The First Million Is Always The Hardest

Catherine Okoroh on Lending, Real Estate Investing & Taking the First Step

• The First Million • Season 3 • Episode 13

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In this episode of The First Million is Always the Hardest, host Bo Kemp sits down with Catherine Okoroh of Advance Lending for a practical conversation about helping everyday people move from curiosity to action in real estate investing.


Catherine brings both lending expertise and real-world storytelling to the conversation, breaking down the common barriers that keep people from getting started — fear, lack of information, credit concerns, down payment questions, and confusion about financing options. Through her work with Advance Lending, she helps aspiring investors understand how the right lending strategy can make ownership feel more accessible and achievable.

 

Bo and Catherine explore why real estate remains one of the most powerful paths to wealth building, especially when investors have the right guidance, preparation, and partners. Catherine’s stories show that investing is not only for insiders or people with perfect financial profiles — it is for people willing to learn the process, ask the right questions, and take disciplined steps toward ownership.

 

This episode is about practical solutions, smart financing, and turning real estate ambition into a real plan.


Because the first million is not built by waiting on the sidelines.

It starts with learning the game — and taking the first step.


SPEAKER_01

Hello, it's Bo Kemp inviting you to the Achieve Summit 2026, Chicagoland's number one business, entrepreneur, and real estate event. It's all happening June 4th through 6th at Wind Creek Casino and Hotel. Join this three-day immersive event that will transform you from operator to owner. Whether you're looking to acquire a profitable business, develop a high-value real estate project, or scale an existing business. The Achieve Summit provides the live marketplace and technical tools to make it happen. And this year's keynote speaker is business leader and philanthropist Marcus Lamonis. More information into secure your tickets or sponsorship, visit at southlanddevelopment.org. See you there. Today on the first million is always the hardest. I'm joined by Catherine Nakoro of Advanced Lending for a conversation about one of the most powerful paths to ownership: real estate investing. Catherine helps break down the barriers that stop so many people from getting ahead. Fear, credit questions, down payments, and confusion around financing. This episode is about practical solutions, smart lending, and turning the dream of real estate ownership into a real plan. Welcome. And for everyone who's watching and listening, tell us your name and tell us your business.

SPEAKER_02

Okay. My name is Katherine O'Coro, which you already know that. And my business, well, I'm a residential and commercial uh lender. I'm a broker, nondell correspondent lender.

SPEAKER_01

And what's the name of the company?

SPEAKER_02

Advanced lending professionals.

SPEAKER_01

So advanced lending professionals, and tell us a little bit about what the focus of advanced lending professionals is.

SPEAKER_02

Well, we I would say our focus is twofold. We work with residential folks that want to buy residential properties. So your first-time home buyer, your move up, move out buyer, uh condo, single families, one to four units. And then we turn our hats around and we work with first-time investors, we work with seasoned investors, uh, we work with those that want to do fix and flips or purchase their, you know, a 10 unit, um, do a DSCR loan. You probably heard that before.

SPEAKER_01

Yeah, and for everybody describe what a DSCR loan is.

SPEAKER_02

Oh, it's a beautiful loan. Uh it's debt service coverage ratio, and it basically means that if the rents cover the mortgage payment, you don't need any other income, that income suffices, and now you can purchase that property with the income from the property alone.

SPEAKER_01

That's a big deal. Yeah, it is. So I want to get into a little bit of the story of how you started the business.

SPEAKER_02

Uh huh.

SPEAKER_01

But before I do that, um, one, I want to say thank you for your sponsorship of the Achieve Summit.

SPEAKER_02

Absolutely.

SPEAKER_01

That is coming up June 4th and 6th at Win Creek Casino. We're excited, and it's an opportunity for us to go into a deeper dive of exactly what it is that you do and how you can help people. But I also want you to tell the story of your experience in real estate and how you got to the point where you decided I'm gonna go and start an advance.

SPEAKER_02

Okay. Um, well, so we started with our first house, and uh we were looking for this house, and it was we didn't know it then, but it was in the best neighborhood. It was a great neighborhood, but the house only had two bedrooms, the basement was unfinished, had no garage, uh, and even the bedroom, the master or the primary bedroom was unfinished. And to most people, that probably was a that's not big enough for me.

SPEAKER_03

Right.

SPEAKER_02

But what we saw, my husband and I, was you know, the basement's not finished, but we can add an office down there, maybe we can add a bedroom down there, we could finish the basement, you know, we could build a garage, and we started doing the math. If you add a bathroom, if you finish a basement, if you add a bedroom, if you add a garage, this adds value. And our formula worked. You know, I had I had been a loan officer for about a year when we bought our first house. And uh my husband also got his real estate license, you know, just to kind of help us kind of navigate uh what we were seeing, and uh I learned a lot from just seeing, you know, appraisals and okay, well, that house isn't updated, but this one is, and the value has changed. So we took that same formula, bought our first house, did all these improvements, and our value doubled. When our value doubled, we got lines of credit, and we purchased a condo and I think three or four other properties just with the equity from that one house. Um my story started, our story started really was is was our first home. And if I could just say this, a lot of people who want to invest, they are like, some people don't even own their own home yet, and they want to buy an investment property. And I'm like, yeah, but if you buy your own home, you got what, 3% down, maybe five, you get you get to get in with a lower uh entry point, lower down payment. And uh it could really change your life if you buy right. And I and and I try to teach people how to buy right.

SPEAKER_01

So it's interesting because there's a lot of information out now that debates whether or not you in fact should treat your home as an investment versus your home. And just what's your thought about that?

SPEAKER_02

I think absolutely. Every home, well, I think a big thing is there's a lot of emotions in real estate, right? People love it. They start decorating it before they own it. The reality is, yeah, I mean, you know, they I'm on my sofa, go here, I want this. And I'm like, don't get caught up in that because you you may lose the investment. You may find yourself like I've got this beautiful home, but I don't have a lot of equity in it. I don't, and that equity is that piece that really changes lives. It is an investment. I'm trying to think how many homes we've owned now as our primaries. I think we've had three or four. Okay. And the the reality is most people will own at least three or five primary homes in their lifetime. People move. Some people, I'm moving one time. Well, now you got kids that need to be, you know, okay, now you move again. Well, I don't I think I want to be in City Omni suburbs, then you move again. Then you say, I think I want to go back to the city, and then you, you know, and it's gonna change. So you're gonna enjoy enjoy it while you have it, but really look at the investment of it. You know, don't customize a house so to your liking that nobody else likes this house and you can't sell it, you know. Uh and then you get to the place where you're like, you know what, this is the forever home. Maybe that when you maybe that's your, I'm gonna retire, and this is, you know, the kids, this is the house right here. I would say not get emotional about it, and every house is an investment.

SPEAKER_01

So it's interesting, you know, there's this theory that people talk about, and I've seen it myself, that the wealthiest among us um often live in a place that they don't own. They own real estate, but it's not necessarily where they live. And so I'm curious just to dig a little deeper about the thought the thought process of so I hear two things. One, uh using your primary residence as an investment is a way to jumpstart the process. Oh, that's right. Because there are all these advantages that you get as a primary homeowner, and particularly as a first-time homeowner, that you can take advantage of in this project. But if you're gonna do that, you can't be emotionally tied to that property because the whole point of that property is eventually to sell it.

SPEAKER_02

That's right. To sell it or rent it out.

SPEAKER_01

Or rent it out. But now, as you become more mature in your real estate pro process, how does that change or does it change whether or not your primary residence should be something that you own or rent?

SPEAKER_02

I think it depends on your strategy or and what your goals are. You know, um, my husband and I in particular, I think because of what I do, um, I've learned not to be very emotional. Yeah. I was very emotional when I bought my first home. I cried at my closing. That's how emotional I was. It eventually changed, and we started seeing what this house could do for us. We went in thinking that, but I have to admit, I was completely emotional. I was a like a blubbering house. Oh my gosh. I was so excited, namely because I was turned down uh when I tried to buy my first house. Is that right? I was turned down, you know, I did everything right, right? You go to college, you graduate, you get a good job, all this. That was that was what I grew up with hearing.

