March 2, 2024

Owning multiple properties with no money? While it might sound ludicrous, there are several ways to do it. Money shouldn’t be the barrier preventing you from getting into the world of real estate investing. In fact, many people have been able to turn around their own fortunes by using other people’s money (OPM)—today’s special guest is one of them!

In this episode, we chat with Mike Larson, who found himself in this type of situation only a few years ago. Trapped in over $40,000 of consumer debt and living paycheck to paycheck with zero savings, Mike decided that real estate was going to be his escape rope. Over the next year, he eliminated as many bills as possible, tracked all of his expenses, and worked tirelessly to supplement his W-2 income. Today, Mike owns four long-term properties, has amassed a multiple six-figure net worth, and lives the real estate rookie’s dream by the beach.

Tune into this episode for a classic, feel-good, rags-to-riches story. Mike shares about his real estate investing journey and provides all kinds of helpful tips—including the steps you need to take to fast-track your real estate career, how to use other people’s money to secure your first investment property, and how to get private money lenders to come to you!

Ashley:
This is Real Estate Rookie Episode 275.

Tony:
So you get this first deal, you seem to do really well with it, right? You have this amazing first deal using other people’s capital. How many total investment deals have you done since that first one?

Mike:
So I owned four and I’m under contract on two right now, one of which I have already assigned. I assigned it the same day. I went under contract at 1,236. This was last week. 1,236. At 932 or 925, I assigned it for a $50,000 profit.

Ashley:
My name is Ashley Kehr and I’m here with my co-host Tony Robinson.

Tony:
Welcome to the Real Estate Rookie Podcast, where every week, twice a week, we give you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And today I would love to shout out someone by the username of Mona Cici. Mona left us a five star review on Apple Podcast. She says, “Love it! With an exclamation mark. Thank you for sharing all the great information. The stuff that you share is so down to earth and it makes real estate investing seem achievable. I’m two years into my investment track and I don’t miss an episode.” She just says that she loves if we could do an episode about some spouse works and things like that. But she says, “Thanks again for the amazing podcast.” So Mona, we appreciate you. And for all of our rookies that are listening, if you can, please take the 37 seconds that it takes to leave a review on Apple Podcasts or Spotify. The more reviews we get, the more folks we can reach. And the more folks we reach, the more folks we can help, which is what we love doing here.
But I’m super excited for today’s episode. Honestly, Ash, it’s probably one of my more favorite episodes that we’ve done. I loved Ava Yuergens’. I don’t know which episode she was, but she was such a young hustler. But Mike is like, he is the epitome of what is that saying? It’s like, “I find that the harder I work, the luckier I get.” I don’t know what the exact saying is, but there’s a quote out there about people who work hard tend to get luckier. And Mike is the total epitome of that happening. He’s found private money, he’s found partners, he’s found deals all because of he just happens to be at the right place at the right time, but it’s all because of how hard he’s working to make that thing happen.

Ashley:
I think something that I realized from that was that these were all in scenarios where he was working. It wasn’t like, “Oh, we love meetups. We love networking events too.” Those are great and you’re going to make connections that way. But it wasn’t any of those scenarios. It was all him taking action and working on his business when these things happened. So I think it’s really awesome to listen to those things too. And Ava’s episode was episode 271. So if you guys missed it, you can go back.
So before we bring Mike on, I just want to highlight too that one of the great things about this episode is the private money and the OPM, using other people’s money and how Mike unintentionally got somebody to offer to be his private moneylender. So listen to what he did to provide value to this person without even thinking that this person would offer him money in the end.
Well, let’s give you the official welcome to the show, Mike.

Tony:
Yeah. Welcome to the Real Estate Rookie Podcast, brother.

Mike:
Thank you so much. I’m truly honored.

Ashley:
Well, we’re so glad to have you here. Can you tell us just a little bit of your backstory and who you are?

Mike:
I am from Clayton, North Carolina, little town outside of Raleigh. I recently made the transition down to Myrtle Beach, South Carolina. I started in my investing journey in 2020.

Tony:
It’s a great time to start.

Ashley:
Yeah. And what made you start then? What was that kind of moment that happened for you?

Mike:
I’m not sure if it was an epiphany or kind of like a come to Jesus talk with myself, but I hit that crossroad where I was like, “Okay, I can keep going down this path that I’ve been on and I’m going to get the same results, or I can change the game up and see if I can better my life.” I was not somebody who was big into finances. I honestly was a day by day type of guy, like paycheck to paycheck, I’ll figure it out eventually. And then 2020 happened.
I think I can accredit a lot of it to a good buddy of mine, Caleb Kennedy. He was the first person that I ever had a finance talk with. He made being frugal look cool. Instead of going out and on the weekends and stuff, he’s like, “Mike, nah.” He showed me, I believe it was his Robinhood account, and it had a very significant amount of money in there. I knew at the time we made about the exact same money a year and my account didn’t look anything like his. So I was like, “Man, how’d you do that?” He’s like, “I’m cheap. I don’t spend money.”

