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July 20, 2022

106. Invest Passively to Live Actively in Private Lending with Alex Breshears

106. Invest Passively to Live Actively in Private Lending with Alex Breshears

Join Mike Cavaggioni with Alex Breshears on the 106th episode of the Average Joe Finances Podcast to discuss how to live actively by investing passively through private lending. Alex is a private money lender, fund manager, underwriter, educator, limited partner, and community builder. She shares some perspectives on private lending now as compared to the past.

In this episode, you’ll learn:

  • How demand for private lending has changed
  • About Alex’s book, Lend To Live
  • The Pareto Principle in private lending
  • Importance of networking and building relationships
  • Common mistakes in private lending to avoid
  • And much more!

About Alex Breshears:
Alex Breshears is a private money lender, Regulation A fund investor relations manager, multifamily underwriter, educator, limited partner in multifamily syndications, and community builder who partners with active and passive real estate investors, syndicators, and military spouses to grow their financial independence, knowledge, and professional network. Alex funds 1st lien and 2nd lien positions for residential property in the Hampton Roads, Virginia area. She also started an educational Facebook group called Lend2Live Private Lending Lessons which offers weekly educational lessons, daily posts for discussion, and opportunities to network with other investors about private lending and various projects that may need funding. 

Find Alex Breshears on:
BiggerPockets: https://www.biggerpockets.com/users/alexatlend2live
LinkedIn: http://www.linkedin.com/in/InvestPassively2LiveActively
Facebook Group: www.facebook.com/groups/privatelendinglessons
Instagram: https://www.instagram.com/investpassive2liveactive
Website: www.lend2live.com
YouTube: https://www.youtube.com/c/PrivateLendingLessons
Her book: https://store.biggerpockets.com/products/lend-to-live

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Transcript
Average Joe Finances:

Hey everybody. Welcome back to the average Joe finances podcast. I'm your host, Mike Cavaggioni and today's guest welcoming back Alex bushier. So if you don't remember, Alex was on our podcast actually back in episode 38, and we talked about private lending and we're gonna talk a little bit more about that today. Maybe go into a little bit more detail with kind of current events that are happening and. Different things going on there, but we're also gonna talk about something really exciting that she has going on. And I don't wanna spoil it too much, but I will say she has a book coming out and it's with bigger pockets. So it's a really exciting thing to talk about. So Alex, I am super pumped to have you on today to talk about what you're doing, especially in the current situation right now. And also this book that you have coming out with bigger pockets, like how exciting is that? Again, my friend, welcome to the show.

Alex Brashears:

Thank you for having me back, Mike. I appreciate

Average Joe Finances:

it. Yeah, absolutely. Listen, we're still gonna start this off the same way we do every other episode. And, for those that may not have gotten a chance to listen to episode 38 yet, cuz I know the people that are brand new to the podcast love to go back and binge. I know you guys do it cuz I'm looking at my stats. So if you haven't gotten to episode 38 yet we're gonna go ahead and let Alex give herself a little bit of her backstory. So Alex, if you could share that with us. Who are you? How'd you get started? Why private lending and what's going on with this book?

Alex Brashears:

So first and foremost, I'm a military spouse and I bring that up because that pretty much dictates a lot of my life. And I don't mean to say that as like a victim. I just, I let it dictate. I choose to let it dictate my life because I wanna stay with my spouse. And. This has been over 20 years. My spouse is over 20 years in the service. We've been married for 20 years. And the reason I bring that up first is because that requires me to move pretty much constantly. So I am currently sitting in my 20th address in 21 years. We have been stationed literally all over the globe at this point now. And it just, it puts some limitations on what most people would consider a normal career trajectory. So I have a ton of college. Like my W2 job was I was a chemistry professor. I went to graduate school to do organic synthesis and pharmaceuticals, but. That job doesn't really transfer from duty station to duty station. So I quickly figured out I had to find another way to be able to bring income into my household. Not so much because we needed it, but because I needed fulfillment as a spouse that I wasn't just gonna, cuz I don't like children just. It's not my thing. So I needed to have fulfillment some other way in my life. And for me, that involved being able to contribute financially to my family and after taking a couple wrong turns, we tried the landlord thing. We were miserable. We tried the fix and flip thing, even more miserable. And then I happened to just bump into somebody at a arena meeting 20 years ago. And they mentioned, they're like, oh, if you're a chemistry major, you have to be pretty good at math. And I'm like, yeah, not too bad. My math, these days has more letters than numbers, but I could do. And then he mentioned, have you ever thought about being a loan officer? And I'm like, no, that was never on my radar. And he explained a little about it a little bit about it. And then he said, you can work your own hours. And I was in college and I was like, sure, let's do that. And what I actually ended up saying yes, to, in that opportunity was he was a private lender and he also was a broker for hard money loans. So while he was out on the golf course, I was the one Manning the office and driving applications to people. This is back when people were faxing and paging one another. And I got to see the real estate business from the other side of the desk. And I was like, I have these people coming in and they're giving me 700 $2,700 checks. They're complaining about their contractors or talking about their tenants. Meanwhile, my. The lender is on the golf course because it's Florida. That's what you do, you play golf. And I was like, yeah, I'm gonna take option B. Thanks. I don't wanna be a landlord and I don't wanna be a fix and flip, I'm gonna do what this guy does. And it's just taken shape over many years. And now it's my full fledged thing.

