02 Jul Brant shares his story and talks Private Money
So again, due diligence is a must but I love being a lender. And again, a lot of our clients like to be lenders for that same purpose. I’m gonna skip all this stuff and I’m gonna introduce Brant here. Now Brant Philips was one of the first guys that I met in Houston. I moved to Houston about six months ago, sorry six years ago, excuse me. Six years ago, he’s one of the first guys that I met. And he hasn’t changed. He’s the same guy. His outfits have gotten a little nicer ’cause I think his wife made him buy some new clothes.
But because the first night … And he tries to deny this but the first time that I met Brant, he was the featured speaker at our ugly sweater investment mixer. We have an ugly sweater investment mixer that we do every Christmas. Now I’m from Seattle, so an ugly sweater investment mixer in Seattle, there’s a certain attire that you usually wear. The ugly sweater investment mixer in Houston, Brant had a sweater on and he had cargo shots on. So I’m like, “I’ve never been to an ugly sweater mixer in December, and people are wearing shorts.” But again, that’s Houston.
So he was the first one that I met, one of the first people I met, he’s written a lot of books. He’s had published books about real estate investing. He’s got a great life story about how he kind of left the corporate world and got into real estate. And one of the things that really spring boarded his career, and he’ll tell you this, is the education and the opportunity that he got of understanding how to use private money, and specifically self directed IRA money, which allowed him to borrow money to buy all his investments, but also understand the lending and the borrowing side of it.
And again, he’s one of the guys that I know and trust. I always ask him a lot of questions. And I’ve learned a lot from Brant. And he comes up from Houston guys. So I want you guys to give a good round of applause for him coming up. Brant Phillips.
Thank you. I appreciate it. Thank you very much.
Way better than the cargo shorts. I’m telling you. No problem.
I’m waiting for you to court me man. You say it’s like dating. I gotta step up my game.
Yeah. Well you’re dressed nice for now.
My wife won’t get too jealous I don’t think. Well, thank you everybody for coming out. I’m excited to be here. How many people are here this afternoon for the Private Lender Lunch and Learn? All right. We got a few people. So good time this afternoon, good education. This afternoon went for about two hours. I’m gonna try to summarize what we’ve talked about today for about two hours, in about ten minutes. So I’m gonna talk a little bit quickly, but we’re gonna have time for Q and A in a little bit. So if you’ve got some questions, jot ’em down and fire away.
So quick introduction about myself, I’m from Houston. I’m originally from Dallas, born and raised actually Dallas in the Rallette area and Rockwell area, and my family moved to Houston in ’88. So I went to high school and lived there ever since. I am a pledge allegiance to the Texans and Rockets and Astros which leads us from all the Dallas teams. So anyways, so yeah, we moved to Houston and went to school there, went off to college. I went in law enforcement for seven years. I actually worked here as a police officer for a couple of years, went back to Houston and got married.
Wife and I had our first child, I was working long hours in law enforcement kind of stuff and decided weekends, holidays, not so great, wanted to spend more time with my family and so I decided to go into the corporate world ’cause grass is always greener on the other side. And took me exactly one day to determine that I wasn’t a good fit for corporate America. Came home from work, wife’s all excited, I got this regular job. And “Honey, how was it?” I’m like, “I hate it. It’s horrible. I gotta get out.” I’m talking about getting out of corporate America the first day I got in.
So I’m like, “Don’t worry, I’m gonna pay the bills. I’m gonna provide for the family, but I’m gonna find something else to do.” So it took me a couple of years of reading some books, taking a part in a couple of little ventures, little small ventures, that flopped. And before I decided upon real estate, got some good counsel from someone who had been really successful in real estate. I read a book called, Rich Dad, Poor Dad. And then I went on to read about another 50 books or so, and dove into the real estate world.
