Episode 27: Designing Win-Win Investment Deals using the 90-10 Rule

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On today’s episode, the Canadian Wealth Secrets Team discusses how knowing your strengths and weaknesses as an investor can be a tool to avoid allowing greed to hold you back from opportunities to structure deals that promote strong partnerships where everybody wins. In particular, they dive into a mixed use multi-unit building held by Kyle and Matt in their North Shore Properties portfolio and how they have been sharing it with a handful of potential buyers who are strong in areas where they are weak to find a winning opportunity for everyone.

What you’ll learn:

  • How can we use “Genius Hour” or “20% time” to build weaknesses into strengths?
  • Why you should consider a Vendor-Take-Back Mortgage to grow your portfolio;
  • How to get creative on a 10-plex property so that everyone wins;
  • How to use the 90-10 rule to strengthen your investment portfolio;
  • How to use: “Just because you could doesn’t mean you should” to think about your potential investment deals;

Resources:

 

Interested in Partnership Opportunities?

For those interested in potential Joint Venture (JV) Partnerships, reach out to us here.

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00;00;00;10 - 00;00;29;17
Matt Biggley
We're really analytical people were teachers, were researchers, so we connected to the municipality there. We discovered all of these amazing grant opportunities for actually fixing and improving buildings. This building is right in the downtown core of Tilbury, and we discover there's all this amazing funding. So that was a strength of ours to find that funding and again, not necessarily a strength of ours to see that through to the point of finished construction and completion of this project.

00;00;29;17 - 00;01;01;19
Matt Biggley
So I think a good example there of how our thinking has evolved to saying we recognize the opportunity we could take the opportunity on, but should we be the ones to see this all the way through or would this opportunity make sense for someone else to take over from here? After all the heavy lifting we've done on it already?

00;01;04;03 - 00;01;08;20
Speaker 2
Welcome to the Invest a Teacher podcast with Cal Pierce, Matt Begley and John, or.

00;01;08;28 - 00;01;25;07
Matt Biggley
Get ready to be taught as we share our successes and failures encountered during our real life. Learning lessons of how to build generational wealth from the ground up. Welcome investor students to another episode of the Canadian Wealth Secrets podcast.

00;01;25;16 - 00;01;51;11
Speaker 2
All right, everybody, welcome back. If you've listened in the past, hey, if this is your first episode, we've definitely want to welcome you to the Invest Teacher podcast. In today's episode, we're going to talk about something that we've been thinking about building on, incorporating into our strategies moving forward, and that is all about kind of creating strategic partnerships around strengths, around identifying weaknesses in our skill sets.

00;01;51;11 - 00;02;10;05
Speaker 2
And I think that's a life lesson we've come to realize in not just our investment portfolios but in everything we do is where do our strengths lie and how can I play into my strengths, and then where do my weaknesses lie in my strategies or in my skill sets? And then how do I bring on the right partner or the right pull here?

00;02;10;05 - 00;02;24;19
Speaker 2
How do I fill that hole so that we can all keep moving forward? I can keep moving forward. So we're trying to think about what are those weaknesses that we can strategically build so that we have that synergy, that two plus two really equals five guys for sure.

00;02;24;19 - 00;02;44;10
Matt Biggley
For sure. And it's interesting because when you're early in your process, I'll say early, but the reality is this process can actually take many years in order to work through. And it's sort of this investor soul searching. And I think where people begin is you're interested, you're eager to learn. So you're learning over here, you're learning over there.

00;02;44;10 - 00;03;13;24
Matt Biggley
You're like, I could do this, I could do private landing, I could buy a duplex, I could do a fix and flip. I could invest in the stock market. Oh, my gosh, options. I could do all of these different things. And while I would say you want to continue learning and you want to keep an open mind, the goal should be to try to do that investor soul searching so you can actually figure out where are you best suited so that your skills, the things you bring to the table.

00;03;13;27 - 00;03;37;09
Matt Biggley
I don't want to go with this whole natural ability thing because I think a lot of it's based on your experiences in life, but it's how you think, how you live your life, how you approach situations. You want to start figuring out, Oh, it's like, where am I best suited to put my energy? And if you think about it, where can I put the least amount of energy to get the maximum amount of reward?

