Quincy knows private lending. In depth. In this interview he explains how to get fully financed from private lenders even if you don’t have a lot of money.
I talked to Quincy about how to make private loans, how to get them, and several ways to find properties that are less common but highly effective and profitable.
We also talked about self-directed retirement accounts to buy investments which he helps people do through his Texas company Entrust Retirement Services.
Transcription by SpeechPad
Damon: Quincy, thank you for joining me today to talk about your real estate investment experience. What I’d like to do is just find out what you’ve done. Actually, what you have right now with your investing, and then talk about how you got there, and have you share with us things that you’ve learned and the experience that you’ve gained. So, where are you at in your investing right now? What’s your portfolio look like?
Quincy: Well, I’ve got a pretty diversified portfolio here. It is heavily weighted towards real estate, and I guess that’s what you’re most interested in anyway. So that’s convenient.
I started off by doing a lot of investing in hard money lending. I really like to do that. They call me Mr. Loan Shark on the side there, but basically hard money lending is where I started doing it. And I have, I don’t know how many, seven, eight, nine hard money loans outstanding at this point in my portfolio. Some of them are done in partnership with other people. In other words, I have 25 percent of the loan or 50 percent of the loan.
So, I have the hard money loans, and then I also have at this point in my retirement plan, I only actually have one piece of real estate itself just a fee simple title to real estate. That was an interesting scenario because I actually bought a defaulted note and had a planned foreclosure to clear up the title to that property. And now, I’m renting it out until such times as things recover and I can sell the property.
Damon: Okay. So how does that work? I’m really not familiar with buying a defaulted. Does that mean that somebody didn’t pay their mortgage, and so you actually bought the note which gave you possession of the property. Is that right?
Quincy: No. I bought the note, and it was already in foreclosure. The note was originally for $68,000 or so, and by the time he had penalties, taxes, and interest and everything included, the balance was creeping up towards $90,000. Well, the property was only worth $65,000 to $70,000, and I paid $40,000 for the note and completed the foreclosure process to acquire the title.
Damon: Okay. So, did you buy that from a private lender, or was that with a bank or something?
Quincy: No, I bought this from a conventional lender. There are companies out there that are actually selling defaulted notes, and, of course, you pick them up for sometimes pennies on the dollar as you can hear if you look at the actual numbers. I bought it for well less than 50 percent of what the balance was on the note. However, that wasn’t necessarily a 50 percent discount since the property wasn’t worth anywhere near . . .
Damon: As much as the note.
Quincy: Right, what the people owed on the note, correct.
Damon: I see. So, is this something that you were able to do because you’re kind of in the business, or is this something that just the average person could do as well if they wanted to?
Quincy: No, I see this happen all the time. At Entrust, in people’s self-directed IRAs, they buy discounted notes now. I wouldn’t say that this is as common as some of the other strategies, such as hard money lending that we see all the time. But it’s not at all an unknown strategy to buy defaulted notes. You just have to find the sources for the defaulted notes.
Basically, what I did is I met the gentleman, the broker for the defaulted note. I just met him at one of the real estate conferences, and I found him to be interesting. He had a defaulted note that was one block over from my mother’s house in Fort Worth. And I said, “Well, why not?” So I took a chance, and it’s working out pretty well.
Damon: Oh, that’s great. So the real key then is, what you did was make sure that the note that you’re buying is worth much less than what the value of the real estate is worth, which also probably means it’s going to be worth a lot less than the outstanding note amount.
Damon: So, if you can buy it at a big enough discount, then you take possession of the property. You still have to foreclose on the property.
Quincy: That’s correct. I did.
Damon: Right. Okay. And then . . .
Quincy: But basically what I did, as I was interested in this, I actually called the borrowers up and I said, “Hey, this is the plan. This is the way that we can solve the problem.” It worked out just fine.
Damon: I see. Oh, so when you foreclosed on it, are those people still living in it and renting from you, or did you get new tenants?
Quincy: They are, and I don’t always recommend that that is the case. But in this case, the problem that the people had was that he was a Hispanic gentleman who didn’t speak much English. Basically, he had an IRS tax lien for $200,000 against him, and this is a two bedroom house.
