Rookie Podcast 113: The 6 Traits Every New Real Estate Investor Needs to Succeed

Rookie Podcast 113: The 6 Traits Every New Real Estate Investor Needs to Succeed

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When you get started in real estate investing, you often don’t know what you’re doing. Is this deal going to work out? Am I choosing the right materials for my flip or BRRRR? Will this appraise at what I need it to? All these types of questions can flow through a rookie investor’s mind in the first months or even years of investing. But, if you’re making the right progress and doing what needs to be done, you’re probably miles ahead of the competition.

Today we talk to Brian Davila, a real estate investor and coach who helps his students answer the same questions like the ones above. Brian has identified the six key traits of a successful real estate investor. You may have been born with some of these, but almost every real estate investor needs to make a conscious effort to become a master of all six.

If you’re able to capitalize on the advice from Brian, you’ll score more deals, connect with more investors, raise more money, and maybe make an extra few hundred thousand dollars a year!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Ashley:
This is Real Estate Rookie, episode 113.

Brian:
These little uncomfortable moments that they’re so scared of, this is why people give up. And that really pushed me to really start taking more action because now I understand if I could break through these little limits, I’m going to be successful, because most people won’t even get that far.

Ashley:
My name is Ashley Kehr and I’m here with my co-host, Tony Robinson. Today we have Brian on the show and I’m so excited for you guys to hear about the six traits that every investor should have and what they should bring to the table.

Tony:
Yeah, Brian’s got a really incredible story. He’s not a rookie but he works with a lot of rookies. He’s talked to a lot of rookies and he’s got this really cool framework that I think all of you guys are going to benefit from. But he’s also got a really cool backstory and I think the way that he got started should hopefully be inspiring to a lot of people that are listening. I think it’s easy to see those real estate investors that are maybe five, 10 steps ahead of you and you forget that they at one point were also rookie. So Brian does a really good job of painting that picture of what rookie Brian looked like.

Ashley:
Yeah. Before we get started onto today’s show, we can’t wait to see everybody at the BiggerPockets Conference. Make sure you guys come up and say hi to Tony and I, we’ll be wandering around. We’re also going to be the MCs at the conference. So you’ll see us up on the main stage, have a couple fun dance routines planned, lots of stuff during intervention. Tony’s been practicing his moves, but yes. And then also make sure you guys join us in the Real Estate Rookie Facebook group and subscribe to our YouTube channel, Real Estate Rookie. Let’s get into today’s show.

Tony:
Brian, you’ve obviously got a ton of experience flipping homes. You’re not the prototypical rookie, but we brought you on not just to share your backstory but because you’ve got this really cool framework, the six traits that you feel every new investor should have if they want to be successful. So Ash and I thought it’d be a really cool idea to kind of go through those traits, share that with the rookie audience so they can kind of pick up on some of that knowledge. Now, for those of you that are listening, for our rookies out there, as Brian is talking through these different character traits, the different personality traits, Ash and I want you guys to kind of rank yourselves on a scale of one to five to see where you fall on that specific trait. And depending on where your score is, we’ll give you some feedback on how you guys can make them better. Brian, enough talking for me, why don’t you take it away? Let’s establish that first character trait.

Brian:
I came up with these six because I actually coach with Ryan Pineda and we’ve spoken to hundreds of real estate investors and I figured out that these six are kind of what I found are the differences between the ones that become very successful and the ones that never really get started. The first trait that I think is the most important is risk taker and I put a highlight underneath that called risk it for the biscuit. As you know in real estate investing, there’s always some risk to any deal that you’re doing, whether it’s a flip, an Airbnb, a rental. It could go great or it could go the other way. You have to be willing to stomach the risk that you’re going to take once you purchase a house or when you ever make a big decision in your life, just like how I quit my job with not a clear destination yet in real estate. I just literally quit. So I think being a risk taker is a big quality that you’re going to need to be a real estate investor.

Tony:
Let’s dive into that a little bit, Brian, because I think I agree that there’s a certain level of risk that’s associated with being any kind of entrepreneur, but obviously in the world of real estate investing as well. How does someone build that muscle of taking risk? I think so many people let fear hold them back from taking action. So, what’s your recommendation to Rookie investors that need to develop that risk-taking muscle a bit more.

