636: Private Capital Explained: The 4-Second Pitch to Unlock Unlimited Funds (Part 1) w/Amy Mahjoory

This is the Bigger Pockets podcast show, 6:36.

We always want to end every relevant conversation with a request for a referral. So if somebody says they love what you're doing, they'd love to support you, but they're not in a position to invest. Just say, hey, no problem. Do you happen to know anyone else who is interested in getting double digit returns, you know, backed by real estate? You know, let me know. So I ended every single conversation when I first got started 10 years ago with, with a request for a referral. And I did that for 18 months consistently.

What's going on, everyone? This is David Green, your host of the BiggerPockets podcast here today with another Seeing Green episode. In today's show, I will be taking questions from different people that have submitted them. And Rob, is that you?

You know, I don't know why you always make me sit through all the seeing greens and like, you don't ever let me talk. So I thought today would be the first Seeing Green where maybe we change it up a bit. Are you cool with that? I've got some questions and they all revolve around idea of raising money.

I call it Seeing Green because I want you to see me not to actually speak and be heard. But I suppose since you're here and you've already jumped in, it's not much I can do about that, is there?

Nope. We're here. We're here. We got a really good episode for everybody at home. We are interviewing Amy Maggiore, who is a master at raising private equity. And she's got this very amazing framework that we get into, very tangible steps on how you can go out into the world and raise money, not just from friends and family, but total strangers out in the wild. I think this was a really impressive thing. You know, she really kind of broke down a lot of the objections that I had, which is, well, if you don't go to friends and family, like, who can you actually raise money from? And she gives us a lot of stories that really, you know, kind of opened my eyes a little bit. So this is going to be something that we're committed to teaching here on the podcast because I know raising money is a very scary and very intangible thing to learn about because everybody tells you how to do it, but there aren't necessarily tangible steps. So we're gonna actually be making this into a four step, I guess, or a four part series, if you will. And it'll, you know, the first two episodes are gonna air here and today we're gonna be covering the foundation needed to go out and raise private money. So with that, can you kick us off with a quick tip and then we'll jump right in?

Yeah. Today's quick tip, go to bigger rockets.com reshow. This is for the various podcasts we have and if you go there, you will find various free goodies including a masterclass by Brandon Turner himself on building your personal brand information that will help you on your capital raising journey. From today's guest, Amy Majuri. So check that out and in fact, I would even recommend to randomly check it out every once in a while and see what free stuff Biggerpockets might have put out there for you. A little bit of an Easter egg that you can go find even when it's not Easter.

Are we still giving away the sign your signed headshots on there, do you know? Or we discontinue that?

Well, there's been a lot of demand for the like the boy band style poster of me with my shirt off and some hearts floating over my head. I haven't decided if I'm going to offer bigger pockets or if I'm going to sell them as part of a like a charity type event because they're worth so much money. So stay tuned for that.

All right, well, you can find David in this month's Tiger Beat. What's that? I don't know.

Do you know what that is?

Okay, well, yeah, that's one of those old like magazines where that Hanson and like, you know, the Bop Crowd. That's where they would feature them.

Okay, well, well, you can find David in this month's Tiger Beat. But until then, let's jump in.

The great green Tiger Want to invest.

In real estate but don't have the time or know the best local markets? Rent to Retirement has got you covered. Here's the deal. They've helped thousands of investors just like you find turnkey homes across the best US Markets. And best of all, they do all the heavy lifting for you. With over 255 star ratings on BiggerPockets, Rent to Retirement experts help you build strategies to retire early through real estate. And right now, Rent to Retirement offers some amazing incentives on turnkey new construction properties. Just for example, you can get up to 30% off new build prices or you can get 0% down loan options or interest rates available as low as 3.99%. So don't miss out. These deals will not last. Text REI to 33777 or visit biggerpockets.com retirement to start investing in top cash flow markets today.

If you're serious about scaling your portfolio, you need two things. Good data and good deals. Lennar's Investor Marketplace gives you both. It's full of new rent ready homes in markets across the country. Each property comes with verified rental comps and local insights. You can see potential returns, compare markets and make offers, all without leaving your desk. It's like finally having the homes, the data and the financing all in one place. Head to biggerpockets.com Lennar and see what's live right now. That's biggerpockets.com L E N N A R Please consult your own legal and tax advisors to evaluate the risks of any real estate transaction.

What if I told you you could forget everything you know about investment property loans? Because Host Financial is rewriting the rulebook, tossing out those pesky DTI restrictions. They focus on your property's income potential. No tax returns or personal income statements needed. Simple, efficient and tailored for investors like you. Imagine a lender that sees the gold mine in your property, not just the numbers on your paycheck. That's the Host Financial difference and they're approved in 47 different states. So your next big deal could be just around the corner. Ready to unlock your property's true potential? Visit hostfinancial.com don't let old school lending hold you back another day.

That's host financial.com Amy Mageri welcome to the Bigger Pockets podcast. How are you today?

I'm doing well. Thank you very much for having me.

It is our pleasure. Now you have a sort of fascinating take on how people can make money in real estate and I suppose it's something that everyone would be better off to learn, but especially new people don't understand the power of it. So I'm excited to hear your platform, your framework, your story today. But can we start off by hearing what your portfolio looks like now and then a little bit about your background?

Yeah, absolutely. You know, my background is very traditional. My portfolio these days is very diverse. I've been investing in real estate over the last 10 years and during that time, you know, because of my ability to raise capital, I've raised, you know, millions of dollars in private money. I now have the opportunity to pick and choose what deals I want to invest in. So as a brand new real estate investor 10 years ago I started out heavily in fix and flips in downtown Chicago in the high end market, wholesaling like a lot of other investors. And then I started to slowly grow my passive income portfolio. Made a couple of risky investments, lost it all, had to rebuild. And now the majority of my portfolio is investing, Investing passively into commercial syndications. And then I still a fix and flip, but on a much larger scale here in Austin, Texas.

Awesome. And how on earth did you get started to get to this point?

