Steve Olson
• 56 min
How to get your first investment deal as a real estate agent with Mike Ugarte
Real Estate Operator with Steve Olson
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Podcast Summary:
In this episode, Steve Olson and Mike Ugarte discuss the intricacies of real estate investing, focusing on the importance of understanding client needs, the value of having a real estate license, and the strategies for new investors to enter the market. They share personal experiences, lessons learned from early mistakes, and the significance of building relationships and trust in the industry. The conversation emphasizes the need for options in client presentations, innovative financing strategies, and the critical role of deal flow in successful real estate investing. In this conversation, Steve Olson and Mike Ugarte delve into the nuances of real estate investing, emphasizing the importance of a steady approach over seeking quick wins. They discuss the significance of partnerships, the learning process involved in investing, and the concept of gap money in financing deals. The dialogue highlights that successful investing is about consistent effort, collaboration, and leveraging resources effectively.
Top Takeaways:
- Real estate investing can lead to financial success and personal fulfillment.
- Mistakes in early flips are common and provide valuable lessons.
- Having a real estate license offers advantages for investors.
- Understanding client needs can transform listing presentations.
- Providing options to clients is key to successful transactions.
- Innovative financing strategies can open doors for new investors.
- Building relationships with investors can lead to partnership opportunities.
- Deal flow is more critical than access to capital in real estate.
- Your first investment deal is often the hardest to secure.
- Real estate investing can create a contagious enthusiasm among peers. Real estate investing is about rinsing capital repeatedly.
- Successful investors focus on consistent deal flow rather than home runs.
- Partnerships are crucial in real estate investing.
- Investors often overlook the importance of collaboration.
- Learning from experienced investors can accelerate growth.
- Gap money covers all costs not included in the mortgage.
- Investing should be a fun and rewarding experience.
- Most agents have the foundational knowledge for investing.
- Start small and gradually increase your investment size.
- Networking and attending meetups can lead to valuable opportunities.
Chapters
00:00 Introduction to Real Estate Investing and Scaling Teams
06:03 The Value of Real Estate Licenses for Investors
11:58 Creating Options for Clients in Listing Presentations
17:47 Overcoming Barriers to Entry for New Investors
24:13 The Importance of Deal Flow in Real Estate
30:03 The Journey of Finding and Closing Deals
39:08 The Importance of Partnerships
46:51 Learning from Experience
53:40 Understanding Gap Money
Raw Transcript
Steve Olson (00:04.549)
Welcome again to another episode of the Real Estate Operator. My name is Steve Olson. Thank you so much for joining us. Today I have my good friend and growth director, partner in business, friend in scaling this amazing team that we call Stoly Network, Mike Ugarte. Let me give you a little bit of background about Mike before we get into this. Number one, he's been in the business 20 years, longer than I've been alive, which is amazing. Number two, he's got a long, crazy history of scaling multiple different businesses.
One of the things that I'm super excited about for Mike to give you all this over time is that he grew an office and for those of you guys that have ever done this before, you know this is obscenely hard. From no agents, zero to 150. Mike, how long did that take? Over how much time? That's crazy. That's zero to 150, that is crazy. Next thing I wrote down, extensive experience in multifamily investing and fix and flip, which I know you guys all want to learn about. We're gonna talk a lot about that today.
Mike Ugarte (00:46.334)
to be about four years.
Steve Olson (01:00.979)
He is a teacher, a coach and heart and he believes that winning through others is the name of the game and his in breast his
Steve Olson (01:10.711)
and his brand Invest Well Live Well is built on the idea that real estate can be a path to both financial success and personal fulfillment. Mike, thank you so much for joining me.
Mike Ugarte (01:21.288)
Glad to be here.
Steve Olson (01:22.907)
Okay, so I could talk about real estate investing and you've done a lot more of this than I have, which I'm super excited to learn from you just being here on this video with you. I think that one of the biggest opportunities for real estate agents is that we're taught by it because we go to all these different conferences and we talk to all these gurus, we have all these ideas and all these people that tell us, if you want more money, do more deals.
And then people say, well, I don't know that I want to do more deals, but I still want more money. Okay, well, if you want more money and you don't want to do more deals, then just grow a team. Well, then they grow a team and they're like, well, I don't really want to be a manager. And I don't want to, I don't want to be crude in this whole like coaching thing and profit and loss and profit margin and net profit and all that stuff. It's like way too overwhelming for me. So what happens is they kick their team over and then they go back into general production and they say things like, well, I just need to up my average sales price or maybe.
If I really do wanna do this, I do need to sell more homes. The number one thing, Mike, and we're gonna talk about this today, is that I don't think enough agents are their best client. And what I mean by that is there's so much money left on the table with real estate agents that don't understand how to invest in real estate because I think most of them don't know how to get started. Number two, they believe it takes a lot more money than they think it does. And number three, they're not within a certain network that kind of rewards that type of behavior. So as we get into this, will you do me a favor?
Will you tell me really quick, like just high level, what was your first flip? Like your first journey into investing in real estate and was it a success, was it a failure, how did it go?
Mike Ugarte (02:59.242)
It was a failure and it was a flip and we didn't know what we were doing. We got emotional on the whole process, which is one of the big mistakes you make. We fell in love with the property and we fell in love with the potential. We bought everything on potential. So we ended up losing some money on it. I say we broke even.
I did it with my brother who's a general contractor. He's still this day says we lost money because and I said, no, we failed to make money, but we kind of broke even. you know, well, we did lose some money because there was technically closing costs and all that, but we didn't take a bath. And so we learned from that. And, know, and the whole process is really it's a learning process and you're going to make mistakes. Every every investor, every, you know, now that I'm in this, every investor
has horror stories or war stories is what we call them, right? I go to so many investment communities and meetups and this is one of the first questions, tell me about when, and it always comes to that, man, I did this one deal or I had terrible partners or this happened or that happened. So we're always sharing the war stories and you learn from them.
Steve Olson (04:00.035)
Yeah. Yeah.
Steve Olson (04:21.915)
You know, somebody told me in the investment space that you either learn or you earn in flipping. once they told that to, I was like, okay, that totally makes sense. Cause like you, I remember the very first home we flipped. We did make money on it. It was like, it was like six grand. was not anything crazy, but I will tell you, it almost cost me like three of my relationships with my closest friends. It was, it was a battle to the freaking end. It was a pain in the butt to sell. And we didn't talk about this before in our prep call.
But I think I felt, think I was the same as you. I over romanticized about the property. I told everybody about it. I over, 100 % I will agree that I over invested in it. I put materials in it that should not have been in that home because again, I just, hey, wouldn't it be great if we bought this $150,000 home and put a hundred grand into it and tried to get 350? And it did work out, although everybody told me it wasn't going to. What I realized is during the showing feedback and everything that we were doing, people are like,
Hey, it's great that you put a KitchenAid, what is KitchenAid's prosumer line called? I can't think of off top of my head, but it was up there like, not necessarily like with a wolf or a Viking, but it was their premium line. And everybody thought it was great, but I realized really quick, like it's cool, but it's not cool enough to where they're paying me a premium or they wanna pay, you So I learned that lesson really quick. Real estate investing I think is the great hidden wealth.
key, unlocker, however you wanna say it, in real estate agents' business. Mike, do you hear a lot in your circles, like, is there still a stigma of like, if you're a real estate investor, you shouldn't have a real estate license, do you still hear that a lot?
Mike Ugarte (06:03.752)
Yeah, I hear all the time. I hear a lot of investors say, you I don't want to have a license. I don't need a license. And I think it's everybody looking at it the wrong way because, you know, in doing both, I realized that as a real estate agent, you have so many more advantages than you do as just an investor. And you look at the investors, every investor who tells you, I don't want to have a license.
What was the first thing they're looking for? They're looking for that good agent that's gonna give them deal flow, right? So they're always, much as they, it's a love hate relationship, as much as they say they don't like us, they need us, they want us, they're always looking for us. And if you're a good agent that understands investments and how to work with investors, mean, that's a niche that pays over and over and over again compared to
Steve Olson (06:36.198)
That's right.
Mike Ugarte (06:58.93)
you know, our regular customers who move every, you know, seven to 11 years now, it's the latest stats, was an investor, a good investor is going to buy three to five homes a year.
Steve Olson (07:08.839)
That's right. That's right. know, my biggest investor I worked with, this was back when I was in California, was originally in single family. The market was on a downturn in Phoenix. It was really hard to get single family homes because everything was multiple offer, selling over, and it just became too exhausting. So I said, hey, we should go do multi-family. I don't know a whole lot about it. I've sold a lot of four and five and six and 10 units, but if you want to buy like a 500 unit or whatever, like I'm not your guy, that's not my thing.
We should look into it because I think there's going to be a better ROI. So we go through this for two years. He ends up buying a ton of real estate. We get a property management company. I don't do property management. And he gets it all leased up. Everything's going good. And then one day I get a call and he goes, sell the whole thing. And I said, what? He goes, yeah, sell the whole thing. I don't want to do this anymore. And I'm like, OK, is it not profitable? He goes, no. Profit's fine. He goes, it's a little bit less than I thought it was going to be, a little bit more of a headache than I thought it was going to be. I just don't want to do it anymore. I said, OK, well, great news. Like, you're way up. So that's good.
So we go to all, mean, we're talking dozens and dozens of properties. So on the surface, I'm like, whoa, I just got all these listings. And of course you can't offload them all at the same time. You gotta do it in phases, right? So I sold the whole thing. Well, fast forward a little while later, he's in town. We're at this, I don't even think he's caught a happy hour, but he was meeting some people. was there and he introduced me as like, this is my idiot real estate agent, dumbest guy you'll ever meet. And I'm like,
What a weird way to introduce me. So after a couple of beers or whatever, I said, hey, why did you say that earlier? And he goes, you're the smartest real estate guy I've ever worked with. And I said, well then why did you introduce me like an idiot? He goes, because I don't understand why you're dumb enough to rent me on these deals and you should be me. And I'm like, I totally didn't get the context of that conversation. And he was right because here I am, this was probably a total buy and sell.
Maybe 50 transactions give or take that I over three years that I had the ability to do with him. And I don't know what my total commission was on the deal, but assuming I made, I don't know, 15 grand on each one, right? I it was a lot of money. Don't get me wrong. But the amount of money that he made was like way more than that, you And I'll never forget that conversation. He said, look, the, the instant that you can turn into an owner and not a practitioner is when the wealth will set, will step in. He goes, however you view it.
Mike Ugarte (09:17.982)
Mm-hmm.
Steve Olson (09:30.02)
And he had a big exit in a lawn care company, I think is what it was. And that will always stick to me is that leverage and ownership and any asset that you can get, the game in life is just to acquire as much of it in the smartest way possible with the least amount of risk and downside as possible. Not with the biggest spreads, not with the highest NOI or the biggest cap rate or anything like that. Leverage yourself to where if we go through a downturn, you're not gonna freak out. And he goes, and on the other side, maybe when we go through a crazy upturn,
You may not be making as much as everybody else, but you're never going to lose your downside. I'm unfortunately not in touch with him anymore. I probably should reach out after this podcast. But he had so many, whether he knew it or not, he had so many little nuggets that I learned along that journey with him. And it's like, once you put all those nuggets together, you realize like, well, duh, this guy's loaded or duh, guy is super wealthy because he thinks about the world differently than everybody else is. I think there's a lot of, I'd like your insights on this, Mike.
I think most agents go into a listing presentation and they walk through the home and it's like it's not up to shape right or it needs there's like unpermitted You know work into it or it needs, you know significant rehab or the pools cracked or there's a crack in the Trust or the foundation, you know is off offset or whatnot and most agents are like This is gonna be a really hard listing to take or I've got to sell this at a discount or I don't want to work with investors and it just kind of stops there they look at it as a
lower price deal. Whereas somebody like you can walk into that presentation or they can walk into that pitch and they can say, look, I really have three options. We fix it up and you sell it for the most amount of money possible. Number two, you sell it as is and we go find an investor. Or number three, I buy it from you, right? Like those are really are only three options. If you think about it from that perspective, that real estate agent really has every option anybody could really want. You agree or disagree with that.
Mike Ugarte (11:28.734)
100%. When I started investing, especially in the fix and flips, it changed my listing presentation completely because I don't go into listing presentation anymore looking to find them the highest price in today's market. My job is to get you the best price, the best offer with the best terms. Yeah, I want to do that. But what I go in looking for is what are your options? And I give them options.
Steve Olson (11:50.277)
Mm-hmm.
Mike Ugarte (11:58.046)
Every customer will, you know, when I do a, when I talk to them after and I asked them, Hey, why did you choose me? You know, over the other agents you interviewed or what did you like best about the presentation? He you gave me, you're the only one that gave me options. And, and, and that's what people want. They want options and, not everything work. You know, we as agents, we have that one track mentality where we want to fit a square peg in a round hole every single time. Right. Because that's what we're taught.
Steve Olson (12:12.807)
That's right.
Mike Ugarte (12:26.79)
It has to be this way. It has to be this way. And it isn't, you know, our customers want, they want advice from us. They want options. They want to know what they can do. And for some people, you know, some people want the money, right? So they want the highest price. And then other people want convenience. They'll trade money for convenience. You know, I'll give you a personal example. And it isn't an investment thing because there's a lot of that. But when I bought my current home,
Steve Olson (12:27.271)
That's right. That's right.
Mike Ugarte (12:56.446)
This seller was off market. His neighbor sold it and at the time I was a manager, one of my agents was a manager and then she came to this listing presentation and he says, I don't want to have to do what my neighbor does. I don't want to have to fix my house. I don't have to put it on the market. Is there any way that we can sell this off market? Well, I knew already the neighborhood, I knew I wanted the house. So I had told her, all I need you to do is make sure that the house isn't falling apart. If it isn't,
Steve Olson (13:12.62)
Mm-hmm. Mm-hmm.
