As we move through the stages of growth, we sometimes fall into the shiny objects trap. We chase the shiniest thing in front of us that we forget about where we want to go in the first place. If you are ready to take borrowing to the next level, then you better learn how to ramp up your fundability while also keeping your vision intact. Merrill Chandler and his guest, Mark Dolfini, the founder of Landlord Coach, LLC and author of The Time-Wealthy Investor, take you from small business borrowing into a discussion about commercial level borrowing. Mark breaks down the dos and don’ts in the process and shares how your fundability gets positively or negatively impacted by it. He gives us an in-depth look at what is happening in the commercial lending markets and how these things will affect real estate investors. Through his book’s fascinating VIP model that is used to coach landlords, Mark provides some great insights to help us become a desirable borrower to these banks, especially for those in the do-it-yourself game. He zones in on the importance of being in alignment with your vision; otherwise, you’ll end up further down from where you want to be. Be fundable and lendable not only in the small leagues but also in the big leagues while staying in alignment with who you are. Follow along in this episode to learn more.
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Are You In Alignment With Your Vision? With Mark Dolfini
I’ve got a spectacular guest. We are leveling up as you have never seen. We’re going from small business borrowing into a discussion about commercial level borrowing, the do’s and don’ts, and how your fundability positively or negatively impacts that fundability. We’ll dive right in with Mark Dolfini.
My guest is Mark Dolfini. He does an amazing job of presenting a fascinating model that we’re going to go over where he coaches landlords. When he and I met, and we started talking, that scratches the surface on the depth of not only of his awareness of what’s happening in the commercial lending markets but how that impacts the real estate investor and that’s our tribe. Welcome, Mark. I’m glad to have you here with me.
It’s good to be anywhere. With 2020, I’m not even sure if the moon isn’t going to crack in half and have vultures coming out.
Somebody told me about a tweet and it said, “Can you imagine being the history teacher trying to cover 2020, 10 to 20 years from now?” It’s going to be a semester-long course, just the year 2020.
Freshman year is going to be like revolutionary war history, then you’re going to go on to World War II, and then junior and senior year might be 2020.
That’s where the entire world pivoted both in social unrest as well as economic unrest. They’re not even related. These two things are not even related to this time. We got COVID with all of these people in the streets. I can’t imagine we’re not going to have another little whipsaw in the COVID environment. In the midst of all of this, some of us are trying to keep our heads about us to see how we can positively impact our communities, positively create a reasonable and deliberate way about us so that we can inspire others to grow and improve their lives amidst all the madness. First of all, tell my tribe a little bit about your background and how you ended up landing in the landlord coaching space and especially about this phenomenal book that I was able to read. I thought it was going to be about landlording. In fact, it was a highly transformative and awareness-raising book.
It’s a bit of a long story like most substantial stories you would want to hear. I grew up in New York. I joined the Marine Corps because I wanted to get out and see the world a little bit and serve my country. I did that and after a couple of years of that, I was thinking that there had to be a better life. I was right. Marine Corps was very good to me and very good for me, but I wanted to go and do my own things. I was always very entrepreneurial and creative, and that wasn’t a good fit for the Marine Corps so I left. It was funny because I wanted to get out and get my education. I had to take the SAT. I graduated 352nd of about 354. I graduated from the top 98% of my class.
The beautiful thing is we all mature or excels at different stages in our lives, so I get it.
The reason I say that though is because if there are people out that they may have that limiting belief that of, “I’m not smart enough or he’s different.” Trust me, put that head trash away because I promise you, that is not the case for anybody. I was able to figure it out. I got a good enough score to somehow get accepted to Purdue. I went to Purdue. The time I was there, while I was at school, I was starting to look at buying rental properties. I was working for a bank and I was trying to figure out how do I get fundable? I didn’t have enough money to buy. I had to learn how the banks thought. They don’t think logically. I can tell you that. I think that you know this.
Algorithms are the quintessence of “if-then-else.” That’s not as logical as one might think. It’s circuitous in a number of ways.
