EP 306 – Mistakes, Multifamily And Raising Capital with Tyler Sheff

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NCS 306 | Multifamily Market And Raising Capital

 

Trying to come up with a way to reduce taxes, Tyler Sheff started researching how to do that legally. The only thing he came back with was buy real estate and hang onto it. That’s what he started doing. Scott interviews real estate and note investor, Tyler Sheff, about some of the mistakes that he has made over the years, along with the multifamily market and raising capital. Tyler is a successful real estate investor and runs a podcast called The Cash Flow Guys Podcast. He focuses a lot on notes and multifamily, and raising capital in markets where a lot of people see some interest and where a lot of note investors are coming from.

Listen to the podcast here:

Mistakes, Multifamily And Raising Capital with Tyler Sheff

I’m extremely jacked up to have Tyler Sheff, from The Cash Flow Guys Podcast join us as a special guest. Thank you for joining us here. For those who don’t know Tyler, he is a very successful real estate investor. He also runs an amazing podcast called The Cash Flow Guys Podcast. He focuses a lot on notes and multifamily. I thought we’d have him come on here to talk a little bit about the multifamily market because that’s where a lot of people see some interest. That’s where we see a lot of note investors coming from. He’ll talk about some of the tips that you use to raise private capital. Tyler, why don’t you share a little bit about your background? How you got started and what you’re doing now?

I’ve done this twice, what I call my second rodeo so to speak or my second act. One of my audience said, “This is your second act.” The first act, I was a house flipper. I was the guy that bought houses, fixed them up, and flipped them. I got good at it, I got real cocky, and then got what they call a seminar. I got an education as I didn’t have to necessarily write a check to an educator for it. I wrote a check to a lot of different people because I made a few mistakes, paid a lot of taxes and did all that good stuff. I got out of the real estate business, luckily before the market crashed, not because I saw it coming. I got out because basically we had a couple of flips go wildly wrong. I lost a bunch of money, and I’ve decided that I wanted to cash out.

I rented up all my flips, put tenants in them, and held them for a year. The property value went up 25%, I cashed out. The problem is, it didn’t allow for the taxes on that. Apparently, there’s no room on the 1040EZ form to sell a couple of dozen houses. That was a problem. My charm does not work with the IRS, they’re not very happy people. “You got the checks in the mail guys. I’ve already mailed my check for this year.” I get it. I know it’s not a big one. I’ll try harder next year. I’ve done the best I can. Long story short, I got out of flipping. I went to work for the government mainly because my wife said I needed to go get a job. The problem there, I made a lot of money because I started at $30,000 a year.

When you worked for the federal government as an employee, if you show up on time and basically even try, they’ll keep promoting you. I went from $30,000 a year into the six figures inside of two, three years, which created another tax problem. I’m getting paid by the government but giving the other side all my money. I had to come up with a way to reduce my taxes. I started researching how to do that legally since Tyler’s charm does not work on that anyway. The only thing I came back with was buy real estate and hang onto it. That’s what I started doing.

Let’s talk about that class you didn’t have to take that you paid for. It’s a very similar road I got to doing fix and flips and started getting outside of my bread and butter. I started getting excited about bigger rehabs, sitting on the market longer than expected, more in rehab costs and stuff. It literally killed me for the most part. Is that something similar for you?

I bit off more than I can chew. We were doing a lot of volume, we weren’t systematizing things. We had three partners. The one that went haywire was three of us. One was a contractor. He was a friend so we never bothered to check his license. We come to find out after he opens up this big 3,000-square foot Victorian and starts working on it that he doesn’t have a license. He also helped himself to $250,000 of our money. One of my partners was the financial guy. He was the guy that had the money. I brought the deals and did all the chopping and the selling of the property, the whole nine yards. The third guy was the contractor dude. He has no license. The city found out. They came in and red tagged us, and it was a nightmare. I lost $250,000 in one deal. That hurt. I’m a realtor as well so I would go sell a house, get my measly tip money at 3% commission. I would take that, go buy drywall and paint and that’s what we had to work on. He would go do a service upgrade, he was an electrician. He would do a service upgrade and whatever cash he could grab, he would put into the deal. It was a train wreck, lesson learned.

What advice can you give to real estate investors out there? What’s the biggest thing on here?

NCS 306 | Multifamily Market And Raising Capital

Multifamily Market And Raising Capital: Have written documentation and paperwork, and put some agreements in place of whose responsibilities were what and who controls the money.