I said, “I just have to ask you. How in the world do you owe the IRS $200,000?” And he explained that in his situation he was getting a W-2 income, supposedly from Houston and San Antonio, but he never lived outside of the Fort Worth area. So, it was obvious that somebody was using his Social Security Number.
Damon: Oh, my goodness.
Quincy: And so, the foreclosure, of course, cleared that all off of the title. Of course, the foreclosing attorneys had to notify the IRS, but we don’t want to get into a lengthy discussion of foreclosure law, I don’t think, at this point.
Damon: No, no.
Quincy: Anyway, it worked, and I told them I would never sell it back to them, but they could rent it as long as they wanted to. And if they wanted me to sell it back to somebody, like a family member or something, I might do that at some point in the future, but that I would never sell it back to them because I don’t want to be accused of colluding to defeat the IRS out of their money.
Damon: Yeah. That probably wouldn’t be a good side of the argument to be on.
Quincy: No. And it was a legitimate foreclosure. They really were in default. They really hadn’t paid the note, and they really hadn’t paid the taxes. So, it was kind of a unique situation, but everything that you do you’ve got to be very, very careful with buying defaulted notes to know the whole story.
Certainly, I would never advise anybody to buy a defaulted note unless they knew and understood the foreclosure laws of the state in which they’re buying it and whether the lien was the first lien or second lien or some other lien status. There’s a whole lot that had to go into this particular investment to make it work, but it worked for me just great.
Damon: Right. Well, that’s excellent. That’s a really interesting deal. And you mentioned Entrust. That’s a company that you own. You’re the president of that, and you do self-directed retirement plans.
Quincy: That’s correct.
Damon: Maybe you can explain that a little bit.
Quincy: Yeah, basically, just real quickly, it’s a self-directed IRA or what they call self-directed IRAs. There’s a handful of companies in the country which offer the services of being able to buy non-traditional investments in your IRAs. So that would be including things like real estate itself and notes and private company stock, so trusts, LLCs, and that sort of thing.
That’s the service that we offer at Entrust. Entrust is one of the biggest providers, and then the Entrust model has a model where there’s franchise offices. And I happen to own the whole state of Texas as my franchise, and I speak all over. But basically my home base is in Texas.
Damon: I see. Okay. You mentioned earlier that you have some hard money loans that you serviced. I assume you’ve actually got the financing and lent the money to people. You’ve also brought other people in and pooled your money together with them. Is that part of the self-directed IRAs, or do you do that separately?
Quincy: I’ve done both. I’ve done both ways, both personally and I’ve done it with my retirement plan. I don’t, obviously, combine people’s money that are my clients. When I say I’ve combined together, these are family members that have IRAs at other offices of Entrust because I’m not permitted, of course, to administer my own family’s accounts.
Quincy: Other people that I’ve known that are not Entrust clients of mine. So, at Entrust in a self-directed IRA, you are not allowed to basically suggest investments to people at all. So, I’m real careful to avoid that kind of circumstance.
Quincy: Usually, these are, like I said, close family members or maybe close friends that I’ve combined together to make loans with.
Damon: I see. So, let’s talk about that business a little bit, the lending the money business, because I know some people listening to this have money. They have cash, and they’re looking at either buying real estate or perhaps even lending it out or getting into partnerships and things like that. And, perhaps, this is another option that they can consider of being a private lender and making the money available to people who are going and buying property.
Could you elaborate a little bit on how that works?
Quincy: Sure. I mean, it’s not very complicated. Of course, this is largely dependent on state law, so you always want to be careful and check with the state law where you are because the loan laws differ on each state. So, of course, I do all of my loans in Texas because one, that’s where I am physically located, and two, that’s just where I’m knowledgeable of the laws of the state of Texas. I’m comfortable with what happens, because any time you’re a lender, basically, you have to be prepared for the ultimate circumstance, which is that they don’t pay the loan and you take the house over. If you’re not prepared to do that, then making a private loan is not the right decision for you.
Damon: Not a good way to be going, because ultimately that’s like the worst case scenario where you need to be prepared for that in case that were to happen and know what you’re going to do.
Quincy: You absolutely need to be prepared for it, but I have to correct you on one thing. If you are doing private lending correctly, the worst circumstance is they pay you back.