Tony:
Yeah. Mike, I love that story because you said he made being frugal look cool. And that is such an antithesis to what society kind of promotes. Me and a friend were talking the other day, and it’s like there’s so many people on social media who have these big followings. A big part of the reason that they’re followings are so big is because they’re posting wads of cash, and, “I got this and I got that,” and that’s just not my personality. I’m not a flashy person like that, but that’s what a lot of people were drawn to for whatever reason.
But I think if we can all do a better job of normalizing frugality and making that the cool thing, and exactly what you said where it wasn’t necessarily the car that he was driving. It wasn’t necessarily him going out on the weekends, all these crazy things. What really impressed you the most about him was his Robinhood account. And imagine if all of us had to walk around with our net worth or our Robinhood account numbers floating on top of our head and people seeing that as opposed to the clothes we wear or the cars that we drive or the neighborhoods that we live in.

Mike:
100%. I mean, it was a game changer for me because I was one of those people. I drove a BMW. It was literally paycheck to paycheck. I never thought about my retirement. I never thought about, “Hey, if I have kids, it’s going to cost 2,000, 3,000, $4,000 a month. I’m not saving 2,000, 3,000, $4,000 a month. So what am I going to do?” And so that was in February of 2020, I was like, “Well, I’m going to be cheap.” And I eliminated as many bills as possible. I started tracking every single penny that I spent.

Ashley:
How were you tracking that mic? Were you using Excel, an app or something like that?

Mike:
The good old-fashioned way, pen and paper.

Ashley:
Yeah?

Tony:
No way.

Mike:
Yes, sir. Yep, I have books now. So I literally just started writing down everything that I spent. Each month I would try and improve it, “Okay. I spent this much on gas. I spent this much on food. Let’s see if I can knock a little bit of this off.” And at the time, I was still body building, so my food was very basic. So I’d go and try and find the cheapest chicken, I’d try and find the cheapest rice, I’d buy it in bulk. 20, 40 pound bags of rice. I cut vegetables out. I was like, “Man, I just need protein and carbs and fats. Sorry, the greens ain’t working no more” and just made it as cheap as possible and I started paying off debt, because I did have some credit card debt.
I had that car, which I ended up selling, getting rid of when the economy went crazy and used car values went up. I didn’t have to pay anything to get out of it because at the time, I think I owed 26,000, 27,000 on a car, which was, now I look back, I’m like, “Jesus, Mike, if you just had the money you spent back then, you’d never have to work a day in your life.”
So that was at February. I did not own… I’d never even thought about buying a house. As bad as this seems, I didn’t think I’d ever be able to because I didn’t keep up with my credit. I used to be ashamed of all this. But now I look back and I’m proud of it because it led me to where I am today.

Tony:
And Mike, just really quick. I don’t think you should ever be ashamed of that, right? It’s like every person has a backstory. None of us would be who we are today without that backstory. So there is a high possibility that you wouldn’t be on this podcast with us right now having this conversation if it wasn’t for those decisions that you made and what you feel were mistakes if those mistakes didn’t happen. So I think there’s always a lesson to be learned. But one thing I just want to ask before we keep moving. So you went on this journey to radically reduce your monthly spend. You don’t have to tell us the exact numbers, but just were you able to cut it in half? Was it like a 25% decrease? How much were you able to bring down your expenses over that timeframe?

Mike:
Probably little over $2,500 a month.

Tony:
Wow.

Mike:
Yeah, that’s what I was able to save per month after. So I reduced it by $2,500 a month.

Tony:
Let me ask another question. Ash, I want to ask this to you, and then Mike, we can go to you afterwards, but there’s always this debate in the world of personal finance. You hear someone like Grant Cardone who says, “Don’t worry about saving money, just worry about exploding your income.” And then there are people like Dave Ramsey on the opposite and the spectrum who say, “Stop buying that $5 coffee every day.” Where do you fall, Ash? Where do you think is the right balance to strike between those two extremes?

Ashley:
I think it’s more of the mindset for that $5 coffee. It’s not the $5 coffee that’s going to make you save money and build wealth and have that financial freedom or to pay off debt. That’s not going to make a huge impact on your debt. But it’s that mindset that you’re willing to be frugal, that you’re willing to give up things, and giving up that $5 coffee will make you realize other things that you’re able to give up to save money.
And as far as the exploding your income part of it, when I was paying off my personal debt, which was student loans and farm equipment basically, and a line of credit on my house, what we did was invest in rental properties and use the cash flow. And for years, my cash flow just went to paying off of that, and I never took any money out of the rental properties. So I think that there is that other huge debate as to, “Do you pay off your debt first and then invest? Or do you invest simultaneously? How does that work?” So I think it’s very different for every person, but that’s what worked for me, is using other people’s money to buy the properties and just using the cash flow to pay off debt.

Tony:
Mike, what about for you? You went on this radical journey to reduce your expenses. Did you also focus on… I mean, obviously you did, right? That’s why you’re on the podcast. But how did you make the transition from saving everything to now pouring that into building your income?

