How to Find Real Estate Deals for Your Self-Directed IRA (ft. Shenoah Grove)

Episode Transcript

(00:00) one of the properties in my husband’s Ira we bought for about $100,000 and probably about 15 years ago and today it’s worth probably $600 to $700,000 I mean we got it for a great deal but even if we would have bought it for $150,000 and now it’s worth 600 no one’s feeling sorry for me if I tell them that I overpaid because I had the luxury of holding on to it long enough if you look at how uh Warren Buffett buys he buys and he wants to stick in there forever because he wants to watch that value you go and grow and with a self-directed IRA
(00:33) some of those mistakes can kind of be swept under just by holding holding it long enough welcome everyone to the directed Ira podcast this is Matt soron I’ve got a special episode for you I have got shinoa Grove from the Texas Reas shoa spoke at our last alternative asset Summit um I’ve actually been to her house and some of the events they’ve done with the Texas Ria which was incredible and I wanted to have her on today to hit a really important topic we did a survey from over 1,000 directed Ira customers answered this survey and
(01:03) we asked an an important question we asked what is the number one thing holding you back from having success with your self-directed IRA and Cho you’ll probably be surprised by this but I wanted you to come on to help solve this for people here was the question their number one thing holding them back from having success with a self-directed IRA was not finding deals marketing yeah they want to know how do I find deals how do I connect with the right people where should I be going what you know I think a lot of people are used to their
(01:35) Ira 401k and what’s the deal oh it’s I just type in a ticker symbol on my computer that’s my deal right but when you’re self-directing these aren’t like you know Investments sitting on the shelf you just check out of the checkout line you you know you type into a computer so now real estate being the number one asset people typically invest in with a with a self-directed IRA I want to bring you on to talk about this so what do you think about that first of all does that surprise you you know I’ll be honest it
(02:03) does not surprise me it’s seems like it’s one of the things that most people are most intimidated about or most afraid about and a lot of the people who are investing with a self-directed IRA listen they’re subject matter matter experts and what they spent you know 20 years at being in a cubicle and now they’re out of the cubicle and now they’re into the game and they don’t know you know they they had a company that was bringing in marketing that would allow them to get paid right uh they weren’t maybe interfacing as much
(02:29) with the marketing of the business but uh marketing is is is is all is is is everything in in any business we say we you should always be spending about 80% of your time doing the marketing because if you don’t have marketing you don’t have leads you don’t have deals you’re not going to be able to invest in your directed Ira or your cash or anything else so as part of Texas Ras we are Texas’s largest Association of real estate investor groups and man we teach about marketing all the time in fact we do a three-day class and most of that
(02:59) class is about Mar marketing and what I’ve I’ve found is and this is a quote that I love from Alex horos uh from acquisition. comom some of you guys may have heard of him but yeah he says listen there are no silver bullets but there are a lot of golden BB’s and when it comes to marketing right there’s there’s not just one place to go right so you talked about a ticker you know you know some people who are getting started investing talk about the MLS well MLS is where you want to go if you want a really bad deal yeah that’s true
(03:29) but if you want good deals sometimes you have to use some of those golden bbb’s of which we’ve identified over 65 of them and also some people just have the X Factor of just who they talk to and how they talk to them and how they are able to you know transform conversations into deals but for me what I found for those who want to get deals quickly and sometimes this is going to be super uncomfortable for the person who has been again in the cubicle or working in an office environment you know talking to people that are very left brain
(03:59) analytical uh um uh data driven right sometimes when you’re talking to people who are you’re buying houses from some of that data drivenness is not there in fact it’s less logic and more emotion and it’s hard for a lot of people who are coming from the corporate space to realize that you use logic as a tool but you don’t use logic as a rule uh when you’re working with people who maybe are in difficult situations for me I like to make a Dollar Holler and the best way to make a Dollar Holler is to do marketing
(04:31) that gets to multiple people and really resonates so one of the things that I’ve spent uh a long time uh St uh studying and learning and listen I’ve been investing for over 21 years but I’m still studying and learning from some of the best Minds out there so we use some of the negotiation so I’m kind of jumping from marketing negotiation but some of the negotiation uh tactics and strategies of Chris Voss uh Phil Jones and Chase Hughes so Chase Hughes is some who teaches backwards Hat wear and Frat Boys how to be the next Jason born so
(05:06) it’s part about the marketing but once you get that lead it is whether or not you can convert that lead so some of the top marketing strategies that I see uh number one uh number one shopping list the foreclosure list the pre-foreclosure list uh here in Texas where I do most of my investing you got 21 days between the notice of acceleration to the day that it goes to foreclosure now if you want to get ahead of that and most investors who are just getting started are not aware of this strategy but it’s something that we call a notice of a
