Welcome to The Deal Pen, a podcast that digs into the details of untold stories from crafty real estate investors. And now here's your host Avi Rosowski.

All right, David, can you hear me? Okay.

Avi Rasowsky

I can hear you just good.

David Alexander

All right. We are, uh, we are lucky to have David Alexander with us today. Welcome to The Deal Pen, David.

Avi Rasowsky

How you doing?

David Alexander

I'm doing good. I'm looking forward to chatting with you. Obviously we've known each other for probably five or six years now, right? Quite a while. You've, you've changed my life tremendously, which we'll get into, but, uh, David, thank you. Yeah. Thank you for agreeing to do this. And, uh, we'll dive into a little bit about your background and how you got to the place you are now, which is a lot of, uh, what you did with me is helping other people grow their business. So I look forward to the conversation with you.

Yeah. So where do you want me to start?

So I think the best place to start, let's go backtrack from the first time you and I talked. I was introduced to you by Brad Smotherman, I believe. I think Brad gave each other our names. And at the time, I'm sure you remember, I was wholesaling all across the country. I was doing a bunch of virtual wholesale deals. And you called me out of the blue one day. This is probably 2019. And from that point forward, I very quickly learned to just stay away from some of the stuff I was doing, which was wholesaling at low price points and dealing with properties that were not in my backyard. So I want to get into how you got to that. So if we could backtrack way back to really kind of how you got started into real estate and what led you to some of the things that you've been advising me. And then we'll just kind of dig from there and go into deal structures and all kinds of fun stuff.

Okay. All right. So, so to start out, so all my life I was, um, the only skills I had was bartending and waiting tables. That was it. So, um, I had, I was a serial entrepreneur. I just started businesses and, and screwing them up and starting business screwing them up, mostly t-shirt businesses. I was in the screen printing, screen printing and, And I finally had my last t-shirt business and it was July of, I believe it was in July of 95 or it might have been 96, I think it was 95 though. And I walked out the door, we just bought a big piece of automatic equipment, it didn't work, and I was just mad. So I locked the doors and decided I wasn't going to be in the t-shirt business anymore. And I went home that evening, back then my hair was you know, damn near down to my ass long, and I didn't want to go work for anybody else. And that was one of my excuses. I was like, I'm not cutting my hair. And I went home and told Laura, my daughter's mom, I told her, I'm not getting a job. That's the bad news. You know, and the good news is I'm going to figure out this thing called business. Because at that point in my life, up to then, I thought I was really smart. I thought I was like, I was smarter than everybody else. And my uncle had come to me about a year and a half before that. And he looked at my t-shirt business and he said, you're doing it wrong. And I was like, get out of here. Go back to your country home and leave me alone. You don't know what you're talking about. I got the world by the tail and I know what I'm doing. So then once I was locking the doors and I walked out the door that day, I looked down the, I was in like one of these little strip centers where there's a whole bunch of small business owners. And I realized that every one of us there, we all knew each other and we all worked 12, 14 hours a day, except I was working actually closer to 18 hours a day, literally, on most days. And, but we all knew each other. We're all hardworking, we're self-employed and we're doing it. And I looked across the way and I thought, man, I bet the dude that owns that, that high rise over there, I bet he's not even there. And I bet the dude that owns that freaking car dealership there, I bet he's not there. And I just had an epiphany that, shit, I'm doing this wrong. And I ain't so smart. I didn't know anything about systems or passive income or anything. I just knew I was passive income. So at that point, back then, the internet was barely working. It was the dial-up. So you could dial up and go make you a tuna sandwich and get a Coke. you know, whatever, and before the page came up. Right. So I would go to Barnes & Noble every day and read every book I could get my hands on, on the best or whatever. I come across a book called The Kitchen Table Millionaire. It's out of print now, but I mean, if somebody wants to get a hold of me, hit me up. I can email them the seven pages I read. But I read seven pages about owning mortgage shows. OK. And I knew that I didn't want to be an MLM. I was smart enough to realize that MLMs were just that the person at the top was the one making the money, and all the other people believed they were making money, but they were just 10%, 15% salesmen, and that's it. And the moment that anybody in their downline put working, they were no longer, they were out of a job. It was only the guy at the top that was getting rich, or the few people at the top. So I didn't want those. I knew I wanted to own some kind of asset, except at the time, I didn't know that I wanted to own an asset. I just knew that mortgage notes seemed like something to be solid.

You know what I'm saying? So you got into mortgage notes from the Kitchen Table of Millionaires, where you first found out about it?

That's where I first found out about it. Yeah. Read that little book. It's seven pages. Seven pages. And it talked about how you could buy and sell these mortgage notes and then you could buy and sell them in pieces. Okay. Like most people buy and sell them and they broker them, kind of like flipping houses. They wholesale them out. One of my mentors used to joke about it. You call them broke brokers. They don't have any money, so they broker the notes. They're just in the flipping business like anybody else, just a job. But the real money was in learning how to flip them, to buy them at different yields and keeping a piece of it. Either keeping a piece of the cash flow or keeping the back end. And so that was what I learned in the beginning. Now, again, the problem I ran into was I didn't have any money. I was broke. I didn't have any rich uncles, any rich aunts, any rich grandparents, any rich parents. Nowhere to turn to. I didn't grow up near money. I didn't know anything about it. The closest thing to money was my actual uncle. And he was an investor, but not like a big time investor. He lived up in Oklahoma and he might buy 20 head of cattle. and then hold on to them and then sell them later. You know what I'm saying? Or buy a piece of land and then sell it later. He wasn't, he wasn't, uh, he wasn't, that's just how he lived. He lived on very little and he made a living doing that. So for him, it was just so he never had to get a real job.

This is the uncle that told you you were doing it wrong in the t-shirt business.

Yes. Yes. So I actually called him back up right after I shut that business down and I went and met him. And I said, all right, Uncle Johnny, tell me what's, what am I doing wrong? And he goes, son, he goes, you're selling shirts. And he goes, you know, the customer that comes in, they're selling the job. You know, they're selling the job to the local bar or whoever's buying the shirts. And they're charging $15 a shirt. Meanwhile, you're buying the shirts wholesale for them. You're printing them wholesale for them. You're making $2 a shirt. you're doing the artwork wholesale for them, or they bring in their own art, you're making two bucks a shirt, and they're making $12 a shirt. You're not making any money. They're making all the money. I said, you gotta be the whole cog. And that stuck with me. So once I got into the real estate business, and I was forced in the real estate business, I had to learn how to buy and sell houses in order to have a note. I had to learn how to buy myself creatively, but I didn't have any money. So I had to figure out how to creatively structure deals and put those deals together because I wanted to own the mortgage note. And so that's what I learned how to do. And I don't know, it's kind of weird to pin down where my first deal was, but I think one of my first deals that I did with him, he put up $1,500 for a mobile home I bought. And I don't remember what I sold it for. But like nine months later, I paid him back, I think $2,200. And he was happy. And he made some money on his investment. And I don't even know what the yield is. Look up the yield, 1,500. And nine months later, what's 2,200? I just put together, well, yeah, I thought, hey, And he'd be happy with that. And on that mobile home, I was making like, I think I was making like $230 a month or something. And then I started doing some other deals. I started learning how to buy, take over payments, subject to. I started learning how to buy cash and started honing all the techniques. A buddy of mine posted on a on a on a board a forum that we were on about some now some later it was just he just posted two sentences so back in the day the problem we had with getting money was that you know if and this is the problem that is that's very very prevalent nowadays these wholesalers come into this market and they're not really wholesalers, okay? They were just transactioneers. They watched the latest YouTube video. Nobody has any good fundamentals. None of these guys, they'll be all working for Uber Eats here in the next 90 days to nine months. You know what I'm saying? They're all going to be Uber Eats and DoorDash is going to be full of people. They're all going to have to go back and get jobs or or go broke for Amazon or whatever they do. But because they didn't learn any fundamentals, the only thing they understood was get something under contract, flip it. And when the market was going straight up, that's pretty damn easy to do. But they didn't learn the fundamentals about buying and selling and about holding assets. They didn't learn the 70% rule when you're buying something for cash. Even today, the wholesalers, you know, they get something under under contract sub two at two at a hundred cents a dollar. They think they can still charge another twenty five thousand for somebody to take over payments. You know, it's like right. And sadly, there's some dumb asses that are paying it. You know, I know.

