Private Money Lending with Beth Johnson - Author of Lend to Live

Hey YouTube, this is Cody, and today I'm here with Christian and my private money lender and close friend Beth Johnson, who actually was one of the very first people to help me get started after I got to 30 rental units in Washington State. But she's here because she just wrote a book, was featured on BiggerPockets, and is, uh, ready to show you how she got to where she's at.

Yep, she actually filmed the BP episode in here, so if the background looks familiar Awesome. If it doesn't, you probably haven't seen that episode yet, so I will drop a link below for you. And let's get rolling. So Beth, what inspired you to write a book?

I wanted to write a book because when I started getting into private money lending, I didn't have anybody else to really help educate me on how to do it properly. And so I wanted to go out there and put some education out so that not only active borrowers like Cody could convince seller-financers to back their deals, but also for those sellers and other people who wanted to lend private money to be able to do it safely and securely in the proper way.

Oh, that's awesome. And you mentioned before that when you do your marketing and you get your name out there, you actually like to be behind the scenes. So a book's pretty public. How did that go from what you do to, hey, we're going to put this out here, we're going to publish with BiggerPockets?

So I was on a Facebook forum and searching for a private lending community to belong to that just didn't exist when I was growing my business. And I happened upon a gal named Alex Brashears who did start that private lending Facebook group. We connected instantly. And I was still running my business. We were exchanging information. She's in Virginia, so she's all over across on the other side of the country. But she came to me one day and said, we're going to write a book. I saw a dinosaur. And then we talked about this in the BiggerPockets podcast. It's a long story, but she came to me and said, I'm going to write a book. I want to write it with you. We're going to do this together and I'm going to get a publishing contract. And I said, you go do that because I got a business to run. And wouldn't you know, 4 months later she got a business or a book contract. So that's how it started.

And with the book, what is the main piece that people in my generation that don't have the info, what are they going to get out of that?

I think the main, you know, the people that follow you guys are really want to be inspired on how to create their own portfolio with very little down. You guys have put 105 properties under contract and in your portfolio. And how much money have you spent out of pocket on that?

Personally, myself, about $10,000 to acquire it.

So how did you do that? I mean, you have to be able to convince sellers to want to be able to finance you, right? And if you're young, if you have no money, how are you going to do that? It's not just on looks, no offense, right? But you need to be able to educate them on the reasons why you want them to back your deal and carry a contract, how it might maybe give them some tax breaks over a couple of tax years. You want to make sure that they can invest in you as a young person, they can pass that knowledge on. So there's a lot more emotional about it than financing. But a lot of sellers don't want to finance deals because it's scary. They've never done it before. They don't know what holding a contract means. So to the effect that your listeners and your followers can understand how to actually transact a private money loan from the point of view of as a lender, then maybe you can go to the seller and convince them that you actually know how to and care about protecting their money if they want to finance your deal.

And it's not just a napkin contract. You go into promissory notes, deed of trust.

It's not.

Yeah.

And I think oftentimes when you talk to sellers, you can educate them on the different ways to construct a deal, right? Whether it's a contract for deed, whether it's a seller carryback, you're educating them on how it can benefit them, how it benefits you, how they can actually make more money on top of that purchase price, which I think is often not really thought about, you know, from the buyer or the seller side is like, oh wow, I can get a million bucks for this property, but on top of it I can get, you know, 8, 9, 10% return on that money that I carry back. That's awesome. Oh, and I can get real estate to protect it. So if you screw up, I get my property back and I can sell it again. How killer.

So that's something I got out of reading the book was as an investor, because I don't do lending and I've done it once and they defaulted. And that's a whole nother story.

That's how Christian got a Tesla.

Yeah. This book will show you if you want to lend, by the way, This goes through how you don't make that mistake. I wish I read it first, but it turns out it wasn't out yet. Um, if you're an investor though, this is so important for you to understand these principles. I read the book through twice because it's just so helpful to learn how are lenders thinking about the deals. What do I need to do to cover the people who are lending money to me? If you want to be a good investor and you want to manage capital correctly, understand that side of the game. This is something BiggerPockets hasn't put out a lot about. This book covers it all. What I liked about it is that it's just very linear.