Average Joe Finances:

Alex that is just every time I hear your backstory with just how this whole thing came up with you. It just boggles my mind because you'd even have to go through that initial pain of being a landlord and just having to deal with this stuff. Cuz you saw it from the very get go when you started, working, at this private lending firm and you just, you got a good idea of Hey, The guy who's doing this and I'm working for him and he's out on the golf course, but the other people that are borrowing money from him that, are making just as much, whatever. But they're borrowing money from him and they're putting their money into this to buy these real estate assets. But they're constantly complaining about, oh, the toilet broke or something happened with the electrical outlet or somebody slipped and fell and sued me and this blah, blah, blah, blah, blah. Wow. What a perspective to have as you're looking into Hey, what's gonna be a good way for us to generate another way of, cash flow or passive income, into our household. You got to see some of dirty sides of real estate, from the very get go. And it just, again, like we talked about, I'm pretty sure we talked about this in episode 38 as well. It's just, it's amazing that, you're able to just run with that because now, Hey instead, let me just build up my capital and just lend money out. What a good way to look at. Now, at moving forward, you've been doing private lending now for a little while. When we last talked, episode 30, it was over a year ago. You were talking about some of the different things. You were doing different projects you had going on. And to where you are now, a lot of things have changed over this past. Years since the last time that we talked and the, the last time we talked, it was kinda like at the height of the pandemic and, people were in a real estate frenzy. It was like, you threw a dead fish in the water with a bunch of blood. And the sharks were just like, wha so I. What is it like now versus what it was like a year ago, being from the private lending perspective? Are you still seeing some of that same demand? Has it slowed down or has it, has the pace changed a little bit? What are you seeing from your perspective?

Alex Brashears:

I'm seeing changes on a market by market basis. Interesting enough. So my business partners out on the west coast, in the state of Washington, and she's starting to see definitely some market softening, it's houses are spending a little bit more time on MLS, more than 24 hours, like it was during the frenzy a year ago, but they're spending a little bit more time on MLS. You're starting to see more of those kind of notifications from Zillow. Hey, price reduction. We're starting, I'm just now starting to see that some of that in Virginia as well, where houses are sitting on the market a little longer. But I don't know if my particular market it's from a position of the realtors are baking in, the 20 buyers showing up. So they're trying to, push the price to begin with, or if there's actually like an asset devaluation softening. So I'm still not sure on my market, whether that's the case. I believe on the west coast where my, business partner is gonna be, is truly some asset devaluation because they just, they went skyrocketed over the last year. So that's putting a lot of people in a scary position where. They just don't know how to backstop and prepare for what possibly might be coming.

Average Joe Finances:

Yeah, no, that, that's a great point, Alex, and, I wanna point something out too though. Cause I feel like, yeah, we're starting to see, homes sitting on the MLS a little bit longer. You're starting to see some of those price reductions. And to me, I feel like we're at a point where we're plateauing. I don't think we're necessarily in some. Decline or correction, but I think we're at a point where we're plateauing and like you said, it's gonna vary by market, right? Each market has its own intricacies. That makes it unique. So out here in Hawaii, like it's not the same as what you're dealing with back in Virginia or what, even what California's dealing with could be pretty close, but not, it's not the same now. One of the things that, that, I wanna, that I'm curious about is cuz you're mentioning homes that are on the MLS, but I would think most of your clients that are coming to you to use private money are trying to do off market deals. So are you seeing a lot of, a lot of changes there, is there less money people are coming for from renovations, like working on a flip or anything like that? What kind of trends are you seeing on the off market space?

