Ep 451: How To Deal With Real Estate Distress

Transcript

this this business is like a g Giant game of chess right this is not Checkers so there's a lot of things that come up

right in between all the the cool deals and the nice deal structures and the negotiations there's a lot that comes with that and uh yeah a lot of it's

painful a lot of it's weird and it's unfamiliar territory so I wish somebody had pulled us aside and had this conversation with us you know when we first

[Music] [Applause]

started so today we're covering uh forms of legal distress and uh it can come in

many different ways and we'll cover from like either from our personal experience or from what we've heard how to deal

with it please reach out to a lawyer and attorney and Specialty use cases um this

is just our opinion of the matter and how to deal with certain situations um so we have a huge list of things we're

going to cover each one of those if anybody has any questions please put it in the chat um our whole goal of doing this is that uh we think there's a not

necess a a recession but there's trouble times coming ahead and it's going to

affect a lot of people so if you know how to help people or at least know what the basics are you can help people do

better and if hopefully people listen to this later we're going to relas this as the podcast episode um by the end of the

year so this is another thing that like I said we trying to help educate people on the the the ugly side of real estate

because every it's all sunshine and rainbows but till you get sued so um

first on our list is demand letters uh demand matters us a preliminary communication expressing intent to take

legal action uh um Anthony what's your opinion on demand letters and then I

I'll hop after you um I know there's a lot of good jokes about them yeah there's a lot of

good jokes about them um I think I think once you once you cross that line though yeah you better be ready to go all the way because they're pretty offensive

they're very offensive um it's kind of like a if you ever get sered a demand letter um it's one of those things where

like be ready to go to war I mean at that point um if you're ready to serve somebody demand letter be ready to go to

war um there's a lot of things that can be resolved in other ways but usually having a lawyer drafted demand letter

will cost you like 200 to 50500 bucks and you'll get an answer but you might not like the

answer Anthony yeah yeah usually the answer is that unless you have somebody that's

that's I guess yeah it really depends on who's on the other side of that letter right um if it's a normal person that

might not have access to a line of capital maybe they're not super business savvy uh demand letter works pretty well but if there's somebody who's well

capitalized that that's been in business for a long time you send them the demand letter yeah you better you better be

prepared to go in heavy on some legal and it adds up quick so one thing I'll say to that too if you're serving

somebody in demand letter be sure you're ready to you understand what the other person on the other side of that thing

is I'm gonna 100% reiterate that 100% agree with Anthony on that one um if you Ser somebody a demand letter that is get

gets those all the time or they know how to deal with it um you might not want to serve them theand letter um you're not

going to like the result um on the other side if it's somebody inexperienced and you can kind of maneuver them and you

know they're inexperienced the manland is gonna GNA solve your problem pretty pretty fast and in a hurry so it has its

use cases but make sure if you're the one doing it make sure you know who you're doing it to is is the is the main thing

um it outlines Grievances and demands and specific remedies that they're requesting and any attorney will take

your your $500 to write a demand letter because it doesn't mean anything it's almost common um to some people they're they're a

little insulting but um it's it's it's almost it doesn't mean anything in in

most cases um and it's kind of our demand any anybody else you anything else to demand letters Anthony on that

one yeah I'm coming I'm responding in the group chat right now somebody's somebody's a buyer's acting funny so I'm

Legal actions for unpaid debts and potential consequences.

like yeah so I was like here's how you respond to that he I got to come in as referee sometimes um no I think that's prettyy much it for demand letter yeah

so if somebody does something in business and and uh you feel some type of way and you want to take them to you want to take legal action that's usually

we the band letters kind of the yeah kind of the first step um just you gota use them carefully and uh yeah like I

said that that starts the communication usually so now whoever you send that demand letter to you're probably going to end communication with that person

now so you're not texting them or calling them anymore asking them Hey where's my money and Etc U now it's going to be your attorney communicating

with their attorney so you kind of seese communication at that point so you gotta be careful yep all right next we're

going to jump into a little uh we're going to jump into lawsuits which I think is kind of behind demand letters if you search somebody demand letter be ready to file a lawsuit um the uh

lawsuit forms legal proceedings initiated by one party are against another um it involves filing a

complaint and legal responses Discovery and potential trial now um if you're

going down this road be sure you're ready to go down it because this is a long road um a lawsuit can last a year

to five years I have a cousin my wife's cousin she's been through a law she's gone through lawsuit right now for three

years um the attorney drag out the company's drag out the lawyer charged by the hour it's going to get really

expensive it's G to take a long time and um make sure it's worth it um they call

it worth the squeeze if it ain't worth the squeeze don't even do a demand ler don't even do a lawsuit because you're you're just gonna it's most time it's

ego if you're going to do a lawsuit there's a lot of ego in it and or has to be worth a lot of money to to do the

lawsuit as a whole um any un losses

Anthony um just that that yeah they can drag out they can they can kill your deal they can kill your time so I'm gonna sue them so I get my money like it

doesn't work like that you might never get the money you might uh spend it all in the attorney fees of what you were going to make for the profit anyway um

and chances are yeah let's say you know you might be found like negligible or something like you did something terrible along the way too that you forgot or messed up and you might end up

owing damages right and and and owing money so yeah you get count suit and it's just a big ball of wax so you gotta

be sure you want to step into that mud before you go there um James answer your question uh we're not going to bring up