It's very principle-based.

Yeah, it's straightforward. Here are the principles you need.

And if you don't always do something a certain way, you'll never do it that way. And what I mean by that is if you don't have your strict principles and always follow it, you will violate it. And I've had mentors that have done that where they say, do it this way. And when you do it that way, it works. And when you don't, it doesn't. So if you just follow the principles and you stick to those and you don't violate those, as long as you always do it that way, your odds of success go up.

Yeah, here's the thing. I mean, if you are just starting out, you have no money, you don't have very much experience, you need to leverage other people's money, OPM. Well, this book tells you how to be the other people in OPM. And if you don't have much experience, if you don't have much money, understanding the financial side of things from the lender point of view, that's going to be your ticket in the door with the seller to be able to get them to invest in you, carry back that contract, and allow you to buy these properties with very little to no money down and start building a portfolio like Christian and Cody.

So the story is worth way more than the real estate, and your ability to connect with others based on that story determines how far and how fast you go in relationship to your goals. The problem is, if you don't know how the little intricacies of lending work, well, then you can't really tell a resolute story because you don't know how to fulfill the end. You can't get to the end goal if you don't know what to do. And I didn't know everything I needed to know doing my first deal and my second deal. And I didn't really meet Beth until my second deal because we met at that 12-plex over in Moses Lake.

That's right. Actually, he never helped him take down any property until a couple of months ago.

Yeah.

It's all done through seller-financed deals.

We've helped them cash out some, you know, and you did, you did a flip for me. You did.

That's right. Oh, that's true.

You did that Puyallup flip last year. So Yeah, you don't have to get private money for the down payment, but if you understand how it works, it allows you to get into seller finance deals because you can paint a clear picture for those sellers to get you into opportunities you couldn't get into otherwise. Mm-hmm.

That's been a key part of the blend of money that we bring in on creative finance deals. You have seller financing, even conventional deals where we're just, you know, you go out and you purchase the property, deal debt and equity.

That's it.

That's all you have to figure out. It really helps with the question, how do we buy it? When you're asking, how do we buy it? How do we never lose it? This is a really key piece. If you want to understand how the game's played, you need to understand on the buy side, how do we negotiate and how are we going to fund? Sure, we start with the deal, and that's what we talk about on our channel a lot, is how do you find the deal? How do you manage the relationship? How do you put together the terms? We don't talk as much about is once you have that deal, you do have to figure out where is the money going to come from. When we buy little money out of pocket, that doesn't mean we're not putting any money down. This is one of those ways that money can come in to fund your deals when you know what you're doing.

Money follows relationship too. So it starts with relationship, building a rapport, making them want to invest in you. It tends to be that some of the older sellers that are trying to liquidate their portfolio really like the idea of being able to pass this down to the next generation and help somebody out, because somebody helped us out too. I mean, look young, but I'm, you know, in my mid to 40s, 30s. And now I'm looking to be able to pass down some lessons that my parents taught to me and gave me a helping hand. And so it starts with the relationship. It then transitions into performance. We want to see you perform. We want to see integrity. We want to see you act in the way that you told us you were going to. So making good on that loan. And then it ends with relationship too, because I'm now going to do a third lien position for these guys. And it's based on relationship, it's based on history, it's based on performance too. So just a rule of thumb out there is that you always got to lead in and be authentic and sell yourself and show them through the education that you take time to understand, to protect their interests too, will create mutually beneficial relationships.

And third lien positions are not very common.

I don't do them for anybody.

Relationships come first. And if you follow principles and you have a relationship, you can get deals that no one else can get. Do you have anything else you'd like to share with the channel for today? I'm sure we'll have you back on.

I don't think so. Follow these guys. They're great and inspiring guys to follow. Um, it's been a real honor to watch Cody and his progress over the years. When I met him, you probably know his story, you know, he had a couple of dozen properties under his belt with no money out of pocket. I met him out at his site because we were friends on Facebook, but not in real life. And the kid couldn't even buy a six-pack. So it was just really cool to see him grow and to see Christian grow his portfolio quickly too and be able to quit his W-2. You're following some really amazing guys.

So check out the book. We put a link in the description. Get the book and then we'll see you guys next time.