You know, I had no idea what I was doing 10 years ago. I was that person sitting at home watching HGTV and all the DIY channels. And I knew that real estate was something I wanted to do as a side hustle. That was it. While I pursued what I thought was my dream job at Nike. And I am a perfectionist. I'm very type a competitive personality. So I didn't want to try to figure out on my own. I wanted that fast track to success, Even though my goal was only two to three flips, you know, that year. So I invested in a coaching program and then the rest is really history.

Was the coaching program focused on any one thing? Like was it flipping? And that's why you went, that's why you started there.

It was everything from A to Z in your real estate business. So building a team, interviewing general contractors, outsourcing, systematizing contracts, analyzing deals, marketing for deals. So everything I guess you would need to be a well rounded real estate investor.

So give us an idea of, you know, you do this, you get started, you start doing the flipping. And you also said that you did high end as well in the Chicago market, I believe. Did you immediately start flipping high end homes or is it just sort of like a general progression to get to that point?

That is such a good question because this comes up all the time. I never knew I was good at raising money. This is something that always came very easy to me. Earlier I said my goal was two to three flips just as a side hustle. And the reason I really fell into the luxury market was because what I had found is during my first six months of investing, I was much more.

Calculated and low risk because I focused on the low dollar. One bed, one bath condos in downtown Chicago. It's always the same thing. Kitchen, bathroom, flooring, paint, kitchen, bathroom, flooring, paint. We never had to worry about any of the other big ticket items. Well, I started to talk to my acquisitions manager and we realized there was a huge.

Market that hadn't been tapped into in the north side of Chicago because of the high dollar price points. Right. Everyone's going to the middle income price point. So it was very saturated with, you know, quote unquote competitors. And so I took a step back And I said, hey, I had raised all this money on accident, so fine, I'm not scared of the price points. I'm just going to jump right into the luxury market. So that's kind of how it started. Nobody was going there. And every property I put an offer in on it kept getting accepted.

That's awesome. So, okay, so you start. Well, actually, I wanted to ask something really fast as a follow up. You said you had an acquisitions manager. Generally a lot of people don't particularly have that at the very beginning. That's something that is added to a team. Describe that role. Is that something that you actually hired? Was it someone that was hired on a per deal basis? How did that arrangement work?

That is a phenomenal question. So I'm going to go right into coaching mode. So a lot of new.

A lot of newbies will be like, I don't have a team, I can't do this or I can't do that. And I take a step back and I say, everyone has a team, whether you know it or not. So for me, when I refer to an acquisition manager in year one, that's just a fancy way of referring to my realtor, right? So my realtor, the majority of my deals came through the MLS and they still do and through networking. And I had a couple of different realtors that I worked with. My realtors also happened to be investors themselves. So they wore two hats. They would analyze the deals for me because they were investors before they even brought them to me. Whether they were pocket listings or MLS.

Listings, I love when that happens at this point, I think David and I have talked about acquiring houses and like luxury houses. And I get realtors that send me deals all the time and they'll even do the comps for me. They'll show me the comps in the area and they'll say, hey, here's what I think it's gonna make. Here's the cash on cash return. And it's always like, okay, there's a significantly higher chance I'm gonna work with someone who does the work before I even ask for it. So that's always nice to hear.

Totally. Yeah. And that's something we don't want to do, you know, right off the bat. Like, we want to make sure our realtors or acquisitions managers or whatever know that we have a vested interest. Right. Do a couple deals with them. They will gladly fill out your deal analyzer. Just educate them on how it works and be like, look, I want to make our decision making process as easy as possible. If you can fill this out, it takes two minutes and then send it to me, I'll let you know, yes or no, within, you know, 24 hours, whether or not it's going to work.

Sure, sure. And you kind of mentioned you. You quote, unquote, accidentally raised this money, which most of the time we're working. We're working to raise money. And so, you know, I'm kind of curious. When you're embarking on this whole journey of going the raising money route, how are you able to, I guess, prove yourself? You know, I don't know. Did you have, like, a track record of success before you, you know, raised this money, or was it something specific that, you know, that you were able to pitch to them, that. That really got them on board?

Yeah, you know, it's crazy. I didn't have a track record. I mean, I started raising money on my second deal. And we all have strengths and weaknesses. Right. I am terrible at marketing, all aspects of marketing, but I'm just very building rapport and trust with people. And that's what raising capital is. You're building relationships. You're leveraging off existing relationships from your inner circle, your outer circle. But the way you get these individuals to ultimately invest with you is through confidence, and that confidence comes through your education. So you're constantly educating them on who you are, what you're doing, what's in it for them, what's in it for you? What are the risks? Are there guarantees? Like, I have 15 different credibility pieces that I'll take my prospective lenders through. Sometimes after 3, they commit to the deal. Sometimes after 15, they don't commit to the deal. So it's just educating them on your standard process.

Amy, what do you say? How much weight would you give to someone's ability to articulate themselves well or their strength in communication when it comes to raising money, as opposed to just being good at finding a deal and good at real estate investing?

Yeah, that's a phenomenal question.

When you have the right people in your network, whether it's coaches, mentors, or systems and scripts that, you know, and I'll give you guys some, but that you want to start to create yourselves, anybody can get out there and raise money. So, sure, it came very easy for me. People will always ask, well, it's easy for you because you relied on your friends and family members. And I didn't because I'm stubborn. Plus, they weren't supportive. And when they heard that, they would say, oh, it's easy for you because you just bought A list. I've never bought a list. So having scripts and systems really gives you guys and even coaches and mentors the confidence to get out there and raise money the right way from the right people, because you will turn people away regardless of your experience, regardless of your liquidity. Right. We're always being told we got to have skin in the game. I'm actually going to squash that today. And then regardless of whether you're doing this part time or full time.

So before we get into sort of your system, can you share some tips that you may have for people who are not as strong of a communicator, even if they have the information in their mind?

Yeah, sure. It's a step by step process. So whether you're an introvert or an extrovert, the very first thing you want to do is make this mindset shift. And we really want to believe that we are providing others with an opportunity to exist. I hear all too often.

I feel bad asking this person for money. I don't want them to think that they're doing me a favor. Have you guys ever heard that?

All the time.

All the time. Yep.

