By raising private capital, you control the flow of your money and the deals themselves. It’s the fastest way to raise money, and you can do it even hands-off. You just need to partner yourself up with the right people.
Join Ava Benesocky & August Biniaz as they talk to the CEO of Freeland Ventures and the host of the Accelerated Investor Podcast, Josh Cantwell. Discover his Seven-Step System for raising capital and what you need to do when on the phone with an investor. If you want to make money that leads to a strong wealth-building strategy, do not miss this episode.
Get in touch with Josh Cantwell:
Accelerated Investor Podcast:AcceleratedInvestorPodcast.com
Strategic Real Estate Coaching:JoshCantwellCoaching.com
If you are interested in learning more about passively investing in multifamily and Build-to-Rent properties, click here to schedule a call with the CPI Capital Team or contact us at firstname.lastname@example.org. If you like to Co-Syndicate and close on larger deal as a General Partner click here. You can read more about CPI Capital at https://www.cpicapital.ca. #avabenesocky #augustbiniaz #cpicapital
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About Josh Cantwell
Josh is a true entrepreneur and prides himself on never having had a boss in his entire adult life. A native of Northeast Ohio, Josh graduated from Baldwin Wallace College in 1998. After graduation, he obtained his Series 6, 63, 66 and life and health insurance licenses. He also worked as a Financial Advisor from 1997-2004.
Josh has vast knowledge and experience in helping to coach clients and mentor students and borrowers from across the US in finding, structuring, negotiating and closing various types of transactions for a profit. Josh
is also the host of the Accelerated Investor Podcast, which has hosted past guests like Kevin O’Leary, Barbara Corcoran, Donald Trump Jr, Jack Canfield, Rod Khleif, and JV Crum III. He is the founder of a variety of successful businesses, including Freeland Ventures, Strategic Real Estate Coach, Accelerated Investor Office, and more.
7-Step System For Raising Private Capital For Residential, Multi-Family And Large Apartments (For Resi And Apartment Investors) – Josh Cantwell
We have our guest, friend, and associate, Josh Cantwell, on the show. We were on Josh’s show.
It was a fun time being on Josh’s show. There are quite a bit of people who reached out and said, “I heard you on Josh Cantwell.” We hope to do the same for Josh. He’s on our show. You’re going to get to know the man.
He has had some tremendous guests, Donald Trump Jr. With what’s happening with Trump, I bet that he’s probably furious about having FBI agents running through his dad’s house. We won’t get into the politics side of things. Let’s start the show. Maybe we can tell our readers a little bit about Josh.
They’ve got to know about the man himself. Josh is a true entrepreneur and prides himself on never having had a boss in his entire life. Josh has vast knowledge and experience in helping to coach clients and mentor students and borrowers from across the US in finding, structuring, negotiating, and closing various types of transactions for profit.
Josh is also the host of the Accelerated Investor Podcast, which has hosted August and I, and guests like Kevin O’Leary, Barbara Corcoran, Donald Trump Jr., Jack Canfield, Rod Khleif, and JV Crum III. He’s also the Founder of a variety of successful businesses, including Freeland Ventures, Strategic Real Estate Coach, Accelerated Investor Office, and more. We’re excited to dive into this entrepreneurial mind. Josh, welcome to the show.
That’s a crazy bio. I am surprised that’s me. I appreciate you having me on this show. I’m excited to share. I love talking to an audience, especially new folks. I hope to have a positive impact on their future through this. Thanks for having me on.
We’re excited to chat with you and get things going here. Start off by telling us about your background and your start in real estate.
I’ve done eighteen major apartment syndications. We own 4,300 units of apartments. We sold off 1,300 units in 2021. We’re sitting at 3,000. We invest in what we call cashflow stable markets, which means the Midwest, South, and Southeast. We stay away from what I call boom-bust markets, which are primarily along the coastlines, like Florida, New York, New Jersey, California, and things like that. I’ve had three phases of my life, even four. Real quick, I started out when I graduated from college as a financial advisor. That’s important because I use a lot of the same strategies to raise money that I learned many years ago when I was a financial planner.