SPEAKER_03

Yeah.

SPEAKER_02

And uh to get turned down for a loan, I was like, but why? I uh the job I don't understand. I didn't know anything about credit. Um credit wasn't great, and I didn't know how to fix it. I didn't know what to do. And uh I honestly couldn't find a lot of help, which actually led me to even changing my career. I used to be a recruiter. When I got turned down, it consumed me. I was just like, oh my gosh.

SPEAKER_01

It felt personal.

SPEAKER_02

Oh my gosh, it was extremely personal. I cried. And I tell people, I cried. I was like, oh my gosh, I felt like a failure. You know, I don't know if people can relate to that, but when you feel like you've done everything right, yeah, and then somebody says no, and then nobody explains why, you do feel like you're a failure.

SPEAKER_01

Well they laid out a path and you said, okay, I will adhere to the path that you've given me.

SPEAKER_02

Yeah.

SPEAKER_01

But now you at the end of the game say, nope, you can't win no matter what.

SPEAKER_02

But I don't understand though, because I checked all the boxes, right? And then they said no. Um so I started researching and um I learned about the Fair Credit Reporting Act. And when I tell you that I dissected that document like nobody's business, and I I was looking at my own credit and I figured it all out and uh and I was like, it's working, and this is working. You know, I'm seeing things removed from my credit report, I'm managing my debt better, I'm paying off debt, I'm doing these, my scores are going up. It's working. So a year after I got denied, actually not a year, four years after I got denied, um, I eventually wound up buying my house. And at that point I had become a loan officer, and a year after being a loan officer, bought my first house. Yeah.

SPEAKER_01

So the you were so upset by not actually achieving that goal. It changed my person who makes the decisions.

SPEAKER_02

And can I tell you about it changed my entire life. That's why I always say, you know, uh, there's this proverb, I don't know who said it, right? But it when something happens, don't say this is bad or even that it's good. You don't know. And as long as you think that way and you keep going, you're gonna so many things are gonna open up that you never would have even considered. I I in a million I would have never said, I want to be a loan officer, I want to help people, I want to because I didn't I I had no exposure to it. I didn't hear about it in college. It happened because of a life, uh a downturn in my life. I was denied, and then it changed the whole the way I thought about everything.

SPEAKER_01

Well, it's an amazing story to go from I'm trying to do the right thing, I get denied, to turning around. And now not only did you buy a property, but now what you figured out is that I can actually help other people buy property.

SPEAKER_02

That's right. I became what I did not see.

SPEAKER_01

Yeah.

SPEAKER_02

That's exactly it. That that's actually why I started uh why I decided to become a loan officer, is I said, you know, I want to be what I don't see. And I said, I wonder if there's anybody else out there like me. You know, I remember praying even because when I uh and don't worry, I'm not I'm not getting emotional now, but I'm incredibly grateful that I thought the way I did, that I didn't take no for an answer, and that it put me on this path to keep looking.

SPEAKER_01

It was motivation as opposed to a setback.

SPEAKER_02

Yes, it was a setup, not a setback. Yep, and it set me up and it really has changed my life. I tell my husband all the time, I'm like, look at where we are. It's all because of real estate. It's all because of real estate. And we've taken some calculated risks and we've taken some not so calculated risks. We've won, some, we've lost. The downturn was tough. We rebuilt and reestablished, but I said it's because of the knowledge we gained and because of the mistakes we made, and because of kind of keep going back in. Um, we're we tend to be more conservative. We're looking at the numbers, which is what I do every day in my job. I'm looking at the numbers. I help people figure out what they want to do, and then I connect them with lenders to figure out how to do it.

SPEAKER_01

You know, it's interesting. It would not have been abnormal or uncalled for for you to just be fearful of going back into that process. And one of the things I talk about in the podcast a lot is the difference between fear and danger. And a lot of people conflate these two things. They confuse them to be one and the same. They think just because they're fearful of something, that it's also dangerous. Um but those two things are often separate, right? Um a burning house is objectively dangerous, but firemen walk into a burning house all the time, right? Because they overcome that fear. It would not be uh you know unreasonable for you to have said, you know, I failed at this first attempt and I'm fearful about taking the next step to do it again. But you actually went to another level and said, I'm gonna become that thing I don't see. That's right. And I just think that's amazing. And you you also mentioned another thing that's a concept that we talk about, which is reckless versus calculated risk. Um and a lot of people, once they've overcome the fear of taking the risk, their next problem is figuring out well, what's calculated and what's reckless. You mentioned a little bit how you started to kind of expand your risk profile. Yeah. And how do you manage the difference between what's reckless and what's calculated?

SPEAKER_02

Uh we always go back to what we've experienced or what we've seen. Um we learn from other people's mistakes. Um that's yeah, hopefully.

SPEAKER_01

Instead of your own, right?

SPEAKER_02

Yeah, exactly. Um, but something I was gonna tell you is that, you know, I talk to a lot of people every week, all day. You know, I talk to the first-time home buyer, to the seasoned investor, even the new investor. There's a lot of fear out there, and there are a lot of people that who whose fear have has has really crippled them. Uh I have several examples of people that I've worked with now probably for at least, I would say, three to four years that have not purchased a home for fear. What if I don't have enough money? Um what what if something goes wrong with the place? Well, something is gonna go wrong with it. Because it's it's you know, that it's it's a house, right? Or it's a building or two-flat or three flat, whatever it is. Um I have a lady right now, and and she finally said, No, I'm ready. I started talking to her two years ago. She applied, we got her pre-approved, and she started looking at everything. Also, her expectations were she didn't really know. So I would tell everybody, get out there and just start looking at properties, get pre-approved, just start looking at properties. Let your agent know, maybe I'm not ready now or whatever the case may be. But her fear crippled her so much that she literally went from maybe she could get a nice turnkey property that needed a little bit of work for maybe $400,000 till now it's $700,000. So she missed that window. And now what she's seeing looks worse than what she saw before, and she's like, Oh my gosh, I missed the window. I said, but don't miss the next one.

unknown

Right.

SPEAKER_02

Right? So that fear, so learn from that that that was two years that went by that the whole market changed. So that fear can be really dangerous too.

SPEAKER_01

I think, you know, uh a really important point there is you're always gonna have some level of fear. And but you have to recognize Do it afraid. That's an emotion. Yeah. And and I do believe this concept of be afraid and do it anyway. Yeah. But that's too simplistic. Okay. And truthfully, I think what you really are asking people to do is to say, don't let your fear stop you from actually taking a calculated risk. And for a lot of folks, they struggle with what that calculated risk actually looks like, largely because they have a fear not even of losing money, they have a fear of failure. They have a fear that someone's gonna say, you know what? See, I told you you couldn't do it. And then you prove those naysayers wrong. So part of it is getting people to a place to be comfortable with, it's not gonna be perfect, right? It's not gonna all work out all the time. You might even have instances where you make an investment in real estate and you don't make that much money or any money at all. But that's not a reason to not continue to look for those opportunities and to take a calculated risk.

SPEAKER_02

Yeah, absolutely. I yeah, no, I was gonna say, um, there's a lady I was talking to recently, um, and I one of the things I told her was determine what you can take and what what's like a take it or leave it. I said, everything you this is the you know the person I'm talking about. She I said, Is it money you're afraid of losing? She's like, Well, no, I know I gotta invest. Okay, so we know it's not the money, right? I said, Is it uh she has a daughter? I said, Are you afraid your daughter's gonna No, my daughter's gonna live with me, so no, okay, okay, so that's so that's not it. I said, Is it um that something's gonna break, you're not gonna know how to fix it, or you're not gonna have well no, that's not it either. I said, Well, what is it? And she was like, I don't know. I think I'm just afraid of fear. I'm just I'm just afraid. And I I mean I even tell my kids, I'm like, if you can't put a finger on it, then it has no weight, so you gotta move on. And she's like, you know what, you're right. She's like, I'm I have an imaginary fear. I have I I can't put my finger on what it is.

