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Survival Secrets Every Investor Needs for Tough Deals with Joe Rinderknecht! · The Academy Presents podcast

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  Did you know that 90 % of the world's millionaires
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  invest in real estate? Well, I'm Angel with the
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  Academy Presents Real Estate Investing Rocks,
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  and I'm here to help you if you want to go for
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  your piece of that pie. Are you new? Are you
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  new to this and you just don't know where to
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  start? It's okay. Are you someone that has invested,
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  but you feel stuck? You feel like you've lost
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  momentum. You don't know where to really head
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  from here. Are you a seasoned real estate investor
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  who is doing great, but maybe you just want to
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  hone a few skills here and there? This is the
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  place for you. The Academy Presents Real Estate
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  Investing Rocks podcast will connect you with
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  industry experts so that you can save time, avoid
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  costly mistakes, and begin living the life you've
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  dreamed of all through real estate investing.
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  You're already taking the first step. just by
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  joining us here today. You said you bought a
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  51, right? Holy moly. Yeah, 1951 builds. Yeah,
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  that was not fun. I won't do that again. The
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  oldest one in my portfolio now is 82. We have
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  a 62 and it's, yeah. Not far off from the 51.
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  Asbestos pipes, lead -based paint. But it's,
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  but again, plumbing. If you're not setting aside
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  enough for plumbing, it's, it's one of those
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  things that it's going to happen. It is not an
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  if, it is definitely a when. So budget accordingly.
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  Yeah. Yeah. And be prepared. Yeah. You know,
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  and I think to maybe go to the next topic here,
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  I know you had said that people are interested
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  in like raising capital. You know, good segue,
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  I think is like, if you, You've raised capital,
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  you've given investors specific returns. If you're
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  short and you got to go to a capital call, you
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  just diluted your investors and therefore diluted
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  their returns. And doing stuff like that makes
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  it tougher to raise capital in the future, right?
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  Because if investors aren't getting the returns
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  they expected, because they're trusting you,
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  right? the deal and the location sure have a
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  thing to do about at the end of the day, it's
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  a hundred percent about you and the operator,
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  you know? So you got to make sure that those
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  numbers are right, because if you don't do it
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  right, then you have to do a capital call, you
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  know, like we've heard, I won't mention any names,
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  but like even some of the best and the best in
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  the business that are having to do capital calls.
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  And it's like, what? That guy's doing a capital
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  call? I never thought in a million years. Again,
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  they're human, but stuff comes up. You just got
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  to do your best. You can't foresee the future.
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  You can do your best to plan for it, but you
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  just don't know what's going to happen. I don't
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  think anybody could have foretold the current
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  economic landscape. While I would like to believe
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  that we're starting to turn around, I want to
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  believe that. That would make me very, very happy.
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  It kind of feels like we're starting to turn
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  around. But could it double dip? Absolutely.
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  Could something else come that just bombards?
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  100%. You just never know. And so being overly
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  cautious is probably the smartest thing to do.
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  I think that in the haste of wanting to get the
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  deal, people will put some of the caution to
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  the side and you have to make sure that you still
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  keep that overabundance of caution. It may be
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  that three, 300 deals don't pencil because you're
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  overcautious, but then that 301 does. And it
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  is like, it's your, it's your money bag. Like
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  it's insane. But having that overabundance of
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  caution, I believe, is a very good thing. But
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  you have to be prepared for the famine that's
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  going to be sitting there while you're waiting
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  for that deal to pencil. Yeah. Because you don't
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  want to wind up in a situation where you lose
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  a property or you lose your investor's trust
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  because trust is a very tricky thing to get back.
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  Yep. Yep. And, you know, that's... like one of
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  the biggest things that I've learned as far as
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  like raising capital is like trust goes right
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  along hand in hand with your reputation. Right.
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  So like, I'm in a, I'm a part of a capital raising
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  community right now called fundraise capital.
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  It's with the, his name's Ryan Miller. He's done
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  like, he's got a couple of nine figure funds.