Mike Ugarte (13:26.217)
here's a contract signed by me and my wife, tell them to just fill in the price, right? And I knew, I wasn't worried because I knew she had done a CMA and she was gonna buy it on the price, but tell them to just put in his price. so she came with, it wasn't an investment option, but she came with an option and said, my boss, know, offer on the house next door, he didn't get it. He lost it because there was multiple offers on the house, my neighbor's house, and he really wants to move in neighborhood, here's an offer.
you don't have to put it on the market. And that got her the listing, but it got the deal done. This house never went on the market. If it did, I probably wouldn't be able to buy it because it's on a big lake and everybody wanted to move into it. But, you know, it's just having an option. that's outside of the investment world. And the investment side, you know, I went and looked at a property two weeks ago and that somebody called me. It was another agent, sent me referral and said, hey, it's...
My customer inherited the house. Can you go look at it? Would you let me know what you can do with it? Walked in the house and there's spider webs everywhere. It's run down the roof. And then, you know, I went with my partner, with two of my partners and we came back and we put an offer. Like, we'll buy it. You know, we'll buy the house. We'll fix it. you know, so we're still working on that one.
But yeah, those are the options that we have. And we told him flat out, hey, if he wants to sell it at the open market, I'll be more than happy to listen for him, but it's in really bad condition. He's going to have to do a lot of repairs, clean up and all this other stuff. I can get an investor, an investor will take it off his hands. And if he's going to do that, then I'm willing, if he wants to sell to an investor, I'll buy it. And here's our offer. And let me know what he says. So he doesn't have to do any cleanup.
or they don't have to do any cleanup.
Steve Olson (15:24.095)
I'm trying to do the math right now so I can give you an accurate representation of like what you just triggered, know, me thinking of telling you that story. But I have a, wouldn't call him a friend, somewhere in between an acquaintance and a friend. I don't talk to him that much, but we are friendly. And there was a home for sale here in Carlsbad and it hadn't sold, you know, was on the market for I think 45 days, which in our market is a long time. Now it's normal, but back then that was an abnormally long time. And the price they were asking for was fairly high. All of a this thing closed.
and I look at the closing price and it's sold for over list. And I'm like, that's kind of weird that many days and it's sold for that much over list. Well, fast forward X amount of time later, I find out this guy knows the one who bought it. And I'm like, hey, like you're in the real estate space too. why did you overpay when this home was on the market? And he goes, we did a seller finance deal. And I said, okay, well, what does that look like? And he goes, basically what I said is I know the prices are gonna go up. They're always gonna go up here because of the water. And he goes, so I offered him 10 % over list.
and prepayment of two years of interest free payments, but that price was not good for 24 months. And I said, okay, you know, mortgage payment is where it goes $8,900. So I wrote him a check for 215,000. That was our entire down payment. The entire finance of the home was at 100%. And we said that the price that we will buy it is a two year price from now at, you know, 10 % over whatever it was, I think it was like 2.15 million or something like that.
You would think when you hear those deals, you're like, nobody would take that. The guy was freaking ecstatic. He was ecstatic. The home was owned outright. There was no mortgage on it. He was collecting interest payments. He got two years ahead of time so that there was no like, you know, funny business and stuff getting not paid. Now, he could have said, my mortgage payment is gonna be, I'm making this up, right? My mortgage payment's nine grand. I'm gonna put $215,000 down and his first payment is due on day one or day 31, right? But instead he said, hey, we're gonna give,
Mike Ugarte (17:16.936)
Right.
Steve Olson (17:20.481)
No money down. I'm gonna give you a 10 % premium for that and I'm gonna prepay two years worth of mortgage payments. The funny thing is, Mike, it's all the same numbers. It's just where you're willing to put that line item on the sheet, right? And so I'm talking to him about this and he goes, there are so many people that would do this. Why you would even get a normal mortgage? And he goes, now if you're wanting to stay somewhere long term,
Mike Ugarte (17:35.857)
Exactly.
Steve Olson (17:47.871)
and you're not gonna leave, then getting a normal mortgage or putting a bunch down, that makes sense, right? But he goes, I don't know about you, we've never been in one house longer than six years. So for me to part ways with 500 grand and not have that cover any expenses, just a down payment on a home, he goes, that's a lot of capital, whereas sure, I put $215,000 down, but that covered the next two years of mortgage payments. So I'm like, look, mathematically, you're on a totally different level than I am, right? And that was a really good question.
Here's what I wanted to get to on this podcast. There are agents listening or watching this right now and they've been in the market for a year, one year, five years, 10 years, whatever. And they know that they need to be investing in real estate but the average agent is thinking I either don't have the credit, I don't have a ton of money, I'm working on buying my own house right now. I know there's this whole like, you know, I've been, 44, half my adult life I've owned, half my adult life I've rented. And I gotta tell you, like,
There are just as many reasons to rent as there are to own, depending on what market you live in and all of that. Assuming you have the right owner and it's not a fly, because there are a lot of rentals out there that people are renting just because they don't want to sell. I don't know that I would recommend renting those properties, because every time that lease renewals up, you never know whether they're going to say get out. That's stressful. But if you're with an owner that's like, is an investment property, it's nice, it's not like, I don't know how rentals are out by you. In California, it's 50-50, meaning,
Mike Ugarte (19:04.307)
Right.
Steve Olson (19:13.447)
50 % of the rental properties, they haven't been upgraded in 15 years, everything barely works. It's in okay condition. And then you have the other 50 that's like really, really nice, which does command a premium, right? In Phoenix, it seemed like all rentals, nobody cares about. They're just not in good condition. It's a weird market over there. You're a real estate agent. You wanna do your first deal.
You think the only way that you can do a deal is to go get a hard money loan, put down 20%, pay 12 % interest, two points down, fund the whole rehab and then hope it works out. But I don't think that's the only way that you can get into it. let me ask you this question. We can kind of riff on this for a minute. Let's assume that I'm a real estate agent. I have decent deal flow. I'm doing two to three deals a month, maybe four. I have a little bit of money in the bank, but I'm kind of nervous about risking my own capital. How do I get into my first investment deal? And more importantly,
to use our examples as examples. How do I make sure that the first time that I do this, I learn a lot so it can set me up for success? Like what would you recommend to that agent?
Mike Ugarte (20:17.054)
So I would ask you, Steve, do you have a customer who's an investor that trusts you and you like the way they work?
Steve Olson (20:26.884)
Yeah, 100%.
Mike Ugarte (20:28.702)
Okay, one of things I would tell you is approach your investor since you already have trust and say, hey, on your next deal, the next deal that I find you, if I give you a portion of my commission, could I get in on the deal and then have skin in the game and learn from you? And also when you sell it on the profit side, I get a percentage of it.
Steve Olson (20:54.065)
So because I know people are gonna say this, when you say when I give you a portion of my commission, what Mike is not saying is let the deal close, you get your commission check and you go give him 3000. I think what you are saying is when the deal comes to close, you're gonna allocate a portion of that as part of the down payment of the acquisition costs, right? And you're gonna basically treat it like a mini syndication deal, kind of, right?
Mike Ugarte (21:11.4)
Right, right.
Mike Ugarte (21:16.466)
Right, right. if you don't want to, you if you have savings and you want to do it with savings instead, mean, all it takes, lot of people don't realize, it just takes a lot of money. Sometimes it could be just a down payment, right? Or the deposit, not the down payment, the deposit or the escrow deposit, you know, or down payment. You know, they're probably going to get a hard money loan or covering some expenses, closing costs or whatever. It's, you know, you're going to get, well, you put in, you're going to get a
Steve Olson (21:28.347)
Yeah.
That's right.
Mike Ugarte (21:44.286)
proportional. So the investor doesn't care. investor, you know, from the investor's side, he's going to be like, cool, I have a partner that's less money. That's more money I can leverage. That's, you know, that I can keep in, you know, for me and for another project. And whatever that amount is. I mean, and then you're in the deal and you're learning. Now you have skin in the game and then whatever, you just learn from what they do. That's an easy, quick way to get in. It's partner with
Steve Olson (21:47.43)
That's right.
Mike Ugarte (22:12.486)
with one of your customers. You know, I've done it.
Steve Olson (22:16.858)
You know that we had.
Let me ask you this. So if the if commission on a deal is like 12,000 bucks, right? And I say, Hey, I'm gonna give you $6,000. What you're saying is that whatever that $6,000 equates to in regards to percentage of risk is what you're going to get out of it. So if that means four and a half percent, that means four and a half percent of the upside you're going to collect, right? So nobody should expect like, you know, here's a $300,000 home, I'm going to put in six grand and we're 50 50 partners, it's not going to work that way, right? We're like, but a lot of people think they do think that way.
Mike Ugarte (22:45.03)
No.
Steve Olson (22:48.421)
And you've had partners, like maybe you haven't, I have, where like, hey, yeah, we'll throw in 200 grand to a deal. And you realize, they've never done this before. And they're calling you every single day. Hey, where's my money? Where's my money? Where's my money? Where's my money? And you're like, look, I wish I had 200 grand in cash just to give you right now so that you never call me again, right? Those aren't a specific type of people. That's just inexperience. That's all that is, right? And then maybe there's nerves.
Mike Ugarte (22:59.586)
huh. huh.
Steve Olson (23:16.903)
We were looking for a hard money partner back in 2007, maybe eight or nine right when the market was starting to downturn in Phoenix. And we had done a few flips, had some pretty good success on those, you know, lower end $120,000 acquisition, maybe put 40 into it. We're selling for 205 210, you know, enough to keep the money moving, right? Nothing to like go buy a Lamborghini with or anything. And I'll never forget somebody introduced us to this guy.
who was doing condo conversions, apartments to condo conversions in Phoenix, Arizona. Scrappy guy, was not very well presented. His office was one of the apartments, know, in like the back room, this crappy desk in the corner. So he invites my business partner and I in, and then we sit down. It's super intimidating, because it was like, the one that he was using his office was half remod, it was just really shouty. But I noticed, I can't remember what kind of watch he was wearing. It wasn't a Rolex, but I knew it was a really nice one. I'm like, okay, so this guy's probably,
you know, okay, you he just doesn't really care about the some of the showy things. So we he all he wanted us to do is they bring me the last 10 deals. And I said, Well, we haven't done 10. He goes, Okay, well, however many you've done, bring those to me. And I'm like, What do you want? He goes, Just give me like, bank statements or ledgers or you guys, I just want to see your thought process. Okay, cool. That'll be you know, that was good. Because I never put that stuff together before. So I think we had six or seven, we put those together, we go meet with them. His name was Scott. We sit down. And Scott goes, Okay, you guys hungry?
And Aaron goes, yeah, we're hungry. He goes, cool, why don't you guys go get food? Let me look at this, come back in 20 minutes. And I'm like, well, okay, that's kind of weird. So we left, we got food, we came back. he looks, he goes, okay, he goes, the numbers are a little on the light side. And he goes, but I think there's potential here. And he goes, so how many homes can you guys buy in a given month? And I said, well, we don't, you that's why we're here. He goes, pretend money is no option. And I said, legitimately, I think we could probably acquire maybe.
Mike Ugarte (24:47.772)
Hahaha
Steve Olson (25:09.196)
seven or eight homes based on current marketing in our existing network right now. And he goes average sales price for home on my probably 240 is where we're going to end up. And he goes, okay, because that's only a couple million bucks. And I said, Yeah, he goes, if you had more, can you do more? And I said, Yeah, and he goes, give me a stretch number. I'm like, I don't know, 5 million a month. He goes, cool, I'll give you 5 million a month, just like that. And he goes, but here's a catch, we're going to be 5050 on title, there will be no points. And I'm going to take the first 40 % of every deal that comes in.
And he goes, as long as you're okay with that, I will give you unlimited money. We can do this. If you can do this 50 times a month, we'll do it 50 times a month. And I'm thinking like, well, we were kind of hoping 9%, blah, blah, blah. He's like, no, no, no, listen, no points up front, no fees, no questions asked. You keep doing this. I take the first 40%, you guys make the other 60, and we do this until this market doesn't hold. And I asked him, like, you just met us an hour and a half ago. And he goes, yeah. And I said,
You're just willing to write us a check. goes, well, in fairness, I'm not going to write you a check where I'm going to deliver the money at closing. So I will have title, you know, or I think he wanted all title actually, if I'm not mistaken. And he goes, look, I'll be honest with you. I hope you fail. I hope you buy all these and I hope you run out of money because I need more properties and this is the easiest way that I can acquire them. So I hope you get every single one. I hope you screw every single one up and I hope you give all of them to me and I'll make all the money. And he goes, if you guys are who you say you are,
and you do a great job, I make money on that as well. And he goes, hope you understand that I will physically not fund the deal. I will not fund crappy deals. So yes, I'm gonna underwrite him. Yes, I'm gonna look at him. And he goes, but, and again, that was another learning lesson of like, that was almost now, I can't remember, I'd have to ask my old partner, Aaron. I don't know if he was gonna fund the rehab or not. That part I can't remember. I think he may have put that on us, but I don't remember that part. But here we are, it was like our fifth meeting that we've ever taken.
And this guy was literally willing to write a blank check because we we had put in the work on the other ones. Now, were we going to make the percentage of profit that we probably could have make if we had our own cash? No, but he, he bought a speed. And again, I don't even know how many deals we ended up doing with Scott. I'd have to, I'd have to look at that up again. We did do a few. but the thing that I learned from that conversation and maybe you've, you've seen the scene that they're seeing the same. I'd like to hear your input. is unlimited.
Steve Olson (27:31.247)
amount of capital out there. Like unlimited amount of capital. Everybody needs people that they trust. Everybody needs deal flow. The challenge is not the money. The challenge is deal flow. So if you're a real estate agent and you have deal flow, you are sitting on a freaking gold mine right now. Your aunt, who you've never spoken to ever before, if you ask her a question, if I gave you a proven way to invest in real estate with almost no risk and the ability to earn X amount of percent on your money every year,
Would there be any reason you wouldn't at least have a conversation? 100 % of people will tell you, I think I should be investing in real estate. I don't know where, I don't know how, and I don't know who I should trust. Thoughts on that.
