Raising Private Capital With Matt Faircloth

the most important skill they should learn in getting into real estate or really anything even acquiring businesses yeah is Raising Capital if you don't know how to raise Capital you will always be limited to your own resources you just don't know how to look for money in your own network and it is there this will happen I decided I'm gonna get into real estate so I'm gonna go join a country club because I assume that's the only place that people have money I've never got one person there to invest in anything I do let's say I raise some money what are some things I can do with somebody else's money how do I get people to tell me whether they have money to invest or not yeah hey guys welcome to the YouTube channel I've got one of my favorite people on the planet especially in real estate here with me Matt Faircloth one of my heroes somebody I look up to and have looked up to for a very very long time I believe he's written the only book you should read on raising private capital I talk about this book all the time this is the old version we're going to be talking about the new version today and we're also going to be talking about what Matt Faircloth focuses on how he got into this but um Matt before we get started I tell everybody the most important skill they should learn in getting into real estate or really anything even in wiring businesses yeah is Raising Capital that's right well and the reason for that is first of all thank you for having me here um if you don't know how to raise Capital right you will always be limited to your own resources right you'll be you'll be limited to your own bank ability uh Your Own Credit you'll be limited to how much money you have in the bank or how much money you can scrape together at a under your own name once you know how to raise Capital you'll be able you can write whatever check you want to write uh by soliciting it from your own network even borrowing other people's bank ability right um once you know how to do that the world really opens up on the on the size deals you can do yeah what's interesting about that too is that you don't have to be the person that finds the deals if you are the person that knows how to raise the money that's right yeah you kind of get the keys to the kingdom I mean you know we raise a lot of capital as as uh as does Pace's organization so people bring deals to both our companies because they know that we know how to put uh Capital together and it's almost like like a secret but it's not a secret right um and it's not like pace and I uh were uh you both grew up in country clubs right you know went to Ivy League schools and you know country clubs and that's how we know people with money um and that you know people with money as well whether you think you do or not and that's probably the biggest uh thing I hear Pace when I talk to students and and folks that I meet like I don't know anybody with money right uh yeah what right well okay two things if you don't know people with money there's there's two truths right and one only one what's true number one if none of your friends nobody in your network has any money that they should invest with you you have a network problem you need to go get new friends right and get in different Circles of people because you become you surround yourself with right right so everybody around you is broke and really cannot invest in your deal which I don't think is true but if that is true then go get new friends you're gonna just gonna become broke like that right but what I believe is actually the second truth which is that you just don't know how to look for money in your own network and it is there there is literally trillions of dollars sitting around us that doesn't know where to go that's looking for a home and doesn't realize that it can get put into into things like what pace and I do into real estate Ventures right they just kind of know where to look so I um this is funny because before I found your book again I tell people I was interviewed on Bigger Pockets a year and a half ago and they asked me what's your favorite book and I said your book this is before you and I became friends and um I have always looked up to that book it's up in my office it's on it's one of the very few books on my shelf and this is what happened I decided I'm going to get into real estate so I'm going to go join a country club because I assume that's the only place that people have money hideko I've been I've I've been in this country club now 10 years okay I've never got one person there to invest in anything I do but you're really good at golf now I'm pretty good at golf yeah um so I what's funny is I joined the Country Club Thinking okay well I need to go where the money is right because I have the same problem that you're talking about which is I thought nobody in my current Rolodex my current family friends circled influence nobody had money yeah because nobody was talking about it that's right and I also wasn't coached along with the right questions to ask so I pick up your book I read it I had I remember in chapter six I had an epiphany of like I shouldn't have joined this country club I went through through all this effort do I throw rocks at country clubs in the book oh sorry it just I wasn't the right mechanism for me but by the time I got to chapter six and I started realizing that what I should have been doing you are directly responsible for leaning me towards the appropriate path that has helped us raise over 100 million bucks so thank you for the proud of me it's what's incredible is that it comes from a book that you sell that you change my life through that book and not only did you change my life but you changed all the people's lives that I've bought deals with yeah and all my employees that have been done profit share with me on those deals all because of again the book the old version the old version of this book so um you wrote when did you write this book originally the 2018 okay it's 2018. I picked this I pick I must have picked this book up the second it came out and I it changed my life forever I tell everybody about it I've always told people about it and then here we are come full circle you now have the new version of the book coming out yeah and I want to we're not just here just just happened to be chatting with Pace about this I'm super grateful to like throw some gratitude over at PACE I I'm lucky enough that pace has written the forward to this book that that that you believe in in what in the technology have put forth in this enough to put your own name and your own brand on this thing as an endorsement and I cannot thank you enough in my life so I I was very when they asked me I was like are you joking me you're gonna let me be a part of a book that changed my life so thank you first and foremost but raising capital I think the words raising Capital are daunting they're scary and for somebody just starting out they don't even know what raising Capital means yeah so very basic yeah if I'm watching this for the first time I've never raised money before one what is raising money yep and two what let's say I raise some money what are some things I can do with somebody else's money raising Capital simply just approaching people in your in your own network and explaining how you do what you do so you got to be a teacher number first and foremost those that are really great Capital raisers are great teachers because the reason why these folks don't already invest in real estate or don't have other Ventures going because they don't understand yeah I can't tell you how many people tell me I didn't know that was legal but yeah I would get financial planners you know are out there telling these books oh you can't