Getting Started: Close Your First Deal with Guest Co-Host Robert Orfino

TRE 33 | Closing Your First Deal

 

Getting started in real estate can be brain wracking especially when you do not know where and how to begin. This episode can help you loosen up your nerves when entering the real estate investing world. Jason Bible and Robert Orfino start off with some motivation to get you started on closing your first deal. They share some techniques on how to invest with money or little to no money. They also dish out some factors that can positively affect your business such as having good personal credit and promising financing structure, as well as networking or knowing the right people to guide you in your business.

Listen to the podcast here:

Getting Started: Close Your First Deal with Guest Co-Host Robert Orfino

We did a little bike ride. For those who are in the cycling community in Houston, I don’t know if they do it annually or twice a year. They’ll put together a great little Heights tour. You ride around the Heights. How was that?

I got a good old time with Curtis and we got to figure out if there was a career there in the Heights. It was very good. We are in the Heights and we got a little low down in the areas that are up and coming. There are still opportunities there. We got some price points, looked at it and felt pretty good about some of the decisions we’re making. We’re liking it and obviously the next ten years, anything inside that loop, that’s all gentrification.

I drove Sarah by the Heights house that we bought. The look on her face was like, “What is that?” I looked at it like, “What’s the big deal? We do this stuff all the time.” She’s like, “Show me when they’re done.”

That’s going to be an excellent one. We actually think that’ll be a perfect Airbnb opportunity. Obviously the Heights, there’s no HOA up there. There is a historic, but they’re more towards the building structure and the building designs and finished products than they are working with foot traffic. That was the last HOA we called. They said, “That creates foot traffic and we don’t do foot traffic.” I’m like, “I think what you’re telling me is opinion and I’m pretty sure we could go ahead and do an Airbnb in your neighborhood, but we won’t because obviously it’s not welcome.” Even though there are Airbnbs in almost every neighborhood. I’ll go on the map and even when strict HOAs abolish it, there are still Airbnbs.

Go to Sugar Land and type in Airbnb. There shouldn’t be any. It’s the whole city technically.

I’m guessing there’s not a lot of Airbnb police in Sugar Land. They’re recruiting still. They’re training the Airbnb dog team to sniff out Airbnbs. They run up to your house with cleaning products you use every day.

Why don’t you get started?

We talked about getting started at different levels, no money, little money, a lot of money. A few folks reached out to us and said, “I’m at this position and I want to go on. I’m hearing this in my life and I’m at this level in my life. I want to get going.” We want to help you get going. Let’s get some properties. Let’s reach out and start that process. What I want you to guys to do as I want you to figure out where you’re at, and we talked about doing that self-audit. You can reach out to us and let’s get some houses. We have a couple of agents that we’re hiring and they’d love to work with you. It’s Mr. Texas Real Estate Team powered by Keller Williams Platinum and these guys want to get going. This is the perfect day for you to reach out, whether it’s us as agents or other agents that you know, start doing it.

I want to focus in on the flippers and on the wholesalers. For those of you out there that are thinking about buying and holding notes, something that you should be doing, you need to diversify your portfolio, “The market’s up, everything’s going great. Recession is canceled, but I’m still only making 4%,” it’s time to start looking at real estate very strongly. We want you guys to reach out to us in our, I’ll give you the number. It’s (281) 401-9008. If you’re ready to start building your portfolio, give us a shout. We’re actually hiring a broker. She’s got fifteen years of experience. She wants to come on the team. We had some great interviews. Let’s get some houses and small apartments. I was on the phone with a friend from California and he’s thinking about joining our mastermind. He was like, “Are you grabbing all the small apartments?” I’m like, “There are so many. We can’t buy them all. We can’t even look at all of them.”

As a percentage of housing stock, small apartment complexes units from let’s say 1 to 50 are a significant portion of the national housing stock. There are gazillions of them all over the place. It’s unlike a hundred units and above. When you kick out Class A and you’re looking at class B and C assets, these are the type of assets that investors like us can buy. We’re not buying class A. That’s for insurance companies. That’s for hedge funds. That’s for pension funds and that’s for big boys. For the rest of us, it’s Class C and Class B assets and when you go to a hundred units and above, there’s not a whole lot of them. I could pull up and see how many there are in the city of Houston.