00;03;37;09 - 00;04;06;07
Matt Biggley
Now, I'm not saying to be lazy, but I'm just saying if you could do something over here that just feels easier to you, you might still put a lot of effort into it over here. But the reward is great, whereas over here you might see a bigger profit or you might see a bigger potential for revenue. But the reality is you might have to do way more learning or way more digging, or it might be way more stressful for you in order to get that better result at the end.

00;04;06;07 - 00;04;28;11
Matt Biggley
So the question then becomes is who are you? What should you be focusing your time and attention on? And I'll be honest and say in Guys, we met with an awesome, awesome Canadian Wealth Secrets listener for a couple beverages on Friday, and that particular person's going through this soul searching process right now where they're like, This seems great. This seems great, this seems great.

00;04;28;18 - 00;04;53;21
Matt Biggley
And ultimately, how do we get to what really will be beneficial for you as an investor to maximize your time, minimize your stress and effort, and of course, hopefully maximize that reward at the end of the tunnel? Yeah, you said it well, Kyle. I mean, real estate investing is not about self-improvement in this case. We don't want to dwell on our weaknesses and look for ways to improve those things.

00;04;54;00 - 00;05;12;29
Matt Biggley
You really want to identify what your strengths are, and it's not to say you can avoid mistakes. Mistakes are part of the learning. And even in our own investing experience, we've had to go through some things to really realize what we are and what we aren't. So when it comes time to your weaknesses, you can either leverage those through great partnerships.

00;05;12;29 - 00;05;29;22
Matt Biggley
I just had a message from a listener over on Instagram asking me about how to pick partners that we're going to jump on a call to talk about that so you can leverage out and find partners who are better at certain things than you are, or you can just really double down on your areas of strength. And I go through this with new investor clients all the time.

00;05;30;02 - 00;05;59;12
Matt Biggley
They want to explore student rentals, they want to explore flips, they want to do conversions. ADOS You know, multifamily, long term buying holds, burns. And so I have to really almost refine that for them and try to calm them down, almost to say, This is what I do and this is why I do it. And so for you, let's really think through what a fit is for your skill set, for the amount of time you're willing to dedicate to this for the team that you have in place for the available capital that you have.

00;05;59;12 - 00;06;15;01
Matt Biggley
And so I think it's actually about doubling down on your strengths. And for us, we've continued to refine what our strengths are and what our strengths aren't. And a lot of times the question is you could do something, but should you do that, something with real estate investing?

00;06;15;01 - 00;06;32;11
Speaker 2
I think that you brought up a lot of great points here. Matt, in my mind immediately went to the opposite. You know, that's my nature is to think about playing the devil's advocate, playing alternate points of view or doubling down on our strengths. And we got this going on here. And really, do we want to get into this thing over here, this new avenue?

00;06;32;11 - 00;06;49;10
Speaker 2
Is that really where we want to go? And I think where it makes a lot of sense, where you made a lot of sense is really understanding your why. And we've talked about that here on the podcast, too. It's like, really, why are we doing this? What is our objective here? And can I achieve that objective in different ways than, say, going down that path?

00;06;49;10 - 00;07;08;05
Speaker 2
Because let's be honest, none of us would be here if we didn't play into our weaknesses at some point to strengthen those weaknesses, right? I would not be here sitting with you guys if I kind of always said investing in real estate isn't my strength, and then I don't actually build that strength and make it a strength, right?

00;07;08;05 - 00;07;26;28
Speaker 2
So we do have to consider that sometimes it is worth exploring going down that weakness path. But Matt's key idea here, I think, is we have to think about what is our objective. What's that? Why is that tradeoff is my time. Those resources moved towards that avenue. Is it worth it and am I going to get enjoyment out of it?

00;07;26;28 - 00;07;47;05
Speaker 2
Am I going to get benefit out of it? Is it something I want to spend those resources on or should I play to my strengths? I think about your portfolio. Sometimes you have your portfolio. You don't want to say like, Hey, look, I've got this portfolio that has to be reliable, it has to be safe. We've got a huge percentage over here, but then I've got like this small percentage over here.

00;07;47;05 - 00;08;07;16
Speaker 2
That's my risky side, right? I get to explore and try different things. It's almost the same thing with our resources in our time and our thinking and our strategies. Hey, I might go over here and keep it my bread and butter over here, but then, hey, a little bit of my time I'm going to dedicate towards this avenue and it might pay off like, say me choosing to go, Hey, I'm going to keep teaching my math classes.