put your retirement account anything else aside from the stock market that's it right all these things are not true uh and it's our job as capital raisers to debunk a lot of the myths around these types of things and and uh and that so it's about showing people in your network another way to build their wealth and help you build your business alongside it and that could be by them coming into a debt position AKA loading you money you know or coming into an equity position uh pacing I both do both of those in our businesses and you guys can do both as well if you're able to explain the difference between debt and equity and how your investors protected and how their how their precious money is protected and into your deals okay so last night I'm on a zoom with my my students and I had a student group students came in married couple and they go Pace we just sold our dry cleaning business we now have a bunch of money that we can start investing in real estate and I know here's what I would rather you do step one go get Matt faircloth's book yeah I want you to read it because what you're going to realize is that you should leave your money to the sideline yeah and you should go and learn the valuable skill of raising Capital yeah and they go but we have our own money why should we go raise Capital so if even if somebody does have their own money and they have the ability to go raise Capital what does Raising Capital do for somebody in in real estate well I mean unless unless I mean great God bless they sold their their business and everything like that so probably sitting on a reasonable Capital put in but let's say they're playing with a million bucks right um the size of deal that they could do uh or maybe if I were them I would do multiple deals maybe I should buy one thing or they're just getting into real estate the size of opportunity they could do would be this big right they are limited to what is in their bank account but the exposure they get the exposure meaning the knowledge the know-how the network the everything that they get uh for themselves is this much bigger right if they go and raise some Capital maybe even if I was them in that scenario I would go to an investor and say Hey I want you to match me I'll go dollar for dollar for whatever yeah so I've got my own skin I'll go dollar into the deal if you go dollar into the deal right and then they can do maybe double or maybe triple maybe maybe you go to a few investors and say I'll go dollar for dollar so for every dollar you put in I'll put in a dollar as well you if you've got your own capitals a lot of times investors feel good knowing that your Skin's in the game it doesn't really matter per se but uh but that's that's maybe a way that I would arrange that because it could just take down a larger project or a portfolio of order so interesting you know the more I learned and more I read your book I've probably read the book four or five times because I think a really great book is a book you're not quite ready for yeah and I wasn't ready for the entire book I was ready for like four or five chapters and I had to put some into action and then I came back and I reread the book and I go okay now now the some of this stuff now makes sense that I've applied it it makes sense at a higher level yeah the whole book made us made sense the whole book changed my life when I first read it but when I applied it and they came back and reread it I was like oh my gosh what I'm getting at is it's interesting how many different ways you can structure a deal it's not just one thing like people will ask me now thank you based on what I've learned from you people will ask me questions like Pace how do you structure your deals with your private money lenders how so how do you answer that question well I've even went further people have been like hey does the SEC tell us how we have to do Equity splits right like the SEC says yeah like you know it's like it's written somewhere on the scc's walls of their they that you know you have to give your investors a 70 30 split or you have to pay a six percent preferred return right no that's what's beautiful about raising Capital it can be whatever you want uh and that's what's great and that maybe why pace and I are relied on this is the opportunity the blank canvas you get with creative financing with buying stuff subject too with uh the arrangements you have with your investors is open for discussion it is whatever you want to negotiate and then you put those things in writing and it can be whatever you want uh we've done deals where we paid investors a flat rate of return just a an intro just an interest loan and we've also done deals we've built a string of houses in Philadelphia Pace where the guy made a percent on his money and then he had a percent of the profit on the upside at JV deal right you just listed out three in in less than 30 seconds you listed out three different structures just yeah would you say that you've probably structured a deal a hundred different ways yeah with for every deal that I've done there's been a specific structure to that deal it's very rare to see the exact same structure on any other deal yeah is that right right it is because people and and my students have come to me and said hey Matt can I get a copy of your loan docs I'm like I can but it's not worth anything to you because the loan structure you're going to negotiate with your investor if you go investor first and if you talk to them what they want what do you want you want monthly payments you want upside what kind of rate of return is Meaningful to you uh are we getting the money from an IRA are we getting the money out of cash is it coming out of real estate all those things change the loan docs right it's you know what's funny is if you said this to me eight or nine years ago I would not have understood how every one of those little demographics would have differed based on what they want right so like for example let's say I am a I'm a school teacher I've got fifty thousand dollars and I'm that person probably wants a monthly check yep okay versus somebody who's worth 20 million dollars is probably okay deferring their payment every month until you're done with your project because they don't want to be bothered with the monthly payment they want the upside and I'll tell you what else another another Factor right let's say that somebody watching here has a IRA account right an IRA is a former 401K just so you guys know so if somebody has a day job you know uh and they leave that job the 401K retirement account that they have is now an IRA automatically they can roll it over to be a self-directed IRA which then can get invested in our deals right the the thing is the IRA has its own EIN number and it's it's like money on the shelf that you can't touch until you retire currently 59.5 half I'm sure they'll increase it by the time you want to hit retirement age right but they can't touch that money and so what's interesting about that is if they're putting that Ira into one of our deals right and paste those that deal with this person starts sending them monthly payment what he's done is created a problem for them right if they loan him a hundred grand and he says okay I'm going to do 12 just because easy math 12 interest right so a thousand dollars a month then they they now have this thousand dollars in their IRA account what am I going to do with that right I have to reinvest it it's what they call dead money it's just sitting there and it's you know he's sending them a thousand a month they don't need and they can't touch they can't enjoy the school teacher that has 50 000 set aside right that school teacher he or she can start taking that money and start enjoying it maybe they can go