(05:36) substitute trustee so notice of a substitute trustee is and I’m going to get a little technical here when you buy a house and you get a mortgage from a Wells Fargo Chase Bank of America you sign a promisory note to them and you also sign a deed of trust if you’re in a deed of trust State like Texas and when that in that D of trust there’s a trustee list listed there and that trustee is an attorney and the attorney is the one who is in charge I’ve done this before by the way yeah I’ve gone to the courthouse steps and auction off
(06:06) people’s houses okay keep going this is a great tip because I see exactly where you’re going which is getting ahead of everyone else 100% lead so I love this keep going and share this tip I’m gonna back up here in a second but on a notice of substitute trustee what that looks like is the bank will assign you know a different attorney than the attorney that was listed in the original deed of trust and the only reason why they would do a notice of substitute trustee is because the owner of that property is behind on their payments okay and the
(06:38) interesting thing about the notice of substitute trustee is unlike the notice of acceleration of sale that comes out 21 days before typically the notice of substitute trustee comes out 22 days before 25 days before 30 days before 60 days before and it’s coming out every single day versus the notice of acceleration that foreclosure notice is usually coming out day 21 or day 22 or day 23 they just mash them all in to that uh time frame to give a owner enough time to recoup it and then also so that the uh bank doesn’t have to deal
(07:13) with uh paying you know attorneys right so this is basically the pre pre-foreclosure list and this should be your shopping list but it also has to be for the folks who are not afraid to have conversations with owners and not afraid to um uh and really it truly just accelerates your learning curve so the sooner you decide to jump in and kind of get uncomfortable the faster you’ll turn to being comfortable I will say so th those are my two favorites and I’ll let me pause for a second because I want to back up even for a second so chol went
(07:47) right into it about like basically finding a good deal and I just want to start pause for a second because a lot of people who are new to self-directing and and they answer that question that we have is like I don’t know how to find a good deal well what makes a good deal well you got to buy right you make money in real estate when you buy you realize it when you sell or maybe you’re cash flowing the property and making time as you’re holding it as an asset but you really make money on the buy so you got to make sure you’re buying right and
(08:14) what Sho is talking about is the strategy of buying a property not at retail prices on the MLS don’t just go buy and pay retail let’s get the wholesale let’s get the discounted price so I make I have Instant Equity when I own that investment well how do you do that you look for people in distress how are people in distress they’re not making their mortgage payments they’re about to get foreclosed on how do I know who those people are well there’s foreclosure notices that go out there and foreclosure list that gets sold but
(08:40) how do I know before all those people because those people already get in called check the substitution of trustee I’ve never even thought of that that’s such a great idea because and that is noticed as a lawyer in Utah I would I would get substituted in and what would happen I did this for a little bit um wasn’t my favorite job but as a lawyer but I did it for back in like was this after this is like 2008 and so um but they would substitute Us in me or our law firm and and they did that because they’re like all right here’s the 100
(09:12) clients in this County that haven’t paid their mortgage or the borrowers and they’re going over here and we don’t want to track them anymore they’re now over in collection lawyer land and real estate lawyer that’s going to go sell it on the courthouse steps in a couple months and so that’s a great way to get ahead of that and find those people that are in a distress situation because those are the people where you can negotiate a good deal to then buy at a discounted price have Instant Equity and value in your retirement account so I
(09:40) just want to unpack that for a second yeah and and here’s something that I want to point out too of what my piece of advice would be if people with the answer that survey or you’re feeling that question I want to make sure I’m finding good deals is we go to Real Estate events a lot as a company at directed Ira why do I go to Real Estate events why do I was I excited to go to the Texas re event that we went to with Sho and Phil like this is like six months ago or whenever when we met because I know those people know real
(10:08) estate I don’t have to sell them or teach them about real estate I just need to say do you know you could use your IRA to do this and they’re like oh my gosh I love real estate I’ve always been good at real estate I make money in real estate I don’t know stocks bonds and mutual funds you’re telling me that this old employer 401K this old Ira I have that I’ve been buying stocks or an ETF or maybe I bought Nvidia stock and it’s gone down you know whatever like whatever it is like you’re telling me I could buy real estate with that which I
(10:35) know at and I’m good at yeah and so we like going to those real estate events as a company because we know people understand that asset and how to make money on it if there’s place like Texas Ria they’re like learning how to do that or they have a whole network of people that are doing deals all the time okay so thanks for letting me unpack that but I wrote that down because I’m going to make a couple notes just myself pre-foreclosure list but going a step deeper to the notice of the substitute of trustee and then when you start talking
