Private Money Lending
The Real Estate Cowboys, John Larson and Johnny Collins, talk passive income real estate investing.
Heard locally every Sunday morning at 8 a.m. in Dallas-Fort Worth on NewsRadio 1080 KRLD, the Cowboys invited private money lending expert Bryan Grantham to explain how “being the bank” can bring in passive income.
Host Amanda Guerra keeps the #CowboyCoffee hot while John and Johnny talk how to #BeACowboy and earn passive income in real estate.
1) Everything You Need to Know About Private Money Lending
2) John interviews Bryan Grantham; commercial broker
3) Examples of Private Money Lending
4) Questions from Listeners and Words of Motivation
About Bryan Grantham
Bryan has over ten years of experience in real estate lending and financial services industry. As a principal of Mojave Capital, Bryan is responsible for loan origination and managing the portfolio. He administers every aspect of the lending process from the time the proceeds are dispersed until the loans are paid off. Bryan’s duties include compliance, credit monitoring, and portfolio reporting. He additionally ensures Mojave is compliant with all licenses, certifications and state oversight. Investor relations are also a crucial part of Bryan’s responsibilities. Bryan’s primary focus has been on educating and interacting with investors. Bryan is also a sought-after expert in self-directed retirement accounts and has spent extensive time speaking both publicly to large groups and privately, one on one, educating investors on the benefits of pairing self-directed retirement accounts and real estate investing.
Everything You Need to Know About Private Money Lending
Spokesperson: The following is a paid commercial program, paid for by American Real Estate Investments LLC, and does not reflect the opinions or advice of KRLD or Intercom Media Corporation.
Spokesperson: Are you wanting to invest in real estate? Get your cowboy hat on and let’s talk passive income investing in the real estate market in North Texas. Here’s your experts, John Larson and Johnny Collins, and your host, Amanda Guerra.
Amanda Guerra: Hi. Good morning. A very good Sunday morning to you. Hope you’re having a good day so far. Welcome to the Real Estate Cowboy Radio Show. I’m Amanda Guerra, along with John Larson and Johnny Collins, and our goal of this show is to teach you, of course, everything you need to know about real estate investing. What is your return on life? That is our theme here. The topic this week, we’re going to be talking about private money lending, specifically lending with personal funds or inside your retirement account, and John, this kind of bounces on what we did last week with self-directed IRAs and different things like that. This private money lending’s really a great option.
John Larson: Yeah, it really is. It’s like I said, it’s probably the most passive option that we have for our investors. With private money lending, our team’s never going to call you and say, hey, your investor, your roof needs to be replaced or your air conditioning unit went out. Send us a check for $4,000. Private money lending is just a much, much more passive model. Essentially you’re just being the bank, and if we all know in any deal who really has the least amount of risk in any deal, it’s usually the bank. A lot of our investors like to go that private money lending route, even if they are single family home investors, they still like to diversify in that private money lending option. And just kind of piggybacking off of what we spoke with Ben Williams last week, who’s our Real Estate Cowboy self-directed IRA and 401k expert, he brought up private lending, as well, and a lot of his investors that end up self-directing their retirement account like to go that hard money, private money lending route.
Johnny Collins: Yeah, and I think it’s also very important to mention that just because it’s private money doesn’t mean that it doesn’t fall under some type of oversight. From my perspective, from a title perspective, we treat private money like public money. We treat all the money the same in terms of making sure that everybody has their I’s dotted and their T’s crossed. I think people need to know that. A lot of times, there are certain people that reference back to the ’80s where everything kind of went to hell in a handbasket, and even in the mid-2000s with a lot of creative financing … I have the air quotes up right now … and that’s not necessarily the case here. This is very specific, very controlled, and very organized in terms of the way that you all set it up.
John Larson: Yeah, exactly. And so yeah, elaborate a little bit more on your role in the process. We’ve done a lot of single-family residential land developments in Texas. Houston is where we’re really focused on.
Johnny Collins: Probably individually you guys have probably done thousands with us by now.
John Larson: Yeah.
Johnny Collins: Would that be fair?
John Larson: Yeah, exactly. Yeah. You guys, you open escrow for us. That’s where money starts to be placed until we get to the closing table, because obviously when you’re raising millions of dollars for a project, you don’t get that million dollars in day one. Sometimes it takes us 60 or 90 days to get that money fully raised for an opportunity that we’re presenting to the public. You, as Community National Title, elaborate a little bit more on what that role is.