Brian:
This may be a little bit extreme and it might rub some people the wrong way, but it’s kind of how I said earlier. When I came into real estate investing, I knew rather I was going to become a millionaire or I was going to go bankrupt. So, just understanding the worst possible option that could happen and being okay with it. So I think that’s a big help for me when I first started. So I’ll have number one, risk taker. Number two, problem solver. Number three, you have to be resourceful. Number four, you have to have focus. Number five, you have to have faith. And number six, you have to have social skills.
And then I personally think the risk taker is number one because a lot of people who never get started is because they’re not willing to take the risk. They’re not willing to quit their job. They’re not willing to invest the money into education. They’re not willing to sign the offer. They just wait and wait and then eventually give up. And Ashley, I don’t know you that well. Is there a risk that you’ve taken in your career that you think was life changing?

Ashley:
I mean, I definitely think my first deal was taking on a partner and using their life savings to actually purchase a property. That was definitely life changing for me because I realized I could actually do it. And then I had them put a line of credit on their house and we did it again. So I would say that would probably be like that first initial taking action that was my biggest risk right there.

Tony:
Yeah. The very first Airbnb that we bought, we bought it site unseen in a state that I had never been to. That cabin, that short term rental cost more than my primary residence. It was the biggest purchase I’d ever made in my life for this unproven business model. We had never done a short term rental before. We’d never done an Airbnb before to this place that I’d just heard of like maybe two weeks before we put the offer in. So you’re right, I think there’s definitely a level of risk. But like you said, and we mention this on the show a lot, right Ashley, is that the way that you kind of move past that fear is by thinking worst case scenario and if you can live with whatever that worst case scenario is, then why not move forward.
If the worst case is that you lose the money that you saved up, okay, cool. Can you make that money again? Yeah. All right. Then maybe it’s not that bad. Is the worst case scenario that you got to move back in with your parents because you’ve spent all your money? Well, you did that for the first part of your life. You lived with your parents before, so maybe it’s not so bad. So whatever the situation is, just can you live with that worst case scenario, and that’s how I found that I’ve been able to push past some of those fears.

Brian:
And I’ve told Tony on the phone before, like Tony has a lot of guts. Anytime I call Tony and ask him if I should do this deal or not, he has said yes 100% of the time. So now I don’t call Tony because I’m too scared. I already know the answer. I look at his number, I’m like, no, I’m not going to call him. He’s going to tell me to do it.

Tony:
We all need that person in our lives though to tell us yes, right?

Brian:
Yeah.

Tony:
I love the risk taking, Brian. What’s next? What’s the second trait that we need to focus on?

Brian:
Second trait, another huge one is problem solver. I think a lot of house flippers or investors, they’ll see a problem in a property and they immediately run away or they pass on the deal. But if you could figure out a way to make a deal work when there wasn’t a deal there before, that could be life changing. For example, when I first started, I used to buy a lot of tenant-occupied properties and most of the investors around here would not. But I got so good at negotiating cash for keys and understanding the laws of tenancy in California that that helped me make an extra few hundred thousand dollars a year because there’s less competition on those deals. So if you could run two problems and figure them out instead of running away, that would be life changing.

Ashley:
What is the next one, Brian? After risk taking, what’s the next step or the next attribute you should have, or trait, I guess? Is that what we’re calling them, traits?

Brian:
The next one is resourcefulness. For that one, I put BiggerPockets. I also put Google, Yelp, mentors, social media and peers. I just listed a bunch of free ways to find knowledge and free ways to network and meet people. I have personally gotten deals straight off of BiggerPockets on their website, from networking on their forums. I still use their calculator today. And then just programs like Facebook, those investor groups, local investor groups. I’ve made hundreds of thousands of dollars just networking on those groups for free. So you don’t need to have a huge marketing budget to get deals, but you do need to be resourceful.

Ashley:
I think that is such a great point. Networking with people and figuring out what people can help you, but before you even approach them, how can you help them too? Working that into being resourceful, not just going and asking and begging for information, but really figuring out how to get that. I’m a big believer in don’t recreate the wheel. Like there’s so many people doing different real estate strategies out there and doing them different ways, use what other people are already doing and then just tailor it to yourself. I think that your resourcefulness trait is a huge thing because you can go out and find all this information. It’s all out there. So much of it is for free. You can pay for different things but it’s really just everything you can get for free in an organized bundle, but you can definitely go out and find it yourself. Can you elaborate a little more without going completely off topic on just the marketing, how you can be resourceful and do that for a really low cost.

Brian:
Okay. For example, most real estate investors that I know, they use a system called Podio, that’s a CRM. I don’t know if you guys have ever heard of it, but Podio could actually be 100% free. You can download Podio and kind of build it up the way you want it to look for free. And then you could go on Facebook groups or Instagram and search wholesalers and build a list of wholesalers and realtors, and then just start calling them weekly, sending them emails all for free. If you do that, it’s almost guaranteed you’re going to get a deal without spending a dollar in marketing.