I graduated from college and got my Series 6, 66, and 63 life and health licenses. Most of my clients were 2, 3, or 4 times my age. I got very comfortable talking to people about money. I also realized when I was a financial planner that most of my successful clients owned real estate and did not have all their money in the stock market. I took notice. I started going to weekend boot camps, and I fell out of love with financial planning and fell in love with real estate even though I was 26 years old and making $200,000 a year. I didn’t care for it anymore.As a financial planner, you'll notice that your most successful clients don't have all their money in the stock market but in real estate. Click To Tweet
That wrapped up phase one of my life and moved into phase two. I started in real estate, like a lot of people, Rich Dad Poor Dad, and Multiple Streams of Income by Robert Allen. I fell in love with the concept, but I didn’t have a lot of my own money. What did I do? Like a lot of people, I wholesale properties, fixed and flipped, and did transactional stuff. That was from 2004 all the way until I got sick in 2011. We started doing pre-foreclosures in short sales before the crisis. I grew up in Cleveland. Cleveland had 10 major Fortune 500 companies leave town all at the same time, roughly within a 5-year period.
There was way more inventory than there were houses. We started looking at how we were going to get invested in real estate with no money down, and we fell in love with pre-foreclosures and short sales. We became one of the nation’s leading experts. We started flipping over 100 to 150 houses a year. When the foreclosure crisis hit, we were three years ahead of the curve. We were already teaching it. We did massive events in Vegas and Dallas and everywhere. I then got sick. In 2011, I was diagnosed with advanced pancreatic cancer. We had two small kids, and my wife was eight months pregnant with our third, and I was diagnosed with pancreatic cancer, which has just a 7% survival rate.
Not only did I realize I was in jeopardy of leaving my wife as a widow, but I also realized that my business was structured wrong because I was so transactional. I didn’t have a way to make money. The business made a lot of money when I was there. The team was working, and we were working together, but every deal was a paycheck.
I was forcibly removed from my business for 9 months, 3 or 4 months before the surgery, and another 5 months after the surgery. I could not work. August mentioned this at the beginning. Right before my surgery, I bought a couple of properties with private money, and I was able to have a JV partner manage the properties while I was sick.
We ended up selling properties that I never saw. I saw them two times, and we made about $150,000 on these couple of properties. I realized I could control the flow of money and the deal by controlling the private money and the capital. If I did that from my deathbed, essentially, I could probably repeat this if I could work. I fell in love with private money, which started phase three of my life, where I did a lot of fix and flips. I started buying lots of rentals, and then we recruited so much capital that we started our first private equity fund in 2014.
The way for us to create private money or create passive income was to lend money out. We were doing private money lending and hard money lending out of the fund. It was a very natural evolution. We had more capital than we needed, threw the capital in a fund, started lending it out, and investors got great returns.
This begins phase number four of my life, which is the phase I’m in now. My investors started saying to me, “Josh, this fund is great. What else do you got? What else do you have?” I had some friends that were in multifamily. We were underwriting some of their deals. We were funding some of them through our fund. We saw an opportunity to joint venture with them, sponsor loans, and bring in equity because these guys wanted to scale their business and needed more equity. They needed a bigger balance sheet. We had both of those. We had a big balance sheet, and we had the ability to raise a lot of capital.
Over the last few years, we’ve migrated 100% of our business to multifamily. We now own all these units. We’ve raised tons of money. We’ve wound the fund down, and finally, I’m living the life I read about in Rich Dad Poor Dad several years ago. I’m a fifteen-year overnight success with all the mistakes I’ve made and surviving major health problems.
I’m finally exactly where I wish I had started several years ago. My first piece of advice for the audience is what you learned in Rich Dad Poor Dad about cashflow, apartments, equity, and self-storage, don’t feel like you have to flip houses or do residential first. Get into commercial apartments right away because I wish I had done that.After reading Rich Dad Poor Dad, feel free to go to flipping or residential first. Just go into commercial apartments. Click To Tweet
That’s a tremendous story. There’s a lot to break down there. Imagine surviving something that has such a low rate of survival. You hear about pancreatic cancer with people like Steve Jobs and a few other very famous people.
There’s Luciano Pavarotti and Patrick Swayze.