Johnny Collins: Yeah, yeah. Without getting into great detail, just kind of give you a very high-level explanation. Obviously, when we start to collect money and we open up an escrow account for a client, that’s exactly what we do. We are making sure that the money is secure, and we are making sure that along with that money, there are some instructions that have been agreed upon by the parties that are involved. What normally happens is a person like John’ll come along and say hey, I have a deal here. I also have Bob, just as an example, who’s going to provide the money. So John and Bob have basically agreed to a written contract. That written contract calls for you to put so much money into escrow. We’ll receive that money, open up an escrow account. We will secure it with a net escrow account, and from there we will follow the instructions of the contract. If the contract says that over the next every five days you will release so much money from Bob to John so that he can go out and purchase more property along the way, we’re going to do that. Depending on what type of deal it is, and you guys have done obviously a multitude of different kinds, it may be a residential development where you’re buying it. You’re traunching the money and buying the land in pieces. It may take you a year to acquire all of the land, so that money will sit in escrow and be used as needed, and we will only release the money according to what the contract tells us to do. Does that make sense?
John Larson: Yeah, it does.
Johnny Collins: Sometimes people feel like well once I put all the money into escrow, it’s gone. No, no it’s not gone. You gave us some instructions when you sent your money to escrow. You told us exactly what to do with it and how to treat it. And as a title agency, as an escrow company, that’s the way we’re going to treat it based on your instructions. And there’s so much more to it, because even after that, there may be a three or four phase closing process to where maybe you’re just acquiring the property. At first, maybe you’re acquiring the property. Then you’re building the actual asset or product on that land. As you can see, there are a lot of different variations, a lot of different ways that this process can go, but just remember, that process is always going to be a very well described and outlined in bullet point in some type of agreement or contract that we’ll have, as well.
John Larson: Right. And so there’s another piece of the puzzle which is the commercial lender who’s involved who is drafting that contract and working with attorneys to make sure that all the disclosures are … we’re following the law and everything is good to go there.
Johnny Collins: Sure, sure.
John Larson: All the previous deals that we’ve done before … we’re actually going to have Brian Grantham on the show here a little bit later, who’s actually the commercial lender that loaned on these previous projects that actually you opened escrow for, and some projects down in Houston, in the Woodlands specifically, and so he can talk a little bit more about his role in the process. Because I’m not licensed to do that. I’m just the developer. I bring the deal to the table. It’s a good deal. I have to send that to Brian. He has to look that deal over. He takes that through a ton of compliance before we even offer this to anybody.
Johnny Collins: Well, that’s why I like working with you all from a title perspective. I think we set expectations amongst one another very early on in the process, and usually, it’s my idea to say this, but I’ll give you credit. It was your idea. It was basically stated that everybody will stay in their lane.
John Larson: Right.
Johnny Collins: We’re going to find the assets. We’re going to prepare the assets and make sure they’re pretty. Johnny and Community National Title, you’re all protected and do what you do from a title perspective, and then whoever the lender is that’s involved, we’re going to make sure that they just have the money ready, and we’ll protect everything. Everybody stays in their lane. Everybody plays a role and we do it very well together. So I’m appreciative of that.
John Larson: Absolutely.
Amanda Guerra: Yeah, so like you said, we’re going to talk to Bryan Grantham coming up, a commercial broker. Delve more into this. In the meantime, we would like you to go to radio.com. Favorite our podcast there. For some reason, you can’t sit with us for the entire show while you’re driving or sitting at home with your cup of coffee, go to radio.com. You can favorite us, the Real Estate Cowboys Radio Show, and coming up next, we’ll talk to Bryan.
John interviews Bryan Grantham, Commercial Broker
Amanda Guerra: All right, welcome back to the Real Estate Cowboys Radio Show. Hope you guys are having a good day so far. This morning, we are talking about private lending, specifically when it comes to real estate. And, joining us now, John, I’ll let you introduce him, Bryan Grantham he’s part of the real estate cowboy’s team.
John Larson: Yeah, very happy to have a commercial mortgage broker here with us today. His name is Bryan Grantham. He’s also a member of the Real Estate Cowboys team. Bryan has 12 years real estate and lending experience and he’s placed over $500 million in various deals. So he comes with a wealth of knowledge. Bryan, thanks for joining us on the show.
Bryan Grantham: Thank you for having me, I’m excited to be here.
Johnny Collins: Wow Bryan, $500 million worth, that’s a lot.
Bryan Grantham: It’s been a while. It’s been a long time.
John Larson: So, Bryan, let’s just start from a very big picture point of view. What is private lending for people that are listening to this show and have no idea what private lending opportunities are?