Tony:
So many free ways, and I think for a lot of Rookie investors, they think they have to invest a huge chunk of cash to get started in the world of real estate investing. I think maybe for like the traditional buy long term rental, put 20% down, maybe, but there’s so many other strategies and niches within the world of real estate investing that you can get started for a much lower dollar amount. I love the free resources. In fact, Lili Thompson, I can’t recall what episode she was, I think 89 or maybe 90, somewhere around there, but she’s a wholesaler based in Oklahoma and she’s gotten all of her wholesale deals with $0 spent on marketing. All she does is called expired listings for the markets that she’s focusing on and that’s how she’s gotten all of her deals. So, there’s so many ways to get creative and make this whole thing work for you.
Brian, I want to go back to the problem solving piece because I felt that was a really important statement that you made. You said that you probably have made a few extra hundred thousand dollars per year by tackling this problem of buying properties that have tenants. I don’t want that to get lost on people because that’s a six figure problem that you’re tackling annually. Just by solving that one problem, you’re creating six figures in additional income for yourself. If I’m a new person, well, I guess, let’s take it back to you. When you first decided to, okay, here’s this problem of this property still having a tenant, and most investors view that as a problem that’s insurmountable, that’s not worth their time. When you did it for the first time, I don’t know, what resource did you leverage, what education did you follow to kind of overcome that problem and make it part of your toolkit?

Brian:
I bought one of my first flips and there was a tenant there. As soon as we closed the escrow, he was supposed to get out but then he instead cursed me out and told me he wasn’t going to leave. This connects with resourcefulness. Most people don’t understand that you could call eviction attorneys for free. It’s 100% free to call an eviction company and ask for advice. But most people that I speak to, they’ll say things like, “Oh, well, I don’t know how evictions work and I don’t have enough money for an attorney.” And I’ll say, “Oh, okay. How much is an attorney?” “I don’t know.” I’m like, “Oh, okay. Okay. Well, here, send me the deal and then I’ll look at it.” Then right there, they’ve already lost. But if you’re listening to this, just call a local eviction company and they’ll talk to you for free because they need to qualify the situation to see if they could work with you. And if they can’t work with you, they’re going to give you their prices and usually it’s not as expensive as people think it’s going to be.

Ashley:
Brian, in your experience, because I’ve had this happen several times where just that initial notice, that… So in New York state, you have to give notice that you’re going to start an eviction process. And a lot of times just that notice that is sent to them scares them enough into either paying or moving out and saves you a ton of money. But just because a lawyer told me to do that first step, it has saved me a ton of money in the long term too. Like you said, knowing the steps and the process. I did try and do a… When I first started as a property manager before I even had my own property, the investor I worked for was like, “Oh, you can do it yourself. We don’t need an attorney, blah, blah, blah.”
I had to try and figure out doing the process, and the judge, she made me like cry. I was trying so hard to hold back my tears. But it’s, yeah, in a really small town and everybody knows everybody, so I’m sure everybody knew, “Oh, Ashley put to tears, there’s a judge in town.” So I do recommend getting a lawyer because once I got a lawyer, it was smooth sailing. And I probably could do the process now, but just the hassle of getting the dates correct, getting everything, and it’s really not that much money. I mean, if it drags out, of course it could be, but.

Brian:
Another gem I’ll give to the listeners is a lot people right now have the same problem where they’re running away from tenant owned properties because they think, oh, well, there’s a moratorium. I can’t evict someone. But if you call your local eviction company, and this only works here locally, you got to talk to, wherever you’re at, the local attorneys. If someone’s in California in Riverside or San Bernardino county and they never signed a lease agreement and they’re not paying rent, they’re not a tenant. So you can file an eviction. But someone who doesn’t know that will say, “Oh, there’s somebody there not paying. I’m not going to be able to evict them.” And then they pass on the deal. And then I know that there’s less competition, so that gives me more leverage to negotiate with whoever has the deal or whoever’s selling the property.

Tony:
I love that approach, Brian. It’s leveraging your knowledge as a competitive advantage. And the only way you get that knowledge is by asking questions and not letting that first obstacle be the one that kind of stops you down on your track. Man, so much gold here. So just to recap for the Rookie listeners so far, we’ve got being a risk taker, being a problem solver, and being resourceful. What’s the next character trait that we need here?