Mike:
Well, I knew real estate was the way out. It was about that time in… Actually, it hadn’t gotten till the end of the year because I set a goal that February, I said, “By the end of this year, I’m going to buy a house.” So I was eliminating debt, improving my credit score, saving money. I paid off all those credit cards, paid off a ton of debt. And December 30th of 2020 is when I closed on my first ever house. I utilized the first time homeowner’s loan. So 0% down, just paid closing costs. And I already had that mindset of, “Okay, what am I going to do with this property to make me money?” I’d heard of flipping houses. I have friends that had rental properties and stuff, but I still hadn’t started digging into it.
But the house was built in 1998. It was outdated. So I was like, “Look, I know I can add some value to this. I could do new floors, new paint, new everything, and it’ll make it worth more property.” And the neighborhood that it’s in is immaculate. Golf course neighborhood. When I was growing up, I called it the rich kid neighborhood. So I was proud of that. I knew I was going to do something with it after, but it was during that process that I started learning about real estate. When I was closing on that house, I stumbled upon BiggerPockets and I was like, “Oh, financial freedom.” Because I started saving money and everything, paying off debt, but I’d never heard the term financial freedom before and the thought of something else paying for my bills, it just resonated. I was like, “Okay.” I took every bit of energy that I had that I was putting into bodybuilding and focused it on real estate.
It was a complete… “Well, see you later. I’m going down this path now.” Because I’m the type that if I like something, I want to learn as much as I can about it. I just obsess about it. I just started learning so much. And I knew right then, I was like, “Okay, this is what I want to do. This is how I want to get to that place in life. I want to buy real estate.” So 2020 got closed of my house December 30th. 2021 starts, and that is when I was like, I still didn’t know a lot about real estate. I didn’t know about private money. I didn’t know how to structure deals, do creative finance, wholesaling, any of that stuff yet. So that’s when I was like, “All right, how can I save more money faster?” And I stumbled upon the vending machines. I was looking at different asset classes. I looked at ATMs, vending machines, online businesses. Vending machines stuck out because of the cash-on-cash return.
I met a guy. So I bought my first location at a car dealership from a friend of mine. It made like 300, $400 a month, and I paid $4,200 for it. So about a 10% return on your money. So I’d do that for three months or so. But these were really old machines and they couldn’t utilize credit card readers. So I flipped those, ended up selling that location for $5,000. Took that 5,000, I was like, “Okay, I’m going to buy a couple more machines, but cheaper.” And so I ended up meeting this guy, older guy that lived in town, and that was what he did full time. He had 110 machines running at the time. He was making really good money off of it. And he’s like, “Mike, I got one location that does $800 a day.”

Tony:
What?

Ashley:
Wow.

Mike:
And I was like, “What? $800 a day for a vending machine.” So I check out this setup. This was incredible. He found a farm that was 15 miles away from anything, no gas stations, anything like that. So all the farm hands that would get shipped in there to work on the farm, they lived off the vending machines. I think he had six or seven out there.

Ashley:
Wow, that’s so interesting. Yeah, I’ve thought about vending machines. You see people post about them on social media. It might be a great thing for my kids to get involved with, but that’s what I’ve always struggled with is finding the location of the vending machine. So I love this strategy that you’ve got your first property and then you’re also looking for other ways to supplement your income. Were you working at this time and did you have a W2? What were you doing besides the body building>

Mike:
Yes, ma’am. I was working full time. So I’ve been in the pharmaceutical industry since 2014. I was a, what’s called quality investigator, but basically it’s a glorified technical rider. When they had any systemic issues or product issues, I had to justify to the FDA that we had our standards in place, that our SOPs were good and that it would not affect the product in any way. So I’ve been doing that since 2014. And then, yeah, on top of that, I was coaching wrestling too. So I was investing, coaching, body building, doing all this stuff at once.

Ashley:
Let me ask you this question because this is out of my own curiosity, because I think sometimes people struggle to make this connection. So I want to ask you, are there skills that you acquired from your W2 job that translated over to real estate, that you think because… The word that stuck out to me was SOPs. That can really help you in your real estate business, is creating those standard operating procedures, building those systems and processes. So did something like that or other things from your pharmaceutical job, which you would not think has anything to do with real estate, were there some things, some tasks that you would do or skills that you had learned that have helped you with your real estate business?

Mike:
Oh, 100%. Besides the standard operating procedures, I think it was the way that I had to write and talk throughout my drafts that transferred over to how I talk to people like sellers when I’m trying to buy a property. And then I systemize how I go after these properties also. And the structure, I think the structure of it all, I’m very quality mindset. So my business is run that way. I want to be able to provide the best. And then pharma, you have to do the same thing. You have to provide… Everything has to be identical. So I try and emulate that with my business. So it transferred very well.

Ashley:
I want everyone listening now that maybe thinks that their job doing whatever won’t translate to real estate in any reason, look at Mike as an example. He took his pharmaceutical job and has taken skills from that for his real estate. So just take the time after this episode to write down maybe three things that you do now in your day job that can help you with real estate investing. One of those things might even be that it’s just a W2 that can help you get that first loan, that first mortgage. So Mike, you had mentioned that you did a first time home buyer loan. Can you maybe talk about that a little bit? We hear a lot about an FHA loan where it’s three and a half percent down. What was kind of different about your loan that you did 0% down?

