Top Strategies For Fiancing Co Living with Fernando Corona

What's up everybody? Welcome back to the New and Experienced Investor Podcast. Today we're talking about going from being a landlord to a lender. It's definitely a show you do not wanna miss. I'm Alex Barnett. I'm one of your hosts. I'm the new guy.

I like that salute. I'm Joe Homs and I'm the experienced guy.

Heck yeah! We have an amazing guest today, SoCal local investor. He's now funding local projects as well as diversifying his own portfolio. Very exciting stuff.

Nice.

Yep, yep, yep. Very lucky to have him on today. Before we bring him on, let's remind everybody about our upcoming meetup, August 25th.

We don't have anybody picked yet.

TBD. TBD determined.

Yep. Yes.

We're gonna get somebody real nice.

Same place, same time, same bat channel, all that sort of stuff.

Yeah.

But as soon as we figure out who's going to speak, we'll let you know.

Yeah. Go ahead and sign up on meetup.com or go to ocinvestormeetup.com. That'll take you right there and you can get alerted as soon as we find out. Always like to remind you guys to join the chat. Jump in right now. This is live. We are live right now. You can reach out to us, ask any questions you want of Joe and I or our amazing guest today. So Do us a favor, please share this with any new or experienced investor in your world. Let's get to it. Today we have Eric Barty here with us. Eric, how you doing?

Great. How you doing, Alex?

Great. Thanks so much for joining us.

Oh, thank you for the, the invite.

Heck yeah. All right, let's just jump right into it. Why don't you introduce yourself to the audience? Kind of what you were doing before you got into real estate and what got you into real estate?

Oh, okay, great. Uh, well, I've, I've been in, uh, the Orange County area for about 30 years. Uh, moved here, got married, And just the first opportunity came up through our realtor at the time, and it was looking for something to get into, I guess, to try investing and seeing what it was like to be a landlord. We found a local property, a single-family residence, got into that. Good timing because market— it was, I think, 2004, 2003, sometime in that area. The market was down. I picked it up, market went up. Actually came back with the same realtor and said, hey, you might want to be looking to move on from this since the market moved up. And as my wife would say, I was probably getting greedy at the time and thought I was going to start to become a big-time investor. So I rolled that experience into commercial real estate. My first purchase from that was a 5-plex out in Cathedral City. So we just kind of rolled into that. That was a very interesting experience. Of course, so many, you know, a number of tenants now to deal with and different environments, so on and so forth. So that's kind of what my initial experience was, just rolling from a single family that would have been a great investment had we stuck with it. Obviously, today's prices, so on and so forth with real estate and having all the equity we'd have built into it by now. So. Right, right.

Okay, nice. So you hadn't had any experience before that. It was just kind of your, your agent brought this to you. And, um, what, what area is that? Was in Orange County?

Yeah, Laguna Hills.

Oh, Laguna Hills. Okay, nice.

Just a nice little, uh, nice little 1,200-square-foot residence. Um, we got it, didn't take a lot of fixing up, and got a family in there. And I think that was probably the one thing that, as a learning point was it probably would have been smart to stay where we're at and just start to build from that as opposed to just jumping from that into what we did, taking, you know, trying to leveraging some of the equity we had in the house. Instead of doing that, we just sold it all, 1031 exchanged. Didn't know what the heck that was. But that again, from the realtor that I was working with, he had a guy that kind of specialized in that.

Okay.

So he presented the opportunity. I guess the idea for me was, okay, I'm getting to move up in the real estate world. And I wasn't looking at it as I'm going to be any kind of real estate investor at the time. It just was an opportunity, but it looked like the right next thing to do.

Right.

So I was kind of sold on it. But again, the move was good. It just wasn't the best move to make, I think, at the time, where the property we got, so on and so forth. And then the realization that we were, you know, we didn't heed the advice we were given as far as, you know, it's a cathedral city, it's blue-collar residential, or excuse me, apartments, and you need to treat it a little differently than you might as far as you can't treat it like it's your own and you're gonna fix it all up, you know, and make it nice. And that's what we did. Every time a resident moved out, We would flip that unit and— not flip it, but rehab it and put a good chunk of money into it. Did it 5 times. And that wasn't the smartest thing we could have done. Ultimately, we ended up losing money when we had to bail out of it at a point. So, the sunk cost was getting ridiculous.

Sure. And so, you lost— you got a loss on that. But was that because the market was then kind of taking a dump overall?

2008, the market dumped. And it was just time to get out. We had put too much money into it. We didn't see anything in the future. and said, look, let's just move. We were managing the property ourselves in terms of doing all the maintenance and everything that we could. And just 100-mile door-to-door, it was just getting old.

Yeah.

So a lot of blood, sweat, and tears went into that one.

Yeah.

But the lesson learned was choose wisely. We weren't experienced and we just went along with the role.

Yeah, yeah, absolutely. I mean, and that's what's so amazing about California is like people just lump it in as one market, but within Southern California itself, there's different markets, there's different things you gotta know about. You know, LA is not Orange County, Orange County's not Riverside, Riverside's not Cathedral City. So it's kind of like you are relying on the people around you as the experts.

Yeah.

Knowing now what you know, were they giving you the right advice and you didn't listen, or do you think they were leading you down a path of something that—

Leading us down the wrong path? I think I needed to be a little more educated. I should have, should have. Again, I was looking at the opportunity, maybe the dollar signs, what could the potential that the next step beyond that. I'm into commercial property. It was just too big of a A pitch to me that I listened to, and my wife went along with me, and she suffered as much as I did in putting all this time and effort into it. But I think that's really what it was, is not knowing the market well enough, not understanding it. And the realtor thought he was taking us down the right path, but we weren't ready for it.

Right.

And I would say today I might be ready for it. Yeah, I've learned a lot and might be in a better position to deal with it.

Absolutely. I mean, how do you learn these lessons if you're not out there, you know, paying to play? That's the part.

Yeah, it certainly helped as I've gotten back into it now because we swore it off. I mean, never was— never was I going to do any type of rental property again.

Right.

And I'm right back into it. Yeah. And that on different circumstances, but it is what it is.