Brian:
The next one that I put is focus, and for notes under that, I put don’t get distracted by shiny objects, make sure to time block important activities, and make sure to improve daily. For me, this was one of my biggest traits when I first started. I was obsessed with real estate. As soon as I understood how it worked, literally someone would be trying to have a conversation with me and just I couldn’t even listen to them. If it wasn’t about real estate, I just wasn’t hearing them. I’m a huge basketball fan. For like two years, I didn’t watch any sports, I didn’t go to the movies. I literally I was single, so I would just stay at the office till like eight or nine o’clock at night and I wouldn’t even be working all the time, but I would just be on the MLS talking to older realtors. I was just obsessed with the game. So if you can get focused, that will be another game changer for you.

Tony:
Can we talk, Brian, a little bit about the shiny object syndrome? I feel like you see this really with anyone who’s entrepreneurial, but you see it a lot with rookie real estate investors where they can’t really focus in on one thing. They want to try a flip, they want to try this thing, they want to try that thing. I guess a couple of questions. What’s your recommendation for folks on finding what that thing is that they should focus on? And then what strategies are you using to make sure that you can stay dialed in on that one thing long enough to actually see some benefit from it?

Brian:
Yeah. There’s two things. There’s one, I call it the power of saying no. For me, I say no to a lot of things. If someone asks me like, “Hey, do you want to start building?” “No.” “Hey, do you want to start investing in Idaho?” “No.” I know exactly what my business plan is and I stick to it. No matter what comes, I focus on that for a certain amount of time. For my business, it’s always quarterly. So whatever I’m focused on on that quarter, that’s all I focus on. After the quarter’s over, if I want to make a change, if I want to switch, then I’ll move on to the next thing.
So yeah, number one was saying no. And number two was coming up with a clear business plan. Again, every quarter, I have a very clear business plan. This quarter, I want to do 12 brand new flips and I want to buy three rental properties. If something doesn’t go into those buckets, I’m not doing it. And if somebody is not really helping me get to those goals, I’m not going to spend a lot of time with them because my time is very limited. I have kids, I have to take care of myself physically and sleep and all that stuff. So I think if you could come up with a clear business plan and be able to say no to any shiny objects, that’ll help you a lot.

Tony:
I’m reading a book right now. It’s called The 12 Week Year by Brian Moran. Very similar to what you just described where it’s kind of you’re breaking up your goals into these quarterly kind of 12 week blocks. I love what you said where if an activity doesn’t help me get 12 flips or three rentals then I’m not doing it, I love that level of focus, that level of precision in your goals because it really helps you block out all the other things because I think it’s easy to be busy as a real estate investor, but it’s totally different thing to be productive. You’ve got to kind of figure out, I don’t know, how you dedicate your time so you’re more productive and not just busy.

Brian:
What about you, Ashley? How do you keep focused?

Ashley:
Oh God, I never get focused. Actually one little tiny thing that I do is I close out all my tabs on my computer screen. So on my internet browser, when I notice that there’s a whole bunch over there and I feel like I’m going back and forth from different tasks, I just take them and I delete them all, I close down my whole thing and I start over and like, okay, what’s the next important thing? That’s just one little thing that I do.
And then you had mentioned the time tracker. About probably a year and a half ago, Steve Rosenberg had me do the time tracker. For two weeks I had to write down what I was doing every single day and how long it took me. I mean, if I scrolled on my phone. I had to text him every single night what my time study was and what I was doing. It got to the point where I was like, I’m not going to sit here and watch TV because I don’t want to write that down and Steve see that I’m being lazy by watching TV. And then it just like kind of pointed out things to me that distract me or I’m not focusing on or are time wasters and also helped me develop what are the things that I’m actually really productive at and what are things that I’m working on the business instead of in the business too.

Brian:
Same here.

Ashley:
What’s the next thing after you would say the focus.

Brian:
Another important one is I put social skills. I think this could be number one in real estate investing. You definitely are going to have to know how to work with people. If you can’t get along with people, this is going to be a very tough business. If you lack sales skills, you’re going to rather have to hire someone to have those skills or you’re going to have to learn them yourself.

Tony:
When you say sales skills, Brian, elaborate on that. Are you saying someone needs to be able to be like a high pressure closer and they need to be able to… When you say sales skills, what does that mean?

Brian:
Yeah, that’s a great question. I don’t see sales as a high pressure, sign right now type of person. I just see sales skills as someone that’s able to build relationships. If you’re able to get people to like you and you’re able to help other people, they will help you in return. That’s what I define as sales skills. Grant Cardone has a book called Sell Or Be Sold. I think that’s a great book that explains sales skills.