Quincy: The best circumstance is you get to foreclose on a property that’s got lots of equity and stuff like that.
Damon: I see. So foreclosing could actually be a good thing for you as a lender.
Quincy: Oh sure. Yeah.
Damon: If they pay the loan back after three months, then you don’t get any interest or any real benefit, I guess, is what you’re saying.
Quincy: Right. Well, and you can get some pretty good interest rates. The other thing I want to warn people against is that when doing lending as a practice, you definitely want to stay away from people who are living in the property. There’s too many consumer laws that protect that. So, when I say I’ve done lending and with the exception, of course, of seller financing, even then you have to be careful of the Safe Act and stuff like that.
When I say I’ve done lending, I mean that I’ve done lending to investors. So, I have a very strict rule against lending to homeowners. I just don’t do that at all because it’s not worth it. The laws are complex, and you can trip up too many ways to do that as a private lender. I wanted to make that clarification.
Damon: Okay. Yeah, that makes sense. So, you’re saying you lend to people who are buying properties that they’re investing in, not properties that they’re going to live in.
Quincy: That’s correct.
Quincy: But the process is fairly simple. I mean, you simply need an attorney that can draw up the documents and that knows the laws. There are some things you’ve got to be careful of. Actually, we have a wonderful webinar that we had prerecorded on being a private lender and a private borrower, which is available on our website.
Damon: How can people get access to that?
Quincy: Basically, the website is www.EntrustTexas.com which is spelled E-N-T-R-U-S-T-T-E-X-A-S.com, and down in the middle we have our webinar series. Basically, I can go into an hour long speech, which is about how long the webinar is, about private lending, but it’s based on a lot of experiences that I’ve personally had and those of my clients and gives some pretty good advice if you want to go down into that path of being a private lender.
Damon: Okay. Excellent. Well, that’s great. And hopefully people will go and take a look at that and get more information on it, those that are interested. Okay. So, your portfolio, you’ve got hard money loans. You’ve got the one piece of real estate. Was there anything that you have?
Quincy: Oh, yes. I’ve got other things. I’m also involved in a limited partnership. In my 401K plan I have a limited partnership interest. Actually, I have a couple of limited partnership interests that turn on commercial property.
Actually, in one case, it’s a shopping center in northern Louisiana, and that’s worked out really nice, I have to say. Even though that shopping center is debt financed and therefore causes my IRA or my 401K, in this case, to have to file a tax returned called a 990T, I’ve gotten all my money back plus another 18 percent on top of my money, and I still own the investment.
So, it’s like a free investment, and it’s really been a wonderful thing. The property is doing very well. It’s cash flowing just fine, and we’re using the cash flow to pay down the debt. It’s been a wonderful investment. Even though retail is down, the shopping center is up to 97 percent occupancy. It was like 60 percent occupancy when we bought it. So, basically the shopping center has the same exact thing that you can do with a house. If you buy the ugly house and rehab it and rent it out, then it goes up in value, right?
Quincy: Well, you can do the same thing with the shopping center or an apartment complex, for that matter. But it just takes a little longer, and you have to add a few zeros at the end of it, right?
Damon: Right. In fact, when you mentioned you had all of your money back out of it plus more, it reminded me of the second deal I did. It was a small single family house, and I bought it for, like, $52,000 and refinanced it a few months later. I fixed it up, put about $9,000 into it, refinanced it, got all my cash back out of it, and now I own the property with about $20,000 equity in it. But I don’t have any of my own money in it anymore.
Damon: And it’s cash flowing about $170 a month. So, the numbers are much smaller, but the principle remains the same of what you did with the commercial property, you can also do with these small single family properties.
Quincy: Right. Then, some other things. You were asking me about what other things I’ve done. In partnership with my Roth IRA and my wife’s Roth IRA and my kids’ Coverdell Education Savings Accounts and my friend’s Roth IRA and his kid’s Coverdell Education Savings Account, we actually bought a house in Michigan. No, it’s not in Detroit, but we bought a house in Michigan. It’s a great house that we got for $40,000. It’s a 2,900 square foot house on nearly half an acre of land which we’re renting back out again.
That was all done through an LLC. So, we have a non-disqualified person heading up the LLC, and the property is a rental property. So I do have that, but that’s not owned directly. That’s owned through an LLC.