2007, I bought my first house using a credit card as a down payment. The reason I used a credit card was because I had no money. My wife and I were living in a apartment at that time. We had finished paying off our student loans, the credit cards that we had. Our second child was on the way. And that’s when I came to my wife with this idea I wanted to be a real estate investor. I don’t know if she thought I was nuts. And of course, I was gonna buy ten houses that year, the first year, and have no business experience, working a full time job. We live in an apartment. We have no money. Somehow, miraculously I bought ten houses my first year with a rental property, all rental properties using a model that investors still use today, I was buying properties hard money loans, refinancing with the banks.
Today’s market, new investors get in. I tell my story. They think I was like the Michael Jordan of real estate. Turns out I wasn’t. It was really easy to do back then. Pretty much, anybody could do it. I knew homeless dudes who were doing more real estate than I was. 2007 was a different market. So 2008 comes, this is gonna tie into this whole … my presentation tonight. 2008 comes, I see a lot of investors I was working with and going to networking groups with and things like that.
In 2007, real estate changed drastically beginning 2008. Guys were starting to not show up to networking events anymore. So you started hearing these stories of deals going bad, deals going sideways. And a lot of guys just couldn’t get financing when things started shifting. So I didn’t know what to do. I didn’t know about private money. I didn’t know about Quest RA. But I knew that the idea of partnerships. So knowing nothing about partnerships, I began having conversations with people who I thought I could possibly partner with.
So I put together a few partnerships in 2008, bought ten more properties, still worked at my job, all rental properties, buying them, managing rehabs, leasing/managing the properties, managing the tenants, things like that. So I get to the end of 2008 and I’ve got about 20 rental properties still working my job. And I’m like, “You know, the partnership thing is pretty cool. I’m still able to buy properties and do what I love doing at that point in time in the business world. Like Will said, it became my passion. I loved what I was doing. But I wanna do it full time. But the partnership structure wasn’t working for me.
I was gonna have to do twice the amount of houses and things like that, so the simple math like this probably is not working as well as I’d like it to. So I learned about Quest RA, and Nate mentioned that this kind of started and quest started by small little groups. There’d be ten or twelve people. So I learned about them and I started attending the educational meetings and things like that and just getting information as an investor. And I met some lenders that year. And I’ve been working with them ever since. We’ve done hundreds of loans with Quest clients and we still do to this day. And without Quest clients, without private lenders, I wouldn’t be here. I’m quite sure I wouldn’t be here ’cause I can’t run my business dealing with the banks.
I can run my business but I’m not nearly as profitable working with hard money lenders, no offense to hard money lenders. So here we are today and what really changed for me as well. And I shared this story earlier today when I was speaking was, about midway through 2009, I had left my job then, I was a full time real estate entrepreneur. Things were going well. I was raising private money to do deals, but I still had this … I didn’t understand the whole … the impact of what I was doing. I had this very limited mindset of being a baller, and I was still very nervous going into some conversations about raising money or asking investors to invest with me. One, because it’s a big responsibility as an investor.
2008/2009 was still a really scary time, and so I was still fairly new, still fairly wet behind the ears and I was raising money. I remember coming home one day and telling my wife I’ve got a couple of new lenders wanna invest. And she’s like, “That’s great.” And I remember telling her it is, but it’s a little bit overwhelming. What if things go wrong? What if my business plan doesn’t work out? Et cetera, et cetera. And so I remember telling her if anything goes wrong, my investors come first because I can’t stand the thought of not performing, or not returning their capital and doing what I’ve said.
So that was really big for me. I felt a lot of pressure, and so middle of 2009, one of my very first partnerships, one of my very first partners, she called me out of the blue, something about one of our property, we still owned four or five rentals. She called me about something, whatever business thing. And in the conversation, this was kind of like one of those “oh, by the way” things. I don’t think she knows the impact it had on me. But she said, “Hey, you know what?” She was like, “I was looking through my retirement accounts and my cash and our investments.” And she had pulled a substantial amount of money out of the stock market the beginning of 2008. Was that a good move?