Yeah, exactly. Yeah. I mean, we kind of— Lauren and I had the same situation where we tried to self-manage a property out in Hemet and it just was like, what did we do?

Yeah.

Enough time passes and you're like, all right, let's give this another shot with, with what we know. But I mean, you see it like when people have rental properties. Can you explain the difference between retail flip and like a rental property when you're doing a rehab?

That's actually a great question. Good point. And, you know, I was there with you 30-plus years ago. I've been doing this for 50. So, and I think what, what you experienced back then was not unusual. I mean, I actually wrote a book on first-time flippers and property owners, and you fell into that trap, you know, that I try to tell other people not to. And then back to your question, When I, when I buy a property for rental, I mean, I put it in rent-ready condition is what I call it. So, you know, new flooring, painting, making sure that the appliances are working, making sure that you can plug, you know, something into the socket and it works. But that's it. That's, that's— I mean, I try to keep my rehabs for rentals as minimum as possible.

Yeah.

The only time that I go in and do a full rehab is when I've decided I'm going to sell that place. And I do that for obviously a couple of reasons. Number one, because I know I'm going to get more bang for my buck when I do that. And number two, it's going to be way easier to sell something that's fully renovated to somebody that's coming in to buy it. So, yeah, those are lessons you learn along the way, you know. And I, you know, I'm sure, you know, if you've been at 30 years and you've been through at least 3 up and down cycles, And depending on, you know, what you did with those cycles. I also hear, and I have heard it from them, that I will never rent a place again. But really, you know, if you're looking for long-term wealth, the rental market and owning rentals is really where you should be.

I would say 100% at this point. Yes, I agree. I got back into it just from circumstance within the family, but Now I realize what I can do with that. Not just— and the first thing would be going back to how you set it up to get it ready for rent. Absolutely. Example, I got my father's place and while he was still alive, but he moved down with me and first thing I needed to do is get it rented. And boy, we did not put a lot of time or effort into it, but I got it rented right away.

That's good.

And, you know, the cash flow going and That served us well. Now I've put a little more time and effort into it for the tenants. A couple of years later, raise their rent a little bit. And I'm looking for long term with them as they're looking for it with us. So I want to, you know, it's a little tradeoff, right? You want to put some in to make them happy as well as, you know, raise their rent a little bit, but not too much because I, I want them to stay there for a while. Lesson learned from my Cathedral City is, yeah, you don't want to raise rents and all of a sudden start losing tenants and trying to get Replacements. That's the pain. But anyway, so yeah, I agree.

Yeah. And I've also learned on the way that, you know, when tenants start getting demanding and they start asking for different things and when I manage my places that I personally own, I never tell the tenants that I'm the owner. I always tell them I'm the property manager. And, you know, there's reasons for that because they will pull at your heartstrings and say, you know, hey, I need new carpet or whatever. I, you know, honestly don't put anything, you know, of an upgrade into my units unless I can see a return within a year, you know, hopefully.

Right.

Not more than that, which means rental increase. And I give them an option. I mean, you know, yeah, we can put new carpet, but, you know, your rent's gonna go up $100, $200 a month, you know? And, you know, they know that it, you know, it's a business and you have to make money. You're not gonna give the— federal government. You're not giving them money for free. So, you know, if you explain it like that, and, you know, they realize it, you know, if you want to live in someplace that has new carpet, then fine. And you have to pay for that. So those are other things you learn along the way.

Yeah.

Then they say, well, we're fine with the carpet we have now.

Yeah, there you go. Yeah. Okay, the rent will stay like that then. Not a problem.

Oh yeah, we did get free new carpet.

And a free screen door.

Yeah.

I don't think your mic's on.

Yeah.

Yeah, the guy found out we were in a band, so that's how we used it to pull on his heartstrings. And he's like, we're like, hey, we need new carpet. And he's like, all right, don't tell anybody else about this.

Yeah.

We're like, no problem.

Yeah. I don't know why we were his favorite. So anything we asked for, we'd get. And then the other like tenants would be complaining. We're like, yeah, he's terrible.

Yeah.

Yeah.

I appreciate that, Joe.

Honestly, Because these particular tenants— exactly. I mean, they haven't been that bad, but I could see it coming somewhere down the road. And, and, you know, it's a little too personal. And I get that. So we're in the process of rehabbing my mom's place at the moment up in— these are up in Northern California. And we're going to take a slightly different approach, but it'll be the wife kind of being the property manager. But again, taking that property manager role and, you know, so on and so forth. And I really appreciate that tip because—

Mm-hmm.

That'll definitely— I mean, that's the way we played it with the Airbnb, right? Investments, you do that type of thing. It's not a personal thing.

So yeah, it kind of gives you a buffer.

And, and, you know, what's fantastic with what you're doing is you're in the trenches. You know, you didn't hire anybody. You're like in there rehabbing, which is what I used to do as well. You know, I'm in the trenches. I manage my own properties. I don't You know, give them to anybody else to manage. So I applaud you for that. That, that's awesome.

Yeah, so it can be a bit of a headache, right?

Yeah, yeah.

I'll never forget my, my worst story. I'm sure you've dealt with this— evictions, right?

Yes.

It's got to be the worst. It's a very difficult process to go through. And, uh, I did it once, and that's one thing I'd never like to go through again.

Yeah, Alex loves doing evictions.

I mean, the thing is, at first I was so scared. Then we went to like 3 or 4 of them. I was like, yeah, it's fine. Because the heartstrings—

He takes his camera with him because he takes his camera everywhere. He films everything, you know, and he turns it into a little YouTube Short. And it's like, he has fun, you know. We went to court the first time and they were, you know, a little bit scared. And I said, there's nothing to be scared about, okay? You really— I mean, the judge is kind of on your side. But then they also have, you know, a kind heart as well. So, I go, Alex, this is what's going to happen. They're gonna go in there, the judge is gonna say, okay, here, you're gonna get the property back. But the judge is gonna look at you and say, Alex, can you give this person 30 more days? And you're sitting there going, no, I don't want to give them 30 more days. But the judge is going to say, you get 30 more days, you know. And so sure enough, that's kind of the playbook of what happens each time. And then after that, you know, we're good.