Right.

And so I just say, hey, look, once you have a strict buying criteria, once you believe in what you're doing, then you really are going to believe that you're providing others with an opportunity. That's step one. So making that mindset shift, because if you don't believe in what you're doing, you're not going to have success raising capital. And then what you want to do is just plant seeds. So I always say, hey, the minute you leave your house, anyone you encounter is a prospective private money lender. So we can go through this now or later, but I have a four second power pitch. And that's going to be step one for every single person, whether they're new or experienced, to explain at a high level what they do to start to capture the interest of prospective private money lender?

Yeah, let's, let's start with that.

I mean, let's do it. Yeah.

Okay, cool. So, you know, keeping in mind that raising capital is rapport based lending. So this four second power pitch is something that I chose to implement 24, 7 even when I was working, you know, my full time job, which was a very demanding corporate job with Dell Computers. So I was working for them. I'm trying to figure out this real estate, you know, business side hustle. And I made the decision to say, hey, if this 4 second power pitch risks me getting fired, which it didn't, I'M okay with that. So you guys decide what makes you comfortable. So anytime I would encounter somebody new and they would ask me what I did for a living, or even if I came across an old friend or family member and they would ask me what I'd been up to, I would drop these 13 words on them, which is, I show people how to earn double digit returns backed by real estate. And then I would, I would put it back on them. It's so great to meet you. What was it that you said that you do again? Or it's so good to see you again. It's been a while. So we're purposely dangling that carrot so that they want to ask us for more information.

So now, did you find yourself using variation? I mean, because, you know, that's a, it seems like a very powerful, you know, set of words here. But did you have to really accommodate for every specific, you know, I guess, conversation, or did you always, like, sort of drive the conversation to that point and then drop those 13 words?

That's such a great question. And it's the latter of the two. Very rarely would I take this specific script and tailor it. Now, there are times where investors have approached me and they're very uncomfortable implementing this 4 second power pitch because they think to themselves, amy, what if somebody doesn't even ask me what I'm doing? What am I supposed to do? Go up in there and be like, hey, this is what I do? You know, that's not going to flow smoothly. And I'm like, no, I know. So it's all about the law of reciprocity, right? I use an example about my Uber driver, Larry, who was a retired physician who I converted into a private money lender. And he never asked me what I was doing. So eventually I asked him what he did outside of Uber so that he would naturally ask me what I do so I could drop the 4 second power pitch on them. But what about you guys? Like, what have you found? Because I know you've raised capital before.

You know, at this point, I have the, you know, a platform myself and so does David. And people typically reach out. Like, I have an investment form at the bottom of every single one of my YouTube videos. And it just asks questions like, you know, what are you looking to invest in? What kind of project do you want? A single family acquisition, new construction, treehouse, wacky, everything in between, development. And I let people sort of choose their own adventure because, you know, depending on how I'm feeling, because, you know, I, I pursue different types of real Estate projects every single day. It's not always the same thing. So if I'm feeling a treehouse build, for example, like, that is the. That'll be the investor that I reach out to first in conversation. It's always a little tough to, to bring up. So I, I can see, like, the benefit of this in general, like having a, I guess like a phrase that you can use to work into it, because generally speaking, most people in my realm, in my day to day, they aren't in real estate. And so I typically try not to talk about real estate as to not bore them, because I'm always the guy that talks about Airbnb too much, and they're always like, we get it. You Airbnb. And I'm like, all right, all right, all right, I'll bring it back. Or my wife, you know, hey, that's enough. That's enough.

Well, I guess to the both of you. I assume you have found, though, that those individuals who have nothing to do with real estate may also serve as good private money lenders down the road. Right. So we don't have to always target other real estate professionals.

Oh, yeah, sure. For sure. I mean, look, this, this is like my, my genuine belief here. I believe that you should put yourself out there in any capacity and talk about what you're doing. And that's why I always, you know, I feel like I have to restrict talking about real estate because I do talk about it a lot, and I know in talking about it a lot, I'm going to be talking about my successes a lot, you know, and talking about the things that I do day to day and by educating people on what I do and that I'm pretty good at it and that I'm pretty passionate at it. That's when the conversation of investing with me will typically come up. Because you're like, well, how do I get involved in this? You know, I don't know anything, but I do have money, and that's where you can really strike up the conversation. So for me, when I'm working with a possible private money lender or anything like that, it's all about just putting myself out there and educating them on who I am and why I like doing what I do. And that typically opens the floodgates for me.

I would say, from my side, I rarely ever look for private money. That just isn't something I do as much. I typically invest my own money more so when I do borrow money from people, I make it super simple. I just pay them a straight interest rate. To for the time they have their money, and then when we pay it back, the payments stop. So I don't have to really look to initiate conversations in that direction. But what you said earlier is a hundred percent true, where you can steer people into asking you the question that you want them to by asking them that same question. The majority of human beings do not lead in most areas of life. They don't lead in relationships, they don't lead in business, they don't lead in conversations. They wait for somebody else to set a tone and then they try to jump on board with what that person's tone is. So if you could be in that 5 to 10% of people that can say, like what you said, so what do you do for work? Oh, I do this very high chance they're going to come back and say, what do you do? And that's something I've learned. If I want to bring real estate into a conversation, which as a real estate broker, as a mortgage broker, as a real estate investor, I'm. I always want the conversation to go that road if possible. It's very easy. You just ask them those questions. So what are some of your favorite ways to make money? Or what are your plans for retirement? And if you just throw that out enough times, they're going to come back and say, what's your plan for retirement?

No, absolutely. And the better we are at raising money, the more confident we will be, the more we can start to.