Damon: I see.
Quincy: I also have a Roth IRA owned trust which I’ve done, which has done various little types of investments, including a hard money loan and some note flips where we originated the loan and immediately sold the loan off to another party. We don’t do that but, maybe, once a year because we don’t want to get into the business of flipping notes in an IRA owned trust because that would cause unrelated business income tax to attach.
I’ve done some lending which is kind of interesting. I’ve done some shared appreciation lending, which is to say that I lower the normal rate that I charge on the hard money loans in exchange for a portion of the upside of the property.
Quincy: And that’s really my latest theory is that at this point, contrary to what some people believe, I actually still believe real estate is a wonderful deal. You don’t buy real estate or you have to be careful buying real estate when it’s at the top of the market. But real estate is on sale in a lot of areas, and if you can get strong fundamentals for the real estate and you can hold on for the long term, then acquiring real estate or acquiring interest in real estate that gives you an upside on the equity is something that is pretty important to do at this point.
Damon: You’re comfortable with this because the prices are low enough right now, and you expect that they will appreciate in value.
Quincy: That’s correct.
Damon: I see.
Quincy: And, obviously, all real estate is local. You know that as well as I do. But when you can pick up property that you can cash flow with two percent or greater gross rents a month, now of course, that’s not net, that’s gross. And you can net 12%, 14%, 15%, then I’ll acquire those all day long and sit on them for as long as I need to in order to let the economy recover and give me a great return on the investment.
Quincy: So, that’s what I’ve been able to do is I’ve got a partner because I’m a busy person. So, I don’t like to do real estate fee simple because then I’m responsible for making sure I get it leased and repairs done and stuff like that. I’ve done partnership deals where basically I put up the money, either as a lender or as a partner in the LLC. And then, basically if I’m a lender, I just get a fixed rate of interest, and then, of course, when he sells it, I get half of the upside. That’s the deal in that particular partnership that I work, and if I’m a partner then, of course, I take a greater risk because being the partner, if there’s no rents, I get no payment, right?
Quincy: If there are rents, then I do get payment.
Damon: So, you’re counting on your partner that’s operating the property to actually make sure that there are tenants in there, it’s being managed properly, rents are being collected.
Quincy: Exactly. And basically, it’s worked out real well because, obviously, I would never do this with an inexperienced partner or something, someone that I didn’t feel confident could do the job. But this guy has owned many dozens of these same types of units, and so he already had the systems in place. For him, for his perspective, think about it from his perspective, he gets a great deal because he has nothing into it. All he has is his sweat equity. What I get, from my side, is a great investment and I’ve got nothing into it but the cash. So, both of us benefit tremendously from the relationship.
Damon: Yeah. I can see the value in that. In fact, somebody e-mailed me a few days ago who’s had a lot of operating experience with single family properties, but he doesn’t have any money. He was laid off from a job recently, and so he’s kind of cash poor. He was thinking, if I could find somebody who had money but didn’t have time, I could partner with them. I can go operate these properties, but I don’t have the money right now to go buy them. Someone who’s really competent and knows how to do that sort of thing, getting together with someone who has money can form a real beneficial partnership, as you’re saying.
Quincy: That’s exactly right, and the interesting thing is I’ve done probably six deals with this particular person that operates pretty much southwest of Fort Worth, Texas, where the rental market is extremely strong for the type of properties that we’re buying. Some of them have been these shared appreciation mortgages where I’ve loaned the money and I get a fixed rate of interest. Then, I get part of the upside when the property is sold. I’ve set my interest rate at such that it really doesn’t matter to me if it’s ten years until it sells. It really doesn’t matter.
Damon: You can be really patient with it because you’re earning money via the interest payments as long as the loan is out there.
Quincy: Not only that. So, I’ve done that. And then, the advantage to the investor, him, on that is if I structure it as a shared appreciation loan, the advantage to him is that he gets all the depreciation and everything like that.
If I’m making a loan from my retirement account, I don’t want to be a partner in my retirement account because what good does that do me? I don’t need the depreciation or anything like that. So, I’d rather structure that deal as a loan. That way it much simpler for me to account and everything like that, and for him he gets all the benefits that he wants.
