BUYING 1500+ HOUSES AND DONE OVER A BILLION DOLLARS IN REAL ESTATE

Speaker 0: Shout out to Steve Trane. Jump on the Steve Trane. We real estate disruptors.

Steve Trang: Hey, everybody. Thank you for joining us for today's episode of real estate disruptors. Today, we've got Tim Harris with RCN Capital. Tim flew in from Dallas, Texas to talk about how he's bought over 1,500 houses, done over $1,000,000,000 in real estate, and started a mortgage company with Blackstone. All insane topics that I'm excited to talk about.

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That way we can all grow together. And this is a live show, so please ask your questions. Pretend the answer. You ready?

Tim Harris: Ready.

Steve: Alright. So first question is, what was your life like right before you got into real estate?

Tim: I was a marine traveling the world, and, I was actually in combat, right as I got out. So

Steve: Marine in combat? Yeah. Alright. Where were you, deployed?

Tim: 17 countries in five years. So, I was kind of the tip of the spear. Mhmm. Everything from, peacekeeping operations in The Middle East to, peace enforcement operations in the Asia Pacific, and, training the people in Croatia on how to use Javelin missiles.

Steve: Okay. So do you see then a lot of action, or you're primarily dealing with the the other country's front?

Tim: You know, I was lucky. I wasn't on the front lines. I was in intelligence. So, there were times we went out and did tactical interrogations and things like that, but, typically, it was pretty calm by the time we got there.

Steve: Gotcha. Okay.

Tim: Thank god.

Steve: So you didn't have to go in there, like, facing the guns frequently. Not facing the guns, but, had to be involved. Okay. So then why real estate?

Tim: So a lot of people don't know that Robert Kiyosaki is a former marine. And when I got out when I was leaving the marine corps, my gunnery sergeant, who was the guy in charge of my my manager Mhmm. Gave me Rich Dad Poor Dad. And maybe in the second book I ever read, first would be like old yeller. But, it resonated with me.

I didn't take any action until I bought a Carlton Sheets course on a late night infomercial, after about eight months of selling life insurance and really realizing I hated that.

Steve: When would you say you took this leap for Carlton Sheets?

Tim: Gosh. That would be o two.

Steve: O two. Because Carlton Sheets has made a big influence. Yeah. But most of my audience probably doesn't know who he is.

Tim: Well, it was I bought a bought his course, and it came in a big box, like, two feet by two feet by two feet and bunch of VHS tapes.

Steve: Mhmm.

Tim: I think there were some CD ROMs at that time, not many of them. And you open this box, and you didn't know where to start. And you grab the pamphlet, and it says, for help, call this number. So I called the number, from my landline, not my cell phone, and they said, great. Glad you need help, you know, for an additional $500.

We'll help you. And it's like, it ended up never being used, and I ended up giving it away as a auction item at a RIA meeting, a couple years later.

Steve: That's awesome. So, and I kinda joke with, like, the infomercials. You know? Like, right now, you look at Instagram. There's a lot of similarities.

I would say, you know, we don't have a truth in lending act, but I would say it's a little bit more honest right now than maybe before, but, like, barely.

Tim: Well, there's no barrier. You know, I mean, anyone can put their credit card in and start running ads. Right? They don't have to pay for real production and actually buy TV space. Right?

Right. So it is easier.

Steve: So you took the Carlson Shoots course, and that just was not it. Never took it. And then or you bought it. Yeah. You bought it.

You called the helpline, and they tried to upsell you. Did you buy the upsell or no? I did not. You did not buy the upsell.

Tim: Money. So at

Steve: that point, you're like, to hell with it.

Tim: It was no money down real estate, Steve, and I gave them all the money I had. So we we were out of money for training at that point

Steve: in time. Well and that's you know, for me, that's one of my frustrations. Right? Because that is that's the line that's been always said and it's still said. It's getting the real estate with no money.

And then they they never mentioned, well, you still gotta pay for marketing. Right. Right? You still have to have, you have to pay for leads. You have to potentially pay people.

Yeah. Eventually, pay for space.

Tim: Or gas. Or gas. Two and four houses.

Steve: Yeah. So it's kinda left out in the marketing. Okay. But so then you said you were selling insurance

Tim: Yeah.

Steve: When you did this. So then if Carlson Sheets was not the solution, what was the solution?

Tim: You know, I got lucky. I put my resume on a website called militaryhire.com, and I found a former marine that was buying and flipping houses in Dallas at the time. And so my first job in real estate, I was a project manager. He was buying and owner financing the houses, and my job was from the day he closed to go out, change the locks, manage the rehab, and and then oversee the property until someone moved in. So that was my first year in the business.

Steve: First year in the business, you're basically keeping eyes on the property. Right. Okay. And then when did you start?

Tim: One day, he said, you wanna learn the acquisitions piece? And I said, absolutely. It just it was fascinating to me. And I'll never forget. 811 Kelso, West Dallas, for rent sign nailed to the tree.

We pull up, and he says, we're gonna try to buy this house. I'm like, okay. This is a scam. I mean, it says for rent. Right?

Like, it's not for sale. Mhmm. He's like, trust me. And I'll never forget the lesson I learned at that point in time. We call, they were asking 80 something thousand dollars, and we offered low forties.

I don't remember the detail the the exact number. And I thought he was nuts. Like, there's no no one's gonna take $40 less than they're asking. And, I remember they called back the next day, and they lowered their count they countered it in in the low sixties. I think it was 63,000.

So the year before, I'd made $1,810 a month as a sergeant. I got an extra $100 if we went to combat, and it was all tax free. So best case, I made $24 for the year. And these people just took over $20 off their asking price in a day. Mhmm.

And he and I was like, that's a deal. Right? He goes, no. No. We're gonna we'll we'll go up, like, $5.

So we bought the house for $48,500. I remember that. And the lesson that my mentor, Tim, oddly enough, is his name, taught me that at that day is what's a lot of money to some people isn't a lot of money to others. And and just like everybody, I was hooked at that point. I mean, the the thrill of the deal, the art of the chase, call it what you want.

So, yeah, I got into acquisitions, started running all of his acquisitions. We were buying a lot from Homevestors guys. This is back in 02/00/2003 maybe. And just like probably happens with a lot of your audience, they weren't paying my commissions on time. They were getting overextended on their hard money loans, real estate rich and cash poor.

And, the Homevestor's guy we had bought most of the houses from said, hey. Those guys ever make you mad, come east with the geese. We're Texas. His office was east of ours.

Steve: Got it. Anyway You can see the confusion of ours.

Tim: Yeah. I could. I mean, it's not an Arizona thing. Right? And so I called him in January '3.

And I said, Bobby, I'm I'm I'm done with this. And so long story short, he had bought 80 houses the year before. And then my first year with him, I bought a 111 houses. And the way it worked out on an old yellow scratch pad, he said, boy, I'm a pay you 800 to buy them and 700 if you can wholesale them. So all my brain heard was 1,500.

Right? Like and so I bought a 111 that year, and I wholesale 87 of them myself. So it was the first year I ever made over 6 figures. Had no idea the IRS wanted part of that, but that's that's another episode.

Steve: It's a different story.

Tim: But, yeah, did that for a year. He said we would buy rental property. Owning rental properties had always been that was the part of Rich Dad Poor Dad that had really sunk in. I had to own assets. I wanted to create wealth.

After a year, he decided we weren't gonna buy rentals together, so I quit. Pissed my dad off again.

Steve: So he he promised you you're gonna buy rentals together?

Tim: He said after a year, we could start buying rentals together. He would help me buy rentals.

Steve: Got it. And then he kinda went back on it. Yeah.

Tim: Because we were making a bunch of money. I mean, and, you know, it's Well,

Steve: we were talking before the show. Right? Like, what what what do typical brokers do? Yeah. Hey, Tim.

Come to my office. I'm gonna give all the leads you that you'll ever need

Tim: Right.

Steve: And all support you'll ever need.

Tim: Right.

Steve: And you come in. Hey, Tim. So thanks for joining my brokerage. So get out and hit the streets.

Tim: Yeah. That's

Steve: all you need to know.

Tim: Yeah. Call your family. Bring those listings in.

Steve: Yeah. And we were joking about this, guys, right before the show because we're both owned brokerages. Yeah. Alright.

Tim: You still own one, so that makes you the craziest man at the table. I I I

Steve: shut that down and moved everyone over to Real. Right.

Tim: Fair enough. So, yeah, I mean, there was a hard money guy that we had done a lot of business with that I had become friends with, Scott, still a great mentor of mine. And I called him up. I said, I've saved up some money. I wanna go out on my own.

And that's when he goes, Tim, I love the way you do business. Why don't we partner up and you can use all my money? I was like, great. Mhmm. And, so that was in o four, and I built a 63 house portfolio in one year with with Scott.

And I was a 30% owner. Got it. That that's that's kinda when everything took off for me.

Steve: Got it. Okay. So you went from your first mentor

Tim: Yep.

Steve: You're working for a home investor guy. Yep. To another guy you partnered with.

Tim: Yep.

Steve: And then you bought properties with his money Correct. To 30% equity. Correct. Cool. And you said it took off.

What does what does take off mean?

Tim: I think once you get out of transactional income and into long term wealth and you start looking at the once you're able to accumulate that role, you know Mhmm. And that cash flow starts coming in, all of a sudden you wake up and you're like, oh my goodness. I mean, we actually have more coming in this month than I made this month last year. Mhmm. Like, it it just changes the way I looked at things.

And, but a year later, I met my wife. She was a HomeVestor's franchisee. HomeVestor is a big part of my story. I a lot of people talk trash about them. I I have a great affinity for them.

She called me to wholesale me a house. The joke is and I have the assignment framed in front of my computer at home. She made $3,500, and I sold it to another guy for $8. Right? So I the joke is we got married to keep it all in the family.

But, I mean, in in through that, we started dating. I had to join her company because HomeVestor sent a cease and desist, long story, sold all the notes, ended up being very significant financial event in my life. And the timing was great because it was before the great recession. Mhmm. But this is where the fun part ends and the bad part begins.

In 2007, my wife and I operated the number one home investor's office in the nation.

Steve: In the nation?

Tim: In the nation.

Steve: That's a significant statement.

Tim: I bought and flipped a 143 houses. And so in August '7 most people think of o eight as the collapse, but, you know, in 08/00/2007 when the subprime market melted down, I had 38 vacant flips. I had $63,000 a month in overhead. I had wrapped vehicles. I was the definition I was a poster child of of the franchise system.

And I spent the next year doing everything I could to not get foreclosed on. And, it worked. Mhmm. Still haven't to this day. And, o nine was bad too, but we came out of it on the other side of 10, with a couple dozen properties and a marriage still intact, which which is better than a lot of people I know from that time frame.