I know.

But. But, you know, it'll all change when those guys run out of money and the money gets tighter, it'll all change. And so for me, I've been sitting on the market for the last three years or so. And now I'm going back in, you know, I did two deals this week. And but as, as things change, and the deals get easier, so that so I had a buddy of mine, and what I thought about the fundamentals was that you had to buy a property for 70 cents a dollar minus repairs, right? We all know this, the Mayo formula, and Ron LeGrand was the first one to really talk about that as a formula, right? And the reason the formula exists is because if you're in some 70 cents on the dollar, then 15% is for profit, and 15% is for miscellaneous. It keeps you out of trouble. But meanwhile, all these people out here start buying at 85 and 95 cents of the dollar and flip it off. And that's just because money was so prevalent and liquid and easy. But now that it's not, it'll go back to the regular rules. If you want to sell to a customer over and over, namely an investor, well, then you better have bought it at 65 cents of the dollar so you can flip it off at 70. So you make your 5% or whatever it is. So the problem we had was, remember, I didn't have any money. And I couldn't go to banks. I've never been to a bank, by the way, still to this point. But I couldn't go to banks back then. And so we had to figure out how we could buy stuff in such a way that private lenders couldn't say no.

Okay.

And so a buddy of mine, his name was Alex Jurvich, and he was a real estate guy back then. He owned a dog training website. And he put a little blurb on our real estate forum and he said, man, here's how I'm doing it. What I'm doing is I'm buying stuff some now, some later. Okay. So not only was he buying stuff at 60 cents of a dollar, he was only giving them 30 cents of a dollar to start. So in other words, he'd buy something at 60 or 70 cents of a dollar, and he'd give them 30, 35 cents of a dollar up front, if they owned it free and clear, and he'd give them the other 30, 35 cents later. So what that allowed him to do is he could go to a private money guy or a hard money lender and say, hey, you're only gonna be in this 30 cents of a dollar. How could they say no? They're in a $200,000 house, and all they gotta do is put up $60,000 for the deal and make a 12% loan, that's a no-brainer, you know? And not to mention when I... Go ahead. Well, not to mention when I started, hard money lenders loaned at 18%, not 12.

Okay.

So, that was the other problem. We had to make sure our payments, we could afford the payments. You know, we couldn't afford the payments at $96.18. Right. So, I took the sub now, sub later. And for me, I turned into an art form because I learned how to do that over and over and use the time value of money and make, create, you know, what I call a self liquidating deal. Because if you give somebody X amount of money now, and then the owner finance it back out, there's X amount of payments coming in. Well, then that pays it off in a shorter amount of time. Pays it off faster, liquidates it, cuts your, If you do it right, it cuts your interest rate in half. Or even if you're borrowing money at 12%, it turns your 12% money into a 6% loan. So probably a little hard for people to process that.

I think it is, but I think the key is, I never knew what a self-liquidating deal was until I met you. So how do you explain that to somebody who's never heard of it before, where all they know is, oh, buy at a discount and then hope to make your money back? Can you sort of unpeel the layers of a self-liquidating deal?

Yeah. Yeah. So, so I, you know, very fortunate for me. I grew up with a dad who was extremely smart and, and, um, and, and my mom is extremely aggressive and good at business. Both. I grew up thinking that my dad was the entrepreneur, which was funny because my mom is the entrepreneur. Okay. Um, it's weird how you form things in your head that you don't really know. You know what I'm saying? Yep. Um, my dad never, my dad never really started a business, but my mom, you know, has started several. Okay. And, um, But my dad, his genius is that he could do two things. One, he can look down the road from where you're at and look down the road 5, 10, 15 years and tell you where you're going to be if you keep doing what you're doing. He was real good at that. And since, I'm pretty good at that. I'm pretty sure there's times when I've heard, you've heard me tell people, you know, well, you keep doing that, that's where you're going to be. Stop doing that, you know. Um, and usually I'm, I'm fairly accurate one because I'm, I'm too stupid. I've already made those mistakes. I'm a slow learner. And the other, I, I, you know, I can see a little bit down the road on what those actions are. Yeah.

It took me a while to learn to listen to you. Right. You told me a lot of times. You do this, do that, you know, go buy in your own backyard. Don't do this. Don't do that. And finally I started to realize, okay, just listen. And you've been down the path and you kind of know what you're looking at. So, all right, keep going.

Yeah. So, so we, uh, uh, so my dad, when I was young, he always worked backwards on things and that's the way I learned. I would do everything fast, backwards, you know, so he'd go, he'd want to go buy a car. And if he went to go buy a car, and he liked vans, he'd buy vans. If he went to go buy a van, then he would find out what all the vans are selling for, what the invoice was for him. But then he wouldn't go to the car dealership first off. He'd go to his credit union, and he'd find out how much his credit union was loaning. So back then, the prices were a lot different. But let's say a van was $30,000 back then. He'd go to his credit union and see how much they'd loan him. And if they've been voting $28,000, you better believe that that car dealership, he was beating him up to $27,000. Right. My dad would walk out. He would walk out with paying for a car tax license and put money in his pocket.

Interesting.

And that's just that's just the way he did it. So everything I did when I was. So to get in the T-shirt business, let me tell you this real quick. OK, I work backwards. So for me, it's just normal. I'd been selling books door-to-door, which I think was a great experience for me when I was 24 years old. After that summer, I come home and they called me up and said, ''Hey, would you sell T-shirts for us?'' I said, ''Okay.'' We were selling to fraternities and sororities. We go out here to sell these T-shirts to fraternities and sororities and we're selling them for $9.50. They had to order a minimum of 100. It was a four-color design on back and a one-color design on front. And again, they had to order at least 100. And they didn't get a break until they ordered like 300 or 250, I think. Well, as I was getting my order for my 200 shirts on one, the social chair of the charity said, man, we have this other shirt that we want, and we just need 200 of them. but it's just this one color design and here's the art. He showed me this poster. He had a poster and I said, well, how many colors? He goes, just that one color right there. And it was like a turquoise blue. Well, he went on a white shirt, kind of a dark, dark turquoise blue. And he said, I said, that's all you want? He said, yeah. So I called my boss. So I've written up the other order and he's about to give me the money half down, but he wants his shirt order done too. So I called my boss and I said, Hey, I said, you know, How much will we charge this guy for just this one color shirt? He says, well, you got to charge him $9.50. And I said, it's just a one color. He goes, well, sell him four colors and one on the back. And I just, I'm like, all right, whatever, dude. I hung up the phone. I thought, that's ludicrous. You know what I'm saying? I hear I got a guy trying to give me money and you're trying to tell me to extract more money or whatever on something you don't want that he's not going to be sold on. I was smart enough to know that. So I looked at the guy and I said, I said, what do you think is fair? How much, what do you think is fair? He said, $7 and 50 cents, I think will be fair. And I said, I think you're right. So write me a check, write me a check for half. So he wrote me a check for half of both orders. I turned the one order in to my, you know, to my boss and the other t-shirt order I spent the next day calling all the printers, all the, and every time I call a printer, I'd say, hey man, I need to get some shirts done. So tell me how this works. And then they would, every time they'd answer a question, they'd give me more ammo. So they'd come down to me and say, well, do you want a contract price? Or are you bringing this church to us? Or are we doing it all? And so I learned quickly that there was a wholesale market out there. And then they'd say, well, are you bringing the shirts to us? Well, you know what? I just got back from Tennessee, so I don't know the local suppliers here. Who's the local supplier here in Dallas? Since I'm from Tennessee. Oh, well, that would be Staten over there in North Dallas. Okay, well, I'll bring the shirts to you then. So I call Staten up and set up a wholesale account. So by the time it was all said and done, I got to doing the t-shirts. And I made a mistake in the T-shirt business, but I learned a lot. So I wore the shirts, I did the art, and I have a design background. I always wanted to be, I thought I was gonna be a commercial artist when I grew up, I really did. So I did the T-shirts, got it all ready, got a camera ready for them, had it all ready, and then I took it to a printer, the guy that actually taught me the business the most. And his name was Gerard and he actually let me print the shirts too. Boy, lucky him and pay him. I printed them and paid him. Pretty good gig over there. So I wanted to learn the business. But anyway, I ended up making more on that order than I did on my commission on the other order. You know what I'm saying? And all of a sudden, I'm in the t-shirt business. And from that point on, I never went back to the other people. And I said all that to say that I charged $7.56. Luckily, I charged enough. But immediately, from then on, I always counted my costs. How much does the cost of shirt? How much does the cost of seat? I do everything backwards. And I guess it's not a common thing. Otherwise, a book like Profit First or the book Profit First in Real Estate wouldn't be such a thing. Because apparently, people don't think backwards in order to calculate their profit first. You know what I'm saying? again, i.e. all these wholesalers now, they just get the house under contract and hope they can sell it. Exactly. And it's true when you think about it. Because think about it, most wholesalers get under contract. I heard some wholesalers, real big wholesalers are getting, you know, 30 contracts a month to close 15. Right. And it's sad because they're doing such a disservice to people. Right. They're actually hurting people because now they put these houses under contract and these people think their house is going to be sold.