Bryan Grantham: Private lending, the technical term that I’d say the kind of old-school guys know it by is trust deed investing. Or first trustee investing. Essentially, when you invest into a private lending investment or a deed of trust or a trust deed you’re simply just investing into a loan. You’re becoming a lender and investing into the funding of a real estate project. Could be commercial bail, could be a house flip, any form of various real estate investing. But you become the lender just like a lender would be in any other type of mortgage, but instead of it being Bank of America, Wells Fargo funding these loans it’s you as an individual funding these loans through or secured by a deed of trust or promise rate that’s secured by the deed of trust. Recorded to title at the county just like any mortgage has the full title policy property insurance. So it’s essentially you just becoming the bank.
Johnny Collins: Well, it’s the full gamut of security then?
Bryan Grantham: 100%, yeah. As a licensed commercial broker I have to do this, no again, just like any mortgage transaction through title, recorded, title insurance. You can’t just come in and just, here’s 20 grand cash, it has to come from somewhere wired into title. The money never touches the mortgage broker. So it’s done just like any other mortgage transaction.
Johnny Collins: Well I love your description. I kind of just want to elaborate a little bit on the deed of trust part, John and I were kind of talking about it off air before we got back on. I was just going through the fact that the deed of trust is actually what collateralize the money with the property. Or vice versa, the property with the money. I think so many people don’t realize just how important that is within a real estate transaction that requires money.
John Larson: So Bryan, can you elaborate a little bit on, so, me as a developer or anybody out there that’s a developer I know you work with developers and things like that who are seeking private money lending opportunities. What is your role in the process? Do you actually vet these deals out before you present them to these parties who are looking to take advantage of private lending? Just explain a little bit more of what your role as a commercial mortgage broker is.
Bryan Grantham: Yeah, my role is essentially it’s a full compliant and vetting process. So I don’t actually necessarily represent the developer. I represent the investors. So the developer would come to me with a potential project, my job is to vet that project from a few different perspectives. One, is the deal good? Meaning is the bar we’re going to actually make money on that project? Not just is it a good for the lender? A deal can look good from a lender perspective, but if it’s not good for the borrower that’s not necessarily a good deal. You want to make sure it’s good for all parties. So my first job is to go and vet this deal from the perspective of is the deal a good deal for the borrower, for the lender, for myself as a broker? Is it something I want to carry on my license? Once the vetting process is done and the deal makes sense then I negotiate between the investor or the lender and the developer the terms and conditions and rates and so forth then take the project through the entire title process. So I’ll set up title, communicate with the title company and those escrow officers to make sure that is properly recorded, make sure that the money is safely in where it’s supposed to be and recorded by that deed of trust, which I actually drop with me and my attorney. We do drop the deed of trust, the promissory note in-house. So we provide that to the title company as well as the escrow instruction. So we are kind of running point on making sure that these transactions are complete and done compliantly within state and federal laws. At the same time, we take beyond that step as well, unlike a traditional mortgage broker where they broker a transaction and then they’re able to just walk away. In a conventional mortgage. We have a servicing agreement, or a mortgage broker agreement rather, with our investors that we carry this loan with us. So we’re there with our investors from day one until the end of the investment. Through setting up their loan servicing, which is a third party, essentially for lack of a better word a debt servicing. This third party will collect the debt payments and make sure those payments are dispersed to the individual investors. As well as, in a development project there would be voucher control or construction control, funds are never loaned to the bar work. They are loaned through or wired into another, essentially, escrow account with a voucher control company that pays the invoice. So my job’s essentially make sure all of this is set up through the entire process as well as providing the investors with their copy of the promissory note, the deed of trust, the final title policy. So they actually have record and are holding that deed of trust that shows them recorded on it as it was said. That is the most important piece there, that you are actually recorded on that deed of trust because that is your security-
Johnny Collins: Absolutely.
Bryan Grantham: That’s what collateralize that piece of property. Without that you’re just throwing your money out and hoping it comes back.
John Larson: Okay. So, it sounds to me like you’re pretty much involved the whole way through until these investors are paid back, correct?
Bryan Grantham: Yes. All the way through the reconveyance process. So I work with the investors once the loan pays back to make sure that the pay off is reviewed and it is correct. Then eventually getting the investor’s money back to them.
John Larson: Okay, great. So yeah, it sounds to me that if I’m a private money lender or someone that’s interested in that opportunity it’s great to be working with a guy like Bryan because he’s carrying me through the whole process, right? I’m just a guy that has some capital that, hey I’d like to get a fixed rate return on my money. It sounds passive, it sounds good. I looked at the deal as well. Seems like a pretty safe deal. But then it’s good and comforting to know that you’ve got an expert there that’s holding your hand throughout the process.
