Sharing my recent LIVE interview with my pal, Tim Herriage…where we discuss running a profitable investing business in both up and down market cycles. We have a ton of experience, and a long friendship…you’ll like this one!

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FlipNerd Show Transcript:

Mike: [00:00:00] Welcome to Flipnerd, live discussions with and training from America’s very best real estate investing professionals. We meet live twice a month to discuss what’s working now and get your questions answered. We broadcast live inside of a private online community, which you can join for free by visiting flip nerd.com/live.

Let’s start today’s. Well, it’s up everybody. Hey, welcome to today’s show what’s up, Tim. What’s happening? Hey, Mike. Excited to have you here today. You know, what’s funny is, um, well you were outta the room when I had, uh, at the last investor fuel, I was talking about content. I was giving a presentation on content and podcasts and, uh, kind of playing the long game, like the value of doing stuff over a long period of time.

And, uh, and I used you as an example, and there were a couple people in the room, uh, that you were like podcast number five on flip nerd, which by the way, I think it’s December 23rd, something coming up, I right around Christmas time will be our kind of nine [00:01:00] year anniversary of, uh, doing the podcasts hard to believe it’s been that long.

10 years is a, is a long time for guys like us. But, uh, but yeah. So have you ever been on, you were on with Dylan? Have you been on with me other time?

Tim: Uh, yeah, I think when we started B2 R we did it.

Mike: Okay. So anyway, it’s been nine years, uh, and over 1500 podcast episodes and you. Number five. So, uh, anyway, glad to have you back.

Not that I haven’t seen you since then we see each other all the time, but glad you’re here

Tim: classifies me as an OG, Mike.

Mike: Yeah. You know, what’s funny is I say this all the time. I, I used to. Because I’ve always been, you know, I’ve always been in UFT. We’re always really big into our networks and events and stuff like that.

And I used to be like the young guy that didn’t know anything in the room. And now I’m like this now I feel like Yoda. I’m like this got some wisdom, apparently that some people seek out. And so I know you’re the same way. So anyway, you got a couple old dudes here talking today.

Tim: yeah, it it’s [00:02:00] it’s uh, it’s, it’s amazing how much you forget that you.

Uh, and how much you remember you’ve been through when you forced yourself to do

Mike: it? Some of it is, I think we’re just more highly opinionated now. So you got opinions on a bunch of stuff, and then also you just, you you’re just real decisive now. Right? It’s like you, like, let me think about that a little bit.

It’s like, I don’t have time to think about it. Do this

Tim: yeah. I mean that’s and that’s a huge part of it, right? I mean, it, it. It’s the reason I admire you so much, you’re able to mentor and train and, and, and, and, and herd cats. And I can’t hardly like if someone asks my opinion and I give it to ’em and they start to even wanna discuss it, I I’m getting so old now.

It’s just kinda like, oh, alright. And I just walk off. It’s like you asked my opinion. You didn’t ask to talk to me about your opinion. Yep.

Mike: But, uh, that’s what you guys are gonna get today. We’re gonna be talking about opinion. Experience from guys that have done a lot of deals over the years, but most importantly, we’re gonna talk about kind of investing through market cycles.

And I know there’s a lot of folks [00:03:00] that we’ve all seen people that do really well. And they’re nowhere to be found now cuz the market shifted and they don’t know how to shift or we’ve all known people that did well in a different market cycle. Uh, and they got knocked out the game and. I think real estate investing is one of those businesses where you can make a lot of money in up and down cycles, but you just have to know what you’re doing.

You have to pivot, you have to do things a little bit differently, and that’s what we’re gonna be talking about today. So a couple of housekeeping things for you guys. We want this to be interactive if you ha, if you’re watching this live by the way, uh, thank you for being here. Um, Chat in just chat in what your, some of your questions are about.

Maybe some of the things you’re seeing right now, we can talk about those things a little bit, and we’ll talk through the whole period, whether you share any questions or not. So, uh, it’d be great. If you could share, uh, some questions you might have that we can tackle. Uh, and then also, if you’re not watching this live, um, we do this live a couple times a month, and I’m gonna give you a link here.

If you go to flipper.com/. That actually gets you access into our group. You can sign up, uh, to get notifications of these shows when we’re doing ’em live. [00:04:00] So you can join us live and ask your questions and you can get access by the way, if you go to flipper.com/group, um, this is a live version of the show that I haven’t done for very long here.

Just really started this a few months ago. And we have about, I think, eight other episodes that we’ve done live so far, and I’m only bringing heavy hitters people. Our good friends of mine have a lot of respect for, uh, into this live show. And so those are just some of the most powerful podcasts that we’ve done.

If you go to flipper.com/group, you not only get notifications of, uh, future episodes, you get access to those last eight or so episodes that we’ve done so far and all the ones going forwards, and now a word from our sponsors. Investor fuel is America’s number one mastermind community for professional real estate investors, where hundreds of the top investors from across the country come together to build stronger businesses and stronger lives.

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Visit flipper.com/carrot. To learn more about how carrot can help you while we’re getting started here. Tell us where you’re from. Just chat it in and then also, uh, start thinking about some of your questions. How do I pivot or I’m having these cha challenges, you know, where do we go from there? So Tim, tell us a little bit about your background.

How [00:06:00] did you you’ve been doing this longer than me? So how did you get started?

