EP3: Protecting your Real Estate Investments w/ Paul Rink

Foreign.

So in today's episode, we have Paul Rink, who's a active real estate investor. And we are going to talk today about his journey in real estate. And we're going to talk about some of his properties and what he's looking to do. So thanks for joining us today. Today, Paul.

Yeah, thanks for having me on.

Yeah, absolutely. So tell us a little bit about your background in real estate, how you got started, and kind of where you are right now.

Okay. So background in real estate. I bought my first property in 2012, still own it today. And from there I, at that point, I was not even an investor at all. Just knew I wanted to buy a property, lost a job in 2017, and that's what led me into this wild world of real estate. Went down a couple rabbit holes about flipping and other types of investments. It all led back to rental real estate, where I bought my actual first rental, that I bought it for a rental in 2019.

Wow. So tell me about, like, losing your job. So, like, the, the normal. Obviously that's not a normal mindset for someone like yourself to make that decision. You know, typically someone's like, okay, I lost my job, I need to go find another job. And you know, right off the bat when you say that, you know, I could immediately tell you're very entrepreneurial driven. Right. Because that's not very logical of like, let me dive into real estate and start cranking.

Yeah. I mean, so I didn't dive right into real estate. Like, honestly, it led me to real estate by searching while I was still looking for another job. So I did go back and get another W2 job, but this sparked my interest of like, hey, I can't rely on a job, a paycheck for my livelihood. I need something else. So I started Googling just how to make money. And of course, you know, you get stock investing, crypto investing, all these different types of investments. I've tried so many of them, and the only one that seemed like it was going to work and has proven to start to work at this point was rental real estate. But even being that, like, I've. I've done a little, little side things my whole entire life, nothing that I scaled, and this is something I'm looking to scale and, well, it led me to quitting my job and doing this full time.

Wow. Yeah. So in my opinion, I mean, nothing in the terms of building wealth is quick and easy. But relative to building wealth and the different avenues out there, if you think about, you know, starting a business from scratch and trying to grow that 0 to x amount that makes you passive income. I think real estate is probably one of the easier type of options out there, especially with creative finance to build that long term wealth that everyone's looking for. So in your experience, how is, how has real estate helped you in building wealth?

Oh, well, so many ways and to be very upfront, like it took five or six years before I saw any, like this is just like this last year or so that I really saw any thing actually come of this and really seen everything I've done the last five years. I felt broke for five years because everything, all my money was coming, going into real estate. And you kind of question yourself at times when things are going wrong, if this makes sense. But now I'm able to borrow against my own properties, use them as a bank, sell off a couple. Just the experience I've learned through it has sent me into so many different groups that are now partnerships, helping hands and just like joint venture agreements that have led to where I'm at today. So I will say that, like I said, it's not, it's not a short game. You got to be able to be very long term vision if you're going to start doing the strategy. But it's, it's crazy when you look at a property that you bought in 2012 and I didn't even buy it right. I probably overpay like crazy. But just because I've held it till now, it's over double in value.

Wow, that's awesome. Yeah. If I, if I think about like losing money in a business, it's a, it's a very disheartening feeling when you're losing money and maybe you're on the very beginning phase of building that business and the money you're putting in, it's kind of like just going into a sinkhole. You're just literally plugging it into your business so that way you can stop the bleeding. Right. And sometimes it takes six months to a year or two years, three years to start producing positive cash flow in a business. And at least for me mentally, when I'm, you know, if I think about doing that in real estate, when I'm putting money back into the property and let's say it's losing cash flow because there's repairs coming up, it's kind of a different mindset for me because I think about it as like, okay, well, yeah, it's unfortunate, but this repair I'm making is typically an enhancement on the property, thus increasing the future value of the asset versus A business, you're literally just kind of almost throwing money out in the wind until you get to that point where you know you're breaking even in cash flow. And there's times where you can invest in your business and see an immediate return on that investment. But for me, real estate's a little bit different, especially on the front end when I'm, you know, I'm much more okay with putting money into a property mentally because I know, hey, this is one less repair I have to worry about in the future or this is enhancing the future value. So what is your approach towards making repairs?