That’s the thing. I needed to figure out if I can pay rent, which is a higher dollar amount, would it make sense that I could qualify for a mortgage? Not necessarily. It was very frustrating until I learned. I’m like, “Let me learn about this a little bit.” I’m talking about residential type mortgages, not what you do. That’s a little later that I learned how they thought on the commercial side when I was a commercial analyst. In that space, I was learning about front and back end ratios and learning how they make decisions about borrowing. Once I figured that out, then it’s like, “Let me show them what I needed to show them.” I was able to buy properties. By the time I graduated from Purdue four years later, I had about $500,000 worth of real estate that I had accumulated, which is about a dozen rental properties. I think it was right around a dozen.
Congratulations, especially being in the 98th percentile of your class.
If nothing else, I was able to figure out how stuff worked. As I continued going on, I worked a couple of different corporate jobs. I worked as a corporate accountant for Marriott. It’s a wonderful company. I loved working for the Marriott, but I didn’t enjoy the work that I was doing. I went and sold my soul and worked for an accounting firm for a while, which was cool. When I was working at a bank, I was doing commercial underwriting and I did enjoy that work, but it didn’t play very well. Ironically, banks don’t pay well, certainly to people with my background. I enjoyed that, but that’s where I cut my teeth and learning how banks made decisions. It wasn’t front end and back end ratio on the front end and on the residential side now. It was that service coverage and things like cross-collateralization. Things that all of a sudden were not in the same realm as the residential side.
Listen to everything that he has to say because we talk about leveling up. We talk about the live and flip. We then talk about now we don’t have to live in it. We can live somewhere else and do the fix and flip. Some of our tribe already have dozens of properties in their inventory and their holdings. For those of you who are committed to seriously taking on commercial level banks, and these are the $2 million to $5 million loans and $20 million and $50 million loans, depending on what you’re acquiring, it’s fundability principles still apply. You’re now a Major League instead of Little League baseball.
Share more of your experience when you’re at the banks. What was it that you discovered that made you have an a-ha moment about corporate or commercial underwriting? What were some of the principles that they look at? What are some of the things that a borrower who is swinging for the fence and has a good RBI, but isn’t in the show yet or isn’t in the Major League, should be aware of? What are the things that my tribe needs to be aware of while they build that? Let’s say they’ve got 50 doors and they got some multifamilies. They’re looking to go to the next level. What do they need to watch for? What do they need to be prepared when it comes to that underwriting? It’s all manual underwriting at that level. There is no automatic underwriting per se.
To be a little bit fair, the world of banking changed fundamentally back in 2009, 2010, 2011. Everything changed because the world was a different place. The banking world was a different place. I can speak to my experience back then. I don’t think it’s changed a whole lot but there is more automated underwriting and it occurs at different levels now, depending on the bank that you’re working at. It is one of the reasons why I like working with community banks because I’m not getting an automatic rejection because there was something that was flagged. It’s easier to reject it and then kick it back to the loan officer. We didn’t touch anything that was under $500,000. If it was $500,000 or better, it went to my desk. I did a lot of stuff with real estate manufacturing and some ag. I live in Indiana. This kid from New York, all of the sudden learning about ag lending. I was like, “I can recognize a horse in a photo and that’s about it.”
Are we talking acres or hectares?
I had no idea about any of this stuff. It was interesting though to learn about farming operations and how many litters they would have in a hog. How many you could expect and all this? I’m like, “I don’t even know what any of this.” All of a sudden, I was being educated. The people that I learned from were the dream team of commercial lending. These guys were good. To answer the question of what should people look for? I was already dealing with people that were massively successful. These were people who are building multimillion-dollar developments. They were home builders. These were people who had already made a large impact in the community. We’re building and we’re building even more.Our goals, along the way of our vision, are the intermediate waypoints. Click To Tweet
One of the things that I noticed was that they operated very much like a business, which is something that I talk about in The Time-Wealthy Investor 2.0. It’s not about doing this side hustle. It’s about operating as a business. These were companies that had financial statements, balance sheets, and income statements. They were prepared by CPAs. They were prepared by professionals and they were trying to do it all. They weren’t trying to be their own lawyer and their own CPA. Even though these people started out as mom-and-pop, they recognize the value of an experienced person in their corner.
If you want to be fundable, get with a banker that knows what you’re trying to accomplish. Allow them and give them reasons to want to give money to you. Be fundable, be lendable, be a desirable borrower. If you can be that much for what they learned from you, then you’ve got an advocate who’s going to want to loan you money and not want to take a loan back when it’d be the worst time. If I was to look at the overall fundamental thing, it’s they operated very distinctly like a business.