Mike:
It was 0% down, and they just offered a… I think you had to pay a prince or a mortgage insurance on it. So every month is like 80, $90 extra a month. But if you can compare it, yeah, long term it might be a little bit more expensive, but instead of putting that three and a half percent down or 10% or 20% down for a conventional loan, that saved me a ton of capital up front. And I used whatever I had left to buy vending machines to create more capital.

Tony:
Yeah, Mike, you’ve done a great job of, and this is what we’re talking about, of kind of attacking it from both sides where you went after this kind of debt reduction journey to kind of bring down and save more money, but then you also focus on, “Okay, how can I create more income?” So you got the first property, you got into it for a relatively small amount, then you go into the vending machine business. So just for clarity’s sake, Mike, that first property, since it was owner-occupied, were you able to generate revenue from that property or was that one just as your own primary residence?

Mike:
That was my primary residence. I had thought about doing some house hacking and renting it out, but I was like, “I don’t know.” I was making pretty decent money. At the time I was in a relationship, so she was living there also and we didn’t want roommates.

Tony:
Yeah, no, totally understand. Yeah, I got a wife and kids too. I don’t know if I want roommates either. So at what point did you say, “Okay, let’s get that first investment property,” and what did that journey look like?

Mike:
So 2021 was basically my education year. I don’t know, I might have had a little bit of analysis paralysis, but I wanted to learn as much as possible. And I knew getting into it, I was going to hire a coach that I was going to spend the money to find somebody that’s been in the game and kind of get underneath their wing and learn as much as possible so I don’t make a ton of mistakes. And I was watching the podcast. It was a 45-minute drive to work for me one way. So in the mornings I would watch the BiggerPockets podcast, and then I stumbled upon the Rookie Podcast and it changed my life completely. So that was an hour and a half I was spending a day educating myself.
One of the podcasts, a guy by the name of Pace Morby was on there and he spoke to me. I knew right then I wanted to hire him as a coach and get into his mentoring program, and I did. So that was on November 14th that I heard the podcast because I listened to it that morning. I listened to it all the way home that afternoon. And then two days later I joined up on his SubTo community. That really skyrocketed my education. I felt confident in my skills from everything I learned in there. So that was November of 2021. Well, April. So at that point I started telling people, “Okay, I’m getting into the real estate game.” I’d got my real estate license during that time because I thought that that would help me find investments and stuff, which is a completely different game that I have now realized.
I just started having the conversations. Everybody I knew that had rental properties, I was blowing them up. “Okay, how’d you find this? How did you finance it? How do you find off market deals? How do you tell how much equity’s in the property? What’s an ARV? What’s a comp?” I’m trying to learn as much as possible in talking to these people that have already done it.
I think it was April 15th. April 16th, I get a text. It’s from my buddy Seth Brown, “Hey, check this out” with an address. And I look at it and it’s a little duplex built in the 1960s. I was like, “Okay, what’s up?” He goes, “I think this lady might sell.” I was like, “Well, ask her if I can call her.” That was on a Wednesday. Picked up the phone, called her, she said she was willing to sell. I said, “Okay, Friday, I’m going to come check out the property. If it’s indecent shape, I would love to buy it from you. We could discuss the price.” She goes, “Yeah, that’s fine.” So that Friday I drive to Lexington. It’s about two hours away from where I was living, and I picked up my first property.

Tony:
So Mike, we got to pause here, man, because there’s a lot of good things that we got to dive into. So first, I don’t even know if you realized this, but one of the things you said really stuck out to me is that you started telling everyone around you that you were a real estate investor. You didn’t have any deals yet, right? You hadn’t closed in anything, but you started to identify as a real estate investor. I think that mental switch is one of the most important things that our rookie audience can kind of take away from what you just said, is that until you adopt the mindset, until you adopt the identity that you are a real estate investor, it’s hard to really step into those shoes. And lo and behold, Mike, as soon as you made that mental transition to say, “All right, I am a real estate investor,” now you’ve got your friends reaching out to you saying, “Oh wait, Mike’s looking for deals. Let me share this to Mike.” That one little interaction leads to your first deal.
So again, if there’s one piece of advice for our rookie audience, it’s even if you don’t have that first deal, share with everyone you know that you are a real estate investor now, that you are looking for deals, that you are looking to invest. Because you never know who they may know and you don’t know who the people that they know who they know. So there’s this large community that you end up tying yourself into. So tell us about that first deal, Mike. I don’t want to brush past this. Were you able to use creative financing to secure that deal? Was it something else? Walk us through how you kind of funded and put that deal together.

