13 Flips as a Full-Time Flight Mechanic and Part-Time Lender

Ashley:
This is Real Estate Rookie episode 147.

Anthony:
I was at work, one day and he comes in and I was listening to a BiggerPockets podcast. He’s like, “Dude, you’re listening to that podcast?” I was like, “Yeah, man. I’m trying to get into real estate.” He’s like, “Let’s do a flip together.” I was like, “Okay, let’s jump right in. I’m 100% down. Let’s go.”

Tony:
Welcome to the Real Estate Rookie podcast. We’re super excited to have you guys here, but this is the one show where we demystify the world of real estate investing by having our guests tell you all the good, the bad and the ugly that comes along with becoming a real estate investor so that you can get your first deal, your fifth deal, your 10th deal done and find financial freedom through real estate investing. Ashley, I’m super pumped to be here today. How are you feeling?

Ashley:
Good, Tony? I am doing great. I just want to jump right into our guest today because I met him a couple weeks ago and I’m so excited to have him on the show. I met Tony in Fort Lauderdale at a real estate event, and I don’t know, I just couldn’t stop talking to him about real estate. It was really awesome because he didn’t come up to me right away and try and pitch himself to be on the BiggerPockets podcast. I think it was probably maybe day two that he said, “Yeah, I actually applied once.” I was like, “We’re getting you on. Your story is too good.” Let’s take another look at it. I blame our producers for not taking it the first time, but I gave him a few pointers as to how to fill out the application. He took the time and redid it and I think his episode turned out awesome.

Tony:
Yeah. Just to clarify, our guest’s name is also Tony, so there were two Tony’s on today’s episode. You’ll listen near the end, I get dubbed the other Tony. That’s what I’ll be referred to as now. But I think Tony, and I wanted to listeners to make sure that they really pay attention to this, but he, as a brand new investor, was able to partner with a guy that had done over 400 flips, 400 successful flips. A multi-millionaire kind of guy. He was able to partner up with him as a new investor. Make sure you listen to the strategy that he employed to make that happen, because I think it’s something that everyone can take away from. Again, I also really enjoyed today’s episode and I’m sure you guys will as well. I guess last thing for me, actually, just for those of you that are listening that haven’t connected with us on Instagram, makes sure you guys do that.
Ashley’s @wealthfromrentals. I’m @tonyjrobinson. We do our best to kind of share a lot of what we’re learning behind the scenes you don’t get to hear on the podcast on our social channels as well. But excited to get into today’s episode.

Ashley:
The content is great, but also makes you guys listen to how he’s found two of his partners. One turned out to be a really bad deal, the other turned out to be a great deal. But I think we need to have BiggerPockets start some kind of matchmaking partner website so not everybody is going where Tony has gone to find his partners. But a great story. Tony, he’s going to motivate you and excite you and make you want to put yourself in opportunities and to reach out to people. Pick up the phone and ask for things that you might be holding yourself back because you just think somebody is going to say no. Which in Tony’s case, it really hasn’t for him.
He is really pushed through and doing awesome today. Let’s get Tony, not other Tony. Actually, before we move on, I just want to tell you, Tony, that in my group of real estate friends, that I am called other Ashley. There are two Ashleys and there’s just Ashley, which is Ashley Wilson. She’s @badashinvestor on Instagram. If you guys want to say, Hey to just Ashley and then I am other Ashley. Me and you are the same now, other Tony, other Ashley.

Tony:
Yeah. We’re the same. Yeah. There you go.

Ashley:
Let’s bring the Tony onto the show.

Tony:
Tony, welcome to the show, man. You are actually the first other Tony that we’ve interviewed today. Hopefully we can keep the Tonys kind of in line and not overtake Ashley and drive her crazy or anything, man, but excited to have you on brother.

Anthony:
Yeah. I don’t know how two Tony’s is going to work on the podcast, but I guess we’ll find out.

Tony:
Yeah, man. There’s the first time for everything brother. Tony, why don’t you tell us a little bit about your, kind of your journey and what got you started in the world of real estate investing?

Anthony:
Yeah. I’m 28 years old, a still active duty coast guard. I’m stationed down here in Fort Lauderdale on the Miami MH-65 Dolphin helicopters as a flight mechanic. Going back to my story started about summer of 2018. My wife and I were on the way back from a road trip, I think, in North Carolina. At the time I think we had 15 or 20,000 saved up. Which is still a pretty significant chunk of money, but I was like, “We need to figure out how to deploy this capital, make returns, make the money work for us.” We just didn’t know the execution process. I told her, I said, “Hey, babe, let’s turn on a podcast or something like that. Let’s listen to something and see what we can deploy money to.” She put on some stock podcasts and I was just like, “Man, this is super unintriguing. It seems risky. It’s kind of like …”
I felt like it was a little monopolized by the way that people were talking as far as ups and downs and swings with different media sources and whatever. I was like, “No, no, no, that’s not for us. Let’s try something else.” She found the BiggerPockets podcast and we started listening episode one and the light bulbs just started going off. I was like, “Oh my God, this is insane. Why didn’t I think of investing in real estate?” You always ask yourself, why. Why didn’t I get in earlier? Well, it’s just like finding the opportunity to do so. I think we listened to about eight and a half hours of the podcast. I was so podcast out, but it was such good information coming in that when I got home, I bought Rich Dad Poor Dad because it’s on every podcast ever.
We started reading that. The biggest thing for us was just getting ahold of our in-house financing, our finances in order. We stopped eating out as much. We canceled subscriptions we weren’t using. We just kind of became a little bit more frugal with money. We went from saving about three or $400 a month to about 2,000 a month. That took about two or three months to kind of narrow down. After that, we decided to buy our own house because we were renting at the time. This is back in New Jersey where I was stationed last. We were renting a single family home at the end of the street and we had just got a letter in the mail from our landlord saying, “Hey, your rent’s going up $150 next month.” Because we were at the end of our lease.
I was like, “Babe, I’m not paying an extra $150 a month. We need to figure out a different way. We’re already paying $1,850 a month in rental income. I’m sure we can find a house around that amount.” We got a local realtor and we went and looked at 12, 13, 14 different properties. It was that hopeless state of like, “We don’t like this one. It’s not in the area we want. It’s above our budget.” Et cetera, et cetera. Then we landed on a foreclosure. We were already preapproved at the VA and all that stuff, so I was like, “Can we even buy a foreclosure with the VA loan?” I started doing some research. I found out you can, it just has to meet the minimum inspection criteria, no broken windows, the heater works, no holes in the floor, stuff like that.
When we submitted our offer, it was bank owned. I think we submitted our initial offer at 211. They were asking 224 at the time. Then we ended up settling about 11 days after sleepless nights because the bank will keep you on hold forever. They’re just waiting for another offer to come in that’s higher than yours. We settle that 218. We ended up buying that property. It was kind of like a live and flip. The kitchen wasn’t updated. The backyard only had a three piece wooden step going down. We upgraded all that, lived in it for about a year and a half. During that year and a half, I was still on the coast guard. I was at work one day and when I first got stationed at the unit, there was a guy there that I knew was interested in real estate.
I knew he had done a couple fix and flips in the area. He ended up moving to Puerto Rico for his new duty station. Well he came back shortly after a hurricane to shore in Puerto Rico for family matters and stuff. I was at work one day. He comes in, he’s like, “Hey man, you’re still here?” I was listening to the BiggerPockets podcast. He’s like, “Dude, you’re listening to that podcast?” I was like, “Yeah man. I’m trying to get into real estate.” He’s like, “Let’s do a flip together.” I was like, “Okay. Let’s jump right in. I’m 100% down. Let’s go.”