Tony:
I love that definition because I think people oftentimes think used car salesman whenever people talk about sales skills. But at its core, being a good salesperson is just leveraging your influence to build mutually beneficial outcomes. It’s like if we can all focus on sales in that light, I think it really changes the perspective for a lot of people. So if you’re able to solve a problem for someone and maybe encourage them to get to that solution, then you’re a salesperson. And that’s what real estate is all about at the end of the day is like you said, going back to your second trait, being the problem solver, it’s solving problems and leveraging your influence to help other people solve their problems.

Brian:
Yeah. And even in my personal life, I have to sell my wife on stuff all the time. Like my wife does not like going to the beach. I have to figure out a way to sell her on letting us all go to the beach.

Tony:
Even for me, and we hear this a lot from folks who want to get started in real estate investing is that sometimes you have to sell your spouse on becoming a real estate investor, or just getting on board with allowing you to become a real estate investor. I mean, for me, I definitely had some sales skills I leveraged to get my wife, Sarah, on board, but she loves it now, man. I guess what’s your advice, Brian, for someone to try and develop some of those skills?

Brian:
First, I would read the book Sell Or Be Sold by Grant Cardone, because I feel like that really opened my eyes to what sales really is. I think just educating yourself overall on sales. I know like, who are some sales trainers that I really like, I guess Brian Tracy.

Ashley:
I was just going to add in there too along with sales skills, negotiating. The book, Never Split the Difference, that’d be another great read for somebody too that wants to learn more.

Brian:
Yeah. And I think educating yourself and then you’re going to have to talk to a lot of people. When I first started, I was pretty introverted and insecure, but the more I spoke to people daily, it just slowly built up my confidence. So I would also say building your confidence will help your sales skills. People aren’t going to work with someone who’s like nervous all the time or if they’re not confident, they’re not going to want to work with you. But if you’re confident, if you show them that you can lead, they’re going to want to work with you, which is going to help your sales skills.

Tony:
I think you just got to rip the bandaid off. Like I’ve shared on some of our other episodes that we’re ramping up our direct to seller marketing to try and help our business. I remember the first time I sat down to cold call this list of people, my heart was beating out of my chest. I’m not typically like a nervous person like that. Like I’ll get up, I’ll speak in front of rooms of people, I’ll do my thing. But for whatever reason, the idea of calling a random stranger asking them if I can buy their house, it terrified me. But once I talked to that first person and they hung up on me, I was like, you know what, that actually wasn’t that bad.
And then the next person hangs up on you and it’s like, okay, I can get used to this. It’s not as bad as I thought it was. What I realized is that we build things up to be much scarier in our head than what they actually are and the sales process is the same way. Like we make it the scary, scary thing when really it’s a numbers game and you just know that X amount of people are going to hang up on you and even smaller percentage are probably going to cuss you out maybe once or twice, but an even smaller percentage is going to say yes and that’s where all the money is made.

Brian:
Yeah. I’ll tell you two quick stories. First one, I bought a list of expired listings when I was a realtor and was like, all right, this is it. I’m going to call these people. I’m going to wait until six o’clock, until everyone has left the office and I’m going to start cold calling. So I waited till six, everyone left. I called the first number and someone picked up and I just hung up on him. I was so scared. I was like, “Oh no, I’m not ready.” So I hung up on him and that was it. That was my whole first day cold calling. I was like, all right, I’m going to go home and come back at this tomorrow.
And the next day someone in my office was like, “Hey, we’re going to go door knocking.” So I was like, all right, you know what, let me try door knocking because cold calling was very scary. First door I knock on, someone answers the door and they’re like, “I’m not interested,” and slammed the door in my face. I started literally laughing. I just thought it was funny because I was like, why would someone react like that? But then I started thinking, I was like, oh, this is why people give up because these little uncomfortable moments that they’re so scared of, this is why people give up. That really pushed me to really start taking more action because now I understand if I could break through these little limits, I’m going to be successful, because most people won’t even get that far.

Ashley:
It’s like growing up when your parents tell you you want pizza for dinner, okay, well, you have to go and call. And you’re like, “No mom, you call.” It’s like getting over a hurdle like that where you have to call and order food. There’s still family phone calls I pawn off my husband like there’s no big deal at all. Just like, can’t you just call?

Brian:
My wife does that too. I didn’t understand that. She won’t fill that order too.

Ashley:
Probably she’s not pawning off. She’s just super busy. She’s not… It’s just [inaudible 00:28:16].

Brian:
That’s funny.

Tony:
Well, Brian, great breakdown on the sales process as it relates to being a real estate investor. I think we’ve hit five. We’ve got resourcefulness, problem solver, being a risk taker, focus and social skills. What is our last and final trait?

