April 24, 2018

My First 10 Months Finding Private Lenders

Episode 188:

As a leading real estate mentor in the US and host of this podcast, Mitch Stephen, talks to Mike Wallace about his experience finding private lenders and other resources that you can apply right away!

With extensive real estate experience, Mike helps buyers and sellers meet their real estate objectives. He has a broad knowledge of communities located within the Southeastern Wisconsin area and works diligently on his clients’ behalf to make their home buying or selling experience a pleasant and successful one. He is committed to helping people sell their home or property in a timely fashion while attaining the highest possible price for their real estate.

What you’ll learn about in this episode from real estate coach Mitch Stephen:

  • The power and flexibility that using private money provides real estate investors
  • The experience of going through with his decision to leave a steady, lucrative job he knew well to start a new career in real estate
  • How winners in real estate never overextend themselves and keep multiple revenue possibilities open versus going all in on one thing
  • The way Mike used his loan industry experience to bolster his confidence when he started making those first phone calls to obtain private funds
  • The way he used resources like podcasts and scripts to improve his chances of making positive connections
  • What successfully closing out his first real estate deal did for Mike’s psyche and how it inspired him to keep going
  • Learning to tap into investor resources like 401Ks and other retirement accounts by showing potential stakeholders how they could profit long-term
  • Using the volatility of the stock market as a selling point to investors by showing them the benefit of having a tangible asset available
  • How to gauge the responses to different scripts and adjust your technique to fit the situation
  • The path a new investor should take to start obtaining private funds, starting with friends and family and working their way up to newer connections

Real Estate Coaching Resources:

Transcript:

Mitch: This is Mitch! And welcome to the real estate investors summit podcast. We have Mike Wallace on the line today, and he was a guest on episode 159 where we talked about how he went from $0 to $7500 dollars a month positive cash flow. It’s been a very popular podcast episode. Mike says he gets a lot of love from it and a lot of people contact him and talking to him via the net and stuff. But we’re gonna talk about in this episode, how he’s raised private money in what his experience has been raising private money and just private money in general.

Folks, I’m talking to Mike Wallace about private money. We’re gonna continue this conversation, but I have to take a timeout here to hear a word from a couple of our sponsors and we’ll be right back. Stay tuned for more of Mike Wallace and private money.

Our sponsor of today’s show is Fund&Grow. My friends at Fund&Grow, Mike Banks and Ari Page are doing a fine job helping my students find fundings for their deals. So I want you to go to reinvestorsummit.com/grow and listen to how their getting my students zero percent interest money and or very, very, affordable bank lines of credit. Now we want to remind you that yours truly has interviewed Mike and Ari personally on this podcast, you might want to go back and catch that but I also want to tell you that today 60 of my students have raised a combined 6 million dollars in credit that is tailor made for the creative real estate business that we’ve been talking about.

Don’t have good credit? Well let me tell you about that. I have another 20 or 30 students that are working on their credit. And my friends at Fund&Grow can help you with that as well. So I want you to go to reinvestorsummit.com/grow and check it out. The right funding source can change everything. There you have it. Thank you Fund&Grow for sponsoring today’s show.

As your wonderful and all knowing host at the realestatesummit.com podcast. I feel like it is my duty to inform you of this app that I’ve discovered. It’s a wonderful app if you like driving for dollars or you think driving for dollars can make you some money, which it can, then I want you to hear me out on this. There’s this app and you take a picture of the house and it makes a postcard out of the picture that you just took and then it sends you the taxpayer records information. Now you can check to see if that taxpayer’s address is an address that you would like to send the postcard to and if it is, you can hit a button and in the click of the button, for 99 cents you can send out that postcard with the verbiage that you would likely use for a motivated seller. And that postcard will be on its way out for 99 cents.