Mike Ugarte (28:12.306)
Yeah. No, that's, it's a hundred percent true. We have, we're doing deals now where we're, we basically, I mean, we're working with investors. It's very, it, we're doing hard money. And then we have investors who give us money for the difference that, know, they call it the gap money, right? The gap is the difference between what you're getting on the loan and then what you have to come up to, to finish the project. So we have investors that are investing with us.
And the big thing for us is we were doing it on our own and it's knowing how to ask the right question. mean, long, long time ago when I was coaching with you, one of the first things you told me is you need to, if you want to be a better agent, you got to ask better questions. And it's just not being afraid to ask the question. And a lot of us, and it is because I had it in the beginning.
you're afraid because you're like, my God, I'm going to screw it up. What if I screw it up? What, what this with that? And what you realize is, you know, there's a lot of people that want to do deals. So I'll give you, I'll give you an example on a big scale, right? three years ago, my partners and I decided we wanted to buy multifamily, like big multifamily syndication. So we, we under wrote
Steve Olson (29:25.797)
Mm-hmm.
Steve Olson (29:29.21)
To be clear, I'm going to cut you off. You were the syndicate or you wanted to buy into a syndication?
Mike Ugarte (29:33.662)
No, we were the operators, we're the general partners, the syndicate. So we were doing the whole thing. And so we started underwriting. We must have underwritten over a thousand, not a thousand, but a hundred. At the time, I remember it was about 50 properties in about four months, right? And we couldn't pencil in. And then I went to an event and I talked to, and I was talking to an investor. I met an investor there and I started talking to him and he said, how many LOIs have you written? I go, none, cause they don't pencil in. He goes,
Steve Olson (29:36.336)
Cool. Yep.
Steve Olson (29:50.842)
Wow.
Mike Ugarte (30:03.282)
You need to write more LOIs. And he goes, even if it doesn't matter, just write him because that's how you build your relationship with the other agent. And you'd explain to them why your offers is lower than what they want. And they'll understand that, but you need to keep doing that. So keep doing what you're doing. You're on track. And he's the first one that told me you're at 50, you're halfway there. You need a hundred before you find your first deal. But you need to write more LOIs. So we kept, that was in March.
Steve Olson (30:25.158)
That's crazy.
Mike Ugarte (30:31.288)
We started in December, so we had done 50 by then and we kept doing it. We kept underwriting, underwriting, underwriting. And then finally we found a deal that we thought was going to work and it didn't. It was a piece of crap deal. But anyways, for us, was the greatest thing out there. And I took it to that guy that I had met because I got his information. He said, hey, we exchange information. We spoke for an hour, so we exchanged information. So I took it to him and said,
Steve Olson (30:52.251)
Mm-hmm.
Mike Ugarte (30:59.748)
I found a deal, can you be my key principal on this? Can you be this? Are you going to be the sponsor? And we went back and forth. looked at it and he flat out told us, he says, no, it's a shitty deal. It's a crappy deal. But then he turned the table and he goes, why do want your first deal to be a shitty deal? You guys can make this happen. It's a crappy deal. You're going to make better. You're going to take a shitty deal and make it into a crappy deal. And that's going to be the one you're going to sell to your first investors. Why don't you do a class A deal? And I said,
And I told him, I said, I would love to, but if I can't sell you on a shitty deal, how am going to get a class A deal? And he goes, well, I got one. Why don't you guys partner with us and general partner with us? Because I like the way you guys are working. know, we have been in touch. And he goes, if you can bring in capital, bring in your investors, we'll give you a percentage of our general partnership on our deal. And so we did. We decided, OK, we'll go in. We got in our partners. And that first raise was the hardest one.
It was very difficult. We thought we were going to raise a lot more money than what we could. We asked everybody we knew. And we raised barely enough. We barely hit our goal on that one. But we got our first deal done. And after that, and we told everybody, hey, we have a deal. And then that first deal turned into a second one. And the second one turned into a third one. Because that's how it happens, by the way. Your first deal is going to be the hardest.
Steve Olson (32:01.144)
Mm-hmm. Mm-hmm.
Steve Olson (32:21.136)
That's right.
Steve Olson (32:25.7)
At 100%. That's right.
Mike Ugarte (32:29.168)
you know, what I tell everybody is your number one goal and if you're going to start investing is find your first deal, whatever it is, just do the first one and however it happens, right? Put your ego aside because we want to be the, you know, the kings in charge of everything and we got in on a deal on a much smaller percentage, but we got in. Okay. So we did our first deal after that our set by the time we got to our third deal, people were calling us.
Steve Olson (32:36.123)
That's it.
Steve Olson (32:43.526)
That's right.
Steve Olson (32:57.062)
That's right.
Mike Ugarte (32:57.118)
and telling us where, know, I want to put the money. I still have people now, all the time, what do you have, what do you have, what do you have? And they have money to put in. you know, even a friend of mine who told me no the first three times, the other day calls me and says, hey, I want to do lunch with you. I want to talk to you about this apartment stuff that you're doing. I've been reading a little bit more about it. At the time, he knew nothing about it, you know, and I want to invest. And I said, okay, fine. You know, we started talking.
and he's got six figures he wants to invest. He's itching to invest in real estate. you know, once you get into it, like you said, it's... Deal flow is the biggest problem, right? For all investors and getting deal flow, there's more money than there are deals. Money is not the problem. It's finding the deals.
Steve Olson (33:49.671)
You know, here's what I find totally fascinating about real estate investing. When somebody's selling their home, they don't tell anybody. They literally, it's like they go into hiding. They don't want a sign in their yard, it's a secret, because they don't want everybody saying, well, where are you going? You're leaving the neighbor, is everything okay? Are you upsizing? You know, and they just don't want to deal with it, right? And then when they buy a home, they'll tell everybody, but not until they already bought, right? So it's like, hey, we're closing on Thursday, right? The thing about real estate investing is it's contagious the entire journey.
Meaning like people like, I'm in this deal. It's keeping me up at night. I'm in this deal. It's going great. I'm in this deal. Or they'll be like, hey, I saw on social you were doing this. What was that? I'm, you that's a big multifamily deal we're doing. And then inevitably without them even saying it, they're like, well, how, what are you doing? this guy, Mike, like he, you know, turned me on to it. I'll give you his phone number. And then all of sudden you're like, where'd this guy come from? Where'd that guy come from? Right? Because real estate investing is super contagious. If you're,
Mike Ugarte (34:46.558)
It is. No, it is. No, no, it is.
Steve Olson (34:49.275)
Good.
If you're the type of person who understands that the art of real estate investing is nothing more than than rinsing capital over and over and over to get it to get a cut of it, right? Because I think Mike, tell me how you feel about this. Every investor that I know, whether I've coached them, I don't I don't do investing coaching, but like agents that I've coached have been real estate investors. Everyone that I know that doesn't make it one trait they all have in common.
is they optimized for the highest spread possible, meaning they tried to penny pinch, they tried, I want 100 % of the deal, they spend the money before it's even in, mentally and all that stuff. And then a buddy of mine made 70 grand on a flip that took him, I think 50 days, but mentally he thought he was gonna get 150, so he was telling everybody he got screwed on the deal. I took a bath on this, I lost so much, and I'm like, you didn't lose, you made 70, maybe you could have made 100 on this?
Mike Ugarte (35:23.347)
Mm-hmm.
Steve Olson (35:43.889)
But you made some key mistakes that cost you that money. Yes, you had the wrong lending partner that had some clauses that you didn't read, right? But at the end of the day, you made 70. And I think the people that are really successful, they know that the wealth is in the cadence. It's not in the home runs. Like who are the highest paid baseball players? They're not, mean, sure you have Aaron Judge and you have Otani in LA and you these guys that are making hundreds of millions. But if you look at like the top third of all baseball players, it's the ones that get on base, period.
If you can get on base a ton, you're gonna make an obscene amount of money in baseball. Real estate investing, I think, is the same way. Are there gonna be grand slams? 100%. Are there gonna be times when you're losing sleep the night before closing, hoping that you don't have to come to closing with a $50,000 check? That's going to happen, right? But blended as an average, as long as the deal flow continues to happen, as long as the capital is always working, it's almost impossible, you know, over a period of five years or 10 years that you're not.
like way up. what are you seeing the same thing? I off in that like, not absorption, what's the word I'm looking for? Observation, am I off on that or what would you say to that?
Mike Ugarte (36:54.748)
No, I think it's, I think you're a hundred percent right because a lot of people, they, they, they think, they think home run. Everybody thinks everybody wants to hit the home run. Everybody wants to be, everybody wants to be Babe Ruth. Right. so I'm dating myself there or,
Steve Olson (37:01.798)
That's right.
Steve Olson (37:08.774)
Well, Babe Ruth was also number one in strikeouts too. Most people don't know that. Keep going, sorry.
Mike Ugarte (37:11.932)
Right, right. Right. but everybody wants to hit the home run, but it's not about hitting the home run. And a lot of times what I see investors is they don't want to do partnerships. They don't want to get other people. They don't they want to they think they have to do everything themselves. Like it's one of the myths, I think, in business in general is, you know, I got to do it off the sweat of my back. got to, you know, it's not worth it. I can't break my back. And then all you end up with is a broken back.
Steve Olson (37:27.675)
Mm-hmm.
Steve Olson (37:31.781)
Mm-hmm.
Mike Ugarte (37:41.202)
and you have nothing to show for it. But what I found in the investment side, it's all about partnerships. You have to be open to options, to possibilities. Every time I go to an investment meetup or I go to a conference or I go anywhere where there's investors, there's always an opportunity to walk away. More often than not, I walk away with a deal or a potential deal because
Steve Olson (37:41.254)
That's right.
Steve Olson (38:08.262)
That's right.
Mike Ugarte (38:10.788)
And then a lot of it is, hey, do you want to partner with me on this? It's not like, do you want to buy it? Do you want to partner with me on this? Or I'll partner with you on this if you have this. I have a wholesaler who told me if you get a deal and you don't want to flip it and you have it on the contract, I'll partner with you and we'll sell it to my list and we'll 50-50 it. And I'm like, awesome. Because I really don't care to be a wholesaler big time. That's not for me. But I will wholesale if I need to.
Steve Olson (38:36.795)
Right.
Mike Ugarte (38:40.338)
But now I have an option. I have an L. And it's a partnership.
Steve Olson (38:43.674)
think that also, doesn't that also tell you if somebody doesn't want to be in a partnership at all, it's probably not that good of a deal?
Mike Ugarte (38:51.204)
No. Yeah. And if they don't want to be in a partnership, yeah, that's another way to vet the deal, right? You can also, you know, show it somebody that's more experienced on it and get their input. See if they want to partner with you. They tell you no. Or if enough people tell you no, then you know it's not a good deal.
Steve Olson (39:08.134)
Well, when we, I had this, we'll cut it here after this part. We'll send everybody away with this. When I first moved to California, I went on a pitch for a nine unit apartment complex in San Diego. Didn't really know the California market in regards to multifamily at all. Cap rates were crazy, crazy low. And at this conversation, there were three partners and they didn't tell me this, but I could tell they were not on good terms with each other. And so I had looked through how they were holding title and all their rent stuff and.
I don't remember that the specific details and I said as are any of your guys is any of this in a trust or a corporate LLC at all? No, we all own it personally and I said, okay, it's probably gonna cost you a few thousand bucks But I think that we need to bring in you know an attorney and we need to retitle the property We know we probably need to season it for 90 days then I would because I think it's gonna cost you Some some fairly significant money to sell it as it is right now and I said like I'm not a tax person, know in California is totally different than Arizona, but we
I think it would be worth our time to like do 30 days of research because I think we could be talking like hundreds of thousands of dollars in penalties or unneeded taxes. And he said no. And he goes, the other two partners want to sell right now. And I said, okay. So we went back and forth on the price. then, so I kind of sat on it for a week or so he called me back. He goes, hey, we're ready to go, but we want to list at this price. I'm like, that's way too high. You know, it's never going to sell. know, so I like, let's, let's get through this, right? So go back and forth. ended up not working with me.
The agent they chose actually was a close friend of mine unbeknownst to me. He was also interviewing for the job and didn't advise on any of this stuff, right? Sells it much lower price than I thought they could get he's a great agent So I'm not saying it's his fault by any means and like seven months go by and I get this phone call from one of the owners and he goes hey you had a conversation with one of the partners about retitling the property and I said yeah and he goes do you mind if I ask you a couple questions? I'm like
I already know where this is going. You did your taxes and you're throwing up in your mouth. And he goes, yeah. And I said, what's the, what do you think it cost you? And he said, 1.7 million. And I said, amongst all three of you, goes, yeah. And I said, okay, he explained to me the title. So I forwarded him to some other guy. And again, I'm paraphrasing this and I could have some of the details wrong, but my tax attorney that I sent him to said all, there was one document that would have cost them $1,200 to do, one document.
Mike Ugarte (41:27.646)
Well.
Steve Olson (41:28.871)
and would have wiped that entire tax liability, that part of it away, right? And he's like, we're gonna sue the agent. I'm like, you can't because that's not our job. You know what I mean? That's not part of the scope of the transaction. And he goes, well, if we just would have hired you, you should have told, I'm like, look, I don't know what document that is. I'm not a tax person, but I knew that the way that you guys had this title, there's probably gonna be some money you're gonna leave on the table for this. That's another example. And I can tell you 100%, Mike,
Mike Ugarte (41:39.56)
No.