(11:04) about negotiation though here for a second about being able to negotiate when you find that deal for example so I stopped you there for a second because I want to interject but let me turn it back to you sha because I want to so um those are my favorite two especially if you’re just getting started and especially if you’re willing to you know kind of get your hands a little dirty from the standpoint of have those interactions with the seller if you’re not going to get your hands dirty then you’re going to be looking uh best case
(11:30) you know a wholesaler uh worst case maybe buying off the MLS now a lot of people that I’ve seen with self-directed IAS who are subject matter deep subject matter experts in what they went to school in or what they’ve been in their job in Corporate America for you know five 10 20 30 plus years is is sometimes they just want to buy deals from other people and you know that’s kind of the magic of you know you and I doing things together right yeah so you have the you have the and and part of me thinks you have the halves and I have the wants and
(12:02) the other part of me thinks I have the you know it’s it’s vice versa because you’re you know you have the money right my people have the deal so you know they have each other’s halves and wants right which is a beautiful combination when you’re looking for those types of opportunities so what I will say is if you are buying from a wholesaler which is a way that a lot of brand new investors get started um I just want to make sure that you guys are playing it safe with the wholesalers because a lot of times with wholesalers um there’s a
(12:30) conflict of interests and mat being an attorney you know that typically when there’s a conflict of interest you have to excuse yourself uh or at least notate that and have people make people aware of that right so when I think of a wholesaler’s conflict of interests it is that you as the buyer you’re only buying if you’re believing all of the stuff that they’re selling and they’re incentivized to maybe tell you half truths or partial you know something like that so so always inspect what you expect inspect what you expect so you
(13:03) need to inspect that the arv uh the after repair value what that property will likely sell on the MLS for when you’re done you have to inspect that right third party objective opinion to make sure that that that is truly the value of that property because I’ve seen people cherry-pick uh comps uh from far away or comps that just don’t make sense for that property the other thing that you have to again inspect what you expect is the renovation budget that will get that super high arv that that wholesaler is telling you so a lot of
(13:35) times a wholesaler will give you correct information this high arv is possible but sometimes they’ll tell you uh that they’ll give you repairs that are here these repairs may be what we call Make Ready repairs perfect for a rental property not perfect for when you’re buying when you’re reselling um at that highest arv so inspect those two things because if those two things are right you may be on a slow Road of losing money and I can’t tell you how many times as a as a coach and and as a mentor that I have told brand new
(14:09) investors hey you know that $5,000 $110,000 non-refundable deposit that you gave that wholesaler Hey listen you’re gonna actually lose less money if you just walk away from it right now and not and not do and not do the deal then what you’ll make if you take that deal to the finish line and and ultimately sell it welcome to real estate investing yeah that’s heartbreaking right that’s a heartbreaking thing to say say to someone but it’s something that happens all the time so so you have to take some personal responsibility Warren Buffett’s
(14:39) number one rule of investing don’t lose money Warren Buffett’s number two rule of investing never forget rule number one so you have to be aware of those conflicts of interest even when you know Matt you know is an attorney he has to disclose that there is no requirement of disclosure if you are a wholesaler and by the way new investors are not not a protected class of people so you have to do your own analysis and due diligence or partner with people who who have and I always say um if you want some of the
(15:08) best free coaching and free advice that you’ll ever get as a real estate investor is even if you have a ton of money in your self-directed IRA take that take your deal and I’m just going to loose use this term super Loosely here to a hard money lender and that hard money lender is going to give you some of the best free coaching and advice that you’ve ever received because they don’t want to lose money and they typically don’t want you to lose money so something to consider as you’re looking at working with wholesalers which a lot of people as
(15:37) they getting started they do until they realize wow I paid that wholesaler $10,000 or $20,000 how many deals could I have gotten myself had I invested in my own marketing right now and marketing is scary at the beginning so you need people to tell you hey not just here’s one Silver Bullet but here all the golden BBS that are working right now in today’s market and the market is always changing there yeah let me say on this so it’s like you could be I want to break it down for people they understand because it’s a little different for
(16:11) everybody you could be a hustler type person and you could be like you know what I’ve got time I want to go hustle and fine deals I like doing that I’m I’m a sales type person I’m gonna go chase that pre-foreclosure list I’m going to go chase this the substitution of trustee list I’m going to go chase down on those deals because I want to find deeply discounted buys you could be like that scares the hell out of me I don’t want to do that and so you say so I’m going to buy from wholesalers well wholesaler is just another real estate