Yeah, so what you said, even if it's not enhancing the future value, because some things really are just repairs, that maybe you're not going to see that on the back end if you ever let go of the property. But I mean, this is, we're all talking about rental real estate here and you're making your tenants happier when the property is functioning right. So if there's problems and you're fixing them, that's helping you with your cash flow, that's helping you with happy tenants. And not that every tenant is going to be happy, you're always going to have problems that some people just, they're never going to be happy. But keeping repairs, whether that's going to increase the value of property, whether that's going to keep the tenants happy. I mean, keeping the tenants happy is making you more money too because they're probably going to stay longer if they're happier. You're probably going to be able to bump up rents here and there if they're happier. Even if the market, maybe you're pushing the top of the market. So if you're keeping people happy while they're living there, that's one thing I would say just from dumping money into the property aspect, because we're both dealing with this right now. Yeah, it doesn't feel good. But the long term vision is I'm, you know, fixing the guts of this property. The things that needs to be, need to be there to maybe sell it in the future or keep consistent cash flow coming in and not let it go downhill. It all makes sense because I'm looking at a long term perspective on these properties. I'm not looking at crap. This $8,000 expense is wiping out all of my, you know, cash flow for maybe a year on some of these properties, if not more. But there's mortgage pay down. I'm not paying for the majority of that. I mean, our tenants are paying for the majority. The mortgage pay down there's, you know, appreciation hopefully in these markets. I'm not banking on appreciation in today's market on almost anywhere, but just throughout those couple things, if you're looking long term, you're going to have somebody paying down your property, you're going to have depreciation, tax benefits. So it all makes sense long term for me just because of, well, studying this market, these markets and understanding what rental real estate really does for you.

Gotcha. Yeah. So you talked about a few things there that are important to highlight as far as the benefits in real estate as far as, you know, again depending on market, but long term, over a 10 year period, you know, you would like to think that there's going to be some strong appreciation in a property. So I mean just the appreciation effect in itself is a huge benefit. And then the tax benefits as well, you know, the ability to produce income on a property, as long as you're, you know, taking care of repairs and everything after that it's producing income essentially tax free. Right. If you're doing it right. And then you know, the pay down on the mortgage that you mentioned, you have someone, literally someone else is paying down your mortgage and every month you are getting equity back into your property. So all of those are just fantastic wealth building tools. But it's not all sunshines and rainbows. You know, I have some properties that recently bought in a few months and I've yet to see any sort of break even return because I'm, I'm getting the property caught up on deferred maintenance, things that have not been done for a long time from prior owners. And so I'm putting that money back into the property because if I don't do that now and get things caught up, I'm going to have a much bigger headache down the road. So tell me about some of the challenges you've had on the repair side. Sounds like you have some that are going on right now.

Yeah, I mean this last week three of my properties have had problems. The one down in Charlotte, so I'm not there. So even if I wanted to go put eyes on it right now, I have to trust on the people that I put in place to do so AC went out in that property, so that's gonna have to be replaced. I have some electrical issues there where the dryer stopped working. It's an outlet issue. I have some. There's a pump that's where my water runoff's going to, that keeps pumping the water out that shut off. So all things that like, you know, they're going to start to add up. And my properties here, I had a couple issues too that I had about $14,000 in expenses in one week. So that's never fun to do. I mean to put it in perspective, I have 11 doors. It's not like I have a huge portfolio. So that's eating up months of cash flow over all my doors. It's not so like another thing that we didn't really talk about yet with rental real estate, especially when you're just starting, don't bank on that cash flow to be cash flow to live off of. Because if you're thinking that you're. Unless you have a slamming deal and you're making a lot of money every month, like you're probably not going to be able to live up that cash flow that should be going in your reserves. Especially when you're buying these properties that need some work. You're going to have repairs, you're going to have things that come up that you haven't seen even when you buy them and you don't do things like the AC that I just have to replace. I knew that was coming. I just really hoped it wasn't coming this soon. Since I just bought the property in November.

Have you thought about doing any sort of home warranties at all? I actually just put one on one of my properties and it's my first time doing it so I can't really say whether or not it was a good decision yet. But I had some unexpected repairs come up and I am aware of some other things that are going to be coming up that I initially had cash reserves for but I needed some protection so I put a home warranty plan on it to give me some relief there. But curious to see if, if that's something you've ever explored. Yeah.

And I kind of kicked myself because I took essentially on this deal when we were closing on it. I took four thousand dollar seller credits over the point that the seller was willing to put pay for a home warranty. It was a, it wasn't like a great plan but he was able to pay for a home warranty on there. It would have covered my ac, my furnace, a couple other things in the property. And at that time I'm like well it was like a two year plan or something. It wasn't anything crazy long. So I'm like I, I rolled the dice and I'm like I'm gonna take that four thousand dollar seller credit to get my, you know, my all in costs up front lowered and bad choice. It's proving to be. But that would have, you know, in that two year warranty it would have covered this. So I would have had, I think I would had a deductible still. But it wouldn't have been a nine thousand plus dollar expense.