Oh yeah.

And they can't sell it because they don't know what they're doing. They're hurting people. And I just think it's really, really, really sad because they're in such a run to make money that they're forgetting that your number one job is to help people. If I put a house under contract, you can 99.8% know that that deal's getting closed. The only time it doesn't get closed is if a buyer bails out on me or if something happens in the chain of title that I literally just can't solve. And even then I close on a lot of them that are unsolvable or partial titles or whatever that most people can't. So anyway, I learned to work backwards and that was a thing. And so the self-liquidating deal is exactly that. It's learning how to use two things. One, buying right, buying low, selling high, but also learning about the time value of money and understanding it in such a way that you use it to your advantage. So that you know, and I'm going to use simple numbers, if you buy something and it's paying you $1,000 a month, and let's say it had 100 payments on it, and it's very simple math, if it had 100 payments on it, But you could buy it for 60 payments of that same thousand and keep the last 40 payments for yourself. Even though you don't make any money right now, necessarily. You're going to make some money, right? A lot of money. That last 40 payments has value.

Right.

And I recognize that early on in understanding notes. Most people don't recognize it. They get confused. And I was willing to work for equity. even if it didn't cashflow today.

Did you do that from the get-go or you didn't get to that point?

No, from the get-go. From the start. More so from the get-go. From the very get-go. Remember, we had to borrow at 18%. So a lot of times, I would have to give up the cashflow on the front end, pick up a down payment. So the values of things that I learned, you know, one, If you're going to get in, if you become an investor, you learn how to be frugal. If you come into being an investor and you really want to be an investor, and I see this all the time now, people really want to be an investor, and they really want to be an investor, but they're not willing to sacrifice. They're not willing to have delayed gratification. They want both. They want to live a heavy lifestyle, and they want to They don't wanna live the heavy lifestyle, but they want to have the equity too. And you can't have both. And so I reduced my expenses so low back in those days that I lived on $1,200 a month. I mean, it was low. And so what that allowed me to do is, my first five years of investing, my daughter, she had just been born and her first five years of life, she didn't have any Christmases or birthdays for me. They were sparse. But since the time she entered school on, my daughter's 26 now, she ain't worried about much. She probably doesn't know it, you know what I'm saying? And she doesn't ask me for things nowadays. She's extremely responsible and does well. But overall, she knows that she doesn't have to worry about too much.

Well, we talked about it the other day on a phone call. You talked about most people can't stomach the delayed gratification, which seems to be... If you have the patience for it, and it clearly it's worked out with... In your daughter's example, it was, okay, she might've had to sacrifice and you had to sacrifice as a father for some of the early years, but now the buildup has been so significant for your portfolio that Talk about that self-gratification or the delayed gratification a little bit and why it's so important.

Well, because without the delay, so you have to have delayed gratification for anything that you want, that you really want. At least that's the way I've been taught in life. And so it doesn't always work out, don't get me wrong, but if you plan it right, especially in finance anyway, that delayed gratification, if you learn how to build the equity, even if it doesn't cashflow, then don't get me wrong, you want equity in the cash flows. And you need to kind of monetize it somewhere at some point. But for me, I was willing just to trap equity because what I looked at was because of knowing the time value of money, let's say I did a deal and it made me $10,000 in equity back then. And I would do a deal for 10 or $20,000 back then. It was actually 20,000 was my number. And if I trapped $20,000 in equity into a deal, and maybe I made $3,000 or $5,000 up front, and two or three of those deals a month, and I was living a good life. Like, as an example, very early on, it's probably maybe a year and a half, I don't think, quite two years of my investing career, I opened up the glove box to my car, and I got $4,000 in cash and money orders sitting there that were under envelopes that I'd forgot about. You know, it was a horrible accounting system, but I had money coming in and $4,000 to me was so much money back then. I mean, I literally, I went to CCT every day for pizza and a drink. That's what I ate for lunch every day. Because that's all I could afford. But I didn't allow myself to afford anything else. for a long time, because that delayed gratification, that equity builds up, and eventually, it cashes out and becomes the thing you reinvest. If you do it right, you only got to make a million dollars once, or make a half a million dollars once, or make $200,000 once. You don't got to do it over and over again if you build it up and invest it right. You choose at what level you want to start investing, but that's what, if you follow the careers of like Cuban and Hershovet, and some of these early guys, they all made a million dollars in their businesses by selling them very early on to get their hands on some money. And then once they got themselves freedom, then they were frugal until then, they got themselves freedom. And they just didn't take the million dollars and blew it, they invested it so they can maintain their freedom. And then they went on to make millions and millions and millions of dollars.

What would you say is in the business you're in, obviously, which is what you've taught me a lot of my path with building a portfolio of owner finance notes, what do you think is the fastest way for someone to get from, let's say, their wholesaling right now to building their first million in actual buildup of their portfolio? How do you think is the best way for someone to do that?

I think it's hands down doing what I do. Buying houses and owner finance I'll keep it in the paper. I don't think there's a faster way. I don't think there's a faster way to get yourself fundamentally retired, which means you've got enough passive income to pay your bills. And when I say passive income, it's income that comes in without you work while you sleep. But there is management, and there is still work. So don't think you're going to get out of the work. Don't think you're everything. There's nothing that's truly passive. Nothing you do that involves money is going to be completely passive. But I don't think there's a faster way. A lot of people, they want to get started. They want to wholesale. And of course, that becomes a job. Right. And, you know, years ago, we were we were I was in a backroom. This is probably four years ago. I was in the backroom of a wholesale meetup. We were there. I was there to recruit more people to my side of my side of the world. But their number one wholesaler had done about 40 deals that year. And he's been averaged $7,000 a deal, 280 grand. But the problem is what happens nowadays is when they start wholesaling, they just want to get better at wholesaling. And I'll explain that whole theory. People have a tendency to get more detailed into something instead of having growth. So they want to build a system. They want to build a system around it so they work less. But all of a sudden, they start building the system. And now the system eats up more money. And investing every person I know that's wealthy, they have very small back offices. They don't have these huge 20 people back office like some of these guys are trying to build. Those 40 deals that guy did, had he done them my way, instead of making $280,000, He probably only would have made, I think I calculated it, it would have been about $140,000 of it in cash. But he also would have had about $1.2 million in notes throwing off $12,000 to $14,000 a month in cash flow every month for 30 years. But he took $280,000 one time.

All right, so let's break it down for somebody that doesn't understand the detail. Just one deal. Let's say the wholesaler did 40 deals and one deal made $7,000, even $10,000 or $15,000. But give us the price tag of the purchase versus the upside of the deal, what you could have owner financed it for, all that stuff.

Well, a traditional wholesale, if they're doing it right, a $200,000 house, Assuming it needs no repairs, we're buying it for $140,000. Okay. That's your traditional, right? Now, let's say it needs some repairs. You want to go with repairs in there or out of there?

Yeah, but let's say it needs $30,000 in work.

Okay, it needs $30,000 in work. So that wholesaler should have bought that property for $110,000. Right, before their fee. Before their fee. Before their fee. If they want to make $10,000, they should have it under contract for $100,000. Okay. So we'll say that they bought that for $100,000 in this case.