Now if you look at the address and you see that the address is the same as the abandoned house that you just took a picture of, then you wouldn’t want to send the postcard to that house, of course. So you can push for an advanced search and for an additional 99 cents you can get an advanced search information which might have relatives phone numbers, emails, who knows. So that you could hone in on the owner of this vacant or abandoned house. This is a wonderful service. There’s a lot more to it but I want you to go to reinvestorsummit.com/machine, m-a-c-h-i-n-e all lower case, and check out this app and all it can do.

There’s so much more that it can do. It is a wonderful app. I like taking the pictures with, like a selfie, with me in the front and the house in the back. Ladies and gentlemen this separates your postcard from everyone else in the business. If there’s 25 postcards on the table yours is gonna jump out because a) it’s a picture of their house and b) they get to see you in you’re a human and obviously you’re there in person where you couldn’t have gotten the picture taken. So this is a wonderful app. I want you to check it out, reinvestorsummit.com/machine.

So let’s just jump right in into it. Hey Mike, How you doing?

Mike: Doing great. Thanks for having me.

Mitch: No problem man. So is your phone blowing up since the last episode?

Mike: Yeah, It was, it was kind of funny. I was getting, you know, text messages and phone calls. People hitting me up on Facebook. On Linkedin. And even had a guy reach out to my wife and ask for my number.

Mitch: Hey, well at least we know we’re out there reaching people, huh. It’s good to hear from my side of the table but really great to hear that. Means it’s effective and it’s going out there. We’re going to talk about private money. When was the first time you recognized the power of private money?

Mike: Oh man, it would have to be back when I was at the bank looking at your financials and seeing 1) the amount of private money you had already to purchase some of these properties and then you know when the bank, either, I don’t know if we turned you down or we were taking too long to get a deal done and you just went out and got the property that you wanted anyway and without us.

Mitch: I was wondering if that’s what you were gonna say when I asked this question because I was thinking to myself, you should’ve seen it back then you know what I mean. But you’re like one of the few guys that saw it because everyone else is still working at the bank.

Mike: Yeah, no, that’s exactly right.

Mitch: When did you go on to real estate full time? Do you remember what the month was or the year?

Mike: It would’ve been May of 2017.

Mitch: Okay. So, not even a year ago. May of 2017. How long was it before you got your first private money?

Mike: I had talked to some people before I made the leap. Because, you know, I just wanted to plan as much as I could. I didn’t want to jump in with both feet and come across a deal and then not have anywhere to go. So, I talked to some people prior to jumping in and kinda felt them out and sounded like they were going to be interested but they were like, you know, bring me a deal once you have a deal let’s look at it. So, I felt comfortable. I had three or four guys that I thought were gonna be interested, you know, before I even made the move.

Mitch: You, so kind of tested them out and you talked to them about it and then they kind of left the door open saying sure if you have good deals bring them in and that gave you a lot of confidence.

Mike: Exactly.

Mitch: I usually teach that it’s the deal that bring the money but I do understand you were gonna leave a pretty lucrative job. You’ve been there for 12 years. You had good tenure. You were comfortable there. How hard was it to leave the job?

Mike: Aw man, it was very hard. You know like you said it was very comfortable. You know, after doing it for 12 years, you know, you gain a certain level of experience, and a certain level of confidence to where you know, it’s not, it’s not as hard as it was when you first get into the business. And so, you know, to leave that and try something completely new, you know, while also leaving a very secure cash flow stream, was, it was a hard decision.

Mitch: Yeah, I could see why you [inaudible 00:07:33] put out your head and wanted to get some ducks in a row and keep testing the water, testing the water cause that, leaving that job was probably a very stressful decision. Did you have any track record of buying any properties before you jumped off full time?

Mike: No, I mean the only properties that I had bought, I boughten two personal homes. And my first home then we sold it and bought our second home and sold it. So,that was it.

Mitch: But I would say that you had an advantage over some people, you know what I mean. You did have some advantages, right?

Mike: Yeah, I would think so. I mean I’ve been loaning money on real estate, commercial real estate in San Antonio for 12 years and I’ve been watching your business and a couple other guys that are investors in San Antonio watching ya’lls business for 12 years and seeing how you operate and you know, do the deals and all that stuff. So I felt like I had a little bit of an advantage over somebody that, you know, hadn’t seen those types of things before.