00;08;07;16 - 00;08;16;19
Speaker 2
I'm going to keep doing what I do over here in math, but I'm going to take this a little bit of time. I mean, take this a little bit of effort. There's a little bit of learning and go down this path and see where I go and boom, that one blew up.

00;08;17;08 - 00;08;39;29
Matt Biggley
I love it. It sounds a lot like that Google 10% time, right? That employees had that they could work on something that was this big idea, this project. But again, it's 10%. Don't let it take up 90% of your time. You get 10% a week and you take that time. And that's actually, I believe, how Gmail was created in 10% time by an employee at Google.

00;08;40;07 - 00;09;01;07
Matt Biggley
They were working on this little thing, and I'm sure it maybe started as a weakness and they kept going down that rabbit hole. And I really like that. And what popped into my mind, I didn't think of this before we hit record, but right away we have recently talked about how much we hate flips. Now, that doesn't mean we're never going to do flips again.

00;09;01;07 - 00;09;24;13
Matt Biggley
We've already said we still find ourselves in flips often, but really what it is on the side, we're constantly looking for better ways to do it. We know there's a missing piece, and that missing piece is somebody who knows what they're doing right when it comes to actually throwing the hammer, budgeting it out and actually doing the work within a reasonable amount of time and actually through one of our failed flips.

00;09;24;13 - 00;09;49;01
Matt Biggley
Right, John, you and I, we've actually found someone who is awesome, a good friend of mine who I knew was really great at finish carpentry, but is also really good at lining up the contractors and doing all of that work. So he's been helping us over at our property in Windsor that we're looking to do a little bit of creative fixing and rent owning, which we'll talk about in a future episode.

00;09;49;09 - 00;10;03;10
Matt Biggley
So I guess what resonates with me about what you just said, John, is it's not like we want to close the door and go like, I'm really good here and then I'm not going to learn about anything else. We just want to make sure that we don't get lost in it is sort of the key message that I'm hearing you say.

00;10;03;10 - 00;10;22;04
Matt Biggley
So it's like I want to get better at fixing flips, but I know in the meantime I want to focus most of my you talked about resources, time, energy, attention, learning. But the other one is capital, right? You have to think about, well, whatever capital I have, I want to make sure that it's the right time for that capital.

00;10;22;04 - 00;10;45;26
Matt Biggley
I also don't want to keep that capital on the sidelines while I'm just sort of aimlessly looking around at all of these other opportunities. The piece that reminds me of something I've said most often or many times on past episodes is this idea that I used to be like that home run guy, and I think a lot of people find themselves there when they're trying to figure out where their strengths are.

00;10;46;03 - 00;11;07;20
Matt Biggley
You're thinking about all of those opportunities and which ones are going to get me the best return when in reality it's like, okay, let's look at where we're strong now. Let's focus most of my energy there, most of my capital there, but I can still try to get stronger in these other areas as long as I don't let it sort of overtake everything.

00;11;07;20 - 00;11;34;23
Matt Biggley
Right? So if fixing flips is not good for Matt and I, we don't want to focus 90% of our time there. We want to focus some of our time there, but we want to continue doing the things that we already have some strengths and we already have an unfair advantage in. And let's keep pushing that forward while we try to scale up over here on the other side and I think we want to make this really concrete for listeners today by using an example of a property.

00;11;34;23 - 00;11;55;09
Matt Biggley
We've been doing a lot of thinking about. Kyle It's one that you and I own in our North Shore Properties portfolio. We've been contemplating our next steps. We've been moving this property forward. Even though this property is a pretty good representation of not necessarily something that's in our strengths or our highest and best use as real estate investors.

00;11;55;09 - 00;12;12;18
Matt Biggley
But we got this gem a number of years ago and we've continued to explore ways to maximize it, and we've gone through some really creative thinking on it. It made some great progress and most recently we had investor reach out looking for opportunities. And you shared this with them and I think you presented some great creativity to them.

00;12;12;18 - 00;12;27;29
Matt Biggley
So I want to talk about our ten Plex, our building in Tilbury, Ontario, that we picked up right at the start of the pandemic, literally March of 2020, wasn't it March 7th when it closed? It closed on March three. Things happened.

00;12;27;29 - 00;12;29;25
Speaker 2
13th. I think.

00;12;29;25 - 00;12;30;18
Matt Biggley
My birthday.

