How To Invest In Real Estate With Other Peoples Money: Austin Rutherford - Entrepreneur - Elevate Life LLC

This is the Beyond the Story podcast, a show that goes way beyond the story. And now Sebastian Frost, austin. Welcome to the show. Brother, looking forward to being here, man, hey, looking forward to having you here, man. I'm glad we had an opportunity to connect. First time we connected was on Zoom. We're back on Zoom again. Welcome to the future, right, I love it. I love it. So I had. When I heard you speak a few weeks back, I had heard of you before. I think somebody tagged you in a post and said they were making some really solid real estate moves with you and I'm like this is the guy that I want to get on the show and get to know better. And just so happened, you popped up as the next speaker that morning after I was done. I was luck would have it on here. So it's good to connect here. I was really intrigued by your story and what you're up to in the world of real estate, what you've actually been able to build. So when I want to dive into that, and before we do all that, let's back up a little bit, want to add some context and help our listeners better understand a little bit more about you. So let's back up and talk kind of about the backstory for a few and what really brought you to present day with what you're doing.

Yeah, no, absolutely. You know my. My original dream was to be an NBA basketball player. You know that that was the goal. You know things didn't work out. After high school I went to Arizona to play at a prep school, fell out of love with the game, with basketball, and ended up with a book in my hand called Thinking Girl Rich. That led me to the idea of passive residual income. That led me down the rabbit hole of real estate and owning rental properties, Ended up buying my first duplex when I was 20 years old. I flipped my first house at 22 years old, made $107,000 in that profit on that first deal four days after my 22nd birthday, Reinvested every single penny back into the business. I just turned 30. You know we've done hundreds and hundreds and hundreds of deals on about $25 million of real estate. Today. The cool thing about it is I've been able to do all that using other people's money. So it's a little bit of backstory on the real estate side.

I love it. A quick question about the basketball stuff. What brought you to? You know what? I don't love this anymore.

Man, I get asked that a lot. So I was second in points, first in rebounds, first in steals, first in rebounds, first in assists, so like I was playing well, and I just got to the point where I think I just got burned out. Like I just I didn't even want to touch a basketball, like the games used to be fun, I didn't even want to play in the games and I think it was just burnout. Honestly, you know, I was the guy like basketball was my life, like I would work out two, three times a day and I think I just got burned out by it.

It also led you to what was next, too Agreed.

And everything happens for a reason. I think a lot of lessons I learned in basketball helped me in the game of real estate because, like again, it was my life Two, three times a day I was working out when I fell in love with real estate. I was all in. I had to work 18, 20, 22 hour days and not even blink at it. And then also the competition side. You know in the entrepreneur space like it's winning and losing and I'm trying to be the winner, yeah.

Absolutely. So you bought and sold your first piece of real estate 20 years old. It's pretty remarkable. I did it 25, but that was just buying a house and then selling it, you know, in the in 2005. I was like I did it in my 20s yeah, it's pretty remarkable at your 20s. Walk me through that process, because most people look at a real estate transaction as a very daunting task because most people are living either paycheck to paycheck, they have a W2 job, whatever the case is. But a lot of your success, a majority of what you've talked about has been because of being able to leverage other people's money. Some would call it OPM. So walk me through how that first initial deal actually happened.

Yeah, no great question. Opm is a game changer. So I kind of say I had like two starts. So my first deal ever was 20 years old. I fell in love with the idea of passive residual income, so real estate, owning, rental properties. So I went out and I bought a duplex at 20 years old. It's the only deal I've ever bought. We call it turnkey. We bought it already stabilized and rented and I put a 20% down payment. So at the time I had about $30,000 saved from cutting grass, shoveling driveways, flipping candy, flipping buckeye necklaces. So I was just making money as a kid. So I had the $30,000 saved. I just used that as a down payment. It's the only way I knew how to do real estate at the time. And then I did it. I'm like man, if I want to own more property I need to make money faster. I was like I did one deal in 20 years, like I want to buy a lot more than that. And then that's what kind of led me down the route of OPM. You know, I found someone hired them as a coach. They taught me how to flip houses using other people's money, so that that was the next stage. So when I bought into that program. It took me 16 months to make my first penny in real estate and it was 10 months of marketing to find that first deal and it was a $74,000 purchase and $170,000 rehab. So it's a massive rehab. It's a $600 square foot addition. It was a very big project, even to this day, and really kind of what gave me the confidence One is like the education, understanding private money, like actually learning about it. And then the construction side. You know, I put it under contract, contingent on an inspection, and I had contractors out to the property to bid the job to make sure that my numbers were, my thoughts were aligning with their thoughts and you know they were. And luckily I was able to raise $244,000 from somebody I met at a networking event a year prior, which was amazing. They ended up funding the deal and that's kind of how that first deal came together. There was a lot of lessons learned but you know, like everybody says, the best way to learn is by taking action.

