this is real estate rookie episode 396 are you Unsure how to structure a private or hard money deal today we'll get into what is working using other people's money OPM my name is Ashley care and I am here with Tony J Robinson and welcome to the real estate rookie podcast where every week three times a week we're bring you the inspiration motivation and stories you need to hear to Kickstart your investing journey and today's guest is buying properties all cash building his portfolio using other people's money the Holy Grail of real estate investing he's making flips more affordable for his area to ensure they actually sell on the back end and we'll learn how consistency is key to staying actionable and we will hear how he's doing this himself so Darnell Welcome to the Real Estate rookie podcast what's going on I'm so hyped to be here for you guys um first off I want to give you guys your flowers I started off watching Bigger Pockets maybe three or four years ago um and I honestly pivoted from watching the actual show to watching the Ricky podcast when you guys launched this right after covid and you guys have extremely help me just Propel my business so shout out to you too and I appreciate you guys having me well we are so excited to have you here you know full circle moment you start out listening to the podcast and now you are here to share your experience and to help others get started so Dar now how did you even get started in real estate investing was it family or what kind of happened in your life that brought you to that starting point yeah for me real estate investing was like a a foreign language of sorts I had no idea what it even was I thought you had to be a millionaire to buy properties and invest in houses and you know just live and and pay a mortgage it was probably my last year playing ball up in Canada I was with the Hamilton Tiger Cats and one of my buddies had told me to be rich dad ported so pretty cliche story right I read the audio book I had the the book on my phone and I was listening to it and it dawned on me like look I can make money outside of playing football one that was one reality that I didn't really understand because I was so focused on playing ball but reading r at pad taught me how to make money leveraging your time right how to make money leveraging other money right and just rinse and repeating that whole process so for me real estate investing was the pivotal moment um after reading that book um and I shortly realized that you can buy properties using OPM other people's money by getting into a few different masterminds with Amy majuri and I joined met Fair CLA Mastermind as well so there's been a whole bunch of just small intricacies that have played a part into me getting my first deal but um that's kind of how I got my start reach that poor dad and were there any pivotal books or podcasts or what were some of the resources you had mentioned masterminds what other things kind of helped you gain that knowledge to get the momentum to actually take action um you know going to meetups as well really helped me obviously reading the books was cool um watching a lot of YouTube videos and content and things of that nature but I think when you actually put the rubber to the road and you get around other like-minded people getting to meetup events and seeing how they're growing their portfolios and you ask the questions live in person um and just hearing from the a whole bunch of different talks and and hosts that are at these meet up events that really is what kind of propelled me but also being involved on the Bigger Pockets uh community on the forums page that was huge and pivotal as well that that same last year that I was playing ball in Canada um I made a dummy big Pockets profile I had no photo on it it was just really just my name and it was like some madeup bio I'm a property manager looking to invest in XYZ market like no idea but I was on the forums watching and listening and seeing people ask and respond to questions and to me that just it sparked another trigger on my mind just allowing me to understand that people are willing to help you out there and people want to see you excel in real estate there's a lot of um people that want to extend their hand and just give you guidance so for me it was getting around those actual individuals and getting the meetups that's really what kind of tell me Darnell you mentioned playing football um I see the jerseys up behind you has that experience in your football career kind of LED you into real estate or what kind of has made that transition into doing real estate from football like at what point did you decide like I need to have something else after football o um again like real estate was very foreign that last year playing ball it was like all right what's Rich Dad Poor Dad what is real estate how do you how do you make money work for you um and that sort of thing but then it was really Co that had hit that I think we all are aware of that kind of shut the world down for me unfortunately I lost my last job playing football due to covid I was playing with the U New York Guardians in the XFL during 2019 and that League folded due to co the whole world shut down so I lost my job um and I came back home I was in kind of like a bad mental state I was living back home with my mom and dad nobody wants to kind to be in that place where you're you're not doing what you think you should be doing with your life right um so I just had to do a lot of internal digging and Diving and figuring out what exactly that next PATH would be for me and again reading Rich Dad Poor Dad that was a spark in my mind as to well you can make money outside of football and doing other things um so again just diving into the content YouTube University Bigger Pockets obviously was pivotal but just listening to podcast day in and day out like I literally listen to David Green um every single day in the gym right just trying to figure out ways to get involved in real estate so for me that's kind of how that transition happened it wasn't the easiest it was pretty abrupt but it was um it was worth it I would you know I would do it all over again if I could yeah you you mentioned a few times I know just like diving deep into the content and and the community and I think a lot of people also they know Bigger Pockets through the podcast and maybe the YouTube channel but they aren't aware of like the vast wealth of knowledge that exists inside of the Bigger Pockets forums guys the the forums go back to like the the beginning of Bigger Pockets that's where it started and that's actually how I found about BP is that I was doing a Google search for like whatever how to buy your first rental property and I stumbled across the Bigger Pockets forums and like you said Darnell there's there's so many experienced investors who are inside of the forums that are just giving value giving value giving value so for all of our rookies I'm sure a lot of you maybe are already in the Facebook group but go and join the forums as well and use that as another resource to give you some of that support as you as you go on this journey now I know you you also mentioned