Tell us about the VIP model that is fluent in your book from start to finish so that my people know how we get from one to the other. The end game of this is upping your game in a commercial environment. It is moving from that $500,000 to $1 million to that $3 million. I have boot campers and clients who are always like, “What’s the next level of borrowing?” First of all, you got to know where Mark and I met. We met on an entry on the NREIA Cruise. I’ve talked about the NREIA Cruise, the National REIA group. When we were there, we sat down at the same table for dinner and it was electric. It was easy where each was the positive version of collusion, collaboration, or otherwise.
I had somebody sitting at my table who knew more than I did about commercial lending. I know a lot of things about a few things, but I don’t know everything that’s in this man’s head. I’m like, “This is a done deal. We have to get him on my show.” I wanted you to be able to influence and shine a light on what’s possible next. Some people haven’t even got their first $500,000, but our goal is $1 million for our clients. One of the biggest factors that we’ve run into is that a client will come to me and they’ll say, “I’m all in. I’m ready to get $1 million. I’m going to get the business lines of credit and everything dialed in.”
They then hit $200,000, $300,000, $400,000 and they stop. I’m like, “Why aren’t you continuing?” “I can’t deploy the capital that I have,” because they’re doing everything themselves. They’re not leveraging yet. They have one contractor team. They haven’t done the research. They have 2 or 3 teams at the same time. They’ve got 32 ounces of funding in an 8-ounce glass and they don’t know what else to do. When you sent me your book, I absolutely loved how you model it. Please share with us the VIP model and how that helps somebody who’s in the do-it-yourself game, to moving into a higher level of building a team and an empire.
It’s ironic because I got off a call with a guy who’s looking to take his business and multiply it by about five times. He’s got a $2 million business and he’s looking to bring that to a $10 million to $12 million business over the next two years. I’m like, “That is a completely different business. Right now, you’re probably still doing some of the doing.” He’s like, “I try to.” I’m like, “Let’s hit the timeout button here for a second. What do you pay your people to do what they do?” He says, “I pay them $15 an hour.” I said, “When you are doing that work, that’s what you’re paying yourself.” For the readers out there, you did not get into real estate to create a $12 or $15 an hour business for yourself. If that’s the case, you don’t need to invest $100,000 or $200,000. You could do that tomorrow. We could get into a cleaning business right now before we go. We’ll go to Home Depot, buy a bucket, a mop, a couple of sponges and we’re in business.
You didn’t do that. That’s what I’m saying. There’s a very low barrier to entry for that. That’s why it’s priced so low. When you want to get serious about making money, you’re not going to sacrifice and say, “I’ll save the money and do it myself. Granted, sometimes you have to do it because it’s a matter of convenience. Rather than calling, you’re like, “I’ll spend an hour, I’ll clean it up. I’m already here.” Sometimes you have to and sometimes I still do that stuff. If you’re actively going and planning and plotting to do $12 and $15 an hour jobs for yourself, you’re never going to make it big. If you do, you’re going to be so time wary, you’re never going to be able to enjoy the fruits of your labor.
The whole point is you’ve got to learn to manage the lines of complexity. You’ve got all these things coming at you in different angles and the way to do that is with a system. That’s not craziness. That’s why when you see a very busy business, I don’t care what business it is. McDonald’s, Starbucks, Lowe’s, Menards or wherever you’re at. When you see a system that’s running well, you almost don’t even notice it. That’s the beauty of infrastructure. The problem is when it’s broken or non-existent, that’s when you get bad service. That’s when you get that table over there, they’ve got two waiters on them and we haven’t even been able to give our order yet. It’s a bad infrastructure or bad process, one of the two.
I’ll get into more of that. When you’re looking at the VIP method, which I talked about in The Time-Wealthy Investor, it is a system of setting up a business. The VIP method is Vision, Infrastructure, and Process. This is more of a top-down approach. The vision is about what you are trying to accomplish. Notice I didn’t say, “What you want to bring your business to.” A lot of times, I meet these investors at REIA meetings and I go, “What are you trying to accomplish?” They go, “I want 75 rental units.” I’m like, “74 won’t do it?” It’s always in the increments of 25. I don’t know what that’s about.