Tim: You know, uh, when I got out of the Marine Corps, uh, I ended up just putting my resume on a website. It was called military hire.com and, uh, another Marine ended up, uh, hiring me to be as project. Um, and, and he was a flipper, uh, started out just working for him as a project manager, ended up, uh, he taught me the acquisitions game.

Right? Uh, that first house, you never forget it. Do you? I mean, it’s, uh, had a for rent sign, nailed to the tree and he says, we’re gonna try to buy this house. And I’m like, you you’re crazy, man. I mean, it says for rent, it doesn’t say for sale, uh, and anybody that’s got experience, listen, Like laughing right now.

Like yeah, idiot. That’s the way. Um, yeah, I mean, that was back in 2001 or two, 2002 and, uh, you know, just a series of introductions and, uh, [00:07:00] exploits that kind of leveled up my game every couple years and met people that could help me and then met people that could help me and then met people that could help me.

Before you knew it. Uh, here I am the old guy in the room. ,

Mike: you know, what’s funny is I, I think you were also outta the room when I was telling people this of, you know, over the years cuz you know, you know, you were there when I started, um, Went from knowing nothing to knowing a few things. Um, and I’ve been blessed to have met like lots of people, lots of amazing people in our mastermind, in our, uh, investor machine business.

And, you know, I’ve done the podcast for nine years. So I’ve been, uh, a networking kind of maniac over the years, but you’re one of the people that. That I know from the very early days that I still am even in contact with. So I’d say you, you might be my oldest friend in, uh, the real estate investing world.

So congratulations for that. So ,

Tim: well, it, it’s funny. I was thinking about this the other day. My it’s [00:08:00] funny, the people that stick around out of desire versus require, uh, I was thinking the other day I was talking to my wife, Jennifer, who, you know, uh, and I, I said, you know, I may just shut down the wholesale buying, selling, flipping business.

Uh, and it’s because we pretty much moved on to investing in people’s syndications and bigger deals and, and, and less active, more passive kind. As I try to find a plan to put myself out to pasture. Right. I mean, because, uh, I don’t wanna run the, you know, I think life’s about progressing and growing. So I think, you know, it’s an interesting dichotomy between the ones that are no longer here because the market chew ’em up or the ones that kind of, uh, exercise the dream, right.

Reached that point to where they could step back and enjoy the fruits of their.

Mike: Yeah, I made some comment, coincidentally, just a [00:09:00] few days ago on social media about how, and it was really from the view of an entrepreneur, how much better life is, is when, when you don’t need anything anymore. And you just want stuff.

It’s like, I don’t, I don’t have to worry about survival or eating or paying my bills or any of that anymore and how you get to act differently. And I think there’s a lot, you and I both know there’s a lot of carnage in this industry and probably all entrepreneurship, honestly, of people that start something and they kind of.

Three feet from gold. It just, it was just too hard or they weren’t, you know, they weren’t able to kind of keep pushing forward and, and the best days are yet to come. You have to get over, you have to learn some of those lessons. Right. But I think in entrepreneurship and in real. It’s great. When you get to a point where you don’t have to do those things that you don’t like anymore, and you could focus on doing the things that you want to do.

Right. And so, um, and I think we know tons of people that have made that happen. Um, and you, of course, we know lots of people that didn’t as well, but I think the people that didn’t could have, they just quit too early. Right. Well, you know,

Tim: it was interesting. I actually was listening to re-listening to the, [00:10:00] uh, podcast you did with me on our uncontested investing show.

And one of the things you, you said this phrase that said feed the machine, right. And that’s actually what spurred the conversation with Jen. It was like how much of what we do still is to feed the machine and then. It was fun to look at, do we need the machine? Right? Like it’s not to give up or to quit or to stop.

It’s just like, do you still need that machine? Like, did the machine already serve its purpose?

Mike: You know? Right, right. Yeah. Well, um, so we’re gonna talk about making money in different market cycles. And I don’t think, you know, what’s funny. I saw somebody post something today and they, they made a comment.

We’re we’re going back to normal. This is not a crash. Like if anything, we’re just, we’re kinda getting back to more normal times. And if you just started real estate investing in the past few years, it hasn’t been normal. Right. So I think for guys that have been around for a while, you [00:11:00] realize that like, You know, the sky is not falling.

I think you made a joke, uh, a little while back at, we were at event and somebody’s like, the days on market are slowing down and you looked it up in their market and it had gone from like four to like seven or nine or something like, oh, well, you know, that’s still not normal. Like, that’s not, that’s kind of crazy talk, but let’s talk a little bit about, um, you know, some things that you do differently in different market cycles and, and, and, and to, to stay safe.

Cuz I think as real estate investors, You always have to kind of pull that risk lever down. If it feels like things are changing, right? It’s like you just pull back, you don’t lean into, you know, you don’t, you don’t go from the market. Feels like it’s slowing down. So instead of rehab, a $200,000 house, I’m gonna start to rehab million dollar houses.

You just don’t do that. Right. Or, and, and so important part of that is just evaluating comps a little bit differently if the market is starting to slow. So what do you do differently in a market that feels like it’s slowing down from a comp.

Tim: You know, uh, our good friend, Casey Smith was on the show on our show to this [00:12:00] week.