She was like, “I would have been devastated if I left my money in the stock market.” She was like, “I don’t know when or if I could ever retire.” She was like, “So I’m really grateful that you allowed me to invest with you.” So everything changed for me then. It was like a boost of confidence, and just like the light bulb went off and, yes, I’m borrowing money, but it was several things. From an investor point of view, I’m like there’s so many other people I’ve heard that are getting crushed in the stock market, and I was learning about how much money was available from self directed RAs.
I’m like, “I can really not only buy as much real estate as I want in my business as long as I’m utilizing sound business investing principles that we do. But I can help a tremendous amount of people and investors or lenders.” I’ve been doing that ever since. And then at the same time, we’ve employed contractors for seven, eight, nine, ten years. And we own or finance properties to their families. So there’s a bigger impact with this, rather than sending money off to Wall Street, who knows what’s going on with that money? You’re investments, when you’re investing with local real estate investors and local real estate deals, your investment is here.
Your capital is secured here. You can shake hands. You can go have dinner, go have a beer with the people that you’re doing business with. You see what your investment is doing. And if you’re working with an investment, an experience real estate investor who knows what they’re doing, not only is your investment secured by that real estate, but it has equity in it. And so, there’s a tone of really feel good aspects in this business. Not only you can typically seed rates of returns that you could from average market rates of return …
Didn’t really introduce myself. So that’s my story. So here we are today. The name of my company is Invest Home Pro. We’re based in Houston. And primarily investment company, we do have a construction division that specializes in only working with real estate investors in our market. We do the same rehab over and over and over again. We talked about this a little today. We rehab about 100 houses a year, about 50 of those are usually our own company projects and 50 for other investors. We do them all the same, same paint, same granite, same carpet, same tile, same …
You know what? Some of our construction clients say … they may ask, “Can we pick our paint color?” And we say you absolutely can, you can pick any color in the world as long as it’s beige, specifically the kind of beige that we use if you pick that color, then yes you can. We’ve got an education component, we do some coaching and teaching and things like that. I’m a licensed agent. I don’t really do a lot on the realtor space except this. And I teach agents. Are there any real estate agents here tonight? So I teach agents how to grow their active income working with investors, hopefully you’ll work with us ’cause we get a lot of deal flow from agents.
But more importantly, learn how to take your active business model to create some passive income as well. So my wife’s here tonight if you want some more information about that. How many of you guys are lenders looking to lend? And how many of you guys are borrowers, you’re investors looking to invest? Great. So yeah, so I do a private lender lunch and learn every month, the same day as this event. I do it at noon, so try to come, especially if you guys are looking to lend. It’s two hours. We go pretty in depth each and every month.
And I’m lending more and more. I’ve done several loans this month. We did about 25 last year. And we’re starting to lend more because, me, the older and wiser you get, it’s more of I traded all this time for money when I started this business. It was a very active business. And I was 100 percent a borrower. But each year, I’m getting more passive, more passive income, a little less active in systemizing the active part of the business. So love you guys to come out and attend our lunch and learn. That’s a picture of my family. Sometimes I put this in there and I got a complaint at the last [inaudible 00:14:14] mixer. She’s like “Why didn’t you include a picture of your family which you talked about them?” ‘Cause my wife and I have, I think, five kids. I lose track, so I got a complaint, so I added a picture of our family.
And … oops, last thing. I gotta go back. This book here, I thought there was a slide for it. So there’s a book coming out August first, and the private lender lunch and learn came about because a little over a year ago, Nathan long, the CEO of Quest and I came together for this idea of the private lender lunch and learn because we would do different little mixers or events. We’d talk about private lending, but neither one of us really … We never could answer all the questions. So we created the private lender lunch and learn.