Yeah.

Yeah.

And it's kind of like when, you know, you tell the carpet story sometimes, saying you're the property manager, you can always go, well, let me check with the owner, you know? And then Joe's like, and then I can look in the mirror and I say, good point. Do we want to give him a carpet? Yeah, it's going to be $200 more. So yeah. Yeah.

That way, you know, they're not mad at you, you know, they're mad at the property manager or not you, but the owner. Well, it's the same person, but they don't know.

Yeah.

Right.

You know?

Yeah.

So that's such a good point.

Yeah.

And, oh, well, I mean, are you using like any software or anything to, to, they have, they have software where the people can put in the maintenance tickets and all that stuff now, which adds another layer to it as well.

I've not done that. No.

Um, because I made the mistake when I, when we rented out a mobile home, I was like, here's my number. Call me if anything is wrong.

Yep.

She's like texting me at like 4 in the morning. like, hey, there's someone outside the window. Are you here? Like, I think there's people living underneath the mobile home. I was like, oh boy, this was a bad idea.

Yeah, no doubt. Yeah, that's the, uh, that whole, that whole thing of, of, you know, and you've gotta— you have a responsibility as a landlord, right? Uh, the air conditioning goes out. I, you know, in Cathedral City, it's, you know, 115 degrees regularly, and ACs go out over there. And You know, you're putting people in hotels, you're doing things like this because you want to be— that's the interesting thing about being that in-touch owner, because you're going to, you know, the heartstrings are pulled, you're going to make sure they're stuck in a hotel. You know, you have an obligation anyway as a landlord. But, and unfortunately, you're dealing with an old dilapidated building that you're trying to keep it going and so on and so forth, do your best. But you run into those situations and it is, you know, the 2 o'clock in the morning type call that you got to deal with. And even if you pick up your one phone as a property manager and speak to the owner on the other one, you're still going to have to deal with it.

Yeah.

Yeah.

It was—

do you have any rentals now?

Any rentals? My one place up in Sacramento? Yes. Working on rehabbing a second one. And those are my parents' houses. They each had a house. And so, like I said, my dad's house, we dropped right into it. And again, I wasn't looking to it. This just happened. And I realized I needed to get the cash flow to help with my dad. And now my mom is in the same situation, but now realizing the advantages of these, using the debt leverage out of that, the equity leverage that I have that I can use it in other situations now. So the funny thing is, is Alex is, you know, all of a sudden I paid attention to his page on Facebook one day. And from that, I'm here talking to you now because I started realizing there's some opportunities that we should be taking advantage of and not just letting— yeah, it's nice to have the cash flow, but what else could we do with this? And that's kind of where I'm realizing there's some further opportunities. Now, though, my wife is like, take it easy, don't get too excited. And what do we really need to do? But I think one of the One of the big things I'm looking for, because as I near retirement, is for my day job, is this additional income, the disposable income I'd like to have that'll supplement what I have for my, just my regular retirement. Because I realize that great to have retirement, but you have to plan for long-term and all that kind of thing. But how am I going to do fun things? The hobbies that I have, how I'm going to support those. We'd like to travel around the US in an RV, that type of thing. I want to make sure that there's, you know, the wife is, well, how much money do you need? I'm not quite sure yet. But I think I want to get things rolling so that we have some type of income for these activities. And it's just not about, you know, retiring happy and sitting around because that's all I'd be doing unless I have some, you know, some kind of cash to be able to do some of these things. That's kind of what's getting me back involved in this and looking at it from a completely different perspective than I did before. Lessons learned, experiences, everything I gained from that now has got me to a position where I'm more comfortable and I'm still learning even as of today. So there's just, you know, constant new things that I'm going through. So fun, though.

Are these properties still titled in your parents' name?

Good question. The one is in my— one was my dad's was in an irrevocable trust.

Okay.

So that took a little extra work with an attorney to get out of the trust. And I'm right in the process of doing that. So I'll move that into my name out of the trust. My dad passed earlier this year, so we're working on that. And then the other one's still in my mom's name. So that— and she's still here and she's in long-term care at the moment. So we're working on— again, one's going to come in my name. The other is— I'm an only child, so I'll be getting that at some point. But right now is the intent to get it for cash flow for us.

So, okay, let's start with your dad's. It was in a trust, and I'm assuming you were the beneficiary of that trust. So is there a reason that you're changing it to something else? Like you said, your name?

I'm sorry, as far as from the trust into my name?

Yeah.

Just because it's in my dad's name, being in the irrevocable trust, There were certain things that I needed to— oh, perfect point. How can I use the equity out of that house to my advantage?

Okay.

So that's why I'm changing, getting it into my name for a HELOC.

Okay.

So once I get it in, then I can use the HELOC to invest in other opportunities.

Okay. And then once you do, is it just going to be in your name or your wife's name as well?

That's a good question. I was just envisioning and putting in my LLC, which—

Okay. Which is my next question.

Yeah, that's it.

Yeah, that was going to be my next question. Are you going to put it into an LLC?

Yes, I am. It's likely where I'm going to go with it. Yes.

Okay. And then your mom's property, is it just like right now? Is it just in her name or does she also have a trust?

She has a trust and it's in the trust name. Interesting you ask about that because I'm looking to— didn't know this, another thing I learned. I'd like to get a HELOC on that. I can't do it, although I might cosign with her. But what we're doing in the process of getting it out of the trust into her name, go for the HELOC, get the HELOC established under her or with me as a cosigner, and then put it back in the trust. So it'll— but to get in the HELOC, I have to put it in her name.

Correct.

So I'm literally going up to Sacramento this weekend or tomorrow to take care of that with the county recorder so we get that moved over. But again, realizing that that's an opportunity to use that equity as well. So yeah, it was things I'm learning.

Okay. That's good.

Okay.

Yeah.

No, you're doing it right. Yeah, you're doing it right.

Do you just record, like use a quitclaim deed or how do you— Oh, okay.

Okay.