Now, when we do deals personally that I put up the money and I’m a partner in an LLC and we two are partners, then I get part of the depreciation and he still gets half the deal. So, everything works out really great. Those have been great partnerships that I’ve entered into.
Damon: Well, that’s super. So, I’m interested in how you got started with all these things. You’ve got a lot of different things going on, and you’ve been very successful with what you’ve been doing. But how did you get started? What can you say to people who are kind of at the beginning end of this and saying, well, what Quincy’s done is great and I’d love to do that some day, but don’t really know where to turn or how to begin?
Quincy: Well, I think what the key is, of course, you have to have some money, either in a retirement account if you’re going to do a self-directed IRA, or personally you have to have some money to start with if you want to be on the investor end. Now, remember that my end has not been the sweat equity end, right?
Quincy: I’ve been the money end. So, if you want to be the money end, you’ve got to start with having some money.
Damon: You need some money, yeah.
Quincy: And, of course, IRAs are a great source of that because that’s where, I don’t know about you, but that’s where two-thirds of my investable dollars are, are inside my retirement plan as opposed to outside. It somehow seems to slip through my fingers with two daughters and a wife a lot easier outside of my retirement plan than it does inside.
Damon: It’s a little more locked up in the retirement plan, right?
Quincy: Exactly. That’s exactly right. So, you have to have some money. Frankly, if I really just didn’t know what I was doing, when I started I really did start out lending because lending is fairly easy. As long as you have got a borrower that’s a confident borrower that you feel very comfortable with, then lending is a pretty easy way to start subject to all the warnings and stuff that I give in that webinar that we mentioned before.
So, that’s one way to do it. You could do it if you want to be a little more aggressive, you could be the money partner in the deals that we talked about where you’ve got an experienced person with no money but lots of experience who can actually do the job. Then you might end up being the money partner, either in a shared appreciation mortgage, which will not work in all states, by the way, so once again this is something that you’d have to check with your local laws on, or just entering into a LLC arrangement where you are the money partner and doing it that way.
But the key, the absolute key to anything that we’re talking about as far as investing is to probably do this without . . . don’t do it without going through some kind of real estate club or mentoring organization or something, because there’s a lot of people out there that will rip you off. Let’s just be blunt about it, right? There’s a lot of people that will rip you off intentionally, and there’s a lot of other people that will rip you off because they simply don’t know what they’re doing and they’re just good salesmen, if you know what I mean.
Damon: Right. They can talk the talk, but not walk the walk.
Quincy: Exactly. So, Caution is urged here. That’s where great groups come into play because you can talk to other people, and if this is a fly-by-night person, it comes very quickly to the forefront that this person is not reliable. And also, I would tell people to be very careful.
One mistake that I had made in the past and fortunately haven’t gotten burned too bad, though I did get burned a little bit, one thing I’ve made the mistake on is just each deal has to stand on its own. I can’t emphasize that enough. Each deal has to stand on its own. People tend to get lazy, like they loan money to somebody. He pays it back or she pays it back, and you think, wow, this is a great person. And then, you kind of let your due diligence go by the wayside, or you do things because you have a track record with this person. I’ve learned that that’s a mistake, that everybody has to do the due diligence on every single deal, and each deal has to stand on its own.
Damon: What kind of due diligence are you looking for when you’re evaluating if you’re going to do a deal with somebody?
Quincy: Well, of course, I’m going to look for their experience is probably going to be the number one thing, because you’ve got to know that that person can follow through and do what they’re going to do. Even people that have been in the business for years, the ones that got themselves overloaded with debt are now in a great deal of trouble. The person is the first thing you look at.
The second thing you look at and, maybe, in some cases more important is the property itself because remember if the deal goes south, you’re going to end up with the property somehow. Okay?
Quincy: And so you’ve got to understand the property itself, and that due diligence requires you to understand really what are the repairs that are going to be needed, and what can you do to make sure that those repairs are done before you advance the funds? Also, are you prepared to own this property? You always must ask yourself that question. You’ve got a partner or you’ve got a borrower that is dealing with the property right now. What if that borrower dies or defaults or does something that causes you to take over that property? Are you comfortable owning property in that area?
