you want to sign up for that, go to BlissfulInvestor.com/samwebinar. Definitely come. You get to ask questions. He’s going to go through a presentation and he’ll answer as many questions as we got time for. Please put that on your calendars and you’ll get some reminders too. Do you have anything else that you wanted to share with us before we sign off?

I think we’ve covered a lot. I truly appreciate you taking the time. It’s been a pleasure talking to you. It always is. I feel like we have a lot of synergy in terms of what we look for and what we’re looking for in terms of what we use real estate for. I want to bring it to more people to get to where we are, to make their first investment, and I’m hoping that this tool allows people to do that. I’m happy to answer any additional questions that they may have and happy to answer more questions at the webinars as well.

Thank you so much. This has been such a good show. Thank you for all you’ve offered in this portion of the show.

It’s my pleasure. Anytime.

Ladies, stay tuned. We’ve got more in EXTRA. We’re going to be talking about going through a whole deal. We’re going to do a run-through on a deal. I’m going to talk to Sam a little bit about that transition that happened for his wife and how they made that happen because I know this is a big topic for you, ladies. I am going to also ask him about the 1031 DST. He threw that in just a tiny little bit, and it’s a topic I’m interested in. I’m going to ask him about that in EXTRA.

If you are interested in those topics, stay tuned. If you are interested but are not subscribed yet, just go to RealEstateInvestingForWomenExtra.com. You get the first seven days for free, so you could get this one for free and as much as you can listen to in the first seven days, then you can stay subscribed if you’d like. For those of you that are leaving Sam and me, thank you so much for joining us. Have a great day and always remember, goals without action are just dreams. Get out there, take action, and create the life your heart deeply desires. I’ll see you soon.

Important Links:

About Dr. Sam Giordano

REW 82 | Evaluating Syndication DealsDr. Giordano has been a practicing physician at an academic medical center for ten plus years and has had consecutive designations as a “Top Doctor” in his geographic region. He has also published multiple manuscripts in peer reviewed journals. He has an avid interest in personal finance and financial education, and has formed a personal finance teaching curriculum for residents and fellows at his hospital. He is also an assistant professor at the associated medical school for his hospital. He began exploring real estate investing in 2017 and has now invested in multiple passive syndication deals during that time as a limited partner. He realized there was an unmet need and formed his own tool to better and more efficiently vet passive real estate syndication deals. He has personally experienced the benefit of passive real estate investments as a busy professional, but also realized how few of his colleagues were aware they exist. He is now committed to changing that, and feels a passion and calling to bring an exposure to passive real estate investments to more professionals to ultimately diversify from the stock market and forge their own path to financial freedom.

 

He is a proud husband and father of three children, and during his spare time enjoys hiking, exercising and traveling to explore our beautiful world.

Revive Your Dead Leads And Turn Your Trash Into Cash With Chris Craddock – Real Estate for Women

REW 51 | Dead Leads

 

In real estate, sometimes all it takes is to look at the right places to discover the most exciting deals. For Chris Craddock, he took advantage of those dead leads that are mostly neglected and turned them into something profitable. Moneeka Sawyer talks to the mind behind the REI Revive program to discuss how to navigate such deals effectively and yield the most exciting results. Chris also talks about how important it is for an agent to think like an investor in order to perform well in the market and find the right partnerships that truly work. Finally, he shares the most helpful resources on the topic that he believes can up the game of every real estate professional today, especially when bringing back to life all those dying deals.

Listen to the podcast here:

Revive Your Dead Leads And Turn Your Trash Into Cash With Chris Craddock – Real Estate for Women

Real Estate Investing For Women

I am excited to welcome to the show Chris Craddock. He is a nationally certified life coach and has a Doctorate in leadership. He is the host of The Uncommon Real Estate Podcast, a realtor and entrepreneur who runs multiple successful businesses in the Washington DC metro area. His team, The Redux Group, is ranked number twenty in all of Keller Williams and sold over $160 million in volume in 2020. Chris has been married for many years and is the proud father of six beautiful children.