Really have a written documentation or paperwork. Had we had an operating agreement or some agreements in place of whose responsibilities were what, who controls the money. It would have triggered some thought process. Who should control the money? Technically, the guy that brought the money. In that case, me being the one doing the buying, there was no reason for the contractor partner to have access to the money. I’m bonded by the state and all this, I got good credit and all these good things. If the two of us would have maintained the money, we never would have had the problem. We let that friendship get in the way unfortunately and that’s a big lesson learned.

We see that with a lot of people, “I’m a partner with my good friend. No, we’re good. We’re friendly.” The biggest words I could share with anybody, nothing ends in a good nature. Nothing ends on a good note.

Trust and verify, document everything. I made it a practice in my business and I tell people when I bring capital on to do a deal or something, I warn people up front, “There’s a lot of paperwork. We use attorneys, we don’t guess. We hire the best people on our team, that’s how we make money. That’s how we stay safe as we hire good people and that includes our legal team. You should have your own attorney. Let’s get paperwork drafted up that everybody agrees on, everybody signs and we’re good.” If there’s a problem, we have something to refer back to, “We talked about this and here’s what we all signed. I don’t like it either, but we got to go with this.”

Minutes are important when you’re having a meeting, definitely. We use Laughlin Associates for a lot of our stuff on an annual basis and constantly on the phone over there. “What did you go through this week or this month? What things did you have?” That documentary thing, it’s important. CYA, cover your assets. You’ve made mistakes. Everybody who’s been in real estate longer than one market turn has had ups and had downs. You’ve learned from your mistakes. Fast forward, how’d you get into multifamily?

Multifamily was a fluke. My wife fell in love with this little duplex that she has loved since she was a kid. It’s right on the ocean, a beautiful place. It was two units. Initially, I was scared of it but it made sense. That duplex could allow us to afford at the time to live on the ocean. I negotiated a great deal. Right before we close, the seller flaked out on us and basically canceled the contract. I had taught myself the concept of economies of scale. It’s better to have two tenants paying the rent than one. Considering I’m one of those tenants, I don’t have to pay as much rent. That’s not a bad thing.

For us it was more of a house hacking type of thing getting started. My mortgage broker said, “You’re a veteran. You can buy up to four units with your VA mortgage.” My first multifamily, that fourplex, that bad boy brings me home a net of over $5,000 a month. We got out of the rat race in that matter of a month because we didn’t have any real debt. You do one good deal using the VA loan as a veteran or FHA, if you’re that type of person. You do it right, you just change the use to increase the profit margins. We made a killing off that. We still own it now.

You love doing that, finding different multifamilies on the duplex, fourplex, triplex aspect or do you do some bigger development of bigger units?

We do both. We’ve got some large developments up in Memphis, Tennessee, several buildings up there. We got good management and good teams up in Memphis that helps. Down here, it’s more of a boutique type, smaller asset type of thing. There, it’s more low income housing. It’s a delicate mix of both. The reason why we can be successful in Memphis is because of our team. Here, we’re a lot of the management. We’re using vacation rentals and things like that. The management is more of an online type of thing. It’s not person-to-person like you give the traditional property manager. I usually tell people find a niche that fits you the best, which that’s necessarily the advice I’m taking myself. When I’m working with a client or working with an asset myself, I do better with people that are like me because I understand me. I understand what I would want. For example, I wouldn’t do an ocean front mansion because I’m not a guy that would live in an ocean front mansion. It’s out of my budget. I don’t understand the needs of that type of tenant. The same goes with the low-income housing. I’m not a low income guy. I’m your regular, average, middle of the road dude. I get me. I am Joe six-pack.

Where do you see the multifamily market now? I get phone calls every day from people. “Do you have any multifamily notes that I could buy?” I’m like, “No. If I did, I’d buy them myself.” We were talking when you had me on your show, we were talking about you’re looking at some deals, you’re not seeing stuff that makes sense for you.” Is the multifamily market way overpriced for the most part?

When you’re looking at the market, yes. Here’s what’s changed. Technology is what’s changed things and let me explain. Back in the day when I first started doing this in the single family space, the MLS was a big fat book. Information didn’t travel as fast as it does now. When the opportunity comes available, everybody finds out about it instantly. The key is, and what’s been the key to our success, is finding opportunities that are not for sale. Half the time when we’re sitting in front of a seller, we’re the only people in the game, and I learned that from one of my mentors, Larry Harbolt. We are it. They don’t even know it’s for sale half the time. All they know is that they have a problem, and Tyler and Jill are people that solve problems. Just like you do with notes, and that we do with notes, you’re solving a problem. I don’t buy properties that are for sale, generally. That helps us out quite a bit. Technology educates people that there are a lot more solutions than just Tyler out there. It’s like, “There’s a Scott, there’s a Jimmy and a Susie, and everybody.”