And she, she, one of her quotes was bad. Habits are formed in good times. And I think when I really look through all the different periods of my 20 year career in these times where things I’d, I hate to say even get more difficult. Cause this really in retrospect is not that hard when things change when the market moves.

With you or against you, I think refocusing on your processes and procedures refocusing on the, the, the, the reason behind the skill and, and, and the way it’s kind of the textbook way, uh, tends to protect you. It tends to. Uh, iron out any of those bad habits. I mean, let’s face it, Mike. We sit here today, August 24th, 2022.

Uh, this market is still, and when I say this market, I mean [00:13:00] the entire United States median home price, we’re still 10% above last year, which puts us 25% above 2020, which puts us over 40% above 2019. It’s just insane. And the last couple years, if you wanted to buy a house that you were gonna fix and flip, you could do a horrible job and take five times too long and make more profit than you plan to.

Like it, it just, the market’s been moving ahead of us in erasing our sins, right. And now we’re in a market where. You’re cops, right? You need three sold cops, not just one comp that you can like add 10% onto. Right. You need to make sure it’s actually a comparable property, right. Instead of just a property.

Uh I, I think it’s just, we’re being forced back into levels of discipline [00:14:00] that we haven’t had to have for the last 24 months. And it makes us a little uncomfortable.

Mike: It’s true though. Just go back to basics, go back to the fundamentals. Like you can’t keep moving the way, like the rate, uh, Increases are not gonna continue with the rate they have.

Right. So I know there’s some guys that, that I hear, I hear a lot of people at the last investor fuel meeting, a lot of people were talking about what they’re doing to mitigate risk and you hear everybody does things differently, but they’re all, they’re all trying to get to the same thing as like they’re using 2020 comps or they’re taking 10% off of the current market values, just in case things slide and, you know, kind of basically just trying to be more conservative and not assuming that the houses that sold.

Uh, in the last quarter, are that you’re gonna still be at that same, same level,

Tim: right? Yeah. And I think it’s one of those things you just have to understand, like the location, location, location portion of real estate is one of those things you just can’t ignore. I mean, there are markets [00:15:00] make no mistake.

There are zip codes in the United States where houses are selling for less than they were this time. Sure it it’s just, it’s a mathematical fact. And I think we were talking about it last week at investor fuel or two weeks ago now I lose track. Uh, you can’t let worst case and broad generalities influence your overall opinion of the health of the real estate market.

Right. And as a nationwide lender, we experience this all the time. There are people we finance in the San Francisco bay area that are buying and are selling houses for 10, 15, 20% less than they had planned to, or than they were last year. It’s just, it’s happening. Salt lake city. It’s happening, uh, in general in Dallas.

It’s not happening. Um, in, in, there are parts of Tampa. I heard, I haven’t actually verified this. [00:16:00] I hate to repeat things. I didn’t verify. Uh, but my buddy Lawrence said there were parts of Tampa that were really hurting. So I think, uh, investors have to really hone back in on the basics on the data and.

You, you shift the old book who moved my cheese, right? Yep. You shift, right. If you were making a bunch of money, rehabbing 3 million

Mike: actually have some cheese right here. styrofoam. This is one of my props, coincidentally, sorry. Little

Tim: side note there. No, it’s good. Right? Because you were making a bunch of money, rehabbing $3 million houses in San Francisco.

You, you may not wanna do that. Right. Right. But for instance, our, our friends Sid, right. They went to Kansas city and partnered up with another investor and now they’re growing their business there. Right. Right. So I think it’s all about educating yourself and, uh, moving with the market. Not, not moving against it.

Right. You don’t wanna move against the

Mike: market. Yeah. Yeah. [00:17:00] And part of that could be, um, Is, uh, you know, part, part of the way you can get risk is different exit strategies, right? It could be not rehabbing as high houses. It could be doing more wholesaling instead of rehabbing. It could be doing more whole tailing instead of, uh, rehabbing.

Right. There’s just ways you can kind of move your risk down, which generally is to try to get in and out of deals faster before a market could change even more. Right.

Tim: Yeah. And I I’ve always given you credit for kind of creating the whole telling. Model. Uh, and it’s just because you were the first person I’d really heard of that, did it at scale back in,

Mike: was it 10?

I think probably 2010. I mean, I was, I mean, yeah, we, we were doing it for a long time. I don’t know if I’m the godfather of whole tailing or not, but you’re right. I, I, uh, you know, I definitely did it a lot back then before it was cool. Before you really hear started hearing

Tim: people talk about it. Well, but when I look back number one, I thought you were stupid then, and you weren’t

But when I look back, [00:18:00] what you did is you moved with the market. You saw that there was a lot of people looking for distressed inventory on MLS. Yeah. You saw that MLS. Well, I mean, that was the, the big thing, everybody, oh, will teach you how to work short sales and buy cheap. And like, that was the big thing.

So you simply moved your business to where you could capture what was, you know, what was happening.

Mike: Yeah. Yeah. I had this realization of, uh, and I’ll, and we’ll come back to this in a second, cuz I think the wholesale model, even in a hot market has worked particularly well too because there’s constrained inventory.

So you just have to take something that’s not perfect, but I just had this realization. You know, we, there was this general belief of if, if you could get a homeowner to buy, uh, a distressed property that was like super in need of repair. And there was just this general belief of even if it was somebody that was gonna buy it and fix it up themselves, that they were probably gonna do the work themselves and they’d pay more.