Steve Olson (41:58.458)
Those guys were, they didn't wanna hear. They saw the check that, I think they walked away with like seven million in profit or something like that, give or take. They saw that number and it was already spent in their head. And everything that they had to do was like, well, that's more money out of my pocket and that's gonna cost me. And you know how people get, right? So let's get back to, so I'm telling you that from the perspective of like, when you go together, 100 % of the time you go farther. Like I can't even tell you, I mean,
If you look at Trump, for example, right? Whether you love Trump or whether you hate Trump, if you look at his real estate portfolio, most people don't realize that the majority of his income after a certain point of his career was not entitling real estate, it was in licensing real estate. He was selling the license to use the name Trump. And like it's something that doesn't get talked about a lot. It's a genius move, right? Because the upside risk is very small. They're paying him for the brand because at that time he had an amazing real estate brand. And if Trump was backing it, it was doing really well on the East Coast.
Mike Ugarte (42:41.48)
Bye.
Steve Olson (42:58.159)
And he realized like, look, could I buy this post office and do it all myself and make all the money? Sure. But if I just license it, I can do that 50 times with the same amount of leverage. He understands that probably better than most people do, right? So going together, you're 100 % going farther. Let's get back to what I would do at the beginning. So I have a deal. I go find an investor. say, hey, Mr. and Mrs. Investor, if I'm willing to pony up money in the deal, whether it's part of my commission, a hard payment, whatever, you're going to teach me how to do it. And then,
Mike Ugarte (43:06.994)
Right.
Steve Olson (43:26.608)
How much would you tell them? What would be my expectation over how I would learn? Am I literally gonna look over their shoulder every single day? Like what questions? Like how do I learn off that transaction? What would you recommend?
Mike Ugarte (43:39.164)
You know, that's a conversation you want to have with them because a lot of times they don't, you you don't want to be. If you don't have the knowledge, don't write, you don't want to be a nuisance. And so it's a fine line. So, you know, a lot of times it could be, you know, maybe have a cadence on a phone call like a weekly or biweekly phone call and tell me what's going on. You know, can I ask you questions or, you know, at the end of the day, you're also part owner of the property now.
Steve Olson (43:47.438)
A nuisance.
Mike Ugarte (44:09.042)
You've got skin in the game. And if you guys agree to a cadence, then he can, you that person, he or she actually can tell you what's going on, what they've done. You know, go see the property with them whenever they're going. But do it more as of, you know, let them know that you're doing it because you want to learn, not because you're going to, and don't micromanage it. Like you have no place to micromanage at this point. And you know, you can ask, why are you doing this? Why are you doing that?
Steve Olson (44:34.426)
Mm-hmm.
Mike Ugarte (44:38.558)
And more often than not, they'll be more than happy to share that with you. A lot of investors love to teach what they do. And they love to share the information. They just love talking about it. So you're not going to have a problem there. But set up some kind of cadence or you're not a nuisance. It's like if you're mentor to a real estate agent in your office, you don't want that agent calling you all the time. You're busy. You're doing stuff.
Steve Olson (44:46.2)
Mm-hmm. I agree.
Steve Olson (45:04.816)
That's right.
Mike Ugarte (45:06.12)
but you want to set up a cadence, hey, let's meet weekly on this date and then we'll go over what it is you need to know. And that's what I would recommend. think that's the quickest and easiest way. And if it's not an investor, mean, find a way to partner into a deal. My recommendation is just find a way to partner into a deal. It's the easiest and quickest way to get in and choose wisely, by the way. You know, make sure that they're in alignment with you.
Steve Olson (45:32.198)
Yeah, because you can learn from idiots too, right?
Mike Ugarte (45:34.172)
Yeah, you can learn from idiots and you can learn how to do crappy things from idiots. But also, I've had good partners and bad partners. And whenever I have a bad partner, can tell you the mistake we made is either we were looking at, like you said, we were looking at the end, right? they have a lot of money or they have a lot of this or they have this, they can help. then, we didn't, we kind of, the red flags were there and we ignored them. But, know,
Steve Olson (45:37.392)
Mm-hmm.
Steve Olson (45:41.178)
Mm-hmm.
Mike Ugarte (45:59.442)
They want an alignment with the way we operate. They didn't treat their investors the way we treat our investors, which is a big issue. So you want to make sure you're doing it with somebody you know and you trust, and more important, has the experience. Vet them. You have every right to vet that person. If you're to give them money, vet them. Ask what deals they've done. If they're your customer and they've done several deals with you, then you have some experience there.
Steve Olson (46:18.459)
Yeah.
Mike Ugarte (46:29.416)
But if you've only done one or two, that's not enough. You want to see a track record.
Steve Olson (46:35.332)
Yeah, because that also sets the stage for like your stress because if you learn that somebody who's like crazy stressed all the time, then you're like, this business is and it doesn't have to be that stressful. It's not the easiest thing in the world, but this is not something we should lose sleep over ever.
Mike Ugarte (46:44.69)
Yeah. No.
Mike Ugarte (46:51.742)
No, and even though there are going to be times that you do, those are exceptions and that does, I mean, it happens in our real estate practice, right? This business overall can be a really fun and exciting, rewarding business, but there are days that we have headaches and there are days that we have bad days and there are days that we're like, why am I doing this? But for the most part, it should be fun. And real estate investing is the same thing. And the other thing is,
Steve Olson (46:55.654)
That's right.
Steve Olson (47:11.472)
That's the truth.
Steve Olson (47:17.989)
Mm-hmm.
Mike Ugarte (47:21.406)
is I want to tell whoever's listening as an agent, most agents who've, even if you've never done an investment deal, if you sold one or two properties in your career, you have 80 % of the knowledge that you need to do an investment deal. You already have it, you know? And the flip, you know, is it's really, it's a small road. It's just, you know,
Steve Olson (47:39.654)
That's right. That's right.
Mike Ugarte (47:51.066)
learning a little bit different, how to evaluate properties a little bit different, how to analyze properties. That's probably the biggest gap which a lot of people put. That's simple math. At the other day, it's simple math. And in doing it, we do fix and flips, and then we have a calculator that we do our analysis. And then I have a
Steve Olson (48:15.174)
Mm-hmm.
Mike Ugarte (48:16.478)
bigger spreadsheet with like 12 different tabs underneath for my multifamilies. But at the end of the day, if you look at the dashboard for both, it's almost the same thing. One just has more information because there's like 100 units in rent versus one property that, you know, so we still got to look at the same numbers, right? We've got to look at all the costs. We've got to look at all, you know, if there's going to be a mortgage, you know, how much that's going to cost us.
Steve Olson (48:22.064)
Mm-hmm.
Mike Ugarte (48:45.598)
carrying costs, all of that. And is it going to be work? How much work? I mean, it's the same thing, just more zeros on one side than there are on the other. But at its basic core, it's the same math. And it's a little bit of math.
Steve Olson (49:03.268)
You said, so last thing before we cut everybody loose, because I know they're going to ask. You mentioned earlier in the podcast that very common way that you guys have invested in the past or you've seen other people invest is that you will go get hard money, whatever percentage that is, and then you'll look to either raise or get somebody to cover the gap money, right? so I can give this stick so everybody can understand this. Do you consider gap money, the closing costs and the down payment and the rehab or what does gap money cover and what does it not cover?
Mike Ugarte (49:33.598)
Well, for us, it covers everything that's not the down payment. Actually, no, it's everything. No, no, it is a down payment. It's everything. basically, the gap money in totality is not the... You get your mortgage. You have a hard money lender gives you the mortgage. Everything else is gap money.
Steve Olson (49:44.752)
That is not the down payment? Yeah.
Steve Olson (50:01.285)
including rehab.
Mike Ugarte (50:02.768)
including rehab because it's, it's, it's now, now it's all gap money. But the question is how much of that is coming from me and how much of that is coming from other people. Right. So who's covering, who's going to cover and what percentage are going to cover the gap because it's gap. It's still gap. That's the difference between, between what the bank is giving me and then what I need to get this project through to close. Right. And gap money is rehab costs, closing costs.
Steve Olson (50:04.228)
And then, so what would...
Steve Olson (50:15.078)
That's right.
Steve Olson (50:21.478)
Yeah, that's right.
Mike Ugarte (50:32.798)
points, interest, commissions to be paid on the sale, closing costs to be paid on the sale, carrying costs, like literally everything, right? That's not covered by the, so let's say you're getting a hard money loan and it's 75, 25, so the bank's gonna be 25%, all the rest has got money that you need to close.
Steve Olson (50:57.307)
And then.
Let's say that we're buying a $500,000 property and we get hard money for a $400,000, okay? So we have $100,000 down payment, another $10,000 in closing costs. And let's say holding costs, commission, rehab, everything is another $150,000. So now we've got to go out there and raise somewhere between $260,000 and $300,000 for that deal. Is that typically raised on a percentage of profit at the end? Does it come with an interest rate? Are there points? How do you typically raise that money?
Mike Ugarte (51:24.99)
Well, you could do it a lot of different ways. there's flexibility. So you can do gap money. I've seen it done where there is a, it's like a loan where you give a percentage. You know, if you get, so let's say I need $200,000 and I come to you, Steve, I need $200,000. You're going to, and that's the gap you're going to cover. I'll pay, you know, I'll give you 10 % interest, right? For that money or 12%, whatever it is. And then you're a, short term, six month loan. And you, you know,
Steve Olson (51:27.814)
So there's a lot of flexibility.
Mike Ugarte (51:53.854)
You'd be like, yeah, great, sure, I'll do it. Or I could say, Steve, let's joint venture on this. And I'll give you a percentage of the rate of what we need. So if that $200,000 represents 25 or 35 % or whatever percentage of the deal of what we need, then you'll get that on the exit. So you get a percentage of profit at the end.
Then you could also, I've seen people do a combination. have, I know a friend of mine who's who the way he does it is for when he has investor partners, he said he'll pay 10 % interest annualized on that loan. And he gives, and then he'll give the, the, the investor 10 % on the out on the exit. So there's a lot of flexibility on this and the percentages is something that you negotiate. And you did, you know, really as the deal owner,
Steve Olson (52:48.933)
Mm-hmm.
Mike Ugarte (52:53.806)
You determine what the rules of the game are going to be for somebody to invest with you. Obviously you want to make it as attractive as possible. You know, you don't want to say, Hey, I'll give you 5 % because I'm, you know, I can go to the bank and put it and get 5 % and, and, know, CD and let it sit there for six months. You know, there's more risks. So you're going to give me more money, but you do that and you do the numbers and, you figure out what makes sense for the deal.
Steve Olson (53:00.847)
Mm-hmm.
Steve Olson (53:05.52)
That's right.
Mike Ugarte (53:17.608)
for you to make this deal happen for everybody. It's literally a win, win, win. It's a win for me, it's a win for the investor, and it's a win for the deal.
Steve Olson (53:27.302)
That's right. Okay, so if I'm hearing you right, money or no money, credit or no credit, cash or no cash, partner with your first deal, learn the rope, and just keep doing it until you feel like you can take the next step, right?
Mike Ugarte (53:40.584)
Right, and start small. you know, do small steps. Again, partnering with somebody who knows what they're doing is a small bite. My dad in Spanish, he said, I'll translate it because it's easy to translate. He said this saying that was, you know, he's told me all the time, how does an ant eat an elephant? Right, and it's one bite at a time. So it's little teeny little bites. and just start, you know, start small and then leverage, you know, go to...
Steve Olson (53:59.814)
That's right.
That's right.
Mike Ugarte (54:09.944)
A great resource is bigger pockets. Walter Arthur, go learn, figure out and go to real estate investor associations, find meetups, they're all over on the app Meetup. Just go and sit down and just, don't do anything for three months. Just listen, just listen. You'll get so much information. And that's how it started with me.
Steve Olson (54:23.354)
Mm-hmm. Mm-hmm.
Steve Olson (54:29.174)
Just listen. Just listen. Yeah.
Mike Ugarte (54:36.51)
I started going to the local real estate investment associates, the RIAs, here locally, and I just started showing up because there was something else interesting. then that's how I got my first deal. And the same thing that happened to you. had, you know, one of those investors became a customer of mine and we went to closing and he says, dude, I don't get it. And he goes, look at, look at your, look at the, back then we called it a HUD, look at the HUD, right? And he goes, look at how much money you made. Look how much money I made. Which side do you want to be on? And I was like,
Steve Olson (54:51.908)
Mm-hmm.
Steve Olson (54:56.347)
Yeah.
Steve Olson (55:00.048)
Hmm.
Steve Olson (55:05.67)
That's right. That's right.
Mike Ugarte (55:06.886)
I was like, OK, I get it. It still took me a couple of years to actually take action. But that was a hard lesson. At the time, I was a newer agent. I thought I was setting the world on fire because I was a top producer. And then when he does that, that was a gut check. And I was like, whoa. mean, honestly, I got mad at him.
Steve Olson (55:09.968)
so much.
Steve Olson (55:33.796)
Yeah.
Mike Ugarte (55:34.844)
You know, I didn't tell him, but I walked away pissed. Who the heck does this guy think he is? But then I was like, you know, after a while, was like, he has a point. He's right. You know, I'm I'm making this the smaller amount.
Steve Olson (55:39.094)
Yeah, he's right. Yeah, that's right.
Steve Olson (55:48.004)
Yeah, I mean, like, we could talk about this till the cows come up. So start small, partner out the deal, go from there. All right, any parting words before we send everybody off into the general ether?
Mike Ugarte (56:00.42)
If you're interested in investing, if you've ever had the thought of investing, if you got into real estate because you wanted to invest and the time to do it is now. Like start learning, start taking those small steps. It doesn't have to happen overnight. I bought my first apartment complex three years ago and I had been thinking about it, I would say back in...
Steve Olson (56:12.006)
That's right.
Mike Ugarte (56:28.542)
The first time I ever heard about it was in 2013, right? No, 2008, 2009. And at that time I was like, man, if I could ever buy an apartment complex and nothing happened until three years ago. And three years ago, we ended up buying our first multifamily, which is 126 units in Georgia. That was the first one. By the way, that was a $23 million asset.
Steve Olson (56:48.934)
crazy.