00;12;30;21 - 00;12;50;20
Speaker 2
Actually, maybe the 17th. But I remember you two approaching that you wanted to close this building fast and you were trying to get your hands on it. And we use some private money between you, Kyle and me, and we funded this building. And I remember, guys, you were like, Oh, it'll be a couple of weeks before we secure a mortgage on this property.

00;12;50;20 - 00;13;07;05
Speaker 2
We'll hold the papers for a couple of weeks here. And then COVID hit. And it was months. It was months before we could actually secure a property or a mortgage on this property. We held this money for months because no. One, the banks were not you couldn't go into a bank. It was a little bit crazy, but obviously it turned out really well for you.

00;13;07;05 - 00;13;28;16
Speaker 2
And actually, Matt, I want to ask you this question about that. Like we've been talking about strength and decision making and exploring our weaknesses. But you clearly thought that that property played into your strengths to approach it. What was it about that property that played into your strengths? Because I think at the time it was the biggest property than most number of doors that you had say, acquired.

00;13;28;17 - 00;13;36;01
Speaker 2
So what would you say, Matt, that is about that property that you were like, Guys, that's playing into our strengths. That's one that we should go for at this point.

00;13;36;01 - 00;13;58;21
Matt Biggley
So the strength here, I think John was all about identifying an opportunity, and I think it came down to two great instincts here because what we learned about this building was that the seller had gotten themselves into some trouble with a private mortgage that had been called on them and they needed to close in nine days, which is almost impossible to do.

00;13;59;02 - 00;14;23;28
Matt Biggley
So that was opportunity number one, highly, highly motivated seller in some financial difficulty, needing to close it very, very quickly. The second opportunity was that we were provided by the realtors with the commercial appraisal for this building and a commercial appraisal, if you haven't seen them before, is incredibly depth document that actually probably contained more due diligence than we would have ever been able to do on our own.

00;14;24;12 - 00;14;45;11
Matt Biggley
So we were assured of the building's value, which was almost identical to what we paid for the value. And we got to understand a lot about the inner workings of the building. And so that gave us a ton of confidence in the opportunity. And believe it or not, we bought this building without actually having physically seen it. So not something I would necessarily recommend for any of my current clients.

00;14;45;11 - 00;15;11;24
Matt Biggley
But again, we knew about the seller's motivation. We knew a lot about the building from this commercial appraisal and we also knew that it was midweek and on the weekend there were dozens of GTA based realtors driving down to see this property because of the fairly reasonable asking price and the number of units. So I literally said to the realtor, Write it up, let's get it on paper, and then we'll come out and see it afterwards.

00;15;11;24 - 00;15;32;23
Matt Biggley
It was kind of crazy and I think I probably scared Kyle and our eather partner at the time. But I think one of my strengths is in really pushing what I see an opportunity and without having to get into the analytical cycle that sometimes is real estate investors grinds our decision making to a halt. This just screamed buy, buy it fast, buy it now.

00;15;33;04 - 00;15;54;00
Matt Biggley
And that's exactly what we did. Absolutely. And at the time, one thing. So first of all, being the more conservative one, I definitely was like, ooh, okay. But I had purchased a property sight unseen myself prior to our North Shore days, so I knew what that was all about. Like you said, we had the full blown appraisal, which was great.

00;15;54;09 - 00;16;14;04
Matt Biggley
We got to go through a full building inspection report and all kinds of details there. But the part that really intrigued me was that rents were way under market and it was still what we would consider a cash flow cow at the time, right? So we were like, Oh my gosh, we knew there was going to be some CapEx expenses.

00;16;14;04 - 00;16;37;17
Matt Biggley
Over the years. We have experience with that. We had done that before. Our third partner at the time would be able to give us a sense of what's going to need work, what's not going to work and all of those things. So that was another reassurance for us because again, not my strength, not this mat strength and ultimate Lee, we were like, Wow, what an opportunity for us to lock it up.

00;16;37;27 - 00;17;07;11
Matt Biggley
Of course, with anything, there's always some risk there. But we took that risk because we hadn't seen anything like it in terms of that many units. And for that price, the part that I think was really intriguing to us, I think we would have been scared off if it was all commercial units because that we were new to commercial at the time, but it was for commercial units and six residential and that there for me really kind of tipped the scale towards what we know residential.

