Working Capital The Real Estate Podcast

Five-Step Process for Financing Real Estate Deals with Dave Dubeau|EP31

Dec 9, 2020

In This Episode

Dave Dubeau is a Real Estate Entrepreneur, Best-Selling Author, Speaker and Investor Attraction Expert based in Kamloops, B.C. Canada. He began his real estate investing career in 2003 doing 18 deals in 18 months. He later switched his focus to client-first rent to own deals, and nowadays he invests in multi-family (apartment building) properties. For the last several years Dave has been the World’s #1 Investor Attraction “Imple-Mentor”. Using his proprietary 5 Step Money Partner Formula™, Dave helps his real estate entrepreneur clients to grow their portfolios significantly and in record time by attracting investors (instead of chasing after them).

In this episode, we talked about:

  • Rent-to-own strategy
  • Dave’s current deals – Multifamily properties
  • Steps in raising capital
  • Choosing the right investing strategy
  • Managing property 
  • And much MORE

 

Resources and Links:

The Ultimate Sales Machine

https://www.daviddubeau.com/

Connect with Dave

 

Transcript

Jesse (1s):

Hey everybody. This is Jesse Fragale, Before we started this episode, I just want to say thank you so much for everybody that keeps on listening, it really is amazing to me and I can’t. Thank you enough. What would really help us out is if you enjoy the show to go over to iTunes and leave us a five star review. Also, if you have a favorite episode, what would be great is if you could share it on social media, whether that’s Facebook, Instagram, or LinkedIn, anyways, enjoy the show. Welcome to the working capital real estate podcast. My name is Jesper galley. And on this show, we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you’re looking at your first investment or raising your first fund, join me and let’s build that portfolio one square foot at a time.

Jesse (47s):

Okay. Ladies and gentlemen, I have a special guest as usual on the show today. I have Dave do Bo. Dave is a real estate entrepreneur best-selling author, speaker, and investor attraction expert based in Kamloops, British Columbia, Canada. Dave began his real estate investing career in 2003, doing 18 deals in 18 months. He later switched his focus to client first rent to own deals. And nowadays he invest in multi-family apartment buildings. Dave, how are you doing today?

Dave (1m 15s):

I am fantastic, but if I was doing half as good as you, Jesse, I’d be absolutely amazing.

Jesse (1m 21s):

You’re too kind. You’re too kind. So just based on my state imposed Canadian education, I, I, is that a French last name? And I should just say, come on sofa, Dave.

Dave (1m 32s):

Well, yeah, but then you’d be speaking over my P level bed. Cause I’m a French Canadian who speaks no French. It’s embarrassing as hell. It’s pretty bad when I go to Quebec and they correct me on how to pronounce my own damn name.

Jesse (1m 45s):

Oh, there’s trouble there, but you know what? It’s, it’s great to have you on it’s I heard this story, I believe on the right club podcast. And I was like, you know what, I need to get this guy on the show. So how have you been going? I know 2020 has been quite the curve ball of a year.

Dave (2m 1s):

Yeah. Well, I mean for sure, I mean, my I’m a, I’m a real estate entrepreneur, but I’ve at this stage, Jesse, I’m kind of a passive investor. I, I got a rustle up bucks for other people’s deals and enjoying it in the fund that way. Cause I suck at dealing with tenants and toilets to be perfectly Frank it’s you? So my primary business outside of real estate is I have a boutique marketing agency and we help other primarily mom and pop real estate entrepreneurs put all the marketing and fun stuff together. That’s required to help them attract investors and raise capital for their deals. So the beginning of the year, a lot of, you know, pre COVID, a lot of what I did was flying around the country and speaking out amazing clubs like the right club and all of the places fishing out Eastern Ontario was becoming a frequent flyer to Toronto that’s for sure.

Dave (2m 51s):

And I was so proud of myself cause I had my entire first half of 2020 all lined up with speaking engagement, after speaking engagement at all the plane tickets booked, everything going. And then that changed overnight as everybody you were mountain recall. So it threw me for a little bit of a loop, but you know what, I, I did some kind of cool at the beginning of this whole COVID thing, Jesse and, and I, I reached out to a lot of people in my sphere and put on a, what did we call it? I can’t even remember what we called it at this point, but I put on a large kind of multi-cloud expert webinar, a three and a half hour marathon all about, you know, getting a bunch of people together and brainstorming how COVID was going to affect the Canadian real estate landscape.

Dave (3m 48s):

So we had, I believe 18 different Canadian real estate experts on this call. We had 4,000 people registered for the call over 2300 people on it live. That was the up to that point, the largest online real estate event in Canadian real estate history. And that was all about how, you know, how we thought this whole COVID thing was going to play out. And I’m pleased to say that most of us were quite wrong. Our crystal ball sucked to be perfectly Frank with you because you know, we’re, we’re predicting mayhem and, and, and misery galore with the real estate market because you know, nobody’s going to be able to work or any of that kind of stuff.

Dave (4m 33s):

We forgot to take into account the federal government bailing everybody out and printing money like crazy, which is, has kind of kept things afloat. Now we’ll see in the new year, how long that continues to move forward along. We can actually sustain that. But anyhow, so yeah, long answer to your question there, Jesse, but it, it threw me off for a while, but then we switched to everything virtual and, and this is probably the, one of the best things that could have happened to buy a boutique marketing agency, because now, now we’re working with clients and doing stuff all over North America and all over the world these days as well. So it’s kind of interesting from that standpoint.