That’s probably a mistake that I’ve seen a lot of people make is they go, wow, so-and-so invests in properties that are in areas of town. Well, I don’t want to deal in those areas, but this person has been very successful in those areas. Think of areas that are heavy Section 8, for example. And if you know Section 8 rental housing, it’s very, very profitable if you know how to do it. But then, the areas that those are sometimes in are areas that I wouldn’t feel comfortable if I had to take over the property myself as opposed to have the partner do it because I don’t know anything about that.
So, you have to look at the person and their experience, and you have to look at the property and the property’s location and make sure that you’re comfortable owning property in that location, even if you’re just a lender. You have to be very comfortable with that.
You have to be comfortable with the repairs that are done. One of the things that I say in the webinar is that I never advance money for repairs until those repairs are done and inspected. I don’t do that.
Damon: So, you verify that they were done correctly and they’re really done.
Quincy: That’s right. So, that’s one of my tenets. I have kind of a top ten list that I do for lenders in that other webinar. I take that part really seriously because I have seen too many of my investors turn around and loan money. They just give them all the money and trust that they’re going to do the repairs, and then when they acquire the property in foreclosure, they realize that the money was not used for the intended purpose.
You’ve got to also understand, going back to the person. You need to understand what that person’s strategy is. If you’re dealing with somebody who’s intending to flip property in this economy, you’d better make sure that they actually can follow through on it, because very few investors are able to flip property at this point in this economy. Mostly, the investors nowadays have to be able to hold the property and afford to pay your bill and hold the property at the rates that they’re paying you. Since I loan at 12 percent plus, normally it’s 12 percent plus a couple of points, the people that I’m loaning money to right now are people that I’m comfortable with that are getting such a good deal that they’re able to cash flow the property at 12 percent interest.
Damon: Even with the higher interest.
Quincy: Even with higher interest, so that when they refinance to a lower interest, they’re in even better shape. But if they can’t cash flow the property and have that ability to do that at my rate, then I’m not really interested in loaning them that money.
Damon: How long do you generally have your borrowers in your loan before they go out and refinance?
Quincy: Well, of course, interestingly three or four years ago I used to loan mainly to, of course, people who were buy, fix up, and sell. And so, the loans would typically be a year, but they’d be paid off in anywhere from three to six months. Well, that’s just not the way it works anymore, is it? Not in this economy. So now, I loan to people that are going to be landlords or, at least, have the ability to be landlords, if the project doesn’t flip, if you know what I’m trying to say.
Quincy: And so, I typically make my loans 18 months. Now, that’s longer than most people actually make loans for. Most of the private loans that I see are closer to anywhere from 90 days to a year. I make mine 18 months, and here’s the reason I do that. One, if you’re going to keep the property as a rental, a lot of times you can’t get a loan based on the current fair market value of the property until you have a year of seasoning on the loan. That may or may not be different at this point, but that’s been the rule for some time in the lending world, and, of course, now the lending world is upside down. So, who knows what the rules are? But generally speaking, in order to not count the sales price of the property as the value, you have to wait some period of time before you refinance it. And again, my understanding is it’s typically a year. So, I’m going with the theory that my borrowers might have to go a year, pay me for a year, and then apply for a refinance loan and get it refinanced down to something less.
The other part is that a lot of investors, even if you’re going to rent it for a year and then sell it, well, obviously, a year is a magic time period, because after a year it’s been a long-term capital gain as opposed to a short-term capital gain.
Damon: For tax purposes, right?
Quincy: For tax purposes, correct. So, what I like to see is enough time for . . . here’s my theory. You wait a year to either refinance or sell because, remember, I’m not generally loaning to flippers at this point. So, you wait a year to refinance or sell, and then I want to allow you enough time to get things done. I mean, 15 months would be a reasonable time, too, but I just kind of make it 18 months, to either sell the property and you can tell very quickly if one or two contracts bust out and you’re trying to sell the property or something. It could easily run another six months before you got it paid off.
Quincy: So, that’s kind of my theory on that.
Damon: That makes sense. So, are you lending currently to people who are buying single family properties or more commercial based properties, like multifamily?