Yeah. For the trust, it's really easy. It's in and out. And one of the things I'm also learning working with the recorder is that a lot of documents, you incur the transaction taxes or fees or whatever the state charges. And because it's just a trust in and out, Either way, it didn't matter. There was no additional fees. It's just a simple recording fee. And—

Oh, yeah.

That would just—

Yeah. On your mom's property, the biggest thing that you have to worry about is getting that property reassessed for taxes. And you have to take it out and then put it back in correctly and fill out the— they call it a PCOR, a preliminary change of ownership. If you don't fill that out correctly, then the taxing entity is going to bring it up to the value.

Very good point, because I learned a lesson with my dad. Lesson to the listeners, I guess, if anything, I could pass this along. Irrevocable trust will create issues. As soon as my dad put his property, he had it in a trust and he had it in my name 10, 15, 20 years ago, whatever it was in my name, they took it out and put it in a trust. And that's all fine, except after Prop 19. But that's one instance, just the Prop 19 for if you inherit. But putting in an irrevocable trust also triggered a tax event, even though it's his trust, because he's no longer the beneficiary or no longer the trustee. It took it out of that and it unfortunately retroed back. So I had to go back and pay back taxes on it. Which it took a property that he bought in 1970 and jumped the taxes way up. So yeah, and I took that hit. And so I'm, yeah, working through that. So, okay. Uh, and unfortunately my mom did the same thing, took my name off of it, put it in the trust. And if she would have left me on there, because I'm the only child anyway, so it would have, would have worked out. But lessons learned. So yeah.

Like, where do you— like, who's teaching this? I don't know who Joe knows, but It's like, how are you supposed to know that?

It's like, I would say the one thing that was, was, and, you know, the shows, the Prop 19 was, is it caught a lot of people by surprise because at our age, we jumped into it thinking, okay, yeah, if I, you know, it gives me this opportunity to carry the same, you know, not, not bump up in taxes if I move to another property. Well, I'm likely never going to move to another property and maybe I will, but I'll probably keep my house and rent it anyway. And buried in that Prop 19 was the fact that you will, you know, no longer can you do the inheritance, just pass it over and no tax in it. It's a taxable event now. So no matter what, and it's people are, you know, end up—

Well, with Prop 19, if you actually move into your dad's house—

Good point. Thank you.

Then it would stay.

Right.

Okay. The problem is, You know, that Prop 19, I don't know why anybody voted for it. But anyways, if you don't move into it, then yes, they reassess it.

Yeah, good point. Thank you. Yeah, they just say you have your primary residence, but— and this is up in Sacramento. So it's not really— there's actually ways you can do it as a married couple. There is, there's a couple of ways, not really loopholes, but there's ways that you can You can legally do keep it kind of as a primary residence if you're married. It would take the wife kind of moving up there or making that her primary residence. But I, after thinking about it, realized that, no, I don't even want to mess with that at the moment. And if Prop 19 stuff is still in effect, then maybe on my mom's property at some point, do something like that.

Well, that might be an option for some married couples, huh?

Yeah.

Hey, honey, you're moving to Sacramento.

Yeah.

It's just for taxes.

I'm staying in OC.

You're moving to Sacramento.

How's that for tax?

Well, we kind of realized it could be a blessing though for her. And she's like, yeah, I'm, I'm happy.

Well, yeah, there's always the other side of the coin, isn't there?

Yeah, exactly.

She goes, oh, I've been waiting for you to ask me that.

Extended vacation. Oh, that's great. Well, yeah, let's jump into, um, sort of the lending side, uh, cuz you, when we first started talking, you mentioned you had been doing some lending and now you're investing in businesses and, and other real estate projects.

Can you kind of go down that road at what, that's been like as well?

Sure.

I had a good friend of mine had kind of turned me on to something he'd been working with. And that was hard money loans for contractors. And it was an interesting process he went through. But it was a lot of cash loans that you give to a— he was dealing with commercial contractors, and just to keep them supported, go over their payroll or whatever it may be. And And he would take liens out on the mechanics, liens out on the, or set it up so he could take a mechanic's lien out on something in case something fell through. But I kept that in mind and had this goal. I want to be able to do something like that. And I am, my, one of my hobbies is off-roading and I have a sand rail. And I ran into a guy that's a fabricator. And he builds desert race cars. And so I took my buggy into him, so on and so forth. He's working on it. And over time, we just developed a relationship and started talking about things as he was looking for opportunities to grow his business. And I was looking for opportunities to maybe invest in something. Didn't know what it was at the time. And he had a proposal, which was one, either join the business with him as a partner and kind of be a silent and help him financially. Or this other opportunity was to help him build a brand new designed race car that he had. And I said, well, I want to look at, let's do it, the race car. Let's try this and see how we work together, because then it's not me committing to your business. And I was still very entrenched in my job, so on and so forth. As far as having to be mentally there all the time, I guess is a really good way to put it. But anyway, The situation ended up, I lent him, it was really kind of funny. I got all his financials and everything and went forward and did this loan. No collateral, just cash. I was doing 20 points at that time.

Wow.

Just a 20 at, not compounding, just a flat 20. And I actually set it up so that after the first year, I bumped it up even a little bit more so that my internal rate of return Continued to remain— it was around 18%, but I'd bump it up a little more, charging him 10% for late fees, which he was late on occasion, but boom, he'd make the payments. It was a very interesting experience, lasted 3 years, and the guy just would borrow more, borrow more. And he got to a point where— and all good, made his payment even if he was late. He'd always make his late fee payment, whatever. But at the end of the 3 years, he was ready to wrap it up. And he paid everything off. You know, the last two months at the auto, whatever everything wrapped up, and and it was a really good experience for me. So I the points were good. It worked out. He he got his race car built, so on and so forth. Right? So I went through that. But after that, then I'm okay. What do I do next? And I had a contractor buddy that was doing residential type stuff. Actually lives in my neighborhood. And I always knew that he'd done some work for me, and I always knew he struggled. With always, hey, can I get cash advances for this, that, the other thing? So I just pitched it to him one day. What do you think? I could give you a cash loan. These would be the stipulations, whatever. Again, no collateral. We'll just do it this way. And he said, yes, let's go for it. And that relationship lasted for about 5 years. As a matter of fact, we just wrapped up our last deal and again at 20 points.