Chris, how are you? Welcome to the show.

Thanks for bringing me here. I’m so excited to be with you and spend some time with you.

[bctt tweet=”Persistence breaks resistance every day.” via=”no”]

I’m excited that we’re going to do it on your show too. This is going to be fun, Chris. Thank you. Let’s start by you sharing a little bit about your real estate story with my ladies.

Right out of college, I was a staff with an organization called Young Life. I loved it. It was amazing. I got paid $20,000 a year from Young Life, which was great but anybody in the DC area knows you cannot survive on $20,000 a year.

What is Young Life?

It’s a Christian ministry that works with high school kids. It was life-changing for me and I loved it. I was excited to be able to give back and be a part of it. I still volunteer now. It’s been awesome. With that said, I worked there and then, when my wife got pregnant, I knew I needed to do something to make a little bit more money. I went to the library because before Google, that’s the fountain of all information. I checked out every book they had on real estate investing. I knew nothing. I always say, “Imperfect action trumps perfect inaction any day of the week.” I read these books and did what they told me to do. That’s been a standard piece of my life. I did what they said and knocked on the doors of people in distress. In the next four months, I made twelve times what I made in a year. It was unreal and unbelievable.

What were you doing when you did that?

REW 51 | Dead Leads

The Millionaire Real Estate Agent: It’s Not About the Money It’s About Being the Best You Can Be

I found people that were going to foreclosure. I knocked on the door and said, “I’d love to buy your house.” The crazy thing was before the crash, I was able to buy stuff with 5% down. I begged and borrowed to get the 5% and brought me in a business partner. The other cool thing was when I was in college, I worked for a landscaping business mowing lawns. At one point, I was frustrated because I felt like it was poorly run. I offered to buy the business. I bought the business and ended up selling the business right before I graduated and got married. I made a little bit of money on the sale of the business, $40,000.

I flipped the landscaping business over a year. For me, as a college kid, selling it for $40,000 was awesome. I had some money there as well that I was able to use to flip the houses and parlayed that into two more deals. I kept doing ministry. I loved ministry. I stopped flipping for whatever reason. As I had more kids and the money started to disappear faster, I got back to it. During that time, I’d gone back to school. I got a Doctorate in Leadership because I loved leading people. In ministry, I led a lot of people, wherever it was. I started flipping houses again and I read Gary Keller’s MRA book, The Millionaire Real Estate Agent.

I saw how you could build a team in a serious amount of money. We looked at it again. I followed the directions, colored by numbers and started doing it. It was December 2014 when we launched that team. It took us a couple of years to grow some million. We got there through building that team, partnering with investors, being an investor myself, and all the other pieces there. That’s a convoluted way to get to where we are now.

It sounds like there’s a big focus on you building a team that then partner with investors. I recommend what most other real estate gurus will not recommend, which is work with an agent. You can buy things off MLS or if you have an agent that has access to off-market deals or whatever. In my business and in many years that I’ve been investing in real estate, my biggest asset has been my real estate agent. Without him, I would not be where I am now. I always recommend working with an agent. Nobody else does that. It sounds like you were doing it. Talk to me a little bit more about what you guys do, why you recommend that, how it works and any advice around that.

As a residential agent that also does investment work, I remember in year 2 to year 3, I did $40 million in volume one year, and then I worked so much harder. I clawed, scraped and got to $43 million that next year. I remember hearing from somebody. His story was the same. Right after that $40 million marks, he got caught. They still went ahead but worked so much harder and got less results. We said, “Here’s the deal, as the leader of the team, as that rainmaker, what you’ve got to do is stop working hard to get one more deal and figure out how you can bring in 5 or 10 more deals.”