00;17;07;11 - 00;17;27;13
Matt Biggley
So I actually ran numbers based just on those six residential. Mike what if we can it's small town. What if we can't fill those commercial spaces? Could we get a mortgage so eventually get a real mortgage, a traditional mortgage to get rid of the private money that we're using? And would it still float with just the six units?

00;17;27;23 - 00;17;49;19
Matt Biggley
And the answer with those low rents was yes, which to me is I'm game. You know what I mean? This could take us one year. It could take us five years. It could take us forever years to get it to the place where we would like to see it. But it doesn't matter because at the time, this makes sense based on the numbers, based on what we were reading in the report.

00;17;49;19 - 00;17;57;26
Matt Biggley
And of course, just knowing and understanding the residential side and now having learned more about the commercial side as well.

00;17;58;02 - 00;18;17;25
Speaker 2
Yeah, obviously made a good decision because I think it has been a great addition to your portfolio. But what has changed? This was a great example about thinking about strategic partnerships and thinking about playing into our strengths and kind of bringing partners on to help handle or take on some of those weaknesses so that we can all kind of benefit and make everybody win here.

00;18;17;25 - 00;18;25;21
Speaker 2
So what makes this property a good example of bringing those strategic partnerships on and where's your head's at on managing this property at this point?

00;18;25;27 - 00;18;44;05
Matt Biggley
John I think this building in in Tilbury, this ten plex I think has really been a good evolution for Kyle and I over the past three and a half years as we've really focused in on what our strengths are and what they aren't. And our strengths aren't. As Kyle and I have both talked about on this show many times, we're not contractors.

00;18;44;12 - 00;19;08;00
Matt Biggley
We are not people who are going to throw a hammer around. I often joke that I'm much better with a phone than a hammer, and that's really where our no joke is. Yeah, no joke at all. No joke at all. And so I think as we started to rethink this property, some of the creativity we started think about was we've got these massive commercial units in a community where there is a major need for residential units.

00;19;08;00 - 00;19;29;21
Matt Biggley
So one of the creative ways we started to think about this property was how can we maximize the space that we have here? And so we actually have gone through the process of having plans drawn up to convert some of the commercial space to residential units. And I thought that was awesome creativity in our approach. Now we're not necessarily the guys to see that through because again, I don't like managing contractors.

00;19;29;21 - 00;19;47;02
Matt Biggley
I'm not going to be the one in there dabbling in building things. So we really had this idea hired the architect. We're in the process of that, starting to go through approvals for building permits with the town, but we're not necessarily the ones who would want to see this construction part through. So that caused some opportunity for reflection.

00;19;47;08 - 00;20;18;08
Matt Biggley
And the other creative part that we did was we're really analytical people, were teachers, were researchers, so we connected to the municipality there. We discovered all of these amazing grant opportunities for actually fixing and improving buildings. This building is right in the downtown core of Tilbury, and we discover there's all this amazing funding. So that was a strength of ours to find that funding and again, not necessarily a strength of ours to see that through to the point of finished construction and completion of this project.

00;20;18;08 - 00;20;38;16
Matt Biggley
So I think a good example there of how our thinking has evolved to saying we recognize the opportunity, we could take the opportunity on, but should we be the ones to see this all the way through or would this opportunity make sense for someone else to take over from here? After all the heavy lifting we've done on it already?

00;20;38;16 - 00;20;59;17
Matt Biggley
Yeah, exactly. And I'm so happy you mentioned even the rebate part because that's such a low hanging fruit. And I just pulled it up on my screen because I was like, Oh yeah, I forgot about that. But we're talking about some significant rebates that are available in order to do things like improving the facade of this building, adding residential units or improving residential units so that they become livable.

00;20;59;27 - 00;21;26;12
Matt Biggley
And there's a good chunk of cash, I'm going to say, closing and 100 grand of rebates available. So there is potential still here, so much potential. And it kind of brings us back to the whole purpose of this episode is, again, what is our strength and is it worth our time and effort to focus more than we'll call it the 10% time to trying to really push this thing through?

00;21;26;19 - 00;21;53;02
Matt Biggley
I'm going to argue at the end of the day, from a profit perspective, it could be worth it if that's all that matters. But if it means having the hassle, the stress, the anxiety, like you said, Matt, we're not huge fans of managing contractors or dealing with contractors, and I'm hoping that we find that person and actually, J.R., our guy that I had mentioned earlier in the episode, great friend and who's doing a great job right now on our single family home.