Wow.

So actually, I was up to 25 at one point. But it was a good experience again. And so that was my kind of initial experience. Again, no collateral, anything. You're just doing cash-out loans. And again, with him, this particular guy, it would just be, okay, I want to add a little more on to add a little more on it. And I'd rewrite the contract each time, amend it, and not rewrite it, but amend it. And just, I think, 4 amendments on this particular contract. It was a good experience.

I wanted to ask you what your 9-to-5 job is. But before, I want you to answer that. You had said you found him on Facebook?

Yes. Well, I know Alex, but he had a Facebook— I'm connected with him on Facebook. And I would see his, you know, different— in fact, it was his pitches for, hey, I'm looking for, you know, hard money investments, I think, at that time. And that's what caught my eye. I'm like, Hey, wait a sec. I've done this. What's this about? And I wasn't even really aware of the opportunity.

Was it his face?

Yes, of course, Joe.

Because that's how we met. He was on a Zoom call with me during COVID And he was on the other side there. And it was like, I thought he was like a lonely, you know, lost person. And that's how we met. And, you know, I said, well, you know, come buy me lunch and I'll teach you whatever you need to know. And that's how we got started. So it's curious that almost kind of the same thing happened with you.

What was interesting to me is just the hard— the, the what he was looking for, this hard money, and what, what the opportunities were there. But what I didn't know is what it would— the door that it would open. Because same thing, I've learned a tremendous amount from him in this short experience that we've gone through, uh, and it's grown beyond just a little bit of what we started here. And exactly, it was just— that was it. I just saw it. I, I think I am— I DM'd him on Facebook and he got back to me and away we went. So we got in our first project.

He knows what a DM is. I don't.

Oh yeah, yeah. Eric's down on the DMs.

So what is your 9 to 5?

I'm— I work for a company in electronics industry would have been into.

Okay.

I'm an engineer and in management now, a company called Extron Electronics in Anaheim. They do audio/video commercial equipment. I've been with them for 20, going on 25 years, and I'm in management. I have a team of engineers and managers and engineers, and we do the new product testing primarily. So I love the job, love the company. It's been a great ride with them. And when I said earlier, you know, the idea of mentally how much is involved, it's because at my level it's more strategic level thinking. So it's not a I have to run out on the floor and do this, everything like that.

Yeah.

So it afforded me some of the things that I'm doing today, like the partnership. I wasn't ready to do that and I wouldn't be ready to do it today. This type of partnership of real estate I'm good for, but necessarily getting in, being a mentor or a financial mentor or anything like that with a company, I just was not ready for that. Didn't have the experience. But with the desert car builder.

Mm-hmm.

So yeah, but anyway, it's— yeah, that's again, and rolling up on potential retirement. And the funny thing is, is I don't feel my age and I look at retirement and say, it's coming, but at what point? And then how ready am I going to be? When my father passed, I was originally targeting 70. Why? To maximize my Social Security benefit, which is not that big a deal, but also to really pile it on in those additional years with extra income that I could build in between 67 and 70 kind of thing. Because the idea would be, okay, let's shut down and just really focus on not spending outside of what we need to spend, right, and see how we can do, you know, what we can build up between then and there. And then my dad passed, and it made me think a little bit more about, do I really want to wait that long? Do I maybe want to jump into that a little sooner? And I'm still not sure. But I think one of the things that really is changing my attitude and might result in eventual hard changes going to a retirement at 67 or something like that would be what can I do between now and then and really go after it. I think that's really what I, you know, it's, that's the funny, the wife says, why are you doing it? What's your goals? And so on and so forth. I'm not quite sure yet. And I, but I think this is the time that I can do it. I want to go for it and hit it hard so that I can say in 2 years, I look back and say, okay, I did what I needed to do to to set myself up for these future goals type things.

Well, let me give you a little bit of advice from somebody who's there. I think you need to have a goal. It's not, honestly, it's not a retirement that, like you see on the TV set, these financial planners and managers, they show 2 people on the beach, Invest with us and you can retire like these folks.

Yeah.

You know, it's like, um, I, I, that's not me. It's never, it's never been me. Uh, you need to have a plan, um, after you've decided you wanted to retire, but really not retire. Um, I can tell you there's lots of friends that I know, they retire, they fix up their garage, You know, make it look nice. And then what do you do the next month? You know, it's like, okay, what are you gonna sit on the couch and drink beer or whatever? So, you know, real estate gives you the opportunity to do a lot of different things that you— like you said, you're not— you're not— I mean, I don't physically do my fix and flips anymore. I've got contractors to do all that stuff. So I'm just there kind of telling them, you know, this is what you need to do. And move forward. So, I mean, that's my recommendation.

I appreciate that. And that's really a strong point about what I want to be looking at. I'm not quite sure yet. But I think that is— I'm excited about this, to be honest with you, which is really kind of weird. I didn't anticipate being here, that's for sure. But the opportunity that came up with Alex has just opened my eyes to Boy, I could— I think I'd really like to be able to do this. I don't know what level, but I like doing it. Your point is well taken in that you retire. What does that mean? I can go out and fish and do all this stuff. But yeah, you know, is that really what I want to do all the time? Because I do like to work. I mean, I don't have an issue with that. So yeah, I would look forward to having something, my next chapter, I guess.

I mean, you know, this is my office. You know, they've made this my office and it's wonderful because it goes everywhere with me. If I need anything, I'm like literally on here. I sign contracts on here. You know, I do— this is not a— this is an Android, so I don't do FaceTime. But, you know, with an Apple, you can do FaceTime and stuff. You know, I know all the people I train have Apples and they're like, you know, talking to their contractors. Yeah, no, don't do it that way. Do it this way, right? Okay. So it's like you can be traveling the world, or you can be traveling the U.S. like you said you wanted to do in a mobile home, and this is your office.

Yeah. You know, it's a great idea.