Tony:
Can we pause right there? BiggerPockets was the matchmaker between you and your partner on your first flip? Is that what I’m hearing?

Anthony:
Unbeknownst, yeah. It was the perfect meeting. It was crazy.

Tony:
It was a very similar process for me. My second real estate deal, I found my partner because we both happened to follow David Green on Instagram. He was family. He’s my wife’s cousin so we already knew each other. But when I saw that he also followed David Green, I was like, “Hey, are you interested?” That kind of conversation led us to investing together. Ashley, now you have to tell your story of how BiggerPockets helped you find a partner and get a deal done too.

Ashley:
Well, Tony, you are my partner from BiggerPockets. Same as [crosstalk 00:09:17]-

Tony:
There you go.

Anthony:
There you go. Yeah.

Tony:
That’s the best one.

Anthony:
Yeah, exactly.

Tony:
That’s the best one. Well played.

Ashley:
Before we move on, can you explain to everyone what a VA loan is and how it’s different than a standard conventional loan?

Anthony:
Yeah. I mean, I consider the VA loan one of the most powerful home buying tools out there that people don’t really know about, or maybe they’re just misinformed about it. They can be a 0% down loan. You can buy a piece of property up to a certain amount that the VA accepts or preapproves you for. You basically get into a deal with not having to pay anything. You can even opt to roll the VA funding fee into the backside of the loan into the 30 year mortgage. You can basically come to closing with no money down. Obviously you can use it for foreclosures as well, which I didn’t know in the beginning.
They’re typically lower interest rates loans than regular FHA or conventional loans. They don’t carry PMI, which is another amazing thing. Because that pushes your buying power up a little bit because it doesn’t add into your principal mortgage insurance. Then you have your funding fee. Like I said earlier, you can roll that into the back of the loan. That’s pretty much it. I mean, like I said, it’s probably one of the most powerful underused tools that the military has to buy property with.

Ashley:
Where would somebody go to get a VA loan? Is this something that is just standard at every bank or what’s the best resource?

Anthony:
Most military members bank with either USA or Navy Federal. They offer VA loans. Then you can basically type in VA loan into a Google browser and pick whatever company you want to use. We ended up using PNC Bank because my buddy at work … I try to keep everything in the family a little bit, so if I have an opportunity to bring somebody in on something that I’m doing, then I’ll use them. Especially if they’re a service member or a first responder or anything like that. His wife actually originated our loan and she worked for PNC Bank.

Ashley:
Okay. Now that you’ve found your partner on BiggerPockets, what happens next for you? What are you bringing to the table for this partnership?

Anthony:
Yeah. I think two or three months after we had start kind of brainstorming how we’re going to take down a property-

Ashley:
Dating.

Anthony:
Yeah. Dating. I told him, I was like, “Look, man, this is what I have to work with. It’s 15.” I didn’t want to overleverage myself and put me at basically net zero because I wanted money to restart in case all hell broke loose, like the property disintegrated or whatever. I had the worst pessimistic mindset about it because I was just scared. It was something new to me.

Tony:
I love that you used the word disintegrated, Tony. I don’t think I’ve ever heard anyone, just the house randomly disintegrated and for some inexplicable reason.

Anthony:
Yeah. We went there one day and it was gone.

Tony:
Yeah. It was just gone.

Ashley:
I think Tony’s hoping that happens to his Treeport or Freeport [inaudible 00:12:10].,

Tony:
Right. That it just disappears one day.

Anthony:
Yeah. And materialize. Back to it, we used a local hard money lender in New Jersey, and this was a smoking deal for me. This was, I brought the gap funding. Gap funding is the closing costs and down payment for the hard money loan to execute and close the property. I was 15 grand all in for the gap funding we were 50-50 partners on the property. He found the property. His wife was a realtor at the time. Well, he found the property, I put up the money for the gap funding, and then we went on a promissory note. His LLC took ownership of the home and we flipped it 50-50. I made $15,000 in little over 55 days off of my $15,000. That’s 100% return. As soon as the wire hit, I went home and I pulled out a couple hundred dollars out of the savings account and my wife got home and I was on the couch and I was like, “We just closed the lot, honey.” I was just spraying money everywhere. I was so excited. think that’s really what started the fire. The fire that built into a bonfire.

Ashley:
Was making it rain in your living room.

Anthony:
Yeah, it was in living room. Yeah.

Tony:
That’ll always get someone excited, is making it rain. Tony, I want to pause because there’s a couple of things that I want to dig into. But before we keep going, can you just give us a really brief overview of what your portfolio looks like today or how many deals you’ve closed on so we can kind of set the table for the listeners? Then I want to go back to this first flip.