Quincy: I frankly would look at anything, but typically, because I like to spread my risk quite a bit, I’m doing more lending towards different types of single family but more towards single family. But to be honest with you, it would be very hard to convince me at this point to do a straight interest only loan because, again, I think eventually, whether it’s two years, three years, or even five years down the road, I think real estate will eventually recover. I’d rather be in a position to capture some of that equity from the bargain basement prices that we’re experiencing right now. So, most of my lending has a lower interest rate, a longer term, and a shared appreciation element to it.
Damon: Yeah, that’s really interesting to me. I’m doing single family right now. I did a multifamily deal about two years ago, and I just decided about six months ago to go do multifamily because there’s so many good deals out on the market.
Damon: I’m thinking from my own perspective because I know this would help the people listening to this interview. In fact, I just made an offer on another house on Saturday which they countered today. I’m thinking they’re probably going to accept it. It’s a conventional loan with Bank of America. It’s their foreclosure. They really want me to get the loan with them because they can work the numbers better for them, which is fine if it works for me, too.
But if I were to consider a deal with you, let’s say I went and found a house that was a really good deal, had a lot of upside on it. And then, you look at me and say, “Well, is Damon experienced? Is he the kind of person I think is going to be able to be successful with this?” Let’s say everything checks out. So, you lend me the money, say around 12 percent interest, whatever. And then, we also have an agreement in place to say, well, part of the equity or the capital gain in the property will go to you once we actually sell the house or refinance, I’m guessing, when there’s some kind of event like that.
Damon: And then, I would get the other part of it. Am I bringing any money to the table in a deal like this?
Quincy: Well, of course, each person gets to structure their own deal. In the deals that I’ve done, what I’m exchanging the equity for is that you don’t bring any money or very little money to the table. Obviously, that’s all very, very much subject to variations based on the particular project. The only shared appreciation mortgages I’ve done had prices that the property that was being purchased for no more than 50 percent of what it could be sold for.
Quincy: And again, the deals that I’ve been doing are not short-term deals. They’re minimum one year deals.
Damon: At least, one year.
Damon: And do you . . .
Quincy: That’s just my theory. But, Damon, you’ve got to understand that everybody has a different theory, and also you have different opportunities based on who you know. For example, I would love to think that I could acquire some beach front property in Florida right now, but I have no contacts. I have no way to really effectively do that, and I don’t know Florida. So you see what I’m saying?
Quincy: That’s nothing that leads me to go to Florida because even though I think people are going to make a lot of money, yes, I know it will be a while. Yes, the economy in Florida is terrible, but so are the prices down extremely low. Some people are going to get very, very rich if they know what they are doing. The point I’m trying to make here is I’m not going to Florida. Why? Because I really have no knowledge of Florida. I have no partner in Florida.
Damon: No person there that has knowledge of it.
Quincy: That’s right. I just don’t have anything there. So to say, well, Quincy, what do you do is not as helpful, maybe, as you think it is because what I do is subject to who I know and who I trust and the contacts I have, and the understanding of the laws I have and where I am physically located.
Damon: Right. That makes perfect sense. I talked to a fellow named Matthew Martinez a couple weeks ago. I interviewed him. He’s actually an author, and speaking of Florida, he works out of Florida and manages multiple millions of dollars worth of assets, a very successful real estate investor there. He was making the point, which you’re making, is that you’ve got to understand your local market. You don’t want to go invest in an area that you don’t know or don’t have somebody there that knows it inside and out.
Quincy: That’s correct. And so, maybe, I will some day get a comfortable contact. I don’t think there’s any hurry right now. Florida is still down and will be for a while, but the point is that people tend to overlook the diamonds in their back yard. I’m sure you’ve heard of that book about searching for diamonds. The guy sells off his property. I don’t remember, but this is in Africa somewhere. He sold his property so he could go look for diamonds. Later, it was discovered one of the richest diamond mines in the entire world was the property that he sold, and he didn’t go in his back yard to look for what he was looking for.
Damon: Yeah, exactly. I know this is a little off subject, but I think sometimes when people take vacations, they do the same thing. It’s like, well, if I get halfway around the world, I’ll have a better place, and yet there’s probably lots of great places a lot closer that you can have just as much fun at.