Steve: Me too. Which is one of the reasons why I still have some scars from that time. Because even though my marriage stuff stayed intact, a lot of marriages not. So in you're saying, like, this is a big significant step in your life. So was it the significant jump is because you were a huge because you're shooting up in inside of the home investor, franchise, or what was the big jump after the marriage?

Tim: So getting all that money from selling all those notes was the only thing that saved us.

Steve: Got it.

Tim: We had just built our first million dollar house. We were still in interim finance when the market collapsed. I mean, we went from putting $80 down to $400 down. It was and then we became real estate rich on our personal residence with no income. But we got through the backside.

When we sold that house, we were able to take a very large amount of cash out of it and get it back. Mhmm. Right? And then buy another house at 3 and a quarter interest. So now, I mean, we're gonna $600,000 house, and my payment's $1,200 a month.

Mhmm. The joke is if we ever have another crash like that, I can go be a greeter at Home Depot or Walmart and pay to live in a very, very nice neighborhood. Right. Right? And that that wasn't an option where we lived before.

I mean, it was $8 a month to live there.

Steve: So what were the things? I mean, right now, there are a lot of people or not a lot of people. There are definitely people right now that are struggling.

Tim: Absolutely.

Steve: It's the first time they've seen a market shift, probably. Right? A majority, may more maybe more than a half have never experienced a shift like this. Right. You got to experience

Tim: it Oh.

Steve: At least once.

Tim: Yeah.

Steve: Right? So how did you get out of it? You know? And I'm gonna ask in two ways. Tactically, but also mentally.

Tim: Yeah. So tactically, I tell everyone I have done nothing alone in business. I've always had mentors and partners, and I feel like one of my superpowers is I can acknowledge that I am just an idiot redneck from Dallas, and there's a lot of really smart people out there. And so when the market collapsed, there was a guy named Jeff Drake that was in a mastermind with me, I'm a huge fan of masterminds, always have been, in HomeVestors that he had left Wall Street, and he had all the experience. And I called him.

I said, Jeff, what what is this? He goes, it's bad. And I was like, what do you mean it's bad? He goes, Tim, sell everything now. And I listened.

Steve: Mhmm.

Tim: Right? Like, it it's just one of those okay. And I started selling my houses, whereas everyone else buried their head in the sand and Waited. Waited for the spring. Right?

Well, '8 was awful. Way worse. Right? In early o seven, a man from Homevestor's name, Fred, Burley, one of the original founders, called me and said, Jefferson Bank wants to meet with you. And I said, Fred, I'm good.

I have plenty of lenders, plenty of money. And I said this to you before the show. He said, boy, you never know when a bank's gonna tell you to go to h e, double l. Mhmm. You will meet with Jefferson Bank.

Well, because of that meeting, fast forward to 04/00/2008 when I had a million dollar line of credit call due in full, the only lender in the nation that would loan to me was Jefferson Bank. Mhmm. So, tactically, I've just always listened to people smarter than me, more experienced than me. Mhmm. And, kind of the reason I'm here today is I I wanna share these scars because too many people, they hear us, people like me and you talk, and they think that we're talking from some sort of pontificating, spiritual enlightenment.

And it's really like, oh, no. Like, what I'm telling you not to do, I did, and it was awful. Yeah. So tactically, I just I started dumping everything. We took all of the bad rental properties.

So we had done what a lot of people have done in the last couple years. We'd kept the houses no one else wanted to buy. Mhmm. Right? We didn't keep the three two two brick that everyone wanted to buy from us.

We kept the two bedroom, one bath, no garage on a corner with a bus stop where they deal meth. Right? Like, that was our rent house. Mhmm. So we all of o eight, I would evict and go do the work myself, paint and floor and change locks, and we'd sell it on owner financing.

And, you know, the minute you got that 10,000 in, like, you had to run to pay someone else. And but now that one was taken care of. You had a good family in there. They they were gonna pay that you know, you were good there, and then you had to do the same thing over to the other one. So we just, you know, moved movers and shakers and, one of the best books I read at the time was Who Moved My Cheese.

Steve: Yeah. Fantastic book. And probably a great book right now for anyone that's that's going through any kind of, feeling this shift in their business.

Tim: And then, you know, financially, my wife went and she was a real estate broker already. She became an REO agent, and that income really saved us.

Steve: That's huge, being an REO agent. Yeah. So for those that are unaware of what REO agent is.

Tim: I didn't even realize that was possible, but you're right. So back then, the foreclosure crisis meant that Fannie Mae, Freddie Mac were just on they had to unload their inventory, and they were looking for agents that had experience in asset management and property management. So my wife and I had been doing this for ten years at that time. Well, she had. I hadn't.

She's been doing it longer than me. And so she got a couple, it was either Fannie or Freddie, I can't remember, accounts through the real estate brokerage. And so she was selling 4 or $500,000 houses and getting full commission and doing two or three a month in the worst real estate market ever. Right. So because our town is kind of the town we're in is kind of recession proof.

In some ways, it's not a high net worth individuals. So you asked about the marriage, and that's where I'm going next. So we did not do a great job in o eight and 09/09 at our marriage. There was a lot of tension, a lot of bitterness. She was having to be the one thing she never wanted to be.

Right?

Steve: Red winner.

Tim: Real estate sales agent. I mean, you got a show when you got a show. Mhmm. And we had just had a kid in o nine. So I became the stay at home dad, massive ego shift.

I guess it was communication, love, understanding. We're both too stubborn to give up. You know, we're we're both type a's. Mhmm. But, you know, I'd be lying if I said it was all

Steve: great. Right? Right.

Tim: But, it was tough times, but we fought through it. And then, you know, 2010 is is almost like the storm was over. You could see the sun coming up over the horizon, and, we we we I I'll never forget the day in 2010. I went to her and I said, honey, I think I'm gonna start mailing the probate list again. And she goes, you think it's time?

I said, I I think it's time.

Steve: Yeah. What so that's tactically, mentally. Right? Because these these are tough times. And like I said, you know, we're talking.

Right? Like, we saw a lot of people whether they were in real estate or they were in contracting. They got divorced. Right? The money was no longer good.

Right. So how'd you get through all that mentally?

Tim: I don't know. I I I think it was just a devotion to my family and just I was able to put my ego in check and be the stay at home dad, And we just did what we had to do to get out of it. And coming out of the backside, I just got a great wife, man. I mean, like, we just we talked about it. We were never gonna get in that position again, and we were never gonna get real estate rich and cash poor.

We were never gonna do more than we had to do to achieve our goals. And, so I guess, mentally, it was communication. I lost track of all of my professional network until 2010, and that's when I started the REI Expo, which really was the next stage of my springboard. And the real reason I started it is I had lost track of that feeding ground of intellect, right, networking masterminding that I had from home investors before. And so I started the expo as a way to get people together to share information.

Did you

Steve: lose your home investor franchise then?

Tim: In 2009, we called them and said, you may have it back. Got it. We did it. You know, we paid all of our bills and everything. We didn't stick them with anything so much that in 2012, I ended up joining the system again.

So

Steve: Gotcha. Okay.

Tim: Skipping ahead, but yeah.

Steve: Yeah. Alright. So REI Expo, you launched this thing to basically get back into masterminding.

Tim: Yep.

Steve: So tell me about REI, was it was it REI Expo?

Tim: Yep.

Steve: Okay.

Tim: 200 people the first year in, 2011, 400 people in 2012. Went to Houston, did another one. There were 200 people there. 2013, I got talked in by a personal real estate investor magazine, Andrew Waite

Steve: Mhmm.

Tim: To go national. So we had 800 at the Dallas event. The spring event was in Baltimore, had 200 something there. The summer event was in Chicago, had 200 something there. And then the winter event was in Irvine, had 200 something there.

Seemed like the formula was working. But then from that 2013 event, I met Ed Delgado, the president of the Five Star. Mhmm. And he invited me to speak at the Five Star conference in September 2013. And I shared the story about how when money dried up in the recession when all the good deals were there, how that opened the door for Wall Street.

And my message to these Fannie and Freddie executives was find a way to finance people like me consistently because when there's good deals, that's when you really wanna give me money. And, there was a gentleman in that room that day that had founded Invitation Homes, the world's largest homeowner Mhmm. That he sat through my entire presentation and came up to me afterwards, and I have to say it like this. He's British. He goes, so we're working on a project, and I need your help.

And, within three months, I was the managing director of b two r finance. Mhmm. We we founded it, launched it, did a billion dollars in a year and a half. When I started that, I'd become really good friends with the folks at Think Realty. So the Think Realty Expo was actually the REI Expo.

I sold that to them in early twenty fourteen, and we changed the history of the DSCR business starting in in 2013. We did a little over $1,000,000,000 in portfolio loans, and then, I left active management of that company in 2016. So you

Steve: said you met with Five Star. Yep. If I recall correctly because I was an REO agent as well. Oh, yeah. Thankfully.

Because if I was not an REO agent, I might actually be an engineer right now. So going to REO Expo, I believe it was ran by Five Star, if I recall correctly.

Tim: The REI Expo or the REO?

Steve: REO Yes.

Tim: Five Star ran the default servicing conference, the REO expo

Steve: Yeah.

Tim: The five star conference, all of that.

Steve: Okay. So it's just kinda funny how it all

Tim: It all connected. The attorney that I hired to do the contracts for my expo also did the contracts for their expo. And she saw the way I ran the event, and she heard of what I was talking about, and she connected me with Ed.

Steve: Yeah. Because I went that's how I got my REO contracts was going to the REO expo in Dallas, Texas.

Tim: Oh, at the Hilton Anatole. I don't know. I just remember it

Steve: was a long drive from the airport. I'm like, what the hell are we driving through? Yeah. It was not as scenic as I thought it was gonna be.

Tim: And I have to tell you, Steve. Someone asked me this the other day. I almost didn't give that speech that day. I I I remember I was standing in my my closet. I I've got my suit on.

I put my tie on. I've got my good boots on. I'm from Texas. I wear boots everywhere. And this massive wave of imposter syndrome came over me.

It's like, you're just an idiot. You're just this uneducated redneck. There's no way these people wanna hear what you have to say. And I almost didn't go, and I just remember thinking, no, Tim. You committed to it.

You have to go. And, I mean, literally, by giving that speech that day, there are billionaires in my cell phone that I can call when I have a good idea.

Steve: Yeah. That's powerful. And that that imposter syndrome, I mean, that it it affects so many successful people. It's crazy.

Tim: I've been number one in the nation. I've been the guy that ran the biggest trade show in the nation, and I felt like I was unworthy or unqualified. They'll see right through me.

Steve: So and I I I know a lot of really successful successful people that have it. So let me ask you, is there anything that you did? I mean, I know you made that commitment, but is there anything else? Or does this show up anywhere else in your life or in

Tim: your businesses? All the time.