Anthony:
Yeah. I think we’re on deal number 13. I’ve reverse wholesaled a couple of lots, which I think we’re going to touch on a little bit later. Then the rest was either a live in flip, the flip with my buddy from the coast guard, and then my business partner, we flipped eight or nine homes together now.

Tony:
Okay, awesome. So your primary focus is flipping. I want to go back to this first one, because you said a couple of things that I think not all of our rookie audience probably understood. You mentioned that you brought the gap funding and you already defined what the gap funding was. But then you said that you pulled a promissory note, but your partner took title in their LLC. Can you, a, define what a promissory note is and how that tied you to the property? Then, b, why you guys chose that specific partnership structure? Because I think that’s a unique way to do it.

Anthony:
Yeah. I mean, a promissory note is just a legally binding agreement between two parties. It’s explicit. It’s outlined in the details like, Hey party A is putting up this money. Party B is responsible for this. Then the asset is this property, which would be the address of the flip. We did it that way because, number one, I didn’t have an LLC stood up at the time. Number two, I had no experience under my belt. When a hard money lender looks at a client, they’ll typically look at their credit score, whether or not they have an LLC, and their liquid and experience. I had none of that.
My credit score, I think was a 680, which wasn’t impressive at the time. He had prior experience, so we got better rates doing that. Then me just bringing the money to the table. His LLC took the asset because most hard money lenders require you to close in an LLC. He already had one up. I didn’t have enough time to push one up because then we would’ve done a joint venture or went on title together. But the promissory notes is basically a contract between the two parties outlining what each other’s bringing to the table.

Tony:
It totally makes sense why you guys structured the way that you did. A lot of hard money learners want you have that LLC. If they already had one, it was the easier kind of cleaner way to make that happen. Now, this was your first flip. In terms of divvying up the responsibilities to land on that 50-50 split, what did that look like? Who took care of what? Just to preface the question, the reason why I ask that is, I feel like so many people come to Ashley and I, and say, “How should I structure my partnership? What kind of equity split should I give to this person?” The honest answer is that I don’t know. I can’t tell someone else what the best partnership structure is for them because I have no idea what each person is bringing to the table, what their unique sales and abilities are, who’s bringing the capital, who’s doing the work. I just want you to, if you can walk us through what your thought process was, that way we can share with the listeners what thought process they should follow when looking to set up their own partnerships.

Anthony:
Yeah. Great question, Tony. There really wasn’t a rhyme or reason to what we were bringing to this table. The only thing that we knew was, he was going to buy the property in the LLC, I was going to provide the gap funding and then we would just figure it out from there. If he had duty one day and I was off that day and the contractor needed materials from Lowe’s or Home Depot or whatever, I would go do it, and then vice versa for me. Then obviously at the end of the day, when we got off work, we would ride over together and make sure that the contractors were making progress, doing up any outside cleaning and landscaping and stuff like that. It was just coming out of wintertime when we listed his house, so the grass was coming back.
We were breaking up all the leaves and getting everything ready to show the property because we knew we were going to be done pretty quickly. But to outline partnership details in the beginning, that should be done in a legal structure in the promissory note. As far as the manual labor aspect, just ask each other what needs to be done, and that’s how you learn. Nobody’s going to know the whole process. We were still pretty new in the flipping game anyway, so we didn’t know any unforeseens that were going to come up. During the flip, we actually went over budget where I had to come out of pocket another $5,500 because there was a crack in the foundation that we didn’t see. It had snowed while we were doing the flip and water started rushing into the crawl space and flooding the entire crawl space out. Well, the heater was in the crawl space and a bunch of electrical installation, as you guys know, especially you actually up north.
I [inaudible 00:17:52] shed it out. That wasn’t outlined in the promissory note. It probably wasn’t the best thing to do at the time, but it was something that came up that had to be done quick and I just handled the situation as it came.

Tony:
Ashley, I know you’ve got, I think, a really good perspective on how to start partnerships off on the right foot in terms of divvying up responsibilities. Can you break that down for us because I think you do a great job of explaining that?

Ashley:
Thank you, Tony. One thing that I think you should do starting out with a partnership, is first, date and just tackle one property at a time. Don’t say, “Okay, going forward, we’re going to partner on every single property.” Take it property by property. The next thing is, when things like that come up where, okay, first let’s start with money, if a money issue comes up, have it state in there as to, okay, if you’re 50-50 partners, 50-50 bringing the funds. Each of your partners would bring their portion of their equity into it. What you can also do is have a reserve account that you each put in some money into this reserve account and then’s used for anything that goes over budget on the rehab. That money is already sitting there so you don’t have to chase down partners.
Then once the deal is done, that money just goes back to each partner. Then as far as divvying up the duties, I like to put a cost to each duty. If one person is acting as a property manager, they’re paid a certain amount of money. If one person is acting as a maintenance guy, maybe they’re getting an hourly rate. That way, if one partner decides, “You know what, I’m not doing the maintenance anymore.” They are just done with it and you outsource that, the person that’s doing the property management isn’t left saying, “Wait, but you still have 50% equity. I still have 50% equity. Now I’m doing my work still and we’re paying somebody else to do yours. That’s not fair.” that breakdown of what you could put a price to, so then your cash flow at the end is whatever is left after you paid each other for handling their duties and roles and responsibilities. That’s always an option too.

Tony:
Yeah. Well, I mean, what you essentially did was you took the idea of the E Myth, which has the entrepreneur that works on the business and then the tactician that works in the business and you applied that to the part structure to say, “Hey, we’re going to have equity in the business as the entrepreneurs that own this thing. But then we’re also going to say, what are we paying ourselves as the tacticians that are doing the work?” I think the goal is that as your business scales, you do a little bit less of the tactical work as you hire those things out, but you still retain your equity and more and more of your payment from your properties comes from just being the owner and begin the entrepreneur. I just always love how you break that down, so I wanted to make sure we pause there. Tony, we went down a big rabbit hole, but hopefully that was valuable for the listeners.