Got it.

So that wholesaler will buy that for $100,000. He doesn't have the cash. That's really what scares them. What scares them is they don't know where to get the money. And they're not willing to exercise that muscle to do it. They're so afraid. And they get themselves thinking they need the crack to make money. And so now they make their $10,000. So let's go down that path a second. They make their $10,000, and then later this year, they do 10 of those deals, and they make $100,000, more money than they ever made in their life for a lot of them. But all of a sudden, now they gotta pay Uncle Sam. Uncle Sam wants his VIG, so Uncle Sam takes another 25%. They only make $75,000. But now they gotta go do it again next year, and next year, and next year, and next year. And although it might be fairly easy money working smart as opposed to hard, The way I do that deal is completely different. That deal retails for $200,000. Well, I'm going to take the $30,000. I'm going to split the money in half. And I'm going to take $15,000. $15,000 for labor, $15,000 for repairs. Well, the person I sell to with owner financing, I'm going to finance the deal. So I mean, I got to come up with $1,000. Now, do I come up with that out of my own pocket? Yes, when I have the money. But if you're in this business for very long, this business is cash intensive. You've got to figure out how to come up with the money yourself. And so that's why the note strategy works so well, because the note strategy allows you to come up with the money. I'll get there in a second. So now we turn around, we sell that house for $185,000. The $30,000 repairs cut in half, subtract the $15,000 from the $200,000 sale price. We sell it for $185,000. Now, somebody is going to give me $10,000 or $15,000 cash down. So now, let's say they give me $15,000. Well, I'm going to put my whole $15,000 back in HPMB, Hip Pocket National Bank. So now that money goes into Hip Pocket National Bank. And once that's in Hip Pocket National Bank, now I can turn around and I got $5,000 extra. There's 5,000 extra dollars there. So what am I gonna do with that money? Well, remember, I needed 100,000. So now I'm down to 95,000. I only have a $95,000 problem. Well, so the next process is when you understand finance or whatever, I'm financing this mortgage to this guy. And if everybody understands out there that when somebody goes to buy a house, the bank's on the mortgage. That's the asset that the bank's on. They made you a loan and they owe the mortgage. Well, I'm going to make somebody a loan for $170,000 in this instance. So $185,000 minus 15, I'm going to loan them $170,000. And for our sake for the moment, that $170,000 has $1,500 a month in payments. Probably a little bit less, but we're going to use that as the argument. So $1,500 a month on a $170,000 mortgage, Now there are buyers out there and people out there that need investments and they need cashflow. So you can sell all or part of that $1,500. So for the first stop, to make it simple, we'll say we're selling it all. So we sell all those payments at a certain interest rate. Maybe that interest rate is 8% to generate our $95,000. So that might be 10 years of payments. So if all of a sudden, we sell that 10 years of payments to somebody else, that leaves us with 20 years of payments on the back end. So with a smoke clear, we made 10,000 upfront plus whatever the value of that 20 years of payments on the back end is. Well, that 20 years of back is almost fully intact. That $170,000 10 years from now, will only be paid down to say $155,000. So 10 years from now, that person is going to owe me, I'm going to own that mortgage note of $155,000 free and clear. So while most of these wholesalers are giving up these deals and throwing them away because they're too scared to go figure out how to get financing, or worse, and here's the worst part, They're stuck on the crack pipe. Remember, do you remember me telling you you were stuck on the crack pipe? Oh, yeah. Do you remember that? Yeah. I said, dude, get off the crack pipe. So that crack pipe is called cash. Yep. And you get off that crack pipe and you can actually make real money. And so most wholesalers, most people starting out, they're stuck in that crack pipe and they think they're going to save all this money up and they're going to build one big pile of cash so they can go invest it. in their dreams, you know what I'm saying? But it doesn't work like that. It never works like that because what happens, they start making $10,000 a month and eventually their lifestyle rises to the same. It rises to that.

Because one of the major lessons I learned first working with you is understanding the financial calculator, right? If you don't know what that is, I assume you use the 10B2 calculator for pretty much all your investments.

Yeah, I use 10b2. It's my in a day development. You download your phone for $5.99. Okay.

So, so using your example, I just want to, I want to clarify the numbers for anybody that listens to this. You've got $185,000 sale price to your owner finance buyer, right? Yep. They're going to give you 15, roughly 15,000 down in your example, 170,000 financed at what, what interest rates so people can understand that.

Let's just do 9.99 right now, because interest rates are 7%. We're gonna charge a little bit above.

And 30-year note?

30-year note, yeah.

You're looking at, just like you said, $1,490 and change. So you're right under $1,500 for your buyer coming in, and then you now have to go get $95,000 from private money, right? Yep. So now let's back into that. How do you look at that math?

Okay, so if you put $95,000 in your calculator, and you calculate free end.

So you're using the same $14.90 payment, right?

Yep. This whole payment will go to my investor because I want them to pay it off.

So the end now turns into 91 months and change, which is basically seven and a half years.

Seven and a half years from now, I own the whole note.

So now comparing your deal, the wholesaler made 10,000 now, and they're done. They got to start from scratch next month, but you made 10,000 now, and you have a free and clear note with, let's look at how much you're owed in seven and a half years. How do we do that now? So we're going back to our 170 note, right? Yeah.

Put the 170 note in there, 9.99, 30 years. Okay. And then put the 91 months in there.

Okay.

And then hit future value.

Future value, they will still owe you, owner finance buyer will still owe you $159,802. That's just terrible. So now, now take that $159,000, put it in a future value.

Okay. It's in future value. Zero out the payment. Zero payment. And then leave the 9.99 in there, leave the 91 in there. and hit present value.

$75,000.

$75,000. So that's the intrinsic value of what I made that day. I made $10,000 plus $75,000.

I made $85,000. $85,000 from the same deal that somebody made $10,000 off. Yes. Minus Uncle Sam.

Yep. Minus Uncle Sam. And mine is taxed over 30 years and theirs is taxed today.

Amazing. Okay.

So that took me... Even my $10,000. Even my $10,000. Do you know how much of my $10,000 is taxed?

Well, let's see here. Hold on. Don't tell me. I'm guessing it's zero. I'm trying to figure out why though.

It's not zero. Okay. What is it? So you take $10,000. And you divide it by, I'm sorry. We bought the house for a hundred thousand. Is that what it was?

A hundred thousand purchase. Yep.

A hundred thousand purchase. And we sold it for 185.

Yep.

Okay. So take the, take the a hundred thousand divided by 185. Okay. What is that number?

54%.

So only 54% of that 10,000 is a taxable.

Because of your cost paces. Yep. Okay. Interesting. So, all right. So, so for whatever reason, I think I'm a slow learner, but it took me like three years to figure out. the whole model that you just said, right? It took me a while to understand it and get over that hump because a couple of things. Number one, I didn't understand anything besides right in front of me. What's the next payday at closing? Wholesale, wholesale, wholesale. Two, you already talked about it. I think you learned early on that finding a private money lender for the deal was critical. So that was a skill set that I didn't really start developing until way too late, probably several years into the journey. How did you learn it so early that you needed to find private money? Was it from forums? Was it from other people that had been before you? What was the path to learn that?

So when I started, I had to line up all three things. I had to line up the money, I had to line up the buyer, and I had to line up the seller all at the same closing.

Okay.

So you were doing... No, in other words, I was doing simultaneous calls at all three parties. Okay. So in other words, I was paying cash to the property, I was paying cash to the property and I had to line up a buyer of my note to table fund it when that deal closed. And so the seller could get their money from the sale of my note or part of my note. And I had to line up a buyer, I had to market and find the buyer so that I had somebody that had agreed to pay for that thing at that time.

Yep. So now I'm just looking at the surface level of that. I'm just thinking back to that deal. Wholesalers sold it for, let's say they got a contract for a hundred, sold it for 110, right? Yeah. You got a contract for a hundred and sold it for 185. You sold, yeah, you sold it for 75,000 more than they did.

Yep. Because, because my uncle told me, be the whole cog, go retail, go retail and everything. He told me stop wholesaling. So now I'm the whole cog. I'm all of it.

I do it all. You're going directly to the source, finding the deal, and then selling it to the end user.