Mike Ugarte (56:56.026)
I do not have $23 million anywhere, even after. Okay, so that's the ultimate leveraging of other people's money, right? And it's partnerships. I'm on the general partner side, but there are several partners on that side to make that deal happen. And I happen to be one of those. And then we have our limited partners, which there's a lot of those who brought money in. So there's a lot of people that are partnered up to be able to...
Steve Olson (56:56.561)
Wow. Yeah. I don't either.
Steve Olson (57:13.584)
Mm-hmm.
Mike Ugarte (57:24.126)
purchase a $23 million apartment complex. And guess what? We all own it. It's our asset. I get the depreciation for it. So I get tax benefits. We get the dividends from the rent and we're about to sell that property. We've already have inquiries on selling the property. And when that sells, that's where you make the majority of your money. But it's there. It's there for you. If I can do it.
Steve Olson (57:29.254)
Mm-hmm. Mm-hmm.
Mike Ugarte (57:52.99)
and you hear this all the time, right? If I can do it, you can do it. But literally, it's true. I don't have a superpower that... My dad's 91 now, retired accountant, but he wasn't a gajillionaire, right? We were total middle class. So, yeah, if you want to do it, take the first step and take it now.
Steve Olson (58:07.462)
Mm-hmm.
Steve Olson (58:18.15)
Awesome, Mike. Thank you so much for joining. Any questions? Let us know. See you guys on the next one.
Welcome again to another episode of the Real Estate Operator. My name is Steve Olson. Thank you so much for joining us. Today I have my good friend and growth director, partner in business, friend in scaling this amazing team that we call Stoly Network, Mike Ugarte. Let me give you a little bit of background about Mike before we get into this. Number one, he's been in the business 20 years, longer than I've been alive, which is amazing. Number two, he's got a long, crazy history of scaling multiple different businesses.
One of the things that I'm super excited about for Mike to give you all this over time is that he grew an office and for those of you guys that have ever done this before, you know this is obscenely hard. From no agents, zero to 150. Mike, how long did that take? Over how much time? That's crazy. That's zero to 150, that is crazy. Next thing I wrote down, extensive experience in multifamily investing and fix and flip, which I know you guys all want to learn about. We're gonna talk a lot about that today.
Mike Ugarte (00:46.334)
to be about four years.
Steve Olson (01:00.979)
He is a teacher, a coach and heart and he believes that winning through others is the name of the game and his in breast his
Steve Olson (01:10.711)
and his brand Invest Well Live Well is built on the idea that real estate can be a path to both financial success and personal fulfillment. Mike, thank you so much for joining me.
Mike Ugarte (01:21.288)
Glad to be here.
Steve Olson (01:22.907)
Okay, so I could talk about real estate investing and you've done a lot more of this than I have, which I'm super excited to learn from you just being here on this video with you. I think that one of the biggest opportunities for real estate agents is that we're taught by it because we go to all these different conferences and we talk to all these gurus, we have all these ideas and all these people that tell us, if you want more money, do more deals.
And then people say, well, I don't know that I want to do more deals, but I still want more money. Okay, well, if you want more money and you don't want to do more deals, then just grow a team. Well, then they grow a team and they're like, well, I don't really want to be a manager. And I don't want to, I don't want to be crude in this whole like coaching thing and profit and loss and profit margin and net profit and all that stuff. It's like way too overwhelming for me. So what happens is they kick their team over and then they go back into general production and they say things like, well, I just need to up my average sales price or maybe.
If I really do wanna do this, I do need to sell more homes. The number one thing, Mike, and we're gonna talk about this today, is that I don't think enough agents are their best client. And what I mean by that is there's so much money left on the table with real estate agents that don't understand how to invest in real estate because I think most of them don't know how to get started. Number two, they believe it takes a lot more money than they think it does. And number three, they're not within a certain network that kind of rewards that type of behavior. So as we get into this, will you do me a favor?
Will you tell me really quick, like just high level, what was your first flip? Like your first journey into investing in real estate and was it a success, was it a failure, how did it go?
Mike Ugarte (02:59.242)
It was a failure and it was a flip and we didn't know what we were doing. We got emotional on the whole process, which is one of the big mistakes you make. We fell in love with the property and we fell in love with the potential. We bought everything on potential. So we ended up losing some money on it. I say we broke even.
I did it with my brother who's a general contractor. He's still this day says we lost money because and I said, no, we failed to make money, but we kind of broke even. you know, well, we did lose some money because there was technically closing costs and all that, but we didn't take a bath. And so we learned from that. And, know, and the whole process is really it's a learning process and you're going to make mistakes. Every every investor, every, you know, now that I'm in this, every investor
has horror stories or war stories is what we call them, right? I go to so many investment communities and meetups and this is one of the first questions, tell me about when, and it always comes to that, man, I did this one deal or I had terrible partners or this happened or that happened. So we're always sharing the war stories and you learn from them.
Steve Olson (04:00.035)
Yeah. Yeah.
Steve Olson (04:21.915)
You know, somebody told me in the investment space that you either learn or you earn in flipping. once they told that to, I was like, okay, that totally makes sense. Cause like you, I remember the very first home we flipped. We did make money on it. It was like, it was like six grand. was not anything crazy, but I will tell you, it almost cost me like three of my relationships with my closest friends. It was, it was a battle to the freaking end. It was a pain in the butt to sell. And we didn't talk about this before in our prep call.
But I think I felt, think I was the same as you. I over romanticized about the property. I told everybody about it. I over, 100 % I will agree that I over invested in it. I put materials in it that should not have been in that home because again, I just, hey, wouldn't it be great if we bought this $150,000 home and put a hundred grand into it and tried to get 350? And it did work out, although everybody told me it wasn't going to. What I realized is during the showing feedback and everything that we were doing, people are like,
Hey, it's great that you put a KitchenAid, what is KitchenAid's prosumer line called? I can't think of off top of my head, but it was up there like, not necessarily like with a wolf or a Viking, but it was their premium line. And everybody thought it was great, but I realized really quick, like it's cool, but it's not cool enough to where they're paying me a premium or they wanna pay, you So I learned that lesson really quick. Real estate investing I think is the great hidden wealth.
key, unlocker, however you wanna say it, in real estate agents' business. Mike, do you hear a lot in your circles, like, is there still a stigma of like, if you're a real estate investor, you shouldn't have a real estate license, do you still hear that a lot?
Mike Ugarte (06:03.752)
Yeah, I hear all the time. I hear a lot of investors say, you I don't want to have a license. I don't need a license. And I think it's everybody looking at it the wrong way because, you know, in doing both, I realized that as a real estate agent, you have so many more advantages than you do as just an investor. And you look at the investors, every investor who tells you, I don't want to have a license.
What was the first thing they're looking for? They're looking for that good agent that's gonna give them deal flow, right? So they're always, much as they, it's a love hate relationship, as much as they say they don't like us, they need us, they want us, they're always looking for us. And if you're a good agent that understands investments and how to work with investors, mean, that's a niche that pays over and over and over again compared to
Steve Olson (06:36.198)
That's right.
Mike Ugarte (06:58.93)
you know, our regular customers who move every, you know, seven to 11 years now, it's the latest stats, was an investor, a good investor is going to buy three to five homes a year.
Steve Olson (07:08.839)
That's right. That's right. know, my biggest investor I worked with, this was back when I was in California, was originally in single family. The market was on a downturn in Phoenix. It was really hard to get single family homes because everything was multiple offer, selling over, and it just became too exhausting. So I said, hey, we should go do multi-family. I don't know a whole lot about it. I've sold a lot of four and five and six and 10 units, but if you want to buy like a 500 unit or whatever, like I'm not your guy, that's not my thing.
We should look into it because I think there's going to be a better ROI. So we go through this for two years. He ends up buying a ton of real estate. We get a property management company. I don't do property management. And he gets it all leased up. Everything's going good. And then one day I get a call and he goes, sell the whole thing. And I said, what? He goes, yeah, sell the whole thing. I don't want to do this anymore. And I'm like, OK, is it not profitable? He goes, no. Profit's fine. He goes, it's a little bit less than I thought it was going to be, a little bit more of a headache than I thought it was going to be. I just don't want to do it anymore. I said, OK, well, great news. Like, you're way up. So that's good.
So we go to all, mean, we're talking dozens and dozens of properties. So on the surface, I'm like, whoa, I just got all these listings. And of course you can't offload them all at the same time. You gotta do it in phases, right? So I sold the whole thing. Well, fast forward a little while later, he's in town. We're at this, I don't even think he's caught a happy hour, but he was meeting some people. was there and he introduced me as like, this is my idiot real estate agent, dumbest guy you'll ever meet. And I'm like,
What a weird way to introduce me. So after a couple of beers or whatever, I said, hey, why did you say that earlier? And he goes, you're the smartest real estate guy I've ever worked with. And I said, well then why did you introduce me like an idiot? He goes, because I don't understand why you're dumb enough to rent me on these deals and you should be me. And I'm like, I totally didn't get the context of that conversation. And he was right because here I am, this was probably a total buy and sell.
Maybe 50 transactions give or take that I over three years that I had the ability to do with him. And I don't know what my total commission was on the deal, but assuming I made, I don't know, 15 grand on each one, right? I it was a lot of money. Don't get me wrong. But the amount of money that he made was like way more than that, you And I'll never forget that conversation. He said, look, the, the instant that you can turn into an owner and not a practitioner is when the wealth will set, will step in. He goes, however you view it.
Mike Ugarte (09:17.982)
Mm-hmm.
Steve Olson (09:30.02)
And he had a big exit in a lawn care company, I think is what it was. And that will always stick to me is that leverage and ownership and any asset that you can get, the game in life is just to acquire as much of it in the smartest way possible with the least amount of risk and downside as possible. Not with the biggest spreads, not with the highest NOI or the biggest cap rate or anything like that. Leverage yourself to where if we go through a downturn, you're not gonna freak out. And he goes, and on the other side, maybe when we go through a crazy upturn,
You may not be making as much as everybody else, but you're never going to lose your downside. I'm unfortunately not in touch with him anymore. I probably should reach out after this podcast. But he had so many, whether he knew it or not, he had so many little nuggets that I learned along that journey with him. And it's like, once you put all those nuggets together, you realize like, well, duh, this guy's loaded or duh, guy is super wealthy because he thinks about the world differently than everybody else is. I think there's a lot of, I'd like your insights on this, Mike.
I think most agents go into a listing presentation and they walk through the home and it's like it's not up to shape right or it needs there's like unpermitted You know work into it or it needs, you know significant rehab or the pools cracked or there's a crack in the Trust or the foundation, you know is off offset or whatnot and most agents are like This is gonna be a really hard listing to take or I've got to sell this at a discount or I don't want to work with investors and it just kind of stops there they look at it as a
lower price deal. Whereas somebody like you can walk into that presentation or they can walk into that pitch and they can say, look, I really have three options. We fix it up and you sell it for the most amount of money possible. Number two, you sell it as is and we go find an investor. Or number three, I buy it from you, right? Like those are really are only three options. If you think about it from that perspective, that real estate agent really has every option anybody could really want. You agree or disagree with that.
Mike Ugarte (11:28.734)
100%. When I started investing, especially in the fix and flips, it changed my listing presentation completely because I don't go into listing presentation anymore looking to find them the highest price in today's market. My job is to get you the best price, the best offer with the best terms. Yeah, I want to do that. But what I go in looking for is what are your options? And I give them options.
Steve Olson (11:50.277)
Mm-hmm.
Mike Ugarte (11:58.046)
Every customer will, you know, when I do a, when I talk to them after and I asked them, Hey, why did you choose me? You know, over the other agents you interviewed or what did you like best about the presentation? He you gave me, you're the only one that gave me options. And, and, and that's what people want. They want options and, not everything work. You know, we as agents, we have that one track mentality where we want to fit a square peg in a round hole every single time. Right. Because that's what we're taught.
Steve Olson (12:12.807)
That's right.
Mike Ugarte (12:26.79)
It has to be this way. It has to be this way. And it isn't, you know, our customers want, they want advice from us. They want options. They want to know what they can do. And for some people, you know, some people want the money, right? So they want the highest price. And then other people want convenience. They'll trade money for convenience. You know, I'll give you a personal example. And it isn't an investment thing because there's a lot of that. But when I bought my current home,
Steve Olson (12:27.271)
That's right. That's right.
Mike Ugarte (12:56.446)
This seller was off market. His neighbor sold it and at the time I was a manager, one of my agents was a manager and then she came to this listing presentation and he says, I don't want to have to do what my neighbor does. I don't want to have to fix my house. I don't have to put it on the market. Is there any way that we can sell this off market? Well, I knew already the neighborhood, I knew I wanted the house. So I had told her, all I need you to do is make sure that the house isn't falling apart. If it isn't,
Steve Olson (13:12.62)
Mm-hmm. Mm-hmm.
Mike Ugarte (13:26.217)
here's a contract signed by me and my wife, tell them to just fill in the price, right? And I knew, I wasn't worried because I knew she had done a CMA and she was gonna buy it on the price, but tell them to just put in his price. so she came with, it wasn't an investment option, but she came with an option and said, my boss, know, offer on the house next door, he didn't get it. He lost it because there was multiple offers on the house, my neighbor's house, and he really wants to move in neighborhood, here's an offer.
you don't have to put it on the market. And that got her the listing, but it got the deal done. This house never went on the market. If it did, I probably wouldn't be able to buy it because it's on a big lake and everybody wanted to move into it. But, you know, it's just having an option. that's outside of the investment world. And the investment side, you know, I went and looked at a property two weeks ago and that somebody called me. It was another agent, sent me referral and said, hey, it's...
My customer inherited the house. Can you go look at it? Would you let me know what you can do with it? Walked in the house and there's spider webs everywhere. It's run down the roof. And then, you know, I went with my partner, with two of my partners and we came back and we put an offer. Like, we'll buy it. You know, we'll buy the house. We'll fix it. you know, so we're still working on that one.