Anthony:
Yeah. No. I’m glad she brought that up though because that’s exactly how I structure my partnerships with my partner now. Literally exactly to what you said, minus a couple of the little nuances, that’s exactly how we do things. We have a joint ventureship agreement now that specifically outlines each person’s job, duty and what that duty entails.

Tony:
Let’s kind of keep going. You kind of started the story on this first flip. You talked about how much money you guys put in. Just kind of wrap it up for us. How’d this flip end? What’d you learn? Then what happened from there?

Anthony:
Yeah. His wife listed it for zero commission. She didn’t take anything off the top. It was on the market for, I think, 48 hours and we got a full price offer in. They closed in 30 days and I ended up netting $15,000, which was 100% of my initial investment.

Tony:
Not bad.

Anthony:
Yeah.

Ashley:
Yeah.

Anthony:
Yeah. It was pretty crazy at the time too because that’s still a massive amount of money for a lot of people. Being that I was almost half of my net worth at the time, it was just insane.

Tony:
How much time, Tony, passes between that first flip and that next one? Is it like as soon as you get home after that closing you’re already hunting for that next deal? Do you wait? What’s the transition like for you to scale from that one deal to, you said, doing nine or however many it was with this new partner?

Anthony:
Yeah. When I got home after that flip was gone, obviously the fire was lit. I was like, “Man, this, this works. I can make money doing this.” It wasn’t that difficult because if you manage a property correctly, it shouldn’t be too hard. You just have to have all the pieces in place up front. I joined a bunch of real estate investor groups on Facebook in the market that I thought I was going to be moving to after this duty station, which was the next year, which was Florida. I found this Pinellas County real estate investors market or Tampa or something like that Facebook page. I saw this guy post on there looking for private equity partners on flips, must have 250 cash or more to be considered. I was like, “Man, I don’t follow any rules. I’m going to message this guy anyways.”
I message him, I said, “Hey man, I’m just reaching out. I saw your posts on Facebook. I wanted to kind of introduce myself and I have $50,000 to get into a deal with you.” He didn’t write back for seven days, and I responded to my initial request with another request to answer. He said, “Sorry, man, not interested. You need to have 250K cash or no more.” I was like, “Damn, dude.” That went away. Then about two weeks later, I was like, “You know what, I’m going to call this guy.” I messaged him from a different account and I said, “I have the money. Let’s jump on a call.” He sent me his number instantly. I called him while I was in the same space that I met my business partner in, from the military.
I called him in this backroom in the shop in New Jersey and I was like, “Hey man, I messaged you a long time ago. It’s Tony, blah, blah, blah.” He’s like, “Are you the 50K kid?” I’m like, “Yes.” He’s like, “I need 250,000 or more. I can’t take anything less than that.” I said, “What if we use hard money? What if I use my money to obtain a hard money loan? Then I have all the money that I need for the project.” He’s like, “Well, I’ve never done something like that. I usually use private money. It’s a lot easier.” I said, “Listen, man, I understand where you’re coming from. Just give me a chance. I’m military, I’m getting ready to get out and start my real estate investing career.” Because I knew I wanted to do a full time from that first flip.
He’s like, “All right. If you’re serious, fly down and meet me.” I was like, “Okay, I’ll do it.” There’s a spooky Craigslist article like, Hey, come into my back garage with no lights and I’ll show you the thing that you want to buy. I was like, “Oh my God, this is going to be crazy.”

Ashley:
You’re going to be on the news.

Anthony:
Yeah. A military guy goes missing after real estate deal ends up bad or something crazy. I told my wife when I got home, I was like, “I got to fly to Clearwater to meet this guy.” She’s like, “What?” I was like, “Yeah, I want to meet him.” He put on there, have completed 400 plus flips, and I was like, “This is the Grant Cardone of flipping. I have to meet this guy.”

Ashley:
You’re just going off of what he says [crosstalk 00:24:57]-

Anthony:
Yeah.

Ashley:
Right?

Anthony:
He didn’t have a profile picture.

Ashley:
Did you Google him or find any information?

Anthony:
[crosstalk 00:25:02]-

Tony:
He didn’t have a profile picture.

Anthony:
I didn’t know what this guy looked like, man. It was the craziest thing. All I heard was his voice on the phone. I think I booked my ticket two weeks later and I flew to Clearwater. He gave me an address for a used car lot on the side of a highway and I was like, “Man, this is kind of weird, but I’m already here. I didn’t spend money on a hotel and a flight to get down here and not do this.” I pulled up to the used car lot kind of ratty, kind of shaken down a little bit. There was some workers out back with their shirts off kind of grimy looking, and I’m like … Nothing against mechanics, it kind of rubbed me wrong. Especially when I was already in the mindset of like, “I’m pretty scared to do this.” I put in park. I stayed in the car and I took a couple deep breaths. I texted my wife I love her, and I walked in and that’s how we are now. I guess if you want me to get to the funny part, I can do that.

Ashley:
Yeah. Keep going.

Anthony:
I walk in and it’s not even eight foot ceilings. They were six and a half foot ceilings. It was super cluster phobic and it was dark. There was only one fluorescent light with one light bulb working in it. I’m like, “Man, this is crazy.” It smelled weird. I walk in and I was looking around, I didn’t see anybody. In the back left corner, there was a desk with a computer with a gentleman sitting at it and I said, “Hey, is Neil here?” He’s like, “I’m Neil.” He gets up very abruptly and starts walking towards me. I was like, “Do I run or do I shake this guy’s hand?” I didn’t know what to do. I shook his hand. He’s like, “Come here. I want to show you something.” He pulled this little stool out from the back room, sat me down next to him, he pulls out this filing cabinet to the left of his computer and shows me all his HUDs from the last 400 flips. He’s like, “Listen …”

Ashley:
Can you explain real quick what a HUD is?