Mike:
So I got extremely lucky because this was a home run. I’m talking Mark McGuire 1998 home run. Out the park, okay? So I go talk to the lady. Super sweet, it was great. I cut to the chase, I said, “Ma’am, how much would you like for this property? What do you think is a fair price for this property?” She goes, “Mike, I’d take 60,000.” She paid 30,000 for it 20 years ago.
But I guess we got to backtrack for a second. The reason he called me, my buddy Seth who is my business partner on that deal, he works for a company that they go in and fix foundations, crawlspaces and foundations. So he was there giving her a quote on how much it would cost to get the foundation because it was sagging a little bit, it needed a decent amount of work. And she’s like, “I don’t have that kind of money for that.” And he goes, “Well, I know somebody that might buy this as is.” And he sends me the text, we go from there. So I ended up getting it under contract for 65,000 because I purchased an easement to the right of the property that she also owned.
We put $17,000 into the foundation, which we were able to finance out over a year because he worked for the company. So we didn’t have to come out of pocket with that. We also put $5,200 into just update in one of the units. Painting it, fixing some of the minor stuff in there. We split that 50/50. Everything on this property we split 50/50. And then I went about finding the money to pay for it because I wanted to do a BRRRR on the property.
So me talking to everybody about I’m a real estate investor even though I hadn’t done a deal, a friend of mine’s dad reached out to me one day. He’s extremely successful. He’s now a mentor to me. Extremely successful. Owns, I think he’s right at 30 doors. So he’s the guy I see myself wanting to emulate. He calls me out of the blue one Saturday, “Hey, Mike, meet me at this coffee shop.” I was like, “Yes, sir.” I show up and he goes, “Look, look man, I’ve seen what you’ve been doing.” He goes, “I’m going to loan you $100,000.” He’s like, “You’re going to pay me 6% and use that to get started.” So it was awesome. That was a game changer for me.

Ashley:
Was this a handshake deal? Did you guys actually put together a loan agreement or anything like that? Maybe give us an insight of to that conversation of talking about doing the lending? Were there certain requirements he had or was this the easiest thing you’ve ever done?

Mike:
No, it was really easy. He already had paperwork drawn up for it. So he wanted 6% on it. And then it was just, I think I put him in first position on the note so that in case something happened and I wasn’t able to get the money out, then I wanted to back him because he’s a friend also. He wasn’t just a private moneylender. But it was extremely easy. It kind of came out of left field and-

Tony:
Hold on, Mike. I want to give you a little bit more credit because maybe that conversation was easy, but everything up until that point wasn’t, right? I just don’t want our rookie audience to get stuck on the fact and say, “Oh, well Mike had a friend who gave him $100,000. He’s special.” But no, it’s like everything you did to get you to that point is the hard work that most people aren’t willing to do, right? This person saw you hustling to reduce your expenses. This person saw you hustling to build relationships. This person saw you find a really great deal, which takes hard work and work out the numbers so that it’s a home run. So there’s a lot that goes into, so I don’t want you to shortchange yourself there.

Mike:
Yeah. There was a lot that happened up to that point also. When I was getting my real estate license, I called him out of the blue and I was like, “Hey, do you mind if we meet for lunch?”
“Yep.” We meet. And I was like, “I want to do business with you. Any way that I can help market you, I’m going to do it. Teach me what you need to teach me. Every deal that I get from my real estate license, you’re my mortgage guy.” Because that’s what he does, is mortgages. We had a lot of conversations in between those points. I also went out and found deals for him. So I would shoot him a deal, “Hey, what do you think about this?”
“It’s not for me,” but then, well a couple of them are ones he wanted to pick up. So I provided value to his life.

Ashley:
That right there, that was before he offered you the money, correct? Yeah? So that is such a great key element to our listeners and just showing how you went and you provided value first. It wasn’t you asking for money for him to lend to. You taking those steps led up to that moment where he came to you to lend you money. I think that’s a very important to mention and just a awesome strategy to make a connection with someone and to make it genuine. You honestly wanted to provide value to him by sending him deals, doing moans with him, things like that. I think that’s probably a big reason as to why he did want to lend to you.

Mike:
I agree. And he knew I respected him a lot. Like I said, he is a mentor to me. He’s just somebody that I want to be like. Every time I saw him, I was asking him questions, “Okay, how does this happen? How do I do this?” He’s just taught me a lot. That day he really skyrocketed my real estate career.

Tony:
Isn’t it crazy how one conversation can have that impact and kind of change everything? I want to go back to the deal, Mike, because… This is something I’ve never really thought about doing Ash, I don’t know if you have, but you guys found this deal because the current owner didn’t have the capital, didn’t have the know-how to solve the foundation issues. And to them it was easier to just give the property away as opposed to them doing it themselves. It’s like Ash, I wonder what if we just started a campaign where we just looked for all the houses across America that have foundation issues. How many off-market great deals do you think we could find if we were able to go to a seller and say, “Hey, don’t worry about fixing the foundation. We’re going to buy it from you as is.” You could probably get a ton of off market deals that way.

Mike:
Oh, definitely. See, we didn’t have to pay full price either because he worked for the company. So we got it at about 50% of what is the quote to the general public. So that saved us a ton. So right now that’s $17,000, 65,000 purchase price, and then 5,000 in minor stuff. So ARV on that property, 140,000. So at 70%, that’s 98,000. I hit a full BRRRR, 100% clean BRRRR.

Ashley:
Awesome.