They’ll say, “I want 100 rental units.” I’m like, “99 wouldn’t get you to where you want to go?” I’ll do that for a while. What they’re doing is they’re confusing the number of rental units for the life output that they think that will buy them. They think 100 rental units is going to get them this lifestyle when realistically I could say, “Why would you want 100 rental units if 25 could get you the same life output?”
It’s much less lines of complexity. For most people, you can deliver on a vision that that’s what you want out of your life. The problem is most people don’t have a very clear vision defined. They say, “I’ve got a vision board. I know what I want.” I’m like, “Okay, tell me what you want. What are you trying to get to in the next three years?” I don’t challenge it to be a jerk, I challenge it because I’m truly interested. I want to know. It starts to fall apart. I do that not to be a jerk about it, but because I want them to get clarity in their vision.
If it can’t withstand scrutiny, it’s not going to withstand the real world. We’re going to lose every semblance of what that means. I’m Mr. Tactics guy. What I hear you saying was similar to the message that one of my partners was telling me, which is what I enjoyed when I was reading your book. I spent my whole life in tactical maneuvers rather than strategy. He said, “Merrill, the only thing that is valuable for you to do is the only things that you can do that nobody else can do.” I’m sitting here doing everything that anybody could do. In fact, I’d even already hired people to do some of those things like your example.
I was not breathing the rarefied air of only the things that I had the exclusive skillset or mindset to be able to create. My business doubled the second I took your advice, what you’re teaching right now, and get out of the doing part of it and have a clear vision and let the system do the heavy lifting instead of me. I came to an amazing awareness that changed everything for me. It’s like second nature to you, and here I had to spend 50 years back ending into this very idea.
I coach this stuff. I have a coach too. I’m not the coach that says, “You need a coach.” I have a coach that I’m paying a lot of money to. It’s interesting because you’ve met me. I’m not a big guy. I’m 5’7” about 150 pounds. I’ve met your assistant, Sky. She’s teeny tiny like my bride. I could teach them a certain self-defense technique, a certain tactic that would probably work well for them because they’re small. If I was going to teach you to do a throw, that’s the only tactic you know. You’re bigger than me. You could probably do it a lot better than I could, but that’s the only tactic you know. It’s not always a “one size fits all” thing.
Many people say, “I can get you into wholesaling. You’ll make $30,000 a month. What you got to do is this thing that you hate. Don’t worry though, you’ll get $30,000 a month.” You go. “Yeah, but I have to feel like I sold my soul to do it?” It’s not worth it. I get reached out by people on Facebook all the time. They’ll say, “You’d be great at selling,” whatever magic potion they want me to sell for them. I probably would be good at it, but I don’t want to. It’s not the highest and best use of my time. That’s what a clear vision does for you. A clear vision first. I use the analogy of the most dangerous place on the planet is between a mother and her child.
Mom has got a very clear vision about watching that child grow up and be safe and everything else. Certainly, a good mother. When you go after your vision with a ferocity of purpose like that, that’s dialed into you and innate, you’re not going to allow distractions to come into your world. You’re not going to allow nonsense, drama, and things that are going to distract you from that vision. It’s the analogy that I use to say, “Merrill, you and I are going to go on a road trip and drive from Michigan to Florida.” Our vision is to get to Key West, feeling the sand, sitting in a lawn chair, and holding a cold drink. Our goals along the way are the intermediate waypoints.
It’s like, “We’ll hit Indianapolis, then we’ll hit Chattanooga, then we’ll hit Atlanta.” It’s goals along the way. Vision is the ultimate, then the goals are the milestones along the way or the waypoints. Somewhere between Indianapolis and Chattanooga, you say, “I got a friend who lives in St. Louis and it’d be so cool to hang out with him. The last time I saw him was in third-grade. I’m sure he’s a cool dude. Let’s go hang out with him.” I’m going to hit the timeout button again and go, “No, that’s not aligned with your vision. Our vision is to get there.” Let’s face it. In real estate, how easy is it to get distracted.
It’s a bigger and better deal. It’s the next opportunity. It’s like, “This may be easier, faster, and better than what I’m doing now. We’ll divert all of our resources to chase the shiny object.” Chase the credit score instead of building a fundable profile.