Yep. Hey, you live and learn, right? I probably would have done the same thing too, honestly. I would have taken the 4k seller credit. So you. Have you mentioned that you're operating some of these properties remotely so you have some property management in place today, is that correct?

Yeah, my, my one down in Charlotte's a room by room rental. It's a six bed, five bath with two kitchens. I actually am switching that over to pad split right now. By July 1st we're adding three more rooms and it'll be a pad split. The rooms are huge in it now. The company I'm using now would only let me go up to six rooms. So I'm doing remote from, from Cleveland, Ohio there and they only deal with the tenant side. So I still have to deal with all the repair side and such like that from here. Luckily over almost two years now of being in that, researching and talking to people in that market, I have a pretty good team down there that I'm very happy with. So even if I don't have somebody to repair something, I, I have a trusted person that's helping me find someone. And so far, you know, knock on wood, I've been, I'd say pretty lucky to have nobody screw me over on the repairs.

So when you say they're only dealing with the tenant side, is it as far as tenant communication and like filling the property? Right. Other everything else you're kind of managing and does that come at a lower percent of revenue as far as their management fee or how does that work?

So that's another reason I'm switching. They are supposed to be dealing with all the tenant side and it's just not the biggest. The biggest seller for me was they were able to market the property well and get me top market rents. That's proven to not be the case. I was filling most of my rooms by sending people to my link and doing my own research on like Facebook Marketplace and such like that and all these groups. So that was my biggest seller because I was trying to not deal with the tenants in this strategy. Finding out that I'm dealing with them more and more and more and to the point where I'm actually communicating directly with some of them on these more important things because the management software is just not the people that are involved in the like the 247 support are not responsive quickly. So that's one of the reasons I'm switching and also going into padsplit which a lot of people in our community where we met know as they picked up Charlotte as a. An actual. One of their actual prime markets are their target markets. So they're actually building there and now they have also they're building out their repair side as well. So do I think it's ever going to be perfect? I'm going to have a lot of hands on dealing with this property. It's a room by room rental. There's always going to be me needing to do something but hopefully from the interviews I've had with Pads but that it seems like they're going to be able to handle a lot more of what I'm handling now. So. And as far as the management fee goes, it's $100 a month per room over top of that whatever the tenants pays. So they try to sell that to you as you're not paying that but really you are because you have to cut down your rent to bake in that hundred dollar fee. You can't just charge them a hundred dollars over whatever market is. Nobody's going to rent your rooms.

What are you seeing as far as in your area, the rent by room rate monthly.

It really all depends on what part of Charlotte you were in because there's so many. There's some really nice areas like South End where people are still getting like between a thousand and twelve hundred dollars for a room if they have a private bath usually. And then I'm in an area that's getting gentrified where they're building out off the main roads and I'm more on the end. So I played the long game and I'm hoping they keep building in which there's all signs that they're doing so to hopefully get that value out later. It's still, you know, minus huge repairs like that are going on now. It still cash flows pretty well every single month. But I'm banking on increased rent, increased property value long term by them gentrifying this area. And for my property specifically, I'm getting my low end 695 a room and my high end right now 1100 and that's a suite. That room's actually empty right now, but it was renting for 1100.

Wow, man, that's pretty strong.

But you got to think too that this is a five full bath. So like four of the four of the six rooms have their Own private bathroom as well. And one of them is really their own apartment. It's. It's actually two rooms, walk in closet, huge bathroom with a jetted tub. It's a suite. The only time they ever have to leave the room is if they, you know, want to go to the kitchen or do laundry. And they can have a mini fridge and a microwave in their room if they want. It's in the downstairs has a private entrance. So two of these rooms have private entrances. They never have to go to the main area of the house if they don't want to.

So did you have a bunch of rehab to convert your home into a pad split? Like, did you set up some walls and stuff like that?