Alex Brashears:

I would say a lot of the buyers are actually still finding deals on MLS. They're just potentially getting a little creative. So for example, one thing that's allowing them to be creative is the exit strategy for the property. So if, for example, they are buying this property with the intention of turning it into a short term rental and the revenue numbers are there and the revenue numbers are higher. Sure they could put in potentially a full price offer and still get the cash flow and still operate the property the way they want to. Another thing that I'm seeing now, like you mentioned, they're doing a little less rehabbing, so they're not putting the ultra high end finishes in because they, frankly, they don't have to, we're still in a really tight market, and I agree with you. I believe. A little bit of a pause as opposed to a correction, especially with the amount of military we have here. We have so much federal dollars in this area that I don't see a devaluation in my market. But you definitely can tell that people are pulling back a little bit. They're not doing, brand new roofs, brand new, everything, they just wanna get it kind. Flipped and put it back on the market because we're mid, PCs moving season here. So stuff is still coming off MLS. I don't wanna give anybody impression. Stuff is not selling off MLS. It's just not the super frenzy we saw a year ago. I'm

Average Joe Finances:

actually very surprised though that you're saying that a lot of these you're seeing are coming off the MLS. You're seeing people actually like purchase properties off the MLS and flipping.

Alex Brashears:

Yeah, we that's actually, the only thing I fund with my own personal capital is fix and flips. Just because during COVID I was a little worried about underwriting standards going up and down as the viral counts went up and down. But yeah, there's still a fix and flip market here. It's moved away from, you're seeing this on a national level too. It's moving away from the city core. And so in our case, in my opinion, our path of progress is west. Basically cuz we're at the ocean, but our path of progress is west and they're now moving into areas where. Two years ago, three years ago, it was all farmland. And now it's, houses going up as fast as they can get the wood and the supplies to build them. So we're still seeing that a lot of interest in this area for employment base and for housing.

Average Joe Finances:

Yeah, that's very interesting. Cause I spent 15 years over there in, in, in that beautiful area of Hampton roads myself, during my time in the Navy as well. And it's very curious to see though that you see this trend moving more west and they're trying to build more, out west as well. So are you seeing like more stuff happening in like the Williamsburg area ? Could definitely see especially with old Williamsburg, like there's a lot of. Potential Airbnb potential. Short-term rental potential out there. So are you starting to see more of that come up?

Alex Brashears:

They're actually moving out towards Suffolk, up into Smithfield, out towards Windsor Carrollton. Okay. Because the people that are working north up on the peninsula Langley, for example, they're commuting over the James river bridge and they're going that, that federal again, the federal employment. They're bringing those federal dollars down from Langley and they're moving into Carrollton. Smithfield, Windsor is of white. Because they can get a pretty large home at a pretty decent price compared to what their income is. And so it's just pushing literally the path of progress out here is just moving more and more west away from the coast. As you have more people that can, again, remote work. Maybe they don't need two people that work, that kind of thing. So that, in my opinion, that's what I'm seeing in my market. They are doing their city is trying to revitalize certain parts of downtown Norfolk, especially, and actually Portmouth is getting a big casino. So people have been buying short term rental properties in Portmouth, which right now you're thinking, Ugh, if anybody's ever been in Hampton roads, It's Portmouth, but they're banking on all of that commercial dollar coming in with the casino coming, cuz that's been approved. So again, that's also. So that tends to be the general path of progress right now is west. Yeah.