SPEAKER_03

Yeah.

SPEAKER_02

I'm just afraid of the process. Yeah, I'm afraid of the process. That's it, right? I'm like, what are you afraid of with the process? Well, that I won't understand. I was like, we're gonna walk you every step of the way. You just have to make the decisions. You want this building or whatever, we're gonna help you get through there. Now what? And she's like, I've taken away all the excuses. So now she's like, she's proceeding, she's gonna get her place.

SPEAKER_01

Well, you made this point about uh becoming the thing you didn't see. For a lot of people, they struggle to see themselves as real estate investors.

SPEAKER_03

Yeah.

SPEAKER_01

So they they in their in their mind, they can conceive of that, but in their heart, they don't feel it. Right? And because of that, they're they're it's like an imposter syndrome. It's like, yeah, I'm out here and I'm I'm I'm cosplaying, like I'm gonna be a real estate investor, as opposed to them owning and saying, Oh, I'm gonna do this. And and I I that's understandable. So finding a path and giving yourself a direction to move so that you are consistently doing work over a period of time, that it moves from kind of being cosplay to being actually something that you really do is a really important component sometimes for people to get across in that hurdle and not feeling like they're an imposter. I want you by your first property, you know, and and you exit your first property. Yeah, then you really feel like, no, I'm a real investor now. So and you went through that process and it took you from that to all of a sudden deciding I'm gonna start advanced lending. Yeah. Like tell us the story about why you decided to move in the direction where I'm gonna have my own business where I'm doing this work.

SPEAKER_02

Um, well, I felt like I was a little in a box. Um, and then also I really love what I do.

SPEAKER_03

Yeah. And you can feel that.

SPEAKER_02

Yeah. And I was I was getting a little bored.

SPEAKER_03

Yeah.

SPEAKER_02

So I actually was my husband, because he said, Don't you think it's about time that you kind of branched out? And I was like, I guess so. There was fear on my part though, I'll be honest.

SPEAKER_01

How could there not be?

SPEAKER_02

Uh I was always used to working under like I work for big companies or you know, uh they they have this name, and so but then I had to realize that no, no, I have a name.

SPEAKER_03

Yeah.

SPEAKER_02

No, I have a name, and I I've I've worked hard to have integrity and to uh know my craft and and I really enjoy people. Yeah. So and I wanted to help people. Now, people help people in different ways. Um, I've actually helped people become millionaires, I've helped people invest in real estate, I've helped them change. Oh, it feels amazing because I always tell people, one, I can sleep at night, and two, I don't mind seeing somebody that I work with in a grocery store.

SPEAKER_03

Yeah.

SPEAKER_02

And the reason why that matters is because when you do things like that impact people's lives, you there's shame. I don't have any shame. I've helped a lot of people. Um, I've had I mean, so I've been in the industry now for over 20 years, and I still get referrals from people that I've I haven't done a loan for in years, but they're sending me their kids and they're sending me their family members. That means a lot when somebody entrusts you with their family and their kids, and they're like, this is the only person I want you to talk to. That means so much to me. And uh, and I and I'm thinking, like, I thank God because I'm like, I became what I did not see. I actually speak at schools. Um, I've I went to a school uh the other week, and it was so cool. The kids were asking me a lot of questions and stuff, and all I could see was myself and them. And I'm like, man, if somebody like me came to my school, yeah, I wonder if I would have been a loan officer sooner. I wonder if I would have been in this industry sooner because I would have seen myself. And uh I'm actually going to another school, and I I I I take every opportunity to tell people what I do because it is uh it is really unfounded. There are not a lot of black women in finance uh on this side of things. Um but I I enjoyed I land across the U.S.

SPEAKER_01

Yep Um So you're in all 50 states.

SPEAKER_02

Yep. Well, I'm not licensed in all 50 states. I'm licensed in Georgia, Texas, you know, Indiana, Maryland, you know. So I have about seven state licenses, but I have loan officers that are licensed across the U.S. And so we collaborate and work together and we're able to service all 50 states um with all the products. And the most fulfilling thing and the thing that takes away the fear is when you feel like you're you're you're walking in your purpose. When you're walking in a thing that really not only just changes your life, but changes the lives of others. I think that's the most impacting thing for me is that I can point to people that I've helped. I get, I there's a there's a satisfaction in knowing that even if, you know, I'm not the loan officer. And I tell people that I'm like, even if I'm not the one, I please tell me what you want to do. And then I'll point maybe it's a credit union, or maybe it's a private bank, or maybe it's a regional bank, or maybe it's a whatever. So I try my best to direct people even if I'm not the source.

SPEAKER_01

And sometimes I'm sure you have to go through a process of educating them about how to manage their credit, educating them about how they create their deal team as well about like how do they create a pipeline of product. All of those are elements that are necessary for people to be successful.

SPEAKER_02

You know, yes. And uh I have a recent example of um someone who was selling their place and they went with the uh a discount broker. Yeah. And it was it was a horrific process. The it was it was a lag in communication, it was there was the the the the seller didn't know what was going on, the buyers, which means the buyers also only knew from their side, uh, there was a lot of missteps, um, there wasn't a lot of direction given. Our process was lagged, we wound up having to get an extension because they went, they didn't want to pay. And um, you know, while I I do believe people need to be competitive, I think you have to understand what you're getting and what you're Not getting when you don't work with a professional, someone who has experience, but the most important thing, they have to have your best interest at heart. And so even if somebody's the cheapest, that doesn't always make them the best. And somebody's the most expensive, it also also doesn't make them the best. I think people if I were if I were giving advice to investors, to homeboy, to anybody, is you've got to find your team, but you also have to find your match, personality match, you know, energy match, you know, um, you know, you you can check licenses, you can check uh reviews. Reviews are big. Especially if people are honest, I always say if people give reviews, they should be honest. Really m try to match, see if you match the person's energy. You know, are you comfortable with the way they they speak and how they explain things to you? Um I thank goodness I've actually been referred to people who felt they were like, I feel like I'm talking to my sister or my cousin, or and I'm like, okay, good. Somebody that I know, you know, um, because I am very interested in people. I am very interested in what they want to accomplish uh so that I can help them do that. It's just very fulfilling to know that I'm not, I'm not only helping myself. You know, you know, I tell this story about a lady I met when I first became a loan officer. She she bought her first property when she was 19 years old. And I was like, How did you do that? She said, Well, all my little odd jobs. You know, she worked at the grocery store and then this, and it added up until it was stable. And then she bought a bill. It was like 80,000. You know, you can't buy a building. I mean, you good, it's falling apart, right? And it wasn't in great shape. But that started her whole thing. And by the time she was like 40, I mean, she was a millionaire many times over. I was like, nine, man, what was I doing at 19? Like, I was not thinking about buying real estate. So that's why I go to high schools because there are kids that know exactly what they want to do. They've been, you know, I have a friend, she actually did my hair. Uh, she um she was a pharmacy tech for years, and now she's going to pharmacy school. Right. She could actually buy, she could be one of those. She's ready, yeah. Yeah, because she she's been a pharmacy tech since she was in high school, which means that that adds up to experience. And then she gets her degree, like one day out of college, you can buy your first property. And she'd say, Miss Kat, she calls you, Miss Kat. Miss Kat, when I buy my place, I'm gonna. I said, I man, I'm so glad. I wish somebody was talking to me about that when I was 17.

SPEAKER_01

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SPEAKER_00

Your listening to the first million is always the hardest. We are now returning to the show.

SPEAKER_01

You have become an entrepreneur, and I think sometimes when people get into real estate, they forget that being a real estate developer is also an entrepreneurial position. Oh, absolutely. Um and talk a little bit about how you translated your experience as your early entrepreneurship into advanced lending because that's also an entrepreneurial endeavor.