(16:40) investor that’s already found done the work and found the deal and they’re going to charge you more so if they found a property and they got it under contract for 300,000 they might be selling it to you for 330 because they think if you put 100 Grand into it it’s worth 450 or 500 or whatever you know it is and say and or they could even be rental ready immediately depends on the deal but there’s they’re making money there and so when when you’re talking about this you know it’s like this conflict of interest I want to make sure
(17:07) people understand is like they’re selling you the property they’re the seller making money if you pay more so understand that that when you’re buying from them it’s just like buying from anybody they’re trying to sell you at the highest price possible as they should and and they take the risk free profit and they give you the risk full profet yes right so just make sure you’re you know listen in life we’re all Risk Managers right in everything that we do so we need to make sure um to to trust but verify and for me you know I
(17:39) always say listen if the pope gave me change I’d count it back not because not because I don’t trust the pope but because the pope makes mistakes and the pope misremembers and the pope forgets and the pope sleeps and you know so so so you need to you know uh trust but verify but verify everything uh cu the last you know it’s it’s interesting because it seems like the the first mistake that people make is on the last deal that they need to make it on which is the first deal and you don’t want to be one of those investors that says oh well this
(18:14) is what I learned from this deal right instead like be around people who can tell you oh there’s a pothole over there ah there’s a sand trap over there um or or you know this person’s not someone who you want to who you want to do a deal with so so just make sure to get that third party objective opinion of both values as uh the what it will resell for as well as values when it comes to what it’s going to need to be renovated for yeah and you know here’s what I’ll tell you you know one of the things I like about investing in a
(18:42) self-directed IRA is you know people you know you’re going to be in there for a while right you’re not going to be able to take the money out and spend it for a while for most of you and what I will tell you is this um any mistake that you make on the buy by overpaying can be remedied through Market cycles and time right so you hear a lot of investors who will say well I I’m a landlord and then they say well I’m an accidental landlord well how did that happen well you know I bought a house think it was worth this it was
(19:16) actually worth this and I bought a house thinking the repairs were here and they were really here and it there wasn’t any profit left over right after closing cost holding cost resell cost Etc so so so so know you know know those numbers numbers but also know you know specifically when it comes to an IRA you don’t usually have to rush to the finish line and force value in a six to seven month period you can hold on to it one of the properties in my husband’s Ira we bought for about $100,000 and probably about 15 years ago and today it’s worth
(19:49) probably six to 700,000 and we I mean we got it for a great deal but even if we would have bought it for 150,000 and now it’s worth 600 no one’s feeling sorry for me if I tell them that I overpaid because I had the luxury of holding on to it long enough so you know it’s I don’t want to say you can make more mistakes in your IRA but if you hold it long enough and you know it’s like uh Einstein says the most powerful force in the universe compound interest Charlie Munger Warren Buffett uh uh said don’t interrupt it unnecessarily and
(20:22) what do you meant by that is don’t trade in and out trade in and out just for the sake of action some of these if you look at how Warren Buffett buys he buys and he wants to stick in there forever because he wants to watch that value go and grow and with the self-directed IRA some of those mistakes can kind of be swept under just by holding holding it long enough yeah I mean the self- threed IRA is a long-term wealth building tool and you know you can’t access it till you’re 59 and a half just like any retirement account so if you’re in your
(20:50) 40s or early 50s you’re not touching this immediately anyways right you’re going to let this ride and grow and that’s the point we want to get assets in our Ira that can appreciate in value real estate can do that um but you don’t you want to try to time the market just like the stock market it’s difficult to time the real estate market play the long game but also it can um create cash flow for us as we’re holding that asset and so that’s what I’ve Loved about real estate now my first deal actually I’ve done some videos on this on my just the
(21:16) very first deal I did with my IRA was um I actually bought a turnkey rental from a wholesaler okay this is a this was in 2017 when I bought it and this is in Indianapolis a real estate broker who’s a client of mine was buying his own properties in Indianapolis and I’m like oh you’re buying rentals in Indianapolis go pick me one up and he’s like all right I’ll get you one and so he was telling me kind of the numbers on them and I was like those sound like amazing deals the seller of that property was another real estate investor that bought