Legal risks and strategies in real estate investing.

any relevant stories to us because some are still ongoing and uh you're not supposed to talk about your cases that

are ongoing so we right now we have three lwuit going right now uh for

different reasons um so there there's a there's definitely a time and place to do it um to give

you sorry one one want to mention is that when we first started this Hy line

we get on clubhouse and that's where we started doing our first meetings right it wasn't Zoom yet it was just a clubhouse all the time and uh we were

talking about like building out this company what it would would look like moving into the future as we continue to grow and scale and Daniel myself have

never scaled a company like this right so don't don't get us wrong uh we do we do weird things every day that we probably shouldn't do because we're just

we're still learning but we're getting advice from high level people who are you know kind of they are already where

we're headed but we talked about this in the very beginning is that we would have like a certain percentage of our business that would go straight to a legal fund right because we knew that

the the more business you do over longer distance in time yeah you're going to you'll find yourself in in court the bigger you get the more Target you put

in your back where people just sue you just to sue you to try and get anything you have so um the bigger you get the

more the more uh people uh Target you so like people companies like Walmart and these big conglomerates they have

literally lawyers on retainer just to handle all their cases and there's lawsuits left and right probably a new

lawsuit every day so they'll have lawyers on staff like they like company full time exactly

so um the bigger the bigger the company the more the bigger you get the more you're going to have to spend on legal

um it's just going to be a cost you're going to have to eat when as you get bigger because people are people are going to sue you you're gonna have to sue people um it goes a lot of different

ways so like the some of the the lwuit that we're dealing with is um we're suing sellers for specific performance

for not uh coming to the closing table so um there's different situations that call for it and both those deals uh that

are are going are really good deals so we're not going to let them go and we know if we go all the way to trial we're

going to win so if you know you're going to win that's the other thing too depending on the situation or case you

have really good good standing that you're going to win that's that's where you want to go into uh a lawsuit I want

to touch on specific performance too and in this case we gave the seller a bunch of money up front and they didn't show up to closing so uh yeah we stuck our

neck out for them and they they kind of they got us or they tried to get us but it's not going to work out in their favor that they already agreed to sell to us again anyway but um yeah something

I was going to mention about specific performance that's something that everybody on this call needs to be careful about is if you just go and lock up a property and then you try to sell

it and it doesn't work out and need to cancel if you're dealing again with the with a seller who is H who's Savvy who

has money who's been in real estate for a long time they can sue you right for for specific performance for not closing on that contract so that's why me and

Daniel have never taught volume right we've never told anybody in five years to go out and go get 50 contracts a

month and all these everybody talking about scale scale scale volume volume volume and me and Daniel were like hey man we' done 10 deals this year right

right we're not embarrassed to say we've been saying it for years because we we buy carefully right we do stuff very carefully you can't just go and uh not

perform on contracts you're going to get sued sooner or later you can get away with it a bunch of times but it'll catch

it'll definitely catch up to here so um that you Frank no it's me not only that but when

people try to lock up a whole bunch of deals and then file memos on all of them that's a no big no

no get Su real quick so there's a lot of reasons why can sue and can be sued I

mean you can sue over anything so um being sued is just going to happen especially if you in business for any significant amount of time you're gonna

get sued or have to sue somebody that's just gonna happen um I remember one of

my first it was a friend of mine I I did him I did some I did him a favor in trucking and he owed me like six grand

he still ows me six grand um I'm never gonna I mean it's not worth this Sue over six grand isn't worth it so

sometimes you just got to let it go and it is what it is it's a it's a lesson learned but sometimes it's not even

worth suing so you got to weigh the weigh weigh the balance on which if is worth it or

not um we're going to jump into foreclosure next foreclosure is when you

stop making payments and the bank or lender comes in and forecloses on you um it's G to happen I mean we've heard

about foreclosing on multif family units a lot of them from a person in Houston

um it's going to happen it's going to happen happens very often so um foreclosure it's one of those things

where if you can't afford it bought a bad deal sometimes better just let it go um don't fight the Foreclosure um you

can do you can always bounce back from more closure I think this one of the big things about this call is that no matter

what happens there's always light at the end of the tunnel you can always the knowledge you gained even though you you

made a bad decision you might have lost your property overclosure you can still come back from that and do be a good

investor one of our students we talked to he lost everything in ' 08 he had to repay all his investors back and then

some and then he's borrowing from them again so um when stuff like that happens you just got to bite the bullet

sometimes and face the repercussions and then you know you can use the knowledge you gain from that to Excel and do

better yeah I think this just goes right along with cutting dead weight so no matter what if you're investing in at

Foreclosure, bankruptcy, and saving a foreclosure.