It was funny because I was thinking about you. I had paid off some credit card debt. I didn’t have a whole lot, but as I was paying it down, I paid off one credit card in full. I got a letter that they were reducing my credit line from $6,000 to $500. What am I going to do with $500? It’s a rewards card. What am I going to get with that? That’s the way they think. I don’t try to make logical sense of it. I’ll probably cancel the card, move on, whatever. They have their risk things that have nothing to do with it because it’s the retail profile. It doesn’t make sense. I want to be fundable in the commercial space.
Let me finish up the VIP method because I know there are other things you want to talk about. Once you get your vision clear about what it is you’re trying to accomplish. You specifically, what’s the level of life output that you want? It’s not easy to do it on your own. It’s like trying to put a lotion on your own back. You’re too close to it sometimes. You think you’re good. My coach helps me with my vision and making sure I’m making decisions in alignment with that. The next piece is the infrastructure. The infrastructure is not only the bones of your business, but it’s also the asset class selection that you make. With the asset class selection, that could be are you in single-family? Are you in multifamily? Are you in a commercial or mixed-use? Could it be parking garages or storage facilities? Whatever that asset class selection is, that’s the one piece of infrastructure. I did not write about that asset class selection in The Time-Wealthy Investor. I did not write about that only because it would have been a 500-page book.
We call those wealth strategies. Every single one of those has an entirely different set of operating procedures and different infrastructures are required for each one of them.
The next piece of the infrastructure like you talked about is what software do you need? What accounting software or property management software should you have? If you have a virtual assistant or a phone system that looks like this, you no longer get to complain when someone calls you at 2:30 in the morning. That’s your fault. The reason why infrastructure is the next piece is that once your vision is clear, let’s say at a very fundamental level that your vision is to lay on the beach, rubbing cocoa butter on your belly. You have this vision of laying on the beach rubbing cocoa butter on your belly for two months out of the year. If your infrastructure is set up to return emails and phone calls on a timely manner, that’s going to be a terrible experience for you when you’re laying on the beach, trying to rub cocoa butter in your belly. No one wants to work from the beach. That’s terrible. That’s the worst. It’s like someone punching birthday cake in your mouth. You want to be on the beach and be present. That’s the infrastructure piece. That’s the bones of your business. The last piece is the process. That’s the tactical stuff that you learned. You might learn a tactic that you go, “I like this tactic.” It’s in alignment with your skillset and your risk tolerance. That process runs on the infrastructure that you built, that all stays in alignment with your vision for the future.
My takeaway from this as reinforced by what I have read in your book was a huge exclamation point. It’s an easy read. It’s not highly technical. It’s conversational. You tell way more stories than I do, which is a great way to write a book. It was an awesome experience. The thing that kept coming back to me where my original failures had been was in the infrastructure piece. I was carrying my entire process on my personal back. If it’s going to be, it’s up to me. That’s not a business. That’s a cult of personality. My mantra became to let the system do the heavy lifting so that my team, and even myself, get to be geniuses in solving customized problems for my clients and my students. We get to use their genius to weigh in on particular situations, not make them fundable. The system makes them fundable. In your business, exactly what Mark is saying is where are you doing the heavy lifting? Where’s your personal presence required to be successful? As Mark said, the second you’re doing a job for $15 an hour, the value of your contribution to the business is $15 an hour. Now you’re talking to somebody who came from that place and hopefully, we continue to leverage the systems, the infrastructure, and building something that people don’t need a human being to make it happen. Human beings are there to make sure that they stay on track.
If I could make a quick point. Let’s say you’re out there doing a job where you amortize over the amount of time you spend at work and everything else. You’re making about $50 an hour and you’re doing a $12 an hour job, you’re costing yourself and your business $38 an hour every single time you’re doing it. I had this guy who was a mentor. I appreciated the way he ran his business, a local disaster restoration type of business. I always appreciated the way that he had it set up. When he pointed that out to me, I was like, “No wonder I’m broke.” I’m costing myself $30, $40 or $50 an hour. Imagine if your billing rate was more like $100, $200, or $300 an hour and you’re out doing $12 an hour work. Now you’re in the multiples. It stops making sense. I’m not saying that I’m above that work. If I had $1 million in the bank, I would still go out and fix stuff. I love fixing stuff, but there’s some stuff that I shouldn’t be doing. It hurts my business. I’m not saying that you can’t do it, but is it always the highest and best use of your time?