But yeah, those are the options that we have. And we told him flat out, hey, if he wants to sell it at the open market, I'll be more than happy to listen for him, but it's in really bad condition. He's going to have to do a lot of repairs, clean up and all this other stuff. I can get an investor, an investor will take it off his hands. And if he's going to do that, then I'm willing, if he wants to sell to an investor, I'll buy it. And here's our offer. And let me know what he says. So he doesn't have to do any cleanup.
or they don't have to do any cleanup.
Steve Olson (15:24.095)
I'm trying to do the math right now so I can give you an accurate representation of like what you just triggered, know, me thinking of telling you that story. But I have a, wouldn't call him a friend, somewhere in between an acquaintance and a friend. I don't talk to him that much, but we are friendly. And there was a home for sale here in Carlsbad and it hadn't sold, you know, was on the market for I think 45 days, which in our market is a long time. Now it's normal, but back then that was an abnormally long time. And the price they were asking for was fairly high. All of a this thing closed.
and I look at the closing price and it's sold for over list. And I'm like, that's kind of weird that many days and it's sold for that much over list. Well, fast forward X amount of time later, I find out this guy knows the one who bought it. And I'm like, hey, like you're in the real estate space too. why did you overpay when this home was on the market? And he goes, we did a seller finance deal. And I said, okay, well, what does that look like? And he goes, basically what I said is I know the prices are gonna go up. They're always gonna go up here because of the water. And he goes, so I offered him 10 % over list.
and prepayment of two years of interest free payments, but that price was not good for 24 months. And I said, okay, you know, mortgage payment is where it goes $8,900. So I wrote him a check for 215,000. That was our entire down payment. The entire finance of the home was at 100%. And we said that the price that we will buy it is a two year price from now at, you know, 10 % over whatever it was, I think it was like 2.15 million or something like that.
You would think when you hear those deals, you're like, nobody would take that. The guy was freaking ecstatic. He was ecstatic. The home was owned outright. There was no mortgage on it. He was collecting interest payments. He got two years ahead of time so that there was no like, you know, funny business and stuff getting not paid. Now, he could have said, my mortgage payment is gonna be, I'm making this up, right? My mortgage payment's nine grand. I'm gonna put $215,000 down and his first payment is due on day one or day 31, right? But instead he said, hey, we're gonna give,
Mike Ugarte (17:16.936)
Right.
Steve Olson (17:20.481)
No money down. I'm gonna give you a 10 % premium for that and I'm gonna prepay two years worth of mortgage payments. The funny thing is, Mike, it's all the same numbers. It's just where you're willing to put that line item on the sheet, right? And so I'm talking to him about this and he goes, there are so many people that would do this. Why you would even get a normal mortgage? And he goes, now if you're wanting to stay somewhere long term,
Mike Ugarte (17:35.857)
Exactly.
Steve Olson (17:47.871)
and you're not gonna leave, then getting a normal mortgage or putting a bunch down, that makes sense, right? But he goes, I don't know about you, we've never been in one house longer than six years. So for me to part ways with 500 grand and not have that cover any expenses, just a down payment on a home, he goes, that's a lot of capital, whereas sure, I put $215,000 down, but that covered the next two years of mortgage payments. So I'm like, look, mathematically, you're on a totally different level than I am, right? And that was a really good question.
Here's what I wanted to get to on this podcast. There are agents listening or watching this right now and they've been in the market for a year, one year, five years, 10 years, whatever. And they know that they need to be investing in real estate but the average agent is thinking I either don't have the credit, I don't have a ton of money, I'm working on buying my own house right now. I know there's this whole like, you know, I've been, 44, half my adult life I've owned, half my adult life I've rented. And I gotta tell you, like,
There are just as many reasons to rent as there are to own, depending on what market you live in and all of that. Assuming you have the right owner and it's not a fly, because there are a lot of rentals out there that people are renting just because they don't want to sell. I don't know that I would recommend renting those properties, because every time that lease renewals up, you never know whether they're going to say get out. That's stressful. But if you're with an owner that's like, is an investment property, it's nice, it's not like, I don't know how rentals are out by you. In California, it's 50-50, meaning,
Mike Ugarte (19:04.307)
Right.
Steve Olson (19:13.447)
50 % of the rental properties, they haven't been upgraded in 15 years, everything barely works. It's in okay condition. And then you have the other 50 that's like really, really nice, which does command a premium, right? In Phoenix, it seemed like all rentals, nobody cares about. They're just not in good condition. It's a weird market over there. You're a real estate agent. You wanna do your first deal.
You think the only way that you can do a deal is to go get a hard money loan, put down 20%, pay 12 % interest, two points down, fund the whole rehab and then hope it works out. But I don't think that's the only way that you can get into it. let me ask you this question. We can kind of riff on this for a minute. Let's assume that I'm a real estate agent. I have decent deal flow. I'm doing two to three deals a month, maybe four. I have a little bit of money in the bank, but I'm kind of nervous about risking my own capital. How do I get into my first investment deal? And more importantly,
to use our examples as examples. How do I make sure that the first time that I do this, I learn a lot so it can set me up for success? Like what would you recommend to that agent?
Mike Ugarte (20:17.054)
So I would ask you, Steve, do you have a customer who's an investor that trusts you and you like the way they work?
Steve Olson (20:26.884)
Yeah, 100%.
Mike Ugarte (20:28.702)
Okay, one of things I would tell you is approach your investor since you already have trust and say, hey, on your next deal, the next deal that I find you, if I give you a portion of my commission, could I get in on the deal and then have skin in the game and learn from you? And also when you sell it on the profit side, I get a percentage of it.
Steve Olson (20:54.065)
So because I know people are gonna say this, when you say when I give you a portion of my commission, what Mike is not saying is let the deal close, you get your commission check and you go give him 3000. I think what you are saying is when the deal comes to close, you're gonna allocate a portion of that as part of the down payment of the acquisition costs, right? And you're gonna basically treat it like a mini syndication deal, kind of, right?
Mike Ugarte (21:11.4)
Right, right.
Mike Ugarte (21:16.466)
Right, right. if you don't want to, you if you have savings and you want to do it with savings instead, mean, all it takes, lot of people don't realize, it just takes a lot of money. Sometimes it could be just a down payment, right? Or the deposit, not the down payment, the deposit or the escrow deposit, you know, or down payment. You know, they're probably going to get a hard money loan or covering some expenses, closing costs or whatever. It's, you know, you're going to get, well, you put in, you're going to get a
Steve Olson (21:28.347)
Yeah.
That's right.
Mike Ugarte (21:44.286)
proportional. So the investor doesn't care. investor, you know, from the investor's side, he's going to be like, cool, I have a partner that's less money. That's more money I can leverage. That's, you know, that I can keep in, you know, for me and for another project. And whatever that amount is. I mean, and then you're in the deal and you're learning. Now you have skin in the game and then whatever, you just learn from what they do. That's an easy, quick way to get in. It's partner with
Steve Olson (21:47.43)
That's right.
Mike Ugarte (22:12.486)
with one of your customers. You know, I've done it.
Steve Olson (22:16.858)
You know that we had.
Let me ask you this. So if the if commission on a deal is like 12,000 bucks, right? And I say, Hey, I'm gonna give you $6,000. What you're saying is that whatever that $6,000 equates to in regards to percentage of risk is what you're going to get out of it. So if that means four and a half percent, that means four and a half percent of the upside you're going to collect, right? So nobody should expect like, you know, here's a $300,000 home, I'm going to put in six grand and we're 50 50 partners, it's not going to work that way, right? We're like, but a lot of people think they do think that way.
Mike Ugarte (22:45.03)
No.
Steve Olson (22:48.421)
And you've had partners, like maybe you haven't, I have, where like, hey, yeah, we'll throw in 200 grand to a deal. And you realize, they've never done this before. And they're calling you every single day. Hey, where's my money? Where's my money? Where's my money? Where's my money? And you're like, look, I wish I had 200 grand in cash just to give you right now so that you never call me again, right? Those aren't a specific type of people. That's just inexperience. That's all that is, right? And then maybe there's nerves.
Mike Ugarte (22:59.586)
huh. huh.
Steve Olson (23:16.903)
We were looking for a hard money partner back in 2007, maybe eight or nine right when the market was starting to downturn in Phoenix. And we had done a few flips, had some pretty good success on those, you know, lower end $120,000 acquisition, maybe put 40 into it. We're selling for 205 210, you know, enough to keep the money moving, right? Nothing to like go buy a Lamborghini with or anything. And I'll never forget somebody introduced us to this guy.
who was doing condo conversions, apartments to condo conversions in Phoenix, Arizona. Scrappy guy, was not very well presented. His office was one of the apartments, know, in like the back room, this crappy desk in the corner. So he invites my business partner and I in, and then we sit down. It's super intimidating, because it was like, the one that he was using his office was half remod, it was just really shouty. But I noticed, I can't remember what kind of watch he was wearing. It wasn't a Rolex, but I knew it was a really nice one. I'm like, okay, so this guy's probably,
you know, okay, you he just doesn't really care about the some of the showy things. So we he all he wanted us to do is they bring me the last 10 deals. And I said, Well, we haven't done 10. He goes, Okay, well, however many you've done, bring those to me. And I'm like, What do you want? He goes, Just give me like, bank statements or ledgers or you guys, I just want to see your thought process. Okay, cool. That'll be you know, that was good. Because I never put that stuff together before. So I think we had six or seven, we put those together, we go meet with them. His name was Scott. We sit down. And Scott goes, Okay, you guys hungry?
And Aaron goes, yeah, we're hungry. He goes, cool, why don't you guys go get food? Let me look at this, come back in 20 minutes. And I'm like, well, okay, that's kind of weird. So we left, we got food, we came back. he looks, he goes, okay, he goes, the numbers are a little on the light side. And he goes, but I think there's potential here. And he goes, so how many homes can you guys buy in a given month? And I said, well, we don't, you that's why we're here. He goes, pretend money is no option. And I said, legitimately, I think we could probably acquire maybe.
Mike Ugarte (24:47.772)
Hahaha
Steve Olson (25:09.196)
seven or eight homes based on current marketing in our existing network right now. And he goes average sales price for home on my probably 240 is where we're going to end up. And he goes, okay, because that's only a couple million bucks. And I said, Yeah, he goes, if you had more, can you do more? And I said, Yeah, and he goes, give me a stretch number. I'm like, I don't know, 5 million a month. He goes, cool, I'll give you 5 million a month, just like that. And he goes, but here's a catch, we're going to be 5050 on title, there will be no points. And I'm going to take the first 40 % of every deal that comes in.
And he goes, as long as you're okay with that, I will give you unlimited money. We can do this. If you can do this 50 times a month, we'll do it 50 times a month. And I'm thinking like, well, we were kind of hoping 9%, blah, blah, blah. He's like, no, no, no, listen, no points up front, no fees, no questions asked. You keep doing this. I take the first 40%, you guys make the other 60, and we do this until this market doesn't hold. And I asked him, like, you just met us an hour and a half ago. And he goes, yeah. And I said,
You're just willing to write us a check. goes, well, in fairness, I'm not going to write you a check where I'm going to deliver the money at closing. So I will have title, you know, or I think he wanted all title actually, if I'm not mistaken. And he goes, look, I'll be honest with you. I hope you fail. I hope you buy all these and I hope you run out of money because I need more properties and this is the easiest way that I can acquire them. So I hope you get every single one. I hope you screw every single one up and I hope you give all of them to me and I'll make all the money. And he goes, if you guys are who you say you are,
and you do a great job, I make money on that as well. And he goes, hope you understand that I will physically not fund the deal. I will not fund crappy deals. So yes, I'm gonna underwrite him. Yes, I'm gonna look at him. And he goes, but, and again, that was another learning lesson of like, that was almost now, I can't remember, I'd have to ask my old partner, Aaron. I don't know if he was gonna fund the rehab or not. That part I can't remember. I think he may have put that on us, but I don't remember that part. But here we are, it was like our fifth meeting that we've ever taken.
And this guy was literally willing to write a blank check because we we had put in the work on the other ones. Now, were we going to make the percentage of profit that we probably could have make if we had our own cash? No, but he, he bought a speed. And again, I don't even know how many deals we ended up doing with Scott. I'd have to, I'd have to look at that up again. We did do a few. but the thing that I learned from that conversation and maybe you've, you've seen the scene that they're seeing the same. I'd like to hear your input. is unlimited.
Steve Olson (27:31.247)
amount of capital out there. Like unlimited amount of capital. Everybody needs people that they trust. Everybody needs deal flow. The challenge is not the money. The challenge is deal flow. So if you're a real estate agent and you have deal flow, you are sitting on a freaking gold mine right now. Your aunt, who you've never spoken to ever before, if you ask her a question, if I gave you a proven way to invest in real estate with almost no risk and the ability to earn X amount of percent on your money every year,
Would there be any reason you wouldn't at least have a conversation? 100 % of people will tell you, I think I should be investing in real estate. I don't know where, I don't know how, and I don't know who I should trust. Thoughts on that.
Mike Ugarte (28:12.306)
Yeah. No, that's, it's a hundred percent true. We have, we're doing deals now where we're, we basically, I mean, we're working with investors. It's very, it, we're doing hard money. And then we have investors who give us money for the difference that, know, they call it the gap money, right? The gap is the difference between what you're getting on the loan and then what you have to come up to, to finish the project. So we have investors that are investing with us.
And the big thing for us is we were doing it on our own and it's knowing how to ask the right question. mean, long, long time ago when I was coaching with you, one of the first things you told me is you need to, if you want to be a better agent, you got to ask better questions. And it's just not being afraid to ask the question. And a lot of us, and it is because I had it in the beginning.
you're afraid because you're like, my God, I'm going to screw it up. What if I screw it up? What, what this with that? And what you realize is, you know, there's a lot of people that want to do deals. So I'll give you, I'll give you an example on a big scale, right? three years ago, my partners and I decided we wanted to buy multifamily, like big multifamily syndication. So we, we under wrote
Steve Olson (29:25.797)
Mm-hmm.
