What is happening, everybody? It's Matt Faircloth. Welcome. Welcome. Welcome to our Mentorship
Monday Program. If you guys don't already know, Mentorship Monday works like this. People
send an email to helpme@derosagroup.com and that puts you into the queue to get on our
show, our weekly show, Mondays, 4:00 PM Eastern, every week, live. Let's get to our guests
on today's show, man. These are folks that sent in questions to helpme@derosagroup.com.
That's helpme@derosagroup.com. We'd love to have you guys join us too. So after you send
that text over to 66866, send an email, send a question to helpme@derosagroup.com. We'd
love to have you guys join us on next week's program. Justin, who we got?
Well, first off we have Raj. Hey, Raj. Welcome, man.
Hey, Justin. Hey, Matt.
What's up, Raj, how are you?
To paraphrase my question, essentially, I've done some research. I'm actually in the process
of reading your book. That's the first thing I know that you mentioned so that's definitely
there. I've noticed you've even done videos with Vinney Chopra and everybody like that.
That's my man. I love him.
I was looking into syndication. I think in theory, everything sounds great. Applications
wise, that's where I haven't done it yet. I think I'm looking for some insight from
people that are experienced, such as yourself, on how to get started on the syndication process.
Because I think the one thing I've learned is, is I know how to save money, but one person
can't buy a commercial property like myself out of college or get close to it. But there's
building blocks and foundations on how to get started like how you said when you and
your wife started with that single home in South Philly. So I'm looking for insight on
how to do it. Because I know like there's conventions and such out there, but right
now, I don't know due to the whole crazy world nonsense going on right now.
Corona-crazy is [crosstalk 00:01:47].
Yeah, we don't know what's going on. So I was looking to see if you could shed some
light on me with how to get involved with something like you're doing right now for
a novice, such as myself.
I got you. I'm sighing because a lot of the-
I had to come back in [crosstalk 00:02:01].
Yeah, come on in. I'm not saying this because as a judgment towards you or whatever it is,
but a lot of folks want to start and begin their real estate investing career in syndications.
They want to like, "I want to go do a deal. I want to go buy 100-unit apartment building
deal is my first deal in real estate." Now, I'm not saying that's you, but a lot of the
shame on them gurus are out there pitching people on programs or on, "Just pay me five
grand and I'll show you how to do it." They don't give a shit whether you buy a deal or
not, all they want to see you do is give them five grand and that. So there's a lot of snake
oil salesman and saleswomen out there that are preaching get rich quick, or get in quick,
or get started quick type of schemes. You got two paths you can choose right. You said
that you're just getting started. So if I may be so bold, do you live on your own or
are back with folks fresh [crosstalk 00:03:01]?
So I'm back with my parents.
That's cool.
I can tell you I'm debt-free right now. I paid off my school loans. For the past year
and a half, what I've been looking into is real estate. So I've just been saving.
Good for you.
The thing is I have a few acquaintances and friends that I've spoken to them about, but
it doesn't seem as if they're serious. I tried to ask some family like I said in the question,
it doesn't seem like right now I have the support. So I'm like, "How does one get there?"
I know in this business-
You don't start on the big stuff. You're putting too high of a bar for yourself.
Crawl before you can walk and start with something, something that's tangible that you can do.
So, what can you do? What can you do? Can you buy a $50,000 house in Trenton? Maybe,
you're not too far away or your town, Levittown, or whatever, or maybe you can join a team
or partner with someone else. There's other ways of getting into it and getting started
without saying, "Yeah, I'm going to go start with a 100-unit apartment complex."
That's what I was going to recommend to your, Raj, is two paths. You can pick which one
you want to do, and you don't have to do just one. You can actually do both of them kind
of simultaneously. You either start small or you join a team. Starting small means getting
going on small deals buying single, double, triple, triple family, through a triplex,
quadruplex, or less like four families or less, qualify for the FHA, low-money down
mortgage, 3-5% down, qualify for that. Get into a deal. If you're living with mom and
dad, that is your first move. That is your first rental property. You will not get better
financing than that.
If you've got some money saved up, go buy a small multi. There's neighborhoods all over
Bucks County where you live, and it's the best gig you're going to get because you'll
zilch all your living expenses or maybe make a little bit of cashflow. I get mom and dad
might not be charging your rent, but at least you get your toe wet in real estate and you
get to be a landlord even a little bit in a residence. That is step one.