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  And like the, he has like three R's like with
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  capital raising. And it's relationships, reputation,
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  and results, right? Like an investor is going
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  to kind of judge you on all three of those. And
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  so like, especially, you know, trust has a lot
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  to do with your reputation of how you've communicated,
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  how you've dealt with investors in the past,
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  you know, and, you know, most of the time they're
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  not going to invest with you unless you have
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  a good. you know, working, you know, relationship
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  or a referral. Right. So it's, it's best for,
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  you know, I think it's good advice for anybody,
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  whether you're starting or, or, you know, you're
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  seasoned, it's like this business is 1000 % a
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  relationship game. And, you know, you need to
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  start making those relationships today and make
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  sure that they're strong. Even if you got to
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  eat a little crow, you know, even if you got
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  to have. as I call it fierce conversations because
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  like I like that deal in Utah right we had to
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  do a capital call because we didn't account for
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  those million and a half in renovations luckily
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  we had some we got a little extra from you know
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  a bridge loan but like we still had to do like
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  an eight hundred thousand dollar capital call
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  you know and there was what four investors So
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  we each had to bring a large chunk, you know,
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  and I mean, that's a pretty scary conversation
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  to have saying, you know, this is my, and again,
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  like that was kind of my first deal as one of
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  the operators or the GP saying, hey, we were
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  way off, way off, you know, we're a year in.
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  And, yeah, we could lose this property because
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  if we remember, too, like we got hit double because
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  interest rates jumped from 5 % to 10 .5%, right?
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  We didn't have any rate caps. We didn't. It was
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  variable, so it could go up to the moon. So,
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  you know, there's a couple more places there
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  that you can mitigate risk. And then at the end
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  of the day, like things went sideways. we had
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  conversations with our investors and we just
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  had that fierce conversation. And then the result
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  of that was when we sold it, we gave our investors
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  a hundred percent return of capital. We didn't
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  get in that three year period, there wasn't much
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  of a return on capital because we had to do,
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  we had to pause distributions as well. But I
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  built so much trust and a reputation with this
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  one investor, the biggest investor. That, you
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  know, he rolled $800 ,000 from that Utah deal
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  into my Montana deal that we bought four days
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  after selling that Utah one. And, you know, we
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  built so much trust with him that he's now invested,
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  you know, a couple million with us. He's a part
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  of my general, my GP team on the Texas deal we
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  bought. And he's a part of my board of directors.
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  And he's referred us over a million dollars,
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  you know. So it's like you got to be willing
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  to have those fierce conversations and build
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  the reputation early. Just like I was telling
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  you, Angel, one of the other GPs that's on this
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  Texas deal, we brought him in to be a KP or a
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  loan guarantor. I started the relationship with
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  him a decade ago. And it's cool because I raised
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  a $2 million check on our Texas deal. from somebody
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  I started the relationship with eight years ago.
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  And then I brought in a million dollar check
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  for the same deal from a guy that I actually
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  cold called when I got started in the business
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  trying to buy his family's 20 plex. And I just,
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  I'm pleasantly persistent the last, you know,
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  however many years he's just like, Hey, what
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  are you doing? I want to be a part of it. And
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  he invested his family invested. you know, $1
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  .1 million between three siblings after they
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  sold another property. So it's like, I think
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  the big thing here is you got to have vision.
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  You got to see where you're going. Like even
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  times in, you know, cause like those three years
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  on that Utah property, like we were swinging,
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  we were there at the property three to five days
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  a week, swinging the hammer. I had no income
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  coming in anywhere else. I was living off of
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  credit cards. My marriage was in jeopardy and
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  it was the toughest time of my life. But guess
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  what? Like I did it, you know, had that integrity
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  because I didn't want to lose any investor capital.
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  So we showed up. So you got to have that willingness
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  to get your hands dirty and take action yourself.