Yeah. And start it. Start your own podcast on the road.

There you go. Yeah.

Heck yeah.

On the road, finding deals, flipping them. I mean, yeah, we know people that are that are in California that are doing flips, you know, out of state. buying properties out of state. So really it's like the sky's the limit.

Right.

At that point. And once you get it, once you get it down, I mean, you, I think you may not give yourself enough credit for what you do know about real estate already and the network that you have as well. Because we were gonna, you know, like partner on this Lake Forest one and they have contractors, like you got lenders, you have, you have everybody in place right now to, to, to do it, you know? So, And then at the same time, you now have a bigger network of people that you can ask questions. I mean, it's like you mentioned, it's like on each one, on each deal, you kind of learn something new. So it's just good to have and it's definitely within your reach.

Yeah, definitely.

Yeah.

Yeah.

So the deal which actually just recorded and closed today was a mobile home Out in Hemet. As you guys know, I love those. And yeah, we bought 2 side by side and Eric joined us on one of them. So that one was what we call a whole tail. We just wanted to clean it out, put it back on the market, and give it to either another investor or retail buyer. And so we did find an investor who actually, they buy a bunch of mobile homes out in Hemet and They just took forever to close. They are on like island time out there, but they closed.

Hemet time.

Hemet time, which is, I guess, good for the lender, you know? So yeah, no, there's that upside. Yeah, that's the upside. But I know now that you're, you're jumping into other things, you're like, I need my buddy now. So, but, uh, hopefully it was a smooth ride and it all worked out. And, um, yeah. Um, you know, you could, uh, vouch.

And there was way less risk doing this with him than what you were doing with those other 2 deals. Like, you know, I don't know if I would've taken that much risk. I mean, yeah, you had like 20, 25% return, but that's a lot of risk. 'Cause if, you know, the contractor decided he didn't wanna pay you back, how are you gonna go after him? You know?

That's a really good point. And it was just something that I was willing to do. I knew the contractor. And he lives in my neighborhood.

Yeah.

So I— but that doesn't solve the problem because if he doesn't want to pay, you know, what are you going to do? I was really happy that both of these guys— and it was obviously I had some level of, I guess, character judgment that was good. And that's the only thing I'd say, because both of these guys, never an issue. And always, you know, even if it was a day late, they would pay the penalty, wouldn't even ask a question. And it was, you know, greatly appreciated. But they wanted to. And the funny thing is, the working with it, not so much the, the fabricator, because I knew his level of business from what he did, but the contractor. He's a typical contractor, more or less, um, that, you know, they, they run themselves, can run themselves really on the, on the thin line.

Mm-hmm.

And, um, and it was especially in the work that he'd done with me, because he had done work for us, and we would have issues with him. And it was interesting because now I'm in this business with him But his integrity was just impeccable as far as paying me. It was, you know, unbelievable on the contracting side and getting him to show up every day and everything. That was another, another story.

That's normal.

That's right.

You guys know that's normal. That's normal.

So, so that was 100% there. But his— on this other side, he was just, just perfect. And I couldn't ask for a better, you know, person to do business with. And we walked out of it. And in good, good shape, good, still have a friendship and everything, which it developed into a friendship. But yeah, you're— it was a little, little concerning at first as far as, you know, do you really want to get into this? But I was willing to give it a shot and worked out in both, both situations. But yeah.

And well, and I think what Joe was alluding to when you're lending on real estate, we, we wrote up a promissory note And then we also recorded a lien against the property. So if I get abducted by aliens, that's, that's yours now.

Well, that was really the confidence builder right there was once I— because you and I talked about that specifically. And, and, and once I saw everything go through, I'm like, oh, this is, this is comfortable. I can deal with this. And you're right. Now there's something tangible that I have to hang on to. And so that's— it doesn't I like the idea of continuing this type of opportunity until you introduced me to flipping.

And now I'm like, oh, now he's addicted to flipping.

Okay, sounds good.

But yeah, it's great because, I mean, when you're dealing with the end of the transaction, it's like escrow is only talking to you. They want the demand from you. You're the bank. So I think there was one time where I was like, yeah, I owe like this much. They're like, no, we gotta get that from Eric. So that's a whole nother level where they're, they're checking in with you and you kind of have the power of that, you know? So.

You didn't know that?

No, I knew that, but I was like, just make it easy. He owes this, I owe this much to him. They're like, no, no, no, no, no. We gotta get it like signed off and notarized from Eric. Yeah. So, ah, that's good. So yeah, hopefully we got more opportunities. Coming in the future here. This is the point of the show where we've curated a few videos that I want you to take a look at and give me your honest reaction.

Right up here.

Here we go. The first one is rehab mistakes new investors must avoid.

Mistake: over-improving the property. You need to really understand what do tenants care about. For example, if your rents are $1,200, $1,300, you do not need to make that place looking like the Taj Mahal. It just needs to be clean, solid built, and easy to move in. Simple as that. You don't need the top-of-the-line mahogany floors. You don't need incredible countertops. You don't want to go too cheap, but at the same time, you don't want to get too crazy. And always ask yourself, if I do this, how much will my rents increase? Big mistake, over-improving the property. You need to really—

Thoughts?

We talked about that.

Oh yeah, yeah, we kind of talked about that.

Yeah, that was, uh, and it, it's We've experienced this recently, and I'm so— we were talking recently, and Lauren shared a story about her experience of doing similar, of thinking this, having that mentality. My wife is that way. She's terrible about that. She wants it to make it just look right. Even when we were out in Cathedral City, and we're— I'm sorry, when, you know, a tenant would move out and you're pulling appliances and stuff and cabinets and cockroaches and crap, everything. It's right. It's not a fun experience. Because she was in there cleaning that up. And so she lived through all of that. And then what you turn around and do, okay, we're going to put new carpet, new tile, we're going to put a new dishwasher, this, that, the other thing, and just overdoing it because these, you know, right. It's the type of tenant that you want them to tell you. And this is the hard thing about these— this level of tenant, I guess, is they don't want to mess— they don't want you to raise the rent. So they're not going to tell you about anything that needs to be fixed. Unfortunately, when your water's leaking and dropping on this, you know, from the top floor to the second floor and ruining everything.