That’s a good point though. Your marketing is for folks that aren’t on the MLS, they’re not listed. You’re going opposite of where everybody else is, you’re not going after the low-hanging fruit and that’s the biggest thing we see. Technology is only speeding things up. That means you’ve got to change what you’re doing and changing your focus. One of the best things I’ve ever heard and I’ve heard Larry say that, too, I’ve heard other people say, “Go where there are not people looking for you.” Make an offer to the people that have something. Maybe they don’t have it listed, but I guarantee a lot of times people are tired landlords especially on the smaller where they don’t have an onsite management a lot of times. There are a lot of mom and pop managers there.

The one thing that people miss is, when in recorded history have you ever seen any property ever, whether it be for sale by owner or listed by a broker, when does it ever advertise as a good deal? Do they go on the MLS and say, “This one’s $600,000 behind value,” or the owner says, “You give me a cheeseburger, this house is yours.” You don’t see that. Why would they do that? You can’t get mad that you can’t find a deal because you’re not even looking for one. If you’re looking on Craigslist, you’re dealing with a wholesaler. I don’t have to tell you, that dude needs to get paid. He wants $20,000 for his mobile home that’s turned upside down from the last storm.

You’re in the Tampa market, just so everybody knows. You raised a lot of capital for different projects. What are some of the things that helped you get good at raising capital with people? Maybe we can give some pointers to our note nation followers out there.

Probably the number one thing that’s helped me is that people know that I have the ability to solve problems. Not necessarily that I have all the answers, it’s that I surround myself with the people that do. I am the average dude, as I have said earlier, but I’ve been able, over trial and error to find a great team of people behind me. People that I can leverage their resources. You are known as an expert in the note business. Paige is coming up into that space in note business, my partner there. Having the ability to work with people like you guys, that makes me a problem solver. I can come to you with a note problem and you’re going to know what to do. It makes sense for me when I’m representing my investors, they look at that and go, “I don’t have to worry about Tyler calling me going, ‘We need more money. I bought a Lambo instead of paying you,” or whatever the thing is, or “I thought it was going to be a 30 cap, but it didn’t work out that way.”

NCS 306 | Multifamily Market And Raising Capital

Multifamily Market And Raising Capital: What makes people say no is a confused mind.

They know that we are going to leverage our resources to solve the problems for them. That’s what we’re doing when we buy for the seller. We do it for the investors. What makes people say no is a confused mind. I work with guys, other syndicators like in multifamily deals, they’re so technical and cranial, “The reverse coefficient of the negative cashflow amortization on page 742,” and the poor guy that’s got a 401(k) is going, “I don’t know what you said, but I’m afraid to ask any questions because you’ll think I’m dumb,” so they sit there and go, “I’m terrified. I’m going to say no.”

I’m like, “It’s got 324 units. We don’t care about cap rate because that’s pie in the sky. Here’s how we’re going to fix the problem. The property manager is a train wreck so we’re going to fire them. We’re going to replace them with Jimmy the Property Management Company. We’re going to make all the ugly kitchens pretty and that’s going to cost us this much money. If we do this, this and this, it’ll be worth this because on multifamily when we raised the income, we raise the value.” They get that because I keep it simple, and then I put the people in place to make it happen.

I could not agree with you more on keeping it simple because many people over think things. They want to look smart by throwing up on paper, throwing up on people. If you know there’s going to be questions, if you know there’s going to be elephants, answer those questions upfront. Don’t avoid those.

Just be honest with people.

You didn’t let your previous failure stop you from doing new deals?

Absolutely not. If there’s a mistake that could happen, I’ve done it three times because I don’t learn the first time. I wish I could lie and say, “I won’t do that again,” but no, I’ll do it at least two more times then it will sink in. My wife, she’ll do it once and not do it again. She’s smarter than I am. That’s why she controls the checkbook, I don’t.

We have a question, “Do you use LoopNet?”

LoopNet is very expensive to advertise on for the broker, first of all. Jimmy the homeowner or usually your building owner can’t advertise there himself in most cases. Since it’s expensive, what that tells me is if it’s on LoopNet, there is obviously a problem. The broker is desperate because he has to pay hundreds of dollars a month to maintain that account. That thing’s been sitting for a while. We do use LoopNet from time-to-time because what we find is that there are leftovers. When there are leftovers, that means nobody else wanted them. The next question I ask myself is, “Why doesn’t anybody else want them?” There’s more to it than why it’s overpriced.