John Larson: So Bryan, another thing I wanted to ask, so I’m a private money lender and let’s say the deal that I’m lending on it’s a 24-month term. Am I going to be getting updates throughout the process of where we’re at with the development? How soon we are to selling that investment off right to where I can be making my money back? How does that whole process work in terms of getting updates?
Bryan Grantham: Yeah that’s actually a great question. If you’re working with a broker that cares about you as an investor and cares about retaining you and having you invest with them on future deals, yes you would receive at least a quarterly update. Some projects are longer. If it’s a two-year project, first 90 days maybe 6 months, there might not be a whole lot of movement, but at least updates. I think we do updates with pictures, with info from the bar we’re with. If it’s a development project with, let’s say it’s a development that has residential land. You’re sub-dividing lots. At some point, there’s lots that are selling. There is movement. There’s things happening. So yes, you should expect or request those updates. I don’t think it’s a wise idea to invest and be left blind. I absolutely would give updates and would recommend it.
John Larson: Yeah and if I’m going to be lending on a land development or something like that, let’s call it a single family residential land development, I’d like to see some photos, a drone fly over or something. At least seeing some roads being put in there. Then eventually I’d like to see some houses being built on the land, right?
Bryan Grantham: Of course, yeah. I mean, that to me is outside of a fixed interest rate and a pretty secure safe investment. That’s probably the most important reason that people invest in these types of deals is consistency and predictability. They can put their money to work and they know they’re getting decent rates. Often times above market rates.
John Larson: Right.
Bryan Grantham: Consistently. That’s probably the most important thing or the most important reason why people invest in that. It’s safe and it’s predictable. Outside of that, it’s fun to see your money go into a development project that you can actually fly out, go walk, watch the phases go and watch it. You could go daily and go look at it.
John Larson: Right.
Bryan Grantham: To see your money go to work and actually put people to work, that to me is exciting. That’s where I get the rush is I go out and I see what my money’s doing. It’s not just in some stock market where you’ve got GM using your money and it’s just you don’t know what it’s doing. The rich are getting richer. You can actually see your money work, there’s something exciting about that.
Johnny Collins: You’re hoping it’s going well.
Bryan Grantham: Correct.
John Larson: So another thing I’d like to ask, this show is all about passive income, passive income real estate investment opportunities. So you, as the commercial mortgage broker, would you say someone listening to this show that private lending could be a really good option for the investor looking to build a passive income stream?
Bryan Grantham: Yes. That’s the most common investor that I have is someone who is nearing retirement or they’re looking for some kind of an income. Whether it’s cash or retirement account or what have it. Passive income is a huge driving point. It’s too investing in this. You have a retirement account that’s sitting there that to access those funds in a current or a traditional portfolio you probably have to sell some of your assets.
John Larson: Gotcha. Here, we’re about to wrap up here shortly. But, how many clients would you say, you talk about self-direct to retirement accounts, and we touched on that last week. How many of your clients would you say are loaning out of a self-directed account? A good portion?
Bryan Grantham: Probably 75-80%.
John Larson: Okay.
Bryan Grantham: Are retirement accounts.
John Larson: Yeah that’s higher than I thought, but it makes sense because you’re putting that money back in. But all right, Bryan, I appreciate the time. I think you gave a lot of good info here. Appreciate you having on. You come with a wealth of knowledge and thank you so much.
Johnny Collins: Thanks, Bryan.
Bryan Grantham: I appreciate it.
John Larson: All right.
Amanda Guerra: All right Bryan, thank you so much. That was a lot of great information about private money lending. If you would like to, if you like what you heard if you just want to learn more about this make sure to check out our website, RealEstateCowboysDFW.com. We have a lot more great content coming up, keep it right here.
Examples of Private Money Lending
Spokesperson: The following program has been paid for by American Real Estate Investments LLC. All opinions expressed on this program are solely the opinions of American Real Estate Investments LLC and do not reflect the opinions of KRLD, or Intercom Media Corporation. You should not treat any opinion expressed on the program as a specific inducement to follow a particular strategy regarding real estate financing or investment, and before acting on information on the program, you should seek advice from your own financial, tax, mortgage, or real estate advisor.
Amanda Guerra: Welcome back to the Real Estate Cowboys Radio Show. We just got done talking to Bryan Grantham, a commercial broker, specifically about private lending, and then when it comes to real estate. This is something that, both John and Johnny, you guys are really passionate about.
Johnny Collins: Very much so.