SPEAKER_02

Yeah, um, I was getting a lot of phone calls, and I and my loan products were in a box, and I needed a bigger box. So um I actually use a lending platform called Nexa Mortgage, which is a very large brokerage. But I use this lending platform because I have access to over 280 lenders that all specialize in certain things. You know, there are lenders that specialize specialize in farms, in you know, SBA loans, um in commercial property, in ground up construction with investors, et cetera. And I was getting those calls and I didn't have the the lenders to work with. But I also need I also wanted to expand my horizons and do something a little different. So again, like my what I mentioned, my husband was like, Don't you think it's time? And I thought, yeah, I think it's time. And then I took the leap.

SPEAKER_03

Yeah.

SPEAKER_02

But when I tell you it was the best decision, I was I was nervous. I was like, I don't think people are gonna know. And within, I would say within six months of starting advanced lending professionals, everybody knew. Everybody knew. I I've had people saying, I've seen you in the industry for years. Now I can actually work with you. Because they were developers and builders and they were building all kinds of projects. They were doing fixing flips and fixing holes and stuff, and they said, you know, I've seen you. Okay, that's good, let's talk. And so now I'm I'm learning a lot, I'm helping a lot. Yeah. Uh, and and I'm enjoying I'm enjoying another side of the business. So it I I honestly, I've been told, you know, she gets into commercial years ago, and I just I was scared.

SPEAKER_03

Yeah.

SPEAKER_02

Uh I was scared, but it was the perfect time to do it. And um business has business business has been very steady and growing, and it's exciting, and which is why I'm so excited about the summit. I'm like a room full of real estate investors, business owners, entrepreneurs, like those are my people, you know? And uh I'm looking forward to that because I'm looking forward to the conversations. I'm talking to people that want to buy car washes, franchises, uh, they want to start accounting services, they want to open up podcasting spaces, they want, and I'm just so for it. I'm so in for it.

SPEAKER_01

No, you're gonna be in a perfect spot and we're really excited about your role in working with us. Absolutely. Um, and hopefully folks that are listening to this, which will come out soon, will be able to come and meet you in person on top of that.

SPEAKER_02

I'm looking forward to that.

SPEAKER_01

Yeah, well, I you know, I I want to transition a little bit because the intent behind the Achieve Summit is to bring a room full of people that are looking to do transactions. And some of them are aspiring, meaning they're learning. Right. Others have been doing this for a little while. Um some of them are big, some of them are small. Um but one of the things in particular that will be important is for people to better understand kind of the differentiated products that you have. So I wanted to give you a second to talk a little bit about the types of products that you are using to help people in their process of becoming developers.

SPEAKER_02

Okay. So um one is I always ask them, tell me about your team. Do you have some have you done this work before? Like there are a lot of people who were the fix and flippers and now they want to be developers. Well, fix and flip is not the same as like ground up construction, it's very different. Uh so they usually are forming JVs and partnerships with folks that have the experience. But I always say, you know, really what what lenders are looking for is that you've done three. Okay. So I say, you know, you develop a magic number. Three is the magic number.

SPEAKER_01

And you can whether it's you directly or you and your partner.

SPEAKER_02

Absolutely. Right. Yeah, and it and it depends on percentage of percentage of ownership and also credit standing, you know, and assets. You know, you if it's let's say, for example, it's a person who's like, they've done five or ten fix and flips, and they're like, you know, but there's a lot of land I want to build. Then I tell that person, then maybe who who's that contractor that's been doing your flips with you?

SPEAKER_03

Right.

SPEAKER_02

Have they built before? Yeah, they've built this and that. Okay, you might want to talk to them about being a partner. You know, it's equity and stuff, and you've got to have those conversations. You definitely want to have a lawyer to talk over, you know, percentage of ownership, what that looks like in terms of a tax basis. Not everybody's gonna have the same tax basis. So should you have 10 percent? If you own more than uh 25% of a company, now it matters here. But if you own less, that's that's strategy, right?

SPEAKER_01

So just to just jump in real quick on this point, because I I want to dive a little deeper because I think it could be practical and interesting. So if I um have some capital, but I don't have experience, let's say, in building ground up, yeah. The best thing for me to do is to find a partner. Yeah, but is it better for that partner maybe to have greater than 50% and me to have a minority share because that person has the experience?

SPEAKER_02

Yeah, definitely. And also it depends on credit position. Like I have some developers where the person who has all the experience has the worst credit.

SPEAKER_01

Right.

SPEAKER_02

And the person who has the least, you know, has button.

SPEAKER_01

So you may flip the ownership as a result, but it's important to note that ownership doesn't um necessarily dictate economics. That's right. Right? So somebody might be the majority owner, but the economics might still be in the favor of the other person. That's right. Because whatever their experience set is or whatever the issues may be.

SPEAKER_02

And they can work out those things, the operating agreement, you know, all those things are laid out, which is why you need to have an attorney and you need to have a tax professional to do all of that.

SPEAKER_01

Now, just on the tax professional side, one of the things that we are going to talk about at the summit is the difference between uh an accountant, a taxpayer, and a tax strategist. I'm curious, in the experience that you've had, how often do people come to the table really uh having a tax strategy versus simply I'm trying to choose between a S-corp and I'm trying to choose between a C Corp? Because I think a lot of people really don't understand the difference between those three roles of being a tax preparer, someone who actually files your taxes, the accountant who actually accounts for how you're spending your money, and the tax strategist who's talking about what the structure should be that optimizes or reduces your tax liability.

SPEAKER_02

Well, a lot of the so for example, a lot of the newer developers um they tend to have they tend to have tax preparers. Uh and I'm usually saying you need somebody to help you figure out what you need to do and how you need to set this up so that you don't sabotage yourself financially. Um the ones that are more experienced, they definitely have a tax strategist. Um and the ones that want to get into it, I gotta say this too. Yeah, they don't want to pay. They don't want to pay for professionalism, they don't want to pay for service. They want to go the cheap route. You know, they go to Chat GPT or they're using Claude or Gemini or something. You get what you pay for. And then when you find things like that, you know, AI is real, you know, big, and so people I've I get questions sometimes. People will ask a question to AI or Chat GPT or whatever it is, and they'll just send me that. And I'm like, this has nothing to do with you.

SPEAKER_03

Yeah.

SPEAKER_02

You put in because they don't know. You gotta go to a real person and you gotta tell them what you want to do and and trust the expertise of that person, and you're probably gonna have to pay for services. And their experience. And their experience, absolutely.

SPEAKER_01

That's what you're really paying for.

SPEAKER_02

Yeah, you're you're paying for them to say, okay, no, you want to form an LLC, you want to do a limited, or you want to do a JV with this percentage or whatever. And and honestly, you should have the tax strategist, the lender, uh, your real estate agent, all should have a call with each other so that everybody's on the same page. Very few people do that. But all of them should be talking to each other, including the attorney as well.

SPEAKER_01

So they understand attorney.

SPEAKER_02

Exactly. And and I know we're talking about investors, but anybody buying, whether it's an investor for some home buyer, whatever. Contractors too. Oh, and the contract, yes, absolutely. It's important that you talk to a tax preparer, uh, not tax preparer, you talk to a tax strategist first, especially if you're self-employed.

SPEAKER_03

Yeah.

SPEAKER_02

If you're self-employed uh and you tell your, you know, your accountant uh I don't want to pay any taxes. Or I want to pay as little as possible. Well, you're gonna get a real big refund, aren't you? But guess what? You also are gonna have income when it tries to qualify for that particular loan that you're looking for.

SPEAKER_03

Or the next one.

SPEAKER_02

Or the next one, exactly. Uh which is good to also know that that's when it's important to know the lending products. Hey, are they gonna look at my tax returns? Or is that not something that's necessary? That's actually a great question.

SPEAKER_01

So your debt service coverage ratio is a perfect example of where I can buy a property, and as long as I can indicate and and give someone comfort that the people who are gonna rent this property from me can pay for this, I qualify. Yep. So maybe talk a little bit about that. Okay. It could be that and others. Just I think this the hope is that we're gonna help people who are aspiring to be developers understand the types and the ranges of products that they might want to use and how I I graduate from one to the next.