Jesse (5m 10s):

That’s great. And I, I expect to get into interest rates and economic stimulus in the show today. But before we do that, we might

Dave (5m 17s):

Dope because I’ve talk it out a hell of a lot to say about that, Jesse.

Jesse (5m 21s):

Well, you know, we can pontificate on where we think things are in, in that, not so great crystal ball we’re talking about, but you know, what we’d like to do with guests is just back up a few steps and you have an interesting background, not just that you’re from BC Kamloops, but that you, you moved actually outside of Canada prior to investing in real estate. So maybe for the listeners, the journey of real estate for Dave Dubo, how does that story go?

Dave (5m 47s):

Well, you know what? I was born and raised around real estate, not realizing it, my grandfather and my father built a six Plex, which is what we lived in that a family home as I was a kid. So that seemed kind of normal to me. Unfortunately, my parents split up and, and I was living with my mom and she got into real estate, big time in the late seventies, early eighties, built up a portfolio of over 50 rental units at that time, which was pretty impressive for a single working mom back in those days. So that all seemed kind of normal to me. And my first little foray into investing in real estate was chipping in 200 bucks with my mother and my much older brother when they were building a duplex.

Dave (6m 31s):

And they actually said, I got to own the garbage stoop. So it’s been a router for a while, but I didn’t really pay much attention to it. I went through university, graduated with a BA in psychology and you know what BA stands for Jesse. I’m afraid to ask Dave basically Hassanein so it was a pretty much a useless degree in psychology graduated way back in 1990. No, nobody has beaten down my door with job offers. So I said, well, the heck with this, I’ll go see some of the world. So I traveled around Mexico and central America for two and a half years. Ended up down in San Jose. Costa Rica fell in love with Costa Rica, fell in love with a couple of lovely creatures in that country of Costa Rica decided to plant my flag and ended up starting up a language training company down there and got married.

Dave (7m 19s):

Had kids created a pretty good lifestyle, dabbled a little bit in real estate. There did a couple of foreclosure deals without even really knowing what that was all about. And then in 2003, my then wife and myself decided that Canada would be a much better place for our kids to grow up and go to school. So we moved back, but I hadn’t been able to sell my business. So we basically moved to Cabos because of the climate. Jesse King, the Oakenoggen is basically kind of the California of Western Canada, at least. And my wife, my ex-wife being from Costa Rica, climate paid, it played a role in there, but I showed up with, you know, Z, I didn’t have bad credit.

Dave (7m 60s):

I had zero credit. I’ve been out of the country so long. They didn’t know who the hell I was. I was didn’t have very much money had had been self-employed for so long. I was pretty much unemployable. So there was trying to figure out what came at a brand new city, no contacts, no clue. What am I going to do? And it’s probably before your time, but they used to have these things called infomercials coming across TV. And there were these get rich, quick and real estate guys. I saw one of these. I was up late one night with insomnia, trying to figure out how to pay the bills. As guide said, Hey, no way you can get into real estate with little or no money down. I said, you know what? That’s perfect because that’s exactly what I had Jesse Little or no money.

Dave (8m 42s):

So I sent away, you got all these VHS cassettes and binders and all this kind of stuff as American stuff. But bottom line is I dove into it, put it into play very quickly. And my first little kind of serious foray into real estate was doing creative deals in and around. Kamloops did 18 deals in 18 months, kind of got my feet wet. There caught the eye of an up and coming Canadian real estate guru. Who’s starting his, his training and investing company. What on board there is kind of, as director of marketing for his companies did that for six, about six years, helped him grow that to about 128 employees and seven branch offices and 200 or so million dollars a year in revenues did that for six or seven years, took some time off from real estate.

Dave (9m 30s):

Then when I jumped back in, like my bio is that I got into client first rent to own deals and did probably a little over a dozen of those deals starting in 2010. So it did that part-time while I was still kind of doing some of this other stuff and then switched over into multi-family investing as of 2013. Hmm.

Jesse (9m 53s):

Yeah, that’s interesting. And we talked a little bit before the show and I just, as a caveat, I, I do remember those at two in the morning with the, the sports, the red sports car and the no money down. So, you know, tail end of my childhood, but do remember them, but in terms of rent to own, and this is what we talked a little bit about prior to the show. I don’t think it actually has come up on the show yet the concept of Renton. And I remember first hearing about it when I was maybe in, Oh, I don’t know, like grade nine grade 10 of these programs in the States and in Canada, but rent to own and how you can talk to it. And, you know, to somebody where you’re, you’re basically going to rent it in that rent is a down payment to eventually owning it.

Jesse (10m 36s):

Maybe you could give listeners just a little idea what rent to own is and what appealed to you at the time about it.

Dave (10m 43s):

Well, first of all, there are a variety of different rental strategies. So where most people use rent to own is where they have kind of a crappy property that they need to get rid of, or they’re having a hard time renting it out traditionally. So they turn it into a rental and that way they, they tend to get a higher and above average above market rent on the property. They tend to pass on the, the upkeep and the maintenance of the property onto the tenant buyer. So that’s one way of doing it. And that’s kind of property first rental tenant, first rent owners, where we kind of turned things around. And instead of starting off with the property, we look for what we call our ideal tenant buyer.