Many famous people get it because the diagnosis is so late by the time it gets diagnosed. The symptoms are just not there, and the survival rate is slim. They’re talking about lucky and having somebody nicknamed to be lucky. To break it down a little bit more about your journey, the life-altering situation was the impetus for you to focus more on being somewhat of a hands-off investor and being involved by raising private capital.
Now you’re raising private capital. You raised a fund to do private lending, and we call those types of funds here in Canada Mortgage Investment Corporations or MICs. In the US, you created funds, so you’re lending money out, but your investors are also looking for different types of investments. Prior to that juncture, you had not syndicated any commercial real estate larger projects utilizing the private equity model GPLP model until that moment.
Now they’re coming to you. Do you have any other deals? Are you connecting with other operators who have deals who are in need of equity where you’re like, “We’ve got access to equity. We can come on and partner with you and bring you to equity.” Are you coming on as a co-GP raising capital? Are you coming on as pref equity on the capital stack? How did you structure it, trying to partner with these operators?
It’s co-GP. We got involved in underwriting, sponsoring the loan, raising capital, and also sourcing contractors and insurance. We weren’t just, “Raise money and give us equity.” These were 2 or 3 guys that I had already known in real estate for several years. A couple of them lived in my neighborhood. They had already made the pivot from resi to commercial.
They already owned a 50 unit, a 100 unit, a 200 unit, and they were like, “This is working.” They were maybe a year or two years ahead of me. It was a natural joint venture. I know a lot of guys out there who can raise a lot of capital and will be a co-GP. This was more of a natural organic relationship that I already had with these guys. We did all of that, but it was co-GP, raising capital, sponsoring the loan, and underwriting the deal. We were on all the owner calls and handled a lot of the investor relationships and continue to have those nowadays.
That’s awesome, Josh. You may have mentioned this, but what year was it when you got started in real estate?
The first property I ever bought was I was 24 years old. I bought a duplex in 2001. I went full-time into real estate in 2005. I got sick in 2011 and did my first apartment deal in 2016.
Is the business model for you and your group still partnering with operators in a co-GP structure? Is that the model you’re utilizing?
It’s morphed now. We started buying our own assets as our own GP operator sponsor. We started doing that as well. When COVID hit, we had both the JV deals, co-GP deals, and deals we were owner-operating in the Ohio market. I’m from Ohio, Cleveland, and we love Ohio because there’s a stable cashflow market, which is Cleveland, and then there’s a booming market in Columbus and Cincinnati that is just taking off, especially with the semiconductor plant. We decided that we were also going to owner-operate. We then started doing our own acquisitions, doing our own underwriting, sponsoring our loans, and recruiting our own capital. We were vertically integrated.
We were doing our own construction and our own property management for a while. We got too big, too fast, and we had to give one of those up. What we decided to do was we were going to hang our hat on the construction side of things, and we were going to give up the third-party property management to the professional third party.
We were going to manage them like a hawk, which we still do. They probably hate us for it, and we’re on top of them all the time. In the industrial Midwest, there’s not a lot of new construction, as you are aware. If you build something, it’s going to be class A. It’s going to be fairly luxurious. It’s going to be in the urban core. There’s not a lot of construction in the suburbs.
We buy firmly B class and C plus and B minus assets that we can manage to at least a B or a B plus in the suburbs. We do what I call heavy value add. When we buy them, we’re doing full turns, and we’re putting in $5,000 to $10,000 a unit, and most of that money is going into the unit itself. It’s a full gut of the kitchen, the bathroom, new flooring, stainless steel appliances, and everything. We hang our heads on construction because we knew if we did a good job of renovating the unit with lease itself, we would get a massive bump in the rent.
We’re forcing the appreciation. We’re not waiting for the market. We’re looking for that thing that’s got distressed that hasn’t been updated. We’re buying these 1970s or 1980s vintage properties, and we’re focusing and hanging our head on construction to force the value. I still have some co-GP JV deals in my portfolio, but everything we’re buying going forward is for our own account, and we’re the sponsor.