You know, diversify these conversations and scripts, if you need a script, right, because you'll be able to just, you know, really wing it because you're so confident in who you are and what you do. However, you guys both mentioned something that's very, very powerful that I want to just touch on briefly. You both said that you don't seek out your private money lenders more than the more than likely they're the ones seeking you out. And that is. Could not be. That's very, very true. You know, there are a lot of people who will say, hey, you know, I got an email from this person. They want to deploy $500,000. Or somebody's telling me they want to be a private money lender. Like, we all get those messages on LinkedIn, right? Hey, I'm a private money lender. Fill out this application. I'm going to lend you 70% of ARV. It's 7% annualized. Right. So I just really want to reemphasize that, yes, 95% of the time, we are the ones seeking out private money Lenders. So for the sake of this conversation, to everyone listening, what we're not talking about today is hard money because technically that's private equity. That's not what we're talking about. We are not talking about somebody brokering a deal. Nothing's wrong with that. I broker deals. And we're not talking about banks, even the investor friendly credit unions and community banks. Right. So we're going to be seeking out everyone and anyone else. Anyone and everyone who's got cash or assets collecting dust, such as our Uber drivers, our neighbors, people at airports, people on airplanes, people if you go to church, if you participate in sports, it's literally anyone. So try to remember how to differentiate between what we are and are not targeting.

Yeah, so let me, let me clarify here because, you know, like, if we're talking about like David's method, which I know he does this a lot where he says, hey, you invest with me, I'll give you a 10%, I guess, interest on the money that you invest with me. And I believe that's not, I think it's just a straight simple interest. Is that, would that not be hard money? Simply because of the technicality that there wasn't an intermediary that was facilitating that deal that kind of works with the fund of, you know, hard money, I guess investors. What makes that, what makes David style private money versus hard money? I guess since he is more in the 10% camp.

Yeah. So really the what you're offering, whether it's 10% annualized or I offer 12% annualized and no points, I have found that that doesn't matter. What determines what differentiates us between hard money and private money is we are not a private financial institution. We may have an LLC that we're doing these deals under, that doesn't matter. But we are targeting anyone and everyone else. I mean, you can even charge 12% annualized in two points and that's still not going to make David, for example, a hard money lender.

I can see how it can be argued both ways though, because he's setting the standard, he's dictating the terms. But for example, David, you're not compliant or regulated by the sec, I'm assuming. Right. So that's another big.

Factor that differentiates us between us and hard money.

Yeah. In general, hard money is a blanket.

Okay. So it's, it's really more the banking system that makes it.

Also the fact hard money is a blanket term that is used to describe loans that are secured by a hard asset. So if you give Someone a loan and their credit card collection secures it. Or like in a sense, like a car note is a form of a hard money loan. When we use it in our vernacular, real estate investing. What we're talking about is like Amy said, institution that is regulated, that is a, like an official lender that will typically charge points on top of the interest that they pay. And we'll have like closing cost fees associated with the loan that they're giving versus like when we do private money, you don't really have all of that red tape. There's no title company that's going to be involved in this.

Got it, Got it. Okay. One other thing I wanted to ask on the private money, you know, because with, you know, David just talked about all the technicalities here with the hard money and it's collateralized and all that stuff. And we don't really go through that whole process with private money. So when you're going to an investor and you're striking it up and then you agree on your terms, is it typically just sort of solidified through a promissory note?

Great question. Yes. So I use anywhere from three to five different contracts or term sheets. It's always a promissory note summarizing the terms and conditions of our agreement. Amy promises to pay David $100,000 at a 10% annualized return backed by the property located at 123 Main street within the next 12 months. I set up all my contracts on a 12 month. Want to know, just for congruency purposes. Number two, we're always going to secure their investment. Right. So it might be. So we're going to record a mortgage so that they have that tangible asset so that we can't sell the property without their written authorization. They can foreclose on us if we decide to take off, which isn't going to happen. Right. Because that's not what we do. And then number three is, well, Adam is a lost payee on the builder's risk insurance policy policy.

And you said you have five to six different contracts, is that right? Did I hear that correctly?

Number four, sometimes I'll throw in a personal guarantee. I don't offer it up in the beginning as a part of my standard process. However, I'm. I have signed many personal guarantees and I will sign them if it comes up or if it's a deal breaker. Because at the end of the day, you guys, we shouldn't be raising money if we don't know what we're doing. If we're not confident in our ability to execute on the deal. And yeah, I've lost plenty of money and I have liquidated all of my assets to pay people back out of pocket because I think it's the right thing to do. I've even had to put private money lenders on payment plans.

The opposite side of that is, hey, when you structure these deals the right way, like there are no guarantees. So contractually they made an investment. Right. I didn't have to liquidate $1.4 million of real estate in 2017 and put people on payment plans. You know, it's. But for me, I couldn't sleep at night until I knew that I had exhausted all efforts.

Yeah, that makes sense. I think, you know, it's a fiduciary responsibility to perform for our investors so that I think that's the way to go.

Do you want to invest in cash flowing rentals but don't have the time to manage the properties? Is your local market too competitive or expensive to invest in? Rent to Retirement offers new construction turnkey investment properties that you can buy with as little as 5% down and rates as low as 3.99%. Their team handles everything from financing, management, insurance and more so you can live where you want and invest in the markets that offer the best returns. Rent to Retirement has the best reputation in the industry with more five star reviews than any other company on the BiggerPockets website. To learn more, visit biggerpockets.com retirement or just text REI 233777 to start investing in the best markets today.

If you're serious about scaling your portfolio, you need two things. Good data and good deals. Lennar's Investor Marketplace gives you both. It's full of new rent ready homes in markets across the country. Each property comes with verified rental comps and local insights. You can see potential returns, compare markets and make offers, all without leaving your desk. It's like finally having the homes, the data and the financing all in one place. Head to biggerpockets.com len and see what's live. Right now. That's biggerpockets.com Le N N A R Please consult your own legal and tax advisors to evaluate the risks of any real estate transaction.

Tired of traditional lenders holding you back? Host Financial is here to change the game. They've ditched the DTI restrictions and they zero in on what really matters. Your property's income potential. So no more chasing papers for tax returns or personal income statements. Think about it. A lender that values your property's worth over your paycheck that's the host financial difference. Approved in 47 states. They are ready to help you make your next big move. Curious if you qualify? Just head over to HostFinancial.com and find out. Stop letting outdated lending practices hold you back. That's HostFinancial.com where your property's potential meets unlimited financing.