Anthony:
Yeah. Basically it’s the seller and buyer breakdown of the purchase price of the property, title company, fees, insurance, any outstanding taxes, liens, whatever. It basically shows you every number, or statistic wise for the property in which you’re going to have to bring to the table and what the seller’s netting from that transaction. It’s a closing statement. He pulled out 400 of them in a folder and was just raking through them. “I’ve been doing this for 13 years, blah, blah, blah.” He logged into his business bank accounts and was showing me accounts of hundreds, the most money I’ve ever seen before in multiple accounts. I’m like, “Holy cow.” That’s when I started getting cited. I was like, “This is crazy. This guy’s a multi-millionaire. I just met a multi-millionaire he’s crushing in flips.” He said, “All right, you ready to go?” I was like, “Where are we going?” He’s like, “To go walk the properties.” I was like, “Yeah, I guess. Let’s go.”
He’s like, “Can you drive?” I was like, “I don’t know this area, but I guess I’ll drive if …” I’m in the driver’s seat, he’s telling me where to go, and we’re going to these properties. Some in different stages, some were listed, some were in the middle of rehab. Some had just been purchased that were ready for demo and stuff. But the whole day, all I’m thinking is like, “This is crazy. I can’t believe this is happening. I can’t believe this is an opportunity that I get to take advantage of if it’s a real thing.” At the end of it, when I was on my way to drop him off, he’s like, “Are you ready to go? You want to do a flip?” I was like, “Yeah, let’s do it. But before we go into that, what’s my piece? What do I get?”
He goes, “I’ll give you 35% of the net profits from every flip.” I was like, “Can you do 40?” Like a Shark Tank type thing. I was like, “Can you do 40?” He’s like, “No. 35.” I was like, “Done.” That was it. I dropped him off. I went back to the hotel. My wife is waiting there with dinner. I got on a flight the next morning and left and now here I am.

Tony:
I have so many thoughts. I’ll let you go first Ashley because there’s so many things scrolling through my mind right now. But you go first.

Ashley:
Okay. Well, first of all, I mean good for you for taking that opportunity and taking that chance. But also word of caution to our listeners, have some safety precautions. Drop a pin of your location to somebody-

Anthony:
Yeah.

Tony:
Live stream while you’re there.

Ashley:
… get a license plate number. Yeah. Okay. But I want to know, so you did a deal?

Anthony:
Yeah. We’ve done nine now. It’s crazy. We’re ramping up. I just bought 2,500 mailers in a direct mail campaign for my market, so we’re definitely ramping up.

Ashley:
How did you structure that first partnership? I mean, this guy, he seems pretty much of a handshake deal kind of guy pulling out his packet of deals. How did you set your partnership to begin with? Was it like, he said, “Okay, I have a deal. This is the house we’re doing. Get the money lined up.” What did that look like?

Anthony:
Backing up just a hair, before I did my first flip, I actually was going to do a lease to buy option with another gentleman I met on Craigslist. Crazy story. But he was telling a duplex right off the Delaware River and it was cash flowing really well. I asked him if I could buy it to have the conversation, but I didn’t really have the money to do it. As we got further into the conversation, I told him, I was like, “Listen, man, I’m sorry. I have to kind of pass on this opportunity, but I can’t go. I can’t do this deal.” He’s like, “Well, I got a lease to buy option that I’m structuring right now in North Carolina that you can get in.” This is when I was deployed to D.C.
From New Jersey, we deployed to D.C. for the presidential protection mission. We basically held the airspace around D.C. with our helicopters. I’m in D.C. I’m calling my wife. I’m like, “I think I have an opportunity. The guy’s driving down to meet me.” We were going to meet at the Shake Shack right up the road. I met him. The guy was probably the smoothest talking guy I’ve ever met in my life. As far as being able to sign up for anything, you would give this guy anything you wanted.

Ashley:
He could sell a ketchup popsicle to a lady in white gloves.

Anthony:
Yeah. There you go. That’s a good one. How’d you-

Tony:
I’ve never heard of that one.

Anthony:
I felt like she has that written down somewhere. I don’t know.

Ashley:
Yeah. Because it’s on Tommy Boy. Geez, you both are disappointing me.

Anthony:
Sorry. I went back to my hotel room and an hour later I wired him $6,000. He’s like, “Listen, man, I got to have the funds to get in this project. Wire me over the money.” We didn’t have a promissory note in place. This was literally a handshake deal.

Tony:
You wired the money to him directly?

Anthony:
To his credit union directly, like an idiot. I’m blessed to have had that situation happen to me. Yes, it hurt my forward progression of thinking and my money, but I wanted to get into it so bad that I was willing to do anything. Which is a super rookie mistake. Because getting into it, now my legal structure, I have a lawyer look at everything always. It doesn’t matter what it is. Before I lost my $6,000, I was thinking to myself, I was like, “Man.” Then he sent me some crumpled up promissory note that it looked like it was in his back pocket and he’s like, “Here, sign this.” I was like, “Okay.” I signed it.
It wasn’t a legally binding contract. It was just basically napkin writing. He strung me along for seven months and then disappeared the day of closing where I was supposed to get my return back or my initial investment plus my profit. I was already pre celebrating with my wife in Clearwater at this fancy bar. We were popping rosé and have this beautiful dinner and I was like, “Babe, we’re going to get this wire. It’s coming up on 5:00. They’re going to wire us.” Nothing. I was destroyed internally. Because not only did it take six grand from me, but it took four or five months of my time. Because I didn’t get into another deal because I had that capital deployed.

Tony:
Sorry. Really quick before we move on, I just wanted to comment on that really quickly because Ashley and I just talked about this in one of our Rookie Reply episodes, not too long ago. If ever you’re exchanging funds from one party to another in a real estate transaction, never send the money directly to the person. Always use some kind of qualified intermediary, typically a title or escrow company because they’re the ones that will handle the funds to make sure everything is on the up and up. Tony, you learned that lesson the hard way, but hopefully your mistakes can teach the listeners what paths to kind of avoid and how to handle it the right way. Always, always, always use some kind of title and escrow to handle money in a real estate transaction.