Quincy: Well, that’s exactly right. And it goes for real estate, too. I don’t really care even what market you’re in or where you are. You’re going to have a better result, likely to have a better result because of your better understanding and your better contacts where you are. You’ve just got to understand the market where you are and see where the opportunities are, because there are virtually opportunities in every market in the country. It’s just you have to be very careful, and some markets have different requirements to them.
In Houston, we’re fairly stable. In Texas, in general, we’re fairly stable. Dallas is growing at an incredible rate. So, it is local. It is very much local, and that’s what you have to go with when you’re a real estate investor.
Damon: Right. That makes a lot of sense. You kind of have answered this already, but as we kind of start to wrap up here, what advice would you give to somebody who is looking at doing this? You know, either getting started or protecting their risk and making sure that they don’t get into a deal that’s going to hurt them, but really they have their eye on . . . well, I want to be successful at this. What would you say to them?
Quincy: Well, I would say the number one thing that you want to do is don’t go it alone. Don’t try to figure it out on your own. Find a group. I mean, Lifestyles is a great group. There are other groups. Always find a group so that you have some other people that have already made all the mistakes that you are about to make.
Do due diligence in a way that’s like this. Trust but verify and then go reverify again with somebody else. So, you’ve got to learn how to do it. The other thing is, besides going to a group, don’t try to do everything at once. That is a mistake that I see a lot of new investors make.
Damon: Good advice.
Quincy: When they hear a call and they go, “I want to go do lending.” And then, they hear another call and they go, “Oh no, I want to go take property subject to and a land trust.” And then, they go to another call and they go, “Oh, I’ve got to buy multifamily.”
Well, you can’t really do that effectively, okay. What you need to do is decide on an area. Kind of get familiar with the different areas. Decide on a strategy, and then focus on doing that strategy very well.
Quincy: So, get into some kind of group. If I were telling myself what to do from the standpoint of being a new investor and from what I’ve done with all my experiences, I will tell you that going to some of these real estate conferences is also a very positive thing to do, and I’ve done a lot. I’ve done very well in going to the conferences.
There’s what you learn, like if you hear a group of speakers. I speak all over the country, and if you hear a group of speakers, Jack Miller’s group or any of a number of different groups, the people that will take the trouble to travel to go to a weekend boot camp or something like that are people that you probably want to know, and there’s the material that you learn in the boot camp, but sometimes that’s just heavy sales and stuff like that. But the relationships that you make with the people that attend those boot camps are even the more important thing.
So, it’s all about relationships and leveraging the thing. Over the course of the conversation, I think you realize that I’ve said, well I’ve met this person at a real estate conference or that person at a real estate conference. I’ve done real well with that.
If I were trying to start out, I’d both join a group. I’d be very careful with my due diligence, and I would go travel to some of these boot camps, but I wouldn’t get caught up in the sales hype that is inevitable at just about any boot camp that you’re going to do to. I would focus on the relationships with the people that attend those camps.
Damon: Focus on the relationships. That’s really good. I made a note here to emphasize that.
Quincy: Ultimately, Damon, the truth of the matter is ultimately experience is what you get right after you need it.
Damon: Very well said.
Quincy: Yeah. So, the important thing of the conversation here is that you want to try to benefit from other people’s experiences and try not to have too much school of hard knocks here.
Quincy: That’s what I would tell anybody who’s new. Get the information. Decide on an area. Join a group. Work on relationships, and you should be just fine.
Damon: Excellent advice. I really like that. So, Quincy, how can people contact you or your company if they’re interested in getting more information about what you do?
Quincy: Well, generally, of course, the website of www.EntrustTexas.com that we mentioned.
Damon: That was E-N-T-R-U-S-T Texas.
Quincy: That’s EnturstTexas.com. That means there’s two T’s in the middle of that.
Quincy: That’s the best way. Then, of course, you can reach me by e-mail at Qlong, Q as in Quincy, Long@entrusttexas.com at the same website there. That’s the best way to get a hold of me.
Damon: Okay. Excellent, Quincy. Well, thank you so much for taking the time today to talk about your experience. I learned so much about things that I didn’t know about, and it’s been really interesting, really helpful. I think our listeners will find it helpful, too. So, thank you again. I appreciate it.
Quincy: Thank you for the time.
Damon: Take care.