One of the things that you brought up is about doing work from the beach. I wanted to share it with my team. I’ve never shared this because it just came up for me. There was a time several years ago. We’d killed it. I told my team, “We can’t afford to be gone for a full week as an entire team. We can’t shut down the doors, leave a new person that we hired as the receptionist, and be like, ‘I’ll get back to you next Monday.’” We decided to take an entire team, eight of us, we packed up all of our workstations and monitors, and we flew to Hawaii. During the United States Continental hours, we would have to work from 5:00 until 2:00. If everybody is willing to work from 5:00 until 2:00, then from 2:00 until 10:00 or 11:00, we’ll take a vacation. The funny thing was that 10:00 or 11:00 turned into 12:00 and 1:00. Everybody had their own rooms and workstation. This was pimp. It was an amazing idea.
The 5:00 AM turned into 6:00 and 7:00 and 8:00. The only thing we got done was answered emails and kept certain weekly appointments. We have a client class where you get a weekly appointment. The second those were done right around 2:00, it was back out into the world with surfing lessons. We went as a group. We went skydiving as a group. It was a phenomenal experience, except we didn’t get to play as much as we would like. We didn’t do a 50% job for our clients because they were intermeshed. We have never done that again, but I have taken them on a four-day weekend or whatever to be able to do things. You’re absolutely right. If I would’ve had a system that allowed people to move on their fundability path without all of the time and energy needed for an advisor. We’re moving to that because of the things that I’ve learned that you’re pointing out to my tribe.
We’re making it so that you don’t need another human being to move on the path. You just need an advisor to make sure that at a particular pathway or at a crossroads, you at least have all the information you need. That’s very different than making every step occur. I’ve learned a lot of exactly what you’re saying. Your book reinforces the process of creating the vision. I have a crystal-clear vision and having mentors and partners who put bullets in it to make sure that it’s resilient. It isn’t a whim. The infrastructure is what I’m building now, so that my tribe, my clients, my students can move forward without having to wait on one of my team to sign them off or check them off or otherwise. We’re building that infrastructure and go more so that my people are strategists rather than tacticians. Let the system be the tactical influence. I applaud what you’re sharing with my tribe.Decisions become much easier when you can simply ask, “Is this in line with my vision?” Click To Tweet
Honestly, all of a sudden, decisions become much easier because then you can simply ask, “Is this in line with my vision?” People who will reach out to me for advice from time to time will even say, “I’ve got a question about X, Y, Z. I’ve got this opportunity.” I’ll say, “What do you think my first question is going to be?” They’ll go, “Is it in alignment with my vision?” I said, “Exactly. Is it?” Sometimes if it’s in alignment with your vision, especially if you’ve got a partner, it’s going to be in alignment with your ultimate vision? Especially if you’re in a marriage or in a relationship, you don’t make decisions that are going to necessarily bring you into a crossroads.
You want to make that as a couple and you say, “This is going to be a fundamental shift. We need to have this conversation. We need to be intentional about it.” Let’s face it. When you were ten years old, probably the most important thing in your world was your bicycle. I don’t know anymore. Now it’s Xbox or whatever, but probably the most life-changing thing was a bicycle, at least where I grew up in upstate New York. When you got to 14 and 15, maybe not so much because something changed in your world where you’re now able to drive. Maybe that bicycle never got ridden or even oiled or even forgotten about. The next thing you know, you don’t even know what happened to it. It probably got sold off at a yard sale. My point is that as you get closer to certain things, or as we mature, it’s okay for your visions to shift, but they should be an intentional shift. Maybe you get 80% to your vision, you go, “That’s not what I was expecting it to be. That’s not what I was looking for. I was expecting it to be something different.”
One of the things that brings up for me, the questions that I ask in my boot camps, I say, “What is your end game. What’s the why of your life?” Invariably, they are nebulous and include some version of time, money and freedom. There’s an exercise that I’ll take my clients through where we say, “You’ve traveled for three years to every place you’ve ever wanted to travel. You have been in every country. You have backpacked in everything. That’s done. You have bought everything, you own everything, you live in your dream house. Take out all of the reasons we do, all of the things that we say that we want to do. You wake up one morning having done all of this. Now what? What are you going to do with your life when you’ve been everywhere and have everything?” The striving and the garnering and the gathering is where we spend the vast majority of our time.