The last one we pulled up, we had seventeen that closed in 30 or 45 days only.

There are about seven or eight that will close a month in Houston, Texas. I could pull up from Texas A&M Real Estate Center. How many of those have sold in the last couple of months, how many properties sell in a quarter? If 100 sell in a year, that’s a crazy wild year.

TRE 33 | Closing Your First Deal
Closing Your First Deal: Always see to it that your investment of choice makes sense.

 

A fourplex and eightplex, twelve, fourteens, sometimes they’re a little funky. The fourteen we looked at on Friday was a duplex, four, four and four. I’m almost like, “Can we get four different loans on this?” I think that’s very possible. That’s what we’re exploring. They’re still $75,000 too much, but that’s part of the process. We got to go look at it and determine if that’s something that makes sense to you guys and then figure out a way to turn it around and making sure that you’re going to get the rents that you’re supposed to be getting. Make sure that you improve all that CapEx stuff that comes back and haunts you and get into it. If you read the last episode and said, “I’m one of those people that need to get started,” then let’s get started. I want you to feel good about your first step, which is going to be reaching out to either Mr. Texas Real Estate team powered by Keller Williams Platinum or any agent that you have out there.

Go ahead and reach out to us at (281) 401-9008 and we’ll hook you up with our buyer’s reps and we’ll start looking for properties for you. We want that to happen. Make sure that you are moving forward. There’s no excuse right now. Go out there again if you have a little bit of money or if you have a lot of money, then let’s get going. If you have no money, then obviously we talked about some of the ways to get around that. Work some more hours, Uber, some other small things you can start doing to start building out some of those resources you’re going to need.

For those of you who are talking about maybe looking at being wholesalers, I got invited to two new groups on Facebook. One of them, I got the invite and I finally said, “I’ll join.” When you get invited to a group on Facebook, you still get their posts but you don’t get to participate in them. Finally I was like, “Fine, I’ll join your group.” That’s why I finally got to that point. I joined the group and both of them were good. I’m sitting there and I’m reading through there, some of the posts are pretty funny, but we were talking about wholesaling. This guy put up a GoFundMe page so he can have the startup capital to become a wholesaler. Instead of starting a GoFundMe page, which is fine if you want to do that, I don’t care but why don’t you become a real estate agent instead? That makes so much more sense than trying to do the wholesaling thing.

In this town, it sure does. How many transactions a month are there?

On and off MLS, it’s 10,000.

That’s a lot of business.

Real estate is an industry where the barrier to getting in that top 10% is pretty low. Click To Tweet

It’s a crazy amount of business.

I don’t want to put down our industry, but know there’s an 80/20 rule there, probably more like 90/10. 90% of the agents out there, and there are gazillion agents here are the onesie–twosies. They’re going to list their sister-in-law’s or their mother’s house and then there’s 10% of the agents out there like Rich Nickel who’s going out there and crushing it. I’d say it is an industry where the barrier to getting in that top 10% is pretty low. It’s just commitment. It’s time and it’s moving forward. It’s being motivated to do that. If you have no money, you’re going to look to wholesale and that GoFundMe stuff, I would get into being a real estate agent. You’re in the business. I would go to Keller Williams because of the Keller Williams Mortgage Program, which is phenomenal. I would just go and run with that. I would absolutely join up. We got two people out who want to join our team, but they don’t want to be in the core team. They want to go do their own thing. We’re like, “Go for it. Come on in.”

I had an investor come to my house. I was doing the thing with Curtis in the Heights and then I had to race back, but then I realized I still hadn’t got my car washed. I’m very finicky about that. I had to go to the car wash and yet we had Adam and his wife come up. Their kids were there. They came. They got three beautiful kids. One spilled a little water on himself and he immediately stripped down and he’s hanging out on my couch in his underwear. I’m like, “This guy sits on the couch in his underwear. Get your clothes dry.” He was there and that was a lot of fun and hopefully we helped his wife get some things going and talk to him about some of the things we can do in the future together. Then we had a husband and wife came in and they’re typical 401(k) investors. It’s there but they know they’ll keep looking at the numbers. If the stock market goes up 19% in a year, how come you only want up 4%?

Did they bring their portfolio and started writing down some that stuff?