So like, let’s spend a lot of time answering questions going in depth. So we created the private lender lunch and learn. And that was an event that was supposed to be an hour long. And the first one went over three and a half hours. I had to leave. I said, “Nathan, I gotta go ’cause I have another appointment.” He’s texting me an hour later. He’s saying, “People just left.” So it quickly turned into a two hour event that often goes two and a half, three hours. So several months later, I told Nathan, I said, “Man, we should write a book about this ’cause there’s so much information and people want to know more. And I don’t think we’re giving them everything they want.”
And writing books kind of became a hobby for me, which was kind of strange because when I was in school, I barely graduated, and I hardly ever read books. So it’s kind of weird, really kind of strange. But anyway, here’s what I wanna present really quickly. And then, like I said, we’ll open up for questions after Brady speaks, after me. But this is one of the big things that we would always find with people new to becoming a private lender, is how does the process work? So I’m gonna do my best with the help of this little flow chart, if you will, to explain how this process works, and I’ll show you some other case study type of deals that we have.
So first and foremost, the real estate investor finds a deal. An investor like myself, some of the investors here, we do marketing. How do we find deals? We do marketing. We do direct mail. We do postcards. We do letters. We do Facebook. We do Pay per Click. We do SEO. And we do other stuff. We do a lot of stuff and we spend thousands and thousands of dollars every month to get sellers to call us and hopefully do business with us.
So we find a deal. We put that deal under contract. Our process is after we put a deal under contract, we have a lender list, so people who have loaned with our company before, are interested in investing with our company, give us their name, email address, we put them on an email thing, put an email blast out together. And we just blast it out and say send us your rates and terms. Well, for those of you working with smaller real estate investors, you’re probably gonna wanna sit down and meet with them. So the next step is that borrower, if you’ve met a borrower, you may have a met a borrower here tonight at this event.
You meet with them, say, “Hey I’m looking to lend.” They say, “I’m looking to borrow.” And so you’re probably gonna say, “Well call me when you have a deal.” So lo and behold, they’ll get a deal and they’ll call you to sit down. And the way it worked for me in the beginning is I would meet with the investors, we’d go to Starbucks, had some lenders come to my house and vice versa. And I explained to them what our business model is. And I would explain to them this is kind of the deal that we have. This is the process how it’s gonna work. And then you agree on rates and terms.
Ask what rate of return you’re looking for. And if you guys worked out a deal, you’re gonna move to the next step. And the way that I explain it is this. Borrower and lender are agreeing on terms and they’re shaking hands. So in it’s simplest form, private lender is this. It’s a handshake agreement. Me and Eduardo agree. We’re shaking hands on it. But then, we’re gonna back it up with the proper loan documentation, with the real estate attorney, which is the next step, we’re gonna take our agreement to a real estate attorney who’s gonna prepare all the loan documents.
We are going to close at a title company, always. We’re gonna provide our lender title commitment, survey, insurance, all the required documents, we’re gonna provide a personal guarantee, note, deed of trust, everything to secure their loan. This is really really important, that if you’re working with a borrower and he says, “Hey, heres my bank account. Wire the money here to my account.” That’s a huge red flag. Okay? Huge red flag.
So we always close at a title company. We always secure the investment. All I’m going to say is about this that private lending can be very passive when you find the right ballers and people to invest with. But in the beginning, it’s a little bit active, meaning you need to come to events like this. You need to get education, and you need to build your team. You need to have a good real estate attorney that you can call to look over everything. You need to maybe have an insurance agent. You may already have an insurance agent. But someone, “Hey, does this policy cover me?”
What are some questions you have about that? And you need to build a team. So you go to closing. Closing comes, and like I’ve said, you’ve wired your money to the title company, not to the borrower. Closing happens once everything is signed, the note, deed of trust, things are filed, reported, wire goes out, transaction takes place. You are now the proud note holder to a piece of real estate that that real estate investor is gonna begin to renovate, to either … if they’re like us, their residential investor. Buy, fix, and flip.