Then we thought was reasonable because they’re gonna do the [00:19:00] work themselves. And they’re not, they’re not really thinking of the value of their time for the labor. Right. And for guys like you and me, I’m like, You know, 60% of my rehab cost is labor. Um, and so if you eliminate that and, and all they’re doing is look at the material cost and they’ll pay more.

Right. And it’s, and then it kind of hit me of. We’re in, we’re in the same market here, Dallas Fort worth. There’s like outlet malls everywhere. And I’m like, Americans always want a deal. And it’s just this realization of Americans always want deals. And so even if you have to move in and fix it up yourself, and a couple times I had houses that we would like totally rehab.

And the day that we close they’re in there tearing the brand new carpet out, cuz they wanted something else. And I’m like, you know what? I think there’s just a model for people that want to do them work themselves either. Cuz. They can’t, they can’t afford to do it any other way or we’re rehabbing ’em and we think they’re awesome, but they didn’t really want it that way.

Anyway, they just like that it’s new, but they’re gonna rip it out and do something themselves anyway. And so, um, anyway, it, it was, it was an interesting time to just realize that [00:20:00] sometimes if people really wanna be in a neighborhood, they’ll take something. Um, that is not exactly what they wanted, but it’s all they could get.

Right.

Tim: Well, and even as a lender, you know, at RCN capital, we always look at the, as is. And many times investors think of the, as is value of what they wanna pay for it. When really the, as is value is the value of the property in its current condition. And that value doesn’t include fixed and flip profit.

Right. It’s literally whatever it’s worth to a customer. And typically it’s kind of like the ARV minus the general contractor level repair. Right, right. Kind of the as is value. So it, it, it’s just it’s again, if you go back to the basics of real estate, these things have been out there since the SEP that I know of since the sixties and seventies and eighties, that there was an as is value, there was a after repaired value, there was a loan to value.

I mean, [00:21:00] it’s, it’s not rocket science, but it, but it we’re getting close to making it a true science. Working on it.

Mike: um, so, uh, any other thoughts on adjusting exit strategies? Like doing things different? Are you doing anything differently in, in your business or, I mean, like you said, we’re here in Dallas and the market is still pretty good.

So I know it’s different by market, but are you seeing people across the board you’re tied to a lot of people. Are you seeing them change their extra strategies in this market? Yeah. Yeah.

Tim: I think on the wholesale side it’s been really impacted because a lot of. I can’t say dumb money. Cause it’s actually really smart money.

A lot of the overly aggressive money has just pushed pause. Um, right. The yield buyers, the hedge funds. Um, a lot of them are just like, eh, we’ll wait and see. Uh, because there, if it creates a falling knife, they benefit. If it doesn’t create the following knife, it doesn’t hurt. ’em right. Like they’re not trying to feed their family [00:22:00] right now.

Right. Right. When, when you have billions of dollars, you’re kinda like, nah, that’s fine. Um, so I think, I think it’s hurt the wholesale market more than anything. Um, mainly because when a big slice of demand dries up or vanishes overnight, um, you know, those that are still out there buying. Let’s just face it.

Investors are sharks, right? If, if you’re looking at a wholesaler list and you start seeing a lot of price reduced, all of a sudden, there’s not a feeding frenzy, there’s a, Hmm. I’ll have to watch that. Uh, and, and so I, I think the wholesale market’s being impacted a lot. And so you asked what we’re doing different, uh, you know, I we’re really just looking for deals that we can hold tail, cuz I think there’s still a very limited amount of inventory.

I think if you can put it on the market, you’ll make money. Um, I’ve been buying some lots, uh, that’s been fun. [00:23:00] Um, and at our, like at RCN, you know, you, you, you limit before we were pushing to an ADL TV type loan, a TV’s not the best idea right now. And not just as a lender as. Borrower as a flipper, right?

Because the, the previous nine to 12 months, if you bought it 80, you were exiting probably at 105. Right now. If you buy it 80, you may exit at 97. And if you exit at 97 and you bought it 80 as you and I both know. There’s not very much meat left on the bone at all. Right. If you en encounter any problems in your project, you’re probably in a losing money situation.

So, you know, we look for more liquidity now, we’ve still got some investors that we’re doing a hundred percent financing for it’s frankly. Uh, you know, it’s the customers that, that have a good [00:24:00] story. They, they they’re like, no, I have this much money and this is my plan. And this is what I’m doing. Uh, one of your, uh, investor fuel members.

We’re doing five, six loans a month for him. Uh, he’s taking 10% off the ARV in his numbers, like just, just in case the market goes bad. And when I tell that to the capital markets folks, it impresses them. Yeah. Like he’s asking for a loan at a hundred percent financing, but it’s not a hundred percent. It’s a hundred percent of.

Of a 10% haircut. Right. So correct. Uh, it makes you, it makes you feel like you’re doing, doing business with someone that’s thinking ahead, ahead of the game, which then makes you wanna lean in

Mike: with them. Yeah. Yeah. And that conservatism is good. Honestly, it’s, it’s probably, uh, helped me, you know, really not lose money on many deals at all.

A handful of deals over all the years, 15 years, really. Um, and, uh, but you know, it’s caused this kind of weird time right now where I think [00:25:00] wholesalers. Have dropped their prices on what they dropped their offers on what they’re willing to pay. And I think a lot of retail sellers, a lot of let’s say, sellers are hanging onto that equity, cuz it’s more equity than they’ve ever had.