00;21;53;15 - 00;22;17;20
Matt Biggley
He's looking to be someone who may be able to kind of allow us to enter into some of these other areas. Now, with this building, we've got plans to add four residential units to this thing and still maintain within the four commercial units that one commercial unit you had talked about there, Matt, is massive for a Main Streets commercial front sort of store or restaurant.

00;22;17;20 - 00;22;35;13
Matt Biggley
And so it just makes perfect sense. So there is so much potential there. And it's just again, one of those things that we just have a few pieces that aren't in place for us to go. Yep, let's you and I do this now. Slowly but surely we're going to keep on working on this thing because again, the building, it is a gem.

00;22;35;13 - 00;22;57;15
Matt Biggley
It's great. And we have no real rush or need to sort of move this building on. But what we're trying to get at in this episode is if you can find that person, that partner. So Matt, you had reference I walked through with a potential interested buyer. If that person is like, Wow, this is perfect for me. And we structure that deal.

00;22;57;15 - 00;23;20;01
Matt Biggley
We have some suggestions for that particular person based on that person's strengths. I tried to go back to the table and go, Okay, well how do I design this so that Matt North Shore Properties is going to benefit and this new buyer is going to benefit as well. So we look at that potential buyer and we say, okay, what is it that you're really good at?

00;23;20;09 - 00;23;42;29
Matt Biggley
What is it that you're trying to achieve here? How do we help you with that? Luckily, this particular person loves the idea of improving. So if we can give you an opportunity to improve and put us in a position where we feel like we've gained some benefit from holding and owning this building and doing the improvements, we've done, things like the roof and we've improved.

00;23;42;29 - 00;24;07;12
Matt Biggley
I think it was three of the residential units so that rents have more than doubled there. There's still some meat left on the bone. When you get that person who's eager to take 90% of their time and put it towards the things that we're only interested to put 10% of our time into, There is so much potential there, as long as both sides don't get too greedy in this situation.

00;24;07;12 - 00;24;31;07
Matt Biggley
So for us, we're going, listen, we could just list this property and then have to deal with all kinds of inquiries, with all kinds of people who may or may not be a good fit for this building. Or we just take our 10% time. And when we find an interested person that has that skill set and that interest to dig in here, we then dig in with them and say, Hey, listen, can we make this work?

00;24;31;07 - 00;24;39;20
Matt Biggley
Does it make sense? And if so, let's do it and let's get creative. And if not, it's fine too, and we'll just hang on and roll along.

00;24;39;28 - 00;24;57;04
Speaker 2
Yeah. And I think what I'm hearing is you could be going down the 10% path with this property because you've got some plans in place, but you've also kind of exploring, hey, if the right person came in and wanted to get in on this particular property because they had strengths that could add to it, there could be a win win here.

00;24;57;18 - 00;25;24;18
Speaker 2
And I'm curious on, say, some creative strategies in this particular case, because I think and we've talked about this before, about being creative deals aren't just bound, they're made. So I'm curious about I think some folks listening are thinking, well, if I am creative enough or am handy or am willing to go down that path because my strength is on looking at improving particular units and I would want to take that on.

00;25;24;18 - 00;25;50;24
Speaker 2
Is there only option to say, Look, I'm going to purchase it directly from you and I now own it and see you later guys, or what other options have you explored already that can help someone go like, Hey, I don't have to exactly do this. The traditional exact way that I think has to happen. If I wanted to get in on this property or if I wanted to kind of take this on in this project on.

00;25;51;00 - 00;26;12;03
Matt Biggley
One of the things I love about real estate investors as a group of people is that they are very creative and they use a lot of imaginations to get things done so different than when you're buying your own personal residence or when you're dealing in residential resale real estate or new construction. Because by the very nature of oftentimes being self-employed, real estate investors need to be creative people.

00;26;12;03 - 00;26;36;10
Matt Biggley
They need to really be able to think things through. And that's one of Kyle's strengths. I really love that. And so, Kyle, when we thought about how to present this in a way that could be a win win for strategic partners with this building, you came up with some really great ideas, including a vendor take back option, want to make sure that everyone really understands what a vendor takeback is, and then maybe you could help us frame what it looked like in this particular case.