Dave (11m 26s):

And an ideal tenant buyer for me was somebody who couldn’t quite qualify for a mortgage right now. But if we help them out, they could qualify for a mortgage in, let’s say the next two to three years. So this could be somebody who was relatively new to the country and they hadn’t built up a, a credit rating yet somebody who went through some sort of personal or business trouble and, you know, went, but not because of just playing financial stupidity, something, you know, maybe COVID happened. And you know, that wasn’t that such a situation, but a lot of people are gonna find themselves in this situation right now, you know, people that wouldn’t be otherwise successful, but have to go through bankruptcy or whatnot because of the current situation.

Dave (12m 11s):

So if they’re in that situation, but it’s fixable. So in other words, they’ve got good income. They’ve got blemished credit, but it’s fixable and they’re reasonably intelligent. People are coachable. Then what we do in that situation is we go out and we find them a property, a house that they like, and that’s within their means together with investor partners, we’ll buy them that property. And then we’ll lease that property to them with the option to purchase it over the next, typically two, three, maybe four years. It depends on the, on the situation, the property, et cetera. But when I was doing rent into home, we were focusing on trying to do two year deals.

Dave (12m 53s):

So by the person, the property, lease it to them with the option of the purchase. And then part of the old deal was that they would pay up front what I called a non-refundable option fee. So typically that would be something like in the, in the range of at least $10,000, ideally, you know, two to 3% at least of the property value. And then they would pay rent and on top of their rent, they would pay a premium. And that premium would be called a rental credit. And what we would do with that is that rental credit would count towards their down payment.

Dave (13m 33s):

In addition to that initial payment, they put up front and we would help them pay in their down payment in installments. So our goal was to get them at that time to where they’d have seven or 8% of the final purchase price paid in as we’re going along. And then we’re buying the property at today’s price and we’re selling it to them at tomorrow’s price. So we’re trying to extrapolate what the future value of the property is going to be, you know, within reason and sell it to them at that price. And the way we make money is on part of it. So the spread on the ranch we’re charging above market rent, and the other way is with mortgage pay down over those two or three years and market appreciation as well.

Dave (14m 16s):

So it can be very, very good strategy because you offset all of the maintenance and all of the repairs to the tenant buyer. They are basically when I called a homeowner in training. So if the toilet breaks down, don’t call Dave, fix it yourself. This is going to be your house, right. We, we bought it for you. You keep it in good shape. All right. So that’s, that’s in a nutshell how it works, Jesse, and it can be a very good strategy. I got out of it for a couple of reasons. Reason. Number one is it’s a very, it’s very much a market based strategy.

Dave (14m 56s):

If the market’s going up and everything’s going great, it’s fantastic. Right? It’s, it’s all good. If the market goes flat or it goes down, it can be disastrous, right? Because typically we’re buying with this strategy, you’re buying a property at market value. You’re typically not getting much of a deal on this thing, and you’re hoping to sell it in the future for a higher market value. So it’s, it’s dangerous in the, in the respect that it’s speculative, right? It’s, it’s almost like doing a flip over, but it’s over a two or three, 10 year timeframe. So there’s, there’s some danger there. I found myself in that situation, in, in my local market that the, you know, it’d be go, go, go, go, go, go for several years.

Dave (15m 41s):

And then it flattened out and went down a little bit. It didn’t go down a lot, but it flattened out and cut it stagnated for a number of years. And that is not a good situation to find yourself in with rental and property. So that was when I saw the, the writing on the board. The other thing is, it’s just a hell of a lot of work. I mean, finding those tenant buyers, you literally, literally, you have to sift through probably a hundred applicants and I’m not exaggerating there a hundred people that are saying, Hey, buy me a house before you find somebody that actually fits your parameters, that you’re, you’re going to feel comfortable buying a house for. And even then there’s no guarantee.

Dave (16m 22s):

So it’s, it’s kind of a speculative strategy that way. I know a lot of guys out Easter are rocking and rolling with it. And everybody seems like a genius because the property prices are just, you know, don’t seem to be ever stopping when they do stop. Then you’re going to find a lot of people really in deep do-do, if they’re focusing on these kind of, you know, appreciation market appreciation based strategies, which is why I finally woke up, smelled the coffee and said to help with this, let’s start focusing on a strategy. That’s at least relatively recession resistant. I wouldn’t say recession proof, but multi-families, as you know, are definitely a lot better when times are good.

Dave (17m 3s):

They’re great. And sometimes when times are bad, they’re still really, really good. Cause everybody still needs a place to live. So they get downsized with losing their houses. They’re moving into Y apartments. Right. So, so that’s been my main focus since for the bulk of the last seven or eight years, Jesse.

Jesse (17m 19s):

Yeah. Well, it’s great to hear about that. I think it’s something that it’s come up time and time again, but we haven’t had a, a great outline like that. So at what stage Dave, did you make that transition into multifamily investing? And is it, you know, you’re currently doing that today? Is that what you’re exclusively doing?

Dave (17m 36s):

Yeah, so I, what stage at the stage where I said to hell with this, with, with, with, with doing these, these red dome deals, I kind of the perfect storm, all hit all at the same around that time. And in 2013, the local market went to crap. So I had a number of rental and deals that were floundering. I had got divorced, which is a very expensive proposition to go through. And a 80% of the business that I was doing. Business-wise evaporated overnight. All of that stuff happened within about a six month timeframe. So I find myself really kind of, you know, floundering and struggling to keep my head above water.

Dave (18m 21s):

And then that’s when, you know, I S I sat back and said, okay, knowing what I know now, where do I think is what do I think is the best strategy for me? Because again, I don’t want to be chasing after deals and getting a deal, and then having to find another one to replace it all the time. Like it’s a constant churn. So that’s when I talked with a good friend of mine who was involved in multi-family investing, we partnered up, in fact, I said, Hey, man, I want you to teach me how to do this whole multifamily investing thing. And we put our heads together and put together a program to teach people about multi-family investing in Canada. And then during our process as a deal, dude, why don’t we just do a deal, right?