Last question on this topic, breaking down your journey, you start raising more capital, you’re partnering with sponsors, you’re doing deals, but then at some juncture, you transition to doing your own deals. To be able to do your own deals, you need to have your own acquisition team. How did you go about growing your internal company to bring on possibly an acquisition director or for yourself to get more involved on the acquisition side of things and asset management? How did you grow your company internally to be able to do asset management and acquisitions?
I’m a firm believer in partnerships. Every major business that I’ve built, and I’ve built many of them, has had a partner and at least two people. Normally, I got one person I call out of the house and one person who runs the back of the house. When you look at real estate, especially multifamily acquisitions, you typically have somebody in one swim lane. That swim lane is marketing, branding, underwriting, reviewing deals, and raising capital. It’s the front end of the business. It’s the marketing, investor recruiting, branding, working with brokers, and when deals come in, underwriting those deals, and they’re raising capital.
That’s my swim lane. My business partner, Glen, who was my business partner in the fund, is much more familiar with and an expert at construction CapEx. Glen runs our CapEx swim lane, and we hired a VP of construction that had 35 years of commercial construction experience. Once we were at scale and had enough of a CapEx budget, we knew we could afford a guy named Dave.
We could bring a guy like Dave, who had built residential assisted living from scratch. He had built apartment buildings. He had done office conversions. He had a long track record of experience. To answer your question about acquisitions, we brought in a third partner, Tyler. Tyler was our Director of Business Development in our fund, but he was an employee.
We love his work ethic. He’s a hustler, a little bit younger, and a little bit different dynamic. He was used to the mortgage origination business. We thought he would be great in acquisitions because h hustle, rock and roll, works long hours, and that type of stuff. Tyler also owned 150 units of single-family, so it wasn’t new to him. He was used to property management and asset management of his own portfolio. The good news is we had the fund, credibility, and these JV deals. When we went to talk to local brokers, there was not even a second guess of whether we could close or were a credible buyer.
Tyler just turned on the spigot of going to look for acquisitions, talking to brokers, talking to wholesalers, and making relationships with what we call the big seven commercial brokerages, including Marcus & Millichap, Colliers, and Cushman. He went to all those guys and made relationships. Because they saw what we had done in the past with the fund and with the JV deals, they started us feeding us deal flow right away. We decided to split that up.
When we split up the JV-LP split with me, Glen, and Tyler, I’m the CEO of the majority shareholder. They have minority equity, but the three of us buy all of our deals together now, allowing us to have a different swim lane that we can focus on. Tyler is the acquisition asset manager, Glen’s in construction, primarily in finance, and mine is upfront marketing, underwriting, and looking at deals. I’ve put my final blessing on every deal we buy. That has to be my final decision, and recruiting and raising all the capital is on me. That’s worked out well, and we’ve been able to scale just in the Cleveland area from 0 units to 1,400 over the last few years.
It’s all about the team, staying in your own swim lane, and making it happen.
In respect of our time, let’s switch the focus to raising capital and talk about your super system of seven steps to raising private capital. Maybe you can go over that with us.
I’m excited to hear about this Josh because that’s what I do here. That’s my swim lane. Let’s hear the goal.
We’ve raised tons of money. I’ve raised and deployed almost $100 million. All of that, to be clear, none of it is a family office, private equity, or institutional. It’s all through mom-and-pop and private investors, mostly accredited and some non-accredited. It’s all 506(b) and 506(c). We’ve raised a ton of money. We’re good at it. First of all, you have to be willing to put yourself out there. Step number one is you have to be willing to be out in the marketplace at everything you can do that’s a face-to-face networking opportunity, like seminars, Facebook groups, meetups, and live events.If you want to raise capital, you have to be willing to be out in the marketplace at everything you can do. Click To Tweet
Number one, if you’re going to raise a lot of capital, you got to talk to a lot of people, belly to belly. You got to be willing to talk to friends and family. That has to be part of it. If your friends and family aren’t willing to invest with you, you’re probably not going to convince a private investor with $10 million to invest with you or even $100,000. Step number one is what I call face-to-face, belly-to-belly networking. All of us do it. It’s the pillar and the cornerstone of what we do. That’s step number one, being out at least one event per month and preferably not at the event as an attendee but at the event as the featured speaker. There’s something different about being the guy in the front of the room than being the guy or the gal in the audience.
