Top 10 Takeaways - Podcast 3 with Brian Burke

Hosts @Joshua Dorkin and @Brandon Turner and Guest @Brian Burke

1. JUST DO IT. Learn real estate investing by doing it. The best learning is organic. There’s a lot of lessons that I’ve learned in this business that I never would have learned the full value of those lessons if I hadn’t experienced them for myself. Anybody can go out there and tell you, watch out for this or do this or don’t do that. But you’re still going to go out and do it and then when you do it and it really bites you, then you say, all right, I learned my lesson. I guess I shouldn’t do that again. If you don’t screw up, you don’t learn.

2. IT’S GOING TO BE HARD. I struggled in this business for ten years trying to get it right before my business really look off.  

3. TRY TO FIND ANOTHER WAY BEFORE USING CREDIT CARDS. Credit cards are extremely risky. You’ve got to do what you’ve got to do sometimes. But it’s a risk you have to decide whether or not you’re willing to take. Try to find another way before considering credit cards. Work your job until you’ve got the resources or until you’ve paid down your debt, or find a partner instead. I would find somebody who’s got good credit, who’s got some money and who wants to go 50/50 on a flip. But here’s the rub. When you go out to talk to a private investor to back your deal, what’s the first question they’re going to ask you? What have you ever done? What is it that makes me think that I can give you my money and I’m going to get it back? So sometimes you’ve got to take that risk yourself on the first one to be able to go to that private investor on deal #2 and say, look, here’s what I did on my first one.

4. WORKING IN LAW ENFORCEMENT CAN BE GOOD FOR LEARNING ABOUT REAL ESTATE. The great thing about law enforcement was, I was working evenings and weekends, which left me essentially the business week, the Monday through Friday 8 to 5 part as free time. It gave me all week long to go out and chase foreclosures and go to foreclosure auctions and learn and figure out how all that process works and go down to the county recorders office and learned how to research titles and just all the things that are required to build a foundation of knowledge in this business.

5. DIRECT MAIL ISN’T FOR EVERYONE. My least favorite strategy is actually going and dealing directly with sellers. When I first started in this business, I was doing the old postcard mail out and waiting for the phone to ring and knock on doors of foreclosures and that kind of thing, just trying to scour out for a deal. And man, I struggled with that and I just couldn’t get any traction with sellers and when I finally did, I got really close on a couple of deals where we were all the way to the point of signing a contract and it’s amazing to me how so many people who are in a distress sale situation just never really can sign on the dotted line and make the decision to do something about their situation. And I had a couple of deals get really close and then just completely die off because the sellers just went totally dark.

6. NOBODY CAN SAY NO TO YOU AT AUCTIONS. I could go to the auction and I could either buy the house or not buy the house. I didn’t have to get permission from the seller. I didn’t have to get them to agree to anything. I could just make it happen on my own and it was the only way that I could actually take control of the situation and actually make something happen.

7. YOU NEED LOTS OF INFORMATION AT YOUR FINGERTIPS TO BUY AT AUCTION. There’s just no information given out by the trustees that are putting on these sales. So I wrote my own computer software that enabled me to take all of the information that came from all these various sources and compile it into one central location so that when it was time for me to go to an auction and bid on a property, I knew everything that I needed to know about that property, all the information was stored in a very methodical way right in front of me so that I could make a quick and accurate decision. Now, they’ve got internet subscription-based websites that keep track of some of this information for you which I still don’t use.

8. THE MORE TRACK RECORD YOU BUILD, THE EASIER IT WILL BE FOR YOU TO RAISE CAPITAL. Show them what you have done so that they can see what you can do instead of showing them this is what we’re going to do. If you want to raise capital successfully, produce for your investors.

9. THE MORE YOU DO SOMETHING NOTEWORTHY AND GET IN THE PRESS, THE EASIER IT WILL BE FOR YOU TO RAISE CAPITAL. You’ve got to be relevant. You’ve got to get yourself out there and you’ve got to mean something to people. We’ve raised more capital from investors that have come to us after reading articles about us in the newspaper. You wonder why Richard Branson gets in a hot air balloon and sails all the way around the world? It’s not because he’s crazy. It’s because he knows that that publicity means something and when things like that happen, people pay attention.

10. YOU NEED TO HAVE A TRACK RECORD OF PRODUCING FOR YOUR INVESTORS BEFORE STARTING A FUND. Here’s how I did that. After getting about a dozen or two dozen deals under my belt with private financing, I said all right I’ve got this down. I’m going to quit my job and I’m going out on my own. Before I did this, I went to my attorney and said, this is what I want to do and he said okay, if that’s what you want to do, these are the guidelines you have to work under. It has to be 35 or fewer investors. It has to be people that you’ve had a previous personal or business relationship with. You can only raise so many dollars. So I knew what my guidelines were. You’ve got to know what the securities laws are. I went into the police station, and I said, guys, I quit. And next Tuesday, at the senior center, I rented out the room. I want all of you guys to come down there and I’m going to tell you what I’m doing in real estate. And that room was full of guys. And I said, look, here’s what I think is going to happen. Here’s what I’ve been doing. Here’s what I’ve done. Here’s my results. I’ve got a plan. Over the next five years, I want to buy about ten houses a year, fix them up, and resell them. I’m going to split the profits with you guys if you guys will invest in a fund. I walked out of that room with $500,000 and 28 investors that all had guns. So if anything is going to motivate you, it’s going to motivate you to know you cannot screw this up. So I did a little Reg-D offering. I had my attorney draw it up, put these guys into it. I had essentially a $500,000 expense account that I could go out and use to buy houses at foreclosure auctions.

* Bonus Takeaway - PROPERTY MANAGEMENT FIRMS CAN BRING YOU HOME RUNS. I got a call from my property manager saying, hey, there’s this 54 unit apartment complex that was taken back in foreclosure. The lender’s really anxious to unload it. They were in escrow for somewhere near $1.8 million. It just fell out. They lowered their price to $1.3 million. It’s in a great spot and it has a lot of potential. You really need to check it out. We did and we ended up profiting $800,000 on this flip. That right there is why you use property management firms. Because if you’ve got the right one and they know what’s going on, they’ve got their finger on the pulse of the market, you can get a lot of information from those guys.

* Bonus Takeaway - DON’T BID AGAINST YOURSELF. Sellers often want you to give your highest and best offer. When we’re buying houses at auctions, we have a strike price. We have a limit of where we’re going to go. And when we get to that limit, we’re out. We’ll wait for the next one. This is our price. We’re in or we’re out. It’s your call.

* Bonus Takeaway - THIS BUSINESS IS MADE BY GOING OUT AND TRYING YOUR BEST AND MAKING SOME BASE HITS. This business is not made up of a series of grand slam

* Bonus Takeaway - EVEN THE BEST IN THE BUSINESS CAN LOSE MONEY. In 2008, when the economy cataclysmically collapsed, I took a really bad haircut and I lost a few million dollars of my own money and I know exactly what it feels like to really get hurt in real estate by making mistakes. I heard Marty’s podcast about his story in podcast #1 and I can really relate to what he went through. I’m a full believer in expanding your comfort zone and growing big and getting into new things and taking some risks. I think you have to do that. But let me tell you, if you do it carelessly, it’s going to come back and bite you.