Amanda Guerra: You really believe in this. Like we talk a lot here on the show, it’s all about, what is your return on life. This is a way to get a great return on life.
Johnny Collins: Yeah, absolutely. I know people that invested millions of dollars passively in restaurants, in hotel chains, for them to buy the real estate, and they collect a monthly check, and it’s a substantial monthly check. Some of them are younger, some of them are older, but more importantly, all these people have created a passive stream of revenue, and if they choose to, they can live of this specifically if that’s what they want to do. Look, everything that you do passively is not gonna be enough to pay all your bills, but it’s a start. If it pays just your car now, if pays just your water bill, you’re in the game. Would you agree?
John Larson: Yeah. Absolutely. Private lending, it’s hard money. Right?
Johnny Collins: Yeah.
John Larson: You’re able to charge a higher interest rate for that.
Johnny Collins: Sure.
John Larson: Then what you get at a traditional bank, so I think it’s a great, great investment opportunity if you’re someone that’s sitting on a couple hundred thousand dollars, don’t know what to do with it, maybe you got it in the stock market, or the traditional investments that we’ve talked about, and this is just another alternative investment that’s available to you, especially for people that do have an IRA or 401K, and money sitting in an account. We talked last week about self-directing and what you can do with self-directed funds, and yes, you can buy real estate, but I really advocate the private money lending option through an IRA or 401K because I think it’s the most passive model, and I think it’s really, if you’re investing in the right market and the right project, it’s super safe.
Johnny Collins: Yeah. But that’s what any product. it doesn’t matter what you do. It has to be the right thing, and I think another thing that we should just touch on a little bit, John, is the people that are using this money. It’s not the mafia.
John Larson: Right.
Johnny Collins: It’s not Vegas.
John Larson: Yes.
Johnny Collins: For many different reasons, people use private money. Maybe they’re a new business, but a very profitable business, right? And what Ben just told us, Bryan just told us is they’re gonna do all of the due diligence to make sure that the deal is worth it because they’re not gonna put anybody’s money into a situation where there’s gonna be a loss.
John Larson: Right.
Johnny Collins: At least on the front end because then they don’t make any money. It’s in everybody’s best interest for the private money to make a lot of money, and if not, it becomes a waste of time. I’m appreciative of guys like him that get into this, and make sure that everything is above board, make sure everything, all the I’s are dotted, and the T’s are crossed and done in a very professional manner like you’re walking into one of the big banks, or even [inaudible 00:03:22] banks, it’s pretty much the same process.
Amanda Guerra: Let’s give folks an example of this. Let’s talk about the return. What are they gonna see? What could they get involved in some projects?
John Larson: Yeah. I mean, there’s deals available out there that will pay 12%. Now, with any investment, higher returns usually mean higher risk. Right?
Johnny Collins: There are risks. Yeah.
John Larson: Someone that’s offering to pay 12% interest on their project, it might not be in the best market, you gotta do your due diligence, which that’s what Bryan does. Right?
Johnny Collins: Sure.
John Larson: You do your due diligence on the borrower, do your due diligence on the opportunity that they have, right?
Johnny Collins: Yeah.
John Larson: And what I tell a lot of investors is, hey, if they’re offering you 12 or 15%, you need to take a close look at that deal.
Johnny Collins: Yeah.
John Larson: Because that means they’re very desperate for money.
Johnny Collins: Sure. Very much so.
John Larson: Right? There was a deal, for example, that we did down in Houston. It’s still going. The builders are building on the lots right now. It’s a 500 lot development down in the woodlands in Houston. We, I think Bryan, we’re paying 8 1/2% on that money. That’s also on a project that to me, Johnny, which is why I got the project in the first place.
Johnny Collins: Sure.
John Larson: I looked at it as being very safe. Right? Houston, good market, taxes very strong, lots of new people moving in, so there’s a very, very huge, strong demand for single-family homes.
Johnny Collins: Good markets, lots of people moving in, great school districts,
John Larson: Right.
Johnny Collins: Lot of stuff to do, more companies coming to me, all the variables are lining up. Fortunately and unfortunately, I’ve had the opportunities to invest in deals that had high rate of returns, and those that weren’t real estate went to hell in a handbasket. I didn’t have anything that was really solid collateral. Right?
John Larson: Right.
Johnny Collins: We always talk about the best case scenarios. Let’s talk about the worst-case scenarios. Worst case scenario and the deal goes to hell in a handbasket. Well, you still have some property that was evaluated on the front end to be able to pay back the money, and that’s what’s important because your money is collateralized by the property. I think we can’t lose sight of that. That’s the one, although not guaranteed, but very much so protective measure. Does that make sense?