um Matt fer cloth and uh you know I I love Matt he's a great guy him and his wife both amazing Real Estate Investors but um I read his book when I was getting started as well how to raise private Capital um did did you read that book I guess how did how did that influence you as you kind of started this journey I read that book too late to be honest I read that book after pitching myself and the vision that I had from my family to my family about starting our own real estate company and business um I read that book really after my second or third deal because I was Raising OPM kind of organically but not really intentional around it didn't have any formal approach to doing it or what the the mindset should be when you're doing it and how to protect your lenders ultimately right and adding value to them so reading that book came kind of a year too late for me but at the same time it was perfect timing because that's when I was really trying to be more professional in my my approach to raising private Capital so understanding again the ways to protect your lenders the ways to approach them and and give them more value that book was everything I needed it was like the literal blueprint to raising private Capital can you maybe give us a little insight as to what that pitch was like to your family yeah I'd love to so this is funny so it's it was again it was covid I had just bought a condo in Germantown Maryland and again I'm scratching my head football's done and at this point I'm like look I don't want to work a 9o5 my ire life I know I'm going to probably have to to get you know my feet under me and start getting just momentum with being an actual working class person as opposed to just playing football my entire life so I had to figure out a way to get out of that R race one way or another and again reading Rich Dad Poor Dad taught me that you can do that through real estate so I put together this five page there like five or six page PowerPoint that literally spelled out like what the LLC name could be you know what our goal would be with real estate how we would raise the funds in the capital kind of where our target market would be what the benefits are for us not just myself but for my younger cousins and my my children and my my nieces and nephews right and just everybody that comes behind me because I'm at the point now where I'm willing to sacrifice my time and freedom to see my younger generation succeed and that was the entire Vision that I had for my family so I put that deck together pretty much and we got on the call for like maybe an hour an hour and a half on Zoom this is midco this is like May and we're just talking ping ponging back and forth I'm like well shoot my family is actually buying into this like they really believe in the vision that I have and that you know that they can see us going long term so for me it was very easy they were all very supportive um I come from a very big foreign family I'm Jamaican so they they're all Hustlers by Nature um a lot of them are already involved in real estate at a higher level than I am but you know just being able to talk to them and bounce ideas off of them really just made this whole process easy starting out so you sat down you did a five or six point presentation over Zoom that you went through with them and everybody seems on board so now what do you do differently in your presentation so one thing that I I noticed is you said in that presentation to your family you did a slide about uh LLC names potential names how important is that now to you when you're actually doing a proposal and then go ahead and tell us what your proposal looks like now yeah for sure great Point Ashley I think that was um really one of the things I also realize moving forward is like you you don't have to have all the the steps and the finer details figured out before you get started and I think that's what stunts the growth and progress of a lot of entrepreneurs especially in real estate um so that was a step that I probably could have stepped out on and and skipped um but I think that was just another thing that I was trying to do to to to show that I'm taking the initiative so I wanted to get that out there but that's a great point I don't think it's very necessary but it is it was something that I I wanted to do just so that they understood that Darnell is uh he's doing what he needs to do for the family but Darnell I just want to say you have no idea how many times I spent designing logos and business cards for the different things I've started as time wasters from actually implementing and I just wanted to like highlight that that that's like a skip that that's a step you can actually skip when you're you know trying to build your business as it's not the immediate need yeah 100% yeah and I I I didn't even realize that until after effect like to your to your point logos and names and like color schemes those they all look cool but like start the business just start the business and then let the momentum take you to the next step and the next step and the next step um and I learned that just through experience right so you know any tip for any rookie out there anybody listening like take the initiative take the action just start and then take the momentum from there but um I guess how I'm pitching my deals now or you know talking to lenders now it's been very organic the first time that I actually raised Capital after that event with my family was two family members after that it on a separate Venture and the way it was was it was I had a formal deck so in the meantime of me getting fired from football and getting cut my last year from that League folding to maybe like the start of 2020 or the end of 2021 at this point I'm understanding I can raise capital for my family so how can I do it with other people right so I used that deck on two of my family members but then also on another friend of mine I guess you can call them that we were just been talking about real estate ping ponging ideas back and forth so it was three lenders that I brought in on my my next deal after that so the pitch was from Amy it was it was a a deck that literally had my face on the front page what my career was like who I was as a person kind of selling yourself to the private lender themselves initially they want to be be able to trust me as a person with their capital and to build this business the next few slides detailed out what the Fix and Flip was or what the bir strategy was or what the buying hold was going to be and it broke it down slide by slide as to how we're going to raise the capital how we're going to actually go ahead and Flip or renovate the property make it get up to standards but then how we're going to get you your money back most importantly that next slide broke down the details as to what the difference between investing in real estate does for you and what the difference in investing in you know stocks bonds mutual funds and other Commodities does for you and the last step pretty much tied it all together and ask any questions and then at that point me being the the the the deal maker in a sense would have to answer their questions you