I started thinking to myself, I’m like, “What can I do? Where are more deals?” I’m like, “Investors.” The first thing I did was go to other people that are flipping houses saying, “I’ll help you find deals.” You find one person. You help find five flips a year. You help them buy. You help them sell that ten transactions. If you find five people that are doing that, then you’re doing a massive amount of transactions. Let’s be honest, flipping houses, when you buy them and take them down, that’s a cash-intensive business, labor-intensive, and all the other stuff. You could make a lot of money without the liability and without all of the other issues coming with it. You do some of the nice ones and then sell the rest. Frankly, you have to build a massive team in order to do all of them.

[bctt tweet=”Anybody that goes in business has to hit four criteria: happy, hungry, humble, and smart.” via=”no”]

I started working with those investors and then I thought, “Who else has lots of leads?” There was a massive wholesaling organization in my market. I went to them and said, “What do you guys do with the leads that you don’t buy, fix and flip, and what do you do with the leads that you don’t wholesale?” They said, “We give them to an agent. We tried all these things. We tried to start in a brokerage. We’ve given them this agent. We gave her 1,000 leads in the last 8 months, and she’s closed like six of them. It’s not a big piece of our business. It’s not worth it.”

I said, “Why don’t you give me a shot?” They’re like, “We tried it. We’re going to keep the main thing, the main thing,” which I respect. Keeping the main thing the main thing is a good point, but what I said to him, “Have you ever looked at what Jim Collins says as the “Genius of the AND” in the Good to Great You’re already doing this. You’re already paying for these leads. They’re just dying on a vine. Why don’t you give me a crack at it? I kept going back and kept saying, “We’re good.” One of the things I’ve learned in life is persistence breaks resistance every day.

Finally, they gave me 150 leads and they said, “Here you go.” I called them all, and 70 of them were already listed or sold to an investor, 30 of them were out of my area, then I had 40 leads left. I thought, “If this other girl got six deals with 1,000 leads, I’m going to need to get six deals with these.” I did everything I could. I put on the best sales that I could ever muster. Somehow, I got six listings out of those other 40 leads. I called up the main guy running their operations. I told him and he’s like, “You got six deals out of that? I scraped up some leads that were five years old because you wouldn’t leave me alone and get you to stop bugging me. I gave you a bunch of old leads, and you got as many deals. I want you to come in. Let’s pull this thing up.”

Since then, we’ve started building it up. I have a class that I teach on this. We see everybody like brand new investors. I have a wholesaler who had five months of working the wholesale. He didn’t wholesale a deal and within 45 days of doing this, he had $10,000 in referral fees coming back to him. I see that and then you see another group that has a lot of business going on. A big organization where we’re seeing them bringing in over $60,000 a month for leads that they’ve already been paying for. Three-quarters of $1 million a year, what they were already paying for that was lying dead in their database somewhere because they couldn’t flip or wholesale it. It’s life-changing for brand new investors that have a massive organization going on.

There are people that come onto my show that can match my energy. I’m completely in awe.

REW 51 | Dead Leads

Dead Leads: Stop working hard to get one more deal and figure out how you can bring in 5 or 10 more deals.

 

Brendon Burchard says that, “The high-performers create energy.”

Why do you think other real estate agents haven’t already worked this market? Why are they not doing the partnership with the investor’s thing?

Agents and investors should go hand-in-hand, but the reality is it’s these two separate worlds where investors think agents are idiots. Let’s be honest, a lot of them are. A lot of agents feel like these investors are mavericks that do whatever they want and don’t understand the rules of the game. Frankly, some of them are. The bottom line is you go anywhere. When I was doing ministry, whenever I do premarital counseling, one of the first things I had to say to people is, “We’ve all got baggage. We’ve all got our own crazy. Can you handle this other person’s personal brand of crazy because we’ve all got it?”

You find the people that we’re going to partner with. They’re all going to have their own baggage and crazy. It’s like, “Can you handle the crazy that this person has?” That’s the way it is. Most people don’t. To me, that’s the crazy part. They’re leaving so much money on the table. Here’s the other thing. Most agents are trying to fit a square peg in a round hole, and that doesn’t work because when somebody is called an investor and wants to sell to an investor, you can’t send an agent out there and be like, “Do you want to talk to an agent?” Every single person knows 5,000 agents. Why are they going to talk to this agent? Their uncle is a hairdresser and an agent. Everybody is.