Anthony:
Just when you think there aren’t people out there to burn you, there are 100% people out there that come after you, especially if they know you’re new. I think he kind of preyed on me because I told him, I was like, “Hey, this is my second deal and looking to get into it, blah blah, blah.” I think that just made him a little bit easier to coerce me into doing the deal, and then I had false hopes the whole time or false promises the whole time. My business partner now calls me the luckiest real estate investor he’s ever met because he knows people and himself that have lost millions of dollars on lack of legal structure. I learned a $6,000 mistake and it probably saved me hundreds of thousands of dollars.

Ashley:
I was just going to say, what advice do you have for somebody to get over that mindset obstacle of they just lost money? How do they get back into real estate and bad thing and get motivated again?

Anthony:
It was a struggle for sure. You got to remember, bad things happen for a reason and good things happen for a reason as well. I looked at as, I just paid for a degree in legal structure for real estate. I paid $6,000 to get my degree to protect myself legally in my future endeavors. Thank God it wasn’t detrimental to my wife and I. We could continue living our lives the same way that we did it. It didn’t put us in a really hard bind. I was able to recuperate that money pretty quickly.

Ashley:
I think that’s an example right there, is that you didn’t risk so much that it would cripple you too. Being a beginner investor and having those reserves in place so that you could continue living your life and weren’t at risk of going into bankruptcy or foreclosure for your own personal residence. I think that is just a huge lesson for us all to learn, is that there are times to take risk. But don’t risk so much that you could be putting your family’s future or their livelihood at risk.

Anthony:
It’s not worth it.

Ashley:
I think that’s a great lesson for us all to learn and then just when you are talking to partners and people you want to invest with. I think it’s almost ironic that your partner that turned out well, you met through Craigslist also or met online. It’s not had an example that you can’t meet random people in random places, or even online, that that means they’re bad, it’s not going to work out because you obviously had it work out for you, but with a different person

Anthony:
Or I’m just a glutton for punishment. I don’t know. Either way. My wife was like, “Dude, I don’t care what this guy tells you, you better get a lawyer involved. I don’t care what it costs. We are not going through that again.” Thank God she was right. I got a legal team to look over my joint ventureship agreement with my current business partner. It was ironclad. It protected party A party B, and we’ve had no issues. Thank God.

Ashley:
Right there you just said that no matter what it costs for the attorneys, that’s an opportunity cost. That’s not an expense. That’s an opportunity cost for you to protect yourself to prevent from those huge losses that can happen in the future. Your wife is still right. It’s better to pay upfront than to have to be reactive and you’re going to end up paying a lot more or out of pocket. I think for people who are wondering how to structure something, start with your attorney. Start with consulting a attorney. If you don’t have an attorney that you use at all, find one. Ask for references from other investors in your area and just open the conversation. A lot of attorneys will give you a free consult, but I think a lot of times they’re not as expensive as we think that they are too. To have something done can be a couple hundred dollars. But to protect the wealth that you’re going to be growing, it’s way worth it.

Anthony:
Yeah. I was just going to touch on that too. I think the joint ventureship agreement was free for a lawyer to look at. I literally called a legal team in Florida just outside of Tampa and I was like, “Hey, I’m getting ready to structure a real estate agreement with my partner. Can you look over this joint venture agreement?” She’s like, “Yeah, that’s fine. Send it over.” Because they want to earn your business too. You need to treat them right on the backside. You need to make sure any legality structure that you need in place after that, you need to hook them up on the backside or on the front side as well. It was free and I was like, “This is awesome. I should have done this from the beginning. I wouldn’t have lost sixth grand. Yeah.

Ashley:
Your successful partnership, how did you guys end up structuring that legally? You did it as a joint venture?

Anthony:
Yep. I told him my LLC will own the asset, period. I was willing to take the risk even with the joint ventureship agreement, but at the end of the day, my LLC had to own the asset. I was doing the hard money loan in my LLC anyways, so I was going to own the asset. He just structured a mortgage note for default in a partnership that he can file with the title company. In case I want to push him out of the deal or try to take the deal away from him, he can file that with the title company and he’s entitled to his net profits from the deal when and if I sell the property. He structured his legal background on what he wanted to do, and then I took the front side joint ventureship agreement, it’s my property. That’s how I structured it.

Tony:
I just want to clarify a bit. You have your own entity, your own LLC, correct, Tony? Then your partner has their own LLC. But then to join those two LLCs together, all you created was a joint venture agreements that outlines the nature of that partnership. There’s not necessarily a new entity that’s been created between the both of you, but just that document that binds your entity and his entity. Am I understanding that correctly?

Anthony:
Yes, sir. You’re correct.

Tony:
Okay. That’s cool because I think a lot of times people think that you have to create this LLC to do a partnership with someone, and you don’t. I’ve got a lot of partnerships with people and they’re all structured the same way where it’s my entity, the other person’s entity, and then a joint venture agreement that outlines how that partnership for that specific property is structured. I love that you’ve kind of leveled up how you’ve kind of put those two things together. I want to dig into a little bit on how the actual duties are divvied up now because it seems like that partner obviously had a lot of experience, 400 flips before you guys worked together. Is his company managing all of the actual construction and you’re just coming in to handle the financing piece, or are you also playing some kind of role in the day to day management of the rehab?

Anthony:
No, you nailed it on the first part. The way the joint venture agreement reads basically, he finds, manages and sells the property. I am the finance portion of everything that it’s in involved with the property, utilities, hard money loan interest payments, anything that comes up, funding the rehab, I cover that. I keep all my transactions in a CRM and at the end of it, we tally it all up and then we divvy out the profits. Yeah, you nailed it.

Tony:
It’s kind of a hands off process for you. I love it. I mean, what a great way-

Anthony:
I’m so lucky, man.

Tony:
I think it’s really cool because I think a lot of people, when they think about getting into the flipping space, they think about managing subcontractors, they think about going over budget, they think about buying materials, doing all these other things. But what you’ve just laid out, Tony, is a way to still leverage flipping as an investment vehicle, still get all the benefits financially, but in a way that’s very, very hands off. I don’t know. Ash, what are your thoughts? I mean, have you seen it done that way before?

Ashley:
Well, I think for Tony, it’s very passive for you to invest this way, but you are basically working two full-time jobs.

Anthony:
Yes, I am.