know make them feel okay and and and make sure that they're getting all the value that they need for me to be secured um so the pitch now and I i' I've used this once in the past I don't use it I haven't used it since because again all my lenders are organically now on my network but her pitch of you know just introducing yourself hey Ashley I'm Darnell Lesley I'm a local real estate investor and I help my investors make double digit returns backed by real estate are you interested like when she said that and put that in the PowerPoint I'm like well if I'm an investor who has a lot of money why would I not be be enticed by that tell me more please and now if you have a slam Dum deal obviously I'm going to give you money if I want to make some money right so putting kind of all the pieces together from Amy and reading you know Matt Fair Claus's book that really just propelled me and put me on a different level of being more professional without I'm presenting myself to my private lenders so that they can feel more comfortable that I can provide value to them right so that was kind of how that all went Dar I love that framework and a couple followup questions here um so you put together the the deck are you are you just like emailing it over to them and letting them read through it as they want or or are you saying you know if I'm trying to pitch Ash I'm saying hey Ash um I want to walk you through this y top in a zoom call and you're walking them through the presentation on the actual Zoom call together what what's what's been your strategy when you were using that deck that was it Tony that was spot on so the three lenders that I had on my next deal each got on a separate Zoom call obviously I'm not going to disclose your identity so I don't want you to all see oh we're all lending money to the S and so no this is a private matter professional right you're doing business with me and my company and I'm trying to provide vality to you and your family so we got on a one-1 zoom call it was maybe like 35 minutes 45 minutes each the deck was fairly simple but really straight to the point all these individuals knew me as a person already so the selling piece really wasn't selling it was just me reiterating look this is who you're dealing with this is who Darnell is this is what you know kind of person that I am from the personal side but what I'm getting to on the investing side and professional side right and so all of those calls went very smoothly um I want to say most of them didn't last like like longer than I expected it to again CU they had no questions they were like look Darnell like we love you we know you we like this deal like what what are the next steps how can we help you right and so I was just again I'm I'm blessed to come from a family in a network of people that really understand who I'm as a person so that's kind of how that went so D were all of these people then uh family members or or was it anyone else that you had kind of like met through networking or or events two were family one was again another close friend or a mutual connection that I know from playing football gotcha and so I guess just last question on the actual pitch piece how did you initially present the idea to them like were were these the same family members that were in that first deal with you or was this someone else you know a newer family member and you said hey I've got something for you let's hop in a call like how did you actually get them to the point of getting on that Zoom call with you yeah so one so I have again mom dad side right that the business is through my mom's side of the family there's like nine of them my mom's one of 10 so the nine Aunts Uncles and relatives there's like our LLC has maybe like eight or nine different people in it so one of the individuals from that LLC invested into the next deal my dad's side another individual invested into this deal right and then on the the third side was just a mutual connection but specifically how did you get them onto the zoom call was it just a text saying hey I got an opportunity for you you invited them out for coffeee and started telling them about it like what was the initial conversation that was brought up like especially to that friend that's not part of your family that maybe heard your family talking about it but what was that first interaction you had with them so these are all people that I've talked about really estate with in the past right like after reading reset ported in in Canada you know I'm coming home and I'm talking I'm pitching ideas obviously I don't know what anybody in my family makes per number or what any of my friends or network makes per number but one of the things that I'm realizing is that when I'm putting myself out there as that hey you know I'm getting into real estate I want to do XYZ in real estate want to build my business this way right and they're saying well hey look I got some money right like I'm able to cash out some stocks like what do you want to do in real estate that I can add value to and be a part of and help you build so it was really the natural organic conversations that were happening to where when I knew that I had a next deal coming up I'm going to you you you you you you you right because it was just something that I kept track of because I knew that I wanted to be able to build a portfolio using OPM and that valued to other people that wanted to invest in they really had no time or know how to do so so really it was just through formal conversation or informal conversation I'll say that turned into us getting on a call and you know taking the next step is to investing together so Darnell now that you have your investors how are you actually structuring these agreements what are the terms what are the payments like yeah so they're very fluid and I think that's the benefit of OPM and that's why I want to continue building my business using OPM um as opposed to using a bank like you both no um you don't have hard terms right your terms are really based on what makes sense for you and what makes sense for your lender for me in my business if my lenders are to give me 50% of the amount I need or less they're going to get 8% back on their money annualized return hopefully I'm in the deal for four to six months so it's a very quick you know return on your money right if they're giving me 50% or anything to the the full amount you'll get 10% if you're giving me all the money that I need for purchase in rehab you'll get 12% annualized so I kind of break it down into three different stages to keep it very cut and dry so they understand well I could receive XYZ based on how much I'm giving in for this deal the way I protect them is through mainly it's a promisory note right but I've had one lender so far that want to also be put on um title insurance so I had them as the owner on the title insurance so if I just run away with their money they still can legally show hey I'm on titled Insurance on this property I have some sort of claim to the rights on this proper property I've also heard other ways where people are adding their lenders onto or writing their lenders out uh unrecorded deed