The agent has to also understand that these people called an investor for a reason and they don’t want to talk to some agent that’s going to walk out, break it, and open the listing presentation because that doesn’t work. That’s why across the country, all these investors tell me before we start a coaching program, “I tried that. It doesn’t work.” It doesn’t work when you send an agent that doesn’t understand the psychology of a person that is willing to call an investor.

[bctt tweet=”Anybody that calls an investor instead of an agent wants certainty.” via=”no”]

From the investor side, what do you think an investor should ask or look for in an agent that’s going to be investor-friendly?

There are a couple of things. One, if you’re going to work on a program like this, anybody that you ever go in business with has to hit four criteria, happy, hungry, humble and smart. They need to be happy. If they’re not happy, wherever you go, there you are. If you see somebody that’s complaining about splits, commissions, referrals or anything like that, it’s a matter of time before they’re going to complain about you. You want somebody that’s genuinely happy and hungry. If you rip open their chest, they need to have a heart of a lion. If you get somebody that you say no, and they’re like, “It probably wasn’t a good one anyway.” That’s not who you want. You want somebody that is so hungry that you close the door and they’re climbing the window.

Somebody that won’t stop like you call the investor and say, “Send me the leads.” You bug them so much in a nice way that they still like you enough to not tell you, “Stick it somewhere.” They don’t give you 150 old dead leads just to leave them alone. You need to have somebody that’s persistently passionate and hungry, wants to win, humble, willing to sit at other people’s feet, willing to color by numbers, doesn’t think they’ve all got it figured out. If you meet somebody that’s got it figured out, introduced me to that person because I’ve yet to meet that person, and then smart.

It’s not just somebody that gets into Harvard-MIT. It’s somebody that understands EQ as well, emotional intelligence, understands how to read somebody, and how to be personable with somebody. That’s what you’re looking for in an agent. I’m reading a book called Who Not How. It is a business partnership. If you pick the right person to partner with, all the other pieces can be figured out. If you don’t pick the right person, you can give them all the information in the world, and they’re still going to squat on it and waste your whole lot of time and money.

I talk a lot about finding real estate agents that are investors themselves because that’s a big factor too. You want to be in the mind of an investor to serve an investor. You don’t want to be somebody who’s away from it. These are great tips. Thank you so much for that. Tell me about your REI Revive program and how can we find out more about it?

REW 51 | Dead Leads

Dead Leads: If you don’t pick the right person to work with, you can give them all the information in the world and still squat on it.

 

My website, ChrisCraddock.com. You can also follow me on Instagram @CraddRock. I usually try to respond to any direct messages or DMs on Instagram. REI Revive is teaching people how to do what we’ve been doing. We’ve seen massive success. You’ve got to learn how to pick the right agent and how to hand off the leads because most people use the wrong script in handing off the leads. In the second part, you also need to learn how to sort your database because a lot of times, people are worried about cannibalizing their own leads, but they don’t realize that the reality is you had one lead followed up with for two years, but you had about 60 that would have closed with an agent and you would have made a whole heck of a lot more money.

The problem is oftentimes, emotionally, we remember that one deal where if we step back and look at it analytically, we’ll realize that we’re leaving a lot of money on the table for leads that are going to sell with somebody that might as well get paid for it. We teach that. The first half is teaching the investor. The second half is after we’ve taught the investor how to hand off everything and how to pick the right agent, we teach the agent how to close. That’s the whole thing. Agents think they know how to close, but the reality is they do their old tired listing presentation and it doesn’t work. You need to speak to an investor. Somebody that’s called an investor needs to be spoken to differently than somebody that calls a real estate agent.