We explained to them about Airbnb. They like it. It’s a little smaller investment. It’s not a $230,000 or $350,000 first position that we’re looking for. This was nice and they’re going to do very well on it. I have to be calm and I have to be cordial, but I want it to giggle because I could see how nervous they were. I remember being in that place myself and they’re like, “This is uncomfortable. We’re going to do it.” Whenever someone says, “I’m uncomfortable,” I like to clap. I’m like, “Yes, that’s the magic happening right there,” but I didn’t. I just smiled and went through step by step.

We’ve been talking to him and his family for months and they come to classes. They’ve been to our meetings and they’ve done things with my wife and all that stuff. I want to give those guys props. I’m not going to say their name because I was going to hit them up for loans, but I want to give them props for actually taking that first step forward. We went through it and said, “I’m never going to say the guarantee word. This is real estate. It’s high risk. You’ve got to know this going into this stuff, but here’s our plan. Here’s our strategy to mitigate the risk.” We had a good little meeting there and I want to give those guys some props. They’re going to move forward. We’ll be buying furniture in a week or so.

TRE 33 | Closing Your First Deal
Closing Your First Deal: In order to succeed, you have to go through the same process every single day.

 

I stayed up way too late. I’m sitting there Friday night, did the Jacuzzi thing, kids are playing, we’re all having a good time. I’m sitting there watching a little Joe Rogan. I’m like, “I’ve been sitting on this David Goggins The Interview. I’ll watch this thing.” It was so incredibly good. One of the things that David says is “You have to become accustomed to being uncomfortable.” He’s hardcore. There’s you at ten, that’s his one. He runs at twenty all the time. One of the things that he had said is, “Don’t ever double down on your strengths. Double down on the things that are weaknesses because they’re going to make you uncomfortable and they’re going to callus your mind. You’re going to become so accustomed to being uncomfortable that it just becomes uncommon. Whenever I see people start squirming and get uncomfortable, I absolutely agree with, “Now we’re getting somewhere. Their mindset’s changing.” They’re actually growing. That’s what’s happening right there. It’s no different than working out and you’re incredibly sore. Why are you sore? Because muscles are growing. It’s breaking down. It’s that whole process.

One of the things that David said is you’ve got to go through that process every single day. You’ve got to do something that is not fun every single day. I will tell you this, if you find any of his interviews, your kid’s better not be an earshot, because there is a whole lot of potty talk. He is a former Navy SEAL and he has a little potty mouth. There is a lot of Jersey talk going on. If you pull that interview up, be warned that there’s a lot of potty talk in there.

I’ll tell you story. I go see my dad every so often and I go back to Jersey. They’re doing real estate up there too and checking in on my properties and talking to folks in REIA groups. I come back and my wife knows. For two weeks, there is Jersey talk all over the house. Finally she was like, “Enough.” I’m like, “Why?” She’s like, “Stop it. You’re not in Jersey anymore.” I’m like, “Yeah.”

We do a boys weekend every year and I’m actually going to miss out on it this year because I’ll be doing a big bike ride. When I get back that next week, it’s the next couple of days afterwards, it’s like, “We need to dial this down a little bit.” It’s so funny how fast people rub off on you. Let’s talk about getting around people. What do we have going on?

We have a special guest coming in. His name is Merrill Chandler. He’s from a company called CreditSense. He’s the guy who actually helps you shape your business so that you become lendable. There’s a structure to that. It’s not something that happens in 30 days. This isn’t a guy who says, “I can fix your credit in 30 days. That’s nonsense.” He says, “There’s a path to this. There are ten steps you got to go through. Once you get through the end of these things, I can show you how to get a million-dollar line of credit and I can show you how to do that in the right business with the right business structure.” It’s business-focused. After that, it will be very much centered on business. What he shows you is there’s a method to that madness out there, which is known as FICO and D&B.

Your FICO score is your personal credit, your D&B score is your business credit, and there are ways that banks look at those and once you understand the way that the lenders are looking at those numbers and those ratings, there’s a way for you to build your business around it. Like every business that you and I are building, we’re building to sell. We’re creating systems, we’re getting ourselves in the right. We’re making sure our structure’s clean. There’s no commingling of funds. Everything’s structured straight up so that in three years, if someone wanted to buy one of our businesses, there’s a nice clean trail. That doesn’t usually happen on your first one and or three businesses. There’s always a commingling. He’s going to help us as well as helping you structure your door path so that you can get good lines of credit. You can improve your personal credit and you can start working on some of the stuff that makes your business more prosperous.