Brian:
The last one is another huge one, but I put faith and I put faith because one thing that stops most people is they pretty much just give up or they think that they’re not good enough. For me, I definitely was very insecure growing up. I grew up with a single mom. We didn’t have any money. It was rough sometimes. Seeing my mom cry not being able to pay the rent, it can make you insecure. I know a lot of people who think like, “Oh, well, Brian, Tony and Ashley, they’re rich and they’re good looking. I’m not as good looking as them, so I can’t do it.” So they don’t have faith that things are going to work out. You need to have faith, especially in the beginning when you don’t see any success, when you have $0 or you’ve been trying super hard for three months and literally have made nothing, you’re probably in the hole a couple thousand dollars from what money you’ve invested, you have to have faith and keep going.

Tony:
I love hearing that, Brian, because I think it’s so important for the Rookie investors to understand that no matter where they’re standing today, no matter what their starting point is, there is almost no obstacle that’s too big or no obstacle that’s too challenging that will prevent them from reaching their goal of becoming a real estate investor except for themselves. The biggest obstacle that they have to overcome is their own self-doubt, is their own fear, is their own lack of confidence. It’s not deals. People find deals all day, every day. It’s not funding. There’s so much money out there, you just have to connect with the right people. It’s not having a property manager, it’s not the general account. All of those external obstacles, they may seem big but there are clear paths around them. There’s ways to get around them. But the one thing that’s going to hold people back is that lack of faith, is that lack of self confidence, that lack of courage, that lack of just all those things internally. So, man, I love that you hit on the faith piece because it’s so important.

Ashley:
I think to go along with that too is that not only do you have to, I guess, believe in yourself just to get over obstacles, but also if you’re going to work with anybody, you’re going to take on partners. If you’re going to ask someone to borrow money, you have to believe in yourself that you can do it. You have to trust yourself. You have to respect yourself. You have to love yourself before anybody else is going to actually want to put their faith in you that you can get this deal done and that you can achieve it. If you don’t believe that you can do it or that you’re not going to be successful, nobody else is going to want to invest with you because they’re going to see right through it. So there’s like that fine line of being confident but also not cocky and you just have to kind of find your way in between those two.

Brian:
What gave you the confidence to do your first deal and raise the money from your partner when you first started, Ashley? How did you know you were doing the right thing?

Ashley:
I think it was because I was working for an investor and I was working as a property manager and he also let me help him do acquisitions and acquire deals for him where I was doing the underwriting, I was looking at the deals and I knew the market. I took on the partner not because I was afraid of losing their money but because I was afraid of losing my own money. It’s honestly I was scared and so I used a partner as a security blanket. I was just going to say taking on the partner was like me overcoming my obstacle by taking on a partner, I guess.

Tony:
I think the important thing to point out too, Ash, is that you solved a problem for that partner also. They may have had the funds, but they didn’t have the desire to source the deal, to manage the property, to do all the things that come along with actually becoming a real estate investor. So they solved a problem for you by putting up the funds. But you solved a major, major problem for them by doing the majority if not all of the work related to actually taking that deal down. I think that’s where the lessons lay.

Ashley:
From that first partner, I’m just going to read my text messages from him within the last 24 hours for you. So I told him about a new deal I have. He’s like, “Okay, I have 26,000 through KeyBank. I can borrow if I need to. I’m going to take 20K out and write a check to you this week. Please count me in for this deal.” And then he goes on to list like where else he’s going to pull all this money from. “Got to figure this out, but I’m in. Okay. So Wednesday I’m getting a check from KeyBank for this amount. I’ll deposit that Friday and then I’ll write you a check the next day for this amount. I’ll probably do another, this amount, maybe even this amount, and even higher amount.” He’s like, “What are you doing Thursday or Friday so I can get the check to you?” And he’s like, “Okay, you better get this money from me before Vegas or else I might come back with two Peter Liks.”

Tony:
Peter Lik, the photographer?

Ashley:
Yeah, yeah. He loves his art galleries. But what you just said just completely points to that because it’s an opportunity for him too and obviously he wouldn’t want to give me more money if things have gone bad for him. So I just thought this was a really great example of I was providing an opportunity for him and he got value out of it too because he still wants to do more.

Tony:
Yeah. I think that’s something that a lot of Rookie investors don’t understand is that when they present a deal to a potential money partner, they’re not asking for a favor. Like I’m not asking for a favor by presenting you this deal, I’m giving you an opportunity to get a return on your investment that’s probably better than it sitting in the bank earning 0.01% interest in that savings account. As a Rookie investor, you’ve got to change that perspective that you’re not asking for a handout, you’re not asking for a favor, you’re presenting someone with an opportunity to invest.