Chris and I are talking about possibly creating some extra cool stuff for my ladies. Make sure that when you connect with him, you let him know you came from this show so that if we have worked something out that you can take advantage of that. Things are constantly evolving in the world and with our relationships. If you connect with anybody from this show, make sure they know you came from me, and who knows? You might get some fun surprises. ChrisCraddock.com and when you connect with him, say you came from Real Estate Investing For Women with Moneeka. We’ll see where that goes. What I love is that you first talk to and train the investor, and then you help to train the investor’s agent, which is like magic.

[bctt tweet=”People that make the most money are those that solve other people’s problems.” via=”no”]

That’s the whole thing. You can train one but not the other and it doesn’t work. It requires the investor to understand how to put together their system so that you do it and scale it. It requires the agent to follow the system once they’re in front of the people, everything from the precall before you get there. Even once you’re in front of the people, how to find out why they’re there. I’ll give a sneak peek of this. Anybody that calls an investor instead of an agent wants certainty. There are 1 of 5 reasons they do it. One, they want to avoid a commission. Two, they want to sell fast. Three, maybe they’re a hoarder and they don’t want their neighbors to see pictures or see the sign in the yard or anything else. Four, they feel like their house is too much of a mess to put on the MLS. Five, they don’t want people coming through their house at all hours.

If you can answer those objections, you can sell to anybody. It’s like a doctor. I played rugby in college and destroyed both of my shoulders. Every once in a while, I would go in and get my shoulders checked because I jack them up again. The doctor will do all of these things to find the pain, then once he finds the pain, he does this thing called a crank test where he comes around like this and it’s painful. When he hears me scream, he does it again. He presses the pain point and then he presses it again. He says, “Your shoulder is jacked up again. Here’s your prescription. I want you to do physical therapy. See the orthopedist.” It’s the same thing for us. The agent goes to the seller and finds out what their pain point is. You press it and then you press it again. You then say, “Here’s my prescription. Here’s how I can solve the pain point.” The people that make the most money are the people that solve other people’s problems.

Ladies, connect with Chris. I have never met anybody who will train the investor and then train the investor’s agent. If I’m trained and then I have to go train my agent, I’m still a beginner. I can train a little bit certainly but I train a lot better now after many years when I did my first deal. To be able to do both of those things, that’s magic.

I’m excited about seeing the results that we’ve had with many people from beginners to seasoned vets that have massive businesses. It’s been fun and I love it. For me, having a Doctorate in Leadership, it took a lot to go back and get that done, but I’ve loved helping people. Zig Ziglar says, “You can have everything you want in life if you help enough other people get what they want in life.” What I’ve found is good leadership is helping people get what they want. That’s the fun part about opening this program and helping people understand like, “You’ve got hundreds of thousands of dollars in leads and CRM that you don’t realize are there.”

There’s another story that I love to share. These sawmills were milling wood but they were hardly making a profit at all, which I know a lot of investors are working their butts off, but they’re not making that much money. They’re like, “It’s around the corner.” The crazy thing is somebody got the idea with these sawmills. They’re like, “What if we were to repurpose the byproduct? What if we were to take the sawdust and be able to create candles, burn it, particleboard, all these other things you could do with sawdust?” They started selling the sawdust. They were sometimes making more money on the byproduct than they were on the wood they were milling. The same thing is true here. People are paying tens of thousands of dollars for leads but then the ones that they’re not able to fix and flip, wholesale, creative finance, or whatever they’re doing, they’re throwing it away. They’re leaving it in the CRM and they don’t realize they’re leaving mountains of cash in their CRM.

Do you recommend where people can find these leads? Let’s say they’re beginners. They don’t have the leads that they need to revive. They just need leads. Do you have resources to help people get leads and stuff too?