Steve Olson (29:29.21)
To be clear, I'm going to cut you off. You were the syndicate or you wanted to buy into a syndication?
Mike Ugarte (29:33.662)
No, we were the operators, we're the general partners, the syndicate. So we were doing the whole thing. And so we started underwriting. We must have underwritten over a thousand, not a thousand, but a hundred. At the time, I remember it was about 50 properties in about four months, right? And we couldn't pencil in. And then I went to an event and I talked to, and I was talking to an investor. I met an investor there and I started talking to him and he said, how many LOIs have you written? I go, none, cause they don't pencil in. He goes,
Steve Olson (29:36.336)
Cool. Yep.
Steve Olson (29:50.842)
Wow.
Mike Ugarte (30:03.282)
You need to write more LOIs. And he goes, even if it doesn't matter, just write him because that's how you build your relationship with the other agent. And you'd explain to them why your offers is lower than what they want. And they'll understand that, but you need to keep doing that. So keep doing what you're doing. You're on track. And he's the first one that told me you're at 50, you're halfway there. You need a hundred before you find your first deal. But you need to write more LOIs. So we kept, that was in March.
Steve Olson (30:25.158)
That's crazy.
Mike Ugarte (30:31.288)
We started in December, so we had done 50 by then and we kept doing it. We kept underwriting, underwriting, underwriting. And then finally we found a deal that we thought was going to work and it didn't. It was a piece of crap deal. But anyways, for us, was the greatest thing out there. And I took it to that guy that I had met because I got his information. He said, hey, we exchange information. We spoke for an hour, so we exchanged information. So I took it to him and said,
Steve Olson (30:52.251)
Mm-hmm.
Mike Ugarte (30:59.748)
I found a deal, can you be my key principal on this? Can you be this? Are you going to be the sponsor? And we went back and forth. looked at it and he flat out told us, he says, no, it's a shitty deal. It's a crappy deal. But then he turned the table and he goes, why do want your first deal to be a shitty deal? You guys can make this happen. It's a crappy deal. You're going to make better. You're going to take a shitty deal and make it into a crappy deal. And that's going to be the one you're going to sell to your first investors. Why don't you do a class A deal? And I said,
And I told him, I said, I would love to, but if I can't sell you on a shitty deal, how am going to get a class A deal? And he goes, well, I got one. Why don't you guys partner with us and general partner with us? Because I like the way you guys are working. know, we have been in touch. And he goes, if you can bring in capital, bring in your investors, we'll give you a percentage of our general partnership on our deal. And so we did. We decided, OK, we'll go in. We got in our partners. And that first raise was the hardest one.
It was very difficult. We thought we were going to raise a lot more money than what we could. We asked everybody we knew. And we raised barely enough. We barely hit our goal on that one. But we got our first deal done. And after that, and we told everybody, hey, we have a deal. And then that first deal turned into a second one. And the second one turned into a third one. Because that's how it happens, by the way. Your first deal is going to be the hardest.
Steve Olson (32:01.144)
Mm-hmm. Mm-hmm.
Steve Olson (32:21.136)
That's right.
Steve Olson (32:25.7)
At 100%. That's right.
Mike Ugarte (32:29.168)
you know, what I tell everybody is your number one goal and if you're going to start investing is find your first deal, whatever it is, just do the first one and however it happens, right? Put your ego aside because we want to be the, you know, the kings in charge of everything and we got in on a deal on a much smaller percentage, but we got in. Okay. So we did our first deal after that our set by the time we got to our third deal, people were calling us.
Steve Olson (32:36.123)
That's it.
Steve Olson (32:43.526)
That's right.
Steve Olson (32:57.062)
That's right.
Mike Ugarte (32:57.118)
and telling us where, know, I want to put the money. I still have people now, all the time, what do you have, what do you have, what do you have? And they have money to put in. you know, even a friend of mine who told me no the first three times, the other day calls me and says, hey, I want to do lunch with you. I want to talk to you about this apartment stuff that you're doing. I've been reading a little bit more about it. At the time, he knew nothing about it, you know, and I want to invest. And I said, okay, fine. You know, we started talking.
and he's got six figures he wants to invest. He's itching to invest in real estate. you know, once you get into it, like you said, it's... Deal flow is the biggest problem, right? For all investors and getting deal flow, there's more money than there are deals. Money is not the problem. It's finding the deals.
Steve Olson (33:49.671)
You know, here's what I find totally fascinating about real estate investing. When somebody's selling their home, they don't tell anybody. They literally, it's like they go into hiding. They don't want a sign in their yard, it's a secret, because they don't want everybody saying, well, where are you going? You're leaving the neighbor, is everything okay? Are you upsizing? You know, and they just don't want to deal with it, right? And then when they buy a home, they'll tell everybody, but not until they already bought, right? So it's like, hey, we're closing on Thursday, right? The thing about real estate investing is it's contagious the entire journey.
Meaning like people like, I'm in this deal. It's keeping me up at night. I'm in this deal. It's going great. I'm in this deal. Or they'll be like, hey, I saw on social you were doing this. What was that? I'm, you that's a big multifamily deal we're doing. And then inevitably without them even saying it, they're like, well, how, what are you doing? this guy, Mike, like he, you know, turned me on to it. I'll give you his phone number. And then all of sudden you're like, where'd this guy come from? Where'd that guy come from? Right? Because real estate investing is super contagious. If you're,
Mike Ugarte (34:46.558)
It is. No, it is. No, no, it is.
Steve Olson (34:49.275)
Good.
If you're the type of person who understands that the art of real estate investing is nothing more than than rinsing capital over and over and over to get it to get a cut of it, right? Because I think Mike, tell me how you feel about this. Every investor that I know, whether I've coached them, I don't I don't do investing coaching, but like agents that I've coached have been real estate investors. Everyone that I know that doesn't make it one trait they all have in common.
is they optimized for the highest spread possible, meaning they tried to penny pinch, they tried, I want 100 % of the deal, they spend the money before it's even in, mentally and all that stuff. And then a buddy of mine made 70 grand on a flip that took him, I think 50 days, but mentally he thought he was gonna get 150, so he was telling everybody he got screwed on the deal. I took a bath on this, I lost so much, and I'm like, you didn't lose, you made 70, maybe you could have made 100 on this?
Mike Ugarte (35:23.347)
Mm-hmm.
Steve Olson (35:43.889)
But you made some key mistakes that cost you that money. Yes, you had the wrong lending partner that had some clauses that you didn't read, right? But at the end of the day, you made 70. And I think the people that are really successful, they know that the wealth is in the cadence. It's not in the home runs. Like who are the highest paid baseball players? They're not, mean, sure you have Aaron Judge and you have Otani in LA and you these guys that are making hundreds of millions. But if you look at like the top third of all baseball players, it's the ones that get on base, period.
If you can get on base a ton, you're gonna make an obscene amount of money in baseball. Real estate investing, I think, is the same way. Are there gonna be grand slams? 100%. Are there gonna be times when you're losing sleep the night before closing, hoping that you don't have to come to closing with a $50,000 check? That's going to happen, right? But blended as an average, as long as the deal flow continues to happen, as long as the capital is always working, it's almost impossible, you know, over a period of five years or 10 years that you're not.
like way up. what are you seeing the same thing? I off in that like, not absorption, what's the word I'm looking for? Observation, am I off on that or what would you say to that?
Mike Ugarte (36:54.748)
No, I think it's, I think you're a hundred percent right because a lot of people, they, they, they think, they think home run. Everybody thinks everybody wants to hit the home run. Everybody wants to be, everybody wants to be Babe Ruth. Right. so I'm dating myself there or,
Steve Olson (37:01.798)
That's right.
Steve Olson (37:08.774)
Well, Babe Ruth was also number one in strikeouts too. Most people don't know that. Keep going, sorry.
Mike Ugarte (37:11.932)
Right, right. Right. but everybody wants to hit the home run, but it's not about hitting the home run. And a lot of times what I see investors is they don't want to do partnerships. They don't want to get other people. They don't they want to they think they have to do everything themselves. Like it's one of the myths, I think, in business in general is, you know, I got to do it off the sweat of my back. got to, you know, it's not worth it. I can't break my back. And then all you end up with is a broken back.
Steve Olson (37:27.675)
Mm-hmm.
Steve Olson (37:31.781)
Mm-hmm.
Mike Ugarte (37:41.202)
and you have nothing to show for it. But what I found in the investment side, it's all about partnerships. You have to be open to options, to possibilities. Every time I go to an investment meetup or I go to a conference or I go anywhere where there's investors, there's always an opportunity to walk away. More often than not, I walk away with a deal or a potential deal because
Steve Olson (37:41.254)
That's right.
Steve Olson (38:08.262)
That's right.
Mike Ugarte (38:10.788)
And then a lot of it is, hey, do you want to partner with me on this? It's not like, do you want to buy it? Do you want to partner with me on this? Or I'll partner with you on this if you have this. I have a wholesaler who told me if you get a deal and you don't want to flip it and you have it on the contract, I'll partner with you and we'll sell it to my list and we'll 50-50 it. And I'm like, awesome. Because I really don't care to be a wholesaler big time. That's not for me. But I will wholesale if I need to.
Steve Olson (38:36.795)
Right.
Mike Ugarte (38:40.338)
But now I have an option. I have an L. And it's a partnership.
Steve Olson (38:43.674)
think that also, doesn't that also tell you if somebody doesn't want to be in a partnership at all, it's probably not that good of a deal?
Mike Ugarte (38:51.204)
No. Yeah. And if they don't want to be in a partnership, yeah, that's another way to vet the deal, right? You can also, you know, show it somebody that's more experienced on it and get their input. See if they want to partner with you. They tell you no. Or if enough people tell you no, then you know it's not a good deal.
Steve Olson (39:08.134)
Well, when we, I had this, we'll cut it here after this part. We'll send everybody away with this. When I first moved to California, I went on a pitch for a nine unit apartment complex in San Diego. Didn't really know the California market in regards to multifamily at all. Cap rates were crazy, crazy low. And at this conversation, there were three partners and they didn't tell me this, but I could tell they were not on good terms with each other. And so I had looked through how they were holding title and all their rent stuff and.
I don't remember that the specific details and I said as are any of your guys is any of this in a trust or a corporate LLC at all? No, we all own it personally and I said, okay, it's probably gonna cost you a few thousand bucks But I think that we need to bring in you know an attorney and we need to retitle the property We know we probably need to season it for 90 days then I would because I think it's gonna cost you Some some fairly significant money to sell it as it is right now and I said like I'm not a tax person, know in California is totally different than Arizona, but we
I think it would be worth our time to like do 30 days of research because I think we could be talking like hundreds of thousands of dollars in penalties or unneeded taxes. And he said no. And he goes, the other two partners want to sell right now. And I said, okay. So we went back and forth on the price. then, so I kind of sat on it for a week or so he called me back. He goes, hey, we're ready to go, but we want to list at this price. I'm like, that's way too high. You know, it's never going to sell. know, so I like, let's, let's get through this, right? So go back and forth. ended up not working with me.
The agent they chose actually was a close friend of mine unbeknownst to me. He was also interviewing for the job and didn't advise on any of this stuff, right? Sells it much lower price than I thought they could get he's a great agent So I'm not saying it's his fault by any means and like seven months go by and I get this phone call from one of the owners and he goes hey you had a conversation with one of the partners about retitling the property and I said yeah and he goes do you mind if I ask you a couple questions? I'm like
I already know where this is going. You did your taxes and you're throwing up in your mouth. And he goes, yeah. And I said, what's the, what do you think it cost you? And he said, 1.7 million. And I said, amongst all three of you, goes, yeah. And I said, okay, he explained to me the title. So I forwarded him to some other guy. And again, I'm paraphrasing this and I could have some of the details wrong, but my tax attorney that I sent him to said all, there was one document that would have cost them $1,200 to do, one document.
Mike Ugarte (41:27.646)
Well.
Steve Olson (41:28.871)
and would have wiped that entire tax liability, that part of it away, right? And he's like, we're gonna sue the agent. I'm like, you can't because that's not our job. You know what I mean? That's not part of the scope of the transaction. And he goes, well, if we just would have hired you, you should have told, I'm like, look, I don't know what document that is. I'm not a tax person, but I knew that the way that you guys had this title, there's probably gonna be some money you're gonna leave on the table for this. That's another example. And I can tell you 100%, Mike,
Mike Ugarte (41:39.56)
No.
Steve Olson (41:58.458)
Those guys were, they didn't wanna hear. They saw the check that, I think they walked away with like seven million in profit or something like that, give or take. They saw that number and it was already spent in their head. And everything that they had to do was like, well, that's more money out of my pocket and that's gonna cost me. And you know how people get, right? So let's get back to, so I'm telling you that from the perspective of like, when you go together, 100 % of the time you go farther. Like I can't even tell you, I mean,
If you look at Trump, for example, right? Whether you love Trump or whether you hate Trump, if you look at his real estate portfolio, most people don't realize that the majority of his income after a certain point of his career was not entitling real estate, it was in licensing real estate. He was selling the license to use the name Trump. And like it's something that doesn't get talked about a lot. It's a genius move, right? Because the upside risk is very small. They're paying him for the brand because at that time he had an amazing real estate brand. And if Trump was backing it, it was doing really well on the East Coast.
Mike Ugarte (42:41.48)
Bye.
Steve Olson (42:58.159)
And he realized like, look, could I buy this post office and do it all myself and make all the money? Sure. But if I just license it, I can do that 50 times with the same amount of leverage. He understands that probably better than most people do, right? So going together, you're 100 % going farther. Let's get back to what I would do at the beginning. So I have a deal. I go find an investor. say, hey, Mr. and Mrs. Investor, if I'm willing to pony up money in the deal, whether it's part of my commission, a hard payment, whatever, you're going to teach me how to do it. And then,
Mike Ugarte (43:06.994)
Right.
Steve Olson (43:26.608)
How much would you tell them? What would be my expectation over how I would learn? Am I literally gonna look over their shoulder every single day? Like what questions? Like how do I learn off that transaction? What would you recommend?