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  And, you know, people will see that. And it's
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  like, even though I didn't get paid anything
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  on that deal, like it's paying immensely, you
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  know, in the last 12 months. So it's like, you
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  gotta be, it's, you know, if any of you have
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  ever read the book, Chop Wood, Carry Water, it's
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  gotta be for the love of the process and the
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  person you're becoming in the process. Wow, yeah,
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  I know it's, So I got some advice one time from
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  someone that had been through it, had been a
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  part of several properties that had been foreclosed
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  on, had more properties that were starting to
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  have problems and had properties that were still
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  doing great too. Had caught some news. Like it
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  was people knew. And he and I started talking.
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  And he told me, he said, hey, tough love, you're
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  going to do a capital call. And this is what
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  I suggest you do. He's like, start calling your
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  investors now before you're there. Start calling
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  your investors now. One third of them will never
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  invest with you again. One third of them, it's
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  hit or miss. The other third of them are your
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  investors for life. Yeah. And I always think
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  back on that. Because number one, we don't want
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  to have to do a capital call. So we poured our
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  own money into the deal, but we don't have infinite
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  pockets. Right. Eventually, if we can't hold
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  this thing afloat until things turn around, we're
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  going to have to reach out to someone. And that's
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  what this person was telling me was that, you
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  know, start reaching out now. You're not saying
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  it's happening now, but start reaching out now.
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  And those are conversations I haven't had yet.
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  because they're scary and um gotta have that
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  fierce conversation i'm not there yet right you
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  got this but but you know what i'm saying like
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  people look at others and they're like oh you've
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  been doing this forever you must be you know
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  you're so seasoned you can do this you can do
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  that putting it all out there i don't have to
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  make those calls i want to see if we can just
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  float it to the turnaround what if we I can't,
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  then I should have been making those calls, but
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  I have a belief that we're going to be able to
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  float it until it turns around. Maybe I shouldn't
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  have that belief. Maybe I should make those,
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  those hard phone calls and just be ready to be
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  uncomfortable. Like what you were saying before,
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  like, are you ready to be a little uncomfortable
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  now for what's going to be in the future? But
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  like really reality out there, I, I don't like
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  making those calls either. Yeah. Yeah. They're
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  not fun for anybody. But I think they'll pay,
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  you know, leaps and bounds in the future. And,
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  you know, the other thing is like my other partners
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  on this other deal in Utah, like when we did
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  our investor updates, it was largely like, you
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  know, sunshine and rainbows, even though things
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  were going sideways. And when we told the bad
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  news, like I'm grateful that our investors were
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  gracious with us because. in a way we were deceptive
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  and they could have sued us and we could have
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  lost our position in the property we could have
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  lost it to a foreclosure bankruptcy you know
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  but because we kept showing up to make it right
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  at the property and yeah we were infusing our
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  own capital into the deal as well um it the thing
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  that i've learned is that like my standard going
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  forward is with our investors is we will run
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  out the bad news and walk out the good because
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  like our partners our investors have their own
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  experiences and their own knowledge and their
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  own relationships that could save you you know
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  you know and that's really what saved us on this
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  deal is because uh one of our investors he's
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  you know cfo of a bank And so he was really able
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  to help us kind of turn around like the financials
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  and whatnot to move forward. And, you know, that's
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  why he's such a pivotal partner for us now is
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  because he has an experience and an expertise
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  that we don't have. You know, so be willing to
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  have those fierce conversations and you may just
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  find that they have the resources that you need
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  to get out of the mess, you know. What I like
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  to say is like, even though it can be scary,
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  you know, what if, you know, I love saying like
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  that, what if, and imagine for yourself, what
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  if you were to state it in the positive for yourself,
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  right? State it in the positive. So the negative,
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  everybody kind of think like having those conversations
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  is negative, right? Hey, John, just letting you
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  know that. one two three boulevard you know this
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  happened this happened this happened we need
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  you to bring 50k you know the negative thoughts
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  in our minds could be saying oh he's gonna hate
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  me he's going to never invest with me he's gonna
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  drag my name through the mud he's gonna post
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  on social media maybe but what you know how do
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  you flip that to the positive for yourself because
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  like if you go to that into that conversation
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  with the mindset of the positive Maybe John will
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  say, hey, I really appreciate you communicating
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  that with me. You know, that's it's actually
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  a problem that I had to deal with on another
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  property a decade ago. These are the things that
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  we did and actually have this person that you
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  could talk to for, you know, mezz financing or
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  short term financing or whatever to get you through
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  the hump. You know, I'm glad that you came to
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  me when you did because we can resolve it quickly.