Buy fix and sell. We do a lot of owner financing. We do more and more of that each and every year. But they’re gonna have some type of exit strategy. And during that time, depending what you’re agreement is, they’re gonna send you your monthly payments. This is the passive part if they’re performing. If they’re performing, it should be very passive, if they’re a good credible investor. Like I said, we’ve done hundreds of loans. Have all of our deals gone exactly the way we planned them to go? Have we ever lost money on real estate deals? We have. Yeah, we have.
It’s been a long time. We’ve really niched our model and we’ve got better and better. But in the beginning, we’re cutting our teeth. We’re doing this high end stuff, and some super low end stuff. Like we learned a lot of lessons. The marketplace gave us a lot of feedback on some things that didn’t work so well. And we’ve gained a lot of feedback on what does work well. So we just … We do those things over and over and over again. But the thing is this, is the hundreds of loans that we’ve done and the small percent, probably one to two percent that we’ve taken a loss on, have our lenders taken a loss? No.
‘Cause we’ve paid them every single penny that we promised to on that note. So it’s important that when you’re analyzing deals, you’re analyzing two things. You’re analyzing deals and you’re analyzing borrowers. What’s more important, the deal or the borrower? Yeah. So they’re of course both important. But if you have a trustworthy borrower with a track record of experience and credibility and he’s an ethical person, for the most part, you can trust he’s going to find a good deal. And if his track is for years and years and years and dozens if not hundreds of deals have always performing, pretty good chance of him performing.
You get some new person, inexperienced, you don’t know what their background is, you can be very cautious. So while the text book … if you’re reading a book like the asset, the real estate, is your security. My lenders will tell you Brant is our security. Its just the way it is. I loan out to a lot of my students and people I know. And I go on the trust factor. I know their deals. I look at their deals. But it’s like I’m investing in them. All right, so that investor takes it to the finish line, they’re either gonna sell that property or they’re gonna keep it as a rental and continue making their payments to you depending on how long whatever the terms are of that note.
And then, they’re either gonna sell it or they’re gonna refinance it. And I’ll tell you this, as long as I’ve been doing this every single lender that’s loaned to our company comes back, over and over and over again. And they usually they tell their friends, they tell their family members. Because so many people don’t really know about this investment opportunity. They really don’t, especially ten years ago when I started doing this. Very few people knew about this. Fast forward ten years later, baby boomers are retiring or have already retired. They have more education. They have a lot less trust in the stock market and they’re looking for something better.
And this is something better. One of my lenders in the book wrote like a little introduction to the book. And it’s a powerful opening to the book. And they wrote a story, and they called it, We Found a Better Way. And it’s really powerful. And he explains what this has done for them. And it can be life changing. Nate mentioned something to that effect like this is gonna be really powerful in the self directed RA used properly. It can be life changing. And I say that because of an example like this. So nine, ten years ago, one of our first loans was with an elderly lady. And she was on a very limited budget. And she decided to invest $200,000 with us, which was a lot of money for her.
But she got her education. So guess what 2,000 … I’m sorry, she invested $200,000 with us and y’all don’t understand this. $200,000 with us at 12 percent interest. We don’t pay 12 percent anymore, but we did. What does that bring to her each and every month? $2000, right? 12 percent interest only. Also, her investment, her capital, is secured. It’s not decreasing. Her nest egg, the goose that’s laying the golden egg is staying the same. What did $2,000 do for her? It paid all of her bills. Something like that …
So for some people two or three thousand dollars a month changes their lives. That’s what we’re doing with agents. If they’re making $3000 passive, it changes their life, they don’t have to pay a mortgage anymore and they can increase that. So little things like that, little things that education that you could get, will change your life, or it can. So here’s my case study. This is a case study, and this is from two weeks ago whenever I spoke in the youth mixer. I grabbed a bunch of deals that we were financing that month. And so, I’m using the same slide. But these are our deals, these are real houses that you can search and find, and tells the type of deals that they were, and the purchase price, the amount of repairs that we were doing, the loan amount, the after repaired value, and the loan to value rate.