Step two, in starting small, you double your portfolio every time you do a deal. So if
you buy a two-family and you live in one unit, the next time you do a deal, you buy two more
to make your total portfolio four units. Then you buy a quad that makes you eight. Then
you buy an eight-unit, then you're up to 16. Then you buy 16, and you're up to 32. You
buy 32... You follow me, right?
Yeah.
It adds up quick. It adds up quick, and you take little bite-sized chunks off the apple
that are just beyond your comfort zone instead of trying to get started in syndications,
which is three and a half miles outside your comfort zone. Okay?
Mm-hmm (affirmative).
You're not going to get there. There's too many things that could smack you down in scaling
up that fast. The guys that are out there telling you to do it, they're telling you
that can do it from jump street are selling you something. That is the other option is
to join a team. Yeah, and you don't need to take some knuckleheads $5,000 program to join
their team. There's plenty of people out there that are just there to try and help you. Not
even trying to help you, but if you can help them grow, then you can get a small taste
of their deals.
So if you help a company like the DeRosa Group find the department building... We're working
with a guy right now that found a 78-unit in South Carolina. 78 units is bigger than
what he could handle on his own so he's bringing it to me and Justin to help him with that
deal. We're going to take it over, but he's going to get a nice chunk of that deal. And
all he did was turn over a lead. He turned over lead. He negotiated a purchase price,
got the owner under contract, and then he brought it to us. You can do that too.
Because of that, he now will get experience buying, owning, managing, and running, and
then eventually selling an apartment complex. Now he has credibility, and all he had to
do was get his foot in the door and bring a value to someone else who could help them
bring them to the rest of the way.
Those are the two paths to get there. And you can do both. Buy the two-family while
you're also networking with big owners. There's too many hornet's nests you can step in by
trying to step into this business that big. Does that make sense, Raj?
Yeah, absolutely.
I didn't burst your bubble, did I?
No. I mean, I know you're an engineer too so I understand logically where you're coming
from with this as you're explaining it to me. I'm just glad that someone is telling
me... they're looking at it from my point of view in this day and age. You're telling
me, "Hey, there's way too many variables you'll hit that you might not even know how to solve."
So I'm glad that I'm getting that reassuring information from you and Justin. Because you
can go anywhere and read a book and in theory sounds so great on paper, but application,
it's a different ordeal. So that's why I'm just glad to know that I'm getting this honest
feedback on what I should expect.
Yeah. Hey, Raj, I would also say that you should surround yourself with folks that are
doing it. So for me, that meant going to my local REIA meeting, which actually is where
I met this guy like six years ago or something.
This guy.
This guy. So I run a meeting in Princeton. It's probably 25 minutes from you, right?
Yeah.
Pre-corona, we meet once a month. Now, we're meeting online every week. But surround yourself
with people that are doing it, and you can follow their model and you'll start to meet
potential partners and you'll start to be able to ask questions and buy me dinner and
we'll chat. You know what I mean? It doesn't have to be me, but find someone that you want
to talk to and build relationships with because there's a lot of people that are doing this
type of thing and you want to be in those rooms and meet those people. You don't have
to go to a big conference across the country. There's organizations in your area in Levittown,
in New Jersey, plenty of people you can meet in your area.
Thank you both.
You got it, man.
Cool.
All right.
I have some experience, and it was good to hear Raj and great advice you gave him, by
the way. I really liked that. Yeah, start out small and build from there. I've raised
a 230K and-
Congrats.
... pretty awesome, not too bad with only three people. The deal is for 250, but I'm
trying to raise 275 just so I have some money set aside after the deal is up and running
so in case I come across any problems, I'm ready to go. So my question to you is I tapped
into the people that I knew could potentially have it, so these are personal contacts. Not
too bad, I tapped into five people. Three out of five said, "Yeah." So great sign I'm
on the right track. I mean, that's pretty good, right?
That's a good batting average.
I was just going to say the same. I'd take that for batting average any day. Now I'm
stopped there. I could fund the rest of it with my own money, but that would kind of
go against the whole principle. I'm trying to move away from using my own money because
I know that I can't scale a business if I'm continually trying to fund the business with
just my own money myself. So, what do you recommend? Once you've tapped into the people
that you do know you can tap into, where do you go to next? How do you continue to expand
it so I could try to close this deal out and move on to my next one?