You’re going to recruit a lot more capital if you can get the speaking engagement. Step number one is going to the events, but get the speaking gig, get in front of the room, not a part of the audience. Step number two, we create what we call a multi-medium marketing machine. Step number two, we’re a content creation machine. We do shows like this. I’m on probably 3 to 4 or 5 shows a week. I host my own podcast, but that podcast is edited and produced by a professional firm that creates YouTube videos, blogs, blog posts, Facebook posts, Facebook group posts, and LinkedIn posts. They do it all for us. All I have to do is get on the podcast and talk, and I have to the compelling message.
Everything else that happens, from production to social media posts, and email marketing, all of that gets done by a professional content production team. It costs about $500 an episode. That’s what it costs us. If we produce 2 podcasts a week, it’s about $3,000 to $4,000 a month to have that machine just done for us.
I use a company called PodPost Media if anybody wants that introduction. I’ll let you even know who does it. All the face-to-face group stuff, preferably in the front of the room. Step number two, the content production. This is what I call the one-to-many concept. This is one of the traits. I have a whole hawk I do around not just elite real estate investors but elite entrepreneurs and any niche scale what’s called the one-to-many concept. When they open their mouth, they’re going to talk to more than one person.
They’re going to one-to-many. Whether it’s a webinar, radio show, podcast, email marketing, or social media posts, all of that is one person, me, going out to many people. I’m casting a super wide net. Step number 1 and 2 is all about that one-to-many. I want to get in front of the biggest groups I can and cast the widest net I can. With that being said, in step number three, we’ve got to have a place where these people can opt-in and engage with us while we’re sleeping.
Step number three, we’ve got to have an opt-in page or an opt-in mechanism, a website, an investor portal, or some way to collect opt-ins regardless of where you’re at like you’re walking on the beach or going out for dinner with your spouse. Whatever you’re doing, it’s available all the time. A lot of people use different software. It could be AppFolio, Syndication Pro, or a website. You’ve got to have a way for these people to opt in. One of the things that I learned long ago from a guy named Joe Polish is that marketing is sales in print.
Me and my team have written a 120-day autoresponder where we send out 2 to 3 emails a week for 120 days. This is step number four. When somebody opts in, the autoresponder happens. What we’re doing is we’re selling ourselves through an automated marketing approach. I’m not pitching a deal. I’m not selling them security or a PPM. I’m educating them while I sleep through our email autoresponder. They’re getting more episodes of our show and our YouTube channel.
We call it our nurture process here.
We nurture people through that. This is where the secret sauce comes in. In every single email, there’s a link for them to book a one-on-one call. You guys probably do something similar. Here’s the difference. A lot of people want to raise a lot of money, but they want to have a capital guy do it, have an assistant do it, or they want to do it.
This is where I take the one-to-many concept and reverse it. Now I’m going to do a one-to-one. We have the opt-in step three and the nurture campaign step number four. Step number five, I’m going to move the person in our autoresponder. I’m going to let them automatically book on my Calendly link. When they book, it automatically creates a zoom, and I get on Zoom.
Here’s the difference. When I get on Zoom, the first thing I say is, “Thanks for jumping in. I appreciate you engaging in our content. How did you learn about us?” It’s things like this. I then use the SEC, the Securities Exchange Commission, to my advantage because the SEC says that I have to have a prior existing relationship with these investors before they invest.
Even if it’s 506(c), and I don’t have to have that existing relationship, I want the existing relationship first. What I’ve found after raising money, millions of dollars, is that investors don’t want to be sold. They don’t want to be pitched. They want to make the decision on their own. They want to make the decision logically so that they feel like they made the decision to invest, not that they were pitched or sold. The first thing I say, we get on the phone, we have back-and-forth dialogue for a few minutes, but then I’m going to say something like this.
I’m going to say, “I appreciate you and all your interest in what we do. However, the SEC requires that in order for you to invest with us or even consider investing, we have to have a prior existing relationship.” When I was a financial advisor in my early twenties, I would do a fact-finding appointments. I would get to know possible prospects and everything important to them, their risk tolerance, their time horizon, what they had invested in the past, and what they are going to do with the money. It’s all these things.