Your financing structure is going to dictate the type of deals that you're able to close. Click To Tweet

When you look at capital, capital is one of the key drivers in your business. How fast can you grow depends on how efficient in capital structure is. You can’t always borrow hard money loans to do certain deals. Holding onto something long-term, bank financing makes more sense. Maybe you need money quicker. That’s where hard money makes a lot of sense. Depending on how big you’re going to build your business, your financing structure is going to dictate the type of deals that you’re able to close.

Most businesses fail because they’re undercapitalized.

There’s not enough capital, which is important. You’ve got to have the money. In the back of my mind, I’m having these thoughts about legacy. I run into a lot of people say, “I want to get into real estate for legacy.” I’m like, “What does that mean to you? What does that mean exactly?” Folks have this perverted sense of what legacy is. A lot of people think legacy is handing down stuff. That’s the best way I can describe it, “I want to leave a legacy for my children.” That’s what I hear. I’m like, “Explain to me tactically what that looks like.” “I want to hand them this huge portfolio.” I’m like, “You realize that’s not what legacy is.” This is what throws people for a loop. What if they don’t want it? You have now built this legacy for your family that doesn’t want it who I’m sure would have loved to have spent a lifetime doing that. Then you start asking yourself the question, “What is real legacy and why is it important to me? How do I derive satisfaction from that?”

Then you start having this thought of, “It’s applying an indelible mark. You’re applying this mark on something on society, on your family, on the industry in which you work, that sort of thing. That’s what legacy is and you’ve got to figure out why that’s important to you and define what that actually means.” When I run into all these real estate investors, it’s like, “I want to leave a legacy.” I’m like, “You can leave a legacy that doesn’t have any real estate. In fact, your legacy should not be handing down a bunch of stuff. That’s not a legacy. That’s just stuff.” The other heartbreaking statistic is after three generations, they’re going to blow it all anyways so it doesn’t matter.

Your two sons see how much you work, the things to do. You’re on the radio, you’re building out a little empire. They are going to be benefactors of that, but their kids didn’t see you do it. They know you as Grandpa Jason who sits out on the deck there and shoots his rifle or whatever. They love you for that, but they have no respect for the work you put in. It’s usually that second generation, which is why I don’t care about capital gains because it all goes back to the marketplace and all ends up there anyway.

What’s so funny about that, and this is something that Gary Vaynerchuk is on right now. This is the generation in which a lot of families will start because we’ll have videos, we’ll have social media profiles, we’ll have all this stuff. Instead of six pictures of your Grandma and Grandpa. This will be that generation where a lot of that stuff starts because you’ve got so much content that is coming out in social media.

TRE 33 | Closing Your First Deal
Closing Your First Deal: Everyone’s having problems selling their houses these days.

 

There is a badass picture of my dad who’s got the whole little greased-back hair. He’s got this cool short worker jacket on. He looked like a cool dude. I’m thinking, “That’s it. That’s all you got. There’s no video. There’s no recordings and all that stuff.” If I were you, I’d go back with your camera and just have a conversation with your dad and your mom, “How did you meet? What were the real struggles? How did I come along?” You’re going to understand that legacy a lot better. It’s like, “It’s not just the things you leave. It’s that mindset.” Clearly, you are a reflection of your dad. You talked to your dad often and you share some of those conversations and you can see it. There’s a work ethic there. There’s a way to deal with problems there. There’s an investigative mind there from you and on your side of it. It’s that mindset like, “You can always get money. You can buy restaurants, you can buy hotels, you can buy houses, you can buy surf shops,” but having that mindset is probably the better thing.

You get that question all the time, “What happens if everything falls apart and your portfolio goes to zero and the world ends?” I’m like, “We’ll just start over the next day. We’ll grind it out like we did the last five years.” The fascinating thing is once you’ve got that mindset, how do you train the next generation? How do you leave that legacy? That’s where things start to get interesting because a lot of the stuff that you’ve got to do with your kids, you can’t sit down and say, “Do this, do that.” That doesn’t work. A lot of it’s observational. They’re very observational. They’ve got an idea what’s going on. If you think they’re not paying attention, they are. They are absolutely paying attention to the things that you’re doing. If you’re one of these folks that are like, “I want to leave this legacy,” you got to sit down and put pen to pad and say, “What does that look like?” Because you don’t want to spend a lifetime building something in which no one wants, because that is going to be absolutely crushing.