So when I'm going into a pad split and this is what I'm gonna have, I'm going actually going to go down to the property and meet up with pad split team and we're going to draw up a plan for the strategy. Now it was marked as a four bedroom, five bath. I put two closets in rooms that were already there, that were common areas, had already had entrances and doors set up and it turned into a 6, 5. So I did nothing with putting in walls. I put two soft closets in with like the curtain going across it. So it's not even a full blown closet. Put shelves up and, you know, a rack for their clothes. So it was minimal. As far as converting to the two rooms I have now, I do have a, you know, a budget that I'm going to have to throw some more money into the property to run some new H Vac when I split up rooms and add two to maybe three rooms into this property to make it, well, way more profitable.

So it sounds like, you know, even though you have property management in place, what you're finding, and it's what I'm seeing a lot of times from a lot of people I talk to is that you are still having to actively manage the property because they're just not going to care as much as you care as the owner or, you know, you're actively managing the property manager themselves. So that's something that I've struggled with. And the reason why I've just managed a lot of my rentals is really just because, you know, why would I want to pay the fee when I'm still having to step in and actively manage? So if you're thinking that, hey, I'm going to get into real estate, I'm just going to hire a property manager and then I'm just going to Be hands off. And it's going to be true. Mailbox money and passive income. It doesn't exactly work that way. Is that what you're seeing on your end?

Oh, yeah. And I learned that way before buying this room by room rental in Charlotte. I, I've tried to hand off property to property management and I was managing them more than when I was managing the property and I'm sure there's good ones out there. But it came to the point where I'm. I'm not trying to scale to the point where I have to have property management. I want more profit out of less properties. So I'm willing to take on the management skills, especially in the market that I'm living in. And I know well, and I have contractors in place to, you know, I'll do that work. I'll do that. Those calls, I'll do them. I'll do all the navigation as far as when the repairs come up. And I have property management softwares that I use, but I don't, I'm not. If I don't have to have property management, I'm not going to use it because it's proven to not really be worth it for me. I'm in a smaller market back home and there's not really a good choice for property management here. So, yes, for what you're paying for property management, you're still gonna be managing somebody. There's no mailbox money. If you wanna be hands off and stop talking to your property manager, they're probably gonna screw you. Really?

Yeah. I think the only way to truly become passive is to invest in real estate as far as like a private money lender and partner with someone who's an operator. And if they're not going to actively manage the property, they're at the very least going to have to manage the property manager themselves. So if you're looking to get into real estate, funding deals could be a good passive play for someone looking to just truly be hands off. Because other than that, there really is no hands off approach.

Yeah. And then we can dig into that because I think we're both in that world a little bit. I've been doing a lot of private money lending this past year and starting to connect some people together. But at that point you're thinking, now it's not so much, yes, I want to be hands off, but it's underwriting that deal and understanding what the heck's going on with that deal before you ever put your money into work. Because we're seeing so many deals fall apart because people are putting their money into deals, being private money partners, being private money lenders, getting in syndications, and they really have no clue how to underwrite a deal to make sure their money's safe. So when it starts to go bad, they have no clue what to do. They're blaming people and they really don't even know where they're at and how they're going to get their money back.

I've seen that a lot of times. And, you know, it takes, you know, let's say six months to see those issues start to come into play. And when you go back to the underwriting of the property, you could tell that that property, you know, that deal should have never happened from day one. And it's no, you know, it's very obvious why it's failing is because it was underwritten poorly. And the numbers, you know, it all comes down to math. And the math just simply just does not pencil out for a lot of deals that I've looked at that have gone south. And if you're going to be lending money on a property you should be lending to own. I mean, you should be almost to a certain extent hoping your operator defaults on the property so you can take it over. Like that's how good of a deal it should be. When you're lending money on it, you should just go in with the expectation that, hey, this operator may default and it may be my responsibility to operate this property. Am I okay with that scenario?

Yeah. I mean, I have one that's going south right now. There's still a chance they're going to pay me back. We have good communication, but in our contracts, it says we have to file. I have to file a care notice. So I sent out a here notice, but this property is four hours away from me. So that's another thing. When you're lending. Maybe if you're lending, if you're living in Florida, maybe you don't want to lend in California for various reasons, but you're across the. You're across the country. What happens when you have to take over that property? Do you have a team? Do you have people there that could help you? Most people don't that private money lend. But this property that I have, somebody came behind me. I me and someone else came in with 70 grand on this property, and somebody came behind us with 50 grand in second. That second position money lender did not underwrite this deal. If they did, they didn't do it right because their money's wiped out already. If we have to take this property.

Back over just because there's no equity in the.