Dave (19m 4s):

I’ll, I’ll, I’ll shake the tree, I’ll bring some capital into the equation. You find the deal, you manage the deal, we’ll share in the profits with our investor partners. So that’s how we got started. That’s how I got started with a fairly big deal, 54 units right off the get-go.

Jesse (19m 21s):

I was going to go there next, in terms of the first deal, the 54 unit, what were kind of the nuts and bolts of that deal with, what did that look like from the, you know, from initially looking for properties where you first initially looking for properties that big, or did you kind of stumble on something that you couldn’t couldn’t you refuse to put an offer and go through with it?

Dave (19m 40s):

Well, you know what we were, we were looking for properties. I say, we, the Royal, we, I was in Kamloops, my, my business partner is an Ottawa. So it kinda your neck of the woods, your side of the country. So he was the one actually beating the bushes, looking for the properties, because as you’re aware, when it comes to multi-family properties in Canada, 80% of them are in that, in that corridor between Quebec and, and drunk, right. That, that whole area there, that’s where 80% of the apartment buildings are in the whole country. There’s probably cause that’s close to where 80% of the population lives. Right. But, so he was the one out actually looking for the deals. My whole part in this whole thing was helping to raise the capital for this particular project.

Dave (20m 26s):

So yeah, we had to, you know, this was a number of years ago now, so this was six, six years, almost seven years ago now. So yeah, we, we had a good, we looked like we had a good deal, but then there got to be multiple offers on the property. The prices went up too. I just didn’t make sense. So we’d actually raised some capital. We got some investors board for that one, it fell through, but then luckily the second deal came along and it, everything seemed to line up. And so we were able to close on that deal and we had a smoking deal on it. No, did we do very well with it? Yes. Just because in that whole area, this was just outside of Ottawa, you know, things have just, you know, the demand is so great for, for these kinds of properties.

Dave (21m 8s):

We did very well with the deal.

Jesse (21m 10s):

So it sounds like you had a little bit of a soft commitment prior and yet kind of training wheels with one training wheel, with one deal that fell apart and then utilize some of those investors for the next one on that particular deal. Given the fact that it was a 54 unit, even if it was a few years ago, were you at that sophisticated level of putting, offering memorandums together or was it more so, you know, you had your sphere of influence in your close friends that you were raising from. Yeah.

Dave (21m 35s):

It was a severe event, close, close friends that we raising from. We had no, unfortunately yeah, within my sphere, we had some well-heeled people. So we did that deal with five investor partners. The minimum investment, I think was 125,000 and we had somebody to put up close to these are, my numbers are getting, getting kind of rusting. Oh yeah, that’s right. We had, we had to raise 800,000 for that deal. So we have one investor part of their putting almost half, and then some smaller partners that put in the 125 to $200,000 range in there as well

Jesse (22m 10s):

To take you there. Well, you you’ve mentioned this before, and I’ve heard you talk about this before. And I think if I, if my site is accurate, you have it bright behind you in the video, but part of the, the, the way that you raise capital and, and basically what those steps are. Can you talk a little bit about that to, to listeners?

Dave (22m 30s):

Yeah. Well, the first big thing that I want to suggest to people, Jesse is the time to start raising capital is in my opinion before you’ve got a deal on the go. So there’s always this chicken in the eighth thing, and people say, Dave, what’s your ad. Should I, I should have a deal on the go in order to be able to go raise capital for it. And we all have heard the thing, you know, the expression just find a good deal and the money will find you my experience. My experience has been very different than that. So back in the day when I was doing those client first rent own deals, the first couple I was able to sell finance.

Dave (23m 11s):

But again, we’re buying houses for people. So you have to come up with the down payment property, transfer taxes, closing costs, all that kind of stuff. At that time in this market I needed between 80 and a hundred thousand dollars per deal in, in cash to actually be able to buy a property, right? Not, not including a bank financing. So after sell financing, my first couple, I ran a calf, ran out of credit. Really didn’t have a clue about raising money. And of course that’s when the perfect deal lands in your lap. Right? So that’s what happened to me. Perfect tenant buyers came in, went out, tied a property for them. I’d heard this whole thing, find a good deal. The money will find you magically.

Dave (23m 52s):

And I figured, well, I still got to do something, right. So I’d also heard it. You know, what if, if you need to raise money, pick this thing up and start dialing for dollars. Exactly. Cold calling, dialing for dollars, you know, be the Wolf of wall street, Dave. So that’s good. That’s what I had visions of. So I picked up the phone, started dialing for dollars. And I don’t know about you, Jesse, but that is about the most emotionally painful experience. Short of my divorce that I’ve been through. It sucked. It was, it was just nonstop suck. And the reason it was nonstop suck, it was probably because I sucked at it, but also it’s just, it’s rejection after rejection after rejection, which just makes sense.

Dave (24m 36s):

I don’t care how good you are. If you’re trying to raise 85, a hundred thousand dollars has only gotten it. And you’re looking for a chunk of cash like that. And you’re cold calling. It’s the wrong positioning. Plus I was coming from a position of weakness. I was desperate. I needed that money. I was desperate and needy. And my friend Steve jobs says needy is creepy.

2 (25m 0s):

And he is right. Needy is creepy.