“Not only is it required by the SEC, but if it’s okay with you, I’d like to learn more about you and make sure that you are a fit for what we do and make sure we’re a fit for you.” We don’t talk at all about returns. We don’t talk at all about me. We talk very little about my investments. I’ll say quickly, “I’ve done eighteen syndications. I bought 4,000 units. We’ve raised $100 million.” I now make the conversation 100% about them. I’m starting to ask some questions like, “Are you married? Do you have an accountant? Do you have an attorney? What have you invested in the past? Have you done stocks, bonds, crypto, or real estate?”
I then say, “We’re on this path now to create this prior existing relationship. What I want to do next is I want to book another Zoom call with you to learn more about you, and then I can show you one of our past deals because if you understand our past deals, the next deal’s going to look very similar.” We’re now done with step number five, which is this introductory call, but I do very little talking. Remember this, all of our audience. He who asks the questions is in control.When you get on the phone with an investor, you must remember that the one who asks the questions is in control. Click To Tweet
August and Ava, have you ever gotten on a phone with an investor and the investor’s just peppering you with questions about your deals and about yourself, and you feel like you’re on your heels, like you’re on the defensive? Why? It’s because the person asking the question is in control, and the people getting peppered with questions are not in control. I’ve realized that if I want to be in control, I need to make it all about them and be good at asking questions, “Have you invested in stocks before? Great. How long? Great. Have you invested in crypto? How did that go for you? Have you invested in real estate syndications? Great. What do you like about those investments? What do you don’t like about those investments? Who helps you make investments? What are you going to invest for? Is it geographic? What about diversification?”
I’ve got a little script I use with all these questions to remind myself about what to ask. Remember that people also love to talk about themselves. By the time we’re done with that conversation, I always have a hard stop in 30 minutes. I never let that first call go more than 30 minutes. As a matter of fact, I prefer to keep it to twenty, and I prefer to tell those people I have a hard stop. I want them to know I’m busy and don’t have time to get peppered with questions.
I got to tell everybody that Josh is dropping some real gold here. Take your notebooks out and write this down if you ever want to raise any money. Keep going, Josh.
I then go into step number two. We book another Zoom call, my assistant sends out the link and the calendar invite, and they come onto the second call. For about the first 10 or 15 minutes, I’m reminding them now of everything I learned about them because I’m taking copious notes. I’m putting it into my investor management portal. This is step number six. I now have all these notes.
When we get on the phone, I’m going to spit back to them everything I learned about them in the first meeting because now they’re going to realize I paid attention. Here’s the other part of this. I’ll give you another quickie. In the first call, I do not turn on my webcam if it’s Zoom. In the second meeting, always turn on your webcam. This goes from my experience of being single. When I was dating, I hated going to dinner with chicks because I didn’t even know if I liked them yet.
Why would I go to dinner, bury myself in an hour-and-a-half conversation, buy them wine, rack up a big bill, and then think, “What a waste of time?” Instead, I would rather get to know them a little bit, a little bite-size meeting, see if I like them and if it’s worth it to go to stamp number two. It’s the same thing with raising capital. I didn’t want to waste and spend a bunch of time in the first meeting and make myself super available when I didn’t even know if I wanted them as an investor.
In the second meeting, I turn on the webcam. We can now see each other. I’m asking questions, and I’m also then going to do a little screen share of a previous deal or a hypothetical deal. Not a current deal that I’m working on because we don’t have an existing relationship yet. I’m going to show them what we’ve done in the past, like preferred return equity, however that deal was structured. I’m going to always say in the second meeting, “It’s great to meet you. I appreciate it. If I found a deal like this, is this something that you’d be interested in learning more about?” not, “If I found a deal like this, is this something you’d be interested in investing in?”