(21:48) it at foreclosure for 40K I don’t know what they put into it but there was new carpet paints countertops and stuff it was actually pretty dumb renovated pretty nice I bought it for 85 it immediately cash flowed okay I held it for 6 years uh it cash flowed and the rents went up I bought it for 85 I started renting it for 950 eventually rents were up to 1,200 bucks a month by the time I I sold it and um but I remember when I got the loan because this what I remember you you mentioned this about the hard money lender because
(22:17) I only put 40,000 down I got a loan for the other 45k when I went to the the lender I went to a non-recourse lender that’s one thing you got to use you can use a private money lender but they just have have to do what’s called a non-recourse loan with an IRA it was his name is Roger St Pierre he’s uh does non-recourse loans have a bank card um First Western Federal Savings Bank it’s you know not the best marketing name for a bank but you know whatever they’ve been around for like a hundred years anyways they’re a little bank they do a
(22:46) lot of loans to IRAs buying real estate and I remember what he told me when I he I he said is this a good deal and I said I think this is an incredible deal and he’s like well we’ll find out so because that’s what he did he they appraised it they went and basically did like a debt Ser debt service coverage ratio loan they’re like what can this rent for what’s your cost of the debt going to be because that’s where you can lose in real estate I mean you can buy right but you really lose if you get upside down on the debt in real
(23:12) estate yeah but they don’t they don’t want to lend you the money if it’s a bad deal so I remember when he came back to me he’s like all right this is a good deal I was like oh thank you but that’s a good check Blessing about blessing yeah yeah I felt like all right the bank’s willing to go in on this deal with me essentially you know they don’t want to lose their money either and so but I do think a lot of new people seem to forget that they can get sold a little bit and I think that’s one of the number one mistakes some
(23:39) people will make is they’ll get sold like you were talking about like this you know here’s the after repair value of this property and they just are like they’ve already thought they’ve made that money once they bought it I’m like yeah you got a long ways to get to get there first you got to manage a budget on a remodel not easy and it’s got to be right second you got to get that sales price also not easy so so just be careful understanding there is that conflict it’s all on you and I like how you said it you’ve got the risk like
(24:08) when you acquire that property you’ve got 100% of the risk now you get 100% of the reward to when you get it right so don’t forget that either okay one one one other tip Chanel I know you’ve got you’re busy I appreciate you taking the time maybe throw one other tip for us for anybody trying to find deals or getting started um in real estate um with a self- directed diary you know I will say being at the uh Ira Summit in Phoenix there were a lot of there were a lot of syndicators there right yeah um and and they were looking to raise money
(24:42) for their deals so I think that’s another way is to go out and and learn um commercial investing now now residential investing is is kind of like you know me telling you hey you know take a piece of paper go make a paper airplane and fly it and you’re going to say okay yeah you’re you’re going to go do it commercial investing is like me telling you hey go launch a rocket like Elon you know so when you’re doing that you need a couple more people around you right to be able to kind of help and lift you up so if you are
(25:21) someone who is a real student and really wants to you know dive Beyond you know for example getting you know you know two Val values right the after repair value and the repairs and how long it’s going to take you to do it and that that sort of thing but if you really want to dig in a great way to be able to dig in and especially in your self-directed IRA where again you’re not touching it until you’re at least 59 and a half is to invest in other people’s syndications so you can own a piece of uh Matt you know
(25:50) you got a building right behind you right yeah right that’s our office building yeah yeah you could you could own a piece of Matt’s office building probably could condominium ised each floor we own some of it actually not in our Ira because we lease it but yeah yeah so a lot of people and a lot of people I work with are buying uh multif family apartment complexes they’re buying RV parks they’re buying self storage uh probably one of the um uh hotter asset classes right now because it’s kind of uh uh residential financing
(26:22) with commercial returns is residential assisted living right and my guess is you know in in Arizona you you probably see a fair amount of that right is a huge retirement uh place people want to go for retirement so so finding other people that are already investing in commercial and have had some success and specifically what you want to look for is is people who are you know what we call full Market cycle Pros so have made it when the market was up have made it when the market is down you know for me I tell people listen I haven’t had to
(26:54) update my resume since 2003 at this point my resume is in some version of Doss that even the techie of the techie people are on this call who actually know what that word means maybe Word Perfect or something yeah I mean it’s like you know I am committed not to going back to work for anybody else and to be at that level of commitment I also have to continue to be a student of the market so when you are investing your uh directed Ira money into a commercial asset as a limited partner you know be sure you’re you’re looking for two