No equity there because we have to either fire sale it and yeah, we'll make a little bit of money, but we won't even make the whole return with all the light fees that were due. Or if we do have to foreclose and take this property over and then. And then rehab it and get it up to, you know, market. Market rates or we can actually sell it on the market for a decent profit. Well, there's a lot more time and money involved. And I run to wrote this deal to the point where this was the max that we can put in it and feel safe about our money. And they were asking for 120. We'll put in 70 there. There was no, there is no way I could find any comps to put that into even 120 comfortably when it was already rehabbed, let alone before it was rehabbed. So somebody's wiped out if we do have to get to that. So we're really banking on the operator paying. Paying us back. So. Yeah.

So you have, I think you said it was maybe one of your first rentals. Right. You're looking at potentially a different exit strategy. So tell me a little bit about what you're thinking.

Yeah, that first house I bought in 2012, I refinanced it back in 2021 when rates were really low. So I have a 2.375% mortgage on that. It's a VA loan. And I'm looking at bouncing back the idea between the tenants that live there, really good tenants. I have had no problems with them the little over two years they've lived there. Very minor repairs. They let me know what's going on when something does go on. But I've put almost no money into that property because I lived there for 10 years almost. And I fixed it up while I live there. And it wasn't like it was a bad house when I moved in. It just. I knew exactly everything about that house. So when some, when they call, it was really easy to know what was going on. But they're both business owners and they, they've been trying to find a house in the school district for a long time. And they're about to. They're like, we would happy, happy to settle here if you could sell it to us. So I'm looking at wrapping this deal instead of selling it straight out. And I have various different strategies because I have to look at this from multiple different perspectives. Now I have a VA loan tied up that I could reuse if I do sell this property. So that's one opportunity cost that's lost if I do wrap this deal. I mean, eventually my VA loan will get paid down and maybe I'll be able to buy a second property. Depending on, we won't even get into VA loans. But there's a lot of things that are, you're able to buy a second property. There's ways that you can and can't buy a second property with a VA loan. Most of the time people are only buying one property with a VA loan and then their benefits are pretty maxed out. But with that interest rate and I have just over three years of mortgage pay down, I, I have a possible wrap deal here where I can get some consistent cash flow and not have to worry about repairs going forward. So we could talk a little bit on that. And I mean, that's where I'm at with this right now.

So you're, are you thinking of capturing some sort of liquidity in, in a wrap scenario and then having a margin spread on the rest? Like, what are your thoughts?

Yeah, so that was it. Like, I, I, I want, I mean, the way that I was looking at it is I was going to, I do have a small second on this position or on this property that was, I'm going to pay off if we do wrap it. And even after that, I was going to ask for 20% down, which I know that they're very comfortable doing. I'll only end up with like after closing costs, about 20, a little over 28 grand in my pocket, which I can use for whatever I need. And, and then there's about us. Gosh, there's a $65,000 spread after that of equity after I even pay down my second and just leave the first in place. That's I'm financing. So, and then there, you know, I have my mortgage that's staying in place, which is. We're sub 2. It's a sub 2 deal. But we're wrapping it at a 2.375. I was going to put 5.75 over the whole entire thing. And I mean, leave it there for the whole course alone. I don't care if they pay me back in the 27 years that's left on the loan. It's going to be netting me about 610, a little over $610 a month just from the, or just from my, you know, piti on the property, or at least my principal and interest.

Wow. Yeah, you got, you got multiple different Revenue streams in which you're capturing there in that kind of scenario. So the one, the one reason why I've kind of stayed out of her apps is just because I feel like if I'm going to be, and this is just a personal preference, if I'm going to be involved in operating the property, I might as well, you know, continue to have the benefits of tax depreciation and, you know, the asset itself appreciating. So, you know, in a wrap scenario, you're still on the hook, right? I mean, at the end of the day, you kind of still have to worry about the payments being made because you need the cash from the tenant to pay down your existing mortgage, even though you're technically selling the property.