Average Joe Finances:

That's very interesting. Especially like when you're talking about like people buying out in Suffolk, cuz I remember now this is a little off topic for the people that are listening. I'm just getting a little nostalgic right now talking about, being back in Virginia. I was looking in Suffolk was like the only place. In that area, that I was able to find a home with a basement, which to me, I thought was really super cool. You don't really see too much of that, over there, near, especially near the water, but not in Virginia Beach or Norfolk or anything like that. It's interesting to see that. And then I had heard rumors that a casino was going up over there in Portmouth and I have a friend of mine that invests heavily in that area. And I have a feeling he's gonna be very happy very soon. That's really gnarly. And that's, that also goes to show too, like no matter what side of the fence you're on, when it comes to real estate, investing, knowing what's happening in your local market is super important and that's gonna affect. What's going on there with your local MLS and also with your off market deals as well is the fact that they're still building up so much, and that they're gonna build this casino and that they have more development coming in, land development, going further out west, like that's amazing. So there are a lot of potential there and a lot of growth happening in the Hampton roads area. Again, like we were talking about earlier, it's very market dependent depending on where you're at. So it looks like you're tucked in a really good spot, being in that area. Now I wanna kind of shift gears a little bit and talk a little bit about this book you have coming out. I believe it's called, lend to live, earn hassle free passive income in real estate with private money lending. And I know it's gonna be coming out sometime in July, maybe. Yeah. From pockets, bigger pockets.

Alex Brashears:

They've told us, July 28th.

Average Joe Finances:

Fantastic. Yeah. So can, what can we expect with this book? What kind of, topics of discussion I know it's gonna be talking about private lending, but how deep do we go? Is this gonna be like a wave top thing? Or is this gonna be like, you're gonna get really intricate and really get down to the nitty gritty of what private lending's all about.

Alex Brashears:

We have tons and tons of nitty gritty. It was always very important. My co-author Beth Johnson. We were 100% behind. We needed something that was actionable, like request this document because you want this information for this reason. So we actually came up with a little system. You'll be the first person we get to talk to about the little system, but the system. because our brain is called lend to live. Our lending system is called the CPR method. Conveniently enough, we came up with that all on our own. That was by mistake. It just worked. But we broke down the loan cycle into multiple steps that relate to the CS and CPR. And then each step is then further broken down into the paperwork you need in that step, the person you need in that step and the property information you need in that step. So that would be the P. And then the R is gonna be the risks and rewards that you need to consider in each step. So we had it nice, nicely, little boxed up and broken down because that's where a lot of people, they get stuck in analysis paralysis. Honestly, they're like, I don't know what to ask for when I don't know who to talk to. I don't know when to get this person involved. I didn't even know I needed this person to be involved. And that's what we wanted to solve was basically action. Step action. Step action. Step do this for. Reason or else you're gonna have these repercussions down the road.

Average Joe Finances:

So this sounds like this is like the hands on guide. If you wanna do private lending, like this book will be like the purple Bible that everybody knows when it comes to real estate, which is rich, dead, poor, dead. This will be like your private lending Bible essentially. Is this kind of it's gonna be soup to nuts, right? This is everything is gonna be listed in this book.

Alex Brashears:

It's gonna be everything that a beginner lender would need to know because it's gonna be it gets a little problematic, cuz you don't wanna throw so much at them where they feel overwhelmed. But at the same time, you wanna give them enough where they're just a they're they feel confident enough to take action. And the other thing I'd like to bring up to people is most people will think about a book about private lending will be only applicable to people that want to do private lending. But think about it. If you are an active investor and you wanna go start cultivating your own private lenders, you could be like, Hey, I'm gonna read this book and learn everything I can about private lending. And then I'm gonna teach the people in my network. How to be private lenders. And they're gonna look at me like the education guru and say, Hey, look, you're doing all these things to protect my investment in your business, in your investment property. So it's not just a book about private lending. We also wanted to offer it as a guide to active investors because they really don't have anything period on how to work with a private lender, cuz anybody that's gotten conventional mortgages or even hard money loans. A lot of work in happens in the background that they don't know about, like getting declaration pages for insurance, getting title cleared up, like all of those things magically happen behind the scenes in other lending situations. Whereas when you are the lender, it's suddenly Wait, that's a problem. I didn't even know that problem existed. And so we really wanted to make it, so it was applicable to applicable, to both active investors and people who are interested in lending money.