and take the 50k they get paceri and go and buy themselves a new car yeah on a lease payment right maybe I can help them create a new lifestyle through the cash flow but the IRA account on the other hand is whether I structure those is I don't do monthly payments on an IRA because you don't need it right right which you wanted the great great game like way to bring this up yeah if you if somebody invests with you through their self-directed 100 Grand yeah and the structure is 12 Nick you said so I get a thousand dollars a month yeah would and they go I don't want a payment because it's a nuisance I just want the thousand dollars to stay in the deal that's right does does that thousand dollars compound you can yes it depends on the vehicle so if you are in a multi-family apartment building asset then you can't compound Returns on a multi-family asset because it's only you only raise like you raise 10 million bucks to buy a multi-family apartment building it's not like you're adding new apartments to the multi-family it's 100 units we're going to build more units as we go so there's no place to go with the additional money you can't buy any more right of it it's it's only this big now if you're doing a fund or if you're doing a hard money loan Arrangement like like we do so uh a lot of times we'll do hard money and so they somebody loans me 100 gram I've got the money for uh six months September 12 interest again for easy math so six months I now give them 106 when the loan's over right so they now have 106 they can put back into my deal there you go right so they start recycling those interest returns back in so you the the beauty of private capital and the beauty of Ira accounts is you can compound over and over again there's a concept called the rule of 72 guys look this up online it is a phenomenal rule I talk about people corrected me because in the book I say it was it was from Einstein I believe it was people said I didn't say rule 72 it was the eighth one of the world compounding interest whoever said it it's a great vehicle and it goes like this if you take the number 72 and you divide it by the interest rate you pay on an annually compounding return loan that number you come up with is how quick the money will double okay so let's say 72 divided by 12 that comes out that comes out the number six okay I'm I'm a dork and good with numbers really fast right so it's a recovering engineer so that comes up the number six if Pace gives me 100 grand out of his IRA account and I compound that I compound that loan annually in six years you will have 200 Grand right paint this picture to all the folks in your network all you guys know people that used to work at this job and now hopefully they got another job over here and the job the IRA the retirement account they had at the job they used to work at is now right for the pick-in for you to put into your real estate deals while they work at their new job and you can show them hey I can help you double your money in six years or five years or ten years however long you want to make the arrangement for which most people in their retirement account or even they're self-directed if they've rolled into a self-directed most people are not even making any money right the people that are letting a financial advisor manage their money they're actually slipping backwards are is that not kind of the the standard it's the way to look at it because well you don't see it you don't see the backwards slip right so you don't see like oh my my account with Vanguard or whatever it is uh it said you know I kind of had a bad year or stayed stagnant or whatever and that's because it is growing but it's growing for your financial planner and there's so many fees that aren't disclosed in those things right yeah I mean pace and I are required to disclose all the fees for the real estate deals that we do and it's just good transparency right so for you guys we could we uh demand that you guys disclose all your fees to your investors unlike Vanguard who doesn't you know and that so the as the account goes up by 10 the financial planner and Vanguard themselves take the majority that the investors left thinking the money's in good hands but it's really going back to the financial planners those entities right it's better to have transparency and have your money growing into a thing that is six and and Bricks as collateral and it's perhaps something that they can drive by because maybe this investor is someone that lives in your local market and you can they can drive by it and know that their money is making the world a better place in a Fix and Flip or whatever it is you're doing yeah it's interesting that also goes into a marketing uh strategy for getting more private money lenders or investors or whatever private Capital yeah is talking having your investors talk about deals so for example something I took from the book you know talking about podcasts and social medias and part of the book like how to go out and get a brand so people understand and recognize where you're at some of that is now common sense to me now but at the time I was like ah I didn't think of creating a podcast to raise capital one thing that is great is that I will bring now my private money lenders on my podcast yeah and go hey how cool was it to go visit that property that you loaned me money on and they go oh my gosh it was so great I love being on the property I felt like I was part of the whole entire thing because you were and guess what they're doing they're now promoting and helping me raise capital on my behalf without me having to raise Capital yeah and I think that like it from a holistic Good Feeling standpoint they can look and see that and I'm not saying that if they have money in a mutual fund that it's not helping create jobs but them walking around and seeing the property that pace is renovating or the apartment building that I'm buying or whatever it may be is providing a juice to the economy because they can look and see it and touch it and see it either in the YouTube video that they shoot yeah or or that and it's it goes back to them knowing that their money's doing good that on my website right there says transforming lives through real estate because I believe that real estate and what we do and in our Ventures to raising Capital really helps make things a little bit better by me helping somebody achieve their financial goals she's just an alternate nothing's wrong with Wall Street but I want to give an alternative to that just in case they want to have their chips in a few different buckets and they want to have their money do good their money our money the money we raise from our investors per pace and I both provides jobs to people right we just did this we just did this breakdown a couple weeks ago we found out that the average real estate transaction pays 59 human beings right I pray appraisals a real estate agent real estate agent broker we go really deep and we figure out who's repairing the property he's getting up and going the contract 59 people get paid on a real estate transaction think about that guys so get out and buy a house give some people some jobs that's exactly it okay so I'm new I've never raised money before I think people in my I I I believe what you're saying is that there's two truths either a I I have no I have a bad Network and I got to upgrade that or B I have people in my network that have money so I'm going to choose to believe B and in this situation what advice what are some good steps for somebody starting out to go test the waters and see if people they have in their Network have money how do I get people to tell me whether they have money to invest or not yeah you may make your money list right uh I already give you gave