They don’t wanna give it up yet. Right. And I, I think it’s kind of caused this like gap that we’re all everybody’s like, what are you gonna do? I don’t know, what are you gonna do? I don’t know. What are you gonna do? Everybody’s kinda waiting for somebody to give. Right. And, and something’s gonna give right.

Either wholesalers are gonna figure out a way to pay a little bit more by having a creative offer of some sort or whatever. And the seller. Or sellers are gonna get in a situation where they have some distress, they’ve gotta bill to pay. They’ve got something going on and they’re gonna have to cave and it’s gonna happen.

That’s how markets are made, but it’s this weird period where it’s like a standoff, right?

Tim: Well, John bys, uh, I don’t know if you follow John, uh, little bit, he put out a stat last week and it was something to the effect of 73% of existing mortgages are under 4%. [00:26:00] It was, it was a, it was, it was crazy. And yeah.

Then when you looked at it again, it was like 83% were under, uh, 5%. And so it’s like now you can’t really get a rate under 5%. And so it kind of starts to show you it’s it’s not just holding onto the equity, Mike, it’s holding onto the affordability.

Mike: Yeah. Yeah. Yep. Um, let’s talk about, uh, relationships with lenders.

So I, I recall, and I’m not trying. Uh, you know, drag out any bad memories or whatever, but I recall when, um, the downturn was happening, oh, 8 0 9. I was just coming in. So we were naive to what was going on. We fortunately had a couple of lending relationships that were pretty strong. I know you had some lenders pull the rug out from under you a little bit.

And some of it was. What a lot of folks have dealt with, uh, over the years is they get really comfortable with one lender and then something [00:27:00] changes and, and they had all their eggs in one basket. Right. And I know, even though you are a lender, I know you prescribed to having multiple relationships just in case things change.

Right? So talk about the, the importance of having relationships with multiple lenders in a changing market. Like this, I’m gonna

Tim: talk about that, but I found the sta it was so check it out. 34% are below 3%. 39% are, are between three and four, 18% are between four and five. So when you add it all up, it was 90% are below five of existing mortgages.

Like it’s insane. Yeah.

Mike: Uh, I wish I should have refinanced all my rentals. I never, I never did it. Dang.

Tim: Poor guy that told you that. I know. Yeah, I know this , you know, like the thing about lenders, I’m gonna quote the great late [00:28:00] Fred Burley and most people listening have no idea who Fred is. Fred was one of the, basically the money people that helped kind Angelo start home busters back in the nineties.

Uh, Fred called me in 2000. and said, Hey, Tim, um, uh, Jefferson bank would like to meet with you. They’re looking to loan money for more investors. And I told Fred, I said, no, Fred, I’m good. I’ve got enough banks. And Fred said to me, something that I, I, I now repeat as often as I can. He said, boy, you never know when a bank’s gonna tell you to go to hell.

And then he went on to tell me I better meet with, uh, lane over at Jefferson. And I said, yes, Well, fast forward to April oh eight, had a line of credit called due at, uh, first bank of canyon Creek, which is no longer in business they’d been bought out and bought out and bought out. And it’s called the line of credit was called due because most people don’t understand in a lot of bank financing and the, in the paragraph that [00:29:00] says that their rate can renew and adjust.

There’s also a little sentence that says this note may also be called due and. And so what happened in April of oh eight, which if you’re too young to really understand what that date means, it means there was no money available for anyone. Uh, they called and said, Hey Tim, thanks for never missing a payment.

Thanks for having all of your houses rented. You have 30 days to pay off the line, right? It’s like, huh, you’re welcome. And what I found out is the people that were behind the people that were struggling, the people had Vacan. They all got workouts. It was those of us that the bank thought they could get money from that they called their notes to.

Right. So people may be listening, thinking, wow. I mean, I’ve got plenty of money. I’ve got great credit. The bank would never call my line due. Well, that’s actually. When you need money, you don’t call the broke people in your family. Right. You call the ones that actually have right. I mean, so that’s, that’s the thing is like, I didn’t know that, and that was 14 years ago [00:30:00] now.

And, uh, if it, anyway, the whole point is if it wasn’t for Jefferson bank, I would’ve been foreclosed on all those rentals. There was nobody else that would loan me money at that point in time. Yeah. So, so the, the message. You can never have too many lenders. You need to understand the entire financing market.

And it is always too late to look for money when you need it. You wanna look for money when you don’t. Yeah. Yeah.

Mike: Um, Let’s talk a little bit about, uh, in terms of kind of writing out these cycles. I, I think it’s critical, obviously I’m biased because I run, you know, one of the best masterminds in the country, but just the importance of surrounding yourself with the right people.

Right. I think there’s a lot of reasons and we’ve always said that masterminds or coaching or different groups are very powerful to get you to the next level, but I. In a, down in a changing market, I’m gonna say downturn, cuz it’s not really, hasn’t really been a downturn. Right. But just a changing market of being able to get in the right room of people and talk about what are you seeing what’s going [00:31:00] on here?

And you’ve been doing this for a long time. Like how, how important is it to surround yourself with the right people that can probably one make you feel a little more confident? You might be on your own if you’re on an island and you’re kinda wondering what heck’s going on, but two start to talk about tactics and tricks and whatever it takes to kind of not just survive, but thrive during a challenging time.