(27:27) things right you’re looking at the horse and you’re looking at the jockey right so you want the right horse you want the right jockey and um it also is is you know is is also the the the jockey or even the trainers team right it’s like you think of Bob baffer he’s the most successful horse trainer that’s ever existed right he’s had multiple Triple Crown you know uh wins he sent more horses to the Triple Crown than anyone else uh to all the Triple Crown uh races so he has that experience but it’s not just him right it’s his back office it’s
(28:01) his team so don’t just look for and and and don’t have a what I’ll call a concentration risk and one individual make sure that their team is as good as as they are because they’re going to be the one that’s ultimately going to be implementing for you and then also don’t be afraid to dig into their financials and this is where you will have to do you know some work so so some of you know my uh spreadsheet folks out there you you do you know you do have to be a little bit careful from the standpoint of I think a lot of people think well I you
(28:31) know behold my my spreadsheet you know it’s like the numers say this right well garbage in garbage stays in garbage makes little garbage babies that infiltrate your spreadsheet and tell you to do things that maybe you should not do so make sure that when you’re working with another uh when you’re working with this syndicator uh GP that they have a good track record uh that they’re not robbing Peter to pay Paul um that they’ve got you know good back they’re also SEC compliant to keep them out of trouble and make sure that nothing comes
(29:02) back on you either from the standpoint of the deal maybe losing losing money as well so that’s another way that you can get involved in your directed Ira to be able to invest with people with not actually you know taking on and I think a lot of people are you know one of the reasons why they like to invest in the stock market is because they don’t have the tenants and they don’t have the toilets and they don’t have the things that tenants put inside of toilets right and and and with uh investing with you know someone else and it’s you know it’s
(29:32) super easy you write a check right and then and then every you know month or every quarter depending on their distribution schedule you’re getting you’re getting you’re you’re building it and you should be doubling it most syndications if they’re if they’re set up correctly if the if their team right so it’s not just the horse it’s also the jockey it’s also the rest of the team if the team’s performing right you could double your money in 3 to five years right it’s pretty typical but make sure that any in investment that you do from
(29:59) that standpoint the way that um my husband and I like to ask each other when we’re investing in one in one of these indications is is the deal designed to go bad or is the deal designed to go long so I’m I’m okay staying with a with a deal if it if it you know the market changes hey we’re going to be in it for another year okay but we’ve we’ve included that in our in our initial setup of the deal so we can go long as opposed to and we’ve seen over the last couple years is because the interest rate increases and a lot of syndicators
(30:30) not having rate caps we’ve seen a lot of those deals go bad so you know you know if you are really really really willing to educate yourself and become a student of the market and and understand some of these you know Concepts and you know uh this could be a great you know I don’t want to call a marketing strategy but an investment strategy for you uh by again letting other people who are further down the road from a knowledge standpoint and from a team standpoint bring those deals to you raise funds with you and A lender uh to be able to
(31:02) get your self-directed IRA invested and there are a lot of opportunities right now just because uh some of the you know commercial asset classes you’re seeing some of those sellers kind of come down to reality a little bit and uh start start to make some some interesting deals so that’s another thing that I would I would recommend uh just because I know that a lot of people who have uh old war 1ks right they come from Corporate America and you know they’re used to looking at the numbers and they’re used to looking at spreadsheets
(31:30) so take your time to get educated on that because it is again you’re launching a rocket ship as opposed to Flying a paper airplane um and there you know you just need a different team and a team with a different skill level and a team that and a team that actually has a a backend team right because after you buy a commercial asset all the success or failure of that is what your team behind you standing behind you on the ground is actually doing for you so uh that would be uh some my thoughts on that you’ve probably seen a lot of folks
(32:00) invest in some of the some syndications uh as well what what do what do you think is some of the best takeaways from both the successes and the failures that you’ve seen yeah I thought that was a great the horse and the jockey is a great example you can have a great deal a great property they buy it right but if you got the wrong jockey the wrong person operating and managing that it they can wreck it and so what I’ve seen the most successful syndicators the ones that make money and I’ll tell you the ones that make money on deals are the
(32:30) ones that have no problem raising money because every one of those investors on the first deal is dying to get into the next one they’re telling all their friends about the next one the ones that are always selling and their investor relations team is always out there selling selling selling selling selling selling are the ones that are either growing super fast which is okay or they’re not keeping their current investors happy and so but what I would say is I think team really really matters well and I’ll be honest and this