Dave (25m 2s):

It’s it’s just like when you’re a young guy, you had a few too many drinks at the bar and you’re hitting on all the ladies. Right? And the new year that the more desperate you are, the more you were upheld the other person. Well, it’s the same thing with our investor partners, right? So picking up the phone and coming across that way, not a good, not good positioning that didn’t work. So I tried something else I thought, okay, get out there and turn every conversation into a real estate conversation. I also heard that right. Glow networks moves do your 32nd elevator pitch. Try all that stuff. So I had my, my business cards. They went out to the chamber of commerce, BNI groups, toast, wherever the hell.

Dave (25m 42s):

They had a group of people and they’d let me in the door. I tried that for about a week and a half shaking hands meeting people, elevator pitching up a store, raised zero capital Y. Again, the desperation just kind of oozed from me. And by this time I run a tie, right, Jesse. So I had to get an extension, got a one week extension on the subject removals for financing on that deal. And that’s when I came up with a brilliant idea, I’m being facetious. I thought it was a brilliant idea. I said, this is such a good deal. It’s going to sell itself. If enough people see it. So I put together an email, little one pager PDF, and I sent that out to about 200 people that I knew.

Dave (26m 27s):

And I was excited. Cause this was the first thing that had any signs of life. I started getting replies back to my email and I was excited about this Jessie until I started reading the replies. And basically they’re saying, Hey, Dave, dude, haven’t heard from me in quite a while. Some guys, five years, other people, 10 years, one guy hadn’t heard for me in eight teen years for crying out loud. So, and here you are hitting me up for money for a deal, take a hike. What I succeeded in doing, I succeeded in turning off a lot of good perspective investors. And that’s really hard to turn around after you’ve done that. So bottom line, end of the story there, Jesse is I lost that deal.

Dave (27m 8s):

Got some major egg on my face. Cause I’m in kind of a small city. There were about 80,000 people in town at that time. So ticked off that my tenant buyer, big time ticked off the seller, ticked off the realtor, ticked off the mortgage broker, ticked everybody off, got the major egg on my face. And that’s when I sat back and I said, you know what? There’s gotta be a better way. There’s gotta be a better way. I got to crack the code on this raising capital thing. And so I read books and I took courses and got some coaching and training and all this kind of stuff. Most of it was just the same old, same old of get better at dialing for dollars. Get better at schmoozing, get better at doing all this salesy stuff. Try doing some NLP on people, all this crap.

Dave (27m 49s):

And that’s what I shook my head. I said, Dave, you idiot. If there’s one thing you’re pretty good at it’s marketing, why don’t you apply smart marketing to raising capital? And why don’t you try to get people coming to you? Pre-motivated, pre-qualified, pre-educated pre predisposed to investing with you instead of you chasing after them. So that’s where I hooked it by Kirk. I came up with this, what I call five step money partner formula. I got that working. I worked really well with my rent home deals. I raised hundreds of thousands of dollars for different deals there. Then we jumped up into the multi-family space, raised millions of dollars for different projects. I’ve been involved with that way.

Dave (28m 30s):

But more importantly, since coming up with this whole thing, we’ve been able to help a lot of what I call mom and pop real estate entrepreneurs at this point, cumulatively raised well over $300 million for their deals as well. So it’s worked well for me. It works well for quite a few other people too.

Jesse (28m 46s):

Yeah, that’s great. You know what you hear, even when people come on the show and they talk about the deals that they’ve lost, you know, until you go into detail and really understand what the mechanics are behind, that you really don’t understand where the lessons learned are. And that’s a great summary of that. So for listeners, you know, we’ve talked about to go back to the chicken, the chicken and egg thing. We’ve talked about this multiple times, you know, it’s do you have the deal first? Do you have the people first? Well, if you don’t have the deal, then how can you have the people? And if you don’t have the book or the offering, because there’s no deal, you know, and then it gets just confusing to people, especially ones that have never done it before. So maybe we could kind of jump through the steps there that you’re talking about.

Jesse (29m 28s):

And you could also just shed a little light on that process of, you know, chicken egg deal or, or investor. Yeah,

Dave (29m 35s):

That’s a really good point, Jesse. So when I say the, the, the money comes first, I, the investor comes first. So to me it really doesn’t matter what kind of deal we’re looking at. To me, it’s all about getting a group of investors lined up, ready to go into wings, right? So people who have put up their hand who have said, I’m in, count me in Dave, I want first dibs on your next deal. I’m good for a hundred grand or 150 grand or whatever your minimum is. And for me that’s, that means that they’ve signed off on an expression of interest or letter of intent.

Dave (30m 15s):

If we’re going to need them to help with getting qualified for the financing, we’ve got that ball rolling. So they’re ideally, they’re prequalified, all that financial stuff’s lined up, ready to go. So we’ve got that, that group of investors lined up ready to go in the wings, kind of like actors in a plate right before an actor goes out on stage, they’re waiting in the wings for their turn. So we want a bunch of those people lined up, ready to go re waiting for the turn. So now we can go out and looking for the deals. And now when we do find that deal, the money will find us. Cause we’ve lined it up ahead of time. Does that make sense? So that’s what I mean by the chicken and the egg. It’s not necessarily that we’ve got, you know, half a million dollars of investor money sitting in our bank account waiting to be utilized, not necessarily, but we’ve got all these people who’ve said yeah, count me in.