SPEAKER_02

Okay. So um if you so first of all, they have to know that if they're purchasing uh anything that's like a two to say 10 unit, let's just use that as a that's that's why I recommend the newer one start. Mm-hmm. Absolutely. Uh is the building needs to at least be at least 70 percent leased.

SPEAKER_01

Already. Already. So before you buy it, it needs to be 70 percent leased. Yes. And if it's at 70 percent when you buy it, but there are people that you need to get rid of and it drops down to 50 percent, is that okay?

SPEAKER_02

No, that's a problem.

unknown

Okay.

SPEAKER_02

Yeah. I mean, if they drop off after you own it and you've already acquired it. After you own it. No, I mean the problem is you're not gonna have as much rent. But you would have already gotten the loan.

unknown

Yeah.

SPEAKER_02

So now you're responsible for making sure you pay that. It's okay if the leases have expired because in Cook County in particular, um, it's month to month. So it's good to know the laws of the state and what what happens if you have an expired lease, basically. Most people aren't doing new leases every 12 months. They just, okay, well, you were in a lease and you're still there, so it's month to month. Um, that's the understanding. As long as it's 70% leased, and then we usually want two to three months proof that the the owner, the current owner, has received the rent. Yeah. Because not everything is just on paper. We want to see that, okay, that $10,000 every month has been going, okay, which and the seller has to provide that information.

SPEAKER_01

And and how, for example, if you have someone who's been paying cash, how do you do that? What is it?

SPEAKER_02

They should not be paying cash. There's no way to trace it.

SPEAKER_01

You couldn't even just do like a bill uh a note and you can get receipts from you know an office store. Yeah.

SPEAKER_02

You know, it has to be verifiable deposits, which that's a big thing about lending. Everything needs to be able to be verified. You cannot verify cash. And the question is, why are they paying you in cash? So, you know, I mean, if it's money orders or cashier checks, that's different. Cash, no. Is it Zell? No. Is it you know, Cash App or whatever?

SPEAKER_01

Zell doesn't count?

SPEAKER_02

Zell counts. Okay. Zell counts, cash app counts. Because it's verifiable. Cash, you can't. My which is I'll tell you a funny story. My husband's like, never give you cash because I could have $100 in my pocket, it's gone a day, and he'll be like, What'd you buy? I'll be like, I have no idea. It's gone. That's cash.

SPEAKER_01

Well, so now that we've gotten I I interrupted you because I wanted to make sure people kind of got the issue. But all right, so I'm looking at a two to ten unit building. Yeah. That's gonna be my first opportunity. Yeah. I need to have at least 70% at least up. What's the next stuff that I should be thinking about?

SPEAKER_02

Um, one in terms of down payment. So if it's four units or less, or if it's a two to four unit, twenty percent down. You can get away with that, six months reserves. If it's five or more units, you need to have at least 25% down. Most commercial lenders require 25% down. And it's based off of the property, not necessarily based off the individual. So I think that's a big misunderstanding with residential properties versus commercial, is that it's it's based off the property. So as long as the property is cash flowing, which just basically means that the mortgage or the payment is covered with the leases, then that's a pretty viable property. As long as you have the down payment and the um the six six to twelve months reserves. And you know, your credit matters too.

SPEAKER_01

So I need to not only get I need to not only have 25% of whatever the cost is, but I need to have six months reserve for the payments for the loan.

SPEAKER_02

That's right. And closing costs. So buying a commercial property is not for someone who's like, I got $5,000, what can I do? And I'll tell you, this is a perfect scenario of someone who is probably buying someone who like when I mentioned we bought our first house and we had all this equity in it. And let's say we buy another house, we put because we're gonna have a new primary, so we're gonna put down three or five percent or something on that, but the house we just sold, we just cashed in, got $150,000. That person right there is now in the market for their first commercial property. Gotcha. Because they've got $150,000, maybe with whatever else. Now they you know may have $200,000 to work with. Now that's a person because of that house they sold that you can read with. That's right.

SPEAKER_01

But now let's say I've got this opportunity, I found the property. Um, I don't have six months in reserve, but I got the down payment. Um how should I think about going out and raising the capital that allows me to have the six-month reserve, the closing cost, and the down payment? Should I be thinking about doing that from friends and family? Should I be thinking about doing that in some other structured way? What do you recommend?

SPEAKER_02

Well, you I mean, people get lines of credit. You know, how many could be lines of credit? They bring in partners, you know, just like people will bring in a credit partner. Somebody will bring in somebody that has better credit than them and they'll say, Hey, you you're bringing the assets, I'm bringing this. Uh, it could be a family member. It could be mom or dad who's retired and they're like, I got, you know, $300,000, I was sitting in the bank, just kind of, I'm really ready to do something. It might be, hey, let's do this. Um, it could be uh, you know, I mean, here's another thing too. Sometimes sellers finance, sometimes sellers will do uh equity, you know, they'll they'll give you a break, give you closing cost assistance or something like that too. Um and in commercial, there the rules are a little different. So if a seller says, I'll give you 50 grand, sometimes that's allowable.

SPEAKER_03

Yeah.

SPEAKER_02

So it it also just negotiation, which is why you need to have a real estate professional that understands commercial and understands how to negotiate a fair deal for you. Um the reserves, like I said, it could be, you know, you can use a retirement account if you want to, you can bring in a partner, you can get a line of credit if you own another home. People have even gotten business purpose loans and use that as reserves. It's still considered your money. I mean, you're making a payment on it and your personal debt isn't necessarily factored in. Um, but with a business loan, you know, as long as you're honest and forthcoming with what your purpose is to use it, you could get a business loan for it, you know.

SPEAKER_01

So now I've gotten past all of the aspects that you just described. I've closed on the property, I now own the property. How do they now continue to interact with you as a lender? I mean, I know technically I've already got the money, but what are the smartest people that are in this space doing once they've gotten to the point where they've closed on the property in terms of their relationship with their lenders?

SPEAKER_02

Um what whether I'm their lender or anybody else, they should keep in touch with them. You know, let them know how you're doing. Hey, I just wanted to let you know and and ask them questions. The lender usually has a plethora of professionals that they're working with. So you say, hey, I maintenance this. I I had a gentleman who bought a building and he needed a property manager. I was like, oh, I, you know, uh, here's somebody right here. I know somebody right here. Um so I think just you know, keeping in contact with them, letting them know how you're doing. I like to know how people are doing. I like when people say, hey, remember that building you helped me buy? Well, this is what happened, you know. Um I think that's it. And then also when you have that first conversation though, let them know what your plan is. Most people now, I mean, real estate is hot, you know, everybody wants to get in real estate. Um, is that now are you on a trajectory trajectory to buy the next property? Yes. You know, and the next one and the next one. And then how can you leverage this property to do that? So that person, that lender, you should be talking to them before you get the property, at during, after, and then bring them other deals. Like I was looking at this building, you know, now this one is this situation. What should I do? You know, um, I just recently talked to a gentleman who uh said that he gets land contracts. Now, land contracts are not all, you know, people kind of oh, land contract. And I remember talking to an attorney of mine who's very knowledgeable, and she said, she says, why didn't he just do seller financing? At least he's on the deed, and that's why you need an attorney. This gentleman has been buying things with land contracts, which means that he's not on the deed. He has no ownership interest. He gives the the owner money and he's paying the owner every month. Well, I can refinance people out of land contracts, but I can also finance them out of seller paid financing. So that's another strategy and that and that helps folks avoid the down payment.

SPEAKER_01

So explain that for everybody to understand when you're refinancing seller financing, what does that look like?

SPEAKER_02

Typically uh it means that for similar to a land contract except that your ownership is there and you're and the seller becomes now the lender.

SPEAKER_01

Explain what a land contract is for me.

SPEAKER_02

Uh a land contract is well, when people talk about like um a rent with option, it's almost like that.