(32:56) some people may not love this but um where I’ve seen the biggest failures is new people there’s a lot of new syndicators that came into the market three or four years ago that are getting burnt right now that are losing deals that have this rate cap issue that you were talking about shinoa they didn’t get long-term fixed rate debt they couldn’t get the agency debt they had rate caps that have now expired and that property that cash flowed and looked great at a 3% three and a half% rate looks terrible at seven or eight or nine
(33:28) at maybe they got some Mees debt or they’ve got some other debt on the property at 10 11 12% they’re getting crushed and so if you’re the investor in that and this is what I kind of I mentioned a little bit earlier is one way you can lose money in real estate and this is whether your IRA is in it or just you individually investing is is debt debt is your number like not getting the debt right in the deal is what Crush you yeah leverage Cuts both ways a great way to say it it can work for you it can work against
(33:58) yeah you can’t get enough debt when the Market’s going up you can’t get out of debt fast enough when the Market’s going down right so you have to you know and it’s and you know I for for me personally you know when the market goes like this I’m probably in here but when the market goes like this I’m probably in here right yeah I’m you know as a risk manager you know I um I’m you know I’m following Warren Buffett’s number one rule so I’m not going to over leverage right so so so that’s that’s kind of My Philosophy you know as well
(34:35) and you know you know um yeah good horse good jockey good good team for sure and I think that’s a requirement of of just about anything that you do um but especially when it comes to commercial investing for sure yeah and I think one of the positives on that is it can be a little more passive right so I think a lot of people that again you’re self-directing your IRA it’s a little more passive you’re not out hustling to find a deal you’re not calling a list of people you know you’re not even dealing with just buying a you know ready to go
(35:05) type rental property that could be single family and maybe you have a property manager that handles everything but you’re just going to like let me sign some documents and and wire some money and that’s all I’m gonna do now I have a lot of clients that made a lot of money that way well and you can learn by being part of those right so that if that’s something you want to do you know they say the best way to become an active syndicator is to start as a passive limited partner um you know putting 50,000 and watching how that
(35:33) deal goes um and and you know you’ll find a lot of I don’t know if it’s exponential growth but you’ll find a lot of growth when you are doing that and I would say you know one thing that you see I think from brand new people who have had a lot of success very early is sometimes you’ll hear them use the the GW which just makes my skin just and my hair just stand up like straight up is is they’ll use the guarantee word so I would say stay away from anyone who ever says to you you know guaranteed it’s a lock it’s a no flaged flag that that is
(36:09) a flag and a half for sure for sure so so so uh for those of of you guys are active man fastest way to get a deal pre-foreclosure list faster way to get ahead of the pre-foreclosure list notice of substitute trustee uh for those of you guys who want to um not have those conversations with with owners uh but still want to get off-market deals work with wholesalers right but again do your due diligence um and then for those of you guys who just want to you know write a check and that’s not much marketing right but it is being it is it
(36:42) networking is marketing right that’s what the uh uh directed Ira Summit is all about is just doing the networking right so so that is marketing in a way so if you’re willing to you know stand with a cocktail you know in your hand and just talk to other people about real estate invest and see if there’s a good match uh for for their deal for your you know uh for your investment goals as well so so i’ say those are those are five that kind of touch the basis from being active to being to to the networking or marketing you got to do to
(37:14) be to be uh kind of a a passive uh uh real estate investor as you’re as you’re using uh some of these different tools let me give one last one here as we conclude because this is actually what I’m doing with my money now this is the only one we didn’t talk about which is private money lending okay you might want to take your IRA and lend it to another real estate investor maybe this is someone doing a rehab on a property and so that’s what I do with my account now I’ve went from you know getting the rental that was rehab selling that I’ve
(37:43) invested in other syndications right now but what I’ve done most with my money over the last three or four years I’ve done a lot of private money loans now these are secured on the real estate I might be in second position there might be a hard money lender maybe some seller financing in first and I’m in second a lot of times funding the rehab sometimes I’m in first I’m funding the acquisition and the rehab but I’m getting 12% interest in two points and so and and that’s like typically a six-month loan but it’s again you’ve got to
(38:11) analyze the deal okay I’m going to look at that borrower on that deal who who is that borrower what track record do they have do they have other income outside of this just like the bank’s going to do when the bank was going to lend them money or not right you need to be doing the same thing but that’s one other very common strategy I just throughout there is you may be good at being a private money lender and to me that one’s like hitting singles or doubles like you don’t make a lot of money because you’re