Yeah, absolutely so you would go find the deal, structure the deal and then go identify the investor that was looking for deals.

Yeah. So I always get that question. It's like do I get the deal or do I get the money first? A good deal will always find the money, so but you should be doing both at the same time. You know we say you should dig your well before you're thirsty, you should find the lenders before you need the money for the deal. So we do both at the same time at all times. So I don't think it's one or the other, I think it's doing both. And then the cool thing is like, if you already built that relationship you know you've explained private money, you told them about the opportunity, they said, yes, I'm in. You know, I have 200 grand, let me know when the next opportunity comes. And then you go out and you get the deal. Then it's a very easy way to cross the bridge. So that's how we raise it. Now we already have the lenders, we already have the relationships, and then we go and get the deals and then we connect the two. But you know, at the beginning you should be doing both from day one. But again, like you have to know private money to be able to raise private. Because early on I got questions like all right, what happens if I give you the money and you walk out and get hit by a truck and die, walk across on the street Like what happens to my money? And I was like it's a good question. I don't know that answer and they didn't lend me the money rightfully so. So like you have to know the game to be able to give somebody the confidence to invest with you.

And so what is the game? I mean this can go down a million different rabbit hole Of course, if we could just you know readers digest 30,000 foot perspective just for the novice in the crowd to understand.

So here's the simplest thing to understand with private money, most people think that I'm asking somebody to invest in me. When I try to raise private money, it's the complete opposite I'm giving somebody an opportunity of a lifetime to invest with me. So when you have that mindset that you're giving somebody a solution, that you're giving somebody an opportunity to invest with you, it's a much simpler conversation. And the reason why you're doing that is because, if you think about it, if people have money invested in the stock market back in 2020, they had a million dollars, they were getting ready to retire and then the market crashes and now they have 600, 700 grand Guess what they got to work another two, three, four years. And if, on average, the stock market goes up 7, 8% a year, they got to work like another 10 years just to recoup that money. So, like life changing moment, that happens right there. But the variable is people that had money with me. They didn't lose a penny and they still made 10% every single year, even when the market was down. So it's like you can't tell me another place where you can get an investment, where you have a personal guarantee from the owner of the company, where you have an insurance policy in case something happens, the house burns down. You have a collateral asset at 75 cents on the dollar. So even if the market crashes 25%, you're still in that positive and you can earn a double-digit return. It doesn't exist. There's no investment in the world that you can do that, except for real estate. So that's why you have to believe and understand that you're giving somebody an opportunity to invest with you.

But then you've had to build this infant structure over the past decade of being able to say, okay, this is what my offering is and this is why I believe in my heart of hearts that this is the best opportunity that any investor that I come in contact with is gonna come across at all on there, so being able to structure that. So let's just hypothetical, let's just throw the hypothetical ball around, pun intended, just for a minute. Here I got I'm a new business owner, I've got I had a good year and I've got $10, $15,000 that I want to invest into something. Where do I start?