So a couple of these are saying, “Well, why is it zero dollars?” Well the first one was a rental property that we had already owned. We had owned it for about four or five years. And the same tenant who lived there four or five years wants to own or finance it. We send out mailers to all of our tenants every year, “Hey are you interested in owner financing?” And oh, by the way, he was a tenant in the same neighborhood at another house for 20 years. So you think that’s a pretty …
So we love to owner finance properties to people like him. So that’s why … this was what we owed on the property, so we borrowed $80,000. This deal already closed. And we owner financed it to him for $115,000 at nine and a half percent interest. We borrowed at 8 percent. Is that a win/win for everybody? Win/win all across the board. Garden Arbor was another property that we actually intended to flip. We were selling on the market for 220/225, so it was fully renovated, now carpet, new tile, new granite, all that kind of stuff.
This was the … After it was on the market, we got an offer for owner finance. We got an offer conventional. We love owner finance. I’m not going into details about that. We’ll accept owner finance offers over conventional offers. And so we did. So this one’s been refinanced with one of our lenders since two weeks ago. And we’re in the process of selling it to our owner finance buyer at $220,000 at nine and a half percent interest. Pretty good?
So the next deal was a flip deal, we put it under contract, sounds kind of like Nate’s first deal he talked about earlier, $32000 purchase price, $28,000 in repairs. So it’s a $60,000 loan amount. After repair values, close to $90,000. And then this is actually, this was for one of my students who was looking for around $167,000. This deal funded by two lenders, both Quest clients, one of mine is actually a student. He used his RA and then my mother in law funded the other half. So they partnered up to fund this deal.
So this is it. I’m not gonna go into details but if you wanna come to a lunch and learn or … Quest has tons of events, or we’ve got the book coming out, which will be on Amazon. It will probably sell for 99 cents or whatever it is. I’m not plugging this thing to make money. If you’re name is not Stephen King or Oprah, I’m pretty sure you don’t make money with books. I get a check every month from Amazon, it’s like $20 or something. You’re not getting rich writing books, trust me. My return on that is probably like 50 cents an hour I’ve spent doing that stuff.
But get some education. Get some education. This is a really important number that we’ve talked about today. Typically the rule is your loan to value, you wanna be 75 percent or less. You have about 25 percent equity. I get it. This one’s 76 percent. But it’s not exact all the time. But that’s the safe zone, although nothing’s 100 percent safe with investing. But that’s a really important number. And you have to learn a little bit of math when you’re getting into this business. Thank God it’s only a little bit or I wouldn’t be in this business.
I know like five math equations and we just use them all over again. So that works out good for me. All right, so last thing and I’m gonna turn over to Brady. So we do a live event that teaches what my first book was based on called Seven Fundamentals of Real Estate, teaching you how to create clarity, vision, strong mindset, determined mindset when you go into this business, teach you how to generate deal flow, learn how to analyze deals, estimate repairs, learn how to raise capital, finance your deals, rehab deals, and then ultimately build a business with multiple exit strategies and income streams.
So we do an event, we’ve got one coming up in Houston July 27th through the 29th. It’s a three day event. We go in depth and we go long and we go pretty hard. We also have one here in Dallas in September 26th through the 29th, I think. My wife can tell you better than I can, here at Quest. We’ll hold it here if you wanna come. It’s usually $297. We put it for $197. And then we just threw on a bonus that if anyone signs up for the Quest expo today, today, then we’ll take another $100 bucks. So you come for like $100 bucks. But you gotta sign up today. And why wouldn’t you go to the Quest expo? I built my business on networking. I was a networking fool in the beginning, and I still am now.
I still have business partners and people I do business with from 11 years ago, I met my very first year in real estate. So that’s part of the beauty of networking. So EXPO is gonna be awesome. You can raise your hands if you want some information on that. My wife will pass that out and she’ll be in the back of the room after the event as well. All right. So I’m gonna turn it over to my man Brady Durr, and-