any respectable volume you're going to end up having U you know maybe bought something that you should have bought

overpaid for it didn't work out the way you wanted to work out um so you know a lot of people hang on to stuff because they're waiting for it to sell in a year

two years five years so can get their money back right but sometimes that opportunity cost is going to kill you so

you say hey I bought this thing for 100 I thought it was GNA be worth 150 it's worth 80 I'm never going to sell it so I want my 420 I know that's what it's

worth but it might make sense just to dump that thing grab your 80 and then throw it into something else and double it somewh else right instead of just

waiting and waiting and waiting so yeah that I think that kind of goes hand in hand with forclosure I think that's why people get four closed on they hang on the stuff that they know they shouldn't

hung on to yeah so if if you get into a bad deal no problem you just get right back out yeah find identify a better deal liquidate your asset and move into

to the next that's how I would play I'm not telling you guys what to do or how to invest but I'm just saying that that would be the move there to avoid

forclosure and this is one of those things where we've helped we've helped the lady out of foreclosure this year she had a land deal we helped out of

foreclosure so like there's different ramifications where you can step in as a as a problem solver to help facilitate

those but sometimes it might hit you where you have to you're being foreclosed on so it's not this a knock against you stuff just happens and it is

what it is you just got to take it on the chin and keep it moving so they tell you how how to save a forclosure right so you come in you're assuming somebody

else's liabilities right so let's say they have a building there's a business in there it's getting for clothes on you come in You're Gonna Save the Day You're

gonna buy the thing but you're you can also assume that company's debt right so maybe you say I want the building but I

don't want the company like let let the company crash and burn but um I'll take the building all right I'll save the building but I'm not saving the company

so that's another thing to consider in a situation with a foreclosure uh you're assuming everything about that property so something to think about yep uh

bankruptcy so B bankruptcy is when you uh it's a legal status indicating an individual and entity cannot repay debts

uh this one I have an example I've never gone through bankruptcy myself but I met Pace when I first started my business I

went to meat pace and I was in Phoenix and Phoenix was telling me he used to be a contractor that would flip homes for

other investors and he he was doing a million dollars in Revenue a month which

is a lot of houses it's a lot of houses a lot of Crews lot Pace was Pace was yes

oh that makes sense why he just instantly built this big giant massive in a few years if he was already running an organization big enough because in

construction a million dollars a month guys that's ungodly like sometimes my company would do that a year right or

every six months and and I had a phenomenal time and made plenty of money so million a month that's that's a

tremendous organization so think he was doing rehab work for home investors dude

that is crazy that's if that at rehabbing houses a million dollars a month I mean that you're talking about doing like maybe hundreds of houses a

month at least dozens that's a tremendous amount of work people moving it's a lot of people a lot of personnel

so um this is from Pace I know he said it on podcast so I'm not sharing anything he hasn't shared publicly but

um he had two of his big investors they literally filed bankruptcy on him and

they each owed him half a million dollars which means he couldn't collect

that debt once they followed bankruptcy he couldn't collect that debt so essentially he lost a million dollars and uh he just sh his his company down

after that um just because the people Personnel the jobs all the assets you

like I mean at that point like that's takes you a long time to recover from that um so he just shut it down so

bankruptcy it's an option for people but it could affect you too if you're a

lender I mean me and Anthony we talked to a lender um earlier this year and he was talking about how the lender was

lending to other investors and they filed bankruptcy on them and it tied up the property for months because it was

going through a bankruptcy and have to wait till it clears so if you're if you become a lender at some point understand

that if that that borrower file was bankruptcy it could hold up your asset and your uh your property that you're

lending on in limbo for a long time so um there's double sides of that whether

you are filing bankruptcy or need to file bankruptcy or somebody files bankruptcy that you're doing business for I mean anything that you did for

them is just gone um filing bankruptcy it can affect

you for like uh like five to seven years so um there's some certain points where

it may be the best option for you and this is where you talked about bankruptcy attorney um every situation is going to be different um where you

might it might make sense for you to pile bankruptcy um they can't take your car personal vehicle and they take can't

take your personal home but everything else LLC or not is up for grabs when

they file bankruptcy here's another bankruptcy tidbit Bed Bath and Beyond they filed for bankruptcy a few months

Bankruptcy, digital assets, and debt collection.

ago um the bankruptcy would come in and sell off all their assets so the the reason why I know the story is because

uh I saw I read an article online or something that somebody bought Bed Bath and Beyond's website and email list uh

and it was Overstock because Overstock has similar products and services how much did they pay for that it was like five million or something like that oh

my goodness that's right there dude they bought their list and they bought their website so now people were getting hit

with Bed Bath and Beyond like thing even though they're in bankruptcy but it was just a fax company that was using their

name to some more products because they already had all the traffic imagine Bed Bed Bath Beyond's online traffic per

month of SEO that they've been building for the last 10 15 years like it's still it's still worth something even though

it's bankrupt so somebody bought that asset and was still selling selling products and services through

it I think that's something that nobody's thinking about um in in the business world is the digital assets

right and that's the most valuable part like having a mailing list like that from a you know multi-million pushing to a billion dollar company if you can get

their email list I mean the the the retail value of that email list if you auctioned it off somewhere online it

could be worth more than the buildings they own right somebody might be willing to buy that email list like imagine getting

access to Amazon's email list right or Walmart's email or you know what I mean it' be insane that's that's a real asset

and then you're going to start to see this over the next several years is that people start to identify that digital assets are worth more than physical

assets right so we're playing in real estate we love physical assets it's the it's the best way we know how to move Capital right now but you're going to

see moving into the future that uh digal assets are worth way more than anything physical and one thing I'll say to that

with your digital assets you if you wanted to become some type of influencer if you're listening to this and you have

some type of audience building your list is so important um if I realized this I

think really early on I think I heard it somewhere so I've been really focusing on building my list so even even us I

take high priority to collect people's information just because the building that Client List or potential Client