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  You know, because I mean, that's a much better
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  situation, right? So in our minds, we can play
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  that scenario of, you know, the positive, the
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  negative may happen, but at least you put it
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  out there, right? And, you know, what if, and
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  imagine if the positive happened for you because
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  you went into that conversation with that state
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  of mind. I really love that. I kind of talk about
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  something similar when I say, you know, yes,
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  people are afraid of failure, but they're afraid
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  of success too, because they're just different
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  sides of the same coin. So I should probably
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  look at it as I can make those phone calls. And
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  there's a few people I would start with that
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  I think would be an easier conversation. Yeah.
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  Those would be the people I would start with.
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  There's three of them. I know who they are. I've
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  thought about these things. Those would be the
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  conversations I would start with. I absolutely
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  know at least one of them would be trying to
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  give me some advice on ideas to fix the issue
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  because this person's probably already given
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  me some advice on how to fix the situation. It
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  is fear. It's the embarrassment because nobody
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  wants to be seen as a failure yeah and when we
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  have messed something up along the way all of
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  a sudden we feel like a failure and we don't
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  want the whole world to know um now i i talk
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  openly about our problem property i've talked
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  about all the things that have gone wrong with
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  like i talk about it anybody that's come to my
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  meetup on monday with marvelous mondays you know
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  i just talk um because i talk when i'm happy
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  i talk when i'm sad when i'm upset i just talk
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  um and so they've heard it all And they've given
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  lots of advice too, but it's this one particular
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  part of getting someone ready for a future capital
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  call that may or may not ever happen. But you
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  just go ahead and have those conversations. I
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  mean, I guess the positive thing is you discover
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  very quickly who your lifetime investors are.
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  Yeah. Figure out who that one third of your investors
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  for life are going to be quickly. Yeah. Especially
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  if it's. not a capital call that you're executing
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  right away it's like a hey just so you know that's
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  a that's a much easier conversation to have than
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  hey i need you to wire 50k tomorrow or else we're
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  losing it you know no i would wow i would hope
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  that that we would all rally around one another
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  and help each other out in a situation like that
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  but that that goes back to the idea of this is
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  a relationship business. Um, and those relationships
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  are going to be able to pull you through. So,
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  you know, I'm going to kind of end on that because
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  I think that that's a really powerful place to
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  end is this idea of maintaining trust and continuing
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  to build a relationship, even in hard times.
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  Um, because this relationships are what are going
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  to sustain us in this business. And thank you
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  for being here. Yeah, of course. Thanks for having
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  me on. Absolutely. This is a great conversation
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  and literally I can talk all day. So I have to
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  find the parts where I'm like, this would be
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  a great place to stop. But it was awesome to
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  have you on today and just to be able to share
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  your knowledge with everybody that's listening
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  and just thank you. Yeah, thank you. And happy
• 20:16
  to help or have a conversation with anybody who.
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  needs a pump up friend, you know, I'll be your
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  cheerleader in the corner and. Awesome. Hit me
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  up. Yeah, no, absolutely. Do you have a way that's
• 20:33
  best for them to get ahold of you if they wanted
• 20:35
  to, or. Yeah. You can email me. Yeah. Joe at
• 20:40
  cowboy capital .us. LinkedIn, Instagram, not
• 20:45
  really on Facebook all that much. You can also
• 20:48
  check out our website at cowboycapital .us, the
• 20:51
  projects and whatnot we're working on. Cool.
• 20:55
  Great. Well, again, just thank you for being
• 20:57
  here. And guys, until next time, have a great
• 21:02
  day.