There are many different places. DM me and I’ll set you up with some classes. I know you’ve got a couple of questions for me that we’re going to jump into as far as some rapid-fire things, but one of them is find people that are going to help you. Find mentors because there’s no reason for you to reinvent the wheel. Find people that know the path and then followed their path. I’ve said this over and over to color by numbers. If you DM me, I’ll give you the names of some of the companies where you can find data and skip trace numbers, but here’s the easiest one. You either have money or you have time. You got to be able to invest one or the other.

If you don’t have either then don’t get into this business because you’re not going to succeed. Have time. We’ve all got 24 hours. When I got my real estate license to start the licensing piece, I got licensed in a week. I chose not to sleep that week. I stayed up late and decided to pay that price. I didn’t watch any Netflix and didn’t do anything. I did my normal job and then stayed up late and knocked out the other stuff. The bottom line is the fact that you don’t have any time is a myth. I’ll say one last thing on this. I ran a marathon a few years back. When I was training and we would have excuses why we wouldn’t train. At that time, George W. Bush was the president. He would run 5 miles every day. At some point, we were like, “If he is making the time to run 5 miles every day and he’s the president, my job is a lot less important than his. If he can figure it out, I can figure it out.”

The same thing is true for you. You decide your priorities. It’s not the lack of resources. It’s the lack of resourcefulness. A long way around, the question that you asked me originally is if you don’t have any money, it’s called driving for dollars. You drive around. You look for the ugliest houses you can find, and then you take a ping, put it in your phone, and put the address. You get 50 to 100 of those houses and then you go to any skip tracing program. You go into the data program. If you text me or DM me, I’ll give you the names of some of them that I recommend. If you go into a program, they’ll give you cell phone numbers, email addresses, everything for the people that live there. Some of them will be good, but then you can spend the next day. You take 1 or 2 hours, and you call through everybody. Your script is simple, “Are you looking to sell your house? If you’ve got the right price for it, I’d like to buy your house.” You offer to buy their house. They’ll say, “What do you want to sell for?”

Here’s another tip. There’s a book called Never Split The Difference by Chris Voss. It’s the best book on negotiating out there, in my opinion. One of the things he talks about is anchoring. You want them to give you the price. You say, “I’m interested in your neighborhood. I’m looking to see what you’d be willing to sell for. Do you have a number in mind that if me or a business partner of mine were able to buy your house that you’d be comfortable selling?” You asked in different ways until they give you a number. You don’t want to give them the number. You want them to give you the number. When they say yes, that’s great.

You get the number. You say, “Let me do my research.” Do your research, see if you can do it, you negotiate the number down, then you got your first house. Some of these other programs will teach you how to wholesale it or fix and flip, creative finance, and all the other stuff. There’s probably more than we can get into in this episode. That’s the easiest way to and the most cost-effective way to get started and find your first deal.

What do you do with them? In your program, what you focus on is building those relationships, but then you lead people to the next place, which is what they are going to do with those houses once they get them. There are a million things you can do with these houses once you’ve got one in a contract.

REW 51 | Dead Leads

Dead Leads: If you don’t have either time or money, don’t get into this business because you’re not going to succeed.

 

There’s a number of programs that I recommend that will teach you how to get those deals. DM me on Instagram and I’ll be happy to put you in touch with some people, then we can go from there. They’ll teach you how to bring in the deals. Let’s say you’re driving for dollars and somebody says, “I’ll sell my house for X dollars,” but you look at it and like, “I can’t buy or fix and flip this. My program teaches you how to partner with an agent who can go list it and get a commission there.

There are some rules about how agents can pay commissions and referral fees. You have to figure that out and everything else. Essentially, if you find somebody that’s willing to sell but they’re not willing to sell for $0.65 or $0.75 on a dollar, then there are other ways to monetize that. Most people aren’t doing that. That’s the whole thing. You got to figure out how you want to make money. You can do anything, but you can’t do everything. You find your niche, you dive in and you get it done. I know you have a unique niche that you’re in. If everybody can find their niche, go all in and make it happen, you can make a lot of money.

Chris, remind everybody how they can reach you.