List it builds it so builds community is like this everybody here came off a Client

List in some way shape or form um I didn't know Frank before you can't join the hive mind you know and Frank's here

you know so everybody here came off some type of list some way shape or form so it's not a bad thing to say I'm building

I'm building a list or building my list um it's just one of the things that you got to take into consideration when you're building an

audience um and this is one thing we're building our list for our buyers and sellers I mean it's it's crazy we're trying to build our list that way too so

your data is important uh next we're going to jump into judgments judgments are fun so let's say

your lawsuit uh let's jump back to this is on the lawsuit angle again if you if you file your demand letter you go

through the lawsuit you win your lawsuit and now you get a judgment what is a judgment so judgment is a court order

decision determining the rights and obligations of parties involved um so uh

it's you you essentially have uh let's say you suit a guy for $100,000 and now you get a judge judement of

$100,000 what if the guy doesn't have it well you have a judgment against him for $100,000 um the next topic is

garnishments so uh you can use that judgment to get garnishments against

that person so I don't know if you known somebody or it's almost like a child support I mean we can jump into

judgments and I mean judgment pretty easy but you can jump in garments so a garments is a percentage of wages

withheld until the debt is satisfied so they kind of go hand in hand we'll kind of cover them both together um I learned a lot about

judgments uh just because when I was going through business I learned a lot about debt and how debt operates so um

we're gonna jump into credit cards here in a second too but um debt operates is if they can get a judgment against you

they can a go to your job B go to your bank or C uh what's the third option

um or they can they can find some other way to collect but usually those two are the main options that people go through they either go to your bank and do a

garnishment from adversary finan Club that's awesome so they can go to your bank and

garnish your bank account or they can go to your job and garnish it directly from your paycheck um there's a lot of

different ways they do that um and it's usually a percentage of your of your available balance or percentage of your

of your uh of your check that comes in So like um go ahead Junior and your

taxes oh and your taxes there you go I knew it was another one yeah the take it off your tax they'll take your your tax

return yeah I got a funny story about uh having dead against you like that yep go

Debt, student loans, and entrepreneurship.

ahead got some college loans out I went for anatomy and physiology one and two AC everything my construction company took off so I ran with that but I never

finished paying back my student loans and then you know my my 20s I got a job selling time share and it was like a W2

job plus commission right can make big commissions that's how I met Michael Suarez Mike Flores is on here I met a bunch of my best friends are at that job

and we stayed friends forever but uh know this but they sent me a letter like congratul you PID off for student loans I was like what how they were G toing my

wages the whole time I was at that job and I never even noticed it you never your thank you no I would

but it was like this is going to that it's going to that I didn't pay because that's that wasn't how you made the bulk of your money the bulk of your money came from the commissions so that's all

I ever looked at was like how much what was the big check right the little stuff nobody checked on that it's like federal

taxes all that whatever whatever whatever and yeah paid off my student loans I never even knew never felt it

that's crazy that's well good for you you paid up your student

loans I was proud of myself too that's the only time I've ever held a real

job I afford that you know yeah yeah so

43 U yeah that's the only I've had I think I had that job for like two and a half or three years that's like really the only time I've ever worked for a

company in my life always been an entrepreneur that's crazy um this is one

of those things where um if you understand how it works um debt changes

hands very frequently and uh if you ever been in debt in some way sh or fore um a

lot of it is it's TR talk about debt Daniel yes yes we can yes we can so

there everyone assets assets assets me and D all we care about is debt debt debt um there's a great video that

breaks down debt if you look up John Oliver he's a comedian um he has a he did a segment on debt it is amazing um

to at the end of it to kind of spoil it he bought like a huge amount of debt um and just uh he forgave it all but the

thing is is it was like a it was like $10 million wor a debt or something or a million dollars of the debt I forgot how much money it was but he bought it for

like pennies in the dollar like he bought it was like a million dollars with the debt and he bought it for like 20 grand or something like that and he

just he just sent him all a letter that he forgave the debt so the longer the debt becomes further unpaid the cheaper

it becomes so there's a statute limitations on debt of seven years and

if you have a debt after seven years if it's not federal I think it falls off like credit card debt

and go Frank student student loans cannot be forgiven yeah student loans

too thanks to rather communistic government of ours I was gonna say hey

give it give it a couple more months that'll be the last thing he does right before the election to get the vote uh we're not

talking about politics here um that is one of those things that is straight at hands frequently I just

sent Anthony video yesterday about debt how there was a guy buying corporate debt and then he would restructure it

and he made Millions buying debt I mean there's a lot of ways to make money on debt there's a way if you understand how

it operates and how it works it's not something to be scared of um it's actually

Managing debt and leveraging assets.