of trust I've never gone that route none of my lenders have ever asked for it but if they did I'd be open in doing it because I understand how that process could go with title I understand it's another layer of security um and I just I know that it's for me lender my lenders that I'm working with consistently they already know I'm not going to run away right again it comes down to them trusting you as the person and trusting your business model and trusting how you operate you know with them and being communicative and and just not trying to be Shady with what you're doing right so I think it all comes back down to trust but there's a few ways that I can protect them but the main way is always through a promisory note yeah as I'm curious how you set it up as well but I know that's how I do all of my private money transactions where I give them both the the deed of trust is what it's called in California but whatever your mortgage security document is but it's a deed of trust that gets filed with the county shows that my private money lenders have a lean against that for their note amount and I also give them the the promis are note so I give them both documents every time we do a transaction it's a little bit more Hoops but for me um you know I just feel like it it does make us come across a little bit more professional when they can see that the paperwork's there and everything's tied in and if Tony did run away in the middle of the night they do have some form of recourse um for for any deals that you've done Ash how did you kind of structure from a paperwork side of things yeah I've only ever used the same several money lenders and it's just been a promiser note and I think that kind of goes back to Darnell's Point like you know he started out with family family friends you know people that knew him that you know the same with me is people I've known for a while that they know where I live they know where they can come after me by you know something happens at their property but um I'm doing a new private money loan with somebody I've never done it before that lives out of state we know each other but um he does a lot of private money loans and this time we will be doing um a deed of trust for the property so so will be my first time actually having to do that and D I don't know if we asked but are you using the private money to fund flips or or like burgers what exactly you're using the the private money for all exit strategies um I've only hold one deal but I'm using private money right now to get into the property so if I can purchase a property all cash I will do that using OPM just because of where the hard money fees are right now um but if I can use that money to also rehab the property depending on if it's a cosmetic flip and it will take maybe fewer 30 grand right as opposed to being a full gut needing another 120,000 so just depending on where it is that's how I'll kind of use the OPM and what Market I'm in the DMV Market DC Maryland Virginia darnal once you have your private money lender what's kind of the process is it okay you'll get your money back at the 12 months I'll talk to you then what's kind of the the length of your agreement and how does it actually pan out are you making interest payments along the way are they getting a lump sum at the end yeah great question so for me again going back to the whole trust thing of of everything we've been saying right I'm very transparent when it comes to my lenders I understand that this is a big investment if you're giving me $150,000 for something you want to hear progress reports on this property right there's people out there that I'm sure will just take your money run and not talk to you until the deal's done no outside of seeing my social media and seeing what I post on a daily basis I'm going to shoot you a text at least once a month give you photo updates personalized so you can understand this is where your money is going this is what it's getting paid toward and this is the progress report that we're making on that deal right so I'm very transparent in that factor U when it comes to actually paying the lenders back their money again I've been in a a flip the longest for nine months out in DC a headache um but on closed date you get wired that money the same day I'm not holding your money for a year I'm not trying to use that money on another quick deal no when this property is done I need your okay and understanding that this promisory note is now n null and void and we're moving on to the next deal and if you want to keep your your principal Capital with me and I pay you out your interest that's even awesome because now I have more money to sit with that I can use for an EMD that I can use for proof of funds right that I can use to get us the next deal moving forward as opposed to being kind of shyy and and and not letting you know exactly where we are in the process just so I can hold on to your money for another three or four months so it's all transparency for me and it's interesting you run it that way cuz I I Almost Do It the opposite not in an effort to like conceal information but just like hey you you know you're trusting me with this process so trust me and you know like me and my private money leers even joke like when they wire funds in for a deal like okay cool I'll talk to you in you know four months you know when the when the wire comes back so I guess it depends on on your relationship with the with the private money lender I want to know Darnell how has your ability to raise OPM impacted your investing so far oh man it's it's Skyrocket it in the sense of just giving me more confidence but just also like a ease of mind as well right when you we all have llc's right in businesses not that you need one to necessarily get every sort of bank loan you can go no do and dscr but when you're dealing with hard money companies it's a lot because they ask for so much documentation they not they don't drag their feet but you're kind of going on their time of how things are getting done right and you have to meet all the requirements to make sure that they can actually fund the deal that you want them to fund right if your credit score is shot you're probably not going to get as much guaranteed on this loan as you want to right if you don't have the necessary proof of funds or you can't you know close on XYZ date you're probably not going to get the money that you want so there's a lot of rules and restrictions that go into dealing with hard money companies and if you need that route that's a great route that's how I kind of started off but for me private Capital has um allow me to think less about the whole formal process of of securing a deal whereas you know if you can just open your phone and look in your your business bank account and see what you need to close on the property then you just coordinate with closing and title yourself and you handle it that way right so it's it's allowed me to kind of just take a step back and be more you know levelheaded in the situation just be more calm but also um using private Capital I'm paying less in fees so I'm recouping and keeping more money in my pocket when I go