So for me, someone answered two different ways. If I'm trying to raise money from somebody, it's very hard to invest $10, $15,000. Usually it starts at like $25,000 to $50,000 minimum, because you're buying houses for $50,000, $200,000. You need substantial money to do it. So raising money it's probably not enough money to invest passively. But what I would say I tell everybody you don't have to make your money in real estate, but once you make your money, put it into real estate. I chose to make my money in real estate and I also invest my money into real estate. But if you're a business owner and you're able to generate revenue, find a way to place that money into real estate, because that's how true wealth is built. So if somebody's two ways people are trying to do real estate, they're trying to do it passively or they're trying to do it actively. If you're like, hey, I'm broke, I'm trying to go all in on real estate and do what I did and build a whole business out of real estate, hire somebody that understands the game and put the money into marketing, because the deal flow is where the opportunity comes from. The only way you get deal flow is through marketing. So that's one way people come in the other way is like hey, I'm successful, I have some money, I have a business that's generating some cash and I wanna start buying rental properties to help build wealth and longevity. What I say for that is my strategy is called the BURR method. So buy, renovate, rent, refinance and repeat, so you can buy these houses at a discount, renovate them and then refinance out, stabilize them and then refinance out of them. And like, let's say the example I give, like if you're buying a house today, turn key for 200 grand meaning that it's renovated, it's got a tenant in it in a cash flow is day one for $200,000. Typically you have to put a 25% down payment onto the property, so you gotta put 50,000 of your money down. The variable with the BURR model you buy a property distressed, let's say, for 100 grand. You put 50 grand into it, so you're in for $150,000 and then it's still worth 200 grand and then you refinance that with a bank and the bank will give you 75% back out. So I'm in for 150, plus some closing costs and some interest. Let's call it 160. And then it appraises at 200, the bank gives me back 150. So I only have to keep $10,000 of my money into the deal. So instead of having to put 50 grand in, I only have to put 10 grand in, so my money goes a lot longer While that.

I remember you mentioned that, but I didn't know what the acrimonym Stood for when I first heard it the burr method. That what is Burr? Burr method? Yep, burr method. Okay, so what about these real estate syndicates? Seem to be popping up all over the place. Where you can, you know, you just give us 10 grand and being to pick up a check quarterly. What's going on with all those things?

Yeah, so there's. There's two different ways to invest ones just private money, deal by deal, and the other one is to invest into a fund through a syndicate right. And the way that I raise money is I raise it through deal by deal, because what happens is when I borrow the money they get a mortgage on the property and they get a personal guarantee on their investment. So it's a lot more collateralized than the syndicate side. But they don't have equity in the deal, they only get interest Payments paid out. So it's it's a lot more quote-unquote safe and they still get a decent return, interest wise. Over here on the syndicate side, the model slightly different you don't get a personal guarantee and you don't get a mortgage. So if a deal goes south and loses money, you as the lender lose money. Over here on the private money side, deal Go south, the owner loses money. The lender is still paid, needs to be paid in full based on their investment. The reason people that obviously more risk over here. But the reason people do it is because one they get what's called a preferred return, meaning that the first 10% of profits that come in go To the investors. But let's say there's only 5% that come in, they only get 5%, and Anything over that then they split right. The other side is is that they usually get a piece of the deal, meaning they get, you know, a percent or a couple percent of the deal. So as the property goes up in value over time, they get a piece of that appreciation as well. So arguably there's a little bit more upside on the syndicate, but there's also a lot more risk and downside over here. It's a passive cash flow play, not as much upside but a lot more safe on the investment side, if you, if you. But the key for any of this is that's your lending to the right people. Like if you're lending to somebody who has no idea what they're doing, you know, and they overpay for a property like it's. It's not a good situation, no matter how you invest.

That's great way of putting it. What would you say the worst part of your job is I? It's definitely not a job, because you're a business owner and Faster, and you've built quite the the empire. What's the worst part about it, though?

um. I Hate losing money.

Short of losing money, what's?

the worst part. I mean when you're doing real estate deals. There's a lot of moving pieces you have to work with buyers, sellers, title companies, lenders, contractors, tenants, city municipalities, utility companies there's just a whole lot of people involved. It's just a lot of moving pieces that you have to line up correctly to get a deal done. It's a headache, but it's just part of the game.

And outside of the wealth building. What's the best part?