100% let's talk about this real quick then we go on to the next we want to beat a dead horse but let how you go on

tomorrow and you negotiate a phenomenal deal on a $10 million Ranch 0% down boom

in one day whatever your percent down was now you have $9 million in debt to your name that's powerful that crazy

powerful are you not gonna jump in that more no that was it like what else you want to

know you can get a loan for $10 million tomorrow and I'll just go do that a bunch of other times next thing know you

got $100 million in debt to your name that's powerful dude yeah it

too yeah so yeah you take you take that day you can take loan against it you fre can crowdfund it you could uh I mean

damn you you got $10 million use your imagination so this is one thing where if you get some type of debts um who

here has had an outstanding credit card and you got a letter in the mail and says oh take take take Frank got his

hand up I know some other people got their hands up they just don't want to raise their hand uh for James there you go I see you um you got you've gotten a

you gotten something in the mail it says Hey restructure your loan pay it off in 60 months of this amount or one payment

with a 10% discount Veronica I see you in the chat it's GNA it's going to offer

you some type of discount to pay off your debt the reason why is because they bought it discounted and the people that

collected the debt collectors they buy that cheaply and then they try and collect the debt and that's how they make money so let's say you have $10,000

wor the debt the credit card company may not want that on their books so they'll sell that to a debt collector a debt

collector might buy that for two to three grand and I don't know what what the rates are buying Deb and depends how old it is um let's say hypothetically

they buy it for two or three grand um they'll try and collect seven or eight from you and they they'll work on that

debt collecting for years trying to collect that seven or eight from you as soon as you say yeah let's pay off this

debt and uh restructure it to 60 months you've now signed a new agreement with

them as the debtor to pay off that debt for the next 60 months whereas if you

had a statute limitations of that seven years essentially it kickstarts it all over again

that's what I was about say it starts over again what say you it starts all over again so uh there's there's consult

and do things the way you want to do it but there's different ways you can manage that debt and uh all the credit

card debt is federally insured so the credit card didn't lose money it's just an opportunity for the debt collector to

make money and technically you don't owe them as the as the debtor they just

bought your debt until you signed an agreement with them that you're paying them that debt is kind of in limbo because

you only know that debt to the debt it was originally uh borrowed from or essentially that gave it to

you um uh Edward says look up uh FC and

fcrs um Diego asks how do you feel about leveraging the equity of a property to buy other properties is a good or bad

idea um I think it's a great idea as long as you manage the risk um we've

done that to get uh money to buy properties we'll leverage the property we have free and clear um it's 100%

feasible um it depends on your L level if you can use that equity and the asset

to uh leverage the capital Anthony did you watch that video I sent you of Casey

yesterday sorry are you talking to me yeah Anthony yeah did you watch the video I just wed in the front door dude what was the question did you watch the

video from Casey yesterday dude I have not had a chance to watch it but I know I need to Cas is an animal okay so to

kind of put this in perspective Casey talks about creating you have a property

free and clear and I'll break it down to you you can create your own loan against that property even if it's fake it might

be a James has a property freeing clear like hey James can I put $50,000 wor a debt on your property let's create a

note and then I might use that note as an exchange to buy something

else so that's what that video is I'll put the video in the chat uh for everybody here but you can if somebody

owns property free and clear and the way Casey puts it if you check out Casey Miracle on Twitter he talks about uh

creating temporary debt that you might need it for six months at a 5 six% interest you create that note it's

temporarily there and you move it somewhere else so you can do a lot of amazing things with thatb um look guys

if any thinks are pretty good at real estate go watch that guy so you can be humbled it's it's absolutely

ridiculous yeah go watch that video it'll be humble real quick so um debt is is very it's very

underrated um and there's different ways to manage it and um manage it properly I guess that

it can be a huge asset to your business and you can buy it and make money on it that's what you want to do um I'm trying

Building business credit and managing personal credit.

to find the link for James here uh next we're going to cover credit

card debt which I think we covered a little bit here but credit card debt is unsecured debt it's not not tied to any

asset and uh failure to repay can lead to Legal actions including losses and then you make it judgment garnishments

and have to renegotiate that settlement so there's a um credit card debt you can get a lot

of it um when I was uh I found the found the link for you

James here's the link when I was uh when I first got into

business I was really big into credit and uh credit cards and I had like I was

really working hard to like build my credit card um utilization not my credit

uation my credit availability I got it up to like 300,000 um just by managing

credit cards um and building out credit lines I'll tell you a quick a really

quick way like we're talking about distress but I'll tell you a quick way to get your credit back into good standing for everybody here is if you

have friends family a wife somebody know and trust and they have good credit what

they can do is they can make you an authorized user on their account and whatever credit card availability they

have essentially gets transfered over to you they don't have to give you the card they'll issue them a card like if you your authorized user but they don't ever

have to give it to you so um I did this one of my family members um and I've done it for people too uh friends and

family so if you have friends and family your credit is not that good and you know somebody that does have good credit essentially add add you or them as an

authorized user and then it extends your uh credit to them and you get their

credit essentially in a way so it's a good way to build your uh credit as a whole for everybody here hope you that's

a good tip about credit and credit cards but um I've done that for a long time

it's a good way to build credit but if your credit is bad don't do it because then you ruins other

people's credit uh yeah not doing that don't trust nobody and that's fine maybe maybe

somebody trust maybe somebody trusts you and they'll do it for you and it should change but there's different way always do that find a find a good friend make a

friend um I know I did this with my wife my my spouse is a friend that I

trust so I did this to my wife so when I was building my credit cards I would get a credit card in her name have me as

authorized user and then I would get a credit card in my name out of hers authorized user and we kind of build each other's credit at the same