Yeah, so I looked at that too, and I'm looking at it as well. And this is going through the paperwork. We have to make sure that I have the easy ability to take back over that property pending. They don't pay, just like you would in a sub two deal, because this is a sub two deal. But we're wrapping it. That's one thing. So having, you know, an escrow account that worst case they don't pay, that there's money somewhere that it can be drawn out of. Having a servicing company deal with the payments also helps you when you're going to buy another house if you do want to go traditional, being able to qualify, showing that that's not debt that you have responsibility for anymore. And the biggest thing that I'm actually going back and forth on is, well, you know, I have this great interest rate and I'm still stuck over that so much because who's going to ever see a 2.375 again in their life? It's just the opportunity cost of waiting for that money to come back. Because do I sell it in pocket almost $92,000 if I sold it outright right now, or do I wrap it, which I'm wrapping it at a higher price so I'm making it more beneficial to me. So then if they do pay down, like say if they hold it for three years, mortgage rates drop and they decide to refinance, at least I'm wrapping it at $23,000 over what I would if I sold it straight out to them. But on the other hand, I know the property really well and I know the tenants very well at this point that I am comfortable with who's living there. And they've proven to me that they're good homeowners. So there's a less worry there. And running the numbers, like if I wrapped it at 5.75% say they held this the whole entire term of the 27 years left just an interest alone. It came out to $223,000.

Wow.

Which, yes, that's 20. Like the biggest thing is what could I do with that 92 grand now? And can I turn that into way more than that $223,000 probably. But I also have a lot more risk. I can screw up a lot more as well. I know what I have here in this deal. So am I willing to still play the long game, kind of like a long term rental? Yes. Lose that depreciation. Also have to pay the couple years of depreciation recapture on my next year's tax taxes. But know what I'm getting?

Did you do a cost seg on this one or did you just let it ride?

I just let it ride because it's, I mean the property, it's 200 and $200,000 property. Like it's not, like it's a crazy. It's not worth, in my opinion, paying for cost segregation and accelerating depreciation. So I didn't do a cost seg. I only have long term, you know, 27 and a half years. So it's not like I have a lot of depreciation recapture anyway to worry about. So that's a minimal thing. But the thing with me is I want to make it better for them because they're saving. If they went to buy this at 190 grand, that's what I'd offer it to them. If they bought it straight or just straight out and, and they caught new debt on it, I'm still saving them almost $400 a month on their piti. If they went and financed it through me for, you know, by wrapping me, wrapping it to them at $213,000. So I'm saving them more money every month. And I, if I do, if for any reason they do refinance out, it still benefits me just because of that difference I'm making in the sales price as well.

Yeah, I mean, I think the rate you're giving them is attractive enough to where, you know, they probably don't want to refinance that out anytime soon because they're, you know, they're still getting a good deal and you got such a good rate that you're getting a pretty good spread that it works great for everyone involved.

Right. And if I did wrap it, I don't want them to refinance out soon. So here's the Other piece of the puzzle. I mean I've, I've house hacked three times, but I done them them all pretty recently after this. First this house that we're talking about, now I have seven more months. If I sell this house, all that, all that profit from this property is tax free up to $250,000 because it was my, my homestead for two out of the last five years. So I can get that big chunk of money now tax free if I wait over seven months. Now that's, you know, a long term rental. It's not looked at as a owner occupied home anymore. That's all taxable income. And now I don't want them to refinance out of that wrap anytime soon because I, I have a lot of lost costs there now, now, now that's all tax money. So.

Yeah, no, that's, that's a great point. So you kind of need to commit to this pretty soon it sounds like.

Yeah, I mean, I have seven months to close one way or the other to figure out what I want to do with this property. I mean, I don't see a bad scenario anyway. But I want to make that wrap price attractive enough that even if rates drop to say, 5% flat, and I'm right there at 5.75, it makes no sense for them to refi because of the mortgage pay down and you know, closing costs when they go to refi. So. And what's nice is we've had a little bit of conversations on this already because they were, they've shown interest in buying the property, that they're both savvy business owners. So their, their brain can figure this out. And I don't think they're the people to make that dumb move to refi in a year, you know, or something like that. They might, they might. But worst case, okay, I still, I still do pretty well. It's just not the most beneficial thing for me.

Yeah. So this play is really about the time value of money in the sense that cash is worth more today than it is tomorrow. So what are you going to do with this cash in terms of putting that to work?

Well, while I'm waiting to probably find my next deal, I do want to buy one more property down in the Charlotte area, probably the greater Charlotte area, not in Charlotte property. But I've been doing a lot of private money lending this past year and I like to free up more liquidity to put more money into private money lending deals that I've been finding pretty, pretty great returns on. And I'm getting Better and better at underwriting that doing the underwriting process and figuring out good places to put my money. So that's probably where most of my money is going to go. One deal likely, still trying to get creative. So I have, you know, a low entry but most of it's going to be private money lending.