ChrisCraddock.com is the website. On Instagram @CraddRock. I try to respond to every DM. My business page on Facebook is @ChrisCraddock.

Anytime you connect with Chris, make sure you let him know you came from me. Are you ready for our three rapid-fire questions?

Let’s do it.

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

Find somebody that’s doing it well. Spend money, buy them a nice lunch and offer to buy them. I know we’re in the COVID world, so it’s harder to get together. If you want to shorten your learning curve, you find some people that are good and do it. If they’re not in your market and you can’t find them, find somebody you listened to in a podcast, reach out to them and ask their advice. People are so much more generous than you think they are with their time. I’m going to give 1.5 tips. Buy the coaching products. Everybody’s like, “I can find this online.” You can find all of these things online, but you want to find one that’s good, that’s going to walk you step-by-step how to get your first deal. Spend the money. It’s the best money you’ll ever spend if you do it.

Go spend the money and then sit on it. What is one strategy for being successful in real estate investing?

There are two pieces, activity and skill. You don’t even have to be that good if you talk to enough people. You don’t want to any secret about it. An awful salesperson who talks to 1,000 people a day is going to outperform a great salesperson that talks to three people a day. My whole thing is activity and skill. Figure out how to talk to more people. At first, if you have no money, you do it by driving for dollars and you call. As you earn money, then you can do more marketing where you’re sending out direct mail, voicemail drops, or all of the other options that you have to reach out to people. Talk to enough people and then skill up. The way you skill up is every single day, you should never have a day that goes by where you’re not doing at least 30 minutes of personal development.

You’re reading, listening to podcasts, listening to audible books, whatever it is. I recommend an hour. I’d usually do about at least an hour a day. If you don’t have that, your business will grow and your life will go to the extent you grow. If you want to grow, you need to bring stuff in to change your mindset and to be able to think bigger. Here’s the other side. I talked about meeting mentors. I have more mentors in my life that I’m never ever met because I’ve read and listened to everything they’ve ever said. Find those people and bring them into your life.

[bctt tweet=”If everybody can find their niche, go all in and make it happen. You can definitely make a lot of money.” via=”no”]

What is one daily practice that contributes to your success, other than reading and personal development? That was a great tip and I love that one.

Here’s the last piece, many of us had these yearly goals that we never hit. I always call this dialing it back to your irreducible minimums. If you want to win the year, you’ve got to win your quarter. If you want to win your quarter, you got to win your month. If you want to win your month, you got to win your week. If you want to win your week, you got to win your day. If you want to win your day, you’ve got to win your morning. Most people wake up in the mornings and play defense. They figure out, “What’s coming at me?” Handle that.

There’s a book called The ONE Thing. The way they define that is what is one thing that if I do this, all other things will become easier or unnecessary. If you figure out what your one thing is that you need to do that day that will move a rock, so that you win your day, so that every single day you do that one thing in the morning because if you get it later in the day, all just gets pushed to later. Do it in the morning. Win your morning, which wins your day, week, month, quarter and year.

I wrote a book many years ago called Choose Bliss. One of the very first after the intro is all about the morning routine. We all have a morning routine but most of us don’t have a morning routine that serves our day. We wake up playing defense instead of playing offense. If you plan it, you do it intentionally, and now you’ve set yourself up for what I call bliss, what you might call success, you’re setting yourself up to win the day. I love that. Thank you for that.

This has been awesome.

Chris, thank you so much for joining me on this show.

Thanks for having me. This is a lot of fun.

Ladies, thank you for joining Chris and me on 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 you heart most deeply desires.

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About Chris Craddock

REW 51 | Dead LeadsChris Craddock, the Redux Group Team Leader, is a Northern Virginia native and father of six who has been successfully investing in real estate for over a decade.

He is a licensed Realtor® in Washington, D.C., Maryland, and Virginia. A Nationally Certified Life Coach, Chris is passionate about helping others achieve financial and personal success.

He is known for his relentless pursuit of the best deals for his clients.

 

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