Steve: So how do you address imposter syndrome?

Tim: I think you have to learn to identify it. You have to learn to know that feeling, and then you have to learn to refocus your energy. I'm not going all zen on you, but, like, you have to learn to refocus your energy on on facts. Right? I mean, I was invited to speak on that stage because of what I'd already accomplished.

There's a lot of times with money that, when I realized maybe how much I have or what I have at my disposal, I feel unqualified for that. And, you know, you have to remind yourself, you earned this. Like, it's been twenty two years of of a lot of hard work. And, I I think it's kind of recentering yourself, refocusing on the facts. That day, I grabbed this Marine Corps coin I have in my closet that I still carry some days when I'm giving big speeches.

I grabbed it, and I just kinda, you know, grabbed it tight and stuck it in my pocket and took it with me. You know, so I I think it's it's, we can say all we want, you know, realize the audience puts their pants on the same way you do and all that. But I I think it's recentering on who you are, what you're about, and, you know, you have a truth to tell whether whether the people in the audience, embrace it or not. That's their that's their

Steve: deal. Yeah. That's up to them. So you partner up. What's the guy the British guy's name?

Tim: Nick.

Steve: Nick. So you Nick says, hey. Let's do something together. Yep. And you start b to our rent.

So you sold your first company, REI Expo, and you start b to our lending?

Tim: B to our finance. B to our finance. October 2013.

Steve: October 2013. And you said your first year, you guys did a billion dollars in portfolio loans?

Tim: In the first, well, I guess it's technically fifteen months. Mhmm. In the first fifteen months, we did a billion.

Steve: A billion. And then at some point, this became finance of America.

Tim: In April 2015, we did the first single family rental securitization. It was a $200,000,000 transaction. Shortly after, we bought,

Steve: Before we do that, what does securitization mean for?

Tim: We bundled all the loans up and sold them to bond buyers. That's how we made our profit. One of the best things we did was hold on to part of them. Anyway, that's like a carrying a second, and it it was highly profitable. So, yeah, we did this securitization, which it basically what it did for the listeners Mhmm.

Is it introduced a new source of capital. Right? Now all of a sudden, the rating agencies funny story. So I'm sitting with Moody's who they rate these bonds. They say what they were, triple a, double a.

And they had no idea how to rate them because they're business loans on residential assets with people paying, but owned by a business. They really couldn't figure it out. So I had the commercial guys in the middle and then all their, commercial here, residential there, and then all their assistants. And one of the guys in the middle, he goes, what's gonna happen with this house in Kansas City? You know, because it's a flyover state.

Right? If if if that investor stops paying, who's gonna manage it? And I'm over here like, a property manager? And he's like, well, how are you gonna find one? I'm like, Google?

It's they just had no concept of our industry and how it worked on the real level. And so, really, the first two years, I was simply going around educating Wall Street that, you know, hey, Tim and Steve, we're real people, and we have millions of dollars worth of houses and really good credit risk.

Steve: This is different than when Invitation Homes securitized their portfolio.

Tim: Correct. Because that was a single borrower securitization. Mhmm. In essence, at that point, they were saying, oh, do we believe in Blackstone? Mhmm.

Ours was was called a multi borrower securitization. So I have this pool of $200,000,000 worth of mortgages made to, as everybody wants to call us now in Wall Street, mom and pop investors, where bugs me too. Where we had to talk them in to understanding that, you know, this industry goes back five thousand years. Yeah. Like, peep individuals have been renting houses out very successfully since the Babylonian times.

Yeah. And so what broke ground the groundbreaking part of that is they were all DSCR portfolio loans, and it was the first time that a multi borrower well, the invitation home securitization the year before was the first time any DSCR on residential had been securitized. But then our pool of mom and pop investors was the first time that the bond buyers had ever said, yeah. That's a good credit risk. And now fast forward to this week, DSCR investor loans with RCN are cheaper than FHA loans.

Steve: Really?

Tim: Yep. You you can get about a six and 6.8 rate on a thirty year DSCR loan, and a Fannie Mae Freddie Mac loan right now is, like, 7.1%.

Steve: So let's take another step back here. DSCR.

Tim: Yeah. Sorry. Debt service coverage ratio. And the way I've always explained it to investors is it's basically the debt to income ratio of the property. And I like to use round math.

So if your mortgage payment, taxes, insurance, and homeowners association is a thousand bucks, when you hear someone say a 1.2 DSCR, they want that property to rent for $1,200. Yeah. They wanna feel like the rent is gonna be able to cover the actual expenses as well as any maintenance or vacancy that pops up. Yeah. And so that had always been used for commercial, but it had never been unilaterally applied to, single family investments until then.

Steve: Alright. So then, moving along, doing a billion dollars in loans, I imagine there were probably some growing pains. So, you know, for a lot of us, right, smaller mom and pop operators. Right?

Tim: Which I still am. Still mom and pop.

Steve: Right? So we're doing these transactions here and there. You know, we have some headache and some stress from, like, hiring a salesperson, making sure the transaction coordinator has everything done, having the CRM in place. What are the kind of headaches you have doing a billion dollars in loans?

Tim: It's the same thing. I mean, literally, we buy Salesforce out of the box, and it's like, what is a lead? What is a qualified lead? What's an opportunity? What's a deal?

What's a contact? What's an account? And how does it all connect? Oh, we need KPIs? Appraisal order?

We'll you know, phone connects, email connects. Like, it was it was twenty four months of painstaking, mind numbing excitement. Mhmm. Because and I would tell the team all the time because I ended up I was I ran all sales, marketing, and business development. And so remember, I said I was the dumbest person in the room.

So my chief marketing officer I hired had twenty years experience in marketing. Right? I didn't. I hired him. My senior VP of sales had been running mortgage call centers for twenty years.

So I hired him. And And then my business development director had been in business development for twenty years, so I hired him. So I became a genius because I had three geniuses that ran my departments. Right. But, yeah, it was fun.

I mean, I would always remind the team, like, you're not expected to be perfect. What we're doing has never been done, but you're expected to have a good attitude and help me figure it out. Like, we're all in the same boat. So I I have to say, one of the feedback we got in the first year was we run these surveys after closing for the net promoter score. And one of the feedback said, ouch.

Like riding a bike with no seat. That's how he rated the experience. The next question, would you do business with us again? Yes. That's how new and exciting the product was because investors could tap equity where they couldn't before.

Steve: We were blue Ocean. You had no competition.

Tim: Yeah. Yeah. Still blue ocean.

Steve: Still blue ocean. Yeah. Alright. So, you built this out. You've got, ton of traction, and this was around 2014, you said?

Tim: 1314, fifteen. So late fifteen. We did our first securitization April 15.

Steve: And then at some point, you left.

Tim: Later that year.

Steve: Why? I mean, it was fun. It was crazy. Why leave?

Tim: It became about management versus creation. Mhmm. Right? I mean, I'm I'm still just a crazy entrepreneur that likes to build and create things. And I, like, I I could whiteboard with you all day about CRMs and creating things and new products.

Steve: You like to innovate?

Tim: Yeah. But if you want me to talk about HR, nah. I'm good. So it it was the phase of the business was and you haven't met many people that have resigned from a 7 figure salary Mhmm. And comp package, but the phase of the business just didn't require my skills anymore.

I was actually probably, at that point, bad for the comp the day to day operations. Yeah. So I had, you know, an ownership interest in the company and just stepped aside and let more qualified people, run it.

Steve: Did you sell your shares, kept your shares?

Tim: Bit of a complex setup with these private equity people. I retained, my interest until it came, was time for the SPAC offering.

Steve: Got it. And then where where along this journey did you buy 1,500 houses?

Tim: Starting back in 2002 or 2001. '2. Yeah. There was there have been so many years that I bought a 100 houses. I still run a small wholesale company that'll do 40 to 50 this year.

Small. By Tim Harrods standards. You know, I've done up to 211 in one year.

Steve: Mhmm.

Tim: So it the number's probably higher than 1,500. I I I just don't count.

Steve: Right.

Tim: I could probably figure it out if I really wanted to. It's kinda funny. As I sit here today I mean, we're closing an $80,000 wholesale today. That I got from posting on Facebook, hey, realtors. Send me your deals.

And then I just text my buyer and you know? So I still get it I still get a thrill out of that. And and and, I've been heavy wholesale, heavy rental, for a while there. At certain times, our portfolio got over a 100 houses. I've never been happier than it being below 50 Mhmm.

Because we own a lot more expensive houses. We do a lot of midterm rentals, short term rentals, and, but I'm big into most of my new investments are multifamily and commercial now.

Steve: So let's talk about that. So, like, everyone says not everyone says, but, like, a lot of the books we're reading that get us excited about this, you know, Rich Dad Poor Dad and so on. It's like, you buy single family. You gotta buy houses, leverage, and all these other things. And then it's it seems like you go through seasons.

Just like you you have this season in building a business. Once the business is built, you're not excited anymore. Right. We have this season of, like, I wanna buy as many houses as possible. And then you have the seasons, like, why do I have so many houses?

Something along those lines. Yeah. The houses are more headache than I thought they were gonna be. So can you talk through that?

Tim: What I realized in probably o '9 the most was the lower price band of the house, the more complicated the management Mhmm. And the more and the higher the expense ratios. And then by getting around all these private equity types, I really started hearing the phrase return on equity, return on equity, equity multiple. Right? MOIC, multiple on invested capital.

It's just literally, half of my boardroom meetings was I was like, I'm out. I'm out. What did you just say? Been doing this fifteen years and have no clue what you're talking about. I never forget.

First time that, John Beach on the fountain one of the cofounders is like, you know, a DSCR. I was like, no. I don't know a DSCR. He's like, I thought you've been doing this for a while. I have, but never heard of a DSCR.

What are you talking about? I know LTV. Yeah. So, anyway, so then we started selling like, for every two houses we would sell, we could go buy a nicer house. And what we realized was the cash flow was less, but the appreciation was more, and the maintenance expense and turnover was less.

So it became more of an investment. Well, then you start realizing, well, you can sell these two and get into this bigger one, and then we started doing corporate rentals. And so now I mean, I've got an $800,000 house that does $12.05 a month in midterm rentals Mhmm. On a six month contract. So I think it was all about just education, learning

Steve: look at it differently. So, there's so I do a show a show with a pulse box starter detox, and we talk about, like, there is this blue collar. They say mom and pop. We call it blue collar real estate and white collar real estate. Right.

White collar real estate is invitation homes. Right? It's all these Wall Street guys buying these or or these REITs and so on. Right? Like, that's white collar.

They look at assets completely different than we look at at it. And we look at assets. And blue collar is like, yeah. You know, we look at LTV. You know?

What's the what's the rent? Right? Maybe a gross rent multiplier. Maybe something along those lines. That's about us.