Okay, are you looking to do long term? Are you looking to do more short term gator stuff?

So it's like an in between. I, I don't do the emd. I've never had an EMD deal. I've been doing a lot of like the two to six month gap lending and we've been getting pretty, pretty fair returns on it. But one of those deals is one that I'm having problems with right now because those shorter term loans come with more risk. So it's a lot harder to complete these projects in the time frames that they claim they're going to complete them in. And that's also part of underwriting and doing your due diligence. Seeing if, you know, you and I both being in rental real estate and understanding real estate, we have an edge when we go to underwrite properties because when somebody has a scope of work at best, because sometimes people don't even send you a scope of work, which I don't work with those people. But at best, when you see a scope of work and you're like, oh this is a three month rehab and then you're looking at all everything that they're doing and I'm like, there is no way they're rehabbing this property in three months or they're rehabbing it and selling it as well, putting it back on the market and flipping it. So just knowing more what it takes to do the job that somebody's trying to do is helping me be more successful in the private money lending.

So you're more focused on doing gap funding on fix and flips, not so much like wraps, right?

Yeah, I get funding on fix and flips. We're also doing stuff to get people to bridge debt. Like when they're buying multiple properties and needing some time to get to bridge debt. So we buy the property outright, put a lien on it or get, you know, get our mortgage recorded on it depending on what state you're in, mortgage, deed of trust, whatever it is in your state and they get their long term debt on like the portfolio. So that's another thing we are really working on. And I don't know how much you've dealt with novations. We've had a few People ask us about lending on ovations. I'm just struggling to see outside of cross collateralization how to protect my money going into the deal. But we are, I'm trying to find more creative ways to be able to lend my money and keep that protected. Because if I can lend on some of these creative deals but keep my money safe, or as safe as I as it could be, I'm willing to do that because that's an edge that I have as a lender that other people don't have as well.

What kind of return are you looking for in these opportunities?

Well, I was getting 15% flat rate over 60 days for a while and those started drying up and that's one of them that I'm, I'm trying to, I might have to take back. Now I'm almost 60 days late on a 60 day loan. But outside of that I am leaning more toward the six month to the year long. And if I'm getting 15%, if it's six month 15 flat rate, I'm happy. I might want a little bit more if it's over six months. But I'm going more towards the lower return on the safer deals at this point. So if I can make 15 annually on my money, I'm pretty happy with that. I'm still going to be out there looking for better deals that I'm getting better returns. But I would probably be willing to lend my money at 15% annually right now.

Gotcha. So even if it was like long term, right? Because I would think if you, you have a solid operator, solid property, that the underwriting makes sense. You don't even have to worry about it. It's just like, hey, I can for the most part depend on that 15% versus doing some two to six month projects. I mean you're constantly having to churn your money two or three times a year. That's two or three deals that you have to underwrite and vet and that two or three deals may take you 20 deals to look at just to lock those in. Right. So you're creating all that micro risk every time you do that. What are your thoughts on doing that? If you could get 15% on your money?

I would. If I found a good solid project, I would say if I'm lending for more than a year, I want to be a private money partner in the deal and work out something that way. So that, and then build in the operating agreement what my responsibilities are pending the operator does go south, that I can step in and keep this thing going or do whatever I have to do to make sure I get my money back out of. Now there's, we won't go into like everything that you need to do here. But I would want more control if I'm going to be lending my money out long term. But I would be happy to like what you said, lend out 4, 2, 3, 45 years at 15% flat rate. Because I don't have to underwrite so many deals. I just have to keep tabs on one deal. Well, for that money. And this is what I explained to a lot of people that I talk to that want to put out money and you know, connect or gator wrestling, throw, you know, two or three people together on a loan. I try to explain that to them and I'm like, you have to think about, yeah, you want your 15% flat rate over 60 days or 90 days, but you, you get that money back and what do you do? It's not like it goes back to work right away. It doesn't go back to work the next day. You have to find another deal for that money and you'll probably event screw up because you're putting your money somewhere. It doesn't, it shouldn't go just to get that money working again. Or even if you don't screw up and you underwrite, great. The best borrowers can have problems and fall back and screw you over. So the more times you lend out, the more times that you're putting your money out there and the, the better chance you're going to screw something up or have a bad deal. Like this deal that I'm dealing with now. I, I almost made it to that lucky number. Well, not a lucky number, but to the double digits. This was number 10 between connecting and lending. And I had nine good ones that some were late, but I got paid back. This one's turning into a little bit of a problem. So there's a lot more risk when lending. And people I think always look at it as we talked about this earlier, loan to own. Right. They're not seeing it that way.