Why is it overpriced? The guy needs surgery or he got himself in over his head on another deal and he’s trying to bail himself out. He’s trying to retire and he thinks to retire, he needs $1 million. He doesn’t. He needs an asset that produces the equivalent of $1 million in monthly payments. We’d dig past that. I can tell you that LoopNet, if you look at it from a way as a glaring place to find problems, you can find a lot of opportunity on LoopNet, but you’re going to have to work for it. You can’t get mad but it’s $1 million and it’s worth $200,000. Just look past that. Dive straight in and go, “Let’s get to brass tacks. Why have we been for sale for seventeen years? Let’s have that conversation. I understand you want $1 million, but this is a 600 square foot trailer and it’s on its side and I’m pretty sure it’s on fire. With that said, what do the $1 million will do for you?” It’s absolutely a great source.

You can’t look at LoopNet as, “I’m going to pay retail on that.” You hit that nail on the head. It’s a place to find problems. We’ve used LoopNet to identify distressed properties, there’s something distressed about it and then reaching out to the bank a lot of times and buying the debt directly at a discount or getting the true story and we’ll be able to bookend that deal in a lot of cases, especially when we get a portfolio of commercial loans. We’ll see some of them listed on LoopNet like, “Now we have a buyer, seller or owner who’s interested in this thing, it’s just that that those numbers aren’t going to work for us. We can’t buy the debt and then come back with more of a creative solution.” We have a question, “What class a property did you acquire getting started? How do you classify properties A, B, C or D?”

I learned this from one of my mentors. A, B, C, D basically goes like this. A is Nordstrom. When you buy a white shirt at Nordstrom, it’ll cost you $124. The guy will probably shine your shoes while you’re trying on the shirt, and they’ll deliver you a nice cup of espresso. B class is more like your Target. You can still get a cup of espresso, but you’ve got to go to the Starbucks store indoors and it’s in a little paper cup. Our C class will be Walmart. You can get espresso at Walmart, it comes in a bag. You have to buy the espresso bean, take it home and brew it yourself. D-class, there’s no espresso. That is the dollar store. There’s no espresso at the dollar store, but you can still get a cup of coffee or the same thing. That’s how I look at markets. Starting out, find the class that fits you the best. If you are like me, I’m your average, run of the mill guy. I’m somewhere in the middle between Walmart and Target.

NCS 306 | Multifamily Market And Raising Capital

Multifamily Market And Raising Capital: Stick with what closely matches your own self. If you’re a B class type person, then serve B class type tenants.

If you buy assets that are similar to you, if you’re a middle-class America, then focus on the C and D-class stuff. With that said, taking my own advice from earlier, if you have amazing management, which is very challenging to come up with, this is why I like notes and multifamily. If you can find management that you’re 100% confident, knows, likes and understands the client base, then great. Ask yourself this question, “If they leave it, closed their doors, retire, then what are you going to do?” I say stick with what closely matches your own self. If you’re a B class type person, then serve B class type tenants. If you’re a C-class type person, serve C-class type tenants.

Let’s talk about your transition to the note side.

I didn’t realize, number one, the amount of control. When Paige first came to me with notes, it made no sense. I thought she was drunk. I’m like, “Why would I buy paper that somebody else stopped paying on? That’s like buying a mobile home that’s on fire, or an apartment building. Why would I do that?” What I didn’t realize is the spread that’s there. Depending on what you’re buying, spreads can be huge in a lot of cases. The difference is that you have many different options available to you and you’re the bank, which means you’re in complete control. Call Bank of America and try to give them any school of instruction. Call Bank of America and tell them that you don’t want to pay that $16 account fee. You’re not going to pay it. What Bank of America is going to say is, “We already sucked it out of your account during this phone call.” The bank always runs the show.

When you’re in a position to where you’re investing in things where you have complete control, you’ve got so many different options and you’re coming in lightly leveraged. What’s your loan to value ratios? The average buy and hold investor comes in at 100% of value. They’re buying at 100% of face value. Even if you were half asleep as a note investor and you were a terrible negotiator, you’re definitely going to be buying at some discount. Even the website ones offer some discount off of face value, so you’re automatically ahead of the game from day one and then scaling it from there, no matter what. You’ve got the court, the judges, everybody is on your side. You can completely crush what big banks do.