to purchase and sell the deal I'm not paying points right I'm not paying origination fees I'm not paying money to get into the loan because I already have the money but also on the back end I'm not paying you 15% plus a monthly pay out on your interest so it it's a it's a it's a kind of a smaller and minute difference in the numbers of things but at the same time if I can keep two and a half points and 3% on the loan I'm going to do that all day every day so it'll all it'll allow you scale a little bit more just by keeping more money and and recouping more money after the sale so Darnell you had mentioned that you held on to one property I've kept two I'll say I have a bur and then I have one that I also bur in hagertown so I have two bir okay and then how many houses have you actually acquired with private money throughout this time I'm going to say five and that's over the course 2022 wow yeah that's awesome so by purchasing these properties and using the private money what would be like just maybe your top one thing or three things that a rookie investor should be doing right now if they have the same goal of VI of doing you know five flips throughout the next couple years acquiring a couple properties to hold what's one to three things that they can take action on that they can do right now to start raising private money man sell yourself understand your skills right hone in on those if you're a great deal finder start finding great deals right and actually that might be the thing that I'll say right so besides selling yourself and understanding your strength be able to find a great deal and learn how to underwrite and if you can't underwrite find a real estate friendly agent on big Bigger Pockets right they have them all over the place and have them or ask them to run numbers for you on this deal right rental property or flip whatever the case is um but just start understanding like the intangibles that you bring to the table I think a lot of people listening to this show might work not a five so you have communication skills you have organization skills you have time management you have a lot of intangible qualities that go into raising private capital and at the next step understand what a great deal looks like so you can pitch that to an investor right you have to make the deal look so good that they would feel bad for not investing with you 100% the deal has to make sense numbers-wise so where they just feel like well dang they're missing out 100% that's it right so understand your traits and your your your skills sell yourself to be able to find a great deal and run numbers so when you're running the numbers and you're doing your underwriting how were you deciding which like those two that you decided to keep as a bur and than the ones you have flipped how did you actually decide which strategy you're going to be using yeah great question so for me I do all that like early on in the game before I make an like I'll make an offer a really advantageous offer for myself I'll say I don't want to say low ball like it'll be advantageous for me but at that point I'm running numbers based on what that looks like and I always want to make sure I have more than one exit strategy in place right so I always have two or more so if it's going to be a great flip it's also has to be a deal that can somewhat casual and if not it'll be an area that can appreciate over the next two or somewhat some OD years if I have to hold the property longterm or I have to be able to just wholesale it off off back or do a short-term rental and be like Tony um but so for me it's really just understanding the multiple exit strategies and being able to be an agent with Long and Foster that's allowed me to do a lot of the digging on the back end that people don't have access to it's one thing to use Z but it's a whole another thing to be able to tap into the MLS and see you know real life property data and ownership data in one place and get on you know the the releasing portal and see what properties in that subdivision are also renting right you can get the same data from Zillow from Zillow redin and truly all those websites um but I think being able to be an agent and see that data before it actually comes live on Market from other comps I think that's another Advantage but you know for me that's kind of how I'm doing it I'm looking at the numbers early on and just trying to figure out if it's a burr can I refy out all my money plus my private lenders money and pay them back maybe I don't keep any money for myself but I have the property long term right that's payout for me and that's enough for me I got cash flow and that's enough for me right so just understanding the different um exit strategies and trying to make sense of what the profit would look like short and long term do now I'm curious when you when you're trying to make that decision um do you have certain metrics like you know I need X dollar per month if I'm going to keep it as a as a as a rental or you know x% Roi if I'm going to use this as a flip like are there benchmarks that you're using yeah so kind of loose I'm not too too stuck on either or but for rental property I'm trying to get 12% cash on cash return right so whatever money I put in on the down payment any repairs I need to recoup at least 12% of that annually right just to make it make sense long term based on where I could put my money in the stock market or some other commodity right I think stocks are going at what seven to 8% so it's got to be comparable but to the high side for a flip I'm looking to get at least 30% return on investment so all the money that I'm putting into that deal based on what it'll you know sell at I need to be able to make at least 30 % of my money to make that deal make sense for my time right and I can go either way on the deal just depending on how I see the market fluctuating and where I see rates going and where I see BU activity yet um but for me those are kind of the two metrics 30% on the flip and then 12% on a a long-term rental one follow question to that Dar know do you do you feel that given where interest rates are today and you know on a rental property maybe you're between High sixes low sevens today maybe a little bit higher depending on on what kind of debt you're using do you feel that these somewhat more elevated rates are you still finding deals that that will allow you to get like a 12% kind of double digit return on a long-term inel it's it's hard the one I I closed as a burr in Hagerstown maybe like four or five months ago that one is I think N9 or 8% but the reason that I took that deal was because it was a Fix and Flip cosmetic job bought it for 130 put 30k into it it appraised for like 235 so I was able to take out all my Capital plus the Investor's interest and still be at where the market rent was right so my mortgage on that property was what right now it's 1650 and I'm renting it out for $1850 so I'm not really cash flowing in a sense right like one of the thing I want to highlight to the rookies is like your cash flow is not yours so that $200 bump that I'm getting in monthly income from that property that's staying in the