you guys the equation for a self-directed IRA so hopefully you got your pens moving on your piece of paper writing down everybody you know in your network look on your Facebook feed look at your cell phone for people that used to work at job a and now work at job a they can be retired it's okay okay as long as you're not some sort of like a public service School teachers a lot of those folks have pensions right there's nothing wrong with those kind of jobs it's just that if they have a pension it's hard to put a pension involved into real estate transactions but if they had a job for a for a public company odds are they had some sort of retirement account right so that's number one number two do you know 30 of America owns their primary residence free and clear thirty percent that's crazy yeah uh and so because of that and a lot of baby boomer Generations do and even baby boomer Generations like might like my mother and father walk around with like a badge of honor we've paid our house off oh yeah you know we have no monthly payments I remember the community back in the day where they would encourage people on how to accelerate their mortgage make double payments and stuff and they had this thing where people would go and burn their mortgage statements like this big silver bowl and stuff like that and I was like oh congratulations now you've like opened up the keys to the kingdom now you can take that free and clear home that you have and leverage that up and Achieve Financial Freedom right right but they don't realize that they think that they've crossed the finish line by paying their house off yeah right free and clear real estate is a phenomenal vehicle for you guys to put to work in your business um by encouraging the person with that free and clear recruiting real estate to go and maybe put a home equity line of credit on it maybe to refinance it with a mortgage and they'll be like what I just paid that off no don't go take the money and go Hawaii with it take the money and put it into a real estate opportunity that produces cash flow now this is what I said before about the mortgage documents have to be completely different right for real estate investment in your business in your business you need to make them monthly payments because they need those monthly payments to service the debt that they have right right yeah you don't want you're kind of setting them up for failure if you're costing them in monthly payment so they can be in your deal so don't put them into a syndication don't put them anything else borrow the money at a flat rate of return with a flat check going why wouldn't I put them into it's obvious for you and I but why would I put not not put them in a syndication because people watch wait syndications there's a pref a six or six seven percent pref okay going back to debt and Equity right debt is an obligation to make a specific monthly payment over a period of time right I'll say it again to make sure you guys caught that debt is a is a obligation to make a specific monthly payment over a period of time or defer that monthly payment until the very end right but it's whatever the number is seven percent eight percent nine percent right Equity is an ownership of upset it's direct ownership of the asset it is connection to the UPS of the property and also maybe the downs and a lot of times in multi-family these days a lot of multi-families that we buy might not produce very much money at all the first year or two worth of ownership and so although you might tell an investor that you want to produce a six seven percent rate of return you can't guarantee that you're going to be able to make that monthly payment you were setting them up for failure if that money's costing them five six percent on their end and you're quoting you're going to pay them eight and they're going to make a nice healthy little yield spread in between except for when you can't yeah except for when the tenants don't pay the rent yep you know except for when things are down if it's debt you figure it out you got to go get that eight percent from some of you from somewhere out of your own pocket or whatever to keep making them monthly payment or you're in default right debt is what you want with recurring monthly payments if they're if what's behind it is real estate debt so if I've got um one of the things I did through the book is you know going through and listing my basically my money list and I look through my my phone I remember doing this when I read the book I go through my phone I was like I have like five million dollars in here and I what I would do is I would look at names of people I go I know you got 20 grand I know you got five grand I know you got 10 grand I know you got 30 grand I know you got 50 Grand and I would go through and based on what I was learning in the book I would text people and say if I found a quality real estate investment that's great would you be open to so they're they don't even have to commit to me because I don't have a deal yet but I also learned in the book The Time to raise money for a deal is before you have the deal too many people are running around I mean you probably got phone calls from students I gotta close in two weeks and I need another million dollars somebody somebody texted me yesterday and they said I need 21 million dollars I I need to raise 21 million dollars in the next eight days right I said I sent him your Amazon link and I was like I've told you to read this book the time to raise money for a deal is before you have yeah I feel for people like that I'm not I'm not judging it is what it is and I sure hope and pray that they figure their way around it but at the end of the day guys please don't be that don't have that that's probably a hard lesson about to get learned they're probably going to lose EMD they're probably going to either have to negotiate a really expensive extension with the seller um or they may lose their their earnest money deposit or maybe somebody else's service but a good thing I think they're gonna stinks they're gonna lose some ego right their ego is going to get beat up a little bit I bet but they're going to get their EMD back which is which is going to be great because they have an inspection period on it and they're like oh my gosh we're not going to be able to raise 21 million dollars yeah they might lose a relationship with that broker that broker will never do business with them ever again sending them a deal that size okay but you also felt the pressure of oh my gosh I need 21 million dollars yeah and the vacancy of the relationships that you do you had not built yeah so now now you're gonna go forward and go actually looking for deals and raising Capital simultaneously yes your reputation is what you got guys you know um and so build your uh Money Network first as Pace just said it's exactly what you guys should be doing build your money list and send all those text messages hey if I produce the deal whatever and you'll find out real quick who your real interested investors are some may say yes you know I actually I don't have they pay me right this person probably has 30k you might find out they have like 230k okay that's just sitting there uh or the best conversation I've had is I only got like 25 Grand they get into a conversation with them well didn't you used to work at you know Wells Fargo and now you oh yeah yeah I've got that retirement account and that's got like 300 000 in it but I but I can't put that into real estate I didn't know I can't right and this is the biggest thing well I can't do anything with that that's just sitting there that's got to be in the stock market right so you'll you'll have plenty of those conversations don't always remember to ask folks what they have in