Scott, how long does it take you to process a short sale? Last time I did one, was as a realtor through Wells Fargo. It was nine months. After she explained it to me and I started following you on social media and whatnot, it’s like, “Now, I get it.” For me and my investors, they want to make sure that they are going to get a decent return on their money. They’re not going to have a lot of massive risk, tenant and mass accidents or whatever. None of that matters in the note business. John Smith is the person that is the mortgagee, I don’t care. There’s an old mafia movie I could quote where they say, “Something, something, pay me.” That’s it. It’s like, “I understand that you’re having a hard time and whatever your political affliction didn’t win office or whoever, whatever’s going on in your world, you can’t argue with this and you’ve got to pay this.” “Sorry.” “You can’t pay it? We can go to court and that’s not going to be any fun for you or better yet, we can restructure it for you. What if we do that? Make it affordable?” Every time you turn around Scott, you’re making money. It’s like, “Really?” From a guy that raises capital’s perspective, I can with a straight face say, “This makes sense. Tell me it doesn’t.” Nobody would buy bad notes.

He’s talking about the Cashflow Chick, Paige Panzarello, our friend out of Southern California. She does a great job out there. That’s the thing, the bank always wins. The bank’s going to get paid. We’ve got the flexibility. We step right into the bank shoes. We got our little options out there that are available for everybody. I got a question here for you Tyler, “Can you share about a note deal that went south and what went wrong?”

I haven’t had one that’s gone south. I’ve had one where we didn’t yield as much as we thought we were or we hope we were. Basically, what happened is, we learned that in Cleveland Heights, Ohio, they have this law that basically says if you wind up with a possession of a broken house, you get to fix it before you sell it. We got into a forced rehab. With that said, it’s not like we lost money. We haven’t sold the house yet, but we had to rehab it, so that diminished our profit margins. It’s unfortunate. It is what it is, but again, we still haven’t lost money.

Even if we lost a couple thousand dollars, it can be a lot worse in trying to flip houses and things like that. The differences in the note business, we’re not speculating. To some degree you are, but you’ve got so many different strategies. It’s not speculative like flipping houses. At the end of the day, we could always sell the paper to somebody else. We could do that right now, technically. Find somebody that’s got an IRA who wants to buy this house on terms, and it would make a nice little rental. We can still eke a yield out of this thing, not as much as we wanted to, but we’re still going to make money either way.

There are many different extra strategies for wherever your business is at or where the property is at. There’s an extra $10,000 thing with Cleveland that you’ve got to put in, $10,000 in rehabs or something like that?

It was more in the high $20,000’s or something like that.

I bought a note in Chicago, Illinois, Cook County. The UPB was still at $0.50 of $1 of true value. It’d take me about somewhere around $0.25, $0.30 of $1. It took two years to finally finish the foreclosure. The borrower pulled so many shenanigans and the foreclosure got delayed. Finally, it was approved. Now the eviction’s being delayed. The guy sued me in federal court. My attorney said, “Scott, don’t worry. I want to handle this one on my own. I’m going to go ahead and take care of this one.” “I’ve already paid you for everything.” Over $75,000 in attorney costs on this one asset. The beautiful thing is it’s worth $450,000. I’m into it for about $150,000 plus. I got plenty of profit on the backend side.

It’s a beautiful house. It was a nice area there. It’s got another property that I got with it. That was cross collateralized worth about $150,000 as well. That’s one big thing. I would have talked more to my attorneys in Chicago before purchasing that one. It was a pool of ten. We bought it a great deal. I’m going to probably lose money on the deal as a whole deal, but I’m getting my investors all paid back plus their 12% interest and stuff like that. Just don’t buy in Chicago. I bought in Illinois before, which was great. Illinois is great, Lake County is great, but don’t buy in Cook County. I’d buy in Florida. I love God’s Waiting Room. I’ve made a lot of money down in Florida over the years. Where do you see the opportunities? I know you talked with a lot of guys. Where do you think you see the most amount of opportunity is in the market now?

NCS 306 | Multifamily Market And Raising Capital

Multifamily Market And Raising Capital: Focus on the problems and where the people with problems are.

I got to say the note business. It’s the one thing that just keeps churning and churning. You started reading some of the reports that are out there, of the sheer amount of nonperforming notes that are available to the marketplace. At the end of the day, you’re never going to run out of inventory of anything. It depends on how you go about it and attack it. If you stay focused 100% on finding problems, I don’t care whether it be notes, multifamily, single family, mobile homes, parks, office, whatever, you forget about the property, that’s the catalyst, forget about that. Focus on the problems and where the people with problems are.

I’ll tell you honestly for multifamily, the best place I get the most quality leads is I have a VA that goes and sits in eviction court for me. They write down the names and information of people in eviction court and we troll Facebook groups and look for people that are complaining about apartment buildings in certain areas. That tells me I got a management problem. I can fix a management problem. All I got to do is to let the owner know that I’m willing to take that problem away. They will usually hand to me their building on a silver platter. It’s like, “How’s that apartment ownership business going?” “Let me count the ways I hate it,” and then we make them an offer and we solve the problem. The management team, it’s like, “We took over. Bye.”