Tim: I think the reason that there’s that old cliche, there’s no such thing as a stupid question is because everybody learns and absorbs information in different ways and I’m the type of person. And so is my wife that we like to play intellectual pitch. Right. It’s and I can tell you do as well, Mike, and that’s why that’s probably what makes you such a great podcast host.

And it’s, what’s helping me with my podcast is when I ask a question, I’m actually very interested in the answer and not even because I wanna change, but it’s just information. It’s data it’s opinion. So I, you know, [00:32:00] the previous, I’d say four years for me joining RCN last year as the executive director. I was functionally retired and I’m going three places with this answer.

And I ate a lot of barbecue and I hung out with my contractors and my wife and my kids. So in that list of people, there’s not a lot of high achieving, highly intelligent human beings. Uh, my children, you know, are my children and my wife is high achieving and high intelligence, but the contractors in general aren’t um, and so what happened is I didn’t even realize that I had degradate, degradated my own opinion of myself and my own.

Uh, uh, belief systems and the best thing about joining RCN capital. So we took finance of America public last year, [00:33:00] which then I didn’t have a non-compete anymore. And that’s when I joined RCN. But the best thing. Uh, about, uh, . Uh, the best thing about joining RCN has been the masterminds, uh, the family reunion, which you’re in and the investor fuel and the others, because I get to be around people that have just.

Just just desire. Right? They’ve got that hunger and that hunger’s contagious, man. And, and when you, uh, I, I, I give a lot and I answer a lot and I know a lot, but like when you, when someone asks something and you say something, you’re kinda like getting your pin out, you’re like, shit, I better do that too.

Right. Like, um, I, I wrote down on one of the pieces of paper. I said, you suck. Right. And he was talking to myself, right. Because. I think when you’re just around those people, it just, the rising tide truly does lift all boats and you’ll, you’ll find answers to problems. You didn’t know you had, [00:34:00] but you’ll also, you know, I believe that when you help other people, the, the universe helps you back.

Mike: Yeah, no, there’s no doubt that, um, if you put enough Goodwill out there, like that stuff comes back around. Right. And I think it’s, it’s like a lot of things in life. You can’t say, well, I did this great thing today and I’m probably gonna get this great thing that’s gonna happen to me tomorrow. It’s just like, uh, you know, if you, if you’re kind of laying bricks and building a brick wall, it just builds up over time to where it’s, it’s something substantial.

That’ll, that’ll help you in your business. And, and I think, um, you know, it’s the. Foundation of investor fuel. Uh, that you’re a part of is to just give, like, just give, give, give, share in any way you can. And I’m just telling you the biggest givers we give away awards for the biggest giver, right? The people that give the most are the people that I’ve seen, their businesses increase the most because they get back, they get it back tenfold.

And, uh, also like you said, I’ve always believed this. And I hate when people say I don’t really do a lot of new investor coaching anymore. I do a little bit, but I’ve [00:35:00] done a ton over the years. And I always hate when people say those. Can’t do like teach and I believe that might be okay for some university professors that have never had a real job.

Right. Maybe. For me coaching and teaching people and being at the front of the room, whatever it is, uh, has always helped me level up for what you just said is like, it forces me to say, I have to practice what I’m preaching. Like I have to do this better. I have to get better. If I wanna stay the guy that’s in the front of the room or on top, I have to keep leveling up.

Right. And it’s some level of accountability. It forces you to just like, not just have an opinion. It’s like you have to act on that opinion. Well, someone

Tim: asked me over the weekend who my greatest enemy was, and I truly don’t have any enemies as far as I’m concerned, but also, I mean, my biggest critic, my biggest enemy is myself.

Like the actions that I do and I don’t do. And I, you know, I think the biggest resource [00:36:00] that a man can have is the. Right. But because really, and truly when, when, when something’s not going right, look in the mirror, most likely it’s your fault. And you know, when you go to these places and you hear a 26 year old kid wholesale at 200 houses a year making 10 million, and you’re over here, I’ve been doing this 20 years and I do.

You’re kinda like, wait a second, like, am I leveling up or am I leveling down? Am I doing this on purpose? Is this, is this part of the plan or is this complacency and laziness and, and, you know, I have those conversations with myself in the mirror.

Mike: Yeah. Cool, buddy. Uh, what else are we missing here for kind of writing out market cycles?

We, we talked about a bunch of different stuff here. What are we, what are we missing here? Somebody said they wanted to buy your wholesaling business. If you decided to shut it down, couple folks commenting on creative finances is [00:37:00] ripe for the picking, which I agree. I mean, those, some of those, some of the best assets for these houses is not necessarily the house anymore.

It’s the mortgage, right? That’s, that’s come along with it. If you can get us up to you. Right. Um, and so anything else we missed on kind of riding, riding this roller? I say roller coaster, but I

Tim: think. I think number one is shield yourself from negativity. Um, and, uh, number two is you have to understand right now man in the mirror.

Yeah, let’s go for it. Uh, right now percentages are gonna be very, very mislead, uh, because I, if the days on the market in Dallas Fort worth increased by 100%, if they doubled, we would still be half of. Yeah, so they would’ve to double and double and double, but you know, there, there there’s all this look, I mean, media has become about advertising and eyeballs.