Yeah, there's still a lot of education that's needed before. You know, a lot of times people just are excited to jump into real estate and they just want to put their money to work immediately without even really educating themselves properly or surrounding themselves around the right people. And I mean if you're, again, we talked about this. I mean if you're going to be putting money out there, expect things to go wrong and you better have a plan for it and you better be comfortable with that scenario, if you're leveraging the money yourself as the lender, that could be a problem for you if they don't pay and you don't get the expected return. So those are all things that you need to consider before doing a deal.

Yeah, and we're seeing people like, I'm on calls quite a bit with people that are having problems and other people that are doing this as their full time job connecting or lending. I mean it comes down to even calling title companies. You know, there's fake title companies out there. People don't think about these things. Like there's wire fraud. Like there's so much going on that people don't even think about outside of just the deal and the borrower itself. And we have people in our community that are, some of them are getting kicked out finally, but they are purposely trying to scam people, like taking multiple loans out against the same property because people aren't checking to make sure it's recorded and it's not getting recorded. The amount of times that I'm like talking to somebody and there's a deal that's gone bad and I ask them if they have anything recorded against the property. Did you check to make sure your notes recorded? And they're like, I didn't think about that. That's your number one thing. When your money goes out, make sure that note gets recorded. It doesn't matter if it's title that's responsible for doing it. Make sure it's recorded. Check with the county records, make sure it's on there.

Nice. Yeah. No, I mean there's so many things and you have a background in TC and you're doing some TC work for a lot of people. Right. So like, tell me about, as we kind of wrap things up here, tell me a little bit about, you know, what you have and what do you need? What are you looking for?

Yeah, so I, I'm not doing a lot of TC work. I'm only doing tc, well more B deals right now. Trying to help people with some of these creative deals to get them through. I work with somebody else on a full TC team that they've done 70 deals last year. So I just plug into their system. It's kind of like a consultant role. When they have somebody that needs this specific strategy dealt with, I come in and then when I have somebody, I just use their systems and we have a profit split. And as far as what I need, I am really looking to find good private money partners at this point. I would like to find solid People to partner with where I'm not dumping all of my money into deals and I'm using little to none of my money to, you know, give somebody more equity than they're paying for and more cash flow than they're paying for. Just partner with me so I can scale a little bit more. Like I said, I'm not trying to grow a huge portfolio, but I really do want that long term debt that we're talking about. And I see that being the most valuable as a private money partner, giving somebody a little bit more. Of course I would love private money lending long term debt at a great rate, but I'm trying to be more realistic here. And if I want to wrap people's money up for more than six months to a year, I'm probably going to have to give them a little bit more.

Very cool, very cool. So how can people find you out there? Are you on YouTube?

Oh yeah, so I'm on YouTube. YouTube under rings rentals. I'll give you my blink card after that if you want to throw it in the video description. But I'm pretty pretty active on Instagram as well. I mean you can connect to me on Facebook as well and my phone number is going to be on that blink card too. So really every way you need to contact me is there you. I'm an open book. I don't hide anything. I mean you're gonna see that when you start seeing my life on social media. Maybe I'm a little bit too much of an open book, but yeah, it's not too hard.

What kind of content are you putting out there and value you provide and that people could benefit from.

Yeah. So once a week we do have a private money lending talk. I bring on somebody that deals with private money lending and we just talk about mainly the problems and how to keep your money safe. Then one time a week I bring out a service professional from one of my markets to talk about what they provide to the market. You know, mortgage brokers, lenders, handyman, people that are doing things in my market that help us as people having rentals and owning rental real estate. And what my greatest passion is since I've done it three times, is house hacking. So I bring on two house people that have done successful house hacks for my last two weeks of the month and just talk about how their house hacks are and hear all the creative strategies people have done to house hack. And there's so many different ways to do it. So I'm just trying to capture all those stories.

Oh that's awesome. I love that. I love that. Well, thanks for coming on today and sharing about your story and your journey and hope other people have enjoyed this talk and have learned a lot. I know I certainly have. So check out the link in the description link to Paul if you want to connect with him and learn more about what he's got going on and how to protect your money.

Yeah. Thanks, Mundo. This is fun.

All right, thanks.

It.