Ashley:
Correct. Do you want to go into that a little bit? I think it’s valuable to show people that there’s so many different ways to invest in real estate and you don’t have to quit your job to become a estate investor. You’re actually working two jobs and still a real estate investor.

Anthony:
Yeah. My wife a couple years ago was pursuing her masters while she was a full-time teacher and I was at home playing video games. Because at this point I had already automated the flipping process. I have my CRM, I have the hard money loan, and he’s basically doing all the work. I really don’t do a whole hell of a lot in the grand scheme of flipping properties. Yes, I know every facet of flipping a home and what it entails, but I only handle the one portion, which is the finance portion. While I was at home, because we only work 8:00 to 2:00 in the coast guard as far as the aviation’s community is concerned, what was I going to do with the rest of my day? Instead of playing video games or watching TV or Dancing with the Stars, I wanted to find an alternate way or a side hustle of making income so I can grow exponentially. Not only W-2 income and flipping income, but another stream of income so I can start buying real estate.
Back to New Jersey, my last rental property that I was in, the guy across the street from me, I was taking out the trash one day and he’s outside shirtless and he’s in bathing suit, smoking a cigar with a headset on and he’s like watering his flowers. I walked over and I tapped him on the shoulder, I was like, “Hey man.” I was like, “I’m pretty new next door. I never got to meet you. I just kind of wanted to introduce myself and see what you do.” He’s like, “Well, I’m a lender.” This is the time I was going through BiggerPockets and learning about hard money lending, and we had just done a hard money loan on the flip that we were doing. I asked him, I was like, “Can I come over and kind of learn the process and what you do.”
He’s like, “Yeah, absolutely. Come on over.” I went over there the next Friday and then probably three or four Fridays in a row, and I sat down with him two, three hours. I was taking client calls. I was closing the deals. I was looking at the back end, seeing how much paperwork was involved, the whole nine yards. I never really did anything with that until I did my first flip with my business partner in Florida. The lender that lent on our first flip together, I actually called him halfway through that flip and I said, “Hey man, I noticed you’re not on BiggerPockets, which is the world’s largest real estate investors network in the world. You’re missing a huge opportunity. I would like to bring you to that platform and create a lead gen funnel for you and I would like to close those leads for a $1,700 a month in marketing salary and a half a percent commission on a total loan amount of each deal closed.” He said, “Okay. When do you want to start?” I was like-

Ashley:
At that point, you’re thinking, “I should have went higher.”

Anthony:
I was like, “No. What? This is crazy.”

Tony:
Tony, we got to pause there because I want to make sure that this isn’t getting lost on all of our rookies right now. Is that you have an insane amount of, I don’t know, maybe it’s determination or drive or just willingness to reach out. You fly from Jersey to Clearwater to meet this random guy at a used car lot. You reach out to this hard money lender to kind of build this relationship. But in addition to reaching out, you were smart hard enough to apply value to those relationships as well. Because for the flipper in Clearwater, you said, “I might not have $250,000, but I can get a hard money loan to solve your financial needs.”
To this hard money lender, you can say, “I’m going to connect you and do all of the hard work related to building out a sales funnel for you using this new platform.” That’s what I really want the rookies to take away, is that if you want to build relationships with people who are steps ahead of you, find a way to bring immense value. Tony, you absolutely crush that part, man. Make sure you give yourself some kudos for that.

Anthony:
I appreciate that, man.

Ashley:
That’s like Steve Sims, his book, Bluefishing, that’s exactly what you did there.

Anthony:
Yeah.

Tony:
I haven’t read that book. What’s the premise, Ash?

Ashley:
That’s the same where you figure out what somebody needs before they even know that they need it and you bring it to them. In Tony’s example, the car sales guy, he didn’t know that he did hard money in his life, and the lender didn’t know that he needed to be a part of BiggerPockets. It’s bringing something to the table and already having the plan in place and presenting it to the person without them even knowing that’s something they needed. That you figured it out before you go to them asking for a job or asking for something.

Anthony:
Yeah. It was crazy. I didn’t expect him to say yes so quick. I just got home from work. I made it a point to like, “I’m going to pull up in the driveway. Before I go inside, I’m going to talk to this gentleman about what I can offer and how we can move forward.” It just happened. I was like, “I just raised my monthly net income $1,700 plus what other deals that I bring into the pipeline?” Later on that year, we went to Italy in August and I closed my first hard money loan with him. It was $370 commission.
It was the craziest thing I’ve ever experienced. I was like, “Babe …” I showed her the message. I was like, “we just made $370 on vacation from something that I preemptively did before vacation. This is insane.” Then $300 grew into 1,000, and then 5,000. I think our best month was 28 grand or something like that. The way it exponentially scaled was insane. Then from a year and a half to now that we’ve been on BiggerPockets, we’re actually the top rated lender on BiggerPockets. I made it a point to make sure that we were not only on there, but the best.

Ashley:
That’s so awesome. Congratulations on that.

Anthony:
Yeah, I appreciate it.

Ashley:
Not even just being on the BiggerPockets part as the top rated lender, but also in your success of being able to scale that quickly. Also realizing what you’re good at and then using it to your advantage. I mean, you probably still do your hard money loans with this company too.

Anthony:
I do.

Ashley:
I would assume.

Anthony:
I do. It’s crazy too because all these other different revenue streams and managing all that and then different leads that we’re coming in, I think we have 20 to 25 million in either ground up construction or single family, residential hard money loans closing before the end of the year. It’s been insane. Being able to talk to people from around the country that are investing, I get to know the ins and outs of different markets, where the shifts are happening, what price points those markets are in, and then just making wholesome connections with other investors who are like-minded. It’s been a great opportunity for me.

Ashley:
Well, Tony, it has been great to hear part of your story, not even all of it, I’m sure. But I want to take us to the Rookie Request Line where anybody can call in at 1-888-5-ROOKIE, leave us a voicemail and we may play it on the show and have our guest answer the question. Tony, are you ready?

Anthony:
Yes.

Ashley:
Here’s today’s question.