It's 3am on the 6th and you're wondering if you should text your tenant about rent. Here's a better idea. Don't. With avail, rent collection runs on autopilot. Automatic reminders go out. Payments land directly in your account. Late fees trigger when needed. Tenants can enable autopay and with fast pay, you can get paid as soon.

As the next day.

Sign up for free at Avail Co BiggerPockets. That's a V A I L Co BiggerPockets. Avail handles rent collection. So you can actually get some sleep.

So I think kind of as we talk about this and the promissory note and the protections and you know, first time raisers and all that stuff, can we talk about some of the fears here that, that are kind of floating around, especially in times like this? I mean, if you're a newbie investor, if you're kind of green or you're developing, you know, your portfolio, is there a lot of fear, kind of from the investor standpoint that you have to sort of break down and kind of work around? I mean, I suppose it depends on how adamant or how passionate an investor is to work with you. But what are common things that a newbie investor might hear from a fear standpoint from the investor?

Yeah, there are so many fears and objections out there. I mean, it's fear that holds all of us back, right from taking action and from raising, raising capital. At least that's what I found over the last 10 years. So some very common ones are I don't have any experience. I'm brand new, like, no one's gonna lend me money. I've never done this before. So if you find yourself in that position, just remember, it doesn't matter if you've done this before because you have a team of experts who are supporting you. You have your general contractor who's been doing this for 20 years. You have your realtor, your designer, your real estate attorney. So, so for those of you who are new, just make sure you know how to hire a team, build a team, and then you highlight your team and even introduce your team. I've had private moneylenders get on the phone with my general contractors during my first year to Just build their confidence in me and my team. I've flown them out to Chicago. So that's a common one. What about you guys?

I think right now, I mean, obviously, I think interest rates are something that, that, that are kind of floating around and especially in the Airbnb world right now. I mean, one thing that I'm hearing pretty often is, you know, a lot of people are stressing the whole idea of a slowdown in bookings and this and that. But I think what we're just seeing is a recalibration of normal seasonality. You know, for example, in Joshua Tree, things were just last year a phenomenal year across the board. But it isn't always a popular place to be in the summer because spoiler alert, deserts are very hot. And so now I think things are evening out and going back to, you know, seasonality. And so I think I always have to educate people and remind them that we've been in this like, crazy run for a while and like, there's been a lot of money to be made, but it's not always normal. And so you can't always expect record number of years every single year, because it's just not how it works, you know. So I, you know, for me, I think it's. There's always that fear, especially with investors, because, I mean, we talk to investors several times a week. We always just have to remind them that it's like, look, it's the, there's seasonality to take into consideration. You know, we have to budget accordingly. We have a pat. We have a padded bank account for emergencies and all that kind of stuff. And so it's like, we don't typically pay our investors out monthly, which a lot of investors that I work with do want that. But it's, you know, when you're, especially if you're investing with us on the short term rental side, we like to have reserves. And so we really try to coach our investors to work with us on that and accept a quarterly payment or a biannual payment. That way we can actually account and budget for some of the down seasons. What about you, Dave?

I think when I do raise money, I put an emphasis on approaching the person listening from the perspective of I'm educating them because I think if they're experienced with real estate investing, you're not really having to sell them a lot. They're going to be asking you the questions. They already know what to ask, they know what to look for. So if they're hesitant or nervous, that means they don't quite understand how this works. And you have to make them feel safe before they even care about the return they're going to get. So I would take the approach of teaching them. What does the BRRR method mean? This is how they're going to get their money back. The, the method is designed to recover capital so that they can be safe and they can get their money back even if we don't sell the house. If it's a long distance thing, I would give them the long distance real estate investing book and I'd say this is a book that shows exactly what I'll be doing. I'll be putting a core four together. That means I'll have a lender, a contractor, an agent and a property manager that will be handling these components of the deal. And I'd have like a little diagram that showed property manager and this is what they do and lender and this is what they do. I'd make it very simple and then I'd even probably like leave them with some resources if they wanted to learn more. Hey, read this book. I'll. I'll let you keep it or something like that. No one's going to read an entire book before they give you money. But the fact that they can see that this is like a documented thing, this is not just you fly by night. Throwing something around will make most people feel better. So I'm lazy in this sense and I'm always looking for how do I use resources that someone else has already made to support what I'm going to do, right? Like an article out of Bigger Pockets or a book from biggerpockets or a podcast episode that talks about this. I much more like likely to give it to them. And they're going to hear the enthusiasm of the person talking. They're going to realize, oh, this is not a rare thing. Everyone does. Or a lot of people do this often. So this isn't like a crazy like, why is my nephew asking me this question? Or why is this person I just met? This is something they always do. Rob.

So selfishly, this is, you know, a lot of the, the videos on the Rob Built channel have come from these types of conversations where I get the same objections or the same questions over and over and over again. And I'm like, you know what, what if I made a 15 minute video that really goes in depth on the same question I get seven times a day. That way whenever people come to me worried or they ask the question, I'm like, hey, you know what? Set up a video, made this Video for you. Here you go. Please watch it and then let's chat.

Yeah, you know, it's funny because I often, I will often tell the investors who have the element of fear holding them back, hey, the number one reason why everyone in this country is not acting as a private money lender, assuming they're in a position to do so, is because to your point, they're simply not educated on the process. So let's just get out there and educate them. That's all it is. It's a lack of education. And in today's market especially, I'm sure everyone's, you know, getting questioned about, you know, the economy, the market crashing. Well, none of us here can predict the future, right? Sure, we're starting to see shifts. All that means is we don't exit the real estate game. We just change our strategy and we shift with the evolving market. And guess what, you guys, with inflation rates today, it's even easier to raise money today for your real estate deals than it was in the past. Inflation's north of 8%. Hey, private money lender, you have money sitting in the bank. Your bank is literally dying every day it's sitting in your account. If somebody wants to take the time to Google, what does a bank do with my money? You're going to see that they take the money that you put in the bank and they go invest it passively into real estate.

Okay, so with your framework that you have that you teach people how to do this, where should they start?