The wealth building is the freedom A lot of people buy for cash flow. But usually at very early on in real estate there's not a significant amount of cash flow. But once you get 5, 10 years into owning real estate it's a game changer. Because you're paying your debt down, your property is going up in value, rents increasing, your expenses are fixed, so your margin keeps getting bigger. The cash flow goes up. It's a no-brainer long-term. But the problem is people will have a hard time seeing that long-term outcome when they're investing today and not seeing a massive ROI today. So I flip a house, $200,000 house. I flip it. Let's say I make $40,000 in profit today, good day, $40,000 check, that's a win. But if I kept that property over the next 25 years and I don't have the spreadsheet in front of me but I'll probably make $600,000 on that one house over the next 25 years. So I was like do you want $40,000 today or do you want $600,000? And a lot of people take the $40,000 today which, at the beginning of your career, you have to because you need to make money, but at some point you need to play the wealth game as well, so you're not chasing money and deals for the rest of your life. The late gratification 100%, 100%.

You get out on the basketball quarter all these days.

Yeah, we play pick up every once in a while. I didn't play for a long time once I got out of it because I hated it, but I still like to. I like the competitive side of things now.

Yeah, I'm terrible at the game of horse on the basketball Not really a basketball guy. I remember always having a basketball hoop at my house as a kid and, of course, we played horse. And I went to basketball camp and I had Jordans and I swore those were going to make me know how to play basketball, but it wasn't really. It wasn't really best. But I love my Miami Heat. I absolutely love my beloved Miami Heat. I don't know about this year, but I'm not a fair weather fan. I'm like don't we have the same team we had last year that went to the finals? Like, what's going on here? Not looking promising? No, it's not looking good. It's not looking good at all. So what are you excited about for 2024? Time? We're recording this right now. We literally just started a brand new year here.

Yeah, I mean, one of the biggest goals is to double my real estate portfolio. So buy, buy a lot more real estate. Double aggressive, very aggressive. I think it's possible. You know it's continuing what we're doing, but also adding in the commercial side bigger deals, warehouses, large multi-families, all those things. Then the other thing is to grow on social media. You know I got to say it's like eyeballs as currency. You know, every single business that I operate and revenue stream that I have can all win if it starts up here at the. So, like something I asked my group last week, it was like what's the one thing that changes everything? And the one thing for me is if I can have a million more people know who I am, anything else wins beneath that. So that's the, that's the big driver as well. You know, try to add value to as many people as possible and, you know, continue to grow on the, on the social media space.

You should start a podcast. I know a guy agreed.

It's, it's on the list. It's been on the list for like two years, so it's it's a necessity, for sure.

I have arrived. I am here, austin. I was sent directly to you. How could people learn more about what you do? I know you had some, some, some resources you gave out to the group in North Carolina as well, too Want to make sure we provided those same resources to our audience as well.

Yeah, one social media Instagram, youtube, tiktok, austin Rutherford on all the platforms. I responded to my DMs on Instagram. So if you're on Instagram, want to connect, shoot me a DM on there and have a book called how to Get Free Houses. So it talks about the Burr model and raising money. So if you go to howtogitfreehousescom you can get a copy of that. And want to learn how to raise private money? Use privatemoneycom. It's $27 and you get everything that I know about private money.

I love all that. We're going to include both of those links in the show notes. That's the description of this podcast episode. In case you're wondering what in the world a show note is Austin, I really appreciate your time, man. I've enjoyed this conversation on here. Any final thoughts for our listeners on the world of real estate.

Yeah, the thing I always say is like, when people want to start real estate, it's like the fear. The fear says what if it doesn't work? What if I look like an idiot? What if I lose money? What if, what if, what if, what if? And the biggest thing that you have to understand is real estate is not an if game. It's a win game. Real estate has been proven time and time and time and time and time again. So if you take the right actions, it's when does real estate work, not if real estate works. So anybody who's sitting on the sideline with the fear, think that. Think when, not if, and start taking action.

Those are phenomenal. Final thoughts, thanks again for your time, my brother. I appreciate it Absolutely, man. Appreciate the opportunity you got it, man. Until next time, friends, thanks so much for tuning into this episode of the Beyond the Story podcast. Be sure to appreciate it. If you haven't done so already, make sure you're subscribed to the show. This way, you'll get updates as new episodes become available. If you feel so inclined, please leave us a review. Be sure to appreciate it. Signing off from the podcast launch labcom studios. We'll talk to you next time.