That’s one of the easiest ways to turn it around, usually the management don’t care. They don’t have somebody looking over their shoulder, so they run rapidly. One of the great things that we’ve done in the past and it’s worked well not only with multifamily, self-storage as well, is we join the states either they’re membership associations, like the Multifamily Association or the Self-Storage Owners Association. They’ll often send you a list of the members and then we would drop an email out once a month or once every two weeks to people, “Is anybody looking to get rid of something? Anybody in trouble? Anybody can’t pay their mortgage? If you are tired of being that lazy landlord or anything like that, reach out to us.” It would always yield a lead a month or a lead every other month that would turn out to often be a good deal. They get motivation and then reaching out for the debts.

One thing I’ve done in the past is I’ve put an ad out on Facebook to target renters. If you live at one of these apartment buildings and you can connect us with the owner of the property and they buy the property and your first month’s free under our ownership. The problem is, I did that with a 12-unit building and everybody wanted free rent the first month because they all claimed that they told us first. Literally, all twelve tenants found out about it. All twelve tenants notified us within three hours of each other and it’s like, “You’ve got to be kidding me? How could that even be possible?” It did. I had to give first month’s rent free to twelve people.

One of the great things that you’ve done as well is obviously you’ve got an amazing podcast. When did you start your podcast? What made you decide to do it?

I started it in 2015 mainly because I got out of the business in 2010. You get out of business, if you shut off your Facebook for a week, people forget who you are. Nobody knew who I was anymore, so I had to reestablish myself. I learned early on about raising money and the benefits of that. I had to cast a larger net to talk to more people. I got good at doing deals and negotiating and whatnot. I needed to attract capital and my podcast was a great way to get my message out to everybody. The backside of that is I was passionate about it. Number one is I started out for free and realized that isn’t going to work because all this stuff costs a lot of money to produce. I wasn’t a big fan of the $100,000 programs. I thought, “Why does it cost $100,000 to learn how to buy a $50,000 house? That doesn’t make sense. You can hire a realtor for that. I wanted to upset the apple cart a little bit and I guess I did that.

That’s been a good thing. You’ve got it going for three plus years now, well-known. Who’s your partner on it?

The Cash Flow Guys is me and Larry Harbolt. I’ve teamed up with Larry Harbolt. The courses that we sell are his stuff. That’s been out for about 37 years. It’s the stuff that still works now, that works every time. I didn’t want to be a guru, that real estate guru with the Lambo lifestyle. I know what I learned from and I’ve taken his training, it works if you do the work. It made sense. Instead of me going out and reinventing the wheel because he’s already done it, all of our smaller courses are his material. That way we can help more people learn and keep the cost realistic. In addition to that, I did start a mastermind last year which did pretty well. That’s more of a coaching product to help people build the entire business model, more than doing deals like building a business, scaling, and all that.

I’ve known Larry for years and he is one of the most knowledgeable guys, had a tremendous amount of deals, loves owner financing, and loves the note game. What’s been the most surprising thing from your podcast?

I had a guy reach out to me. He was a Russian citizen or Soviet citizen. He started listening to my podcast at episode one. He downloaded it a week after I put it out on iTunes. He somehow got it over there. Listening to my show, he did everything I said to people to do starting out. He moved here from the Soviet Union. He got himself a job, built up the capital, and bought himself his first duplex. That guy now has ten units. He quit his job. He’s financially free with ten units. That blew my mind. The guy sent me an email and I was like, “No, you’re not getting off that easy.” I got him on a Zoom session. He was shy and I wanted to record it, but he wasn’t having it. He was crying and he was passionate about it, but to know that my show would have that much of an impact on people.

In the fan mail, I get all kinds of stuff. Sometimes you feel like you’re Casey Neistat or something. I got a drone from one of my listeners. They sent me a Mavic Pro Platinum drone because I was talking on the show about how I want a drone, but I’m not buying one until I have a cash flowing asset to pay for it. I was in a dry spell, we hadn’t had any closings in a while and I kept talking about it. One day in the mail this check shows up and says, “Here, get yourself a drone.” I’ll do that. Now, I have a Mavic Pro Platinum drone. It’s cool how you can have an impact on people and you could keep people from making mistakes because I can tell them what I’ve already goofed up. “I’ve tried that four times. It totally doesn’t work. Don’t do that, but you can do this,” and I dig that. I know that I can help people save themselves a lot of heartache.

That is one of the best things when you hear people reach out, “We closed on a deal. We learned this, we followed you and this is works.” If only everybody else took action as fast as anybody else because you think about the number of downloads you have or the students that you have go through the workshops. It’s frustrating because it’s about 10% to 20% success rate with people making things happen.