Right.

They don't tell you that thing. So you run into that. So you're trying to, you know, balance the whole thing. But the thing I learned from that investment was just like he said, how much you put— you've got to be careful because there's going to be— if you're going to go to the, let's call it the white-collar level of tenant, they're picky. They're going to want everything. And, you know, if you want to live at that level, you can charge higher rents.

Right.

But you're going to have to meet their demands because they're going to be demanding. And at the blue-collar level, sometimes it's not that way. So, but you can't overdo it. You got to find that balance. So I definitely learned that. So good, good, good advice for sure. Yeah.

What do we got?

All right. Up next, let me find my mouse here. There we go.

I see it. I tell the screen.

How do private money lenders make money?

How do you as a private money lender make money?

I make money on the operator paying me an interest rate.

Every month or yearly or how?

It can be negotiated, but most of the time it is monthly. Sometimes it could be quarterly. Sometimes it could be deferred for a certain amount of time depending on what we negotiate.

So a private money lender will also lend on not just a sub-to deal or seller finance deal, but you'll lend money on like a fix and flip or what you've loaned out to me on is a big multifamily deal.

Yes.

So you look at the deal as an individual and look at the operator and the way the deal was structured, look at your risk tolerance and say, I want either monthly payment or I want quarterly, or hey, maybe I want a part of the deal.

Yes.

Plus interest payments.

Yes.

How do you as a private money lender make money?

Yeah. So I guess how— how is there a certain number you're trying to reach from each deal that you're lending on, or how do you kind of determine that?

If we're talking about the— depends on the environment and what we're looking at. The experience that I had with you on the mobile home there, first time, didn't really— you presented a percentage to me that was reasonable to me. It was at a target that I've since learned that is a good— it was a good number, actually. 20 point, 20% of whatever that I was doing for hard money to the other folks is really, you know, pretty good. Yeah. And, you know, but they're in a situation, it's a little different because they're in a situation they can't go get money anywhere. Right. I'm a source. Yeah.

You got to pay for it.

I'm not a loan shark. Yeah. I'm somebody that's, you know, want to do business with them and they were willing to go for that. So, but back to what I've learned just working this first deal with, with you is that I didn't quite know going into it.

I was—

the 15% looked good to me. I'm like, okay, I'll roll with it. But I think shortly within a month, I think we talked because I'd learned that there are other— you can negotiate, you can do other things.

Mm-hmm.

Just like this was speaking to it. And, and I was realizing that, you know, do we want to— can we do a fixed rate? Can we do, you know, we're just, just hard or do we— what happens if it goes beyond the the 6 months like we originally targeted. And, you know, do you— which choice do you go with? And I've learned something there. Just, okay, you can negotiate. Maybe I want to be part of the deal, which going forward, that'd probably be a way I'd look at it. I'll drop my percentage down a little bit. Can I be a part of that?

Yeah.

Get something on the backside. So definitely I like that type of information and I'm glad I've learned these type of things because New to me. So right on, right on.

I didn't know you'd been teaching so much.

I learned from the best, Joe.

Yeah, that's nice. Did she teach you everything?

Yes, she did. Yes, yes, yeah, pretty much. We got any more?

We got one more. Okay, so, uh, thinking of investing in multifamily, what you must know.

So are you thinking about investing in real estate and you've seen those videos about buying a fourplex or a multifamily building, right? Well, here's need to consider first. One, these properties are typically older, and for example, in my market in Reno, Nevada, where I live, I cannot recall the last time a new fourplex or duplex was built, and this seems to be the trend nationally as well. Number 2, older properties mean more upkeep. Be prepared with some extra cash for necessary repairs or upgrades, and remember, with a fourplex, you've got 4 of everything from AC units to furnaces to appliances. And thirdly, if you have no experience being a landlord and plan on living in the same building with your tenants, it's more challenging and time-consuming than you think. So I'm not saying this is a bad idea, but I do recommend consulting with a fantastic realtor, lender, and even a property manager first before you do this. And they can help you understand if it's the right move and how to best make it happen for you. So are you thinking about—

thoughts?

Yeah.

Uh, wish I would've had that. That—

I was just gonna say the same thing. It's like we didn't have this 30 years ago. Okay. We didn't. It's like, you know, we didn't have meetups, we didn't have anything. We didn't even have a phone.

Yeah, that probably— wow, by far would have been, uh, the, the one thing I wish they would have had is somebody to say whether or not this is what you're going to get into, every aspect of it. And instead of just pitching it to you really fast and, oh, it's a great opportunity, blah blah blah. Yeah, uh, even talking to the people, because I, I actually The people that I bought the fiveplex from, they were realtors and they were experienced and knew what the hell they were doing. And you know, I tried to learn a little bit from them, but I probably never would have done it had I had the insight or advice or just knowledge that somebody could have given me from that. So I mean, honestly, to me, that just plays into what what I've learned just in the short time with Alex and Lauren as well. You know, the things that I didn't know and which Tell me whether I'm going to be comfortable or not in wanting to be involved in this. And, and, you know, it can be intimidating for sure. And that was just like, I was young 30 years ago, right? And so I'm just going for it. I can do this. And yeah, I would not have done it, I'm quite sure. So, but yeah.

I had lunch with an investor today who's flipping, who wants me to help him, to teach him how to flip. And he presented me a deal a couple of weeks back. Maybe a month back, and I said, I would not do this deal. And so he didn't do the deal. But today he tells me at lunch, he goes, Joe, I am so glad you told me not to do that deal because I looked at the numbers and these people didn't make anything on this. And I think we would've lost money if we would've gone forward. So that was nice.

Yeah, that's good.

You know, just carrying on with that, the thing that's different today than back then You have the internet. Yeah, because my Lord, I'm out there. What does this mean? I want to understand it quickly. And you can get there, and it takes the intimidation a little bit out of it. Doesn't mean it's perfect, but it does. At least you have resources you can get to quickly to understand this type of thing. So, and the wife will tell me, he goes, you know, well, you need to go talk to somebody. I said, well, some of this stuff, it's pretty, you know, common sense is there. You just need somebody to kind of explain it. And then, you know, Use your best judgment on the information you're getting. And but it's definitely feedback. Had I had it or the opportunity to be there. Yeah. And there was nobody to hold my hand or, you know, tell me which good, bad, or indifferent. So.