So be careful what you led into your brain. [00:38:00] Part of that’s by who you surround yourself, you like. Be careful getting news from Facebook. Uh, I know we’re live on Facebook right now. uh, our headlines

Mike: and articles. We’re not being fact checked here, anybody, so just it’s all facts just believe me. ,

Tim: you know, I, I, I think that’s probably, uh, number one, be careful where you get your information.

Number two, surround yourself with people that are in or are on the same journey as. Right. Like they’re either where you’re at or where you’re going, not where you were. And too often, especially from this entrepreneurial world where we all kind of have to create our own, um, uh, successes where we came from is just not like full of.

Rock stars that are gonna help us get where we want to go. Yeah. And it’s not bad. It’s, I mean, [00:39:00] you’re not being condescending or elitist because you want to do better for your children or your family or your, your, or frankly, I can’t ever help parents if I needed to or wanted to, if I don’t take care of my business.

Right. Yep. Uh, so I, I. At times like this number one, focused on focus on data and facts. Number two, be very careful who you let around you or into your ear. Uh, and number three, um, uh, it it’s, it’s multiple extra strategies. I think, I think, I think right now, anything that you’re doing in real estate, you need to have at least two outs.

Mike: Yeah, that’s good. And, and I think, you know, what’s interesting to me, I think I said this, uh, I might have said this on your podcast while back when I was on there, but I believe this there’s always people that, like you think the market is hard, doesn’t really work the way it used to anymore. And then some young buck come up and just [00:40:00] like, come outta nowhere and they’re just crushing it.

Right. And, and the thing is, is, and I was, I was that guy one time, like you thought I was crazy when I was coming in and I didn’t know what, I didn’t know, but we still did really well. Right. And I think for us to have been around for a while, so I’m talking to two people. The younger folks that are getting started and coming up, like, don’t listen to anybody.

That’s telling you that this, this doesn’t work in the new market or wherever we’re going, because it does. There’s still people that need houses. There’s still people that get, you know, are going through difficult times, death, divorce, problem rentals, whatever that are gonna be willing to sell their house at a discount, just because of convenience, not necessarily, you know, to take advantage of those folks.

They’re, they’ve gotten themselves in that problem. You might be able to help ’em through it. So I’m talking to the young folks that are coming up that are. don’t listen to what the naysayers say, because you know, there just could be old curmudgeons. And then on the old curmudgeon side, it’s like learn from these young books of like, how did they come in?

And it was just really what was between their ears. Right. That said, Yeah, the cheese has [00:41:00] moved, but I’m gonna go find it. Right. And so it’s, it’s to learn from these people. One way you do that is obviously by surrounding yourself with them, but also not having these preconceived notions about here’s, how it used to work.

And it just doesn’t work like that anymore. You’re right. It doesn’t work like that anymore, but you have to change if you wanna, if you wanna just not just survive but thrive. Right. And I think, you

Tim: know, there’s this amazing concept that used to be taught in the public schools called. Um, and, and math is just the backbone of making money in real estate investing in probably a lot in finance, for sure.

And so there’s a mathematical solution for every problem, as long as you’re willing to do the calculations. Right. So if, uh, Oscar, the owner owes Larry the lender. A million dollars and the house has only worth 900,000, but it’s a 2% interest rate and [00:42:00] you pencil it out and you can cash flow two or $300 a month.

And everybody’s on the same page. Like that could be a great investment. Could be a horrible one. It’s gonna depend on your own math, right? Mike is so rich. He only wants a 25% return if he’s gonna spend his money. Right. Whereas someone else may be looking at nominal dollars, not percent ROI. And so I think, I think you gotta learn how to do your own math and run your own race.

But then when the biggest caution is when the math doesn’t add up, like when you’re building that spreadsheet, You start, you’re able to tell that deal, doesn’t work. Don’t try to change the numbers. Don’t change the inputs. Right? You can change the formula you’re running, but don’t change the inputs. Don’t lie to yourself.

Uh, and then the last piece of advice on that topic is you cannot rehab your way out of a bad buy. Yeah. Uh, one of the ways I’ve seen the most investors go [00:43:00] bankrupt in the 20 years I’ve been doing this is the ones that know they F up and. Over fix the house or, or keep it for a year. It, it will not only drain you financially.

It will drain you emotionally. You will wake up every day upset and not focused. And then when the good opportunity comes, you’re gonna have a crappy attitude and you’re not gonna capture. You’re not gonna

Mike: seize the day. Yeah, that’s a good one. I’ve seen, I’ve seen that a lot too. And I think that could be happening a fair bit now of people that are primarily wholesalers.

and they might overpaid a little bit for it, I guess, given the market depends on what market you’re in. Right. And they can’t, they can’t make what they want on. So like I’m just gonna rehab it and you, you know, if somebody else didn’t want it at those numbers, why would you double down on that? Right. Just you shouldn’t do that.

So, you know,

Tim: when I look at all the toxic rental properties I had to sell in nine, 10 and 11 and 12 and 13 and 14, uh, that I had kept [00:44:00] from before the crash. They were exactly that Mike, they were the houses. No one else wanted. Right. They were the houses that were on MLS for 120 days. Yes. That used to be a thing and nobody bought ’em and money was easy and we would just refinance it and keep it, refinance it and keep it.