00;26;36;19 - 00;26;55;25
Matt Biggley
Yeah, for sure. For sure. So a vendor takeback, typically it's one of our favorite creative sort of strategy is typically when buying properties. That's where we like to go first is go, Hey, if we can get creative with the seller now, typically the seller would have to have a decent chunk of equity in the property that they're selling.

00;26;55;25 - 00;27;20;24
Matt Biggley
So for example, if they only have 20% equity, they have an 80% loan to value mortgage on the property, probably going to be a little bit harder, right? Because they don't have a lot of money in the property. They could still work for something like a small second mortgage, Right. Where they basically are going to handle they're basically going to let you borrow their money in order to help fund the deal.

00;27;21;00 - 00;27;42;08
Matt Biggley
Now, in this particular case, because we strategically designed to have a very low mortgage on this particular building, we have a lot of equity in this building now, some of you are shaking your heads and you're going like, guys, that's debt equity. You guys told us not to leave that equity there. Right. And that's exactly why we're on this path right now.

00;27;42;08 - 00;28;05;04
Matt Biggley
Is we could go to a bank and we could say, hey, refinance this entire property and give us money. But the interest rates are really high right now and we personally don't have a deal on the table right now that requires all of that equity. So kind of two negatives for us to go that route, we could do it and we will eventually do it, but we don't need to right now.

00;28;05;04 - 00;28;31;17
Matt Biggley
We're like, let's just cash flow on this thing and be happy. But because we have that equity, this particular investor who is interested was trying to think of like, how am I going to put the money together? There's going to be a lot of renovation costs. And we had floated this idea that, hey, listen, we could if you put down this amount of money and for us it was a 30% down payment, which is pretty typical for a building, a commercial building of this size.

00;28;31;17 - 00;28;56;21
Matt Biggley
We will essentially fund the rest and we will work on the terms of the agreement to make it work. So we'd pick an interest rate and if it made sense for them, which it does in this case, we would even make it an interest only loans. So they're not paying any principal pay down. They're just paying interest until they can stabilize the building with all the renovations that they were going to put in.

00;28;56;21 - 00;29;20;15
Matt Biggley
So that's the general idea of a vendor take back. Now you're dealing with the seller and they're going to be the primary lender in this particular case. And that could potentially allow for a deal to happen. We've used them in the past as the buyer, and they're so helpful because of a couple of things. Not only can you negotiate the terms a little more flexibly, right?

00;29;20;15 - 00;29;36;05
Matt Biggley
You try to figure out, hey, what's the seller going to do? In one case, we had a seller who said, I just want to get out. I've been in this business for 30 years and I want to retire and I just want a payment every month and that's it. I don't want to deal with hassle, no problem. What were you going to invest in?

00;29;36;05 - 00;30;00;00
Matt Biggley
They were going to go guy. So we looked at the see rate. We said, Hey, here's the GRC rate. How about you hold the mortgage and then we will pay you that same rate. And guess what? If we mess up, you get to take your building back. That seems like a pretty cool little upside here. So with vendor take backs and creativity, there's so many different ways that this can happen.

00;30;00;00 - 00;30;26;11
Matt Biggley
And another creative option that has come to me since is if someone came to us and said, Hey, listen, I'm perfect for this building. How do we both benefit? How do we partner on this? And we go, okay, well, let's decide what's the value of the building now? And then you go and you follow through with that 10% time, you make it 90% of your time and make this building the 14 unit building that we see it as.

00;30;26;17 - 00;30;49;12
Matt Biggley
And then we get it reappraise based and then we go, Hey, we'll split on the equity improvements that were made, right? So we can split on the cost of renovations and we'll split on the equity improvement. And now we've got this whoa, really creative joint venture happening here on that particular property. So there's so many ways that we can get creative.

00;30;49;12 - 00;31;23;00
Matt Biggley
And I think ultimately for me, as we wrap this episode is what we want you to think about as you're listening is where are your strengths, where should you be spending 90% of your time now? Where should you be really focusing that energy? And then what are you going to commit the 10% time to? Because right now, if you're looking at five different things and you're going 20%, 20%, 20%, 20, and you're just spreading it all out, it's going to take you five times longer in order to get to the place where you're ready to act on any of those five things.

00;31;23;08 - 00;31;50;13
Matt Biggley
But imagine 90% in the thing that you feel like is your strength right now. And then 10% over here, you can act on this a lot faster. And then over here you can prep yourself. You can get yourself in a position so that, hey, when this starts bringing in some benefit, be it equity, cash flow, principal pay down, whatever it is that you're doing, you'll then be getting yourself prepared to maybe dive in in this other area over here.