So I've created this four step unique methodology called my Fact framework. And step one of that Fact framework is building our foundation. And the way we build our foundation, there are a few things that make it up, such as, you know, being clear on who you are and what you're doing, really knowing your role, having your business plans and goals in place, like understanding why you're doing this. But the key takeaway of step one, which is building our foundation, is implementing that four second power pitch 24 7. So all we want to do as a part of building our foundation is we're not asking for anything. We're just announcing to the world who we are and what we do through that four second power pitch. Now, we talked about the four second power pitch earlier and a very common follow up question that I'll get is, hey, Amy, what if somebody is into what I'm saying and they want to know more? Now, if you're experienced, the conversation will naturally probably carry itself until you decide to end the conversation. For those of you who are greener investors. I have a 20 second follow up and I'll rattle off the 20 second follow up, put it into your own words, fine tune it, make it your own and then end it there. And if they want to know more, just say, hey, I'll call you next week. We'll hop on a quick call and if you're not sure what to do, call up on your coaches and mentors and they'll literally hold your hand every step of the way. The 22nd power pitch is basically if someone's saying, hey, that sounds great, can you tell me more? I always respond with, yeah, you know, I'm a developer based out of downtown Chicago and you know, we're currently on target to complete, you know, 10 transactions over the next 12 months. And our investors love it because they get to kick back and relax while we do all the work and they earn, you know, double digits backed by or protect with a protected, secured and insured asset. What was it that you said that you do again? It's so nice to meet you. And then that's it.

Well, what happens if, okay, so let's say you get through your 13 year intro. You know, I teach people how to make double digits in real estate and then they say, oh, cool. And then, you know, maybe signaling that they don't necessarily want to know more. Do you just, just cap it off there or do you continue to drive that point?

No, I'm not, I. Look, I really believe I'm providing others with an opportunity. So if they want to end the conversation, I'm not going to push it on them because I really believe that that's their loss. Or maybe we haven't done a good job of explaining to them, like who we are and what we're doing. Later through my nurture sequence, my follow up sequence, I may choose to circle back with them, but if they're like, oh, that's amazing, you want to go grab some dinner? Like, yeah, sounds great. And then cool, right? Depending on the relationship, I'll try to weave it back in in a very subtle and tactful manner.

Good, okay. And that's what I'm wondering. That's. I asked that for all the newbies that are listening to this that, you know, may not have raised money. When, when should one push or one, should one pry or when should one go in for like the, you know, it's like the one, two hook, right? Like when should they go in for, for, I guess, jab, jab, hook. The second jab in it.

Yeah. I mean, what you can always do as well. If somebody is kind of like, oh, that sounds awesome, I wish I was in a position to invest or I'd love to invest eventually. You can always say. Because one of my strategies, you know, I think we'll talk about later, which is step two of my fact framework is, you know, how do we take action? We always want to end every relevant conversation with a request for a referral. So if somebody says they love what you're doing, they love to support you, but they're not in a position to invest, just say, hey, no problem. Do you happen to know anyone else who was interested in getting double digit returns, you know, backed by real estate? You know, let me know. So I ended every single conversation when I first got started 10 years ago with a request for a referral. And I did that for 18 months consistently.

Okay, so I want to definitely drill down a little bit more on the foundation here. But just for reference, so that we understand sort of the different steps of your, of your framework. Can you just quickly take us through the, I guess the, the four sections of, of your framework?

Yeah, so the foundation is step one of my fact framework. So what does that look like? Do you have your scripts and systems in place? You understand your buying criteria? Do you have your target market identified? Right. So being clear, able to clearly and confidently articulate who you are and what you're doing. And the main takeaway, the script is the four second power pitch. So that's the foundation. Once we've built our foundation, we've got the right mindset. We believe we're providing others with an opportunity to invest. We're consistently dropping that four second power pitch on people. Then is step two of my fact framework where we start to take action. Step two is where we start to proactively connect with anyone and everyone. Like coffee talks, in person, meetings, if they live out of state, then we'll schedule a zoom session. But this is where we're starting to educate people on who we are and what we do. We're just, we're booking appointments. Basically.

Step three of my fact framework is the credibility piece. So step three is where as we're taking action and we're booking these 30 minute coffee talks, we want to make sure we have something to take to the coffee talks. We want to make sure we've got all of our credibility pieces created and customized before we start or as we're starting to take action. So we've got. Because basically I use the credibility pieces as a part of our follow up system, as well, and then step four is the transactions. Hey, guys, you consistently build your foundation, you take action, you've got your credibility pieces in place. Then step four is the transactions will start to follow. And once you've converted a private money lender into investing, you want to focus on two things.

Things.

What do you guys think those two things are?

Okay, let's see.

You're saying once they've already committed to giving you money.

Yeah. Like, once they've invested with you one time. What do we want to try to get them to do in the future?

We want repeat business and we want referrals.

Absolutely.

What does the nurture system look like?

You said, oh, no, I was just ending it with. You're absolutely right. So we want to make sure we take care of them right. We stay in front of our audience. We keep them informed, whether it's good or bad. You guys, we're going to have change orders. We're going to fall behind our project timelines. It is very, very critical to our success. Yeah, we educate 100%.

So that's an issue that we have in the different companies that I'm running with. Newer loan officers, newer real estate agents. Most people understand the idea of lead generation. Going out and finding the next deal, finding the next person let you borrow money for us, finding the next person that needs a loan or the next person that needs a real estate agent. And we will work so hard to get a new customer. We'll bend over backwards. We'll do everything. Then you get them. And maybe they're having a bad day and they're being pushy or rude or something goes wrong and you have to take some time out of your day to explain it. And for some reason, we resent having to do that. And then you lose the customer and you got to spend 10 times as much energy to go get the next one to start over again than if you'd put 10% of the energy into retaining the one that you had. And that is a very good point. If you're trying to build a sustainable business is, yes, you will spend a lot of energy looking for clients, but spending more energy on retaining the clients you have and then getting organic referrals coming back is such a better and more sustainable model than giving elevator pitches for the next 50 years of your life. And your business never grows past the points it's at right now.