property like that that's rainy day money so for me I'm able to kind of find deals that maybe aren't panning out to be that full 12% but you can definitely find them depending on how steep you buy or how you buy and how much the rehab is for sure so you hit on something Darnell that that kind of leades me into my next question but like depends on how you find them so what strategies are you using to to find these deals are you are you going on Market do you have a wholesaler that you're working with are you going direct to seller what strategies have you used that have worked well for you so far I'm going all of them I'm not picky right whatever whatever can bring me of the best deal possible that makes sense for me my lenders that's what I'm going with I've used wholesalers twice I've used an agent on my last flip and Fred um I use word of mouth on the bur that I'm living in now like whenever the deal can make sense numbers wise that's the deal that I'm going to underwrite the hardest and that's what I'm going to take right I like I think a lot of people they shy against going to wholesalers because oh I don't want somebody to get an additional $20,000 off of me that's crazy I can find my own deal it might be but if you can all win in the end of the day like who cares if they make 20K on on your deal right you win your investors win they win it's what Real estate's about it's a people business so if they can do their job and make 20,000 thank you sir thank you ma'am you gave me a great deal for 20K I appreciate you so I'm I'm really not opposed to other but I'm getting deals through every single way Darnell how are you handling that deal flow as in you're getting stuff from Agents maybe you're even spending your own time on Zillow um you're getting stuff from wholesalers how you know if you get an email here's a property are you stopping everything and analyzing it or do you have some kind of system or process to kind of handle that deal flow as different people send you deals that they're seeing yeah for me it's um very slow paced so every time I've had a an active project like under rehab um I'm not looking at any new deals only because I'm the type of person where I don't want to spread myself too thin and I am in a sense a oneman operation from my business entity standpoint I don't have vas I don't have a staff working with me right it's really just me doing the in andout Daily numbers on these deals in in management so as deals come in they kind of sit in my inbox and if I have like a downtime I'll kind of Click through really quick and look at the spreads and see oh that looks cool let me see what that's like but I'm probably not going to end up buying like three and four deals at a time right now just because one my Capital wouldn't stretch that forth my lenders but also I I'm not at the point to where I'm scaling my business to Outsource roles to where somebody can be a PM at this job somebody can be a PM at this job somebody can run numbers on these two jobs right so me being a oneman team right now is really allowing me to kind of just be slower in the process but I am looking at deals pretty much daily if that answers your question and you know what Darnell that's actually a superpower to have the patience to do that I mean that is actually really hard to do is to do one at a time and not feel like you should be doing more because everybody else is doing more you're you know or just getting excited I I have the adrenaline rush now I need to find another deal like that takes really really strategic patience and that is a superpower to know that this is what's working for you and being able to maintain that and go with that so uh yeah that's definitely a superpower I want to highlight for you I had to kind of tell myself to do that and like sit down a little bit I was finding myself like getting this frenzy and fomo of like deal deal deal deal deal squirrel and like it's unhealthy for you because if you're not at that position to actively attain those deals and operate them at a successful rate then you're going to put yourself in a bad position so I had to really tell myself like Darnell you've got a deal going on right now focus on this give this deal your entire attention when this is done a next deal will come to you you have to understand that and believe that that there's millions of properties for sale every day so I'm not I don't want to be in a Chase for properties because I think that's when you can get in a lot of troubles when you start chasing you know the the money and in the the accolades and whatever comes with it so spot on and just like having the time to focus on that one deal you're probably making a better profit on it because you are being diligent and that Focus on that one property instead of spreading yourself too thin um you know we've had guests on the podcast that say you know what we're not buying more properties right now we're stabilizing the ones we have you know especially short-term rentals as we're adding Tony adding a pool you know adding a SAA a hot tub all these different things to just add more Revenue to the thing the property they already have and like focusing on that and the operations of and I think that's such a hard thing to do especially with social media and you see everybody's buying oh you know and all these things going on the shiny object syndrome but um that is a real superpower having that patience to really focus on one thing and what you're doing and I'm sure there's times during the rehab where it's kind of like almost stagnant and boring a little bit as to like okay you know I do could have time to actually look at another deal but yeah as you bring up a really good point and it honestly makes me think of like some of the investors that I look up to are entrepreneurs that I look up to who have told me that at certain points they have to scale back their business because they realized they had scaled so big that even though the revenue was more the actual money in their pocket at the end of the day was less because they had so much infrastructure to support this business that they built right so it's like I feel like when you can scale a little bit more slowly and really only add in people as you actually need them then it becomes easier to to make sure that not only you're protecting the top line but the bottom line as well right um but don't know something you mentioned earlier that I just want to Circle back to really quickly was that I think you said you picked up one of these properties for like $130,000 or something like that right so um I guess what what price points are you targeting what does your underwriting process look like like how are you identifying what's a good deal and what's not a good deal yeah so um price points are really open in the DMV Market in DC right for an example a three bed two bath Ro home in DC could go for half a million dollars but a three bed two bath single family house up North Maryland can go for $136,000 right so those it's a a vast difference in the matter of an hour and a half drive going up 270 Highway um and so for me again it comes down to the numbers if I can understand that