Dave (31m 5s):

And then here’s another trick. This is, this is a lesson hard Lark. My rule of thumb is have twice as much capital lined up. As you think you need have twice as many investors lined up as you think you need. So when the smoke clears, you can be confident that you will have the capital when you need it. So that’s, that’s the big picture idea. Now the process I go through Jesse really is designed for folks that are just kind of getting started with raising capital. What I call the mom and pop real estate entrepreneurs. Some of this is going to apply to folks that are doing syndications and that sort of thing. But what I really help people do is I help them get their first, you know, 500,000, maybe up to a million dollars of capital raised from working within their sphere of influence working within the people.

Dave (31m 58s):

They already have that preexisting relationship with, you know, friends, family, coworkers, close business associates, those kinds of things. So that’s what we really want to focus on. And that’s where the whole process comes in. So I guess I can quickly go through the process and be like, yeah, sure. So it’s, it’s five simple steps. First step is let’s come up with a target group of prospective investors. So if you take a notes, just draw a circle on a piece of paper and draw the number 200 in that circle. And that’s what we, I suggest people focus on. Let’s come up with a target group of 200 people that we already have that preexisting relationship with. You know them, they know you that’s very important.

Dave (32m 40s):

So where did we come up with these 200 people? Well, it’s hard to think up 200 people, right? That’s, that’s a tough task. So what I always tell people is get everybody from your cell phone, export them into an Excel spreadsheet. Same thing with your email contacts, same thing with your Facebook contacts, same thing with your LinkedIn contacts, same thing with your Instagram con, whatever the hell you got for social media, get them all out of there and get them into that spreadsheet. If you’ve got old business cards and stuff like that, scan them getting into that spreadsheet. Let’s start off with 1,015 hundred, 2000 contacts and then whittle it down quickly to 200. And the trick for doing that is take a look at your list. When you see a name does a face pop into your mind, right?

Dave (33m 25s):

If a face pops into your mind and you like that face, you don’t want to punch him. You don’t want to punch that face. You like that face. Then keep them, if you see a name and you don’t know who the heck that person is like a face does not pop into your mind, then you really don’t know that person fair enough. Like most of our Facebook friends, aren’t really friends hate to break it to you. So delete, delete, delete, keep, keep, keep, delete, delete, delete, delete, keep, keep, keep. And that way. Instead of having to come up with 200 people, you start with a thousand or 2000 quickly whittle it down to 200 people. People that you know and who know you, because Jessie, as you’re, as you’re aware in order for somebody to invest a hundred thousand dollars, 150,000, $200,000 with you, chances are they’re going to need to know you like you and trust you.

Dave (34m 12s):

Does that make sense? No, like it does. So when we focus on this group of people, we got two out of those three things taken care of. They already know us. They already like us. Hopefully now it’s just a matter of working on, do they trust us with their a hundred or $200,000? Right? So that is job. Number one, job. Number two is once we’ve got that list, we want to avoid making the dumb mistake I made, which is charging in like the bull in the China shop and saying, Hey, it’s Dave, I got a deal. You got any cash? No big mistake. So what we want to do instead is we want to reconnect with these people on a personal level and then give them the heads up.

Dave (34m 54s):

We’re going to start talking business. So make it a, I kind of a nice transition. So reconnect with them. And we’ve got a whole process. We go through this, it’s called a warm up campaign, very simple three, three emails that go out to do all of this for you. And, and you make that genuine reconnection. And then you give them the heads up that you’re going to start talking about real estate investment. Okay. So all of that is step number one of this five step process target group and reconnect with them. Step number two is we need to be ready to go with a presentation to show people, right? So if people show interest and they put up their hand, we need to be able to show them something. So I suggest that you have a good slide deck presentation, like a or keynote, something like that, fairly short, fairly simple, you know, keep it to 20 minutes.

Dave (35m 43s):

Max, we want to talk about a little bit about our background or our power team. We want to use an example of a deal, the kind of deals that we’re going to be raising capital for. And we want to keep it really simple. Here’s the biggest mistake I see people making Jesse is that they assume that everybody else is a real estate weirdo like us, right? Yes we do. Yes we do. And that’s a big mistake because 95% of the general population has never purchased an investment property. Their own house does not count. I’m talking about a revenue property. So we gotta keep that in mind.

Dave (36m 23s):

We are the weirdos or the real estate enthusiasts. We cannot expect other people to understand this at our level. And they don’t want to. They’re not, frankly, they’re not that interested. So this is, this is a big takeaway. You guys keep it at a reader’s digest level. What does that mean? That means reader’s digest is a magazine written for adults, but it’s written at a level that an average 13 year old can understand everything. That’s where we want ourselves to be. It’s not that our investors are dumb, nothing like that. We just want to keep it simple and easy to understand. So if you can do your presentation with an average 13 year old and the kid gets it, then you’ve got it.

Dave (37m 6s):

Does that make sense? So that’s the next step. Have that? What I call your million dollar investor presentation, you had a few practice runs on your belt. You know, you can do this. One-on-one, you can do this with people in your family. You can reach out to your sphere, get some practice runs on your belt. And then the third step is where the magic really comes in. It’s all about the marketing. Because again, if you recall, my goal is instead of me chasing after investors, let’s get investors coming to me, putting up their hands saying, Hey Dave, Hey, Jesse, I’m interested. Tell me more about your deals because that conversation, Jesse, I’m sure you felt this that’s a complete one 80 from us chasing after somebody desperately trying to pitch them on a deal.