Mike:
So that’s what we did. I went and I borrowed the purchase price from my investor friend. I paid him 6% up upfront. Even though it was an annual 6%, I was like, “Nope, I want you to have this up upfront.”

Ashley:
So you prepaid him for a year of interest?

Mike:
Yes, ma’am. Yep.

Ashley:
Wow, interesting. I don’t think we’ve had anyone talk about that just to make it more secure or more advantageous than saying, “I’ll make the payments to you,” it’s kind of we always talk about how to sweeten the deal with a seller to get them to accept your offer, but that’s a different unique strategy with a private moneylender too.

Tony:
Was it prepaid interest, Mike, or was it points that you paid up upfront? Was it separate from your ongoing interest payments or was it actually just the interest and you said, “Here it is upfront”?

Mike:
Just the interest here upfront, yeah. I wanted to provide value to him up front too and show, “Hey, I’m here to do good business. I want all of us to win.” And that’s how I am with all of my private moneylenders now. I was able to get one private moneylender literally off of Snapchat. He was a friend of mine. I posted one of the deals and he’s like, “Are you doing that now?” I was like, “Yeah.” He’s like, “Man, I’ve got a ton of cash that I need to invest. Let me know if you have any deals.” Two days later I give him a call, “Hey, I got a deal.” He sends me a check for $90,000 right after.

Ashley:
That’s it. I’m downloading Snapchat.

Tony:
Yeah. That’s where all the private moneylenders are hanging out. I’ve been on the wrong platform this whole time.

Mike:
Yep. I gave him a good deal.

Ashley:
I’m deleting Instagram. I’m going to Snapchat.

Mike:
And I gave him a great deal. I gave him 40% of our net profit on that deal.

Ashley:
Wow.

Mike:
So it was like a one-month turnaround. I think he’s going to make like $8,500 or something like that for a one-month turnaround. So where are you going to find something paying that well?

Ashley:
Mike, I want to talk about the rehab, about doing the rehab on these properties. Did you have any experience in construction at all? Maybe talk us through what you do for rehabs. Are you hiring general contractors? Are you using friends? Are you doing some of the work yourself? You just said you did turned over a house in one month, that’s pretty efficient. So what are some of the things that you’re doing for rehabs?

Mike:
It depends on the property. So that was the only one we’ve had foundation issues with and that’s how we got in the door there. I have made some mistakes along this journey. I’ll be the first to say it.

Ashley:
So have we all, especially with rehabs.

Mike:
Very expensive. Very expensive mistakes. I made the mistake of thinking just because someone was a friend, that they would do good business. I had a couple GCs that I at the time considered friends and they came in, did horrible work, and it set me backwards a lot. I think if you’re going to do it, you have to keep friendships and business completely separate and you have to treat them… For me, it’s been hard to find very reliable GCs. I don’t know how you guys’ markets are, but where I’m at is just nobody takes pride in that work anymore, I feel like. And they can charge top dollar and I’ll pay top dollar. I want quality work. That’s my mindset. I want my properties to look incredible because they will never look like something I wouldn’t live in. And I expect that from anyone that works with me to give 100%. I’ve had a couple situations where it cost me a lot of money. They came in. I paid up front. That’s something I’ll never do again for general contractors. Twice I paid up front and they disappeared.

Tony:
Yeah, that’s unfortunate. We talk about this all the time. It’s like the entrepreneur in me wants to start a GC company that focuses on real estate investors. Literally, if I’m just the one GC that picks up the phone when the client calls, I’ll already be in the top 1% of the 1% of all general contracting companies.

Mike:
Amen.

Tony:
Mike, so you get this first deal, you seem to do really well with it, right? You have this amazing first deal using other people’s capital. It seems like now you’re kind of building a relationship with private moneylenders. So if we can just pause really quickly, how many deals have you done since that? You did the primary residence in 2020, then you did the first duplex. How many total investment deals have you done since that first one?

Mike:
So I owned four and I’m under contract on two right now. One of which I have already assigned. I assigned it the same day. I went under contract at 1,236.This was last week, 1236 at 932 or 925, I assigned it for $50,000 profit.

Ashley:
That’s amazing.

Mike:
Thank you.

Tony:
Yeah. So your wholesaling now as well then, Mike. So you’re finding deals for yourself, but you’re wholesaling. So of those four deals that you’ve kept so far, two of those I know you used private capital to fund. What about the other two? How did you fund those two?

Mike:
Private money. Yeah, so the two I have under contract right now, we’re just going to turn and BRRRR. We’re just going to wholesale those out because we’ll make a good chunk of change like that one $50,000 profit. The other one’s not as lucrative. It’s only like 10,000. But we’re trying to stack it up right now because we don’t want to continue to have to go out to private moneylenders. We feel like in the next six months to a year, we’re going to just stick in the wholesale realm and then maybe do a couple flips, then next year get into a little more flips because we want to transition away from single family homes and duplexes and stuff. We want to get into the storage facility asset class. I personally want to buy a couple oceanfront condos for Airbnb for my own portfolio, but right now it’s just about stacking up capital. I made the decision this past week that I was going into investing full time, so I’ve left my W2.