Yes. And sometimes, now sometimes in your deals, your deal isn't a retail deal. Sometimes I sell to rehabbers. Sometimes I sell to landlords. But I know that going in. So the thing is, is that I negotiate my deals so well when I'm buying, And I say negotiate, because it makes me sound like some badass negotiator. I'm not. I'm not. I have a few little techniques that I use to get good deals, but the truth is I focus, focus, focus on motivated sellers. So I find sellers that have problems. They have real problems that need to be solved. And I solve those problems for them. And so that's what you get paid. You get paid for solving big problems.

So that led you to go ahead.

Yeah. So that, that, that solves these problems. And, um, and once I solve these problems, so, you know, like, like when somebody comes to me to sell their house, you know, they got a $200,000 house, you know, they know, um, $60,000 on it and they, they're trying to sell their house. and you dig deep, sometimes you find out they don't need to really sell their house. They're in a position where they have to sell their house. Maybe their kid got in trouble or, you know, he got in trouble with the law and they need $65,000 from their house. You know what I'm saying? Well, they're gonna sell their house anyway, but if you can get them $65,000, now that solves their problem. even though that might not be the final purchase price. You know what I'm saying?

Yeah. So you taught me, you taught me something that I think is related to this, which is you don't make offers, right? You say that all the time. I don't make offers. Can you explain to people what, when you say that, what do you mean? Because so many people hear, I hear it all the time. Oh, the number one thing in this business is make offers, make offers, make offers. When in fact, I think one of the best ways to find deals is what, is what you're saying is don't make an offer. Listen to the seller, right?

Yeah, so there's two sides of investing in business. There's two sides of it. So there's the one side of it that when we were taught, we were taught. So now these millennials, they got real smart here in the last few years. They got real, real smart. They got so smart that they outsmarted themselves. And what I mean by that is that we were taught the business from the side that you made offers to banks. But to banks, you made offers. And you made offers to banks because banks were emotionalists. Banks don't care. And so when you made an offer to a bank, that was OK. Eventually, the bank takes your offer. They don't. But to homeowners, you never made offers because homeowners have a problem. and you're there to solve that problem. But then these wholesalers markets started going crazy and the wholesaler business, you know, somebody posted something the other day and it reminded me of one of my axioms, you know, up until 2011, I never paid more than $5,000 for 50,000 equity. It's 10x my money. Meanwhile, these kids nowadays think they want to, they want to pay, you know, 95x on the money, you know what I'm saying, or 85x of the money. And I didn't do that. I didn't do that. So that was a bit of a thing. It was a bit of a problem. So that was the, you had to set these things up to where, I mean, you want to be solving problems. You're not doing anything but solving problems. So they're in two seconds here. I don't want to mess up the call, but they're going to unload my car here. Is there a way to pause?

Yeah, we can pause it. I can just hit stop recording. Give me one second.

Will that mess it up?

No, it's fine. You got to run in a minute anyway, right?

No, no, no. I got another hour and a half back.

Oh, I don't know. I don't think anyone's going to care if they unload it. Do you need to get out and get off though?

I need to do it. I mean, it literally will take two minutes.

Yeah, you're good. I can pause it. Just tell me when to pause it.

Believe it or not, this is for the mastermind. No, nice. Okay. I'm bringing, I'm bringing coolers to, uh, uh, to my mom and Willie, they're driving into the mastermind. So I'm bringing the two big coolers that we, you know, those two big coolers we always have every year full of beer and sodas and water. Yeah. I'm bringing those, those coolers to them. And then, um, uh, my mom has a t-shirt business. I'm bringing eight for her. And so she's going to do our t-shirt. So give me two minutes.

Yeah. Perfect segue. All right. We'll talk a little bit.

All right.

All right. I think we're live again. Uh, okay. That's a, that's a perfect segue every year for how many years straight you've hosted a Tennessee mastermind.

So, uh, I have done, so I've been doing mastermind since like 2000. I started this mastermind in the, cause there's two a year, but the main one's in summer. I actually started this mastermind in December. of 2010. And then I did one that first summer. So every year I do two masterminds. It's not a non-profit, but they're not for profit. I do my best to try to break even and not lose my ass. I always thought it was crazy when these gurus out there would I charge $20,000 a year for you to belong to a mastermind. Yeah. And I just get a whole bunch of good people together. And well, you know how it is. We party and talk real estate for 4 days. Yeah.

And for anybody that's not been to it, it's a totally different feel. Like you're saying, people actually openly help each other with their business. Yes. No one's there to make a whole bunch of money off of other people that are there. It's a really different feel.

Well, I think even the more important, like the more important part from what I've heard, because I've not attended a lot of the 20,000 large masterminds, but the people that have been to them and then come to mind is that when you go to those, it's a lot of people flexing their egos, flexing their muscle about, Oh, I did 78 deals last month. And, you know, and they're flexing their muscle. Right. And about, about, you know, this and that, you know, and how many zeros and all this kind of stuff. And it's funny because, you know, at my mastermind, there's a lot of, you know, people that are there, I guess they're all walks of life. Usually it's, it's nowadays, it's about a third, a third and a third. It's about a, about a third newbies, about a third people in the middle, somewhere between, you know, their, their first few hundred thousand to maybe a, you know, a little over a million to people that are multimillionaires, you know what I'm saying? Um, it's, it's, I'd say it's about a third, third to third. And so the, the, the power there and it rises because like you said nobody's afraid to share so we're all there to help each other you know we're not there to take there's no sales involved nobody's selling anything so we're there to you know just to It becomes more like a famer union. You know that, you know? Absolutely.

Yeah. Yeah. It's a pretty amazing thing. It's, uh, you know, you think, you think for a while, I went, when are they going to get me? Right. And then you realize, no, everyone literally is just helping each other. It's a pretty, uh, a pretty special feeling, which is, I think very rare. Uh, cause there's a lot, I mean, there's a lot of people in the investing space that just want to get your money. And, um, I mean, you know, it is a lot better than I do. Cause you've been around longer. Yeah.

Oh, yeah. Yeah. It was a buddy of mine coined the term, his name's Jack Sternberg, and he coined the term, it's the trickle and fast business, you know, and the kids nowadays coming up, they have a different thing that they have to learn. It's, you know, they don't know what information is good information. They don't know. So, you know, they learn from a guy like right now, I'm watching all these guys talking about these uh you know these the airbnb thing where they where they they do the long-term rental yep and um and airbnb back out so they they have no assets or no nothing or whatever and and they're going to get their head taken off number one they don't have any assets so that sounds great and fine and dandy but when it's all said and done if you want to be wealthy you have to have some assets you're talking about when people are doing arbitrage they're renting and then and then yeah

Airbnbing it out.

Yes. Got it. Yeah. They're doing the rent arbitrage. And so, so that sounds all great and dandy, but then also, you know, like I tell people there, you know, you gotta be careful because at some point, you know, well, when the, when the hotel industry has enough of it, they'll start shutting down. Like for in Dallas, in Dallas, for instance, um, they, um, uh, started making laws where for every bedroom that you're renting out, you have to have a parking space.

Yeah.

Boom. That shut it down in a hurry. You know what I'm saying? And so they'll do things to do that stuff. But when it dries up or when it gets oversaturated, as the market goes down and there's plenty of hotel space and people aren't traveling as much, that stuff's going to be the first thing to go.

Yeah. I got a topic I wanted to dive in with. You got a couple more minutes and then we'll wrap it up.

Whatever time you go.

Okay. So you're a habitual commenter. You'll put your real thoughts on a Facebook post and comment to people and some people get pissed off if they don't know you yet. But one of the things you talk about a lot is the differences between being a landlord and building an owner finance business. And I think that people get so enamored by what they're told and the advertisements and books and YouTube ads and stuff like that about building a rental business. And then you'll come in and say, Yeah, that's a great way to go broke real quick because it's so cash intensive. You got so many things. And I guess the point of my question is, a lot of people that are in the rental business can stomach it if they have a full-time job that pays them. But if you're doing this full-time as an investor, talk a little bit about how quickly landlording can take you down and how it's different than owner finance.