Dave (37m 47s):

When we do it this way, we turn it all around. They come to us and then we show them our opportunity. And we have a grownup conversation, right? It’s not a, it’s not a sales pitch. It’s a two adults taking a look at something and seeing if it’s a good fit for both of you, right? You want to see if it’s a good fit for your investor. You also want to see if your investors are a good fit for you, right? It’s a two way street. So that’s, that’s the thing. Let’s create this marketing that all starts with, you know, these days you got to have a website. I always recommend have a website specifically focused on communicating with your investors, right? You might have one website that’s focused on filling up your, your units, right? So that’s dedicated to tenants or for finding motivated sellers.

Dave (38m 29s):

That’s a different website, have a completely different separate website for communicating with your investors. And then this becomes your online marketing hub. Everything comes from it. Everything brings people back to it. And our goal here is to provide edutaining marketing a little bit of educational, little bit of hopefully entertaining because we’ve got to remember, they’re not real estate weirdos. They don’t want, most of them are not super analytical. They don’t want spreadsheets. They don’t want data coming out of the years. They want to know that we know what the heck we’re talking about. And they want to kind of get the gist of it. They want to see that you’re actively doing whatever it is that you’re talking about. So a constant, consistent communication, lots of different ways to do that.

Dave (39m 13s):

These days, what I find works best, Jesse is stuff like this video stuff. So video logs, short, sweet little videos, three, maybe five minutes max that’s, that’s the maximum focused on one particular topic, you know, kind of showing off what you’ve been doing with a deal or using your, one of your deals. As an example, short and sweet electronic newsletters are another good thing that you can do. Blog posts, whatever you can do consistently pick one thing to start and get it up and going and go out at least once a month to your list of prospective investors. Once you’ve got that up and running, I had something else go out twice a month. And once you get rocking and rolling with this shoot for communicating with your list at least four times a month, once a week, top of mind, but again, keep it light, keep it hesitating.

Dave (39m 60s):

And then here’s the big one. Everybody forgets, always, always, always have a call to action. So people say, well, Dave, how do you get these investors reaching out to you? How do you get how you get these investors clicking on your calendar and booking an appointment with you is very simple. I tell them to, you know, all of the marketing ends, but Hey, if you’d like to find out more about this and how it can work for you, let’s have a conversation click on this link, pick a day at a time that works best for you unless I would talk. Yeah, that’s simple. Right? Okay. So that’s the marketing that’s and this is where everybody falls down, Jesse Everett, and everybody forgets about this because, you know, especially if they have a little bit of initial success and they get enough investors on board and they go out and they chase after a deal, they get that up and running.

Dave (40m 46s):

That takes some whatever, six months. And they’re fooling around with all of that. They put all the marketing on the back burner, get that settle. And then they have to start everything again from scratch. It’s a big mistake because you kind of, you look like a flash in the pan, right? We’ve all seen people. You’ve got excited about network marketing, MLM, something like that. They make a big kerfuffle about it. And then, right. So we don’t want to come across that way. We want to show people that we’re professional, right? And again, this is all about that trust factor. So how trustworthy are you if you make a big splash in the beginning, but then fizzle out and then you’re kind of all this hit and miss who’s going to want to invest with somebody who’s hit and miss. You want to show them that you’ve got that consistency.

Dave (41m 27s):

So marketing is constant consistent communication. So that’s step number three in the process. Step number four is working on your credibility, your trustworthiness being seen as a credible real estate professional in the eyes of your 200 in the eyes of your contact list. We’re not trying to compete with Robert Kiyosaki. We’re not trying to compete with the big guys that have hundreds or thousands of doors in their portfolios or deals or whatever, right? We just want to be seen as a credible authority in the eyes of our contact list of investors. And here’s the good news. You don’t have to have that much experience to be an expert, right?

Dave (42m 7s):

If you go one deal under your belt, you’re already head ahead of 95% of the population. So there’s all sorts of different ways. You can do this. I mean, you might get all fancy pants. You can, you know, write a book. That’s I’m not particularly a great writer, but the reason I got eight books is because it is it’s, it’s the quickest way to be seen as an authority, but there’s all sorts of different things you can do as well. You could have a podcast. You could be interviewed on a podcast. There’s there’s tons of podcasts out there. You’ve got something interesting and different twists. I’m sure they’d love to interview you about that. A couple of easy tips dress up. When you’re going to be talking with somebody about their money. Even if it’s over zoom dress, at least business casual, it’s going to show them respect.

Dave (42m 49s):

It’s going to get you respect back. Have professional materials, business cards. Don’t go cheap on the business cards. Don’t print them out at home. Invest a few bucks in business cards, have a sharp looking website, get some professional headshots, taken photographs, put those up on your website, put them in your investor presentation, invest a few bucks in that it’ll go a long way to having people see you as a credible authority. Does that make sense, Jesse?

Jesse (43m 16s):

That does. So that, that is number four. If I, if I’m, if I’m keeping up here, you’re keeping up really well. Yeah. There’s only five steps.

Dave (43m 24s):

So is it it we’re, we’re going to be done with it. There’s this five step process with her, but step number five is, and I’m sure you’ve seen this now, right? Because you’ve been doing this for a while. Once you’ve got an investor or two on board, and they’re happy with their experience with you, this is where you can really kick things into gear. This is where you can start the snowball effect. What I mean by that is birds of a feather flock together. Your investors tend to know other people with money. If they’re happy with you and you know how to get an encouraged testimonials and warm referrals, then you can grow your investor base exponentially. Right? So it’s all about getting testimonials.