John Larson: Right. Yeah. Absolutely. Because you want to avoid a foreclosure, right?
Johnny Collins: Yeah.
John Larson: I mean, no one wants to go through that process. It’s costly, it can be lengthy, and,
Johnny Collins: It’s stressful, too.
John Larson: Oh. I’m from Detroit, Michigan originally, and although, there’s good opportunities in every market. I just wouldn’t say there’s as many good opportunities in Detroit for their private money lending opportunities and developments and things like that. It’s just not as strong of a market as Dallas is. So then it goes back to why are we doing the Real Estate Cowboys Radio Show? We’re talking about ways to make passive income through real estate, but we’re also talking about the best market in America.
Johnny Collins: Yeah. Absolutely. What’s going on in the DFW area right now is unmatched anywhere else in the country, and we can’t lose sight of the reason why a lot of these big organizations and corporations are moving here daily. They’re moving here because of the opportunity. They’re moving here because of the caliber of the educated people that are here. They’re moving here because of the pool of money that’s gathered here as well. So, you’re talking right, John. And what you all up done in terms of putting the energy and efforts into pinpointing a lot of these deals that are here and available for folks to be a part of, I think it’s phenomenal. And we need to make sure that folks understand, really, what the opportunity is. Does that make sense?
John Larson: That absolutely does. And another thing that I was a little bit shocked by, not really, but a little bit shocked. Bryan said that he would say 80% of his clients are loaning out of a self-directed account, and the reason why I was a little shocked by that is because we talked last week about money and retirement accounts. 18 trillion dollars in retirement accounts and only 3-4% of that money is in self-directed accounts, and I believe that’s because people just don’t know that you can self-direct.
Johnny Collins: Sure.
John Larson: But, from talking to people, you know, I’m out and about. I was out to dinner one time and I was just at the bar, eating dinner, and I was talking to another gentleman next to me. I like to strike up conversation, just see what these people are investing in. And he told me, he turned to me and he said, hey, I have a million dollars in a self-directed IRA. And, he goes, my best investment I have going right now is I have a guy, probably a guy like Bryan Grantham, that’s putting my money to use in private lending.
Johnny Collins: Yeah.
John Larson: And putting it into real estate deals for private lending, and he’s like, I just trust the guy. He vets the deals out. They’re shorter term. I think he was telling me that most of the stuff was about a year-long term, and then when he gets that money paid back, he’s just putting it in the next deal.
Johnny Collins: John, I personally invest. I don’t know if I told you this. I personally invest with a gentleman who’s a hard money lender, and I get 10% a year.
John Larson: Yeah, it’s great.
Johnny Collins: Yeah. I forget about it.
John Larson: Right, right, until you look at your account. You know?
Johnny Collins: Yeah, then there it is.
John Larson: And so, like I was saying, it’s a great option for that self-directed retirement account because you save on taxes.
Johnny Collins: Yeah. That’s true.
John Larson: Right? That money is coming back in, tax-free. So, really, like I said, I don’t know much of a better option. I’m a real estate guy. I love real estate. I love buying single-family homes. I love owning single-family homes, and all the opportunities you have with real estate and homes, but like I said I’m never gonna call you if you’re doing a private money lending opportunity with me and say that you need to replace your roof and send me a check for four grand. And if you’re talking about your retirement account, if you buy real estate, we talked about this early on in the first episode, if you’re buying real estate within your retirement account, your retirement account owns that real estate property.
Johnny Collins: Yeah.
John Larson: So, when the property manager does call you and say you have to replace the AC unit, that’s coming out of your retirement account. You know?
Johnny Collins: Sure.
John Larson: And so I’m not saying that it’s a negative, but it’s just something that you need to understand. There’s that risk involved with it.
Johnny Collins: Yeah, yeah. You’re not saying that it’s the positive either, right?
John Larson: Right.
Johnny Collins: You’re just saying it’s a part of it, but it’s not the same as just doing it out of your own personal account.
John Larson: Exactly, exactly. So, Amanda is saying that we’re coming close to wrapping up here.
Amanda Guerra: You guys love these talks, cause you guys can talk about it all day, that’s the great thing. Yeah, we do need to take a quick little break here, but we have some really good questions from people, specifically talking about private lending and real estate and stuff, and just the DFW market, we have a few questions about DFW investing specifically. Which, of course, you guys are experts on. So, in the meantime, make sure to check out our website, RealEstateCowboysDFW.com There’s a great test on there that you can take. If you’ve never invested before in real estate, you wanna know what kind of investor you are, you can take a quiz on there. Also, make sure to go to Radio.com, favorite our podcast. You can always come back to it, listen to the segments individually, maybe you’re just now joining us, so you can hear what we’ve been talking about previously in the show. We’ll be right back.