That's pretty fancy. That's still pretty fancy. Right? But that's about as far as we'll go. But the other side, you hear these things.

Right? Like, return on equity or Moic. Moic. Never heard that term before. But, yeah, you just they just look at things completely differently, so it's really fascinating.

Tim: And so then and that's why when I say I'm now I was talking to your guy, Aaron, before the show. That's why I'm more into commercial and multifamily now. It has nothing to do with me being the operator anymore. It's all about like, my number is a 20% IRR because that means I can double my equity every five years. And so let's just say you have a million dollars.

Well, in twenty years, that turns into eight, right, without having to do anything. Right. So as part of the concept I've learned from these private equity guys too, you kinda start off as the guy that cleans the stall. I'm talking about horse racing now. And then you become the jockey, and then you wanna be the guy that owns the horse.

Ultimately, you just wanna be the guy that owns the track that gets paid no matter what happens and owns the land underneath it.

Steve: Mhmm.

Tim: Right? And, so I'm kind of in between owning the horse right now and owning the track. Yeah. But it's been twenty two years.

Steve: So you sit on the track. In my head, I was going like like a cartel boss. Right? Like

Tim: You went on the gambling ring that operates at the track?

Steve: I'm just saying you can't make money here without my express written approval.

Tim: Well, there you go.

Steve: Yeah. So alright. So then you exited Homevestor, bought a Homevestor again. Are you still a Homevestor guy?

Tim: Yeah. In 2012, I joined Homevestors again because I I never fully shut down my wholesale operation once I started it again. And then I became a development agent for Homevestor. So I actually, at one time, was one of the largest in the nation. I had 46 offices that reported through me.

And, then in 2016, my partner and I split up, who had run my operations since I had joined Blackstone, in 2013. And, we we sold the franchise, sold the development agent, and, split up our partnership.

Steve: You know, we haven't really even addressed what Blackstone is. So for those that for the uninitiated, what is Blackstone?

Tim: So a lot of confusion around BlackRock money manager versus Blackstone private equity fund or firm. So Blackstone has, a lot of different funds that they manage, and, they are it's private equity. They raise money, and it's all about multiples of equity. Multiples of equity. Whereas, like, BlackRock, they wanna protect capital and grow it conservatively.

These guys I mean, it's like, how many triples can we hit? Oh, you struck out. No big deal. Hit two triples. Right?

Like, it it's these guys are like, you should never strike out. You should only bunt. Right? It's like, and so I found it interesting last year, BlackRock actually started running ads on Twitter, truths about BlackRock and housing. Basically, they were running ads to show people they had never bought houses.

Now they had invested in the bonds that the houses backed. Yeah. But they but there was a lot of confusion between the two.

Steve: Well, the names are very similar.

Tim: Or, Stone, Rock. Yeah. I'm gonna be the real estate disturber now.

Steve: Yeah. Well, because I think it'd be understandable, right, if you're just reading the paper Right. To get those two mixed up. Yeah. So Blackstone is just a huge, huge fund.

And I remember back, you know, again, in REO days, you know, getting these offers from invitation homes. Like, well, you know, like, who are you guys? And I need to put funds, and they sent over for funds. It's like $86,000,000. This is ridiculous.

Tim: Right? It's like

Steve: you're you're overcompensating. Right? And those

Tim: are the proof

Steve: of funds that black still has sent over when they're making offers on our properties. Anyway, going back to Homevest, the only reason why I was bringing that up is because, well, Mike Hambright has been in the show. Right?

Tim: I sold Mike my DA business.

Steve: There you go. So, and he was a big home investor guy home investor guy in Dallas as well. So I imagine you guys probably

Tim: Oh, Mike and I have been really good friends for a

Steve: a long time. Yeah. So, alright. And then somewhere along the way, you started another company and sold it.

Tim: Yeah. When I left, b two r, it was before the Finance of America merger. Well, right as it was happening. That was another part of it. Businesses were changing, and anytime you ever sell a business or merge a business, the founder becomes the dumbest person in the room.

Period. Every business ever sold. So I started doing some hard money loans with my own cash and grew that business pretty well in the DFW area. And then even started brokering nationwide, and, Residential Capital Partners came in and bought that from me twenty eighteen ish. Healthy multiple?

It was a great deal. Yeah. It was a great deal.

Steve: So, you know, there have been so many of us that we struggle with shiny object syndrome. Yeah. And we start things. We don't finish it. We start things.

We don't finish it. We start it. It kinda flanders over here. So there's a couple of different things I wanna touch on here. First, there's hope.

Right? Yeah. You can start a business and exit it. There is hope here. So the second thing I wanna ask is how are you able to start these businesses and exit them?

Because there's, like, you know, there the debate, can you sell the wholesale company? Right? You haven't done that yet. It doesn't appear. But can you talk about how to build a company and then exit it?

Because I don't think a lot of people get that part.

Tim: I think when people buy a company, they have to feel like they're buying a future revenue stream. And that's one of the challenges with, a wholesale company is so many people out there listening design it around their unique skills and abilities. Mhmm. And if those unique skills and abilities are going away, you don't have a future income stream. Like, the hard money business, you have this book of customers that are coming to you every month for their needs.

And you have a sales team, and you have a CRM. We were using Salesforce at the time. I'm a huge Salesforce fan. So when I sold that, I sold the Salesforce org, which is basically the account for those listening. I know you know what it is.

It they got my I think I had six five or six loan officers at the time, and I became a strategic adviser for two years or one year. I can't remember. And that was part of my earn out. Right? So they kinda taped me to the business.

Right? The insurance company I sold we didn't talk about that, but

Steve: Oh, yeah.

Tim: It wasn't it wasn't huge. And that was only, like, a two x multiple, but that was just I was tired of it. It wasn't growing as much as it was the year before. But there, you have embedded customers with extended policies and renewals. Right?

So that was its income stream. The REI Expo was a revenue multiple, but I got a higher multiple on that one because the Think Realty bought it, and they had this customer base. They were after more customer base, and they had all these other products and services. So they were buying the upsell cross sell opportunity as well.

Steve: They're buying a feeder system. Correct. So I guess let me ask a question other way. So you and I have a lot of mutual colleagues, right, peers in the industry. And a lot of them you're familiar with PI?

Predictive index?

Tim: Yes.

Steve: Okay. So it appears our industry attracts Mavericks. Right? Predominantly Mavericks.

Tim: Oh, yeah.

Steve: Right? And so if you're a Maverick, you're a high driver or very independent, driving personality, doesn't care for details.

Tim: Correct.

Steve: Probably social. Right? So you see the challenges of so many of our colleagues. What what would you say is the gap in in in bridging this from a person from a business that you have to have one person that's driving the show to the point where you can exit the business? Because, again, there's not a lot of books to talk about.

A lot of business books talk about how to build a business, how to start a business, how to do marketing, sales, finance, so on. There's not a lot of concepts on how to exit a business. What do you have to do to be able to exit?

Tim: Well, first, you don't hire your mother, brother, sister, and your whole family to run the business. Right? Because you have to have a team that is agnostic that goes with the business. Otherwise, all you have is an asset sale. And so if you have an asset sale, like like, that's really what the, insurance company was.

Right? It's a book of business. I sold it. No salespeople that it was just here's the book. When you're selling a business, like your company here, right, do you get the lease?

Do you get the people? Right? If I'm acquiring your business or analyzing it, how many of these people are you related to? Right? Like, how many of them would quit if Steve quit?

Right? Because if my whole or am I buying the business to keep Steve on? Am I am I merging with him to inject capital? So I I think it's a super long answer, but the the biggest reason most businesses are, I would say, are would be difficult to exit is probably because the entrepreneur is not a great business owner. Mhmm.

They're a great tactician.

Steve: Yeah. So then if you were to try to sell your wholesale business, what would you put in place so that you could sell your wholesale business?

Tim: First off, I wouldn't because it's really just a feeder for my rental portfolio Mhmm. Right, and my wife's projects. Mhmm.

Steve: But if you did But if you did

Tim: If I did, the first thing I would do would be put a president in place, and that president would then be in charge of building out a team, a new team, brand new team. Because anyone existing, I would assume they had to

Steve: go. Mhmm.

Tim: You know, I would get them an a lease on a building that I did not own. I would make sure that it was a, CRM system that was not tied to any of my other verticals. I would make sure it had its own individual accounting system to where numbers were true and producible without, you know, a lot of funny magic. You know? A lot of commingling of funds and entrepreneurial, businesses, which I I feel like is very undisciplined.

Mhmm. But the biggest thing I was I would do is hire a competent business unit president and tell that person to get it ready for sale. And if they didn't know how, I wouldn't hire that person.

Steve: Yeah. Who and that how?

Tim: Really, after twenty something years in this business, that's it. I mean, it it's if you're not gonna be a great sales well, two weeks ago, you sent out an email said, are you a bad sales manager? Number one, great subject line. Number two, I should have explained it more when I forwarded it to our sales managers. It it kind of insinuates like, oh my god.

Why did he pick me? I actually I replied to to all immediately once I send out, like, oh god. But I don't need to take sales manager training. I'm not a sales manager at RCN Capital. Right.

But if one's gonna take it, all need to take it, and then everyone needs to get on the same page. And and then I need to stay out of the way. Right. And I think you know? And that's the other thing.

We all need a coach. And I was telling my 22 year old son, he's training to be a pilot right now at Oklahoma State University. Very proud of the young man. I said, you need a coach. He goes, I want you to be my coach.

I said, I'm not gonna be your coach. I did that when you were in Little League. Now we get to be father and son. I get to be when you want advice, you're gonna call me for it, and I'm gonna give it. Mhmm.

Which means you'll never get advice from me again, like, until you're probably 30 or need some money. But you've gotta have a coach. You've gotta have someone that's, like, you know, pushing you towards something. So I had never sold a bit I didn't know what EBITDA was, earnings before taxes and amateurs interest taxes and amortization until I was interviewing someone for blacks for the Blackstone b two r. And we're in Manhattan, and I'm in this conference room, and there's super smart sharp kids.

All the he's just talking all these words, and I'm over here like, man, what's this guy talking about? And I just never forget. Like, I finished that interview. I was like, you know, I've got some great notes. I can't wait to, you know, share them with the CFO, and, good luck in the process.

And I go in there. I told the CFO, I said, don't let me interview anyone like that again. I don't know what the hell he's talking about. MBA from Harvard, EBITDA. I mean, damn, kid.

Right. So I think you have to stay in your own lane. And if you're thinking about selling a business, you need to make sure that, number one, you have good people in place that can run that business in your absence. If you can't if that business cannot be run-in your absence, no one's gonna ever buy it from you.

Steve: Yeah. Perfect. Perfect answer. So you and I met face to face for the first time at the IMN conference a year and a half ago.