(38:37) capped right they’re not going to pay me more than 12% interest in two points right and so I’m not ever going to hit a home run but I if I’m secured on the property I’m limited I’m not doing the work I’m just the bank I get to play the bank role um so I can’t lose money so I gotta be careful not to lose but I can hit a lot of singles and doubles and and over time which is you’re using this Ira for long wealth building to it can be a really powerful strategy so so um the second lane ah man that that’s you don’t
(39:06) love that one SE a lot of those Ah that’s like that’s like a hard for I mean h i mean I’ve seen them go really well and I’ve seen them go really really wrong yeah um so you know one thing that that I my preference in though if I’m in that position especially if I’m behind like a a a property that they’re buying subject to I’d rather partner with them and lend that way I’ve got a little bit more control and that way I’ve got a little bit more visibility and um and that way I I feel like I’m I’m you know propping
(39:36) up my downside for a loss so so you know I got a little bit less exposure um so those are the ones that I would say like let me get in as as a as a u as a partner on that deal and would you talk about how how that looks from doing it in a self-directed IRA when you’re kind of partnering with your borrower um um and and and and and and some of the gotas and how to avoid some of the gotas uh to make sure that you don’t run run your uh run a foul with your uh self-directed Ira great great question so and of course we talk about this at
(40:12) the self-directed IRA Summit which by the way we’re going to be in Texas in Austin Texas April 25th um all day talking about how you can structure and do deals with a self-directed IRA so and I wrote the number one book on this the self-directed IRA hbook but you can do an LLC um what Sho is talking about there and that’s very common I’ve done this strategy too your IRA and i’ obviously we’ve helped tens of thousands of clients with this but um your IRA can invest in an LLC and basically be like the cash partner in the deal you can
(40:41) have some other investor who’s the work partner in the deal they’re doing the deal they found the deal they’re going to manage the deal but now you’re on title effectively through an LLC you’ve got ownership in the LLC through your IRA that owns the property now that person that’s the work partner in that deal cannot you personally right I get a lot of Real Estate Investors are like well I found this deal but my IRA is going to fund it and I’m going to take 50% personally because I want to make money today and my IRA is gonna get the
(41:09) other 50% you can’t do that but shano and I could do that if Sho is like well I got a great deal um Matt do you want to throw I need 250k to do this deal do you want to be the cash partner in this I could say sure right we’re not disqualified people under the rules there’s some rules called prohibited transactions where you can’t have your IRA invest with or or share ownership between you your spouse your kids parents but two other investors can come together on a deal so shinoa could get 50% 20% 60% whatever we negotiate for a
(41:40) good deal and doing the work and my IRA can come into the LLC as the cash partner and so now for my IRA I am on the LLC that is on title and sometimes you can kind of do the belt and suspenders and you mentioned this you know which is and I could say I want to lean on the property you know because you might be the work partner that’s the manager of the LLC but I’ve also got cash in on this deal I’m also throwing a lean in on the property um so that my cash is protected um in the deal and making sure I’m getting paid out
(42:12) first and Matt before we end today let’s tell them the number one way to do marketing which is just come to the summit people money meet people with deals all gonna be together um Matt I think you guys are going to provide some of the um uh some of the things that help with networking so booze and food uh so it just greases the SKS right make it easy you know little social lubricant make it easy for you H so so Matt a big thank you for H coming to auson Texas to uh to to allow some of these networking magic to happen uh to help you in your
(42:50) marketing helping you in your finding deals and helping you and you’re placing money so super looking forward to that yeah thanks so much and I think want every ready to be there the self-directed IRA Summit it’s again April 25th in Austin Texas shinoa is going to be there I’m going to be there we’re going to be talking about this a lot of other great guest speakers and the other thing is sorry April 26th okay 25th is the Friday we do a little reception before April 26th Saturday um but the nice the other thing I want to
(43:16) say about why they go there is you can hear about what other people have done there’ll be a lot of our investors and our clients there that have million dooll accounts okay some of them will be on the panels and talking about what they’ve done and and it’s it’s nice to just see what other people have done and go talk to them most of these people that are there like telling you their story and what they’ve done and what they’ve learned um there it’s been super empowering to many of them so you can get to network with them also if you
(43:41) have deals it’s a great place to network to find other people because they’re looking for deals that’s again and I started this with the number one complaint people have about a self-directed DI they think they think is holding them back is they’re not finding good deals so if you’re a real estate operator with deals come meet and network these people they’re looking for Deals they got self-directed Ira they don’t want to buy another mutual fund they want to go do a real estate deal all right April 26 chel thanks so much
(44:05) for being on I’m looking forward to seeing you in Austin and thanks everyone