Average Joe Finances:

Yeah. Alex, that is a fantastic point to bring up because like you said too, for the person that's in there getting the deal and you're getting the loan, you think, oh, okay. Yeah. I just applied for it. Everything happens. The. The magic happens and I don't have to worry about it. It just gets taken care of, and I get my money. But what you don't realize is all the small things and all the small details that are happening in the background to make sure it's happening to make sure that title clears and everything right. Because what if there is an issue with that? What happens when you're into that? What do you do? And if you don't know, you're gonna put yourself in a situation where. You're putting both your investor at risk and yourself at risk. So for the real estate investors out there, this is definitely a great way to, to check it out and learn that side, right? Because you should know, when you're getting your money from a private lender, you should know the process of how they're doing it. So you can appreciate more when you receive those funds from them, you can appreciate all the work and due diligence that they do on their end. Cause I, when you look at. The entire real estate team, like we're talking about from your realtor to your lender, to your, your property manager, contractors. Like when you look at every single piece of what every single person does and you break it down to like bullet points that in itself can be its own book with what everybody's role in taking down a property is right. So it's important for a real estate investor to really understand that side. And then, like you said, too, an investor can read this book and then educate other people at a real estate meetup and things like that. And you know what that's doing for that particular investor, it is widening your pool of potential lenders because somebody might be like, you know what? I just sold this deal. I got this large chunk of money and I don't feel like investing in something else right now. Get a little, more of a higher return by doing some private lending. Hey, I remember when, and so brought this up at the real estate meetup and, maybe I'm gonna go read that book right now, too. Get a good understanding and go lend him some money on his next deal. So you can open up a whole pool of potential lenders that way. So what a gr what a great perspective and way to look at it. So I just wanna say, I definitely appreciate that now. You've again, you've been doing private lending for a while, and I know every time, anybody that I know has had a question about private lending or anything like that, I say, Hey, there's this one person that you should go talk to, or there's this group you should go check out on Facebook. And I always send people to check out your Facebook group or send 'em to go talk to you. Now I've met a other, a couple other private lenders out here, some local meetups here in Hawaii. And, it's really funny because like everybody that, that does private lending is very astute about what they do. Like they really understand what they're getting themselves into because it is a lot of work on the back end that I don't think a lot of people realize. For those that are borrowing the money from the private lenders, show them a little love and appreciation because they are putting in a lot of effort to make sure that you're getting the funds that you need. So Alex, if we could. Let's maybe talk about that a little bit, especially like what you do on your backend side. And then we can talk about your Facebook group, cuz right now I know it's probably like one of the largest private lending, Facebook groups out there. you have literally a large following in there. And you bring some great guest speakers in there to have conversations about different topics, and not always private lending. So it's a great place for real estate investors to check out I'm part of that group as well. But Alex, can we talk about some of the backend stuff, maybe some things that people might not understand that, that you do as a private lender. Let's say you're just starting a transaction. Somebody says, Hey Alex, I've got this, flip I'm working on. I need another $50,000, to do some renovations on it. What, like, how does that look when they first approach you and say, Hey, I need 50.

Alex Brashears:

So I will speak to the way I do private lending, cuz as you've discovered, everybody's gonna do private lending a little bit differently and I can tell you the consensus of what's happening amongst the people I know that do private lending, but private lending and the way I am using this term. Is that you're talking to the individual or maybe their business entity that is lending the capital. So that capital has little to no strings attached. The reason I bring this up is because there is a movement in the hard money loan space to rebrand themselves as private lenders, or they'll say I'm a direct private lender. And that is a very different business model. And I'm not trying to poo on hard money lenders. I'm just explaining from an active investor's standpoint, it's night and day. And I would say before cOVID happened. I guarantee most active investors didn't care where the capital came from wasn't even on their radar. And then COVID happened hard money lenders shut their doors because their capital came with restrictions. It came from a business line of credit. It came from pooled money, whatever those restrictions were. So the way I am using private lending is I'm an individual. I have some, maybe some sort of business entity. I am lending out my own capital or capital that I closely control. And now saying that it tends to be very relationship based. You're not gonna message a private lender and go, Hey, what are your rates and terms? You might, but you're probably just gonna make them mad. You're not going. Get any actual helpful advice or answers, because they want to get to know you as a person. There's always this debate in the private lending space. And it's really funny cuz my, co-author Beth is the opposite I am, which is why we make a very good team. So there's the debate between the jockey and the horse. Do you bet on the person or do you bet on the property? Which one are you doing? More due diligence on? It's not saying you're gonna completely ignore one over the other. But I would say it's like 80, 20, going back to parade's principle. So I am on the side where I'm 80% person, 20% property, because I personally believe that an individual, like a really good individual can turn around even a slim margin deal and be okay. Versus a person that doesn't have any ethics. Doesn't, isn't transparent, doesn't know their numbers. You could hand them a deal on a silver platter and they'd still be able to screw it up. And I don't want deals that get screwed up because I'm a lender I'm in this for a win situation for the property, for the borrower and for myself. Whereas Beth is more, her famous line is properties. Don't let me down. So she's 100%, again, 80% about the property and she's gonna make sure you check out. As a borrower with experience and things like that. So I would say building that relationship and trying to get an idea of who am I talking to? Am I talking to the person that likes the jockey? Am I talking to the person that likes the horse and then you're going and saying, okay, what do you lend on? Where do you lend? Because private lenders, again, my definition of private lenders, we are hyper local. So I only lend in Hampton roads, Virginia. because I know this market it's in my backyard. If I wanna drive by and make sure your contractors are there on the day, you said they were gonna be there. I can do that. So if you have a, if you have a quote, private lender telling you they lend in all 50 states, no problem. Chances are, they're a hard money lender that is calling themselves a private lender. So that would be the other distinction I would make. But generally. The terms are gonna be from a loan perspective, the terms are gonna be similar to a hard money lender. They're gonna be, zero to three, four points as origination. They're gonna be, whatever kind of the market prevailing, hard money loan is. So anywhere between eight, I've seen 14% here on the east coast happen for a first lien. But the thing I bring up about the reason. These strings attached conversation is important to active investors is I can go and tell my borrower, do you wanna make interest only payments for the next three or four months? And they'll go, no, if I don't have to do that, I don't wanna do that. Cuz anybody who's ever done a fix and flip, you are like hemorrhaging money for the first three or four months. So if there's some way they can just stop that they'll do that. So they will actually pay two percentage points higher in interest. Because that I then agile them. You don't have to make interest only payments. We'll roll it all into the end. Whereas when you're talking to a lender that has all those strings attached, they can't do that. They don't have that flexibility because they sold a bank on their business model. They sold a pool of investors on their business plan and how they were gonna do loans. And they need those distributions to go back out the door, to dividends to their investors. So that's why I say knowing the source of the capital of the lender you're talking to really changes both the kind of initial conversation and also how your deal flows.

Average Joe Finances:

Yeah. I really wish I would've had this conversation with you a couple months ago because I almost. Did a private lending thing with a flipper out here locally. And, I wound up not doing it because I didn't realize, I thought, oh, maybe they would make the interest only payments to me, and then at the end I would get my capital back. But they were looking to do essentially that Hey, we don't wanna do the interest only payments. We wanna pay everything on the backend when everything's done and in Hawaii, because of how long the permitting and stuff takes. You're looking at six months. So I'm like, so I'm gonna tie my money up in here for six months and then I'm gonna get it back. And it was at 12%. And I'm like, this it's a decent return, but I was like, I'm tying my money up for six months. And I just didn't realize that was, something that a lot of private lenders are doing. Man, I wish we would've had this conversation a couple months ago.

Alex Brashears:

wouldn't say I wouldn't say a lot cause it, or

Average Joe Finances:

Some I didn't realize like that was like. A thing that you can do, it's your money. You can do whatever the heck you want, right? Yeah. If you're doing private lending, but it's interesting to know that you do it that way. And then the other thing that I thought was absolutely awesome is how you and your co-author not really polar opposites, but like you have the opposite look on, when it comes to the property versus the person. And, just knowing you for the amount of time that I've known you, I I was a little surprised, but at the same time, like not that you're 80% on the person, because I know like how you are, you're gonna vet somebody and you're gonna make sure they know what they're doing before they go in here and do this. And at the same time, like they'll be able to make this property work. And totally a hundred percent get it like where you can have somebody that's given a deal on a silver platter. This is the easiest thing to do. Like, all you have to do is sign your name and they'll misspell their name. Because there are people out there like that, they're just like, ah, yeah, whatever. Cool. And they'll mess it up. It just, yeah, it's having that comfort level. The fact that, you actually build relationships with, the clients that, that, you work with and everything. I think that's super important. And it also goes back to a lot of things that I talk about here on this podcast, when it comes to networking and building relationships, like when you go out to these meetups, if you meet somebody that's private lender, even if you're not gonna use them anytime soon, build that relationship, build that bridge, start talking to them, start picking their brain. Cuz you never know if if you find something in the future and you're like, Hey, this is a really good deal. And I know this great private lender that can really help me out. You. You have that rapport and that relationship built up and they have that trust in you, cuz they've seen you at these meetups. They've heard you talk about what you're doing and they understand that you've got a good head on your shoulders when it comes to these things. This all kind of ties back into to what I talk about with networking and building relationships and why it's so important as a real estate investor to, to build these authentic and genuine relationships. Not just saying I've got a connection with this person,