It’s always just, “Interested in learning more about it.” If they say, “I would be interested in learning more about it,” I say, “Great.” I then almost always wrap up with this one line that says, “I appreciate it. It sounds like we might be a fit for each other, you enjoy what we’re doing, and you’re a great person. I’ve learned a lot about you.” If you have a lot of investors, which we do, this works well. “I’ve got over 300 investors. We’ve raised $80 or $100 million.” Fill in the blank with whatever you’ve raised, however many investors you have, and you say something like this, “I don’t need any more money for my investments, but you sound like a great person. If we found a deal, I could probably find a way to use your money. I don’t need it, but I could probably find a way to use it.”
Now I’ve taken all the control out of their hands because now they know that I care about them. I’ve built a relationship. I’ve asked them tons of questions about themselves. I’ve shown them a sample deal that they can earn a 20% to 25% annualized return, or maybe an 8% to 10% cash-on-cash or 12% cash-on-cash and an 18% IRR, a big return way better than the market. I’m going to pull it all away from them by saying, “I could use your money, but I don’t need it. I’m still in control.” Now we’re going to move to step number three, which is the final step number seven. I’m going to have the final call with them.
I usually book these out 2 or 3 weeks apart, just whenever. We then get to the point where I’ve got the relationship. I’m comfortable. If the SEC walked into my door, I could check the box that says I have this existing relationship. I’m going to show them that same hypothetical deal, the past deal, again. I’m going to say, “I’ve got a deal coming. I’ve got this 100-unit or 200-unit. I’m about to start raising for it.”
Let’s say we’re going to raise $5 million bucks. “I’m pretty confident if I go to raise for it, I’m going to easily raise $8 to $10 million. I need to know if you’re highly interested in highly liquid.” This is the last and final step because now they’re making the commitment to that deal when they haven’t even seen the pitch yet. Psychologically, I’ve won the battle, and they’re committed because they’ve seen the past deals. We have a relationship. I care about them, but I also took it away from them.
I use scarcity as one of the best sales tools there is. I pull it away from them, and now I’m in a situation where they’re dying to invest in your deal. Instead of me asking them for money, they’re jumping through the Zoom call to do it. I win the psychological battle. This is all sales skills I’ve learned over many years. These are real deals. I’ve done these hundreds of times. It only works 100% of the time, all the time.Scarcity is one of the best sales tools there is. Click To Tweet
Josh, there are a couple of questions I have for you. In the second call, how long did you take to show them the hypothetical deal?
I try to keep that to less than a half hour. I want to honor my time and their time, and I always want to leave them asking for more.
Then the third call?
That might be more like an hour. Now we’re down to solidifying the relationship, showing them it’s a past deal, but now I’m thinking, “They’re pretty close to being committed. I don’t want to rush them off.” The less time you have, the better. You don’t want to make yourself super available. Everybody wants something they can’t have. Make sure you honor your time. Keep most of these meetings to a half hour.
Here’s the last thing. How often do you touch base with those investors after or even after they’ve invested with you? What’s your personal touch with them when you get on a call with them?
Whenever they would like to, we do a robust quarterly update for all of our investments. We give them the P&L and the balance sheet. We put together a PowerPoint document with multiple slides, pictures, and everything going on with the deal, and then I voice-record it. I do a full Zoom call over it so they feel they have access to me. It’s the one-to-many where I can touch base with 20 to 30 investors through that Zoom video call without having to answer questions from every single investor.
“We’re in the middle of getting close to a raise. We just got a deal under contract on Friday. We’re going to go into that raise. I know it’s going to close, and we’ve already got soft commitments for $7 million, and it’s a small deal. I only need $2 million to close it.” Using this approach I’ve walked you through, we now have an overabundance of investors, and we oversell almost every deal. They all know they can get ahold of Jen. Jen’s my personal assistant and our Director of Operations. They all have Jen’s number, so if any one of them has a question, they’ll call Jen. Get on my calendar, Ava. I want to make myself super available to them. They’re the lifeblood of our business.
Thank you for sharing that with us.
In respect of time, I know you have got to run. Let’s do our last ten questions quick here.
I’m excited about these Ten Championship Rounds for Financial Freedom. Josh, whatever comes top of mind. Here’s the first question. Who is the most influential person in your life?
My dad. He was my first entrepreneurial mentor. He owned his own business. He cut his teeth. He was a great mentor to learn from.
What’s the number one book you’d recommend?