That’s why with my mastermind, it’s mostly accountability. I warn people when they come in. I interview them before they’re allowed to start and if they don’t pass muster, I give them a refund and tell them to have a nice day. This is about getting over the finish line. This is not some buff and fluff type of thing. Tell me if I’m wrong, everything we do comes down to taking the action. The information is a small piece of it. It’s the action that gets you done. You’re killing it on social media because you’re putting in the hours, you’re putting in the work and you’re killing it. It comes down to doing the work.

That’s the thing. It’s not just doing the work. Everybody stumbles out of the gate. You’re going to stumble. The whole thing of embracing the suck. When we do our marketing, there are times we goof up on crap all the time. Shannon, my marketing, she probably thinks, “This guy is crazy. This guy is a freaking idiot sometimes,” but you don’t know until you run the play or you do something crazy.

My wife shakes her head a lot. The other day I saw half of what looked a big turd, so I put it on my head and snapped a picture at the store. She’s like, “What is that?” I’m like, “I’m going to tell people not to be a shithead.”

We have a question, “Is it difficult to raise capital? Are you finding people have a lot of capital sitting on the sidelines?”

What’s ironic is that money is the easiest piece of the element. Honestly, it is. Raising money is easy. It’s not rocket science. People get caught up on the fact that the money is such a limiting factor. What’s limiting about that is the belief system. Finding a good team and having opportunity to invest in, that’s the true challenge. Money is everywhere. Sometimes investors will show up. People that want to potentially invest, we go through a relationship period. I drag things out probably longer than most other people that raise money for a living because I want to understand the person. You get into a deal and you may have to make tough choices, and I want to see how that person’s going to react. Most recently, a person that we were talking to, the first thing they went to when we asked that question, “We litigate, we sue.” I’m like, “No, we don’t do that on day one. That’s like walking up to the conflict and punching somebody in the head. It’s not going to work.”

The complexity of raising money is down to the attorneys. You get with a good attorney and have them handle the legal logistics of that. It comes down to once you are in a position to where you have good opportunities or the ability to find good opportunities, finding the capital to do the deal is not hard. Sometimes I roll my eyes when people that have a lot of money think that they’re some special person because they have money. It’s like, “Yes, but your money is sitting in the bank. Therefore, it’s declining every month. You’re not as special as you thought you are. You have a bigger problem than I do because I can replace you with twenty other people, but you can’t replace me because there’s only one me.” That’s my take on it.

He who has the gold makes the rules, and the deal is the gold in now’s market, it’s not the capital. Tyler and I originally met at Podfest Expo down in Orlando. Honestly, it was a small group of us there that do anything in real estate there.

Very small. They left it up to me to recruit more real estate people.

They had a breakout session. When I talked to Chris on National Social Media Day, there were about 750 people that signed up for it over there. There was a small breakout room for real estate investors, and there were maybe 25 people in that room, and then only six, seven of us that were actually doing a podcast. Everybody else wanted to start one. The guys from Selling Sarasota started one, which was great to see them. They’ve got some good stuff. Most people, “I want to start one,” but they don’t take the action to get it done and it’s such an untapped market.

Think of it this way, the people that are successful in any element of real estate, what is the one thing they have in common?

Consistency.

That, and they’ve learned how to educate everybody else on what they need. Scott, you’re a note guy, so you need notes and capital to do what you do. I need notes, capital, multifamily, and whatever. Jill needs land leads, because she and Steve do land all over the country. They’ve got a great program on all this. They take the time out of their day to make a podcast and you do and I do to educate people on what our needs are. If we sit in a closet and just go, “I wish that a great tape that was awesome would show up my door, and then somebody would come and put a couple hundred thousand dollars my mailbox, that’d be great. Until then, I’m going to sit here in my mom’s basement, eating Cheerios.” You’re not going to get anywhere. You’re going to have to actually make a big splash. That’s the big benefit of podcasting. People don’t realize is that as a real estate investor, you need to do marketing and I don’t do direct mail. I’m not going to shell out $5,000 a month in direct marketing. Do you know what you could do with $5,000 a month with digital marketing?

I’ll give you example. We had National Social Media Day, 27 hours straight of live stream of experts. All in all, it cost us less than $2,000 for the whole thing. $2,000 for the hotel room and for the meeting space. It didn’t cost us hardly anything because we used Zoom to do it with the speakers on there. We had seven sessions. We dropped $100 in Facebook ads, for Facebook promotions on each session. Over 60,000 views and over 4,000 plus comments. It literally got the word out to a ridiculous amount of people on a small little niche aspect thing, but cheap. It’s literally cheap and got the word out. It’s what we’re looking for, our inbox are being bombarded with people that want to hit next year.