time um yep Frank says my wife I did that also bu credit like crazy crazy

crazy little Haack to build your credit but definitely try it out uh what are the main differences between business

and personal credit um I think it cover personal guarantees yeah I do it later

okay so uh business and personal credit card um they're tied to your business

one's tied to your credit card uh some some credit card companies will make you sign a personal guarantee to receive that credit for your business um it

depends on the business uh if you check out like uh credit card hackers or whatever or there's a lot of people that

do like their niches credit cards they'll tell you like all the tips and trick hey you can get a don't hold me to

this but you can get a Capital One that's not a personal guarantee if your business for your business if you get this certain credit card like there's a

couple of hacks if you check out those uh like online forums or videos and Target those people they'll tell you all

the little hacks and tricks to get bonuses bonus points and stuff that's not tied to your personal credit um yeah

there's a lot of hacks for that but um definitely please go over that Daniel because I have a lot of people

that I've uh tried um I've tried funding them for you know certain deals and some

of them are like well go through my business credit because my personal credit sucks or go through my personal

credit because my business credit sucks and I'm just like dude just get it together man find a

balance so um business credit is really hard to build um I know it's you can

build with through cred it is hard yeah you can build it through credit lines and you can build a relationship using your personal credit um it's just really

hard to get business credit credit um I've know I saw a video where a guy he got he got business credit and then he

went and bought like a bunch of cars through the dealership using his business credit it's crazy you can do a

lot of crazy stuff with it um your personal credit is a lot easier in my opinion to manage and build business

credit is very very difficult go ahead Diego no just one one tip I wanted to to share Ely luck with so uh building

business credit um like Daniel said it can be a little tough I've managed to

get a few business credit cards going by just opening a business bank account and letting it sit uh for at least two years

once you hit the two-year Mark and you're you're actively using the account your just a checking account um from

what I understand after the two years it's like you you built that relationship with your um bank and and

that's when I noticed I started receiving a bunch of offers for opening a bunch of business credit cards uh for

for my llc's and just thought I'd share that out with anybody uh no that I forgot about that 100% um seasoning um

you can buy trade lines that are already seasoned accounts just for that reason that way you can get business credit

immediately um but please look into further into that don't take my word for it and don't what do you call that tra

trade linesin interesting trade lines so come

out so go ahead Junior they're trade lines they shelf accounts

yep they shelf accounts you can also buy shelf llc's shelf C Corps shelf es Corps

where they've had work put into them to build up the lines of credit that's available to them there are companies

that sell that yep you typically in the tens uh tens of thousands of dollars but

for what credits available to them and SP worth it yep yep so there there's a whole there's

a whole Niche to that that so you can definitely buy trade lines in shelf Corporation for that reason um we're going to jump into

repossessions repossessions are common in auto loans and secured loans uh legal process where lender reclaims property

borrower due to defaults um this is like personal property and not like physical property because physical property goes

through foreclosures repossessions is more for personal property RVs boats and

car loans stuff like that um repossession it's one of those things like

foreclosures man it happens sometimes you got to restart um get a new car and if it happens it happens um I have a

friend of mine he's gotten his car repossessed a couple times and he's helped people prevent their car from

being repossessed I went to his house um a couple months ago and he had uh one of

his employees had parked his car their car in the backyard to prevent it from being repossessed because it was totally

not family not friends um not anything so it was just a a business relationship

that he parked his car there to prevent it from being repossessed it's crazy there's there's

iume some crazy stuff with the car rep possessions but it's pretty it's pretty funny uh not that it's funny but it's I

have a lot of friends in those stories um and great examples like Veronica says

um I have unique friends how about that and like my my friends aren't necessarily crazy I know people have

crazier friends I'm sure Anthony's got some stories too but

um I I try and bring an analogy for each one to show it's not that serious you

can bounce back from every one of these thank you Daniel thank you that's the big thing you can bounce back from any

one of these if it happens to you or it has to happen to you it's okay we'll get through this all

right um tax leans tax leans are um not paying the government uh from taxes so

us as investors can buy tax taxans uh depending on the state we can buy a tax deed or a tax lean uh for everybody here

one of our speakers from our event last year he's a tax D tax lean

investor I forget the Anthony do you remember the story he bought like some crazy asset through a tax tax deed or

tax lean and he got like a crazy deal I don't know if you can remember the details in that one not not the one that bought all the like the hundreds and

hundreds of land defaults or something he said he said a story at the event that I can't remember that he got like a

crazy property through a tax deed that guy I think I think he had bought a yeah he bought a a tax lean or deed or

whatever for like 6K and property worth like a million and a half or something it's crazy

yeah it's crazy so tax Lanes go check them out pretty pretty

interesting um I forget the exact story but it's it's pretty crazy I can add something to that actually there there's

a really good book out there that I read it's called the 16% solution it goes all

the over tax leans and how by just purchasing a tax lean certificate and there's only a certain amount of states

that allow you to do this not every state can do this uh different states have different interest uh return that

you can get by just holding the certificate itself so let's say let's say there's a house for sale in Florida

which is actually something I tried to do I went over to Florida checked out some of these these houses and the tax

certificates uh that that you can buy for them you can buy a tax lean certificate for as little as like $2,000