their retirement accounts from from prior jobs some of them forget I do like oh yeah there is eighty thousand dollars sitting there they forget they've got like this and just sitting right right it must be like in their mind that it's not real money because they've never really had to touch it yes that's the thing it's not it's money they've never had to manage it's money they don't have to touch but you can make your investors in charge of the financial future and really better their lives because I can tell you vanguard's probably not going to double it up every couple of years like you can no I mean I I was talking to the gentleman at Horizon trust a guy that I send over for self-directed again a lot of this stuff I just learned from your book and he was talking about how the average investors is losing money in their retirement account because obviously even inflation if you're not making five to six percent a year minimum you're losing money in your retirement account yeah you said something like four trillion dollars is unused in people's retirement accounts that could be rolled over into self four trillion dollars I was like there's no way that's possible so what's even more interesting about that number which is true by the way uh about 96 percent of that money is in some sort of a Wall Street vehicle right doing very little right uh so there's trillions guys with a t like this trillions of dollars of money that's sitting there could that could legally be put into our real estate transactions four percent of that of that of those trillions is involved in anything else but a Wall Street right and that includes oil and gas uh you know gold Investments Commodities those kinds of things and real estate four percent well what if people like myself and pace and you can make that number five six or seven it unlocks literally billions with a B of money and what if we could put billions in the real estate industry and real Equity to help us create real change and employable and employ 59 people every time we do a house yeah for real so I what I learned from the book by the way guys um new version of the book is coming out on July what uh July 27th is what I saw on Amazon so July 27th guys should you pre-order you can pre-order on Bigger Pockets you can pre-order it on Amazon too it's one of the few books that I think every real estate investor no matter who what your avatar is in real estate whether you're a real estate agent all the way down to a transaction coordinator even transaction coordinators can benefit from reading this book because transaction coordinators deal with private money lenders creating notes and all these kind of things secondary their second lien positions and promissory notes and all that kind of stuff raising private capital is one of the books that every single person trying to get into real estate should read as one of their first books in real estate I encourage my investors to read it because I want them to get an idea of our mindset and the way that we look at things and I've had folks that read the book thinking they wanted to raise money and be like you know what actually I'm really inspired by what's possible you know I want to invest you know These Guys these folks have become like heavy in the eye quadrant of real estate investing you know and one more thing in the in the new version of the book there's a new chapter written by me as well it's a long chapters but it's a much thicker book now it's much larger it's like a good 15 larger yeah yeah because the last chapter is like 4 000 words because I had a lot to say so they have Bigger Pockets don't let me write one more chapter okay between writing this book five six years ago and this book is coming out now well I had to update everyone on uh it was funny when I wrote raising private Capital we had a major major setback happen you probably remember at the very end of the book now this had just happened and I still was dealing with the battle wounds from it um my wife and I had eight hundred thousand dollars 716 000 but who's counting uh a dollar stolen from us through a Ponzi scheme that was being run by a 1031 exchange intermediary okay so we had sold an 18 unit with a group of investors and us and we rolled it up into a 1031 exchange company and that money was supposed to go into 188 unit apartment building that we were buying down in North Carolina right that money was stolen and so in raising private Capital we'll ask chapter chapter nine I talk about Hey listen just so you know guys this business can punch back very very hard and that's all I got the gray hairs that's how I got the Battle Scars whatever it is but I stayed in the ring right and so I wanted folks to know and that's how I concluded the book like just so you guys know the key to success in this business is getting back in the ring when you take an uppercut right um but in chapter 10 I was able to update folks guess what we got it back you know yeah well we were the only ones that got taken by this guys he had uh he had at the time of the of all this mess uh he had absconded with 6.5 million of other people's money wow yeah just so many Bad actors The Audacity Of somebody thinking you're not going to get caught yeah you're right well some of the money went to bad stuff that somebody is stealing 6.5 million would do with it let's just say to keep it PG but he also was maybe stupid maybe smart enough he thought that this is what he was is going to do to get himself out he bought like 70 houses he bought several mobile home parks bought himself a million dollar home on the beach right and so by him doing that he then had assets that could then uh he liquidated yeah sold and get the money back so we assembled all the other people that were involved in the 6.5 million now we were number three on the list there was a number one person that was over a million number two and then we were we were third place at 716 000. wow then everybody else down the list so we assembled all these folks and hired a lawyer and did ourselves a class action suit um and after years of uh going back and forth with court uh and and you know he folded immediately wife left him going to prison you know that was part of the negotiation because we got almost all the money back and so he got he got away he air quote got away with this whole thing amazing because of uh right I know and he's you know doing his thing so this story is in the new book that story's in the new book and the biggest thing here guys that I talk about in the new book is what I've learned how to do in the years since I've wrote racing it's been five years since I wrote the book we've learned how to go next level and to go more professional and to like become there's a book called turning pro uh Stephen R pressfield I've not read that fantastic book um and it's really about like going from being an amateur into a pro right um and in raising in the next version of raising private capital I talk about what it is like to just quite poking at this business with a stick and and what it is to build to build a real corporate Empire not that you know you want to have a full-time job but to do this thing to quit shooting real estate like it's a hobby and to start running real estate like it's a full-fledged business which we what's that's what we've learned to do over the last five years so we give a lot of tools and Concepts that we think folks need to do if you guys want to learn how to raise capital on a larger level or just operate you know in a more sustainable professional fashion I'm not saying getting a scenario where you're working 60 70 hours a week I'm not trying to create more work for you guys to do I'm trying to teach you guys in the new version of raising private Capital how to