So landlord consent, let's be more specific. Landlording in the single family house business. Not only separate that from the apartment complexes or mobile home parks or something like that. Now I take it back. Separate it from renting land in mobile home parks. Renting mobile homes in mobile home parks is just a dumb idea. But renting the lots, wonderful idea. But in a single-family house business, so the way I was taught the business is that, or the way the business is taught now, let me go there. The way the business is taught now is that step one, you wholesale. Step two, you rehab. And then step three, you get enough cash together to buy some rentals and you start holding rentals. And anybody on that plan, anybody that's on that plan, that's a minimum of a 12 to 15 year plan and probably more like a 15 to 20 year plan before you have any kind of success and any kind of hope for passive income.

Because- How do you break that down?

So years ago, well, think about it. Okay, so you know about the penny double, right? You know the penny doubled and... Tell the story just so people can, if they haven't heard it. Okay. Okay, so if, you know, which one would you rather take? Would you rather me give you $2 million or would you rather have a penny that I double every day for 30 days? And most people nowadays know the answer to that. They'd rather have the penny. Well, the penny doubled every day for 30 days is like $5.3 million. So really all we're supposed to do by building wealth, that's why simple people build wealth faster sometimes, because they just learn how to double their money. They try to keep it safe and double it, try to keep it safe and double it. That's why you only got to make a million dollars once. If you make your million dollars and then you learn how to get the money out and then double it, you just couldn't constantly grow it. Whereas like a lot of people concentrate on building a bigger and bigger and bigger and bigger business, which means scaling and more expenses. And there's a few people that will hit it out of the park and do that, but they're few and far between. Most people gotta keep it simple. So we go back to the penny double. Now, if you double that same penny every day, but you tax it 20%, just 20%, if you tax it 20%, then what happens Which would you rather have, the $2 million or the penny doubled and taxed 20%? Which one do you think?

Probably the $2 million.

Okay. But you'd be wrong. Okay. And you'd be wrong about $1.9 million and $50,000. Okay. I'm sorry. $1.950,000. Okay. Because that penny double and tax 20% leaves you with approximately $53,000 at the end of the month. That's our taxation system. That's our tax system.

Good old government.

Our tax system, yes, our tax system taxes us so hard that you're running in quicksand.

Yep.

So when you go out there and you flip, flip, flip, and you get, you get, do it, then you, then you rehab, rehab, rehab, rehab. You're just, your, your partner, Uncle Sam is kicking your ass. Right. And you're running in quicksand. Right. So let's look at that. Let's look at that first example. Let's go back to that first example we just had with the $185,000. Let's take that same example and do it for a rehabber. The guy that wants to rehab property and flip it. So we take those same numbers and we do a rehabber. So the wholesaler made 10,000. Okay, the rehabber, he rehabs, he puts the 30,000 in it. So now he's in this property $140,000 cash. He sells it for the full $200,000. By the time that he sells it for $200,000, he's going to have on average about eight and a half cents on the dollar in all the other expenses, the realtors, the appraisers, the surveyors, the title company. It's all average $8,500. All right. So now that's $17,000. So out of his $200,000, he's lost $17,000 down to $183,000. He's down to $183,000 minus $140,000. He makes $43,000 cash. He makes $43,000 cash. And out of that $43,000 cash, he's taxed. Now he's taxed another $10,000. He made $33,000 on that deal. Even if he's not, even if he made $35,000, the average rehab takes most people about four and a half months minimum, and that's when they're good at it.

They're making less than $10,000 a month, basically.

It's horrible. It's a horrible return on your time. So my average deal from start to finish, I have four to seven hours in it. And that's if I'm doing the deal myself. Nowadays, I don't even.

Yeah, four to seven hours, you made $85,000 versus four to seven months where they're making $30,000. That's $85,000 based on time value money. If I brought in the $95,000 the way I do,

The way I do now, where $25,000, I'd be receiving $1,500, and I pay $1,000, because I borrow my money at a lower rate. I borrow the money. Hear that? Borrow the money. I don't sell off my payments. And in that situation, I made $10,000 upfront, $500 a month, and then I get paid off an average of about seven years. And I pick up another payday of $75,000. So seven years, uh, 12, what's that? 84 times, uh, no, sorry. Seven times six, that's $42,000. So on that one deal, I'd make 42,000 plus 75,000 plus 10,000. That's about $130,000. I'm making that one deal. Yep. Now let's contrast that with the rental property. Okay. So same deal, right? Same deal. You bought that as a rental property and you paid your $100,000 for it. Now, you're probably not going to rehab it to the point of, as you would as a rehab, putting $30,000 in it, but you're certainly going to have to put at least half, at least $15,000 in it. Okay. Fair enough. So now you're in that property, $125,000 or $200,000. Okay. It's going to rent for probably what? Maybe $2,000 a month. Okay. and insurance are going to eat up a chunk of it. But you got on a single family house, you can count on about 40% somewhere there in expenses. So 40% of that $2,000 a month is expenses.

That's $800.

That leaves you $1,200. But you got debt service. Yep. So let's say somebody has an argument. Let's say somebody has an argument with me and they think they can win it. They say that they can do 30% expenses. Okay, fine, $600. So you do $600, it's gone, but now you have debt service on the other 125. And so, man, there's not an awful lot of money left. There might be two, $300 a month left there. You know what I'm saying? It's a, it's, it's a long, long-term game.

So let's, let's look at the numbers. Exactly. So, so 30% debt, uh, 30% maintenance and, you know, taxes, insurance, maintenance, vacancy, all that stuff. You're you're 600 gone from your 2000, right? You're left with 1400 for your debt service, right? Yep. So let, so let's say you've got a loan for 125,000 at what percent? Seven?

Well, if you're going to do this long-term, you're probably not going to go to the banks.

Okay.

You know, so you're probably going to be borrowing at, let's say 9% at the, you know, for your private money.

Okay.

9% 30 years. So what's that? Yeah. 1,005 and you're only keeping 1,400. So you get 390, 395 left over basically.

Yep.

All right. So now what happens in the, in the real world, that 395 a month doesn't actually go in your pocket, does it? What happens?

No, because after that, because when it's all said and done, you know, an air conditioner goes out and screws up two years, your cashflow.

Yep.

You know, something major happens. You get a lawsuit, something happens and you lose all the cashflow. And so it's like, you know, like I have a buddy of mine, actually a private money guy that I borrowed money from. And he takes 50% of every one of his real income deals and sets it aside 50%. So he's getting 2000 a month. He takes a thousand a month, sets it aside. The other 1,000 a month, that's what he lives to eat on. So in other words, unless you have a job that's paying your bills, the rental game is not gonna anywhere because you have to take all that money and smash the debt service. So you can get those suckers free and clear or almost free and clear so that you have some income. So it's a long man's game. And so now you can argue, well, you get appreciation, that's fine. Normal appreciation is 5%. It's not this COVID thing where it goes up. See, everything will reset and it'll get back down to that 5%. It always does. My buddy, he was, we're converting all of his houses to owner financing right now. He's 75 years old, we're converting all his houses to owner financing. And he was talking about, oh man, that's amazing, because we just sold one of his houses, he bought it for $40,000. But he bought it for $40,000 25 years ago.

Okay.

Just sold it for 200. Put that in your financial calculator. All right. What is 40,000 to 200 over 25 years?

So what am I putting in? 40,000 into where?

Present value. Okay. 20 years, do 20 years, just do 20. 240 months. 240 months. Okay. Yep. And do 200,000. Future value? Uh, yeah. $200,000 future value, zero in payment.

And now I'm looking at yield?

Yep.

The yield. Uh, hold on. I got to put $40,000 negative. Is the FV negative also?

No. FV is positive.

All right. So $40,000 negative into PV, right? Yep. Uh, $240,000 in N. And then future value is what?

200,000.

Positive?

Yep. Zero payment.

Zero payment. Something's wrong. Cause it's only coming up at 8.07.

It's coming up at eight.

Yeah. That's not, yeah.

No, it was actually, it was actually 25 years. So 8%, that's good. That's not bad, right?

I see. Okay. 8% over 20 years. So 25 years, how much is that? Uh, 300 months?

It was 25 years, but yes, it was, yes.

So yeah, 6.5%.

That's what it actually was. 6.5%. Okay. That was just, that was what it did. And now he's 6.5%.

Okay.