That’s that restaurant we’re talking about. The parents spent decades building an icon of a community. The mom passes away and the daughter’s like, “I’m out. This is not what I wanted. I’ve slaved enough for this kitchen. I don’t want to be here.” Understanding what that next generation wants is also pretty important.

To go back to your point, I do think legacy is the training of the mind. If you don’t want to be a real estate person, it’s fine. Let’s say you want to be an attorney, a doctor, an engineer or whatever it is. Let’s use that same problem solving skillset how we approach life to whatever field of study you want to be involved in. At least in our household, no matter how much wealth we accumulate, we’re not going to sit around and play golf all day. Everybody’s going to work, everybody’s going to contribute. What is it that you’re going to contribute to society? Let’s approach that with that investigative mindset. We used to call it professional curiosity where you’d try to figure out, “How do I solve these complex problems?” Maybe you don’t, which is also another side but training that, that’s the legacy. It’s not the stuff.

We’re talking about legacy and we’ve said it’s more about the lessons than the properties, because your grandkids are going to spend all that money anyway. The big lesson here is still how this social media world that we live in loves failure for the wrong reasons. They love to see people fail because roughly 86% of the population cannot be entrepreneurs. There’s just a number, 11% to 14% of the population can be entrepreneurs. For us, we failed. We’re going to fail again, “Elon Musk, your rocket blew up.” He’s like, “I’m going to build another one.” It’s the backlash that 86% of the world gives him because he’s going through it.

I love that he trolls back. He’s like, “Why don’t you show me your rocket, Bill?” It’s like messing with Edison, “You don’t have a rocket, do you?” “You didn’t invent the light bulb. That’s right. I forgot. You’re still using a candle like a caveman.”

The shame comes in not learning from your failures. Click To Tweet

We teach our kids, this next generation that failure is part of it. It’s part of the whole life experience. There should be no shame. That’s what keeps people down. Personally, there are a lot of flippers in this market who are underwater on properties because of Harvey 2.0 and nobody’s talking about it. Everyone’s having problems selling their houses and it’s a dirty secret that nobody wants to say. We’re the only guys up here saying, “This house suck because it got flooded.” I’m about to refi out and I’m going to do an Airbnb and it’s going to be great for the next five years. These last nine months were horrible. I don’t hear anyone else telling that. Even though I can look at the numbers, I can hear their words. Even in this entrepreneurial real estate and investor community, we’re still embarrassed of our failures.

We will do a How to Lose Money in Real Estate. I used to do it for years. There will be 400 people. It gets crazy how many people show up. Let’s talk about our biggest failures and what our most recent ones were. If you look at the Avengers movie, it was all about failure. To me it was so funny because failure then manifested in fear. That’s exactly what was going on. That’s the problem. Everyone was so invested in the win, they have one big failure where half the population disappeared. That’s a big one but you can’t win them all. Here we have this big failure. How many people couldn’t move on from that failure?

All that stuff happened and you can drive anything you want. I don’t care and it’s cool. You can drive a 1990 car, you can drive a Lambo, it doesn’t matter, but if you’re going to represent that as your success in a community where I know that people are having problems. Even the whispers that come, “We put our product out into a market that didn’t want it.” That’s how the market works and it’s okay to say it.

It can’t be the Lambos and jets. It’s only real estate. I guess there are a lot of new industries that are like that.

The multilevel marketing is even worse there. It’s even worse in that world. They all pretend they’re super rich and they’re all broke. I want to be able to say, “I failed. I’m in trouble. I’ve got some things going on.” I’ve shared already on the show and we got one of the three little problems turning around and the next one’s pretty close to being turned around. We work on it. If you’re not teaching your kids that there’s no shame in failure, the shame becomes if you do not learn from that failure. Fool me once, fool me twice. The real shame is, “I didn’t learn from this failure.” I’m a knucklehead. It usually takes me about two times of failure to figure things out but eventually, I learn from it. You have to learn from that and if any legacy out there is possible, teach you children, teach your brothers, your sisters, your mother, your father, anyone at any point in life that if we fail, we’re just learning.