Questions from Listeners and Words of Motivation
Amanda Guerra: Welcome back to The Real Estate Cowboys radio show. Hope you guys are having a good weekend so far. This is the time of the show where we take some questions from our listeners. Karen C, she lives in Dallas. She says she and her husband are just now starting to look into the real estate market. They want to get a couple rental homes, or at least their first one she says. They want to know if there’s specifically an area of DFW that you feel is better to look at.
Johnny Collins: That’s a good question.
John Larson: It really is, and it’s a pretty broad question. It’s going to depend on what their goals are. Number one I’d ask them, can you qualify for a Fannie Mae loan, the 20% down, fixed for 30 years, low interest loan. If you can, and you’re looking at potentially seeing returns upwards of 100% on your money, I would invest in an appreciating area, a strong appreciating area of Dallas. That’s where I would start looking, probably the North Dallas suburbs, maybe in East Plano. West Plano the values are just too high. You need to look at the value to rent ratio as well any time you’re investing in a rental property. I still feel like there’s really good opportunities in East Plano. There’s good opportunities in Carrollton, Farmers Branch, Richardson if you can get your hands on them. That’s the biggest problem right now in this market-
Johnny Collins: You have to move fast.
John Larson: You really do, but those are the areas that with putting 20% down on a property. Let’s say it’s $250,000, $300,000, you’re not going to necessarily cash flow on the investment once you add a principle and interest payment into it, but you’re leveraging the property. So on a $250,000 asset, you’re putting down $50,000. In this market today, these properties are appreciating $50,000, $60,000 in two, three, four years.
Johnny Collins: Yes.
John Larson: If the trend keeps going the way it is, that’s how you’re going to get 100% return on your money because you could in turn and sell that property, liquidate that property, sell it to a retail home buyer down the line who’s going to pay you market value for that home, or maybe you do a cash-out refinance.
Johnny Collins: John, it’s important for you too to let them know too that as long as people keep moving in, we’re going to always have a shortage. There’s always going to be a need for someone to buy your home. When you get ready to sell, there should always be a buyer that’s willing and ready and able to buy.
John Larson: Absolutely. That’s why I really like to target these North Dallas and even East Dallas suburbs because I just see a lot of the development moving north and east right now. It’s just those areas are very, very attractive.
Amanda Guerra: John, is there anywhere that you like or maybe you think is a hidden gem, a secret? We’re going to let the secret out of the bag, but that’s what we’re here for.
Johnny Collins: Mansfield, Arlington. I’m from that area. I’m originally from Fort Worth, and even Fort Worth. There are some absolutely amazing areas, the Crowley area, where you can go find some just flat out steals. If you know the DFW area well, a lot of people don’t like to go on the other side of 635 that are North. Then the southern folk don’t like to come on the northern side of 635. It just depends on your preference. I always say, to the original question, it’s just a matter of what you’re looking for. Does that make sense? If you want something that you can hold for a long time, make sure you get in an area where the school systems are really strong, and the grocery stores, and there are a lot of things that are available to the client.
John Larson: Right. I would say, that’s a good point that you just brought up. Some investors might be thinking maybe oh I don’t want that particular neighborhood. You’ve got to think about what are these properties going to do for you. You’re not going to live there.
Johnny Collins: No.
John Larson: You’ve got to keep in mind this is an investment, I’m not living here. But you’re right, you want to make sure you’re in a thriving area, an area where there’s development, an area where there’s grocery stores and retail, and things like that that are readily available, and good schools, like you said, because good schools mean that families are always going to want to live there. That’s where you’re going to set yourself up for potentially a long-term tenant, or you’re going to have consistent low vacancy. Because these things don’t work unless you have people moving into the property and paying you rent.
Johnny Collins: Absolutely.
John Larson: Somebody willing to pay you rent. That’s my advice.
Johnny Collins: Well I think it’s great advice, John. I’ll tell you this, I get really excited when we talk about these types of things because real estate, based on our conversation, is just a vehicle. It’s a cash flow vehicle. We’ve had a measured success in business, so we get these type of opportunities all the time, but what do we tell the person that’s not necessarily getting approached about a lot of these opportunities? What are they supposed to do right now? I think it can be a bit discouraging when you feel like the money and the opportunities are just volleying over your head.