Tim: Yep.

Steve: I thought I was doing okay. Right? Thought I was doing good.

Tim: You are.

Steve: And the moment I walked into that conference, I felt poor. Right? Right? Because you guys guys you got guys on stage. You know?

Like, we have 30,000 properties. Another guy, I got 85,000 properties and all these other things. Like Did

Tim: a 100,000,000,000 last week.

Steve: Yeah. I was like, okay. So we are what's cool is I got to be, like, you know, the medium sized fish, right, in a pond to now I'm back to being the tiny fish in a in an ocean again. That's the feeling I had. And for me, that's exciting for Yeah.

I am motivated when I see other people doing way better than I am. So what were you doing at the IMEI conference?

Tim: So as RCN, we're we're a sponsor. Right? So we we'll do more than 1 and a half billion in loans this year. We'll do more than 7,000 loans this year. So we do we go to an event like I'm in, and we may have a $100,000,000 worth of loans floating around there, which we call a week.

Yeah. All relative. Right? And, but also personally, the so the I am in SFR conference happens in May in Miami and December in Phoenix. And the first day of panels is my most mind blowing educational day of the half of the year.

Like you said, you you the state of the industry blows you away. Right? The new guy that no one's heard of that already has 20,000 houses in eight months, right, because they rolled up three or four big companies. Then the the economic stuff that I challenge everyone to learn because I didn't understand it ten years ago. Like, if you ask me what a swap rate was ten years ago, I've been like, I mean, like, I don't know, like, at a flea market or, like, swap me?

Like, the whole point is is until you push yourself, it's really easy to get complacent in your own little 75087 ZIP code bubble. Right? Like, I'm the big dog. Right? And so I like going to IMN even when I'm not running a big company like RCN for edge for exposure.

Not even educate. Exposure to things that expand my belief of what's possible. Yeah. I tell everyone this. When I first started, I was a thousandaire.

Probably, like, a hundredaire. But we'll just say a thousandaire.

Steve: Or round

Tim: up. The same math that can take you from a thousand to a million is a comma and three zeros. So it's a thousand times a thousand. Well, if you believe you can get to a million, which I contend a millionaire will not be enough anymore. A millionaire will be, in essence, like, I guess, welfare, inflation.

The same math that takes you from a thousand to a million is the exact same math that can take you from a million to a billion. It's a comma and three zeros. It's a thousand reps. And we tap out on our limits. We tap out on our beliefs.

We tap out on our understanding. And I think when we go to places like that, it allows our mind to see, you know, there'll be a there'll be $4,000,000,000,000 worth of real estate transactions this year. A billion is nothing.

Steve: Yeah. So I I went there with Matthew Potter, and he's the judge that we have part in the disruption. And he said the same exact thing. He was like, I thought we were doing pretty good. And you walk in that room.

Holy cow. Right? Right? It's a completely different world. And it kinda it kinda goes back to the white collar real estate looks like versus what we do, blue collar real estate.

So what do you do exactly at RCN? What does RCN do?

Tim: I'm the executive director, and, my role has really been focused on, I would say, brand recognition, trying to get our name out there. I believe people do business with people they know, like, and trust. And, it's hard to get to trust a lender until you close a transaction.

Steve: Mhmm.

Tim: So I really have to focus on the know and the like. So I go around to these trade shows, these masterminds, and I try to we have a podcast that you'll be on if you'll ever come to Dallas.

Steve: One day.

Tim: Apparently, I have the Dallas Mavericks tickets are gonna be really popular. I'll I'll bribe you through bribing your team.

Steve: Sounds good.

Tim: You know, it's it's all about I believe in what's been very successful for me in my business and my life is give without expectation of receiving. And so I just go around the nation giving, and, I mean, you're not paying me to be here. I'm paying my own way. It's if you can go around the nation giving, people will wanna get to know you. And then if they wanna get to know you, they'll hear what you do.

And, hopefully, you can help them. And if you can't, craziest thing, our number one correspondent lender right now was introduced to me by a guy that you know, Mike Hambrite.

Steve: Mhmm.

Tim: One of his investor fuel members tried to do some loans with us. We turned him down because he's in Baltimore and does too heavy of rehabs. And and just as a national lender, we're never gonna and I you asked me what we do. I'm about to tell you. As a national lender, we're never gonna fit everyone's needs all the time.

But we treated him with such respect, and we were so professionally friendly with him that he referred his buddy that was a big correspondent lender, and now we're closing 30 loans a month with him. Wow. Right? So it it's my role as executive director. I have a real focus on getting our name out there through the retail channels and, really trying to assimilate into, the blue collar, networks of our industry.

At RCN, we loan fix and flip long term rental and ground up construction. We do those loans for investors nationwide except for Nevada, Minnesota, the Dakotas, Alaska, and Vermont. And only for investors. I don't do homeowner stuff. It's single family, small multifamily, and small mixed use.

Steve: Gotcha. There was a follow-up question I had there. Oh, I was gonna say, when we play in the finals, conference finals. Right? Dallas versus Phoenix.

Yeah. I will make it out to I will make it out to Dallas. So, let's, we got some audience questions here I wanna jump into. So, before we jump into it, I wanna ask you, you're we're talking about common errors you see investors making. What are those common errors?

Tim: I think when I say tell your story better, I'm not telling the people out there that are, like, shy of video or Instagram to start becoming a a content creator. But you're I've been saying this as much as I can from the rooftops last year. Your track record is your most valuable asset. It's the one thing in this business you cannot buy. Tim Harridge cannot buy Steve Trang's track record.

We can partner together Mhmm. And then we can share. But the minute we break up, I can't use your information anymore.

Steve: Mhmm.

Tim: And too many investors come to us, and they cannot tell their story. Right? They can't they get confused between their wholesale deals and their JV deals and the deals that are just them and their wife. And I feel like if people would focus more on the track record and document it, it helps you raise capital. It helps you borrow money.

It helps you gain influence. It's your thirty second elevator pitch. Right? I mean because if you tell me, I bought somewhere between twenty and eighty houses. So 10?

Like like, it just seems weird. Right? I mean, now if you're saying over 1,500 and I don't keep track anymore, that's a different story.

Steve: Right.

Tim: Right? But it it so I've been telling a lot of people work on their track record. And the other thing is in the last three years, investors, wholesalers, have gotten really lazy on rehab numbers. And a lot of people are still using these dollar per square foot calculations that do not take into account the 300% increase in material cost. And probably like you as a investor, when I see a house in Rockwall, Texas come across that's 2,000 square feet, that's where I live, 2,000 square feet and it says 40 rehab.

I'm like, oh, yeah. $20 a foot. No. Right? Like, it's just it's not gonna happen anymore.

Especially if you tell me you're gonna flip it for 800,000. Right? It's come on. So then what happens is these investors are used to being able to go in with a shoddy plan and a shoddy budget and still make $50,000. Used to be.

Yeah. Twelve months ago. Well, now they come in and and and they don't have a good budget, and so they don't have a good plan. And so then they get disappointed on the back end. But it's also harder to borrow money from someone like me if you send me a generic budget that says kitchen 5,000.

Right? Because if you put a garbage disposal on, I can't give you a $5,000 draw. Right? You you need to be more specific. And, as a private investor, as a lender, and as a buyer from wholesale people, I think if you if you send me really good comps and a really good rehab budget, there's an odd the the odds of us doing business go way up.

Yeah. So I think people have gotten lazy because of the massive run up in values and easy money and easy sales.

Steve: Well, you didn't have to be good. You didn't have to be good at rehabbing. Right? And even if your ARB was wrong when you blasted it, it was probably right by the time they got it. Right.

So it was it was a really interesting market. It was. Everyone looked a lot smarter for a period of time.

Tim: All the virtual people that, like, literally just made things up and people would buy it and make money, I was just like, wow.

Steve: It covered up a lot of mistakes. So let's take a quick, quick break, and then we'll get to the audience's questions.

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Steve: Question on YouTube from Barnabas Achoya. I hope I'm saying your name right. I apologize if I'm not. We touched on the cons of REITs investing versus directly acquiring commercial res residential real estate like small apartment complex. That's actually a very high level question.

Tim: Personally, I've tapped out on focus and attention, and I'm also past the point where I wanna be the jockey or the horse owner. So for me, all of my commercial multifamily investing at this stage of my life is through limited partnerships and passive investing with jockeys and horse owners. I don't invest in REITs. I invest in private syndications with the the blue collar people that are willing to do the work. Because I don't I don't wanna get watered down.

Right? I'm not after a five I'm still in the growth stage. I may invest in REITs when I'm in my sixties. I'll be 45 this year. I have x dollars in net worth, and it's my intention to quadruple it in the next twenty years.

And so to do that, I have to be kind of in in between doing the work and all the way over to the passive REIT. So that's why I choose that area.

Steve: So I hate REITs.

Tim: And I wanna sell my company to a REIT.

Steve: So there you go. If you can sell your company to REIT, you're doing really good. So my experience with the REIT is there's a couple different factors. First, in I thought at one point, I was gonna buy some commercial real estate. Man, it'd be pretty cool.

Right? This building we're in, pretty cool to buy commercial property. And then I learned how commercial real estate actually works. And first, you gotta have, you know, tenant improvement, this and that. As a landlord, it's pretty costly, but if you got the money, it's fine.

Right? But then I see how REITs operate. And the way REITs operate is they don't need income. Because I am a as a tenant and trying to negotiate with the property manager who's gotta go through the landlord. Say, Tim, you know, I know you listed at 18 a foot, but, you know, I like to be in, like, you know, thirteen fifty a foot.

They're like, no. Like, count I like to say, no. Where the price is the price. Okay. How about 14?

Price is the price. 16? Price is the price. Like, you've been vacant for two freaking years. You can't tell me the price is the price.

Like, price is the price. They're nonnegotiable. And so I finally understood why was that they were more intentional in maintaining the value of the property than cash flow. So the value of the asset was more important than a revenue. Right?

I hope I'm hoping this all makes sense to everybody. And so they'd rather have the property be vacant because they can base the value based off a pro form a with this fake rent and actual cash flow.

Tim: Alright?

Steve: And so in seeing that, it's like, oh, well then, REITs then for the most part are pretty what's the word? It's not worthless, but it's not very valuable of cash. It doesn't have revenue.

Tim: I think of REITs as capital preservation. Yeah. I mean, it which is a great part of anyone's investment strategy. I mean when you're 70. Right.

Don't lose money. Right. Don't lose money. Yeah.

Steve: That's what they do. Don't lose money. It's not grow. It's don't lose money, and if you can just beat inflation.

Tim: Right.

Steve: Right? But the other thing too is and I'm learning this as I learn more about private equity and raising capital and all this other thing. The people handling the rate are compensated on the value of the rate, not on the growth or revenue. Mark to market. Right.