SPEAKER_01

With So I'm renting the land with the option to buy, and that's considered a land contract.

SPEAKER_02

Yeah, but you're kind of renting the property.

SPEAKER_01

And the purpose of the option to buy, so to speak, is that at some point.

SPEAKER_02

They're holding it for you.

SPEAKER_01

I'm gonna build vertically on that.

SPEAKER_02

Yeah. Build on it, or you're going to maybe it's a property that you're doing a land contract on. A land contract isn't just for land, it also is for excuse me, for real estate. Okay. So you can do a land contract on a piece of real estate. I did have an investor, that's the way he acquired, he owns four commercial properties now, and he got them all through land contracts. He basically found sellers, he knew sellers that were, you know, maybe they were tired of the property, they were, they were older, upright age, and they wanted to sell. There were time for them to liquidate. And he said, Hey, I'll give you $5,000, I'll take over all the expenses, I'll pay everything. He got it drafted up by his attorney. He made payments every month, paid the owner money every month, and while he was in the land contract, he was fixing up the property. He's fixing up the property, stabilizing the building, got all the units rented, and once he held it for a year, he's ready to refinance, get a traditional loan, and he doesn't need 25% down.

SPEAKER_01

Now And that's because he already owns the property?

SPEAKER_02

No, that's because he's refinancing, he's not buying it anymore.

SPEAKER_01

I see.

SPEAKER_02

Yeah. But I was talking to an attorney recently about that, and she said a better way to do it is to um do have seller paid financing. Then at least he's have ownership, because what if the owner dies in the middle of a land contract? He doesn't own it. He doesn't own it, and he's been fixing up on a property that he doesn't own. So ideally, you want to do seller paid financing. The seller, I've actually done these before, uh, and it actually worked out really great. Um, I had a client that went purchased a home with seller paid financing, and I refinanced her out of the property after it was like 16 months.

SPEAKER_01

So let's just walk through for everybody. So bought a home, the seller says, You're gonna buy my home, I'm making up numbers for a hundred dollars.

SPEAKER_03

Uh huh.

SPEAKER_01

I'm gonna finance it, you're gonna pay me on this.

SPEAKER_03

Yeah.

SPEAKER_01

And so she paid for 16 months.

SPEAKER_03

Yeah.

SPEAKER_01

Um and then she said, Okay, now I'm gonna buy this home from you, but I'm gonna refinance.

SPEAKER_02

That's exactly how she bought it from them by doing a refinance because the cash out and the agreement, you get the seller paid financing based on what you're actually acquiring the property for. So she to give you this was a real situation, she actually got the and and the reason why this wasn't working is one, she didn't this was a primary home, by the way.

SPEAKER_03

Okay.

SPEAKER_02

She didn't want to get a rehab loan, but the property needed work. And there was no way to finance it without doing a fix and flip, which that wouldn't work because she was going to live there. Um and she didn't want to do a renovation loan because of all the the requirements when you do that, contract, all this other stuff. And her husband was handy. So she's like, Well, how can I get this? The seller heard her issue, said I'll f I'll do seller paid financing. So he got his lawyer together, they drafted up an agreement. Um she was gonna buy the house for $140,000. He says, Okay. So they gave it, she paid them $1,500 a month, she had it for 16 months. We checked everything out before she did it. She made the payments on time every single month, had documentation of all the payments, and then we did a refinance after that period, and she became the owner.

SPEAKER_01

But now she And she paid less than $1,500 a month, I'm sure.

SPEAKER_02

Oh, absolutely. Her payment was probably about $1,300 a month when she actually purchased the property. But guess what? In that 16 months, her husband fixed up the property.

SPEAKER_01

And so the property went from $140,000 in the $100. To $300,000. Right. So she doubled her value.

SPEAKER_02

And she had the equity position, which means she didn't need a down payment because there was enough uh there was more than 25% equity when she finished. Gotcha.

SPEAKER_01

So the key there was that she was able to either hold on to it long enough for it appreciate or invest in it to appreciate so that she didn't have to put any additional equity in it because she could use the equity that was accrued in that time period to make it.

SPEAKER_02

That's right. Yeah.

SPEAKER_01

Right. So that's a that's an interesting way. And it was her primary home.

SPEAKER_02

It was her primary home.

SPEAKER_01

Could she do that if it wasn't her primary home?

SPEAKER_02

Yes.

SPEAKER_01

12 or 24 months. I think there's a whole opportunity to talk about strategies.

SPEAKER_02

Yeah. That was a strategy.

SPEAKER_01

I think for a lot of people, one of the things that scares them is they only can have one view of how to get there. Yeah. When in actuality, as you just described, there may be three or four different components of a view. And then you can take those three or four different things and fit them together in different ways to get there. You were talking about a rehab loan that might be appropriate in certain instances, or you know, versus whatever it else the products might be. So I'd love for you to take a second and tell some stories about people you've worked with. Because the story you just told is very powerful. And I think it inspire a lot of people to say, I want to do exactly that. But there are other people that you've worked with. Yeah, some recently, some probably in the past. Oh, yeah. I'd love for you just to tell us a few stories and I'll probably interject in some questions.

SPEAKER_02

Okay. So let me um I'll try to hit on maybe a self-employed uh person. Uh someone who um did a a renovation that was uh oh. There are so the okay. I'm gonna start with um somebody that I worked with who had a couple of fix and flips under their belt. So one they they sold for about $700,000 and they put in about $250.

SPEAKER_01

Okay. Another property that was all profit for them.

SPEAKER_02

That was all profit for them.

SPEAKER_01

That's that's that that is not something that the listeners should expect to happen. Right, no first fix and flip.

SPEAKER_02

No, she she had incredible taste. She actually is a nurse, and her first fix and flip, she made about $400,000. Wow. It took her three years. It was supposed to be a fixed flip.

unknown

Yeah.

SPEAKER_02

Took her three years, though.

SPEAKER_01

But you know what?

SPEAKER_02

Permits, delays, all that. But she learned from that.

SPEAKER_01

A lot. And and you know what, at the end of three years, she it still works. Absolutely. From a perspective of a return on her investment. Absolutely. If she made three times her money in less than three years, that looks like something like a 40% IRR. That's a that's an amazing return that any investor would take.

SPEAKER_02

Yeah, exactly. And uh that was one. Then then another property, she um she actually inherited that property. She inherited that property, no mortgage on it, and uh, she put about 20,000 in that one. And then there was a third property, uh, she put about 30,000 in that one. Now those three, the only one that actually counted was the first one. So she didn't actually have enough experience, but I was able to get her two exceptions, which was exciting.

unknown

Yeah.

SPEAKER_02

And uh the other thing is she would bring me differently.

SPEAKER_01

Explain the exceptions part.

SPEAKER_02

Oh, the exceptions is because it didn't fit. She's supposed to have three viable fix and flips that matched the one she wanted to do.

SPEAKER_01

Okay. So when you go to get money to borrow, they ask for at least three individual instances that you've done this before.

SPEAKER_02

Yes.

SPEAKER_01

Um and she didn't have three. No. But she had a couple of uh exceptions.

SPEAKER_02

She had one and two that were like, eh, that doesn't really count. The the renovation was, you know, $20,000, $30,000. The property she wanted to acquire now was over a $300,000 renovation.

SPEAKER_01

So this is something that people should be thinking about. If you want to go into this space, you actually have to start actually doing one, C2, Z3. Yeah, exactly. Get to a place where you become financial. So people need a strategy of how do I get to my first three. Yeah. Right? That actually propels them to the next level.

SPEAKER_02

Trevor Burrus, Jr.: Yeah, well, honestly, it starts with that first home. You know, because you have low entry point, you only have to put down three percent, three and a half to five percent, right? And it might take you five or ten years living in that home. It might. You know, I'm big on you know, slow and steady wins the race, not the quick fixes. And I know everybody here is like everything sounds so easy. It's not. And then you learn a lot during that time. Um if you buy your place and you know, best block, ugly house.