Johnny Collins: Well, I want to speak to those people today. First thing I want to tell you is don’t give up. The second thing I want to tell you is there is a place for you to participate, excuse me, in the American free trade system, but you cannot give up. It’s so funny because I see how so many people come into our country, and they literally risk their life just for a shot to participate in the American free trade system. What we’re talking about is showing people how to just take advantage of it even the more. I want to tell that person that right now maybe your finances are not in the place to where you have a lot of money in a 401K, or maybe your finances and your personal financial situation is not one that you feel really good about talking about publicly, or sitting down with somebody and getting direction. Well, I want to encourage you to go do that.
Johnny Collins: The first thing you need to do is take the first steps into sitting down, getting organized financially, taxes, credit, learn what your DTI is, do the small things to make sure you can do big things later on down the road. If you’ve been fighting and struggling for a long time, don’t get discouraged. Just to continue to fight, but fight with purpose. Don’t fight out of habit. Don’t fight out of a lack of opportunity. Don’t fight out of lack in general. Fight with purpose. Sit down, find somebody, call somebody. If you need some help, contact us on the Real Estate Cowboys website and we’ll help point you in the right direction with some people that can sit down with you and help you map out your financial agenda, your financial objectives, and kind of get a clear concise objective of what you want to do, when you want to do it, and how you want to do it.
Johnny Collins: I think so many others go about this alone, and we fail. Time and time again we see so many situations where people go about it alone and they fail. Well, you don’t have to fail anymore. There’s too much opportunity, there’s too many people with great expertise and a ton of experience that can help you get from point A to Z in a very prolific, effective, and efficient manner. So, take advantage of it, ladies and gentleman. John and I are here not just to hear ourselves talk or to entertain one another. We’re here to make sure that we bring consistent reoccurring value to you. If you don’t use us, shame on you. But if you do use us, congratulations to you. We look forward to hearing from you.
Amanda Guerra: If you guys just want to learn more about everything that John and Johnny talk about, we do encourage you, we have a link on the Real Estate Cowboys DFW website where you can go submit your own questions. You can just learn more about what John and Johnny do about the real estate market and DFW in general. Real quick John, next week is a big show, so I’m going to give you a little plug. Tell us what next week is all about.
John Larson: Yeah next week we’re talking about some really cool stuff next week, some stuff that I’m really interested in. We’re talking about vacation rentals. We have David Keener, who is a Southlake resident, Dallas resident. He’s going to be here with us. He’s my development partner down in Belize. This guy’s been on HGTV for his private island developments, and just really, really cool stuff. He’s filled with tons of information, so really looking forward to that show.
Johnny Collins: Man, you look really excited talking about this.
John Larson: You want me to get up and dance around?
Amanda Guerra: If you can talk about Belize, who’s not going to get excited?
Johnny Collins: I thought you were going to dance around.
Amanda Guerra: And you guys have a, there is also a Real Estate Cowboys event coming up that we’d like you guys to go check out specifically on Facebook, start to register for.
John Larson: Yup, that is going to be May 8th, Tuesday, May 8th. We’re serving you dinner. We’re serving you some drinks. We’re taking care of you, pampering you, as always.
Johnny Collins: Dinner and drinks?
John Larson: Yes sir.
Johnny Collins: Did I pay for that?
John Larson: That’s going to be right here at the KRLD 1080 studio. We have a performance ballroom right below up. So yeah, that event is going to be great. That’s going to be talking all about our vacation rental opportunities that we have in Belize. The best way I could frame up Belize, imagine if you had the opportunity to buy property in Hawaii back in 1950. That’s what we feel like we have down in Belize. It’s a really good show we’ve got coming up and a really great event. You can go to BestofBelize.com to register for that event. Space is going to be limited. I think we’re only accepting about 50 guests to that event. If you’re interested in learning more about the Belize opportunities that we have, private island developments, luxury homes, go to BestofBelize.com and put in your information to reserve your spot.
Amanda Guerra: All right awesome. Thank you so much. We thank you guys for sticking with us this morning, hanging out. Hopefully, you learned something here. In the meantime, make sure to head to our website RealEstateCowboysDFW.com. Go to Radio.com, favorite our podcast. If you missed anything on this show, you can find out more information there. Have a great week guys.
Spokesperson: Get your cowboy hat on and talk passive income investing in the real estate market in North Texas every Sunday morning at 8:00 here on KRLD with your experts John Larson and Johnny Collins, and your host Amanda Guerra.
Spokesperson: The preceding was a paid commercial program. Paid for by American Real Estate Investments, LLC, and does not reflect the opinions or advice of KRLD or Intercom Media Corporation.