do this in a more sustainable you know help more people's lives create more create more goodness for when people help more investors do more of it on a larger scale and also live life on your own terms here's a couple of weird questions for you bring it I wonder if you guys have implemented any sort of AI into your raising Capital meaning maybe you guys have a list your investor relation department has a list of investors have you guys implemented any sort of like constant communication with them that's automatic drip of hey we don't have we don't currently have a deal right now but here's what's going on with the the past deals or is there any AI that you've been able to implement yeah so we do the newsletter and email drips and hey this is how it's going and everything like that and it's tough to find deals these days so we just stay in front of our investors hey that's what we're up to um AI we do use AI I use AI on a lot of our social media because I found that AI can write things better for SEO optimization than you or I could you and I are kind of just guessing on like all other writing stuff up well a a you know AI knows how to you know what SEO optimization like what the best way to optimize a phrase is or a sentence or a video description or something like that so we use AI quite a bit on the social media side I've thought about doing the AI email stuff to write send Communications to people using AI we are using AI to research markets as well okay so uh I was with one of our students and um he wanted us to look at Fort Wayne Indiana right I knew nothing about foreign Fort Wayne Indiana so I wanted to chat GPT and I said why is Fort Wayne Indiana a great place to invest and it went and told me all these different things and I read all of it and you know what I did why is Fort Wayne Indiana a bad place then oh real estate and so I put those two next to each other and I said okay let's compare notes as to what AI has to say as to why this Market is good you know and it was it was really interesting conversation that we had with chat GPT and we you know can you elaborate on that or tell me more about the industries coming into Fort Wayne Indiana you know and stuff like that I love it okay so what has changed in the raising Capital environment since you wrote the book last new laws new regulations new strategies of finding private money lenders that you've adopted any anything new that's changed since the book came out five years we systematized a lot of it where I think the hockey Puck's going and it's not quite there yet is the use of things like blockchain technology uh the use of tokenization currently I don't believe tokenization is the right answer for raising private Capital people are throwing it out 24 months ago and I was like I think the adoption of that's going to take six to eight more years well the SEC whether what it is or not the SEC needs to get in the middle of that and there's no way I'm going to go and take on tokenization as a means to get around the SEC the government's they're not stupid but they're slow and it'll take them time to figure out that people are doing it and there because there are people out there using tokenization to avoid registering folks with the SEC or registering your deals because they're basically saying buy my nft yeah and you'll get as a bonus you'll get an ownership share in this thing over here yeah that comes with the NFC yeah or like you know I'm an invest in pay cases deal and so instead of me giving Pace a dollar I'm gonna go get on this portal and I'm gonna pay a dollar and I get a token right and then that token is what I bought like that's my transaction with with real US currency right and now I'm going to take that token and through blockchain a blockchain firewall it's gonna it's gonna make it Anonymous whatever then I'm going to take my token number 2357 and I'm going to take that token and buy equity and Pace this deal right that's the conversation that's being had people are still people are doing this sure they are but here's the problem right the SEC has been very very vocal about the the there they will not allow Bitcoin for law or Bitcoin or any type of crypto to be long-term me a means to hide from the SEC they will find a way to regulate it they will find a way to to see through that now you can do it today but what do you really want to be owning an apartment building in your three or year four when the SEC comes down the pipe and says okay we now require that within 30 days you disclose who are you your investors are we're going to throw you a fine all right okay I don't want to be on the other end of that and what if they say okay well this person was not accredited they put 500 into your deal and you didn't abide by the 506 B rules and you put it on a credit into your real estate and I'm sorry I'm speaking in total French to some of you guys right now not the Reba book I talk all about 506b 506c and there's a lot you guys can learn about this kind of stuff in in the book and whatnot but understand this that there are rules in how not accredited can get put into deals people can that are not accredited invest with me or won't Pace it's possible but don't try and get around the rules through something that hasn't been fully formed and regulated yet like nfts and tokens and that kind of stuff you know the environment of raising Capital now is probably pretty simple to get money but deploying it into deals right now is a little challenging is that correct that's the problem right um so we are we my primary uh vehicle that we offer people as apartment buildings um I've done uh lots of private loans I've done Burr strategy deals whatever and we've graduated into larger real estate projects um but it's very hard to find multi-family that makes sense these days right yeah it seems like the whole multi-family space is at a standstill there's like a stalemate going on where there's some impending issues with some debt underlying debt in other people's businesses and there's people on the sidelines waiting for these things to happen people are not it's the weirdest it's weird right now yeah and so your guys's acquisition acquisition Department I imagine is like I guess we're just kind of a wait and hold patter yeah we keep throwing we keep throwing offers out you know uh and waiting for opportunities to make sense we've actually gotten into building uh so I've got two apartment buildings coming out of the ground right now if you can't find find the deal build the deal I'll build the deal and it employs a lot of people which we're all about but it also allows me to control cost um I can say okay I can build it for this and that for nothing a lot of apartment buildings these days are selling just a few smidges under replacement costs well it's like well why wouldn't I pay 15 more and I can have it all brand new brand new codes and new fan new fancy backsplashes and knew this new that right so we're gravitating a little bit towards new construction um we're also getting into our money loans which I know you're involved in already as well and I believe that not like eight different flavors of ice cream diversification that you guys should be offering to your investors but in this day and age it's important to have let's say two or three different flavors of ice and you can offer your investors that if you want cash flow short-term yields this is what I have for you if you want this type of vehicle you know the longer range upside whatever it is maybe you put them into an apartment building that's not going to pay him very much for the first year or two or not paying anything for the first couple years but it's a good safe shelter to put to put money America still needs tons more housing you know and so apartment