So if they get paid 2% of the value of the REIT, it's more important that the the the portfolio doesn't shrink than it is to grow the portfolio. Right. For that reason, I would never invest in a REIT.

Tim: Yeah. I mean, it's it's it's interesting. So a REIT bought, Lima One a couple years ago, and they look at it as a great capital deployment arm. In in in in the way I think of REITs or commercial investments or even multifamily investments, I think we all have to do a better job at having, like, an investment thesis. Like, what we're trying to accomplish.

Mhmm. I was telling one of your, guys, Bino? Bino. Bino. Cool, dude.

Steve: Very good. Yep.

Tim: I was telling him, I said, you know, I'm at the stage of my life where a 20% IRR means my capital will double every five years, but I need that capital back. Right? Like, I need an exit event. It's why I'm gearing away from single family homes because number one, it's hard to get your capital to double in five years. Number two, you have to sell it and incur a taxable event or go to the ten thirty one stuff in order to, you know

Steve: Get a cashback.

Tim: Yeah. So for me, I'm into these other things because to get all spiritual on you, like, I believe God has given me this great ability to make way too much money. And I feel like I have an obligation to protect it and grow it and and take care of my family. Not not a gift, like an obligation. So for me, it was all about hustling when I was really young and making the money, printing the paper.

And then it became about, owning assets, and then it became about, oh my gosh. We're gonna lose all the assets. And then it became about I grew them back, and, now it's kind of how can I protect it and how can I grow it, but also and every entrepreneur needs to hear this because a lot of what we after twenty something years, I I tend to go off on tangents that where I talk beyond my real brain power even? I learned how to work hard with my hands. Right?

The Marine Corps growing up framing houses, like, I put in some days work that most people can't do. It's my goal to teach my children how to and I learned to do that to make money, to make a living, to earn my way. Mhmm. I wanna teach my children and I and the next generation of anyone that'll listen to me how to make money make them money. Right?

Not efforts. Like, I wanna teach them how to understand sales training so they know which business to buy. Mhmm. They can walk in and tell it's a properly run business. Right?

And how they can take their money and make that money enrich their life versus their effort and their time.

Steve: Yeah. So you're saying you're investing in other things. What are those other things, they're giving you 20% IRR?

Tim: Multifamily. Multifamily. Is a big part. One of my best investments right now is commercial, triple net leases. I invest with a a group.

I'm always a limited partner. I'm never a general partner. I have zero interest in being a general partner because that comes with work.

Steve: And liability.

Tim: And liability. Very good point. Yeah. I mean, I'm I'm a limited partner in commercial and multifamily investments. And then my wife and I selectively buy the right houses in Rockwall County, Texas where we live that will be good midterm rentals where we can make the right amount and cash flow on really nice houses.

I mean, we're cash flowing on $600,000,000 houses, at a higher rate than we are $300,000 houses. But it's a niche. It's not very scalable, but my wife enjoys it, and it's a great place to park capital.

Steve: Yep. So there's a few different things I wanna touch on here now. Why triple net investment?

Tim: Because I don't understand anything about commercial, but the guy that put the fund together is a really good friend of mine, and I trust him. I'm I'm just like every other investor. A lot of it has to do with trust. And, so the two gentlemen, Dennis and Fred, that are running the fund, I just I trust them. I know their business track record.

Steve: Mhmm.

Tim: And, it's, so far, it's it's far exceeding their projections.

Steve: Got it. Very cool. I don't know a lot about triple net investments. I know what triple net real estate is. I don't understand the investment component, so I was curious about that.

Tim: But, like, one of those is a JPMorgan, Chase regional headquarters that's been there for, like, fifteen years and has, like, another ten years left on the lease

Steve: with long term leases.

Tim: Automatic escalations. And it's like, okay. I mean, JPMorgan probably not going out of business for the next, you know, five to ten years, so works for me.

Steve: Yeah. That, I mean, that makes total sense to me. What I was talking about on a REITs, you're obviously way more familiar with this than what I than I am. Any holes in what I was talking about as far as REITs?

Tim: I I honestly am not that familiar with REITs. I mean, I I I know they like to deploy capital in real estate, and I know they've gobbled up a lot of groups similar to what I do. And, I I like people that want low returns and want to buy companies for high multiples.

Steve: Yeah. Well, I mean, that's the thing. Right? Like, the dream is to sell to re any companies you re because their rates are much, much lower. They require much lower return on investment.

So apartments. So I think apartments are interesting right now. Right? So they were all the all the craze for years and years and years. And every year, I kept thinking it can't get any crazier, and it did.

Yep. Right? And I didn't really understand until last year the reason why. And please correct me if I'm wrong here. My understanding now is that the value of apartment complex is directly tied to what you can borrow at.

Is that accurate? Yes. So what you can borrow at is directly tied to the fed rate, and the fed rate shoots up. Then your cap rate goes up, then the value of the complex goes down.

Tim: So the last two u, complexes, we've, groups that I'm associate not we. I I don't do it. Groups I'm associate funds I've invested in, the last two acquisitions have been thirty five year fixed rate have had thirty five year fixed rate debt that was Thirty five? Yeah. A lot of people don't understand.

There are HUD loans on apartments that are out there at floating in the low threes, low fours that are assumable.

Steve: Okay.

Tim: Now you do have to raise more equity. So, like, this was a 22 or $25,000,000 complex in San Antonio, and we had to raise $11,000,000. Right? Whereas this time, a year and a half ago, you would only needed to raise roughly 6. So where I'm concerned in multifamily is bridge loans that are coming due.

Mhmm. Interest only loans that have balloons. But I still feel like when you look at the other thing that drives apartment growth, because a lot of REITs will buy apartments unlevered, so interest rate doesn't matter

Steve: Mhmm.

Tim: Is income growth. And apartment income growth is still projected to continue to climb, for this foreseeable future. So I think if you look in the right everything in real estate today, I think, has an asterisk that says location. Right? Mhmm.

So I'm probably not interested in buying apartments in Austin, Texas or San Francisco or Denver or, you know, Salt Lake City. Phoenix is actually faring pretty well during this, reversion. It's not a correction. We're reverting back to what we call normal. What you and I call normal.

Mhmm. Dallas Fort Worth, I mean, there's still more jobs than human beings, and less houses than human beings. Right? The math tells you you can still go up. So I I think if you look if you're looking at rent growth and job growth and population growth, apartments can still be a good investment as long as you have a good fixed rate mortgage that you can assume or invest in because the what I always say is you can't have cap rates lower than interest rates.

So and that's on an acquisition side. So right now, if the best they can get a six, then the best you can model selling at is an eight. Now if you bought that on a three or a four cap, it's a little difficult, but not if income goes up 20 or 30%. Yeah. So most most, syndicators I know are modeling exiting at an eight right now.

Mhmm. And if that means it drives their offer down, then they look at how much they can increase rent. So there's still you just gotta have an operator you can trust and good long term debt.

Steve: Yeah. Well, I hope you're right.

Tim: Well, me too. Yeah. My wife may have made

Steve: me move to Phoenix. Yeah. So because we have, you know, we have one complex that we invested as an LP, and I'm wondering, like, oh, man. I hope everything's fine. Right?

We'll see. So b ball on Instagram wants to know, what do you recommend a person that's new to buy and hold investing to get funding for a new property? So

Tim: now everyone calls it BRRR investing.

Steve: What was it called before?

Tim: I don't know. Just what we did. It was just, like, the way it worked. Yeah. I I think investors really need to get good at running math because lazy man real estate relies on LTVs and percentages.

It's just lazy. And I say that because that's the way I used to do it. Right? I think if you're new at buy and hold, you have to get good at the math. You have to understand your cost going in.

You have to really look at the DSCR going out, because that's the most predictable, I think, cash out or rate and term option right now. If you have good w two and good credit, I think you still use your Fannie Mae and your Freddie Mac until you tap out there. You've gotta have a good lender that I mean, most lenders like RCN, and you can hit us up, but I'm happy to help with this, can help you model the takeout. Right? Like, if you're financing a 100,000 at 6.8% with two points, Here's your cash to close.

So if you're at us if you think its value is this and the rent is that and the taxes are this, then there's a lot of inputs. Mhmm. But you can get a pretty good indication of kind of where you need to cash out or refi. And then what I do I should send this to you, and maybe you could share it with people. I start with the amount of cash Jennifer and I are willing to leave in the deal because that's ultimately gonna drive all the other numbers.

And our target is about 25,000 per house, and we like to make a 10% return per year just on the cash flow on market rents. If we can do that, everything else is gravy. The appreciation's gravy. The if we go midterm versus short term, that's great. Like, everything else works.

Sometimes, we'll look at leaving 50,000 into the house if we really like the house. I'll tell you right now, in general, if you're looking at trying to do zero down investing, you need to get really good at acquisitions because there's not many markets that are cash flowing. The rate and term refi rate right now, that means, like, you're only refinancing the amount you borrowed on your hard money loan is around so it's a it's 75 LTV. So if you're trying to do zero down investing, you just need to back in to that number. Right?

If let's just say 75% is $200,000. Right? And you're budgeting 50,000 in rehab. Right? Well, you know, you need to buy that house for $1.40, not $1.50 because you're gonna have other cost.

Right? So you gotta get good at backing into the math, and and I've got a calculator I'll send you because it's Yeah.

Steve: I think that'd be great for you

Tim: to send me. It out because if you don't do the math right, by the time you pay points and interest and carry cost and vacancy cost and you're planning to leave 25 and it the number's 45 and you only had 25, now you can't finish the cycle. Right? And the whole key is cycling that capital, cycling that that debt. So I I'll send that to you.

It's so funny. After twenty two years experience, you you you understand things that you can't explain. And so my wife could not understand what I was trying to explain. So I built an Excel spreadsheet to show her

Steve: Yeah.

Tim: What I was trying to explain. And now it works.

Steve: Now it works. There you go. Yeah. I think if you send share it with me, we could post it in the show notes.

Tim: For sure.

Steve: Nico on Instagram, what are the three steps to acquire nonperforming notes? I am not familiar in this space. You know this space?

Tim: I love the NPL space, the nonperforming loan space. There's not a ton of that available. There's been a lot of misinformation in the last twelve to eighteen months that this big wave of foreclosures is coming. In general, my personal opinion about that is typically the person saying that wants to sell you a course about short sales or foreclosure sales. Something like so first off, 73% of active mortgages in America are below have a 4% interest rate or less.

90% have a 5% interest rate or less. It's an amazing amount of affordable the the the how affordable these people's payments are are ridiculously low. Mhmm. Number one. Number two, it was I I follow Rick Sharga a lot from Adam Data.