Catalina:
Hi, this is Catalina from Fort Lauderdale. I want to invest out of state and specifically in Kansas City, Missouri, because I used to live there before. I would like to obtain a loan. The problem is that a lot of the lenders don’t want to allow that because I don’t have a minimum two year history at my job. That’s the only obstacle that I keep finding. I’m a real estate agent, but I just started this year. This is the first year for me, so I don’t have that stability yet or that record. I wanted to see what other options are there that I can get a loan, just a small loan, to buy something small in Kansas city and see what type of recommendations would you guys give me if I have to reach out to a private lender?
Who can I ask? If you could give me any insight as to what I can do, I would appreciate it. How long would I have to pay back any personal loans if I were to have one? I’m just looking for something less than 50,000, 60,000. With that amount, you can do a lot in Kansas City. I appreciate any feedback, guys. Thank you.

Anthony:
Hard money lending. It carries a negative connotation for whatever reason in the early investing stages of people that are getting into it, but we don’t go off of DTI. We don’t go off of W-2’s tax returns. None of that. If you have an LLC established in the capital to get into the project, as long as the asset performs, we’ll fund it. That’s it. It’s super simple. Having those barriers, she’s a 1099 employee, I’m I’m assuming, she doesn’t have that income that a normal bank’s looking for, like three years of tax returns and making good money and stuff like that. Because they’re not valuing the asset, they’re valuing the borrower. We’re an asset based lender with minimum borrower requirements.

Tony:
Tony, you mentioned something that I want to drill down on. You said that a lot of new investors have maybe a negative connotation about hard money or that they’re afraid of using hard money, and I agree with you. I know for me in my first deal, I didn’t even consider hard money because I felt like it was something that was too advanced maybe for someone that’s a new investor. What is your vice or maybe what kind of words or wisdom can you share with our rookie audience to take away from that stigma or maybe diminish some of that fear they have around using hard money to fund their first deal?

Ashley:
Is it a baseball bat that breaks your legs if you don’t pay or what happens?

Tony:
Yeah.

Anthony:
We actually hire a bounty hunter and then they come and find you. That’s dirty work. I don’t want to get my hands dirty. I’ll just hire somebody to do it. No, it’s quite interesting too, because yes, you’re paying a higher interest rate, but normal private money lending is the same interest rate, if not higher. What you have with a hard money lender, is somebody that’s underwriting your deal for you. They’re going to put in the checks and balances into your deal and they’re going to make sure you don’t fail. Because if you fail, the lender fails as well, and we don’t want to lose money. The lender never wants to lose money and they never want to foreclose on you.
They’ll help analyze your deal. Make sure it’s a deal that’s going to be prosper for you. Most lenders require an appraisal, so you’re going to know what the value of the property’s going to be before you even get into it. Then you also have appraisal contingencies built into your contract. If you have something that comes back a little low that the lender’s like, “Hey, we can’t fund it. It’s not enough profit spread.” Then you can back out of the deal and you just save yourself a headache. Hard money lending is an amazing tool. I know people I do 20, 30, 40 flips a year that still use hard money. It’s super easy.

Tony:
Yeah. Thank you for breaking that down, Tony. You made a really good point, that a good hard money lender can act as almost a second check on a good deal to give you the confidence that you need to move forward with any given deal brother. Thank you for breaking that down, man. I really appreciate that.

Anthony:
Yeah, no worries, Tony. I appreciate it.

Tony:
As we wrap things up here, Tony, we just want to give a quick shout out to one of our Rookie Rockstars. Today’s Rookie Rockstar is Austin Lewis. Austin found out about BiggerPockets in March of this year. He and his wife really dug in YouTube, BiggerPockets, all that good stuff. They got pre-approved in May. Then they closed in their first deal in June. From March to June, that’s just a few months and they already got the first deal closed. That’s record speed. But the house they purchased was listed at 67. They bought it for $68,000 and it appraised for $70,000. They were able to get it rented out and they’re expecting a 14% cash on cash return. Austin, congratulations to you and your wife. What a fantastic first deal.

Anthony:
That’s amazing. I’m jealous.

Ashley:
Tony, thank you so much for joining us today. Can you tell everyone where they can reach out to you and find some more information about you?

Anthony:
Yeah. I’m really active on IG, tonymichaelrei, M-I-C-H-A-E-L R-E-I on IG. You can find me there if you’re interested about more about my story, how I got started, any tips and tricks you can DM me there. I have a link tree in my profile to all my different material that I use. That’s pretty much it. Facebook maybe, but I only get on Facebook to find a reverse wholesale land deals. I don’t really use Facebook [crosstalk 00:54:56]-

Ashley:
Hey, tell everybody what that is real quick.

Anthony:
Yeah. Real quick, I was in a gym one day a client had texted me. I normally don’t do this because I like to be focused on my workout, but I hit the Facebook button and marketplace refreshed. There was a lot of land at the top left corner and it said Palm Bay, Florida. Well, I had just funded a developer’s deal in Palm Bay, Florida. I contacted him and I said, “Hey man, are you so interested in buying land to develop more houses?” He’s like, “Yeah, what do you got?” I sent him over the two deals. We went under contract 15 minutes later and I made a thousand bucks just by putting the pieces together. It’s crazy. Now he’s buying eight more from us. So it’s been-

Ashley:
So cool.

Anthony:
Yeah. It’s been crazy.

Ashley:
Yeah. That’s great. Well, thank you so much for joining us. We’d love to have you on the show and can’t wait to watch you continue your journey and hopefully we get to meet in person again and other Tony can join us.

Anthony:
Yeah. I got to meet the other Tony.

Ashley:
Yeah.

Tony:
We’re one podcast episode and I’m already relegated to the other Tony now.

Anthony:
No. I’m so sorry. I got to meet Tony Robinson. The other Tony, damn, what is my problem?

Ashley:
You mean Tony Robbins?

Anthony:
Tony Robbins. Yeah. That’s the one I want to meet. Sorry.

Ashley:
Yeah.

Tony:
Yeah.

Ashley:
Thank you guys so much for listening. I’m Ashley @wealthfromrentals and he’s Tony @tonyjrobinson on Instagram and we will be back on Saturday with a Rookie Reply.