buildings are not going to get cut in half the multi-family Market's not going to crash because we need more housing in this country so it's going to be stable it just might be stagnant for a long time and I think that's what's going to happen for the multi-family is it's just going to be the stalemate where we're going to have the Mexican standoff for a while for multi-family and maybe transactions go way down and sellers that need to sell are going to sell so there's some distress sales as you said debt comes around oh yeah but a lot of folks don't need to sell I mean I've got buildings that have seven year financing on them that you know I got a seven year rate lock I'm not going to sell anytime soon yeah you're holding on to that yeah I'm going to hold it you know so if if I'm somebody that is just starting out yeah I got to read the book obviously the book changed my life it really has and I bring it up all the time to people like hey guys it's a great thing it's a great book to get started um it's a great book to read multiple times as you graduate yourself there's a lot of terms that you won't understand the first time you hear it but welcome to learning anything new what I would say is is the ultimate superpower to is to know how to raise private Capital yes because um somebody told me after I read the book I was they asked me what do you wish you would have people ask you this all the time Matt if you could start back over all over again what would you do different yeah and my answer always is I would have learned how to raise Capital way faster and they go oh it's because of the golden rule I'm like What's the Golden Rule he who do under others as you would have them doing to you I go no no not the golden rule your mom taught you yeah the golden rule is he who controls the gold makes the rules yeah meaning I don't even have to be the guy who owns the gold yeah meaning I can control my grandfather's gold my friend's gold or whatever and the people just bring deals to you yeah that's right and if you've got it once you get no make yourself known in your community so you can raise Capital as they said people are going to bring opportunities to them pace and I both get opportunities brought to us regularly we're doing an opportunity right now in San Antonio 140 in an apartment building you know Pace gets plenty of opportunities brought to him as well because we've built a structure and a business around raising money now I'm not going to just raise money for a fee and go away I've also built the other parts of the business as well operations and structures and culture and those kinds of things so if I'm doing the deal we're going to absorb it into the amoeba of the DeRosa group and it's going to be a part of our a part of our fold but I can make that deal happen you guys can build that too there's no like you know secret that Payson I have aside from just understanding that money is is a lot more prevalent and a lot more around us than you guys think it is I do have a secret the secret is I read your book second thing is in the book I do realize after I started sending out text messages to people this was this was the thing I believe I had as a misconception that the book corrected for me was um I don't have to have a deal to raise money yes I mean I'm not going to take their money until I have the deal but I've heard people doing that that's terrible mistake terrible don't do that don't do that but getting people to go yeah if you find a deal I'd love to be a part of it yeah okay so this is what I did this is the first thing I did to start raising money I had buddies of mine that were doing fix and flips I was a contractor primarily at the time so I would go to my buddies fix and flips that I was doing the renovations on and I would go hey can I use your house as the backdrop of a quick 30 second video to potentially raise some money and my buddy's like yeah of course so I would record a video and I'd say hey this house just got flipped and the person who flipped it is making this much money the private money lender on the deal is making this much money on a monthly basis I'm looking for opportunities to buy like this when I need people who have Capital if I found a deal like this would you be interested investing with me and I it's a 30 second video and I would send it out to people in my message and all of a sudden I get people pinging back yeah I've got 50 Grand yeah I got 100 Grand I'm like I've got commitments on money before I even have a deal yeah it gives you a lot more courage though doesn't it I mean for you guys watching maybe you're not making the offer and the deal that you think's a phenomenal deal because you're not sure where the money's going to come from so what if you turn the conversation around go find the money first the level of confidence the level of Courage you're going to have and talking to Brokers and looking at deals because the broker says well where's your money going to come from I've already got a half a million committed so will you show me the deal now right that is a that's a good point when I jumped into multi-family um it was really interesting the multi-family Brokers are like how much money do you have already raised and I go oh well I don't have any heat raise but once I get it under contract then I'll raise and again yeah no no no we're not gonna give we're not going to go under contract with you if you don't have commitments on your Capital yet yeah wow it is so important to raise the money beforehand so um guys this book is unbelievable I haven't read the new one so I'm super excited to have this it's coming out in July yes can they pre-order it now they can they can go to biggerpockets.com forward slash store or they can go on Amazon and they can check out the new release of it as well that's coming out in July as well guys I would I would go to Amazon nothing against Bigger Pockets I love Bigger Pockets but Amazon is easier um to get the book through that's what I was experienced with with mine and actually it seems like Bigger Pockets wants people to go through Amazon or is that right I well they there are some bonuses and that kind of thing like their website yes yeah yeah like if you buy your book through uh through Amazon do they get the bonuses that you came up with yeah videos and that kind of stuff they do so it didn't matter to them yeah um but so where would you want people to buy the book either one guys uh Amazon or Bigger Pockets uh I I think Bigger Pockets is a maybe somewhat agnostic either way to where you to where are you doing an audiobook I am but I I didn't did you read your audio did you I did yeah I do not so much it took us three days Eric and I did it and um actually I was a month late on my deadline okay and I grew a higher level of respect for people that write books after I wrote my book yeah it's a lot harder than people think of it I know it is guys writing a book is extremely difficult now sitting and reading your book in a studio I think is 10x more difficult so uh you can buy the audio version of it it is not read by me forgive me for that it's read by a professional person who knows how to read things really well and has a really good reading voice uh and that's it's not me reading the book but it is there is an audio and a Kindle version of it as well so guys um while we're all about believing in people who bring us value so go buy the book the link is down below make sure you support the book is um what it's probably going to be 26 bucks something like that yeah yeah that's what it is 25 28 whatever the price is it's under priced okay it's underpriced for me this book brought me millions of dollars in value um hundreds I will raise hundreds of millions of dollars in my lifetime maybe