Mitch: Well, I’m gonna guess and I want the audience to know, I haven’t talked to Mike about this interview beforehand. So these are questions I’m just gonna spring on him. I don’t really know what he’s gonna say but I think I know what he’s gonna say, maybe. You know, you dealt with a lot of investors down there at that bank. And there were winners and there were losers. What stood out about the winners?

Mike: You know, the winners they never over extended themselves, They were conservative in the projects they picked to do. And they always had multiple accesses to money. You know, outside of the bank. So, either they had their own liquidity, they had access to private money or, you know, they could get multiple bank loans at a time so they didn’t…so I guess what I’m trying to say is nobody has their eggs in one basket.

Mitch: As far as getting money went

Mike: Exactly

Mitch: Yeah. Did you struggle at first when you were trying to find the private money? Or were you pretty comfortable right off the bat?

Mike: I was pretty comfortable making that initial phone call and I think that’s just because my experience again, you know, been negotiating, you know, multi million dollar loans for a while now. So, I was comfortable making the phone call and asking but it was still nerve wracking trying to come up with what questions are they gonna ask me. What are the reasons why their not going to be interested? So, that was a little nerve wracking just cause I hadn’t done it before and I didn’t know what kind of reaction I was gonna get.

Mitch: So, you were worried about rejections?

Mike: Absolutely. You know, so tried to do my homework before. You’ve done a lot of material out there on making these phone calls which I kinda read and listened to as much as I could. The 20 objections were very helpful. I think I read over those just about every morning. Trying to memorize that and trying to memorize scripts. [crosstalk 00:10:20]

Mitch: You never told me all this. You never told me this. How did you get em?

Mike: Searching for em, listening to podcasts. You know, just your website. Yeah, I don’t even remember how I found them all. I was just searching everything I could related to [crosstalk 00:10:33] you cause I know you have a lot of stuff out there.

Mitch: You should’ve just asked me. I would have given them to you. Well, okay but you found them anyway. So, that’s cool. How much was your first private lender deal? Do you remember what your first amount was, or who it was?

Mike: Yeah, it was a friend of mine and they committed about, I wanna say, it was about 150, 200 thousand upfront, so I said okay, let me go get a deal off that one coming and you know, I think we closed it like 50, 60 thousand, was the first one but I knew that I had about 150, 200 thousand to play with, which was nice.

Mitch: How important was that first yes and that first you know, them saying yes it one thing but how important was that first funding where it actually went through and they actually loaned you the money? How did that affect your sight?

Mike: I mean it was huge. You know, starting this new business and the first one was like alright here we go. Lets see if this works. Lets see if they actually send the money. It actually went, you know, as smooth as you could have asked for.

Mitch: That’s amazing cause I tell everybody you gotta get that one under your belt, right? Cause after the one goes through, it’s like, you become almost invincible don’t you? I mean, you just, you get two feet taller and your chest sticks out further and you just walk with a whole different swagger after that, right?

Mike: Yeah, I mean the level of confidence obviously goes way up and then being able to talk to you know future investors about it. You can say, tell people hey, I’ve done this before with other investors and you can mean it, because you have. And so, no, that was a big deal.

Mitch: Yeah, that’s really cool. So do you have a personal sales pitch or do you use, I mean, I guess I have an elevator pitch that I was teaching and I didn’t know if you grabbed that or not. Or did you make up your own kind of elevator pitch?

Mike: Yeah, I mean, you know, once I kinda tell people what I’m doing and they show, you know, any kind of inkling of interest, you know, what I really usually say is, even if you could cash what’s in your checking account you don’t want to use, you know, we can use money that’s in the stock market. Do you have money in the stock market or do better yet, money in your 401k that’s just sitting there that you can’t touch and if they can move that to a self directed 401k, you know, that’s a great funding source. You know the financial guide that managed 401k and manage all those kinds of funds, they’ll tell you that their goal is to get somewhere around 6 percent growth.

