Ep 9. Real Estate and Relationships – Dave Michal
Dave Michal is my real estate mentor who has touched roughly 10,000 properties from single family homes to large commercial buildings, sometimes acquiring them at 15 cents on the dollar. Finding great real estate deals all comes down to relationships.
in his career Dave has been involved in contract for profit, contract for deed, partnerships, and direct whole ownership in over 9 thousand five hundred single family homes and 50 commercial developments, totaling over $200 million dollars worth of real estate. This guy is the real deal.
During the time of Hurricane Katrina, Dave was a 50/50 partner in a company that specialized in disaster relief and government contracts. His real estate business was doing very well. However, something happened where Dave needed to sell his shares in his business, and liquidate all his assets. 20 years of his life was down the drain.
Because Dave is a man who always protected his reputation and his relationships, he was able to rebuild what originally took him 20 years, in just 4 years. Its all about the relationships folks.
How to get started if you’re new to real estate?
You can go at this on your own, or try to pool some money with a group of people. What most likely ends up happening is you overpaying for a property and working on thin margins. This was the original route I took. However, because i had invested in forming relationships with people like Dave, an opportunity presented itself for me to take a partnership with them and “piggy back” on some large commercial deals where the asset was purchased for 15 cents on the dollar. These were deals I would have never had access to as an individual, but because of my relationships with a guy like Dave, I was suddenly in the game!
How can you meet your own Dave Michal? It all comes down to who you reach and touch. Invest some time and resources to become a part of networks that bring the right people together. That is your “skin in the game” but it also gives you access to people you normally would not have access to. This held true for me. In Episode 2 I told the story of how Dave and I met through Greg Reid. By investing in Greg’s event Secret Knock, I was able to meet many of the mentors I have today. Simply being in the same room as these guys put me on a more level playing field.
How to Maximize Protection and Minimize Taxes?
Do you ever wonder you multimillionaires like Mitt Romney pay only 15% in taxes? The answer…ENTITY STRUCTURING!
When you and I earn income from our day jobs, that is considered “ordinary income”. Before we ever see that money, Uncle Sam takes his cut, which when all is said and done, ends up being around 50%. The remaining amount is what hits our bank account for us to spend, and if we’re lucky, save.
What the pro’s like Mitt Romney do is hold these assets, like real estate, in various entities or companies. There are many options, LLC’s (Limited Liability Companies), C-Corps, S-Corps, etc. The key here is that income is earned, THEN expenses are deducted, and what ever balance is remaining is then taxes. That tax rate, which varies depending on several factors, is much lower. For passive income, like rental income from real estate, you are looking at roughly 20% taxes. THIS IS A BIG DEAL!
But wait, there’s more… what about maximizing protection?
If you were to own a piece of real estate in your personal name and a tenant fell and got hurt on one of your properties, they could sue you personally. In the case that you own your own personal residence, thy could come after your house!
What do the pro’s do? ENTITY STRUCTURING!
By owning the investment property in an entity like an LLC for example, if a tenant wanted to sue, they could only sue the LLC. This means they can only go after what is inside the LLC, which means they could not go after you personally or your house. As you start to amass wealth, proper entity structuring is a must!
Why You Should Consider “Piggy Backing”
As I got started in my real estate investing career, I realized I had two options:
- I could try to do projects by myself, do all the work, accept all the risk, and make 8% returns if I was lucky.
- I could join forces with the most experience investors, minimize the amount of work I had to do, limit my liability because I was working with people who have done this before, and get access to properties that were purchased for 15 cents on the dollar.
Which would you choose?
Additional benefits to “piggy backing”:
- Learn what a good deal looks like, what pitfalls to avoid, and how to maximize profits.
- Gain the reputation of the partnership. You could walk in a bank and say that you are the owner of a small duplex and ask for a loan, and they would laugh at you. Alternatively, after being a partner with someone like Dave and his LLC, you could pick up the phone, call his banking connections, share that you’ve been a partner of that specific LLC for the past few years, and have the credibility of that LLC. This would give you access to funding connections you would not have otherwise. Dave’s track record allows him to get access to millions of dollars in a matter of days. Wouldn’t you like the same opportunity?
- Take a bite of the elephant one bite at a time. When you get into the middle of a deal and are dealing with general contractors, raising money, and ensuring you have the right entity structuring and the proper operating agreements, it can become overwhelming. By taking the ride with experienced investors this process is more educational as you get to watch the process while allowing your investment portfolio to be built safely and in the proper way.
Why Generosity Matters
Having a generosity model it business is paramount. You get to the point in your life where you realize it is not just about money, but making an impact. Each one of Dave’s companies has a generosity model built in, setting aside money for charity and affecting change in the local communities. What has happened is the local communities began to take notice of his efforts and it created a reputation for the partnership. This has provided access to additional deals because people want to do business with people they like and trust. How can you incorporate a generosity model into your business today?
Learn more about Dave
On the Beam
Online community of Entrepreneurs that helps you discover your “why” while have access to influential entrepreneurs
Online platform that allows you to “piggy back” with Dave and his companies. He pulls back the curtain his companies so you can learn all the strategies he uses on a daily basis. This is the hard core real estate platform and offers networking, and hopefully will eventually provide an opportunity for smaller investors to take a part in the action (depending on how the laws change in 2015, stay tuned).