I was explaining this to a friend of mine, “You don’t understand. There’s no outcome in which I don’t win.” For me, there’s no failure in it. We’ll see what happens with these 27 units, but if we can’t get it funded, “What are the other options we have available to us?” I’m going to win at that game. It may not be the way I wanted to, but we’re going to end up winning either way.

TRE 33 | Closing Your First Deal
Closing Your First Deal: The real value of investing is in your network.

 

We’re still on pace for $25 million in 2019. There’s nothing anyone can say to me at this point that’s going to hurt me.

We do a hot tub networking. Even if this deal goes completely down in flames, how much have we bought in the last three, four months? It’s just a rounding error at this point. It’s a big number.

We definitely learned a lot from that. We definitely learned the time on the contract and all these other clauses in the contract. We’re not making that mistake again. We’ve already sent out another commercial contract and hopefully $1.1 million. We should get it countersigned this week. It’s about making sure we have the right time, making sure we have the finance contingencies. Then we have syndication that’s getting started. We worked with Jillian again saying, “Put that document together for us. We’re never going to be at the whim of a commercial banker.” We still want relationships with them, but on some of these deals, I’d rather syndicate then take the time to find a nice 20, 25-year loan product.

Let’s talk about why the mastermind is so much more important than real estate coaching because when you run into challenges and you will, it’s those folks around you that are actually doing this business that become irreplaceable.

That peer-to-peer sharing is sharing failures. Nobody in that room was talking about how great they are and we don’t want you to talk about that. We’ll cut you off, “You’re great. Keep winding your Rolex.” We come over here because we want to learn. That peer-to-peer sharing is phenomenal. Other than those big companies out there that are still progressing, I don’t see a lot of us signing up for coaching anymore. We’re teaching the public here that there’s a better way to do it. It’s not a $35,000 backpack. It’s a $7,500 peer-to-peer sharing. You’re going to get a lot more out of it.

We are talking about legacy and getting started and we’re talking about failures. The whole idea behind our peer-to-peer sharing groups and our mastermind, it’s our peer stuff because the mastermind doesn’t meet enough long enough. In our peer-to-peer sharing groups, it’s about, “I’m having a challenge here. Then how do we address that challenge and move forward?” Because I’m willing to bet the vast majority of the people in that group, whatever problem you’re having, they have solved once before. You don’t have to do this alone. It’s not a real estate coaching program where you come in and you get your backpack.

You can watch all the videos online, that’s fine, but the real value is in the network. If somebody in that room doesn’t know that you know the answer or online that doesn’t know the answer to that question, I can about guarantee you within three emails I can find a guy or gal who does know the answer. I had a challenge. We were looking for a business evaluator. I asked one guy and literally four minutes later we had one of the best guys in the city. We had an appointment in his office the weekend later. Literally within a week, we had already had an appointment. We had all this stuff resolved literally in ten days. That’s the network you want to be in. We were having some issues on the commercial side. A couple of phone calls, a handful of emails later and the problem is solved.

That’s how you do it. We could have took a $5,000 class, but we sat down with an attorney and said, “This is how you do it.” He didn’t charge us a dang thing.

He said this, “Do this and this and this. Call me if you need anything, guys.” That’s what you want to be as a part of the network. I’ll give out the phone number, (281) 4019-008. That’s the number in which you can text. Don’t call Rob. He’s not going to pick up. Send him a text, “I’d love to know where the Meetup is. I’d like to be a part of one your groups.” Send that as a text message.

I’ll probably go back and hit everyone who’s texted me so far and give them the schedule. If you are in our mastermind that meets once a month, we’ll definitely be doing our 6:00 before the regular meeting. We’ll be sitting down with the folks that have joined up from the membership and they’ll be getting some one-on-one with Merrill and his team that are going to be there. That’s for the folks that are in that. There are always folks who slip in. We’re going guard it because this is some pretty good knowledge and obviously this is what those folks paid for. We do appreciate our audience. Go out there. Go get some real estate this week. Reach out to an agent. Don’t be afraid of failure.

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