It was something like the average homeowner has, like, 42% in equity. And even the foreclosure filings right now and the third, what he's talking about is, like, a notice of default, someone that's already, you know, ninety days past due. Like, the 3060, nineties are still, like, 50% of 2018, 2019 levels, which, as you and I both know, were historically really good years. So I I I to buy NPLs, you're gonna have to talk to whoever owns the loan to answer the question directly, even though I don't think it's gonna be a great strategy. Local banks may be a good source.

Hard money lenders, some people, we get always people, hey. I wanna get your foreclosures. I'm like, well, number one, we don't have any. And number two, if we do, I have a 100,000 borrowers that I would sell it to. So there's that.

Right. So I I think, you can contact some of these big hedge funds. They buy the distressed mortgages that may have title issues or chain you know, chain of title issues, that kind of thing, tax liens. The only if I wanted to find them, I would call one of the note buying gurus like Scott Carson or Eddie Speed, and they would tell me where to find them.

Steve: Yeah. I was gonna say the same exact thing, and Eddie Speed should be out here in a couple of months.

Tim: I love Eddie.

Steve: Yeah.

Tim: Grandpa, man.

Steve: Man, you can listen to him talk all day.

Tim: Oh, yeah. He's my grandpa. He gave me such a good idea to mastermind that I just raised $750,000 on, like, the other day. Like, the way it's structuring a deal is so cool.

Steve: Is that my step rate or talking about avoiding capital gains?

Tim: No. It's, basically, short term rental is all the rage. So I had this deal that wasn't gonna cash flow on DSCR because I and I needed twelve year, twelve months historicals to go to this lender that it would work on. And Eddie was like he was talking to someone else. He goes, man, I'll tell you what.

Just offer 3% and half the, short term rental cash flow until you cash them out. And I was like, can you say that one more time? And I was like, writing it down. Well, I thought 3% was too low. I'm not Eddie.

So I offered 6% interest only for three years and half of the net operating income after all bills are paid. And I had more than a million dollars worth of interest off of an email to 40 people.

Steve: Nice.

Tim: So, yeah, I mean, this twenty two years, I'm still learning.

Steve: That guy can creatively solve any problem. Exactly. Iffy on YouTube, Tim received, given the pro prosperity without purpose is meaningless, how and when did you find your purpose? When did you find your why?

Tim: Yeah. So there's a great clip that Aaron got earlier. Aaron? Mhmm. Yeah.

For some reasons. It felt like Adam for a second. So I get real. Like, money doesn't matter to me. I feel like I can wake up and make a million bucks, lose a million bucks.

Like, money is the easy part of this. I started out as the guy that just wanted to be a normal American, not have to go to combat anymore and have a family and, you know, wanted to be a millionaire. Along the way, to be real, I I lost my way, several times. I think we as entrepreneurs, the ego and the drive can sometimes drive drive us off course. There lost.

There was a time one of the reasons I left Finance of America was all the travel and and the late nights and the partying and, ignoring my children that were in their teens at the my my oldest son who was in his teens at the time. Never ignored him. I mean, I would fly in for the football game, but I wasn't there at dinner. You know? So the, I think the way I found it was by realizing the man in the mirror is always the most critical person of me.

And I I there was a time, you know, in early eighteen, I was running a big real estate company, had a bunch of businesses, and I had the the largest, real estate club in Texas. And it was, during one of the meetings, my son hurt his knee at track practice. And, the coach called me, and I said, I'm sorry. I'm busy. Let me get my wife to come get him.

Thought it was nothing. Right? I mean, sure, he's gonna be fine. Within twenty four hours, he's having surgery. It was really a bad injury.

And, man, it just hit I'll I'll never forget. I was in the waiting room in the hospital. I go to the bathroom. I'm staring at the mirror, I'm like, what the are you doing? This stupid little meetup, and you have 500 people.

I'm the talk of the town. This stupid little meetup was more important than, like, your son is injured. Come help him. Mhmm. And, I called my partner in that meetup that afternoon.

I said, I'm done. He goes, what do you mean? I said, I'm done. He goes, what about next month's meeting? I said, figure it out.

I'm done. And, at that time, that's when I sold the real shut down the real estate brokerage. I I was telling you, I should have taken it to to took it to e e, e x p. You

Steve: mean real?

Tim: But Real. Yeah. Should have took it to real. I just shut everything down. Yeah.

I it it's it is very easy to let the ego and the accomplishments and the celebrity and the fame and the, the the lavish lifestyle overshadow the whole reason you claim to do this.

Steve: Yeah. The glory, the the fame, the accolades, they feel good. Yeah. Yeah.

Tim: So to be real, b ball, I think it was. Mhmm. I found it through twenty two years of trial and error, and, it remains center of every decision I make right now. My wife tells me, when you know what you don't want, you know what you want. And, that's why at RCN, I don't have employees.

I am in charge of no one at the company. Jeff, the CEO, is in charge of the entire company. I am just out here kind of autonomous Tim because that's what I wanted. Because the I'm one of those I pour into things whenever I commit to it. And the last time I had all of my sales team was in Charlotte, so I was there, like, four or five days a week.

Right? And I had team in New York, so I'm there. And I had team in Dallas, so I'm there. So I think you just have to keep your the the the Simon Sinek book, Start with Why. Mhmm.

I'm more focused on trying to make sure I end with why.

Steve: Yeah. Well, I was gonna say so that book or that that TED Talk, Start with Why, I think, is one of the best videos. It's the second most popular, I think, TED talk of all time. It's a great, great video. I don't think you need to read the book if you watch that video, because I read the book after watching the video.

So I think that TED talk is amazing, but it doesn't help you with identifying your why. And so you actually wrote another book, find your why, and that book actually helped me, identify my why. Right? And my why really was help other people accomplish their dreams, their purposes. So, next question here is from, Justice.

Where do you see the biggest opportunities in single family real estate in the next one to three years given the current market climate?

Tim: I'll break this up into two answers. One assuming that you're blue collar and one assuming you're white collar. The white collar opportunity is in buying the houses. The hedge funds were tripping over last year. If you have the capital or can raise the capital, you need to buy every single one of those you can.

Because there is billions and billions of dollars waiting. The only thing they're waiting on is the Fed to stop raising rates. They're not writing waiting for rates to go down. It's the reason some of them started buying again in January because there was talk of slowing down the increases. Well, now I haven't even looked, but I almost guarantee you all those that started buying it in again in January are on pause.

Yeah. Because the Fed minutes today said a lot of the Fed was already talking about they thought they should have done 50 bps in January, basis points, half a percent. See, I go into finance talk. Well, now with the good jobs report, and everybody has to remember good is bad right now. I know.

And the good, producer price index, which was bad. Right? All the economy looks so strong that now there's a lot of fear that the next meeting, they'll go 75 basis points.

Steve: I think so. Awesome.

Tim: If if there were peep so instead of 25 to 50 being the range, the range is now 50 to 75. Yeah. They're almost assuming 50 because they they were arguing for 50 before. So, you know, so that's gonna any of the the iBuyers that were coming back in are leaving or pausing. So while they're pausing, I feel like it's a great opportunity to go suck up that inventory.

Make sure it cash flows. Make sure you have the capital to sustain one to three years. The housing shortage, the housing crisis in America is getting worse by the day. We need, like, 7,100,000 homes today. Well, tomorrow, there will be more human beings here than there were today.

Right? And so just the math is not in our favor.

Steve: Yeah.

Tim: Builders aren't building at the rate. It's, like, the lowest rate per capita ever. It's just insane. So number one, if you have the capital and you can afford the hold on those old hedge fund houses that that they were buying the last couple years, buy it, hold them, rent them, you'll be selling your portfolio to a multibillion dollar institution in a couple years. If not, you need to I I I would say probably stay out of the top 20 MSA core markets.

So, like, in Dallas, I probably wouldn't buy in Dallas City or even Dallas County, but I'd get out into some of these suburbs that still have good populations and just look for those three two two brick houses that are in a nice neighborhood. And I think you can prob a lot of these wholesale deals are going for $70.75 cents on the dollar minus repairs right now in DFW, and you should be able to cash flow those at at least 70%, maybe 65% on a on a DSCR loan. Call it at 7. And so then I would I would target those because population centers are going to have to continue to expand. And I I don't we don't have five hours to talk about why, but, go go where the where the where the people wanna live and have a yard where it's still affordable.

Steve: Question from Alexis here, on YouTube. How high are DSCR rates typically?

Tim: So we gotta go back to context. When we start when we originated the first ever single asset single home DSCR loan in April or May 2015, it was an eight and a half percent interest rate. At 60 LTV, we were only approved to do 10 of them as a test of black from Blackstone, and we sold out in an hour. Like, it was, like, selling crack. Not that I have a lot of experience with that.

But then, you know, in '21 and or in the '22, we were refinancing at three and a quarter and three and a half. And you just have to delete '21 and '22 from your brain. I believe that DSCR rates right now, they're in the sixes. Most likely gonna be in the sevens depending on your credit score and your loan to value and all the other different parts of it. I would really like to see homeowner mortgages stick in the fives and DSCR just stick in the sixes, and let's just get back to normal.

But right now, DSCR rates, you're looking between 6.8 and probably eight just depending on the LTV, the credit, or the loan program.

Steve: Niko on Instagram, is it advisable to try and build a rental portfolio using OWC? I don't know what OWC is. So do you know what that is?

Tim: Owners with capital?

Steve: Alright. Sorry, Nico. Don't understand the question. John, we're looking at eight to 60 unit apartments to buy. What is the minimum cash on cash you look for, when you're buying?

Oh.

Tim: So I'm always an LP. My I don't even look at cash on cash as much as I look at my number one criteria is I have to have at least 50% depreciation to capital ratio because I'm playing a tax game. Number two, I need to have a 20% IRR. And number three, I need to have a sponsor with at least 25% of the general partnership that has like experience in that market.

Steve: In that market as in in that Like, if it's San Antonio. You want someone in that geographic market. Yeah. Gotcha.

Tim: And I don't care if they live there. I need to know they have experience owning an asset, call it plus or minus 20% of the unit count in that area.

Steve: So what's the because there are a lot of guys that I see that do apartments. They kinda do it nationwide. Right? So what is is important to you about the geographic experience?

Tim: Society tends to mirror its surroundings. And I think when you're trying to understand tenant behavior, rent growth, and a lot of these other things that go into the pro form a that ultimately is gonna, like, help you sell at the cap rate you wanna sell at, I just I'm a believer still after all my experience that real estate is just a local thing. Yeah. And I need someone making decisions that understands that, Eric. Great great example.

Guy pitched me a deal in Memphis. Smoking hot. Kent Clothier is a good friend of mine. I text him. I'm like, what do you think about a deal in Memphis in this area?

He goes I won't say what he said, but it was no. And I called him. I said, dude, but the the numbers he goes, Tim, you asked my opinion. You know we have the experience in Memphis. I'm telling you, no.