even over a billion dollars total from the foundation the pillar that I got from this book so I thank you so much for for hanging out and and talking about the book is this book is there do you feel like there's anything you miss when you write your books like because there's let's see how you got basically 200 Pages yeah as somebody who has so much wisdom about about raising Capital you finish the book and you go I wish I could have put this in the book and fit it in there or do you feel like you got it all in there well I'm grateful that I got another shot to add to it right because yeah books are static in that sense which is why it's important uh it's for those of you guys that want to create media to be have constant conversations with your base through YouTube through Instagram through whatever it is when I do LinkedIn um because you want to have continued conversations with people because the brain doesn't the brain keeps producing ideas right and so I'm grateful that I got another crack at writing uh another chapter for the book because and that's why the chat was so long because I don't have to say right and so I'm hoping that can be a uh another revised Edition years down the road that can add to again maybe we'll talk maybe they finally figure out the crypto thing or the tokenization right um another Vision I had one day that I talked about I got to talk about this in the book um is how it is my dream one day for the for me to buy an apartment building and for the tenants in the apartment building to own a little piece of it not not for me to Grant it to them but what if you and I could figure out a way for our tenants to like okay my rent's a thousand dollars a month got it here's my thousand dollars a month to pay for my living expenses here's 200 a month that I'm buying a piece of the real of the place that I live right be cool well like that when that single mom you know you know when her kid graduates high school maybe there's like 30 grand sitting in real estate Equity that could get capitalized to send the kid to college right and maybe she'd never have to move maybe she can live there for the rest of her life and we can create a Better Living environment and help people raise their financial gain that's something I talk about in the book but what I'd like to have is to actually do something like that and then okay here's the cool idea here's how I did it right so I got a Wheels turned and you guys see this that's a really cool idea okay uh final question if you could write another book other than raising Capital yeah what else are you passionate about that you would go write another book about and uh so I'm beginning the journey uh you guys know my wife Liz Faircloth who is one of the the co-founders of the real estate invest her which is the community they're building Financial wherewithal for women my wife and I are beginning the journey on talking and writing a book about halfway done the book on how to invest with your spouse because so many people that are active out there in the real estate Community either one spouse is active and running the day-to-day the business the other one is like the best cheerleader ever for that person and helping them out and you know whatever they need and many many husband and wife combos you and I know that are either in our student bases or whatever are you know the right arm in the left arm of the business the husband and wife the wife's out there finding deals a husband's raising the capital A lot of times husbands brow beating the contractors or vice versa whatever it is um and so we want to write a playbook for couples that are working together yeah so that's that's that's will likely be the next book that I have my name on so good I mean we get a lot of husbands that come into our world with YouTube or whatever they're like how do I get my wife to support me and I say get your wife involved in the business that paint a vision how she can apply herself to your business and actually amplify and build the Kingdom stop trying to build the Kingdom on your own and then coming home and not talking to her about it yeah go build it together and it's a lot more fun and you'll have a lot more connectivity I love that you guys are actually writing that book right now the way you guys do it by the way uh is you get your wife or your husband enrolled and excited in the life that this entrepreneur vehicle is going to create for you right so let's talk about what life will look like five years from now once we've got x amount of doors once we've done these business ventures or whatever like what will life look like what what Journey what will our reality be and you get the buy-in like yeah maybe we live somewhere different maybe we both try better cars I don't know whatever it is you think life's gonna look like better vacations better cars better reality saving up more for the kids to go to college whatever it is you both your and you and your spouse are super passionate about get very clear that that road to what you want can be driven with real estate or with entrepreneur ownership right and that's the way to create the biggest raving fan hey how can I help I want to be a part of this because I want that I want that I want to be at that Finish Line journey and where this thing's going to take us right it's I've seen too many spouses try and drag the other spouse Kicking and Screaming I'm not interested in real estate well I get it they're not but look at real estate as a vehicle to get you what you really want in life right you know love that so you've got raising private Capital the refresh is coming out July 1-0 2.0 so uh guys go pick up this book it changed my life I talk about it all the time I've been talking about it for three four five years how this book is the book that helped me get started in raising private Capital raised millions and millions of dollars do a lot of deals and then um go and subscribe to Matt's what uh YouTube channel YouTube channel uh derozastergroup.com is our website yeah and then just go to YouTube and look up to Rosa group we put our content several times a week and it's really just forward facing uh an investor level conversations with folks on how to build your brand it's really made for active operators on How to Build a Better Business love it brother thank you so much for joining me you're the man thank you man thank you guys we'll see you in the next video do not forget to buy the book the link will be down below um and then also your wife Liz Faircloth where can people find out about the upcoming book there is it just we gotta wait the real estate invest only halfway done so we'd only be able to come alive I know right you can send me those come on Matt uh messages Instagram website and we can use some encouragement from our community uh to get the work done Liz and I need to just hunker down maybe go put ourselves in a cabin somewhere and just finish that book so we can get it out to you guys to make a difference thanks again brother guys go pick up the book Matt Faircloth raising private Capital Bigger Pockets amazing partner of his Link in the description down below we'll see in another video

Channel: Pace Morby

Views: 21,874

Keywords: real estate, real estate investing, pace morby, pace morby creative financing, subto, subject to, creative finance, creative finance pace morby, matt faircloth, how to raise private capital, raising private capital, rei, real estate investing strategy, IRA, equity, investment returns, compounding interest, fund of funds, syndicate, financial freedom, retirement accounts, wall street, private money lender, leverage, network, creating leverage, raising, private, capital

Id: Euk5Wsm-pzg

Length: 54min 7sec (3247 seconds)

Published: Tue Aug 08 2023