And if they do that, they fell good about it. So, if I can borrow at 6 percent to 8 percent somewhere in there, depending on the deal, you know that’s a pretty good sales pitch to the investor. Because, one their making the same if not better return and it’s usually a better return than what their making and their getting a first lien on an asset. As opposed to money invested in some stock or mutual fund or whatever it’s in.

Mitch: So you’re teaching people how to self direct their IRAs, and their 401ks. A lot of people don’t know that they can do that, do they?

Mike: No, I didn’t know that you could do that. Then once I learned that that was a possibility, I mean, I feel like that just opens the door to so many people. Because you may say “hey you know if you have 50 grand to lend me, you know that’d be awesome. I can pay you, you know 6, 8 percent, something like that, on it.” And someone say, “well I don’t really have 50 grand just sitting around”, well what about your 401k. And it’s like “okay I’ve been working for twenty years. I’ve got a couple 100 thousand dollars in this 401k. Well you can use that.” I mean, it’s huge.

Mitch: Yeah, yeah that’s a really big one. How does the stock market effect you talking to people?

Mike: You know, the stock market is so volatile. When it drops a little bit, you know people get, people get scared. And you know they, the assets that they have you know, stock in the company, you know it’s not a tangible asset. You can’t go touch it. And so, when the stock market goes down, I feel like a lot of people, you know start thinking of, okay, what else can I do with my money. So, I tend to watch it quite a bit.

Mitch: Yeah, I found that too. It’s great time to talk to people about money when the stock market is really dropping or when it’s in a slump cause, because the way you lead into that conversation is just, “hey man did you see what happen with the stock market this morning?” And you could just tell within like two seconds the look on their face if they are heavily involved in their losing or if they weren’t in the stock market and they don’t care.

Either way, it’s kind of neat because if they drop their chin and put their head down and start shaking their heads no, you know that their losing their butt in the stock market and say you know, and how you say it is, “you know I’m so glad I’m not involved in that anymore and I don’t have to live by that ticker tape. If you ever wanna know what I’m doing, I’ll be happy to show you.” You know, and then they usually perk up. The other thing is, is if they say nah, I’m not in it, I say, “you know what, you sound like a smart guy. I’m not in it either. Would you like to compare notes because I would like to know what you do and I’ll show you what I do if you want.”

You know, and just open up a conversation like “hey you wanna share cause if you’re not in the stock market I’d like to know what you’re doing. Because I don’t want to be in the stock market either and I’m not. And I’m having some reasonable success. You wanna see what I’m doing? Show me what you’re doing and I’ll show you what I’m doing.” That’s the easy way to do it. [crosstalk 00:15:48]

So, yeah. Not to be self serving here, but do you use my scripts to the T or do you like the scripts or do you go off on your own and work it your own way?

Mike: No, I do use em and as far as a guide, I mean, there not gonna be a 100 percent perfect for everyone you talk to. But for a guide and then you just kind of massage it, you know based on the person you’re talking to. But, no, they have been extremely helpful when I’m calling somebody to talk to them about private money.

Mitch: So have you been able to get the responses that I am trying to elicit when I wrote those scripts you know, where I’m trying to get them to ask you if they can play. Or do you end up having to ask them if they want to play? Or do you go straight up and ask them if they want to play?

Mike: A little bit of both. You know, sometimes just talking to somebody, telling them what I do, you know, they’ll bring up well I’d be interested in doing something. That’s always fun when they bring it up. And then every now and then you know, you gotta I guess do a little bit of a hard sell and just say, “hey, you know I’d love for you to be a part of this with me.” So it just kinda depends.

Mitch: Yeah, I mean not any one thing fits all, you know nothing fits all. So, but it sounds [inaudible 00:17:09]  I would have guessed this from you. You’ve made it your own. You know, and plus you know people close enough sometimes that you can just talk to them directly. You don’t have to play the little game there, so to speak, if yo don’t want to. Cause you’ve had some pretty long relationships with people that have money, so, I want to be completely transparent on this episode and this show because you know, if you have advantages, I’m gonna tell people the advantages that you have. That’s one of the advantages that I think you have is you were used to talking to people with money. And you knew people, a lot of people that had money. Cause you were privy to their finances, to their financials. So.