Brian:
Yeah. One student that I mentor, his name is Bosco. First of all, really quick, I love this kid. I was talking to him last year during COVID and he was sitting in his car. I hope he doesn’t get mad, but he was sitting in his car pretty underwater financially, like credit card debt, all types of bad stuff. He would get deals and then when he shopped them out to investors, he would be like, “I’m only going to ask for $5,000 because I don’t want to be greedy, I don’t want them to think that I’m like this bad person and I want to build a long term relationship.” And I’m like, “Bosco, I love you, bro, but you need money right now and this deal, running the numbers, there’s a lot more than $5,000 you could make.”
But he still did it. He did that a couple times; $5,000, $5,000, $5,000. And I was like, “Brother, you’re doing all this work, you’re spending all this money, you quit your job to make $5,000?” I was like, “Do this. Next time, ask for $25,000 no matter what. No matter if you think it’s there or not, just ask for $25,000 because you’re probably running the numbers wrong.” He did it, he asked for 25 grand. I think they brought them down a little bit, but he still made more than $5,000. So I’m like, see, you need to like, don’t be scared to ask for more and then negotiate yourself down instead of starting low because you can’t say $5,000, they say yes, and you’re like, oh, well, what about six? What about 10? It’s not going to work.

Tony:
Right. Well, Brian, I mean, so many good things. I just want to recap for the listeners. We had resourcefulness, being a problem solver, being a risk taker, focused, faith and social skills. I really enjoyed this conversation. This is one of our longer episodes, but it was so good because we’ve hit on so many awesome things. Ash, I don’t know, any parting words from you or final words from you, Ashley, before we keep rolling?

Ashley:
I don’t think so. I’m really enjoying this episode, Brian, and I can’t wait to hear your answer for our mindset segment because I feel like it’s going to be really good coming from you from what you’ve told us already. Tony, can I take him into that?

Tony:
Yeah, let’s take him in.

Ashley:
Okay. Brian, what is something that maybe you thought or assumed before you actually started out as a real estate investor? And then once you jumped into it, you realized was not even true or was completely different. What is like a view that you have completely changed your mind about?

Brian:
I think I kind of touched on it before, but whenever I saw anyone else, like I could just use Tony as an example right now. Tony has a great camera. He’s fit. He’s good looking. I would think Tony’s better than me, or Ashley. I’m like, “Oh, Ashley has a gold chain. She’s probably rich. I’m not as good as them.” I have to ask-

Ashley:
Please stop it. You’re making me sound so cool with a gold chain.

Brian:
Yeah, but still even something, if I saw somebody with a new pickup truck or even just a key of a BMW, I would think, “Oh, they’re rich. I’m not as good as that person. I wonder why they’re just so much better than me.” But then slowly once you start building your confidence, you understand that it doesn’t matter what you have and what they have. If you’re confident, people will respect you, they’ll want to work with you and you could be successful if you have confidence. Have you guys ever struggled with that or is it just me?

Tony:
No, of course. I feel like every real estate investor has that sense of comparison where they look at the person that’s maybe a few steps ahead of them and they feel like they can’t compete. But I think your point of kind of focusing on yourself and knowing that everybody has their own journey, that’s the important part.

Ashley:
When I met Steve Sims, he had written the Bluefishing book and he had told me how you’ll notice sometimes if you’re watching somebody that was in your position, Brian, where you think somebody is better than you, or maybe there’s a celebrity or something, you put them on this pedestal and you’ll notice when people go up to them, they bow down like, “Oh, hi, it’s nice to meet you.” And once he said that, like I watch people now and I look for that and it is so true and it’s you like bow down. It’s like, stand up straight, it’s other person. Own yourself and be confident going up to that person and shaking their hand or whatever with a firm grip. But it was just so interesting how he said that, that it’s just part of who a lot of people are. It’s just their mindset. I can picture myself doing it plenty of times where you just crouch down and it’s almost like you’re bowing to that person.

Brian:
And then you’re not yourself and then you leave a bad impression. People are like, why is this person bowing to me?

Tony:
All right. Great advice, Brian. I want to take us into our Rookie request line here. Rookies, if you guys want to get your question featured on the show, give us a call at 888-5-ROOKIE. Leave us a voicemail. We might use it on the show. So Brian, are you ready for today’s question?

Brian:
Yes.