I can get really a really steep deal in DC but still be able to cash flow very strongly on that 12% Mark or get a good 30% on a flip I'm going to take it in DC and I'm going to try to raise more privit capital and maybe bring in some hard money because I know that's still a great deal overall whereas in hagertown or Frederick I can purchase these properties all cash because I have that amount of money in a business bank account that I can use so it really depends on the market between DC Maryland Virginia even you know up in Baltimore can kind of be cheaper side depending on where you are so it depends on what part of the DMV I'm in that my underwriting would change um that my price points would change sorry but the underwriting is pretty much stagnant across the board right so fix a flip again I'm looking at purchase price um looking at rehab cost looking at paying commissions up front at adding all those factors in and then on the resale what's the estimated arv um what's the estimated commissions and taxes and then looking at the net profit there and on the rental it's the same exact thing right what's the monthly mortgage going to be at maybe you know worst case half a point higher on the mortgage right what are the repairs needed what are the possible cap xes right and building that in and trying to back check to figure out what my net uh monthly income would be on that property as well so really just depends on where I'm at in the market but there's such a vast difference Tony I I I think that's one of the bigger challenges to. of going into some of these bigger cities where it's like you have these massive swings and and prices right it's like you kind of where're I'm at in SoCal like you're not going to see a half a million dollar property and $100,000 property anywhere near each other right so we know that we're kind of playing within the same box but some of these other markets there are those big swings and I think that's where maybe some of the the rookie investors who are trying to go out of state they can kind of maybe miss the mark sometimes because they go into some of these markets and like man I can pick up a house for $100,000 but if you don't know that area you could end up buying in maybe a place that's not really supportive of your investment goals um Ash I don't know do do you see swings like that in purchase prices where you're at or is it all pretty consistent it's all pretty consistent I would say like as far as like swing maybe like you know it's such on a smaller scale like you're not going to in the country you'll see you know a million dollar house and then a $100,000 house just because it's in in the rural area where you know people have land and they either have a small house they have a mediumsized house they have a big house but when you get into the city the price is pretty consistent her neighborhood I would say that um even if you you know you know the different streets you want to be in and stuff that you know there is a little bit of difference but not huge and drastic like that at all but I do want to ask Darnell about your rehabs when you're going and looking at a project are you doing like full gut rehabs cosmetic what's your ideal type of rehab I like the worst of the worst houses I like to walk through the houses and like have to cover my to hold your nose yeah don't open the fridge don't open the fridge don't open the toilets don't open the toilet yeah I like the full gut jobs mainly because it allows you to one be more competitive in your purchase price right your offers things like that but also I'm kind of like a Visionary in a sense so I like to see like the worst of the worst imagine going through a demo process getting it up to the Immaculate HGTV finishes and just looking back four or five months ago and seeing that transition that change that property went through that I can give and sell to a deserving family right to me that's so gratifying I'm not going to turn my shoulder on a cosmetic job if it'll make me in my business of money obviously but I like the the projects that are the worst of the worst you got to you know do structural work finish work everything in between only because again it's just it's the most fulfilling to me but I know some people they don't want to walk through a house that smells like cat pea necessarily but get it so when you're doing these rehabs are you using the private money to fund the contractors and the material cost too or you using different strategies for that yeah so private capital for me again is the the seed it's the start money for me and if I need more Capital um and I can't raise it myself I'm going to hard money um but initially the private Capital would be like my down payment closing costs holding cost and anything I can use on the back end for the rehab I'll use private capital I use the hard money to actually purchase the property with remaining 85 to 80% right and if I need more money for the rehab I'll use hard money but ideally it's going to be um strictly just for purchasing is the hard money and then if I can use private to get into the deal and reab I'll use private because usually those are your costs that will fluctuate the most and so now what I'm actually doing is I'm focused on building business credit so one of the things that I've done after my last flip was I opened up a Home Depot credit card and I opened up a Flor The Core Credit Card why because that's where I'm going to get most of my materials moving forward so I have a credit line with Home Depot now that's allowing me on the flip that I have in Frederick to go to Home Depot and buy up to I think it's like $23,000 worth of material on a credit card that I'm paying 0% interest for for 12 years that's OPM in a different stance but it's corporate OPM if you think about it right but I'm still paying 0% on that money and then within 12 months I'll be well out of that flip so I'll pay that card off in full right it's not going to crush my credit score because it's tied to my business but I'm also going to be replenishing that card fully so if it does hurt my credit at any point it'll be rebounded at a later date so it's understanding right like how to collateralize and find different ways of purchasing collateralizing and and rehabbing a property so I'm using OPM to get into the deal strong using hard money to purchase the remainder of the deal using again OPM to rehab the deal and then using um business line of credit to also help me purchase materials and finishes that I need also so it's kind of it's a mix of of all it's kind of some sort of Arbitrage I'll say yeah darell mine and Tony's eyes got real big because you said 12 years instead of 12 months I know it is 12 months okay 12 months yeah I was going to say yeah our got real big and then you then you said again I paid that paid off until months and my rehabs are done but um yeah I've done that too is open up the zero% interest credit card for rehab and I just give it to my contractor and you know we load it up and then when we refinance the property the credit card is paid off just like any other debt on the property and you know having that safety knot of making