Mike: Yeah, no exactly. That’s been a big advantage for sure.

Mitch: So just tell the audience real quick, how many, it’s not even, it’s not even the end of your first year. You started in May of 2017 at the date of this recording, we are March the 21st of 2018. So it hasn’t even been a year yet, how many months is that? So it’s like ten months. Ten months [crosstalk 00:18:08] into your first year. How many houses have you done?

Mike: Oh, it’s 33, 34, something like that.

Mitch: Yeah, and you got some on the books.

Mike: Oh yeah, Oh yeah.

Mitch: How many do you got ready to close right now? I mean, got under contract that you’re trying to close right now?

Mike: I’ve got, three under contract right now.

Mitch: So, that will put you at 36. So, you’re going to hit at least 36 by the end of the year, probably? That’s a great year. Was that your goal the first year you started? Or I mean, what was your goal? What did you expect to try to do in your first year?

Mike: You know, I had no idea. I thought I would be happy if I could do 20. I thought that would be a really good year. You know, talking to some other people they told me, if you can do ten you’re having a great year. And I kinda put a stretch goal on there, you know, if I could do 30, close to three a month, I would be feeling real good about myself. So, I’m pretty happy with what’s gone on so far.

Mitch: Well the first year I think is incredible. I bet you’ll hit about 40 houses in your first year. You know, my first year I did 45 houses, now that I’m thinking about it. I did 45 houses my first year. 60 houses my second year. 150 houses my third year but that wasn’t cool, I needed to cut back because it was too much. But anyways, you’re on a great trajectory man. You’re doing good. One last question and then we’ll wrap it up. What’s your advice to those who are about to take challenge of finding private money?

Mike: You really just got ta go out and ask for the business. And going back to my banking days, you know, one of things that we were taught and what we did was, is we start with the low hanging fruit, friends, family, co-workers, those types of people and then the next thing is what I call connectors. Which those are the attorneys, the CPAs, business owners, bankers, just people who are out looking at deals and that know people that have wealth and gotta find the few out there that for whatever reason you click with and they wanna see you be successful.

You know, one of my favorite questions to ask, you know, somebody that’s an older person that’s been in business for a long time is to say, “hey, you know if you were Mike Wallace and you were 34 years old and you were doing what I’m doing right now, what would you do? Who would you talk to? And the really successful people that you know, for whatever reason want to see you be successful, they really like that question and they will help you. And so, my advice would be to, you know try to meet as many of those connectors as you can.

Mitch: Well very good, very good. Alright Mike, I appreciate you taking the time to be on the episode again. I don’t know, you’re always a pleasure to talk to. I love your success. And I like the way you’re handling yourself. By the way, you have a new baby don’t you?

Mike: I do. Two months old.

Mitch: Two months old. So you started a new business and had a baby all on the same day. You’re just crazy for punishment aren’t you?

Mike: When it rains, it pours.

Mitch: Alright, so, let’s introduce him to the world. What’s his name?

Mike: His name is Nash Michael Wallace.

Mitch: Alright, he’s gonna be a national sensation starting from two months old. Okay. Alright, man. I appreciate it. All you listeners out there, thank you for taking time to stop by and getcha some Mike Wallace and learn a little bit about private money. I wish everybody lots of success out there and I hope you’re hitting your goals for this year.  This is Mitch Steven with the Real Estate Investor Summit podcast and we’re out of here. Bye now.

Mike: You’ve been listening to the owner financing master Mitch “be the bank” Steven. On the Real Estate Investor Summit Podcast. Let us now blatantly, without apology, bribe you towards financial freedom by offering you a whole bunch of free stuff. Go to reinvestorsummit.com and getcha some and you all come back now you here.

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