$4,000 once you buy that uh you you get a return of depending on the state it

can be up to 16% uh during the time that the tax is not paid and after after so long if they

don't pay the taxes then with that tax leading certificate you have the option to purchase the property um or well you

would have to go into a some sort of legal battle uh to do that but you can get a house for pennies and a dollar uh

with with just buying the tax certificate I don't know if Texas does it actually because they do every state

does it it's just it might be a tax lead or tax deed state but every state does it and they have different limits I

think Texas is either two or five years I can't remember exactly I know California is

five isn't that what Logan former does yeah Lo Logan Logan's done stuff

Tax lean stuff Tax Le stuff for sure okay I think the one I'm thinking

is tax lean certificates particular yeah they're called different things but it's

all the same thing it's just called certificates or deeds depending on the

state gotta not completely like Florida is a lean and

deed State the lean you've bought the debt and whatever interest rate and

you've got a maximum or a minimum of two years that you have to hold it before

you can sell it at which point in time then you can sell the deed and someone

can buy it or you can buy it and own it at that point completely free and clear for the amount that you're into it for

so but if you buy it say $200,000 at 14% the max in Florida is

18% say you manage to get the winning bit at you know for $200,000 at 14% for

a house that's worth million bucks you've got two years that you have to hold it then you can sell

it at that point in time you can petition for the sheriff's office in whatever County it's in to sell it and

you collect all of that money plus the interest like whatever the total amount is including the interest is the default

starting bid so if you want it you bid whatever and it's yours and the nice thing is

it's yours all the money goes to you anyways so you don't have to worry about coming up with the money if you decide you want

it Ed says there's retired people that just buy leans just for the

returns and then Diego says the book is called 16% Solutions in case any was It's Curious

so check that book out notot of good info here thanks Diego for hopping in um definitely yeah definitely go

check out tax some good info there yeah there's a lot of good stuff there um we're going to jump into collections and

wage garnishments uh wage garnishment limits um they can only take a certain amount of your income uh whenever you do

get go to collections or wage garnishments so it's going to depend on each person um I've heard stories of

people that they get a they'll get a they'll go to collections or they'll get a garnishment they like yeah I can only afford $5 a week or $5 a month or

something like that and then that's all they can that's all they get paid so even you can go through the and this is

the whole point of like if you have to sue somebody or you're being sued is that you can go through the whole thing of doing a demand man doing a lawsuit

and getting a judgment and then when it comes to collections you might get $10 a month and they're paying you the rest of

their life um so that's all we always say if you're going to the lawsuit route

make sure you understand what you're going through because you might not like the outcome even when it comes down to it um next thing I say is preventative

measures you can do a lot of things depending on what situation you're dealing with and the cool thing about

this is that you're learning this you can use this for sellers too sellers going through a certain situation you can help sellers through certain

situation so there's um preventative measures to do certain things like I know you can consolidate credit card

debts into one loan to a put that on instead of taking it from your personal

it takes it to uh on like your debt to income I don't know there's a whole little strategy with that but you can do

certain things to kind of help relieve the pressure in certain different situations uh you may might be a to whell the property might be able to do

certain things but just understand there's a lot of different options maybe bankruptcy the options for the seller um

you never know so don't push sellers down certain routes if there's better options available to them and this is

where it comes down to where if you're dealing with really distressed seller sometimes us buying it their property wholesale isn't the right thing to do

and that's okay I think we've we've uh me and Anthony we we've had situations where we've told the seller like Hey

we're not the best option for you you can solve this problem doing this certain certain paperwork and we're not the person to solve this issue and

there's better ways to do this so um make sure you're doing everything the right way when it comes to the sellers

if you are selling helping sellers through through tough times and understand that they may not be thinking

properly when they're going through this because to to me and you we're having this cand of conversation but to them it

could be life or death I mean this could be disastrous in their personal life um

depending on how heavy that burden is so make sure you're understanding and you're being light handed and

understanding situation when you are dealing with sellers that are going through this or friends or family that are going through this um it could be

very um you they could be getting calls every day they could be calling family members they could be leaving mail um

very aggressive male to their to their doorstep um it can come in a lot of

different ways the deck collectors are ruthless the the garnishments can hurt a

lot like there's a lot of things there's a lot of pain that comes with this so make sure you're understanding all the indications of that people that are

going through this or if you go through this it's not something um it's not something fun to go

through um personal guarantees these are commitments by individuals to personally responsible for a business debt a lot of

credit cards if you get a credit card or business loan they'll ask a personal guarantee to sign for that debt if it

becomes default so a lot of commercial loans they'll have people that just sign for the personal guarantee just to make

sure that there's some type of other repayment if the deal goes south um and

it could imp it could implicate personal assets um if the business can't repay so

um this is the other reason why I love Creative Finance Anthony have you ever signed a personal guarantee with a

seller see if he's listening I never have no so Us by going

getting creative financing and seller financing we don't have to do personal guarantees um there's there's huge

incentive uh there's huge like ramifications that you don't even realize when you get seller financing so

um this is why we go to seller financing it's such a huge underrated asset that the sellers give you that ability and

you're not get doing a personal guarantee so um just understanding that

stuff when you get into the big boy game like storage personal guarantee if you're not signing somebody has to right