And you have the trusting face.

You can always trust 2 dimples. They would never lie to you. Yeah. But I mean, like, even just this office, it's like right down the road. So now, you know, like Like, you got other people that you can call and, you know, bounce ideas off of at least, you know. I mean, we're still doing it on our flips when it comes to layouts or anything. I'm calling Joe on the daily. Um, so just good to have for sure. Yeah, yeah.

Just don't call me at 11 o'clock at night.

I pocket called him the other night.

Yeah, I haven't heard the end of it. My wife goes, why, why are they calling you at 11? I go, I don't No, because all I can hear is Lauren and Alex talking in the background. So must have been a pocket dial. Yeah.

Of all the people.

Of all the people.

Yeah, no kidding.

It's like, wow, that's way past my bedtime.

Yeah.

Um, do we have any questions in the chat?

We've got one question from Liz.

Nice.

What advice would you give to someone looking to get started with their first rental property? Yeah, you.

That's you.

Yeah, you're the guy in the hot seat.

Ah, personal property. I would say personally, try to find somebody that can, can, can give you personal advice, not just the internet. I think that's the one thing that you don't want to count on is looking just what you see at YouTube videos and stuff like that. I think you need the real experience, need somebody that you can can engage with, because they're going to be able to maybe offer advice or things that, you know, that's pretty hard— that's hard, fast information. It's not, you know, answering questions that you might have or anticipate things that you might want to say. So I think that's probably the biggest thing is to try to get somebody to help you, try to mentor you a little bit, because there's, you know, hopefully a trusting face like Alex would be, you know, that type of individual would be be perfect. But, um, somebody that has a little bit of experience in it can guide you. And, and, uh, even myself is— I can offer some advice. And, and I've done it to other friends or whatever, just, you know, some preliminary advice. And you'll run into people that also have similar experience. So you kind of just have to branch out and see what there's out there with friends or family or whatever that might be already doing something like that. So.

Great advice.

Yep. Yep.

I love it. And I mean, luckily you can get personalized advice through the internet. But, um, I mean, not everybody has a good judge of character like, like you. Like, you know, I mean, that's, that's a good skill to have too, is Lauren has that really— she's got that tuned in. She's got a bullshit meter.

We call it a bullshit detector. I—

yeah, I have to look at her because I'm like, if the guy's nice to me, Alex will get like—

she's like, yes. She says yes to everything. And I always have to check with her.

Yeah.

So that's why it's a good deal.

I got people around me now that are like, no, I want to tell you, I mean, Lauren, because I've been dealing with Alex all along. And Lauren jumped into the mix just recently on something that you and I were discussing. And I had no idea. And she brought up a point that just put me right back, you know, brought me right back down to earth. And such a good strong point. I really appreciate it, Lauren. It was It was at the moment I'm like, wow, she just doused everything, you know, all the fun and excitement. But it was you. No, no, no, it was, it was good. I said that to her. But it was good because it was like, geez, come back down to earth. Yeah, it was literally that. Because I'm just flying off in my head.

That's him.

That's him.

Yeah.

And he and I were both doing the same thing. And she says this, and it's funny because I mentioned it to another a guy that I was dealing with or talking to, showing the house or whatever. And he's a realtor, the guy I was telling you about. And I said that to him that, you know, geez, Loren brought up this point about the appraisal. And he goes, oh yeah, I forgot. And he's a realtor. And he goes, you know, it's been a while. But he said the same thing. He goes, oh yeah, we got to check it right here and say, you know, things— it just puts a whole different perspective. A good thing.

Yeah.

So you know more realistically what you need to be at. Oh yeah. Especially was, and she has really good intuition at making decisions. The whole Cathedral City was not a good idea in her mind. Sure enough, didn't turn out to be our home. She she nailed it, and it was a perfect decision. Place great place for us to be, so on and so forth. And she's done it in a couple other things. In fact, the home that that we're looking at right now again, she has this you know her mind is is you know really excited. She's excited about it, and it. I'm gonna go with that, that feeling. And I don't have that, but— and I don't always make the best decisions, but I'm— I got a pretty good BS detector as well. So yeah, I play that.

So anyway, it's good in business, tell you what.

Yeah, it is.

I arbitrage mine and outsource it. But thank you so much, man. I appreciate you being candid about all, you know, your experiences and really excited that, you know, we got to form a relationship and excited to see what the future brings.

Oh, absolutely. Thank you. Thank you for everything, honestly. Yeah, it's been a— it's been a short ride, but a great ride so far. And it's just the amount I have learned to your audience has been incredible. Okay. I've even been watching your podcast before this. You know, I didn't have an idea I was going to end up sitting here, but before that, I'd been listening to them. And the information I'm gleaning from that is just extremely valuable. So keep it up. And again, what you're doing, you're carrying on what you've learned from your mentors. And it's just, it's a beautiful thing. So I appreciate it.

Love that. Love, love, love that. Joe, anything else?

And along those lines, my latest book.

Yeah.

Okay. Why I Have Met with Over 500 Investors from BiggerPockets in the Last 10 Years. And this is, this is actually the reason. That I've done that just to give back. And there's some examples in here of the people I've met with and the advice I've given. Lauren's in the book as well. So, uh, it's on Amazon, a whole $9.99 if you, if you want, if you'd like to get a copy. But this is, this is my latest book that I, that I wrote, and there's a lot of interesting things that I've met with people and and taking them through deals and things like that.

So Joe's changing lives out here, trying. Love it. Right on, you guys. Well, we had a blast today. We will be back here next week, same time. And yeah, please share this with any new or experienced investor in your life, and we'll see you next week.

See you next week. Like, share, and subscribe. Oh, good job, Joe.

Bye.

If you want some more advice on real estate investing, reach out to us one-on-one.