SPEAKER_03

Yeah.

SPEAKER_02

That's the formula. And you think about, you know, hey, this house does, you know, I always say uh pink toilets and brown carpet, those are the best places.

SPEAKER_01

Um, those in the 50s, yes. That's right.

SPEAKER_02

Uh, you know, grape bones. Maybe the property was taken care of uh interstructurally, but it's just not cosmetically appealing.

SPEAKER_03

Yeah.

SPEAKER_02

Those are the best homes. And they tend to appreciate a lot more because everybody wants the new thing.

SPEAKER_03

Yeah.

SPEAKER_02

And it's like, no, don't get that. It's a great neighborhood, though. I'm I'm looking for the house that has the, you know, like I said, the, you know, the pink toilets and all that. And uh build there, like start building equity there by improving the home and do it yourself. Hire this person or that person to do this project or that project. Put some sweat equity into it and watch your equity grow. Then get a line of credit. And then maybe, maybe somebody does, maybe you inherit a property, or maybe you see this rundown little house, but you've got some skills and you know somebody who's really, really good at fixing things up. Maybe you pick up that house cash, or like with the Cook County Land Bank or the, you know, South Suburban Land Bank, you know, get a property and let that be your first one. And don't rush it. Let it be your teacher. You know, uh I mean I wouldn't say make the mistakes, but take your time with it. Yeah, exactly. Take your time with it. Permits may take longer, your contractor may quit. I mean, stuff is gonna happen. But when you finish it, it's gonna be amazing. And then you sell it. And now that house that you got for, you know, $30,000, now you just sold it for $210.

SPEAKER_01

So one of the things that I try to do, um uh I've been working with folks on something called the breakout blueprint. And the idea is uh let's help you build a plan over a six to eighteen month period for you to actually be in this industry. And I think one of the mistakes that people make is they focus first on the fix and flips, um, meaning that they think of themselves as I'm gonna be like you know, the folks on TV that we have coming to the conference, Egypt Shirad, who's gonna be able to do that. Yeah, oh, yeah, oh, yeah. And my concern isn't that that's wrong. It's just that um in terms of the level of risk that you have to take to be in this industry, uh if I had to pick one area I would focus on, it's multifamily ownership. I would prefer to focus my effort on multifamily ownership until I'm comfortable enough to be in kind of a commercial or industrial space. That's not to devalue the val the the the importance of single family homes. It's just that I'd rather have four people or five people or ten people that are paying me rent to know that I can sustain one or two bad pairs than to have only one person that I'm worried about in the process.

SPEAKER_02

You're absolutely right. I agree. So I talk about fixing flips because everybody is kind of that's like popular, right? And it's it's quick return. That's the other thing. But I I have another story of a gentleman who um he he reached out to me and he told me, he says, Hey, I'm retiring in five years. And he goes, I and he goes, I I'm gonna get a little pension. He said, but I need to create another income source. So he says, I want to buy a commercial property. Now he was looking in Wisconsin, he was looking at Indiana, and he lives in Chicago. And I and I asked him, you know, why are you looking at it? He said, Well, I heard that you know there are good deals there. I said, But do you know that market? Uh do you know people there? He goes, No, no. And I said, Why don't you work with where you're like you're familiar? I said, because you can go to the property. You there's, I mean, you're I'm here, right? I know people, you know, I can help you. Yeah. I was like, maybe you want to kind of stay in your own backyard first before you go to other states. And he goes, So finally he, you know, he took my advice and he goes, okay. And he found a six-unit property. But the before that, actually, he was working with a real estate broker who was like a buddy.

unknown

Yeah.

SPEAKER_02

And I said, Oh, so do they work in commercial real estate? He goes, No, but they were really good friends. And I said, Okay, so I'm gonna tell you. I said, That's great, that you're great friends. I said, But if he doesn't have the expertise that you need, you may not be friends after this.

SPEAKER_01

Yeah. So he can't help you the way you think.

SPEAKER_02

Yeah, he can't help you the way. He can't he's not just showing you a property. He's trying to help it make it make sense. And so um I recommended somebody to him, and he had a conversation with them. Come to find out he actually knew who this person was, but he didn't know, he he he just didn't think about them at the time. Right, exactly. And I said, No, I said, she's amazing. I said, but she knows the numbers and she's gonna get all the details, she's gonna get the the uh pro um um operating uh and expenses, she's gonna get all of that for you, she's gonna make sure you have all that, and she's gonna be able to tell you uh what where the rents are going and all this. And she says, Oh, I'd like to talk to her. So they met and they went and looked at the six-unit building. The building was um $500,000. And uh he goes, and he qualified for it. It made sense, the rents that you know, making sense and all this stuff. Then he went and had an inspection. Always get your inspection. He had an inspection, and uh there was there were some things wrong with the building. He he was gonna walk away from it. She talked to him. The price went from $500,000. So he got the building for $350. A six unit for $350. And he goes, The work was really about $50,000. But she negotiated so tough for him. He bought a six unit, it's not falling down, it is completely rented. I talked to him, he is like, I am hooked. This building is making him so much money. They were all two bedrooms and great neighborhood. And he's like, I need another deal like that. And I said, Well, you already know the formula. You got a great real estate broker, um, you got all the numbers. Um, and then I did the numbers for him, you know, kind of going through everything. And I said, and then I was talking to you and you listened, and he is loving it. He's like, I think he's making his mortgage payment $350,000 on six unit, right? Right. Uh rents are about 12, about $15,000.

SPEAKER_01

I imagine if he's borrowing $350,000 and he was able to probably use the equity in that building, he's probably paying what, $3,500. Including all expenses. Yeah.

SPEAKER_02

He's making about seven grand a month. So he's got six units.

SPEAKER_01

Each unit is making fifteen hundred dollars a month. Yeah. He's basically doubling his money. That's right. You know.

SPEAKER_02

Beautiful situation. But you know, so this is where it's But it but it was a year and a half of conversation. We did a refinance first of his home, he put money in the bank, he saw all the nuts, you know, so that was his six to eighteen month plan.

SPEAKER_01

Well, this is this is where I'm going with this because I think for a lot of people, they need to start obviously with a long-term vision of where they're trying to go. Yeah. Their goal is to own multiple multifamily businesses, uh family uh homes, properties, uh, apartment buildings, right? Before I get there, I probably need to do one or two fix and flips. Because I need two or three of these fix and flips on my record to show people that I can be uh a good risk. But before I do that, I've got to fix my credit. I've got to make sure my credit is in the right place. And before I do that, I need to think through what my uh fears versus my uh danger really is. And I need to think about calculated versus you know reckless risk. And all of that needs to be happening at the same time that I'm making relationships because I need a deal team.

SPEAKER_03

Yeah.

SPEAKER_01

I need to have, you know, and my deal team includes obviously my lender, they're not I need a lawyer, I need other people, I need to understand the market. That's right. How do I learn the marketplace? Um, so that I understand when we're going to be able to do that. Go like the Chiefs Summit.

SPEAKER_02

And talk to people, ask questions. Prepare three questions.

SPEAKER_01

Yeah.

SPEAKER_02

When you go to the Achieve Summit, I mean when when people go to the Achieve Summit, they should have three questions. What brought you here? Yeah. Somebody's gonna say, Well, I'm an investor. Once they say they're an investor, what kind of investing? Why buy commercial real uh you've just made a connection. This person is doing what you want to do. Yeah. This is a can this is somebody you need to keep in touch with.

SPEAKER_03

Absolutely.

SPEAKER_02

Would you mind sharing with me your your big pros and cons of owning commercial real estate? What are the differences between between c owning commercial real estate and residential real estate? You know, um what w costs? You know, what are the water bills? Do you would you buy a building that has separate utilities or do you recommend maybe one with a boiler so heat's included, or you know, those types of things? Uh what kind of maintenance is acceptable? You know, should I buy some like the the gentleman who I mentioned who um bought the six unit? Yeah, who bought the six unit, it scared him to death. And the real estate agent said, Well, this is you know, this is an older building. Explain some things to him, and he goes, and then when you talk to the home inspector again, he goes, Well, no, this is probably you have to do this in five years. I mean, every business build building is gonna be work. So it calmed him down. He understood because he had a deal team. Yeah. And that home inspector should be a part of it, too.