After that’s done, what do you want to do? It’s fascinating to watch. They’re like, “I think I’d like to be my son’s baseball coach.” We go through that exercise then I would say, “Can you be a baseball coach right now?” After you’ve been everywhere and done everything and own everything that you have, how do you want to spend your time? That’s the message that I’m taking from what you’re sharing. Your vision is in alignment with my vision. Is this new thing in alignment with my vision? Is my vision crystal clear and written down? Not just a vision board, but a clear view of how I will spend my time once I am there, wherever there is.
We all have idea of what our ideal lifestyle will be. Even a lot of people will say, “I want to own a Ferrari and a house that curves with the Earth and everything else.” I’m not saying that that’s wrong. I’m saying that understand with given limited funds if that’s the only thing that matters to you, then fine. If you’re working 90 hours a week to have that stuff, then all you’re doing is paying for caretakers to watch over your stuff. I say this a lot. Having a boat is cool, but having a boat that sits in your driveway is not cool because you’re spending so much time on income generation and not on life output.
My whole view is I rent everything. I rent wave runners, boats, houseboats. I don’t want to own any of that stuff. I want to be able to finish my vacation and walk away. Especially assets that depreciate, are you kidding me? That’s not my jam. Let’s switch gears here and talk about your insider view, pulling back the curtain on commercial lending. We’ve talked about our vision. We’ve talked about clarifying that vision. We’ve talked about integrating a system or the infrastructure that’s going to do the heavy lifting, the bones, the skeleton of it, and then the process. If that is designed and our end game is to get into bigger projects, that $500,000 or more, $3 million, $5 million, $10 million, $20 million projects. What does my tribe need to know? What are the things that they need to watch for? I know that’s a very broad question, but just broad stroke if we can.
I had done a video a long, long time ago on my YouTube channel about having an intentional relationship with your banker. Many people treat their banker like they’re a bad friend. We all have that friend. It’s like, “How are you doing?” You’re like, “What are they going to ask for? They send you a Facebook message and they’re trying to get you to buy something. You’re like, “I never hear from you to check in on me like how you’re doing.” That’s how we treat our bankers, and then we’re super critical when they don’t go to bat for us at a loan meeting or a loan review. We’re only calling them when we need money. It was funny. We’re treating them like we’re the bad friend. It was funny because I would reach out to my banker every now and again to say, “How’s it going?” I like these small community banks for that reason. They appreciate stuff that’s going on in the community.
I talk about a community bank. It’s generally less than $1 billion in assets. That’s probably starting to get to a little bit bigger bank. I like the smaller banks because now they have the ability to provide a lot of the same services, the online banking stuff that most of the bigger banks would tout and say, “We’ve got online banking.” A lot of the community banks do as well. You’re talking with the individual, you generally talking with the guy or the gal that’s going to be making the loan decision. Start having that conversation with the commercial lender that’s in there and someone that you can generally connect with. There’s going to be people that you’re not going to connect with, but find someone that you can connect with. Maybe talk to other people in your community who have a relationship with a commercial banker and have that conversation. Say, “I’m new in real estate investing. I’m going to be looking to do some borrowing down the road. What kind of things do you guys run into? Are you trying to grow your bank?” I don’t know any bank that’s not trying to grow their deposits.
You can start bringing in a positive relationship over there. You can start referring to friends there. If they think that you’re a friend of the bank, when you start coming to the table then ask for some money, now they’re doing a relation. Now it’s a relationship that they’re nurturing. There are lots to know. Start getting smart on some of their vernacular. We can’t even scratch the surface on this stuff. When I start talking about cross-collateralization and they say, “We’re going to cross-collateralize this with your house,” and you don’t know what that means, you can ask them.
I don’t expect anybody here to understand what a hypothecation agreement is unless you’ve been involved in one. My point is there’s basic stuff like how they calculate the interest rate. Back in my day, they called it the CMTI. It’s the treasury index. Now, they call it the CMT. Sometimes they call it different stuff. Generally, they’re going to price it at 300 to 350 basis points above the 3, 5, 7, or sometimes 10 years CMTI. If you add that up right now what’s the CMTI like, it’s 0.6%. Back in my day, when I was in commercial lending, it was usually around 3.5%. You’d be looking at loans somewhere between 6% to 7%. You’ve got to understand that most of the types of loans that they’re going to be getting are not going to be 30-year amortizing. They’re going to be 20 to 25-year amortizing. They’re going to have roughly a five-year commitment on them and renew at five years. If you’re calculating your deal based on a 30-year amortization, which is longer term, smaller payments, if it’s a thin deal to begin with, all of a sudden you sit down at the closing table and you’re like, “The payments are a lot more than I was expecting. What’s the interest rate?” You’re asking the wrong question. Your interest rate’s fine. It’s the amortization that is different.