Dave (44m 6s):

I always recommend try to get video testimonials. Nothing is better than a video testimonial. The other persons can pump your tires way better than you ever could on your own. And it’s far more believable. So video testimonials and warm referrals, you don’t want to be, you know, just getting somebody’s name and phone number and calling them out cold. No, you want to get a warm introduction to your investors, friends. And that way that’s when go so much further to getting that referral. So that’s step number five. That’s the five step process in a nutshell usually takes me eight hours to explain that my full name workshops, but I need that 30,000 foot perspective.

Jesse (44m 45s):

I like it. And it in the spirit of good content, we’ll probably have to reduce that to five steps and put that up on YouTube. Cause that’s, that was a great summary. So Dave, we are coming up to the end here. Thank you so much for kind of being as that concise. And I think that’s a lot of value for people. There’s four questions. I ask everybody that comes on the show. So if you’re ready, I can toss some of these over to you. Okay. Favorite book in real estate or business that you’ve had over the years can be more than one, but maybe one or two books that, that have really made an impact on you.

Dave (45m 21s):

The ultimate sales machine by Chet Holmes,

Jesse (45m 27s):

Right on, yeah. Okay. Early mentors, you know, again, one or two people that have had an impact on the career that you have in real estate or business. Right?

Dave (45m 36s):

Mom, my, my mom really was a great influence, even though she was a full-time employee. She was very entrepreneurial. She had at the time that she was doing all that real estate stuff, she also had a, an art gallery and was working full time and doing all of that. So I grew up with a very entrepreneurial mother who was always encouraging, you know, never, never said, no, you can’t do that. It was always, yeah, I think you can. It’s a very encouraging, always my, my mom.

Jesse (46m 8s):

That’s great. Good to hear that. And I don’t know if she’s listening, but I’m lucky to have, have one of those myself. So that’s a, that’s a great answer. Something you, you wish you knew at the beginning of your real estate investing career that you, now that you do know now.

Dave (46m 24s):

Oh yeah. That’s easy, man. So I mean that, that whole thing where I did those 18 deals in 18 months, and then I, I did the, the rental deals. That was good experience. But if I had have understood the law really understood the long-term value of buying a hold and got into that sooner and started using other people’s money sooner, instead of trying to figure out how to do all this stuff on my own, that would’ve been wonderful. That would have really, really been wonderful. So understanding long-term buy an old, getting into multifamily, investing, raising capital sooner. That would be my advice to my younger self.

Jesse (47m 4s):

Yeah, that’s it, you know, it just kind of jogged my memory on something I heard the other day. It was a Warren buffet. I’d never heard this quote for him or something to this effect where he said, you know, if I told somebody that I gave them a punch card and they had 25 punches to have over their whole career and they only needed to make 25 investment decisions, you could get successful probably only with four or five, but you have 25. And I feel like people oftentimes feel that need to sell this, buy this, get into this and yeah. Buy and hold. And just, unfortunately it’s not as sexy as, you know, maybe fixing and flipping 10 a year.

Dave (47m 39s):

I, you know, I think it’s sexier. I mean, when you understand it really is. I mean, if you think about it, when you understand the multiple profit centers and real estate, because at the end of the day, that’s, what’s sexy making money is what’s sexy. And I haven’t seen very much out there that compares to a good multifamily deal because I mean, as far as, as far as I understand, like there’s eight different ways that we can make at least eight different ways we can make money with a multifamily property versus a flip your maximum there’s two. Right. And it’s very, very, very dangerous. So to me, this boring, long-term buy and hold in my mind is much sexier.

Jesse (48m 23s):

Well, I certainly agree. And my last and as listeners know my favorite question, first car making

Dave (48m 30s):

77 deaths in B2 10.

Jesse (48m 33s):

Oh, come on. I like it. I mean, that’s the first we’ve had a Datsun on the, on the, on the show, you know, what’s crazy about the Datsun is how expensive some of the old ones are today that are fully kept original. So

Dave (48m 47s):

Yeah. Well, yeah, 77 that’s would be two 10 would be worth a little bit, two 42 40 Z.

Jesse (48m 55s):

Yeah. So two 40 CEDS, definitely. Which, which spawned the, the, the later three seventies. And I think there’s still three seventies today by a Nissan, but all right. That’s our first Datsun. Fantastic.

Dave (49m 7s):

Well, that’s how old I am. There were even, there were dances for Christ’s sake.

Jesse (49m 12s):

Okay. So Dave, for people to get in contact with you, aside from a quick Google search, where should, and can they go

Dave (49m 19s):

Well, you know what, if you guys like this whole idea of attracting vessels raising capital, then I’d love to give you a complimentary copy of my book, the money partner formula, I’ll trade it to you for your name and your email address. And you can get that at investor attraction, book.com. You notice that I’ve spared, no timer expensive, putting the sign up for you, buddy Guster attraction, book.com. And that way you’ll get it onto my list. We’ll be in touch. And then if you’d like to join me for one of my one day virtual book workshops, we’d love to have it.

Jesse (49m 56s):

My guest today has been Dave Dubose. Dave, thank you for coming on working capital levy, Jesse. Thanks for that favor. Listening to the working capital podcast. My goal is to help individuals break into real estate investing as well as educate experienced investors. If you enjoyed the show, please share with a friend subscribe and give us a rating on iTunes. It really helps us. If you have any questions, want to learn more or likely to cover a specific topic on the show. Please reach out to me via instagram@jforgalsorheadtowwwdotjesseforgalley.com. My name is Jessica galley, and I’ll see you back here for the next episode of the working capital real estate podcast.