sure that credit card payment doesn't you know start acre interest that you're getting one that's 12 months or 18 months so that you have enough time to make sure you paid it off and i' just like to give a disclaimer if you are not good with credit cards you have a lot of other credit card debt probably don't do this strategy and honestly probably you won't get approved anyways for a 0% interest credit card if you do have bad credit and don't have a good history with credit card but just a full disclaimer there make sure you can be responsible and you're not stuck with $20,000 and material costs and 25% interest you end up having to pay on it because you can't pay it off I think um one more thing I would add to that Ashley is you get approved for that sort of financing the same way you would for a personal credit card the banks do try to do their best to protect themselves and protect you as a lender and borrower as a borrower sorry so again if you can't afford that type of you know stress definitely don't do it but there's a lot of benefits that come to it because once you pay those cards off in full your next strategy should be hey I'm gonna hit the bank up again excuse me Mr Banker Mrs Banker can I get an increase on my line of credit so the next flip I have $50,000 worth of line of credit that I can use for the rehab moving forward so it's just a way to just be strategic but you know you hit it spot on be responsible with it last question I I'll ask for you right now before we we wrap things up is I'm just curious are there are there any safeguards that you're using when you're using the hard money while doing the rehabs like have you found anything that works kind of well for you navigating that relationship yeah for sure so I actually found my current hard money lender that I'm using through social media right like he found me by me posting videos about my previous flips he's like yo like I'm A lender like let's touch base let's get on the call let's figure out how we can help you and I was like let's do it so me posting on social media allowed me to find this current lender but I think continually going back to him as my lender is going to help me grow my business because it's all relationships so he's going to see that I have a slam dunk deal that will make his company money I'm G to see that he trusts me as a borrower and I can you know close on a deal that actually makes sense and make myself some money so when I continually go back to him and repen replenish those lines of credit and that loan it'll just make the relationship strong because we each trust each other we know that we can both do our job to the highest extent so going back to the same lender over and over and using that relationship is going to be key for me and really anybody that uses bank financing moving forward so one of the ways that um hard money kind of protects you um is that they require you to give them an itemized scope of work right they're in it for you to win as the investor but they're ultimately in it for them so they can make their money back for their company right like if your deal doesn't make sense they're not going to invest with you which is why they're making sure that they have their systems in place to make sure that they can win as well so with all the hard money companies that I've worked with in the past they've asked for the itemized scope of work right they've asked to see the bid from the actual contractor doing the work so the the automized scope of ver is going to literally tell you and spell out all right demo is going to cost five grand reframing and finishing off a bathroom's going to cost Seven Grand right laying new LBP flooring throughout is going to cost three grand so they want to see those type of concrete numbers so that they know exactly where their money is going and to make sure that they do actually make sense and you're not telling them some fluff that they've been through and see that a kitchen remodel is going to cost you $1,000 right they're going to automatically raise a red flag and start asking more questions so the hard money compan is really there to protect you as a lender um and although it's a lot of documentation and talking back and forth and conversations it's ultimately for your best interest as an investor um and so that's kind of how they protect themselves and you on the front end but also throughout the deal right I've dealt with hard money companies that will require you to have a draw schedule right the draw schedule being how many times they're going to give you money to draw out of escro for the the rehab budget so the two hard money companies that I used early on they required a four draw schedule meaning I would have to front the first initial payment right I want to say the first demo that I did was like six grand so I fronted the first six grand they wanted to see I had skin in the game I was committed to the property I was committed to the deal so I fronted that six grand and as soon as they saw the demo was done they brought an inspector out they charged me a free to being the inspector out there to walk through the property and see that the demo was done and then they replenished my six grand but then they also gave me that second draw of money which is going to be for the structural framing of the property right so that was draw two once the structural framing is done then they bring in the inspector again to say hey Darnell we see that the structural framing is done on the property what's the next step that you need on this scope of work you have the third draw being for $30,000 for putting in you know drywall and insulation and and you know rough and plumbing things like that then they'll front the third draw once they come back and you say hey Mr lender I'm done with the third draw we now need the four fourth and final draw they'll come back and bring the inspector again and they'll see that all right Darnell you finished off you know all the stuff behind the walls rough and plumbing is good draw walls up paint's done here's your for throw to pay your contractors out so that's really how the the contractors will protect you ultimately as the the borrower because they got to protect themselves as well but in that process they're just making sure that you're doing your due diligence and you're an active investor in your property not just letting the contractors run wild with their money right so that's kind of how they work and before everyone starts thinking this is so nice of the lender like wow what customer service above and beyond they are charging you for each of those site visits just you know for all of the inspectors work but Darnell thank you so much for joining us this was a phenomenal episode on private money a little bit of hard money we really appreciate you taking the time to come on here and to share your experience we're going to put your information into the show notes so people can learn more about you and reach out to you I'm Ashley and he Tony thank you guys so much for joining us on this week's real estate rookie and we'll see you on the next episode try so hard cover up your [Music] games change [Music] you