Big time. Big time. I mean, for us, I think we're starting to realize that strategic partners are the best partners. Right. Like, all of my investors have been really Great. And we, we, when we really first started this whole like private money raising thing, we were just, we were talking to everybody. If they had 50,000, if they had a hundred thousand, it didn't matter. We were just like, let's talk to everybody, let's get on the phone. And I think as we started to realize, you know, we really started being very selective with the investors that we worked with because we weren't looking to just have a one and done transaction. We were hoping to do multiple transactions with the same investor. And fast forward to today. We have a lot of investors that are reaching out that, you know, they have larger sums of money to invest. And so we put a lot of energy into nurturing that relationship. Because if I could have three investors versus 30 on a single deal, not a syndication or anything like that, that to us is going to save so much more time. Because you're right, David, we have to spend 10, 20, 30% more energy just making sure that that relationship is great, but it's still a lot less energy than talking to 50 people on Zoom every single week.

Yeah, I agree with you. And for those of you wondering, yes, you guys, when it comes to private money, you can absolutely get 100% funding from a private money lender. Like unlike the hard money guys, right. They're not going to give us 100%. So with private money, because we set the standards, we can get 100% of our purchase price, our renovation costs, and all of our carrying costs in the form of private money. And in the beginning, sure, I would take, you know, investments from someone as little as $8,000, which I will never do again. But I did it in the beginning. I was building that list.

Because for me, it just wasn't worth the time and energy this investor happened to have. Ongoing questions. So make it clear if you would like that as a private money lender, you are a silent stakeholder. You don't have a say in the renovation and the design. In my sales strategy, like, I will proactively keep you, keep you informed every month of what's going on and then you'll get paid back. I still tell them my standard process is I'll pay you back principal plus interest at the end of the deal at the closing table.

Yeah. So I, I sort of want to dig back into foundation a little bit here because I'm really curious. I mean, I think, you know, if you're interviewing for a job, for example, they say you as an interviewee should never bring up money first. If you, if you do, you've already shown your hand. So I'm sort of curious on your end, when you're in the F stage of this, the foundation and you say, oh, I teach people how to make double digit returns, are we now even in this stage saying, let's get into the numbers, I need money, here's how much I need, or is it truly just about really developing that relationship first?

Yeah, it's the latter of the two. It's really just about raising awareness and developing that relationship. So we're not going to go through any numbers or quote unquote, ask for money until step three, the credibility piece where we take them through our deal analyzer, our org chart, our target market.

Our all of our, you know, strategy, investment strategies, our contracts, our list of frequently asked questions, our private money presentations. So that comes on as a part of step three.

Got it, got it. So now let's get into the 22nd follow up here because this is where I'm kind of curious if it stays within that F, because you said, oh, can you remind us of the 22nd follow up?

Yeah, the 22nd, it will stay as the tail end of the foundation. So the end of the foundation is the 4 second power pitch combined with the 20 second follow up. So I like to use them simultaneously if somebody asks for more information.

So the 22nd power pitch again is assuming somebody likes your 4 second power pitch, they want to know more. Instead of going into a bunch of details and numbers, I just say, yeah, you know, I'm a developer based out of downtown Chicago and we currently are on Target to renovate 10 properties over the next 12 months. Or just tell people what your strategy is. We're going to wholesale three properties. Or if you don't have a strategy, just say we're on target to complete two transactions. That's fine, just whatever your goals are. And our investors love it because they get to kick back and relax while we do all the work and they earn double digit returns with a protected, secured and insured asset. And then I end, that is the end of foundation.

Right. So is there any amount of just even from that follow up? Because I'm sure you get a lot of people. I mean, you did say earlier in your example, like, great, let's go have dinner and talk about it. Obviously that would lead to action, but I imagine that most of the time they're like, wow, that's really interesting. You know, let's keep in touch. So for those types of people, when you're sort of nurturing this foundation or kind of building it up. What does that follow up look like outside of a person to person, you know, in person conversation?

Well, if somebody wants to know more, then next week you begin step two of the fact framework, which is taking action. Step one of taking action is now we're starting to preferably sit down in person or via zoom, and you're going to start educating them on your business model. And that's always with a private money presentation. That's going to be your very first credibility piece.

Even with this presentation and everything, that would still be sort of in this foundation stage.

No, that's step one of taking action. So foundation ends with the 20 second follow up. We're done. Now if they want to know more, we're going to start taking action.

So last question. If we know that we're going into action, do you have any advice for transitions to make it easier to move from foundation into action?

Yeah, because you want to have that level of confidence, especially for the newbies. Oh my God. I just got a bunch of yeses. People want to know more. This just happened at a workshop I hosted the other day. So at a minimum, make sure that you have at least, let's be a little proactive, at least one credibility piece ready to go. And as you're taking action and as you're meeting with more people, as you're getting creative and thinking outside the box and finding more people to meet with above and beyond your 4 second power pitch, you'll have the confidence to know that you have that private money presentation ready to go. So you're not going to refrain from scheduling that 30 minute coffee talk.

I love it. Yeah. What I really like about this is, you know, I think a lot of people have, you know, for. Not everyone is super social. Right. And it's like really tough to strike up a conversation with a stranger and everyone gets really nervous of, you know, small talk and like, what are we going to talk about? I don't know this guy, I don't know this chip, you know, whatever. And so I like that you sort of get into every conversation with an intention. Right. You know, like, hey, what do you do? Oh, what I do is this. And I'm just kind of curious. In your experience, have you had a lot of surprise investors come out, you know, in your whole life just from random scenarios where, you know, you would never have expected it? Like, has your power pitch really been fruitful in some pretty unexpected situations? I guess is, is what I'm asking.

100% of the millions and millions, well above $20 million in private money that I've raised have come from complete strangers as a result of this 4 second power pitch, who I've developed a relationship with through my Fact framework. I did not target friends and family and I still don't because I'm stubborn and that's a whole nother story. But all of it came from random people.

Oh, wow, that's cool. So that's, you know, because I think a lot of the advice out there is starting your network, start with your friends and family. You, you, you, you don't. So can you give us like what, what does that look like? I'm so curious because I think it sounds, I mean, you mentioned your Uber earlier, so I can kind of understand that. But are you going out of your way on a day to day basis to meet people and talk to them? Is that kind of part of the game here? You have to be willing to just make new connections, you know, Whereas ordinarily you would probably ignore someone, not you personally, but a person.