And that’s the other thing don’t keep the house. No one wants if you’re gonna be. Yeah. I mean, if you’re gonna be in this, that investment should be the house that everyone wants.

Mike: Yeah, you and I know, again, I won’t, I won’t say any names there that high volume guy here that, you know, tried to wholesale everything, and if it didn’t work, he would either just I’ll rehab it or just keep it as a rental.

And so you’re keeping your crap or you’re trying to rehab your crap. Uh, and that’s just not a good, that’s just not a good model. for sure. Awesome. Well, uh, guys, thanks for, uh, joining us today. We got a few more minutes left here, a couple things, one. Thanks for all of us. Uh, all of you that have, uh, been joining us live.

If you’re not live, or if you are live and you [00:45:00] don’t know how you got here to make sure that you, uh, find out how to get us next time and you can join us live for the whole show to get some notifications up front and to get access to all the other shows that we’ve recorded here recently, go to flipper.com/group.

Dot com slash group to register. And we’ll let you know when the next episode is, and we’ll give you access to the, uh, previous episodes as well. And, uh, before we go, Tim, how do folks, obviously you’re done a lot of in real estate investing in the Dallas Fort worth market, and now a big part of RCN capital.

If folks wanna connect with you in any way you’ve got podcasts and, uh, all sorts of other stuff, where, where should.

Tim: Yeah. I mean, if, if you can figure out how to spell my name, uh I’m I’m on

Mike: all the social media. It’s right here on the screen. If you can’t copy that down, then

Tim: God help. All the social media channels.

I’m just at Tim har. Uh, if you Google Tim heritage, you’ll find thousands of articles and videos and blogs I’ve done over the years. I have a daily podcast, the real investing podcast where I answer [00:46:00] people’s questions. Um, that’s been really fun to do Mike. Yeah. Uh, I’ve got it down where I can bang out two weeks worth of content and, and answering questions in an hour.

It’s just really been fun. And then we have the weekly RCN capital, uh, uncontested investing. Which is, uh, presented by R I Inc magazine in a partnership with RCN. Um, and you know, if, if you are an investor out there and, and you’re not in touch with RCN, you need to get in touch with us. Uh, even if you’re happy with your loan sources, uh, you look, it doesn’t take much in this type of unstable economy, um, or not economy, unstable capital markets, interest environ.

One wrong move can tank a lender. Um, sure. And I got in April, a guy from a company I’m not allowed. I won’t talk. The company was a bit of a cocky a-hole of me at a copper. I was like, how can we work together? Cause that’s my question. Always, Mike, how can we work together? Right. [00:47:00] Like, and he’s like, ah, we, we do our own securitizations and you guys could never, you like, he was kind of rude.

Well, they’re out. Literally between April and that, because they did so many loans at the wrong structure, they didn’t move ahead of the market that the market crushed them. Yeah. Like hundreds of millions of dollars crushed it. Yeah. Yeah. So, so yeah, I mean, get to know us, get to know me, follow me, friend, me, be my buddy.

And, uh, uh, we will get people to talk to you that are much smarter than me about financing, uh, real estate. I. Awesome.

Mike: Good stuff guys. Since we’re live, I’ll go ahead and say this. We have, uh, uh, one other couple, a couple, I guess I’ll give a couple plugs here. It’s my show. I can do what I want, right. Is, uh, next week.

Literally next week, August 31st through September 1st, we have million dollar meeting. The last time I looked, we had like six seats left. So if you go to million dollar meeting.co, uh, you can get one of the last couple tickets that are there. It’s an amazing event. It’s the best [00:48:00] event of the year. As far as I’m concerned, I’m biased, but I’m just telling you, it’s a great event.

We’ve got like 22 speakers. Tim’s actually one of them. Uh, and we have a lot of amazing speakers and this is, this is what I. I asked 22 people to come share a half hour of their very best tip on a topic. Right? So it’s not, nobody’s pitching anything. It’s not a pitch Fest. It’s just great information on how to do this.

And then if you’re a VIP ticket holder, we have dinners, uh, both nights. And it’s, it’s really just amazing. Honestly, it it’s, I need to charge way more for it. Uh, but it’s, it’s a great event. Million dollar meeting.co is how you learn about that. And then while Tim’s here, Tim’s also in my mastermind, Tim, we’ve been investor, fuel’s been going on for five years.

I remember there were times, uh, you’ve only been in for less than a year, even. Right. So we’ve been friends for a long time. And actually for a while, when you were just an investor, you weren’t with RCN, we were full in Dallas. Right? You were like, how you, how am I gonna get into this thing? I’m like, sorry, I can’t let you in.

Yeah. But I’m glad you’re here now. And uh, honestly guys, we have just an amazing family of real estate investors, uh, that [00:49:00] come together and kind of do life together. Really help lift each other up in our businesses and build better lives together. If you go to investor fuel.com, you can learn more in our next meeting is honestly just right around the corner.

So, uh, Tim, thanks for joining us today, buddy. Mike, thanks for having me,

Tim: bud. We’ll see

Mike: you soon. Good to see you, everybody. Again, go to flipper.com/group to learn about our next show and our past shows. And until then, we’ll see you on the next episode. Thanks for joining me on today’s flip nerd live to get access to our upcoming interviews with experts and get your questions answered and join our free online community.

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