SPEAKER_01

Well, the deal team is important, but I think there's something else that's important that I advocate for, and I'm curious kind of how you think about, which is I think in many cases people should think about being in the private lending business, right? Meaning that I'm gonna start lending to others who are buying those multifamily units um the equity that they need. I'm gonna be lending, I'm a debt lender for the equity.

SPEAKER_02

That's another way to do that.

SPEAKER_01

Part of it is I get to see more deals.

SPEAKER_02

Yeah.

SPEAKER_01

I'm not involved in the deal. I'm not taking that risk. Right. I'm using for your investment. My worst case scenario is I'm stuck with a property that I was interested in investing in in the first place. Right. I'm just doing it kind of on the back end.

SPEAKER_02

That's not a bad idea, but I but I also think there's a risk there because people don't trust. So if you I think uh I do know several companies that do that, um, and people who have done that. Uh I think it's I mean, that's another way.

SPEAKER_03

Yeah.

SPEAKER_02

You know, um there's so many ways to invest in real estate. It's really where they're risk talking. If they're like, look, I got $10,000, then maybe you want to do that. Because you've got $10,000, you're not gonna go bankrupt if you, you know, the worst thing that happens is you you're part owner of this property, right? And you're getting your return and it's just slow and steady, right? So maybe that is a way to start out um investing. Uh maybe you've got, let's say you've got $25,000. You're like, well, if I got $25,000, you know, what do I want to do with this? So maybe you think, I'm gonna buy a home and I'm gonna fix it up myself. I'm gonna buy a condo or something that I'm gonna live in and I'm gonna fix it up myself. If you've got $50,000, I think based on the amount of money you have, changes how you start investing.

SPEAKER_03

Yeah.

SPEAKER_02

If you're like, I just sold a house and I put $150,000, $200,000 in the bank, well, now maybe you're looking at commercial. Or now maybe you're looking at uh a small strip mall with partners, you know, or by yourself. Or, you know, I think people don't spend a lot of time thinking about where they want to go. They just want the here and now. Um, that leads me to another story. I have a gentleman that I've been working with who he's never purchased a primary. He inherited a property, um, and he is incredibly excited about investing in real estate. So one week he wants to do fix and flips, the next week he wants to buy commercial, the next week he wants to do ground up construction. Yeah. And that's the problem. Yeah.

SPEAKER_01

You can't be a dabbler.

SPEAKER_02

Yeah.

SPEAKER_01

He and you have to develop some sort of it's not that you can't do more than one thing, but you can't dabble in all of them.

SPEAKER_02

Yeah, and it and and he's in a very and I just told him and I said, if you don't mind me saying this, I said, you gotta pick one. I said, you gotta start somewhere, but you've got to narrow it down because you you're all over the place and you got a lot of people in your ear. I said, what are you comfortable with? And he goes, Well, I I really want to do commercial now. I said, Why? Well, because you make more money. I said, No. I said, You gotta think about the the the the weeds of it. What do you like about commercial? Well, you make more money. I said, then that's probably not where you want to start. I said, Have you ever bought your own home before? He had never purchased his own home. I said, then let that be your first investment. I said, you can live there and you can fix it up, build equity in it, and then sell it. You you're he was not a person who's attached to real estate at all. And he had this other property that he also inherited. And um, and I said, Well, what are you gonna do with that property? He was gonna get a rehab loan for about $400,000. And I said, Well, if you get that, that's all you're gonna be able to do. But if you sell it, uh now you've got, you know, maybe $200,000 and the world is your oyster. Right.

SPEAKER_01

So the licensors, the rehab land loan requires you to own the property for a certain period of time, right?

SPEAKER_02

Uh no, you can actually go into a property doing a renovation loan, a rehab loan up front. So there's uh there's like FHA203K is one. There's also conventional renovation loans. So say somebody sees a house they want to fix it up. It also depends on how your contract is negotiated. Like if the seller's willing to give you the time. It might take you 45 to 60 days to close on a renovation loan going in to a primary, or you buy it and you can do a refinance renovation. Gotcha. The biggest difference though is if you do a refinance renovation, your loan to value is gonna be like you're gonna have to have more equity in it. Yeah. Like a 75% loan to value is gonna be required, the ARV. So um ideally you want to do it going in, because then you can get away with the 5% down. Yeah with a conventional renovation of 3.5%.

SPEAKER_01

Well, this I can consider.

SPEAKER_02

I know I just said a lot.

SPEAKER_01

You're like, this conversation is is fascinating. And actually, um, I have an idea that we'll talk a little bit more about uh offline because I think that the the permutations that you are describing of how people get to a place where they've got both the confidence, the knowledge, um, and the experience um that allow them to buy real estate is really interesting. Last question I want to ask is kind of an open one, but you know, we're going to a period of tremendous uncertainty. And um I'm always of the belief that with uncertainty comes an opportunity to make money, but you really have to be even more conscientious about a reckless versus a calculated risk. Given what you know, whatever your thought process of what's going to happen in the next year, 18 months, two years, how would you approach this market from a real estate perspective?

SPEAKER_02

I would definitely take calculated risks. I think uh I think this is a great time to make money in real estate, to be perfectly frank. Um I think I always say stack your chips, save your money. Don't go buy the frivolous thing. We were just talking about chicken cooks and you know and farming, you know. Yeah, I do. I think I think people need to be very aggressive about saving. I think no reckless spending. Save your money. There are gonna be opportunities. And when they come, you're gonna wanna be able to move forward. So I do think people need to invest. I don't think people should get caught up in the interest rates. You can always refinance the interest rate. It's about the cash flow. There are people right now that are on the home buyer side that are buying homes with 6%, 7% interest rates, and they're still buying and still less than rent. And there are people that are purchasing investment property that are getting, you know, seven, eight, nine, even ten percent interest rates, and they're still making money. So if you can make money and the interest rates are high.

SPEAKER_01

Well, when they they go down, you make more. That's right. I will say this, and this is to age myself a little bit. Um, you know, I can remember when interest rates were in the teens.

SPEAKER_02

Oh wow.

SPEAKER_01

But the houses were No, the interest rates for the houses were in the teens. Oh, yeah, there were 30,000. Right, exactly by a house. But you know, I think people confuse that. You know, like we've gone through this cycle before, right? The 70s and the OPEC Oral Crisis, which unfortunately I was old enough to remember, the 80s with the SNL crisis, which again I was unfortunately old enough to remember. This is a repeatable cycle that's happened that you can see. And in each of those instances, people who bought homes at that time ended up making a tremendous amount of money.

SPEAKER_02

That's right. Now I always say, you know, they always think because I'm in the industry, I say now's the time to buy, but now is the time to buy. It is time to it, I I believe it is time to buy, it is time to invest. Because when you're gonna have less competition, because the people that are afraid who haven't quite gotten over that, they're not doing anything.

SPEAKER_01

Yeah, fear will paralyze a lot of people in this environment.

SPEAKER_02

Yeah, and I'm like, don't do it, don't do it.

SPEAKER_01

Fear will also open up a lot of opportunities to make purchases and for deals that wouldn't exist elsewhere.

SPEAKER_02

That's right. This is a deal market. Yeah. This is a deal market. This is a open up your mouth, open up your savings account. It's time to invest. Yeah. Absolutely. And I think the people that invest now are going to be our next flood of millionaires.

SPEAKER_01

Well, listen, I want to thank you very, very much. This is a thrilling conversation. We're excited to have you at the conference coming up. Excited to be there. And we're actually excited to have you back on the show. I think you'd be great to come back on this time. So we'll have to talk about that. But thank you. Appreciate it.

SPEAKER_02

Thank you so much.