And, and that, that counts all those COVID years, you know what I'm saying? Yes. Where they shot up. Yep. So, you know, But, but so he made six and a half percent return on his money.

Gotcha. Okay. So that's a, yeah, that's a long-term view of how much he's making on that one property.

Yeah. Yeah. He did really well on that one. That was one of them he did well on.

Yep.

But that's not the norm. The norm is about, right about five. I was, I was talking to a whole, whole bunch of landlords back in 2003 and I was explaining to them why I started selling all my house to donor, going back to donor financing. Cause I actually had, had a bunch of rentals at one point. And I went back to owner financing and, um, and they all followed me out of the room. I was in a, at a foreclosure summit conference and they all followed me out of the room to ask me what I did and how to solve their problem. These guys had two, three, 400 rentals.

Okay.

And they all wanted out. What year was it? Rentals in the single?

2003. Okay. And so all these guys with hundreds of rentals were getting burned out.

They were burned down. It doesn't scale. It doesn't scale because you have to, if you hire a management company, then you lose more money. You have to manage them yourselves. So the truth is, is that it doesn't work. So the only way to make money in the single family rental business is what you have to do is four red houses, I'm sorry, four green houses trade up to a hotel. That's how you make money in it. You buy, so you would have bought in 2012. And in 2019, nobody knew it go further. You know what I'm saying? But in 2019, you would have sold, you would have 1031, and you would took all the money and traded it up into some commercial. And that's how you win the game with single family rentals if you're going to do it. But you're going to have to have a job and take anything out of the business. You know what I'm saying? You can't take anything out of that investment business. It's just not an easy game. Whereas what I do, the owner financing, in my opinion, it's the easiest game there is. It will specialize knowledge and anybody can start anywhere. You can start on mobile homes. Hell, the other day, I was at a real estate event, a Brad's real estate event, and afterwards, we all went to a karaoke bar. I didn't take me up on it. This is an interesting thing. He was up there singing karaoke and his wife grabbed me and started dancing with me. We started talking for a little bit after and, you know, I'm buying shots for everybody. We're having a good time. And you know me, I can throw a party if I can. And so I'm buying shots for everybody in the whole damn karaoke bar. And I started talking to him about their business and he has an appliance repair business. And I gave him my phone number. I said, if you call me, I'll tell you how to get retired in that appliance repair business. I'll tell you how that business can get you retired in three years. I said, because I would have showed him how to finance those appliances to the people on short-term notes. So he would have been fixing them. He buys these appliances for probably 50 bucks and he fixes them for probably another 25 bucks. So he's doing for 75, he probably sells them for 200. But imagine this, imagine now, he instead he sells them a little mark for 295, if you put 20% down. So now they put 60 bucks down, he's only in the damn thing $15. And he finances the balance at 50 bucks a month, his first payment, he's cash positive. And that he has a little payment stream for, you know, a year or two. But he never did call me.

Maybe he will. Maybe he will.

I would have showed him how to do it. Yeah. No, I love it. Who knows? But that's what I want to teach people. There's a book I've had in my head for now going on 15 years called Creating Wealth Without a Job. And I want to teach people not just real estate, but how to create wealth, period, that you need to create debt. Debt owed to you, that equals wealth. Exactly. That's what the banks do. You have your choice. You can be a bank or a casino and you and I probably aren't going to own a casino. Right. So we got to be the bank.

All right. So, so that two, two sort of final questions and then, and then we can definitely wrap it up. Cause I know you've been, uh, kind of so much time. Why do you think it is that so few people actually get into this? It feels like the under underground. Everyone gets into flipping or renting or wholesaling. Why is it that so few people understand what the banks understand, which is create the note and owner financing is even better because you buy at a discount and then create the note. Why is it so undercover?

I think because most people come in the front door. All my life, everything I've learned, You know, because, I mean, I went to college for two semesters, or not two, actually a semester and a half. I didn't finish, you know, and I studied girls. So, you know, I didn't, everything I've ever learned, I've learned from street smarts, from figuring out the angles, figuring out from the backside, you know, not going in the front door. I don't know why that is, it's just the way I learned. And I think that conventional, that most people are just taught the conventional ways and they learn the conventional things. They're scared of anything that's unconventional. And mortgage notes and creating notes seems unconventional. I mean, I didn't know you could own a note before I read those pages in that book. I didn't know it. I wasn't aware. I thought you had to have some kind of special licenses or be a bank. I didn't know that normal people own mortgage notes, but there's hundreds of thousands of mortgage notes, subprime or not a subprime, we're not subprime, secondary market created a year. They're everywhere. And there'll be more as the market goes down. Because as the market goes down, there'll be more and more of them. And so that's kind of the thing.

I love it. And then I guess anybody, so obviously everyone that may listen to this is going to be at a different stage. Some people are just starting their journey. Some are building, some are sort of getting into a place where they're trying to go reinvest their money and have the ability to lend. What, specifically for the people that have not gotten into this owner financing game that want to get into it, what is the best way for someone to actually do it? Because so many people want to do it, but very few actually do it. What do you think is, from those that you've seen that have gotten to the, you know, gotten actually into the game and doing it, what would you tell people like that, that want to get into it and have the true commitment to stick with it?

So here's the three things I look for, for me, in an apprentice. So this is what I would tell people they need. Okay? All right. because it's the same thing that I need in somebody that's going to ever work with me. I would tell people that they need a burning desire above all else to have freedom. They have to have a burning desire to have freedom. If they don't have a burning desire to have freedom, they're not going to make it. Doesn't matter. They have to have the ability to be teachable, to be coachable, to have an open mind. Okay. Um, so, you know, because a lot of people say they're teachable and they think they're coachable, but I lost you. Hold on. Sorry, it was a phone call. They get going and they, I can't explain it. they're set in a certain mindset. Maybe they've learned from somewhere else or whatever, and they're not willing to commit to whatever it is because they don't believe it's real. Then the third thing, they have to believe and be open enough to believe that they can have more, they deserve more. There's a certain amount of I guess skepticism with what we do in creating wealth, you know what I'm saying?

Yes.

And, you know, so they, they, they have to do that. And they, so maybe it's a little bit more than that. So they have to, that self-driven comes from the, from the burning desire, you know what I'm saying?

Yeah. So basically like people, for example, someone that may not feel like they deserve to have millions in wealth, it's just, Oh no, I was, I'm just a, I'm just a nobody. I'm only supposed to make X amount of dollars a year. This can't be for me. That kind of thing.

Yes. Yeah. So, so it's like, and you don't even have to walk millions. They just have to want a different life. Yeah. All right.

Well, I, I appreciate, I know it's a, it's, it's a bit of time on the interview, so I appreciate you diving into all different directions. But if, uh, I know one thing that, uh, we talked about is if, if anybody wants to find you, you've got a website, right? DavidAlexander.com.

Yeah. Yeah. Yeah. I mean, they can go to DavidAugustine.com and find me. They can find me on Facebook. Okay. Um, you know, I, I welcome all newcomers, all people. Um, you know, I, I don't, I guess that, oh, that was, that was the other thing. They had to set aside their ego, which is a big thing for me. You know, it's like, um, you have to set aside their ego. They have to set aside their ego, um, and realize that they don't, they don't know it all. And those are, those are probably the three things. Because if they can't set aside their ego, if they can't be teachable, and they don't have a burning desire, I can't help them. So I would say that the one thing that you have to want is to seek out a mentor. And a mentor can save you a lot of trouble if you're willing to seek them out. You're mentoring people right now on different things. But if you seek out a mentor, and they can shorten that learning curve for them. But you have to follow what that mentor says. And almost, I don't want to say blindly, because you have to have some kind of discernment to know that there will be, but you have to make sure that once you know that that they're that they're not bullshitters, that they're for real. And sometimes it's hard to tell because there's a lot of bullshitters are good. Oh, yeah. But once you know, once you know, Then you almost have to follow and listen to what they say verbatim, at least for your first deal or two or three.

Just trust the path, right?