00;31;50;18 - 00;31;55;07
Matt Biggley
How about you, John? What would be a big takeaway for you after having this chat on this episode?

00;31;55;13 - 00;32;21;07
Speaker 2
Yeah, other than you're deciding on your 9010, which is that y moment, it's like, what are my objectives? What are my goals here? Thinking about your 90% and then your 10% kind of exploration time? My big takeaway is being open to strategic partnerships and thinking about how to benefit from the wisdom, from the experience, from the expertise of a potential partner to actually make the two plus two equals five.

00;32;21;07 - 00;32;37;22
Speaker 2
And both of you grow in a win win situation. So I think strategic partnership in looking for those strategic partnerships are so important. You don't want to be in a position where like, I'm really just looking for the money and you want to think about what else can I do, How can I be creative here? So I do create a win win.

00;32;37;22 - 00;32;56;29
Speaker 2
I think we were exploring a deal where this possible partner was looking for some capital investment into the venture that they were looking for. It wasn't the right fit for us because it wasn't in our wheelhouse, wasn't in our 90%, and we weren't dedicated to spending our 10% on that avenue. It just wasn't where we wanted to go.

00;32;57;08 - 00;33;27;13
Speaker 2
And our recommendation was for this particular individual to say, you're looking for some capital investment only, but what you might want to do is think about capital plus something else. What other option or what other toolset can your capital investor bring into the scenario so that you can do the two plus two equals five? Because if you don't, if you don't look at that strategic partnership, you're really just doing two plus two is four and not getting that extra bump in that area that could fill a hole or fill that weakness.

00;33;27;13 - 00;33;30;22
Speaker 2
So look for strategic partnerships is my big takeaway, gentlemen.

00;33;31;02 - 00;33;48;14
Matt Biggley
I love that, John. I think that represents a real maturation of our thinking as investors. But I think with investing just because you could doesn't mean you should. And I think this is about really clarifying what your strengths are and doubling down on those. And you can either leverage out those weaknesses through strategic partnerships or just avoid them altogether.

00;33;48;14 - 00;34;12;01
Matt Biggley
But let's get clarity, let's get focused so that you can be sure that the time, energy and capital you're dumping into investing is used to its highest and best use. I love it, my friends. Hey, if you've been listening to this and if you feel that you're gaining some value one way you can quickly assess that is thinking about in maybe even writing down before you click play on an episode, where's your head at?

00;34;12;01 - 00;34;32;22
Matt Biggley
Where are you thinking? And then writing down how you feel at the end of the episode. If you feel like you're further ahead, then you gain some value here and we're wondering if you could do us this big massive favor, not just for us, but for other friends like you who want to benefit, want to push forward in their wealth building journey.

00;34;32;28 - 00;34;56;02
Matt Biggley
You can help them find us by giving us a five star rating and review. Actually, any star rating and review whatever you think is valid and appropriate, a rating and review on podcasts or whatever platform that you're on. It really helps us to reach a wider audience and will keep us motivated to keep these shows coming along every week.

00;34;56;19 - 00;35;17;27
Speaker 2
All links and resources and the complete transcript of this episode can be found over on our website. Invest in TerraCom and in particular, invest in teacher Gqom forward slash episode 27 that is investor teacher dotcom forward slash Episode 27. That's where you will find all the links, all the resources from this episode.

00;35;17;27 - 00;35;40;18
Matt Biggley
Today we invite you to also visit investor teacher, dotcom forward slash books for a list of the best investing books that we have compiled to share with you. We are all learners here. We love to learn and learning from others can allow you to flatten that learning curve and get on the path to success. So that's invested. TerraCom Forward slash books.

00;35;41;01 - 00;36;18;21
Matt Biggley
If you are interested in a conversation about a strategic partnership with us, also called a Joint Venture, we'd love you to visit invested TerraCom forward slash JD that will bring you to a link where you can tell us a little bit about yourself, your strengths and your interests in a partnership that's invested. TerraCom for Agave. All right, invested students class dismissed.

00;36;18;21 - 00;36;33;13
Matt Biggley
The content is for informational purposes only. You should not construe any such information or other material as legal tax. Invest, statement, financial or other advice.

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