Mike Ugarte (43:39.164)
You know, that's a conversation you want to have with them because a lot of times they don't, you you don't want to be. If you don't have the knowledge, don't write, you don't want to be a nuisance. And so it's a fine line. So, you know, a lot of times it could be, you know, maybe have a cadence on a phone call like a weekly or biweekly phone call and tell me what's going on. You know, can I ask you questions or, you know, at the end of the day, you're also part owner of the property now.
Steve Olson (43:47.438)
A nuisance.
Mike Ugarte (44:09.042)
You've got skin in the game. And if you guys agree to a cadence, then he can, you that person, he or she actually can tell you what's going on, what they've done. You know, go see the property with them whenever they're going. But do it more as of, you know, let them know that you're doing it because you want to learn, not because you're going to, and don't micromanage it. Like you have no place to micromanage at this point. And you know, you can ask, why are you doing this? Why are you doing that?
Steve Olson (44:34.426)
Mm-hmm.
Mike Ugarte (44:38.558)
And more often than not, they'll be more than happy to share that with you. A lot of investors love to teach what they do. And they love to share the information. They just love talking about it. So you're not going to have a problem there. But set up some kind of cadence or you're not a nuisance. It's like if you're mentor to a real estate agent in your office, you don't want that agent calling you all the time. You're busy. You're doing stuff.
Steve Olson (44:46.2)
Mm-hmm. I agree.
Steve Olson (45:04.816)
That's right.
Mike Ugarte (45:06.12)
but you want to set up a cadence, hey, let's meet weekly on this date and then we'll go over what it is you need to know. And that's what I would recommend. think that's the quickest and easiest way. And if it's not an investor, mean, find a way to partner into a deal. My recommendation is just find a way to partner into a deal. It's the easiest and quickest way to get in and choose wisely, by the way. You know, make sure that they're in alignment with you.
Steve Olson (45:32.198)
Yeah, because you can learn from idiots too, right?
Mike Ugarte (45:34.172)
Yeah, you can learn from idiots and you can learn how to do crappy things from idiots. But also, I've had good partners and bad partners. And whenever I have a bad partner, can tell you the mistake we made is either we were looking at, like you said, we were looking at the end, right? they have a lot of money or they have a lot of this or they have this, they can help. then, we didn't, we kind of, the red flags were there and we ignored them. But, know,
Steve Olson (45:37.392)
Mm-hmm.
Steve Olson (45:41.178)
Mm-hmm.
Mike Ugarte (45:59.442)
They want an alignment with the way we operate. They didn't treat their investors the way we treat our investors, which is a big issue. So you want to make sure you're doing it with somebody you know and you trust, and more important, has the experience. Vet them. You have every right to vet that person. If you're to give them money, vet them. Ask what deals they've done. If they're your customer and they've done several deals with you, then you have some experience there.
Steve Olson (46:18.459)
Yeah.
Mike Ugarte (46:29.416)
But if you've only done one or two, that's not enough. You want to see a track record.
Steve Olson (46:35.332)
Yeah, because that also sets the stage for like your stress because if you learn that somebody who's like crazy stressed all the time, then you're like, this business is and it doesn't have to be that stressful. It's not the easiest thing in the world, but this is not something we should lose sleep over ever.
Mike Ugarte (46:44.69)
Yeah. No.
Mike Ugarte (46:51.742)
No, and even though there are going to be times that you do, those are exceptions and that does, I mean, it happens in our real estate practice, right? This business overall can be a really fun and exciting, rewarding business, but there are days that we have headaches and there are days that we have bad days and there are days that we're like, why am I doing this? But for the most part, it should be fun. And real estate investing is the same thing. And the other thing is,
Steve Olson (46:55.654)
That's right.
Steve Olson (47:11.472)
That's the truth.
Steve Olson (47:17.989)
Mm-hmm.
Mike Ugarte (47:21.406)
is I want to tell whoever's listening as an agent, most agents who've, even if you've never done an investment deal, if you sold one or two properties in your career, you have 80 % of the knowledge that you need to do an investment deal. You already have it, you know? And the flip, you know, is it's really, it's a small road. It's just, you know,
Steve Olson (47:39.654)
That's right. That's right.
Mike Ugarte (47:51.066)
learning a little bit different, how to evaluate properties a little bit different, how to analyze properties. That's probably the biggest gap which a lot of people put. That's simple math. At the other day, it's simple math. And in doing it, we do fix and flips, and then we have a calculator that we do our analysis. And then I have a
Steve Olson (48:15.174)
Mm-hmm.
Mike Ugarte (48:16.478)
bigger spreadsheet with like 12 different tabs underneath for my multifamilies. But at the end of the day, if you look at the dashboard for both, it's almost the same thing. One just has more information because there's like 100 units in rent versus one property that, you know, so we still got to look at the same numbers, right? We've got to look at all the costs. We've got to look at all, you know, if there's going to be a mortgage, you know, how much that's going to cost us.
Steve Olson (48:22.064)
Mm-hmm.
Mike Ugarte (48:45.598)
carrying costs, all of that. And is it going to be work? How much work? I mean, it's the same thing, just more zeros on one side than there are on the other. But at its basic core, it's the same math. And it's a little bit of math.
Steve Olson (49:03.268)
You said, so last thing before we cut everybody loose, because I know they're going to ask. You mentioned earlier in the podcast that very common way that you guys have invested in the past or you've seen other people invest is that you will go get hard money, whatever percentage that is, and then you'll look to either raise or get somebody to cover the gap money, right? so I can give this stick so everybody can understand this. Do you consider gap money, the closing costs and the down payment and the rehab or what does gap money cover and what does it not cover?
Mike Ugarte (49:33.598)
Well, for us, it covers everything that's not the down payment. Actually, no, it's everything. No, no, it is a down payment. It's everything. basically, the gap money in totality is not the... You get your mortgage. You have a hard money lender gives you the mortgage. Everything else is gap money.
Steve Olson (49:44.752)
That is not the down payment? Yeah.
Steve Olson (50:01.285)
including rehab.
Mike Ugarte (50:02.768)
including rehab because it's, it's, it's now, now it's all gap money. But the question is how much of that is coming from me and how much of that is coming from other people. Right. So who's covering, who's going to cover and what percentage are going to cover the gap because it's gap. It's still gap. That's the difference between, between what the bank is giving me and then what I need to get this project through to close. Right. And gap money is rehab costs, closing costs.
Steve Olson (50:04.228)
And then, so what would...
Steve Olson (50:15.078)
That's right.
Steve Olson (50:21.478)
Yeah, that's right.
Mike Ugarte (50:32.798)
points, interest, commissions to be paid on the sale, closing costs to be paid on the sale, carrying costs, like literally everything, right? That's not covered by the, so let's say you're getting a hard money loan and it's 75, 25, so the bank's gonna be 25%, all the rest has got money that you need to close.
Steve Olson (50:57.307)
And then.
Let's say that we're buying a $500,000 property and we get hard money for a $400,000, okay? So we have $100,000 down payment, another $10,000 in closing costs. And let's say holding costs, commission, rehab, everything is another $150,000. So now we've got to go out there and raise somewhere between $260,000 and $300,000 for that deal. Is that typically raised on a percentage of profit at the end? Does it come with an interest rate? Are there points? How do you typically raise that money?
Mike Ugarte (51:24.99)
Well, you could do it a lot of different ways. there's flexibility. So you can do gap money. I've seen it done where there is a, it's like a loan where you give a percentage. You know, if you get, so let's say I need $200,000 and I come to you, Steve, I need $200,000. You're going to, and that's the gap you're going to cover. I'll pay, you know, I'll give you 10 % interest, right? For that money or 12%, whatever it is. And then you're a, short term, six month loan. And you, you know,
Steve Olson (51:27.814)
So there's a lot of flexibility.
Mike Ugarte (51:53.854)
You'd be like, yeah, great, sure, I'll do it. Or I could say, Steve, let's joint venture on this. And I'll give you a percentage of the rate of what we need. So if that $200,000 represents 25 or 35 % or whatever percentage of the deal of what we need, then you'll get that on the exit. So you get a percentage of profit at the end.
Then you could also, I've seen people do a combination. have, I know a friend of mine who's who the way he does it is for when he has investor partners, he said he'll pay 10 % interest annualized on that loan. And he gives, and then he'll give the, the, the investor 10 % on the out on the exit. So there's a lot of flexibility on this and the percentages is something that you negotiate. And you did, you know, really as the deal owner,
Steve Olson (52:48.933)
Mm-hmm.
Mike Ugarte (52:53.806)
You determine what the rules of the game are going to be for somebody to invest with you. Obviously you want to make it as attractive as possible. You know, you don't want to say, Hey, I'll give you 5 % because I'm, you know, I can go to the bank and put it and get 5 % and, and, know, CD and let it sit there for six months. You know, there's more risks. So you're going to give me more money, but you do that and you do the numbers and, you figure out what makes sense for the deal.
Steve Olson (53:00.847)
Mm-hmm.
Steve Olson (53:05.52)
That's right.
Mike Ugarte (53:17.608)
for you to make this deal happen for everybody. It's literally a win, win, win. It's a win for me, it's a win for the investor, and it's a win for the deal.
Steve Olson (53:27.302)
That's right. Okay, so if I'm hearing you right, money or no money, credit or no credit, cash or no cash, partner with your first deal, learn the rope, and just keep doing it until you feel like you can take the next step, right?
Mike Ugarte (53:40.584)
Right, and start small. you know, do small steps. Again, partnering with somebody who knows what they're doing is a small bite. My dad in Spanish, he said, I'll translate it because it's easy to translate. He said this saying that was, you know, he's told me all the time, how does an ant eat an elephant? Right, and it's one bite at a time. So it's little teeny little bites. and just start, you know, start small and then leverage, you know, go to...
Steve Olson (53:59.814)
That's right.
That's right.
Mike Ugarte (54:09.944)
A great resource is bigger pockets. Walter Arthur, go learn, figure out and go to real estate investor associations, find meetups, they're all over on the app Meetup. Just go and sit down and just, don't do anything for three months. Just listen, just listen. You'll get so much information. And that's how it started with me.
Steve Olson (54:23.354)
Mm-hmm. Mm-hmm.
Steve Olson (54:29.174)
Just listen. Just listen. Yeah.
Mike Ugarte (54:36.51)
I started going to the local real estate investment associates, the RIAs, here locally, and I just started showing up because there was something else interesting. then that's how I got my first deal. And the same thing that happened to you. had, you know, one of those investors became a customer of mine and we went to closing and he says, dude, I don't get it. And he goes, look at, look at your, look at the, back then we called it a HUD, look at the HUD, right? And he goes, look at how much money you made. Look how much money I made. Which side do you want to be on? And I was like,
Steve Olson (54:51.908)
Mm-hmm.
Steve Olson (54:56.347)
Yeah.
Steve Olson (55:00.048)
Hmm.
Steve Olson (55:05.67)
That's right. That's right.
Mike Ugarte (55:06.886)
I was like, OK, I get it. It still took me a couple of years to actually take action. But that was a hard lesson. At the time, I was a newer agent. I thought I was setting the world on fire because I was a top producer. And then when he does that, that was a gut check. And I was like, whoa. mean, honestly, I got mad at him.
Steve Olson (55:09.968)
so much.
Steve Olson (55:33.796)
Yeah.
Mike Ugarte (55:34.844)
You know, I didn't tell him, but I walked away pissed. Who the heck does this guy think he is? But then I was like, you know, after a while, was like, he has a point. He's right. You know, I'm I'm making this the smaller amount.
Steve Olson (55:39.094)
Yeah, he's right. Yeah, that's right.
Steve Olson (55:48.004)
Yeah, I mean, like, we could talk about this till the cows come up. So start small, partner out the deal, go from there. All right, any parting words before we send everybody off into the general ether?
Mike Ugarte (56:00.42)
If you're interested in investing, if you've ever had the thought of investing, if you got into real estate because you wanted to invest and the time to do it is now. Like start learning, start taking those small steps. It doesn't have to happen overnight. I bought my first apartment complex three years ago and I had been thinking about it, I would say back in...
Steve Olson (56:12.006)
That's right.
Mike Ugarte (56:28.542)
The first time I ever heard about it was in 2013, right? No, 2008, 2009. And at that time I was like, man, if I could ever buy an apartment complex and nothing happened until three years ago. And three years ago, we ended up buying our first multifamily, which is 126 units in Georgia. That was the first one. By the way, that was a $23 million asset.
Steve Olson (56:48.934)
crazy.
Mike Ugarte (56:56.026)
I do not have $23 million anywhere, even after. Okay, so that's the ultimate leveraging of other people's money, right? And it's partnerships. I'm on the general partner side, but there are several partners on that side to make that deal happen. And I happen to be one of those. And then we have our limited partners, which there's a lot of those who brought money in. So there's a lot of people that are partnered up to be able to...
Steve Olson (56:56.561)
Wow. Yeah. I don't either.
Steve Olson (57:13.584)
Mm-hmm.
Mike Ugarte (57:24.126)
purchase a $23 million apartment complex. And guess what? We all own it. It's our asset. I get the depreciation for it. So I get tax benefits. We get the dividends from the rent and we're about to sell that property. We've already have inquiries on selling the property. And when that sells, that's where you make the majority of your money. But it's there. It's there for you. If I can do it.
Steve Olson (57:29.254)
Mm-hmm. Mm-hmm.
Mike Ugarte (57:52.99)
and you hear this all the time, right? If I can do it, you can do it. But literally, it's true. I don't have a superpower that... My dad's 91 now, retired accountant, but he wasn't a gajillionaire, right? We were total middle class. So, yeah, if you want to do it, take the first step and take it now.
Steve Olson (58:07.462)
Mm-hmm.
Steve Olson (58:18.15)
Awesome, Mike. Thank you so much for joining. Any questions? Let us know. See you guys on the next one.