Frank yep that's just going to happen um I was going to say that's the power in what we do guys is that

you know the more legal documents you need proof income when people start looking at your records and your statements um your buying power is

dropping dropping dropping right so let's say you go to 10 lenders and they say hey we want to see all your books we're going to give you a $2 million

loan right by the time one of those lenders approves you then you're done you're not getting the other nine but

what we do is we'll go out there and give ourselves the 10 loans anyway right and go out and leverage all that debt and we never ask any Institution for for

permission to do so if you're going direct to seller yep um second position leans I'm end of

the call is a priority of leans on assets when multiple loans are involved second position leans may have

subordinate claims to First Position leans in case of default um I did a really cool uh podcast with Kevin aamos

it's like if you look look him up um it was probably like a year ago um he did a

really cool deal by buying like a third position lean and then paying off the subset leans and he ends up getting like

half a million dollar Equity just by buying a subset lean so um if you take a

second position lean or if you buy a second or third position lean you can there's a lot of implications that come with that but if you lend on a deal and

they put you in second position just know first position has hierarchy in that in that property and it goes into the hierarchy

of first second third fourth and fifth um so there's a lot of nuances and

understanding your your position in a property if somebody offers you a second position um you just got to understand

what you're getting and sometimes second position might be worth it I know a lot of commercial properties they create

there might be a first position lean of 70% and then they'll put a second position lean of the 30% of their uh

limited partners so there's a lot of different ways to structure deals the bigger the deals get usually there's

going to be a second thir position leans on the property so um if you are getting into a lean position or you want to buy

a lean position make sure you understand the different types of lean positions and what what are the other positions

holding and where they're at and they're current standing so I think I covered everything from

everything I could think of um about legal distress from Real Estate credit cards foreclosures demand letters um

there's a lot of stuff in there uh if you need to dig into certain things talk to an attorney talk to a lawyer if you

need to help sellers with this have get a referral for a lawyer or attorney to help these people through these

situations because um when people are going through them they are heavy to carry

heavy heavy to carry so um I hope that helps you become a better investor and

if you ever if you know somebody going through it I hope I can help you can help them and understand the basics of

debt and good bad debt what it looks like ramifications of it um I got one

last one Daniel that I've been meaning to to find out more about this and uh a

a lot of people have reached out to me with the opportunity but I don't understand it too well and hopefully

this might be a long shot but I'm hoping somebody knows about it have you all heard of the term infinite banking using

your life insurance yeah in order to buy properties with that or or or take a

loan against that to to where you're paying yourself the interest y to where you become your own bank and we just

talked about that a little bit yes um that uh I recommend you do

this if you have a lot of capital to invest um it takes a lot of money to Kickstart it going and you have to have uh Capital

to lend yourself essentially so if you're um if you're not well capitalized

it's not even worth it to go down that route um it's one of those things where you take it on when you're ready but is

definitely is a way to once you already have wealth it's a way to build wealth even further um yeah you have to

overfund your policy essentially so if you're not in a place place to do that

don't even worry about it um and this is where like different people different times um maybe you'll get their

eventually and you might know about it but it's one of those things where you you don't necess want to jump in over your head because a lot of times people

will sell you that oh you can do this this and this and then they realize what it actually costs to get up and running and they might start it and not have the

funds to even leverage it properly or it even makes sense so um that's my two

cents on that thank you Daniel appreciate that that helps yeah yeah you have to be well

capitalized that's the biggest thing for those things it's a it's a good strategy you got to be well

capitalized any final thoughts

Anthony NOP get out there go do something get somebody on the phone make something happen and then you'll learn

all this stuff firsthand instead of just listening to it but if you're out there getting your hands dirty you know then then you can learn all this stuff firstand but if you're not in the

trenches doing it you're never going to experience it anyway so I'm just always like just take action um anal is

paralysis it's not allowed in this room you just go out there I'd rather you go out there and do something completely stupid and we'll fix it and work our way

backwards than to just continue to not do anything at all go make some money guys absolutely absolutely bail forward

man if you've never dealt with some many situations if you've been business long enough and you're making money long enough it's going to come up you're gon

have to sue somebody you're gonna get a manand letter served to you it's going to go one or the other way and uh it's

just going to happen so uh be prepared know that it's not the end of the world uh consult to an attorney come talk to

somebody who's dealt with stuff like that if any of you guys get sued for something let us know might be able to

help you out not that we're gonna give you legal advice but um we could tell you how to who to talk to might give you

a referral to a lawyer attorney um you never know so reach out to your network whenever stuff like this comes up that

you don't understand and somebody might have gone through it prior to you so they might give you some insights that

you might not understand and how to deal with certain situations so um if you do go through trouble trimes or know

somebody who has definitely reach out and hopefully this call helps everybody learn something and how to deal and

transition through stuff like that all right Happy Thanksgiving y'all we'll see you on next uh next Tuesday everybody

here thanks for tuning in I hope you all learn something and are able to take that with you for the rest of your life

all right hey guys if y'all are in the San Antonio area and you're gonna be alone on Thanksgiving hit me up you can come me with us have a good one take

care God bless you bye hey if you have any deals you'd like to submit to The Hive mine and our team go to Hive bc.

it's actually the Buyers Club submit your deals and we can hopefully diso your deal for you have a great

day

Ep 451: How To Deal With Real Estate Distress

Daniel Esteban Martinez

Anthony Gaona