Amanda:
Hi, my name is Amanda. I’m from Essex County, New Jersey. My question is in regards to holding costs and paying back personal lines of credit. I don’t feel like anybody goes into that much detail about it. So I’m curious how people are managing that. Do you have reserves set aside to cover those things? What kind of money are you using? Is that money that you’re including in what you get from private lenders or hard money lenders, et cetera? How are people paying back during the rehab process their holding costs and personal lines of credit? Thank you.

Brian:
I think most people don’t know that rookies know that lenders will actually fund your rehab. So typically the way I fund my deals is I only put like 10% down. So let’s just say for simple numbers to house is 200 grand. I’ll put 20,000 down and then I’ll fund the rehab, which will be like 30,000. And then the lender will give me back my $30,000. So I’m only in it like $20,000. So if you’re raising money to do a flip, pretty much you kind of only need to raise like 50,000 because you put the 20 down, you could use the 30 to make the payments and fund the rehab. So once the rehab is done, you get that $30,000 back and you could just hold that in case something else comes up or to finish making the hard money payments.

Ashley:
Great advice, Brian. That’s really the power of using line of credits is that you can pay them back and you’re not paying interest on them while they’re not being used. And then you wait until the next deal and then you can pull off and use your money again.

Brian:
One tip I will tell people though is I’ve met a lot of Rookie investors where let’s just say for the example they only have 50,000. They put the 20,000 down. They use the 30,000 for the rehab, then they get the 30,000 back and then they’ll go buy another house without finishing the first house and then they start running into problems because then they need more money to finish the second rehab and maybe something comes up on the first rehab and they’re not accounting for the payments. So just make sure if you’re just starting off and you’re a rookie, I would say wait until your first deal is that lease and escrow and has gone through the home inspection before you’re like, okay, let me just buy another one; because I’ve seen a lot of rookies get into some issues doing that, over leveraging pretty much themselves.

Ashley:
Yeah. Earmarking that money and having it spent before you actually have that money. And that’s not only just advice for flipping houses, that’s advice like every day, like don’t spend that money before you actually have it. If they announce a new stimulus check is coming out, wait until it’s deposited before you actually go out and spend it and max out your credit card.

Brian:
Yeah. Before COVID hit in February, I had like eight houses and at one point I only had $6,000 in my bank account while I had eight projects going on because I was banking on the first one. And then the first one fell out of escrow literally the week before. After all contingencies, I was just like, no, you guys have to close. They lost their EMD. I was at a big hole because I was just over leveraging myself. And then on top of that, COVID hit. So you know how I said I’m going to become a millionaire or I’m going to be bankrupt, at that point I was like, oh, I’m going to file bankruptcy. So, yeah, don’t over leverage yourself for sure.

Ashley:
And I think that’s the thing too is when you start out as a rookie, you just think, oh gosh, the amount of money I’m going to have in my bank account, so awesome. But as you continue to grow and scale, I feel like that number gets smaller because you’ll just keep reinvesting it into different deals and never have any cash. Okay. So I’m going to take us to our Rookie Rockstar. This week, our rock star is Kyle K. from North Carolina. He just listed his first flip for sale. Congratulations on completing your first flip. The purchase price, $155,000, closing and holding costs, $13,000, the rehab, $80,000, and the ARV is $355,000. The project took two months longer than he expected and wasted a lot more money from being unorganized, but I’m sure he’s taken away a lot of learning experience from this. He does mention one, cheaper is not always better. Awesome job, Kyle, on your first flip.

Tony:
Yeah. Great work, Kyle. Awesome spread there.

Ashley:
Brian, can you tell everyone a little bit about where they can reach out to you and find out some more information on you?

Brian:
Yeah. I’m most active on Instagram. So you can look me up @thebriandavila on Instagram. You can email me at [email protected] I do work with Ryan Pineda and we do coach people to start flipping houses. So you would check out futureflipper.com.

Ashley:
Well, Brian, thank you so much for joining us today. We really appreciate it, and we might just be having you back within the next couple months. We have a little project that we’ve been working on in the works. So everybody watch out for Brian to maybe be back on the show in a couple of weeks or a couple of months. Brian, thank you so much. We really appreciate having you. I’m Ashley, @wealthfromrentals, and he’s Tony, @tonyjrobinson on Instagram. This is the Real Estate Rookie podcast and we will be back on Saturday with a Rookie reply.

 

Watch the Podcast Here

In This Episode We Cover

  • Why every investor needs to take calculated risks frequently
  • Becoming a problem solver so you can get deals others will pass up
  • Using resources like BiggerPockets and Facebook Groups to find deals
  • Choosing the activities that will set you closer to your goal 
  • Having faith even when you’re low on energy (or money)
  • Building relationships and developing basic sales skills 
  • And So Much More!

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