Tony:
Congratulations, man.

Mike:
Thank you.

Tony:
We got to get like a little bell that we can ring for our guests when they quit their job. You got that on the soundboard?

Ashley:
I have my little soundboard. I don’t know what any of the buttons are, so this is going to be a surprise as to what sound it makes.

Mike:
[inaudible 00:38:29] it.

Ashley:
Hand clap. There we go.

Tony:
There we go.

Mike:
I act like I’m super happy, but guys, I’m so scared. This is the first time since I was like 16 about having a full-time job, you know?

Tony:
Yeah, it definitely is a scary moment, right? Ash and I have both gone through that transition of the last couple of years. And it definitely is, I think, a scary moment. But once you realize that you’re able to provide for yourself and provide for your family with your own… Not your own two hands, but it’s like with your own work, it’s almost this relieving sense because now you’re not tied to what someone else thinks of your value, right?

Mike:
Exactly.

Tony:
Now you’re not tied to what someone else wants to pay you. The upper limit of what you’re able to earn is squarely on Mike’s shoulders, or it’s on Tony’s shoulders, or it’s on Ashley’s shoulders and it’s not on XYZ corporation for them to say, “I feel like Mike is worth this much money. I feel like Ashley’s worth this much money.” Or, “Tony, you’re going to get this much more money.” It’s 100% on you. So there is this fear, Mike. But dude, once you kind of break through that fear, it’s almost this liberating feeling because you realize you’re in control.

Mike:
I can’t wait. I mean, I just recently moved down here to the beach too, and this is something I’ve wanted my entire life. Since I was a kid, I was like, “I have to live at the beach.” And then back in December I was like, “You know what? I had a talk with a friend of mine, very successful.” He reminds me a lot of you guys how positive and just uplifting type guys, the ones that you just want to be around all the time. Well, we had a talk and he’s like, “Mike, I see where you’re going. I know you want more in life. You got to get away. You have to just go somewhere, start over and just focus on this new life.” So back in December I made the jump and it’s just been incredible since. I’ve met some absolutely fantastic people here that are super successful in the real estate world and they’ve taught me so much.
I’m like Luke Rotvold off the phones now. That guy is an animal, so I’m just chasing him so hard right now. This is coming from a guy that I used to hate cold calling with a passion. Now I blast it few hours a day just going. And it’s from being around people that I’ve seen utilize that that are… My good friends, Kevin and Lance down here, Lance is over a hundred deals a year. So that’s something that I want in my life. I want those kind of numbers. It’s just building that confidence. When you’ve got the right circle, they’ll help you build that confidence.

Ashley:
Mike, I want to ask, what are some of the steps that you did to decide that now was the right time to quit your job? Is there anything that you have to prepare for now as to, like the first thing I always think of is health insurance. What are people going to do for health insurance? So can you talk us through some of the things that made you decide now is the time to quit?

Mike:
I think that deal I did last week. It was literally a nine-hour deal. I got it under contract. Nine hours later I [inaudible 00:41:41] it for 50,000 profit. I was like, “Mike, if you were able to do this 40, 50, 60 hours a week, there’s no telling how much you can make.” I loved what I did. I worked for some good people, but it wasn’t my passion. I just don’t want to be 65 years old and look back and go, “Man, I wish I’d have just chased, give everything I could to real estate, to something I was passionate about.” But with health insurance and stuff, I’ve got a good amount of money saved up now. So I guess I’m going to have to find a good policy to jump on. I haven’t really thought about it yet.

Tony:
Now you’re scared of it, right?

Mike:
Yeah, no.

Tony:
Mike, I wanted take us to our Rookie Request line, but before we do, I just wanted to ask one final question about the private money piece. I guess two questions. First, what kind of rates are you offering to your private moneylenders today and has that shifted as the inflation has played an impact and the feds been raising interest rates? Have you seen your private moneylenders asking for higher rates? And then the second question is, what documents do you typically use to formalize that relationship?

Mike:
So we actually had a lawyer draft up something for the loan and all the money. One of our deals, we didn’t have any paperwork at all. It was just purely a handshake. But I try and pay them as well as I possibly can because I want to establish the trust, the loyalty and show like, “Hey, Mike knows what he is talking about. He just gave me a 15% return on my money in 60 days.” We do something where we’ll guarantee six months. So okay, say we got the money loan for 10% on $100,000 or whatever the amount is. We’ll go, “Even if we turn this around in two to three months, you’re getting paid for six months no matter what.” So it’s beneficial to them. And it just all really depends on the deal, I feel like. My private money guys have not tried to stiff me or tried to go higher on the rates. I think they see that I’m going to pay them well.
So there’s enough food on this table for everybody to eat and I want to make sure my guys are taken care of because then if I need something I’m taken care of. So we’ve got really lucky with that. We got one private moneylender through another friend. It was all because my business partner, Josh Cotton, was sitting at a coffee shop on his lunch break cold calling, okay? This lady walks up to him and goes, “Sir, are you a wholesaler or an investor?” He goes, “Yes ma’am, I am.” She goes, “That’s funny because my husband does the exact same thing every night. You guys should meet.” Well, we meet and just hit it off. It was awesome.