So I went against his opinion. And nobody on the deal team, but it was just one of those too good to be true. So I'm a networker, Steve. It it so at the Bigger Pockets Conference, I meet this young kid from Memphis that, like, is is raring to go. Let me know how I can help.

And I called him. I said, hey. I'm coming out to look at this asset. Why don't we drive around? I'll teach you what I know, and you just teach me about your town.

He goes, where are we going? And I told him the complex. He goes, are are you bringing a gun? Like, what do you mean? He goes, dude, like, I'm not going over there unless we're heavily armed.

I was like, fair enough. Right? So it's it's just one of those things. Like, the crime map didn't look that bad. Mhmm.

The city was investing a ton of capital into that ZIP code, but the local people, they knew.

Steve: And it was a war zone.

Tim: Right. And the philosophy that I have that I've been taught by mentors that, the British guy that helped start Imitation Homes was also the he bought Trammell Crow's multifamily business. So I'm lucky to have his insight on multifamily too. One of the ideas is you never wanna buy the best asset in a bad neighborhood. You wanna buy the worst asset Right.

In a good neighborhood. And, we were looking at the best asset in a bad neighborhood.

Steve: Gotcha. Let's see. Barnabas, if you have cash in the bank right now, does hard money lending business make sense? How would you go about starting that?

Tim: Well, that's a bit of a trick question. Maybe you just joined. I do about a billion of that a year. But if you wanna start hard hard money lending, make sure you know your numbers. Make sure you're willing to perform.

The worst thing a lender can ever do is not perform. You're only as good as your track record. And if you don't close, this industry, specifically the blue collar people where I come from, we're gonna put you on blast. Right? Especially if there's a wholesaler involved.

They're really gonna put you on blast. So I would start with just, you know, someone that you meet at the local RIA that has a good track record that can tell you their story. You know, tell them you'll do twelve and two at 70%. Now not if you're in Phoenix, then you have to do it, like, for a $100. You gotta do it for free.

Yeah. You gotta do your CD will pay you more. But, no. I mean, you know, just look at what the hard hard money folks are charging. And if you're gonna be a small operator, make it relationship based.

Don't make it, complicated.

Steve: So what is your biggest struggle right now?

Tim: Focus. Focus. I I am struggling with priorities mainly because I see so much opportunity. This guy wants me to help him raise a fund. This guy wants me to be on their board.

These people want me to help with the development. I'm trying to do 2,000,000,000 a year over here. It it it's focus. And, honestly, I get frustrated sometimes at people's action or inaction. And you ever watched the show Billions on HBO?

Steve: Sadly, no.

Tim: Oh, okay. I love it. And there's the the, performance psychiatrist is Wendy, and we call my wife, Jennifer, my Wendy. And when I get frustrated, she's like, well, wait a second. That's not you said you didn't want that.

So you can't be mad about the way that person's acting when you said you don't want their job. You don't wanna be in that role. Or when I get mad at someone in my wholesale company, she's like, well, but you're not there to manage it. And you said that there would be increased, you know, fallout and okay. And you don't wanna grow it.

Right? Like, that's the whole thing. She's reminding me of the decisions I've made. And as a maverick, sometimes those just you we forget about those choices, and we like you just wanna jump in there and fix it. So I think my biggest struggle's focus.

I've I've I've lost 15 pounds in the last two months. I really let myself get just let go last year, with all the traveling and the steak dinners and all that. So I've I've dialed that back, time. So last year, I spent almost ninety nights in a hotel room. Oh.

This year, I'm pretty sure I can go to every single event I went to last year and only spend, like, twenty nights. But last year, I'm just like any entrepreneur. We were establishing a beachhead. Right? Like,

Steve: when we place.

Tim: Yeah. And you had to go out, and you had to may have to stay at the Investor Fuel Mastermind for five days. Well, now I can only go for one night, and I can take the first flight there and the last flight home the next night. And I can trust the team that I've been able to put in place over the last eighteen months to take care of the rest. Yeah.

So I and and I hate to sound like this because it almost sounds like I'm trying to, like, big dog people. I can go make sure I pay the most attention to the key accounts, and then I'm there during the parties where people continue to know me and like me. And I can count on my team to really work hard to establish that trust.

Steve: Yeah. I mean, I think I don't know that's big big time. I think that's just what you gotta do as as a visionary.

Tim: Right.

Steve: Yeah. So if you feel that focus is a challenge at all, that is something we talk about in the well club. Right? So, uncertainty talks. So, definitely, if you'd be interested in checking that out, we can talk about that.

How are you going to measure success?

Tim: This is gonna sound really strange, but I've already succeeded. I was retired really from 18 when my son got injured until 21 when we took finance of America public. I realized that I was setting a bad example for my youngest son who's 13 now by sitting around and eating barbecue. And I mean, it it got so bad that I would I was working on houses again, but not because I had to this time, but because I could. A framer made me mad, and I decided to go frame a garage.

You know? I would be drinking Modelo on the truck tailgate at 03:00 in the afternoon with the guys. So part of the reason I'm doing right now, what I'm doing, is to show my sons that you can succeed and still work hard and have balance. So, yeah. This sound it sounds almost concede.

I I've already succeeded. Now success for me would be my children go getting college degrees even if they don't go get a job. My oldest is a four point o student, doesn't drink, doesn't party, flies airplanes, scuba dives, played college football. Like, that's a success. My youngest son just made his first select baseball team and has decided that's his favorite sport instead of football.

Like, that's a success. I'm there for every game and every practice. That's a success. I kissed him on the head when I left to get here this morning, and I'll kiss him on the head tonight when I get home. To me, that's a success.

Steve: I love that. Justice, has a follow-up question. What do you think is the most important thing you can do as a leader to drive results through other people and get to the point where your business runs without you? The one thing, the most important thing.

Tim: Trust.

Steve: Can you elaborate on trust?

Tim: Hey. In military intelligence, we had a saying that was, in God we trust, all others we monitor. If you do that with your team, you will create one, they'll keep coming to you with everything because they know you're involved. Number two, you'll show them that you have no confidence in them, and they will be afraid to make decisions or mistakes. I was telling your team earlier, professional baseball, if you get a hit 30% of the time you're at the plate, you make the hall of fame.

Right? But in business, we wanna succeed or win a 100% of the time. It's unrealistic expectations. And if you're going to hire a team and drive results, kind of a poor choice of words for for me, but we'll roll with it. I think you have to be willing to set guardrails and reporting timelines and methods and get out of the way.

So trust without abdicating. Right? Structured trust. Maybe that.

Steve: Yeah. And I think I I think that's great. What is your superpower?

Tim: I'm a networker. I I I I I trust people. I find mentors. I I I think it's just there's not a single thing anyone listening to this, and I challenge you to test me. There's not a single thing anyone of this could need that I can't find for them that most likely I know the person I'm connecting them with.

Probably have them in my cell phone. So I'm a connector. That's my superpower.

Steve: I totally believe that believe that. I mean, I could experiencing that at IMN, you're grabbing people. It's like, Steve, you gotta meet this guy. Steve, you gotta meet this guy. What failure did you learn?

Which failure do you learn the most from?

Tim: Neglecting my family. All all the money in the world is not worth having without the people that you love. Like, the whole why that got you into the business, if you lose that I know so many successful people that are divorced and live alone, and and and that would be my worst nightmare. So failure would be losing my family. But if you want me to talk about business success

Steve: Failure.

Tim: Or business failure, it would be probably losing an investor's money.

Steve: Yeah.

Tim: And not paying it back. I've lost investors' money, but I always pay it back out of my own money. Mhmm. I've never had an investor lose money.

Steve: Got it.

Tim: That would be failure to me in business.

Steve: I agree with you a 100%. And then what book have you gifted more than any other? Richest Man of Babylon. That's a really quick answer. There's gotta be something powerful about that book for you.

Tim: I had just never understood money, Steven. My my my mom was a realtor, and god bless her. She raised us as mainly three boys, mainly a single mom. She was just always that could sell ice to an Eskimo, what would buy it back. Uh-huh.

I mean, if she made a thousand dollars, she spent a thousand and 2. So, like, I never really understood money and the principles of money, and the richest man in Babylon is just so simple. Yeah. It it it it just, you know, put your money back, save your money, invest your money, enjoy your money. It kinda hits all the notes, but in a simplistic way.

Steve: Yeah. Classic's not there. We're timeless.

Tim: I I literally offered it to Beano. And I said, email me, and I'll send you a copy, and he emailed it.

Steve: Yeah. It's a timeless book. So I want you to think about what you wanna leave the listeners with. Last thoughts. Guys, we personally we see a window of opportunity in this upcoming market.

I am excited to seize the moment. If you have capital and don't know where to get started, you can invest with us. If you have killer deals, you need help to close on. You you can partner with us. Go to teamwithsteve.com, and let's do business together.

And if you guys got got value today, please like, subscribe, share, comment, leave a five star review on iTunes. And be sure to tune next. We got Michael McDonald. So what are the last thoughts you like to leave all the listeners with?

Tim: I told your team earlier. I've been saying this before. I read Ed Mallett's book, The Power of One More. Mhmm. And I got to meet Ed last year and just such an impressive guy.

People have been asking me all last year from a stage, like, what's the one thing you wish you'd done different? The answer is one more. One more house. If you're planning on keeping one this year, keep two. If you're planning on keeping one every six months, keep two.

If it's one a quarter, keep two. If it's one a month, keep two. Steve, if I'd kept one more house per year for the last twenty years, it would be about a $10,000,000 difference in my net worth today. The the power of real estate is time. And, like, just the cliche.

Right? You don't wait to buy real estate. You buy real real estate and wait. I mean, buy cash flowing asset real estate right now, and just trust me, twenty years from now when I'm 65, you'll you'll send me a note, like, thank god. There will come a time I'm 45.

Before I leave this Earth, my kids will be sitting around a table somewhere talking about, can you believe dad used to buy those houses for for less than a million dollars? It's coming. It's just natural. Compounded like, it's just natural. It's gonna happen.

Yeah. So that the best thing I can leave you with is find a way to delay a little gratification. Don't buy the car. Don't buy the house. Don't buy the five carat ring.

Like, just buy one more house than you plan to, which means if you're on this call and you're thinking you're not buying one in 2023, guess what? Buy one. Buy one. You will not regret it.

Steve: Yeah. Perfect. How can someone get ahold of you?

Tim: At Tim Harridge. Easiest way to find me.

Steve: Simple.

Tim: Only one of me.

Steve: You wanna spell that real quick?

Tim: H e r r I a g e.

Steve: Alright. Perfect. Thank you very much.

Tim: Thanks, buddy.

Steve: Been a pleasure. See you guys next week.

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