It’s more effective. How much of that costs you in postcards? If you did do postcards, what would that cost you?

$50,000. You think about that, that’s 50,000 stamps. 50,000 nickel and dime postcards you bought from PostcardMania, $100,000 to $200,000 at least.

You get 1%.

It’s all about working and showing up on a consistent basis. We’ve seen plenty of people or know plenty of people who started a podcast or started something, then after two or three episodes, they fizzled off because they weren’t focused on it. Whatever you do, marketing-wise, message-wise, be consistent with it. Get the word out because that’s half of things. People may tell you no now, but it means not now, and follow back up with your one form of fashion. I’m a big believer of everybody’s a buyer, everybody’s a seller, everybody’s a funding source. They may not fund your deal now, but they may at some point have something or they know somebody who’s got something and you want to be the first person that comes to their mind. Any final words for anybody out there, Tyler?

It all begins with taking the first step. It’s easy to sit here and watch us talk about making money in real estate, but the sad fact is unless you do something different than you did now, you’re not going to accomplish a darn thing. You can sit there and watch Scott make money and notes all day long. It’s not going to happen to you unless you pick up the phone and make friends with somebody new and bring some value to the marketplace. I love what you’re doing, Scott. You’re doing an amazing job on social media and the education front as well. Thank you for bringing that into the mix.

We bust our butt here to get it done and I’ve got a good staff that helps out with it. The same thing with you, I love what you’re doing with the podcast. I love everything I see online with you. You’re doing a great job as well and I look forward to hanging out with you. You’re going to be up in Philadelphia for the Podcast Movement?

I’m not going to go this year to the Podcast Movement. I’m going to South Dakota and Rushmore.

We have a question, “Please share with us how you are using social media to generate leads?” There’ are a couple things that we do is I use Facebook religiously. In Facebook, you can upload your audiences, you can upload email lists, you can export your LinkedIn connections, and that’s one of the things that I do religiously. It’s more targeted directly to our LinkedIn list. It’s easy to narrow down your audience and where you’re focused on and things like that with Facebook. It’s one of the biggest things. Plus, the fact that Instagram is amazing with photos, especially if you’re in type of real estate aspect of things. Instagram is critical for that because it’s photo, it’s also owned by Facebook. The Instagram TV they have coming out now is also going to change the business dramatically on Instagram. Tyler, thank you so much for joining me. Have a great day. Check out Tyler on The Cash Flow Guys Podcast, iTunes, Stitcher, all those great platforms. Check him out also online and on Facebook. Once again, Tyler, thanks so much for being an awesome guy, for being here on The Note Closers Show. Have a great day. We’ll see you all at the top everybody.

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About Tyler Sheff

NCS 306 | Multifamily Market And Raising CapitalTyler Sheff currently serves as the Chief Executive Officer (CEO) at cashflowguys.com, a company which aims to educate their clientele in investing in real estate and building long-term wealth. The Cash Flow Guys treat each client as a student, giving them the necessary tools needed to succeed as a real estate investor from the ground up. The Cash Flow Guys have one goal – to simplify the process of buying and selling real estate. Coupling his active involvement in real estate investments with his proven negotiation skills makes Sheff a valuable asset to any client. As an educator, the greatest reward Sheff gets from all this hard work is watching Cash Flow Guys students learn and ultimately become successful.

Originally from Buffalo, New York, Tyler Sheff grew up in Hamburg, NY before settling in Tarpon Springs, Florida.

Tyler Sheff’s varied career has helped pave the way for his success today. Sheff’s professional career has included time as a soldier in the US Army Military Police, a Florida Certified Police Officer and Firefighter, a Contractor, a Repair Technician, and a Boat Captain. From 2010 to 2014, Sheff took time away from real estate to work with the US Government. From 2010 to 2014, Sheff worked with the National Oceanic and Atmospheric Administration (NOAA), a federal agency focused on the condition of the oceans and the atmosphere. While out on the open water, Sheff prepared proposals and estimates for FMO Funded ship’s force projects, and, as a specific result of his efforts, the Fleet Maintenance Office was awarded over $1,000,000 in special funding. This project saved the NOAA over $525,000. During his free time on the various NOAA Ships such as Ka’imimoana, Nancy Foster and Okeanos Explorer, Sheff spent a great deal of his free time taking advanced courses in real estate and investment techniques. He also studied real estate law and settlement procedures in depth, which has solidly equipped him to best help clients with a myriad of real estate challenges and potential roadblocks.‬

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