Just trust the path because that, you know, I'm sorry that I'm drawing this out longer, but I'll give you an example. No, it's good. The thing that you'll know about and that I can tell you about that you could probably agree with is my selling system. You know, I have a system for selling and People will call me up and say, man, the house is not selling. And I'll say, well, are you using my selling system? And, you know, for owner financing, and they're like, well, kind of. What do you mean kind of? Well, we put simply put, you know, I recommend 40, 40 bandit signs out and then we put five out, we put 10 out. Okay. And how's that work for you? Well, not too good. Okay. And then what do you do? Well, we're answering the calls. OK, well, that's not what I tell you to do. You know, what I'm saying is that they don't listen to it and do they don't know the pain it took me to get to that selling system. Correct. Yes. No, the thousands, hundreds of thousands of dollars I lost trying to get to that selling system and the pain and the time it took to figure it out. And but they want to be successful. But what happens with entrepreneurs is they believe that they're smarter than you are. Yeah, I get it all the time. You know, I get it all the time. I'll be teaching somebody and at first they don't want to split a deal with me because it's a high cost. You know what I'm saying? And that's a high heavy cost. You know, I'm just going to do it myself. OK, go do it yourself. I don't care. I want you to be successful. But somewhere down the line, they figure out, oh, my God, I need to go back to David and get him to fix some of this stuff, because What happens is, is they, they don't know what they don't know.

Right.

And, and, and until you're taught and you're taught good fundamentals, um, you, you, you, you got no way to know. So if somebody wants to get in the owner financing business, here's what I would, I would recommend.

Okay.

I would recommend they pick up a book. This is the book I started with and it's, but, but he's good at fundamentals. It's by Wade Cook. It's called, um, the real estate money machine.

Okay.

And I recommend they pick up that book and try to understand and grasp that book. Um, I recommend that they of course get invest in debt, uh, garyjohnston.com. And then I recommend that they study marketing these three books. Um, the one, I think it's the one page marketing plan. Okay. Um, the other one is, um, uh, how to get everything you want out of all you got by jay abraham and that's probably not the right title but it's close enough they can find it and strategy dad how to get everything you want out of all you got okay by jay abraham by jay abraham and strategy daddy which i don't know who the author is those are three marketing books and and the reason why is because most people don't understand the difference between marketing and the difference between advertising what was the third one strategy what Strategy daddy. Okay. I don't know the author. I can't look it up. And, um, and, um, study marketing because that's where it all starts. But you have to become a world-class marketer before you can become good at this business, because this business is Bass Ackwards. To do what we do is a Bass Ackwards business. It's not a mainstream business. We can't go to a distributor and buy five stakes or five houses at uneven prices. But because we buy them at uneven prices, that's why we make money. You make money in either chaos or a vacuum. You and I in this business are able to do both. We're able to buy in chaos, which is an extreme uneven market, and there's chaos coming here over the next year or two, I would suspect. And we're able to sell in a vacuum.

Meaning there's nobody else. You're saying we're the only player that's got an owner finance house. That's when you say vacuum. Okay. Yep. Yep. Buying chaos, selling vacuum.

Yeah. So the things that are selling in vacuum is normally like you go to a concert and they sell you a beer for $12 because they're selling in a vacuum.

Yep.

Yeah, exactly. They gotta make their money. Yeah, they gotta make their money in two hours in that concert. And actually usually they only sell beer for about an hour and a half because they want you sober before you leave, you know? Yeah, yeah.

You can't get beer after the seventh inning. Yeah, I got you.

Yeah, yeah. So they turn around and they sell it for 12 bucks. So, you know, they're selling it back in gasoline. Although it's not a perfect vacuum, it's still somewhat of a vacuum.

Yeah. You got to go to the gas station.

You got to go there.

Yeah. You're already at, yeah. You're only at this point in the road and you have to stop.

Yeah. So, so all these things, you make money either in chaos or you make it a vacuum. And we happen to have a business where we get to do both. Um, and so when you can control both those things and make money that way, you can build a lot of wealth fairly quickly.

What, what other businesses are like that? Is there any, is there anything else that you can do?

Well, most any business, you can do that.

Okay.

If you know what you're doing, you know, I mean, like, like I just told you with the appliance guy.

Yeah. He's the chaos. They've got a broken fridge, right?

Yep. And they, they, they want to get rid of it. So he picks it up for free. He puts the parts back into it. He's in it for 50 bucks and he's going to sell it for 250. And if he finds it, he'd sell it for 295. I mean, he can literally get rich $30 a month and finance that out. And I don't know, let's just do the calculator yield on that real quick. He sells it for 295. He's in it for $75. Let's make it a break even number. He's in it for 60 bucks in parts. He gets $60 down. He finances $240. at 15 or 18%, he can probably do 18% as a consumer loan. So he does 17.99 or whatever, 18%. He does that over 12 months. What does that look like?

Hold on.

He does it over 12 months? Yep. $240 is $22 a month. $22 a month. It makes $22 a month. So, you know, he does okay.

And hold on, he only paid how much?

Well, he probably got it for free. He probably fixed it for 50, 60 bucks. He got 60 bucks down. He has nothing in it. And now he finances the sale for $22 a month.

So he created $22 a month for a year out of thin air?

Out of thin air.

Yeah. I like it. You can do it then. I mean, I like the house business better, obviously, but yeah.

yeah yeah but but he has a ready supply he could probably do you know he could do volume he could do a hundred of those a month

Yeah. I, I used to do lead generation was my previous business and, and appliance repair was one of the lead and they had tons of phone calls. It's just crazy. Yeah. Yeah. You convert each one of those in and you do it the right way. That's beautiful.

Uh, yeah. Yeah. You know, you can do it, you can do it in the martial arts business. You can do it in the business service building, the service business. You can sell them, uh, their, their black belt training programs to finance.

Well, you've got all these companies now that are offering the financing to these HVAC contractors and roofers and all home repairs. And you can, I mean, it's, it's a, clearly it's a business model that makes money. So.

Yeah. I have a cousin, I have a cousin. He's in the foundation business up in Oklahoma. I told him he should be, he should be selling his foundations for 15, 20% more in finance from in-house. Cause he's in them for very cheap, you know? And so. Well, there's all these things that people could do. They just don't know. They're never taught. But the trick is, is you got to create debt.

Yeah.

You know? And so, um... Alright. And who knows? You might be able to sell your refrigerator for even more. You might be able to sell it for $400.

Exactly. Yeah.

If you're willing to finance it. You know what I'm saying? Maybe you got to put a code of payment or something. I don't know. Exactly. Yeah. But you're... Because you're willing to finance it, it's a different thing. You know? Yeah.

Yeah. Yeah. Well, the rental, yeah. Furniture rental. You got a rental center and all those.

Yeah. I mean, they marked those TVs up, what, three and a half times. You go buy a big screen TV that's $500. By the time you pay them, you're paying three and a half, four times for that TV.

Look at what Warren Buffett did with Clayton Holmes and Mortgage Company and all that.

Oh, it's even better. So I was thinking about this the other day. So Warren Buffett creates his own vacuum. And what I mean by that, Warren Buffett is one of his biggest companies, he owns insurance. He owns insurance company. So all these companies, the reason why he bought them is because he sells them insurance.

They rely on each other.

Yeah, I take over mortgages on 21st century or 21st mortgage mobile homes all the time. And they make you pay the tax insurance, but you better believe that insurance is probably with Berkshire Hathaway.

You know what I'm saying? Right. No other insurance companies want to take it, but he does.

Yeah. Yep. But he does.

Yep. Yep. Yep. No, it's a beautiful thing. All right. Well, we could go on. I mean, we could go on all night long, but I, yeah. So if somebody wants to reach you, go to davidalexander.com. You got some contact info on there, I think.

Yeah. Reach out to me on Facebook either way. Yeah. Okay.

Facebook. And then obviously, yeah, get into the game. And, uh, I really appreciate you teaching. I mean, you've taught me basically everything I know about owner financing and, and help me build everything I've got right now. So thank you for everything as always. And, uh, I'll see you in a few days.

All right, man.

Drive safe. All right. We'll talk soon.

Thanks so much for tuning into this episode of The Deal Pen. We sure do appreciate it. If you haven't done so already, make sure you're subscribed to the show wherever you consume podcasts. This way we'll get updates as new episodes become available. If you feel so inclined, please leave us a review. And remember, there's always more deals to be had in The Deal Pen. Until next time, friends.