If you had the opportunity to travel back in time, what advice would you give your younger self?
I would invest in commercial multifamily apartments from the beginning instead of doing residential and wholesaling.
What’s the best investment you’ve ever made?
It’s anytime you can invest in yourself, the Weekend Warrior bootcamps, reading, and podcasts. You’re always going to get a higher return. If somebody said, “It’s my last $10,000 in the world. What can I do to get a return and make a living?” I would tell them to spend all $10,000 on themselves and go to Weekend Warrior bootcamps, training, or maybe hire a mentor because you’re always going to get more scale and leverage by making yourself better than just investing in an investment vehicle.You'll always get a higher return on investment if you invest in yourself. Click To Tweet
What’s the worst investment you’ve ever made, and what lessons did you learn from it?
I could tell you that all the investments that I made that have been bad have been because I relied on a contractor that didn’t execute. I made numerous bad investments in real estate, single-family deals that didn’t go well, or even multifamily deals that were behind schedule. It was always because of the contractor risk. That’s why we started our own construction and did our own construction. I don’t trust anybody anymore. We do all of our own stuff. I lost money, specifically in real estate, because of contractors.
How much would you need in the bank to retire now? What’s your number?
I’m pretty much financially independent now. My wife and I have kept a fairly low profile with expenses. I could pay all my bills and all that stuff with $15,000 a month. All we need is $1 million at a 15% to 18% return. Luckily, with all of our investments, we’ve achieved that. You got to buy assets that pay for your toys and your liabilities. It’s what you learned in Rich Dad Poor Dad.
Dolf de Roos would say when he wanted to buy a Porsche. In one of his early books, he bought a small apartment building that had a garage. He had that Australian accent. I remember asking, “What’s a garage?” He was talking about a garage for your car. I was young. I didn’t understand the accent. That still resonates with me. The quicker you can get to financial independence is all about paying your basic bills with an asset that produces enough cashflow. To me, I only care about cashflow. I care about what’s my cost to own the asset. I don’t care about the equity that I’m making. Equity is a byproduct of paying the debt down and having an asset that’s appreciating. The only thing that matters to me is the net free cashflow. That’s what we care about.
Next question, if you could have dinner with someone dead or alive, who would it be?
My favorite band ever was Stone Temple Pilots. Scott Weiland was the lead singer of STP. It still is my favorite band. I love it. It would be Scott Weiland, for sure. He was also from the Greater Cleveland area, where I’m from, and I would love to know what was on his mind and why the heck he became an addict and died because his music was phenomenal. It would be Scott Weiland, for sure.
Josh, if you weren’t doing what you’re doing today, what would you be doing now?
I’d be a volleyball coach, and I am a volleyball coach. When I was younger, I played college football. I played three sports in high school, but I never played volleyball. I’ve got two girls. My daughters both play travel volleyball. They travel all over the country. It’s a super fun, competitive sport. I would love to go back and be like a high school, college-level volleyball coach.
Book smarts or street smarts?
Definitely street-smart but listens to a lot of books. I prefer to learn from someone from a book. Networking with successful entrepreneurs is the best way to learn.
Last question, Josh, if you had $1 million cash and you had to make one investment today, what would it be?
No question. I would invest as a limited partner in multifamily syndication. There’s no better way in the world to get a cash-on-cash return, a preferred return, call it 6% to 13% cash-on-cash, whatever that is, and then get equity on top of it. You just got to select a great operator. There are a lot of people who have bought multifamily properties in the last couple of years with floating rates and sulfur loans and thought the market was just going to keep going up, and it was going to bail them out. I would make sure I would do an LP investment with a great operator with long-term fixed-rate financing, with very low loan-to-value in a growing market. That’s exactly what I would do.
Josh, you’re a superstar. Please let everybody know what’s the best way they can reach you.
On my main website, all of our stuff is there, our portfolio, passive investments, mastermind and YouTube videos. FreelandVentures.com/passive is the best place to get ahold of us.
We appreciate it. Thanks again. We’ve got to get you back on to talk about your coaching program and discuss that on a different show, but we’ll do that at another time.
Thanks for being here, John.
Thanks so much for having me on the show. I appreciate the time.