Our objective at Get Fundable tribe is to become professional borrowers. Not rookies, not consumers, but professional borrowers. The entire model that I teach is relationship building. Reconcile bad banking relationships by doing the right things and then build new banking relationships. You and I speak the exact same language. What I hear you saying that I want to point out to my crew is that you guys need to be aware that business banking relationships start before the money is being requested. In the smaller realms of under $1 million where we teach how to put traffic into your accounts so you can trigger the automatic underwriting guidelines. You can look like somebody that’s worth them paying attention to.
That’s the flowers and the chocolate that we’re taking to our date’s door, and then how they respond. We then start this courtship and begin building a relationship with them that could last a lifetime. The best ones that I have, I’ve got twenty years on some of my banking relationships and we follow bankers wherever they go. If I’m at Chase or a community bank and they moved somewhere else, follow that banker, keep your relationship, nurture that one and begin to expand. Those are very key ingredients that you’re mentioning about building those relationships.
Real estate is a contact sport. You’re not going to do it in a box. I hear some of these people complaining like, “I didn’t get a PPP loan, and this and that.” I’m like, “Did you have a conversation with your banker before you needed it?” “No.” What are they expecting? It’s not like all of a sudden, you must be this guy’s best friend.Real estate is a contact sport. You're not going to do it in a box. It is about relationship building. Click To Tweet
This isn’t Tinder for banks. This is relationship building. One last thing, I’m thrilled that you’re coming to the bootcamp. I can’t wait to get to have another conversation afterward because you get to fill in some of the blanks of our model. I’m sure we’ll do this again based on a deeper dive because I need to dust off some of my old commercial tomes in order to be able to ask intelligent questions. I don’t want to waste your time, but it’s been a pleasure having you here. Please send me a book. I need another copy of the book. I want my partner to have that as well. Please send me another copy of that. Please tell us where we can get ahold of you.
Honestly, I’m a social media scoundrel. You can reach out to me through Facebook. I’m on Instagram. You could always reach out to me directly. My email is Mark@LandLordCoach.com. I gave everybody a free strategy session. A lot of times it turns into more than that. I don’t like feeling I’m being sold on something. This isn’t like an hour-long sales pitch. I promise you, I’m going to give you actionable stuff. I truly like to help people. If it makes sense to go on with the longer relationship and coaching relationship, we can talk about that. I don’t like to be sold and I don’t like to sell.
That’s part of where the kinetic energy arrives. It’s about collaboration. If there’s something to collaborate on, let’s do it. If there’s not, Godspeed, God bless and do your thing. Thank you for being here for playing in my sandbox. I love having you come over and coach my team, my crew. I want all of them to know more than I know. I bring in all the people who know more than I know so that they can enrich their lives on their quest to their why, to their end game. Thank you very much.
It was my pleasure. Thanks so much. I appreciate it.
- Mark Dolfini
- The Time-Wealthy Investor 2.0
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About Mark Dolfini
Mark Dolfini is a veteran of the U.S. Marines and the author of three real estate books. Most notably, The Judge: A Landlord’s Tale, released in the summer of 2018. His much-anticipated 3rd book, The Time-Wealthy Investor 2.0, was recently released in January, 2019, which teaches the exclusive VIP Method of how to create a real estate business focused on Life-Output. It became #1 Amazon Bestseller in March of that same year.
He received a Bachelor of Science in Accounting at Purdue University, and worked for Marriott before venturing out full-time in the world of real estate investing. He is the Owner and Managing Broker of a property management company based out of Lafayette where he oversees the combined ownership and management of $40 million in real estate assets. He is also the founder of Landlord Coach, a real estate investor training company, and sits on numerous boards including the Better Business Bureau of Central Indiana, the National Federation of Independent Business, and is a Training Director for Central Indiana BNI Franchise – a networking organization.
He spends his free time pistol shooting and kayaking and lives in Lafayette, Indiana where he and his wife Jennifer are raising their two sons, Leland and Logan.
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