That is exactly right. And that is a hundred percent what step two of the Fact framework is all about. Amy, you're telling me I don't have to target my friends and family members. How in the world do I get, get everyone else in this world to invest with me? So where do we go to find people? What do we say? What environments do we put ourselves in? So that's all we're doing is we're building our networking mind map under step two of my Fact framework. That's what we're taking action to network more creatively and to build more trust and rapport with people. So another example, this is very, very calculated. And you guys, for those of you who are not coming comfortable doing this, the more you practice it, the easier it becomes and the less calculated it becomes. I'm on an airplane at least three times a month. Even still today when I'm on an airplane, I will take out my laptop and purposely open it up at least one time and start scrolling through before and after photos because what do you guys think that's going to do?

Oh, what's that?

Oh my God. Yes. This really is my project. No, I don't work for somebody else. I, it's my company. I'm also passive aggressive, in case you can't tell. But exactly, it's capturing the interest of the people next to me. Right. Which allows me to go into that four second power pitch. So it's, it's the exact same system every single time. What's the first thing you say to a stranger. The 4 second power pitch. How do you capture their attention? By getting creative and thinking outside the box. So that's just one of literally seven, 70 different strategies that I have.

That's awesome. David, I think you said that on airplanes you'll open up your laptop and just watch videos of yourself on bigger pockets. YouTube.

Right, that various gym post workout selfies, accolades and awards that I've received for various things. I like to pull out all of.

Your awards and put them on the little table.

Yes, that's exactly right.

You know what? I have actually kind of done, like I've edited my own videos on airplanes and I'm. But I don't like, I always turn it away because I don't want people to think that I'm just like watching videos of myself because I already do that. I mean, they just loop at home. But on an airplane, I'm not going.

To get your thought. Amy, this is a good point question. Rob, I swear, airplanes have a different dynamic than everything else in the world. Okay, I could go to Walmart, I could go to Home Depot. Nobody knows who I am. I don't get recognized ever. The second I'm in an airport, I get people recognizing me, wanting to take pictures. If you're on the plane even more so people will walk by and they'll do that double take. I haven't quite figured out what it is that makes people recognize other people on airplanes, but I just flew back from Long beach two days ago and I'm walking out of the bathroom, like just basically zipped up and some guy goes, David Green. And I just assumed, oh, you must have been at my meetup, right? You probably flew in for the same thing. Hey, talk to him for a little bit. Then I sit down on the plane. He's the guy I'm sitting next to. Didn't go to the meetup. Had no idea that I was even there. Just happened to be a person that likes bigger pockets. Lo and behold, he's actually working with one of our team members to buy a house in Sacramento. So shout out Derek if you're listening to this. But I just thought like that doesn't happen anywhere else. But the minute I get in an airport, all of a sudden A, people will recognize you or B, they're open to conversations they don't have at any other time. It's like you're the guy I'm sitting next to on the plane. So I have to listen to you tell me all about your, your cryptocurrency dreams or your dog walking business that you want to start or like whatever it is. You just read Rich dad, poor dad and like I'm going to hear about it for the next two and a half hours on the plane. Can you share what you think makes it happen on an airplane? So we could possibly recreate that in other scenarios intentionally?

That is so funny because that happens to me, but not on airplanes. So that I, that has yet to happen to me on an airplane or at an airport. Very seldom but consistently people will recognize me because I did a four part series with hgtv. So I would actually rob. Any insight. If you can crack that code, let us know, sir.

You know, it is always at the airport, isn't it? That's always, it's always. Yeah, it is, David, that's so true. I, you know what? And it's always, I'm at this point now where like it happens every so often and it's always at an airport, but no one's ever around. So I'll go to my wife and I'll be like, babe, someone, someone recognize me from bigger pockets. And she's like, sure. And I'm like, I swear, I swear. No, I don't know. I think it's just, it's, it's. There's kind of like two people on an air, two types of people on airplane. The people that want to talk and the people that don't want to talk. I used to be the former. I always love chatting with the person next to me. And now airplanes are kind of my sanctuary because I typically will fly with my, with my kids and my wife. There's two kids, they're one and two. And it gets very, very crazy. So when I get to travel on an airplane alone, I'm like, oh man, this is first class for me. You know, it's pure peace and quiet. But I, I really like the advice here, honestly, just because I think whether you're raising money from friends or family or not, there's some pretty actionable steps here. I think there's a lot of ways to get your, yourself out there. For me, when I was first starting my short term rental journey, I was posting it on Facebook, on Instagram, you know, just everything that I was doing and it's cool, it's a cool thing. I was really proud and people were like, tell me more about that. And that's how I was connected with people in my network. You're saying go out and meet people out in the wild and tell them what you do. Put yourself out there, make chit, chat Be uncomfortable and establish a connection there, and it can be a very fruitful thing. That leads to seven figures of fundraising. And, you know, for me, I'm a content creator and I put myself out there on the Internet every single. Every single day, every single week. And because I do that and because I teach people how to do it and because I love it and I educate them, the credibility, which I'm sure we'll get into later, is instantly set. And people will email me and offer me money, and they don't even know me. So that's another form. Like, you don't have to even do either of these two things. You could just make content online and talk about what you do and love and show that you love this stuff, and you'd be surprised at the amount of people that reach out.

You're stealing my thunder. That's all a part of taking action. I love it.

Okay. All right. Well, it's a good preview for the next one. We got. We got a couple more episodes of this.

All right, that is fantastic. And I think that is a good point to wrap up part one of this segment on building a foundation with potential private money lenders. Amy, thank you very much for sharing what you did. This is really good. Everyone listening? If you Continue Listening, Episode 2 will be airing next. As Amy gets into the next step in her process, I'm excited to see what you have to say here. This is David Green for Rob Delusions of Aviation grandeur Abasolo signing off.

Thank you all for listening to the Biggerpockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by E and K, copywriting is by Calico, content and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. the content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. BiggerPockets, LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.