Cool. I would go to the investors that got in. You had three that came in and one that
told you no.
Three that came in, and two that told me no.
I would go to the three that got in, ask them if they can refer you to anybody in their
network that would be able to lead you the other 50. That's number one. Number two, are
you borrowing, or are you doing equity?
It's total borrowed. They'll have no equity in the deal, all day.
It's all debt. Okay. What interest rate are you paying?
So I gave them different rates depending on how much they're giving. So I basically put
a whole table together and based on how much they would give. If they gave 50, they give
a certain amount. They give, 100, they give a different amount. So it's around [crosstalk
00:10:27]. Yeah.
With that last 50K that you need, just say, "Listen, I'll throw you another percent on
your entire loan if you put in another 50 grand." The easiest place to get money is
people that have already committed to give you money.
I totally agree with Matt's advice because your investors already are in on this. They
believe in you. They believe in the project. I will say that you mentioned that you could
fund it, and so I don't know what your timing situation is like but if you're taking on
debt, you could fund it and still continue to raise this as debt and basically buy yourself
out. I would hate for you to miss out on an opportunity to-
That's the cheapest option. Sorry to cut you off, Justin.
That's all right.
The cheapest option for the deal is for you to front the equity and not charge yourself
interest. Right?
Mm-hmm (affirmative).
That is the best cash flow for the deal. You're buying a property for what? 225? 75?
250.
250. And I own a building three doors down from the one you're buying, and I might appraise
for 550.
Yeah, that's amazing.
Just letting you know that you got a bunch of upside. Right?
Right. I hear you.
Yeah, so God bless you. So what I would do is I would get in there, raise rents, do some
light mod, find a way to squeeze a few more dollars out of that property and refi it because
you'll probably value out at 400. Be willing to put your own money or you can gamify this
thing and just make it like an interesting game you want to play with yourself to see
if you can raise the money just because, just so you can pound your chest and say, "I raised
all the money for this deal."
Yeah. I mean, it is a bit of a challenge. I always have the ability to put it in myself,
but I feel like it's almost a crutch. This is a stretch for me. I do get the financing
side of it. It's obviously cheaper to use my own money than it is to use someone else's.
Because see, this is the convincer to me, you're last person on was talking about going
to syndicate and I totally agree jumping into that is a bit crazy. So I basically leveraged
my way up the scale to this point. So that's how I've gotten the properties that I have.
I realized after a while, that game, while you can do it, it takes a lot more time. It
takes a lot of time. If you really want to grow fast, you've got to get more funds coming
in to make it happen.
Oh, yeah. Well, to comment briefly on that, I would tell anybody stay with debt for as
long as you can. So we had a ton of investors and we were getting bigger deals, so we had
to get to equity to take down the bigger deals that we wanted to do. But given the size stuff
that you're doing, man, I would absolutely stay with that for as long as you can and
same thing for Raj too. Then just if your money goes in or even of investors' money
goes in, find a way to refi this deal as soon as you add some value because I think that
you've got a lot of upside on this thing.
Makes a lot of sense.
Pierre, then the last thing I'll say is start telling everyone about this deal as a success
story as soon as you close on this. Because you need more than five people that you can
call about the next one. You want to build that base larger and larger, and use this
story of this deal to talk to more and more people about it so they get excited so then
they're going to be knocking on your door, asking when the next one's available.
Use this as your stepping stone. Use that as your scale-up bragging rights.
I feel it's coming. I believe it.
It happens fast.
I feel it too.
Yeah. Yeah. Thank you so much.
Another great Mentorship Monday, guys.
More great advice, people scaling up.
Helpme@derosagroup.com, that's where you want to send your emails. We want to see you here.
These have been great programs. I'm really so grateful, Justin, we decided to start taking
these things live and broadcasting them.
It's fun. It's a lot more fun.
For years, I've been reading off Mentorship Monday questions and answering them one way,
but it's just such a better dynamic to just have a conversation with people. So I'm really
glad we thought of this program. Guys, we want you guys to contribute, helpme@derosagroup.com
to submit your questions and come join us at Insiders. Text the word DeRosa to 66866
right now and come join us because we've got lots of cool stuff coming down the pipe at
Insiders this week and next week. So I look forward to seeing you guys there.