Tony:
Mike, your story is so crazy, man. It’s like there’s all these kind of serendipitous moments where it’s literally the byproduct of you guys working hard. Who goes on their lunch break to cold call? It’s a very special type of person that does that, but that single action kind of creates this domino effect. It’s the wildest thing, man. So if there’s one thing that I would want the rookie audience to take away from your episode, Mike, it’s that if you work hard enough, good things tend to happen. And you’ve proven that just over and over and over again, man. So I want to take us to the rookie request line here. So for all of our rookies that are listening, you guys can always phone in your question, just give us a call at 888-5-ROOKIE. If your questions are good enough, we might just use it on the show. So Mike, are you ready for today’s question?

Mike:
Yes sir.

Tony:
All right. So today’s question comes from Andrew and his question is, “My name’s Andrew. I’m calling from New Jersey. The question I have for you all basically is how you differentiate your entities? I work with two partners and we have one specific entity that is carry almost everything. Everything is under one entity when investing people’s money, private moneylenders, or investing in off-market properties. I’m wanting to know if you guys differentiate those. Do you have two different types of entities? How do you handle that? Hope to your answers. Thank you so much for taking my call.” So I guess the basic premise of that question is Mike, so you have properties that you’re holding, you have your wholesaling arm, you have partnerships. How are you structuring between your entity, your partner’s entities, and then the different activities in your business?

Mike:
I set them up in different LLCs. Every one of them is in a different LLCs. So I’ve got the property with Seth that’s in one LLC. I’ve got our actual business that’s an LLC. And then I’ve got what we hold because I’ve got properties with Josh, my one business partner, then with Seth. So we have different LLCs for that too. I just separate everything completely. And then with my own personal portfolio that will go into its own LLC.

Tony:
Ash, it look pretty similar for you too, right?

Ashley:
Yeah. Each partner has a different LLC, each business has a different LLC. The development in the rehab has its own business, even though it works on the properties that are owned in one of the rental LLCs.

Mike:
It keeps the numbers easier I feel like.

Tony:
Oh, totally. We separate all of our active income from our passive incomes. All of our rentals are in one set of LLCs. All of our active income from our flips and our events and our coaching program and all the other active things that we do is in a separate LLC. So yeah, it can get pretty crazy with the entity stuff. So Andrew from New Jersey, if I had one piece of advice to you, I would go talk to a good CPA and go talk to a good attorney in your estate and kind of give them the layout and the breakdown of your business and the different things that you do. They should be able to help you set things up in the right way.

Ashley:
And I would get them, if you can, on the same call too.

Tony:
Totally.

Ashley:
That’s the best, yeah. Okay. So Mike, we are moving on to our Rookie Exam. The first question is, what is one actionable thing rookie should do after listening to this episode?

Mike:
Go out and talk about it. Have those conversations. Tell your friends, tell your family, “I want to get into this, I want to become a real estate investor.” And then the next thing is hire a coach. Save yourself a ton of time and hire a coach. There’s always going to be somebody that’s better than you at everything in life no matter what. So why waste the time making all of these mistakes when you can just go hire a coach and eliminate it?

Tony:
Question number two, Mike, what’s one tool, software, app or system that you use in your business?

Mike:
Mojo Dialer. That is my bread and butter.

Tony:
I love Mojo. Can you explain what Mojo is, Mike, for folks that aren’t familiar with that software?

Mike:
It’s the system that you use to cold call. I’ve got a triple line dialer on there, so I’m able to call three numbers at once. And then if one picks up, that hangs up the other two. Just so you can get as many calls in as possible.

Tony:
Yeah, Mojo’s fantastic. I was trying to set up a wholesaling arm early last year, so we had Mojo for a little while. Yeah, the way that you’re able to run through all those numbers in a relatively quick period of time is pretty crazy.

Ashley:
Okay. Our last question for the Rookie exam is, where do you plan on being in five years?

Mike:
I want to be on the beach all day long, relaxing, letting my passive income pay for everything. My goal is to personally at 40, I want to say I’m getting up, I’m going to work because I want to, not because I have to.

Ashley:
I think that right there is something that will resonate with a lot of people. And that really does change your life. There’s the fire community where it’s Financial Independence Retire Early, but when most people get to that point, they don’t actually want to retire because they want to work at some passion project or keep working at something that excites them and fills them with joy and passions.
Okay. Well Mike, thank you so much for coming on with us. Can you let everyone know where they can reach out to you and find some more information about you?

Mike:
Yeah, so we have a small Instagram page called Valiant Acquisitions LLC. And then I have my personal page, it’s larson910 on Instagram.

Ashley:
Okay, cool. Well we really appreciate you coming on sharing all of your information. Definitely added a lot of value, so we appreciate it. Thank you, Mike.

Mike:
Thank you, guys. This means a lot to me.

Ashley:
I’m Ashley, @wealthfromrentals. He’s Tony, @tonyjrobinson and we will be back on Saturday with the Rookie Reply.

 

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