Alex Brashears:

Yeah. Yeah. And it's funny, you mentioned that cause I have that happen all the time. But another, like when you're talking about the 50 K example, the back pedal a little bit, something that I have discovered in my own kind of business practice, shall we say is, I can actually use private lending to augment my other areas of real estate. So for example, I run short term rentals and I own short term rentals and. These people in my network, you think about a ven diagram. There's people in the military, people investing in real estate and there's that little sliver in between where most of my network happens to be, for better or worse. That's what it is. But there's, you've slogged through things together for the last 20 years. You speak all the same acronyms, you just jive. And I've had some of them come to me and say, Hey, I wanna buy this short term rental and anybody who's ever had to stand up a short term rental, like the first three or four months, again, you're hemorrhaging money, whether you're doing renovations or not, you have to buy the furniture and the decor and the technology and get all the stuff connected. It's just, it's a thing. So what I've done is I've offered them, private money. And I say, okay, for as long as this loan is outstanding, my business has to manage the property and, they'll work to get the capital coming in, because again, they can potentially get more revenue from it as a long term, as a short term rental versus long term rental. So I have another client that I could manage the property. My co-hosting business could manage that property for them while I had money that was also working. So I had a little bit more control over the deal. So I was okay. Being in second lean because. A good equity buffer for these particular deals that I did this. So it actually ended up helping me build other real estate businesses, having private lending and having those relationships with people where we felt safe enough to say, Hey, look, I'm buying this, I'm doing the, the 10% down, second home loan thing, but I don't have $50,000 to do blah, blah, blah, blah. And stand it up. And I also don't know how, and I really need to know how, cause I'm closing in 30 days on a short term rental. And so it really can be that flexible. And I don't think a lot of people, I will tell you like active investors, you guys zero in on the interest rate, what's your annualized interest rate. I'm like, dude, if you're borrowing like a hundred thousand dollars over the course of 12 months is $1,000 going to be the hill you wanna die on. Or are we gonna sit here and have a conversation about what I can bring value to you as an active investor and what you can bring value to me as a lender? Let's start there instead of let's drill you down to the lowest annualized interest rate we can possibly get. I'm like, okay, you're not my borrower, cause that's not how I operate.

Average Joe Finances:

Alex. That is a fantastic point. And it's funny, it's something I wanna bring up to all my listeners here. So when Alex and I were talking about getting this scheduled and having her back on the podcast, we were talking on Facebook messenger. And I was talking to her about some things that I was doing right now with velocity banking. And we were just talking about like the difference between simple interest and amortized interest on a mortgage and different things like that. And we just had this long conversation and just geeked out. I think we were going back and forth for like an hour in Facebook messenger. And then I was like, wait, what were we talking about again? Oh, that's right. I'm trying to get, yeah, we're trying to get you back on the podcast here to talk about your book that's coming out. This is one of the things that I'm talking about when you build these genuine connections with people, and we could just reach out to each other outta the blue, and we could just start talking about just finances, interest rates and different things like that and stuff normally other people will be like, oh, what, why do you geek out about that stuff? Because it's for me, when it comes to the numbers, I'm not, I don't even like math. I'm not even a big math guy. I just like making more money and building wealth. And for myself and my family. To be able to sit here and have these conversations and be like, oh, Hey, I'm doing this. And I'm, I'm experimenting with this and trying this. And by doing it this way, I'm saving this much on my interest. And by doing things differently, this way, I'm able to invest in this, and we're just sitting here geeking out and having this whole conversation. I just wanna point that out guys, cuz this it's one of the things that I just love about being in this community is when you make these connections like this, it's just super fun. And Alex, like when you're talking. The possibility of being that set that second lien loan on, on a property, like for a short term rental and things like that. Like a lot of people don't look at it from that perspective, they're not saying, oh, I didn't realize she could help me with a short term rental or anything like that. I thought, I can only use her for a flip and things like that, but it's, as a private money lender, It's your like, again, it's your money. You can do with it, what you will, and you have that experience in that short term rental space. And you're a lot more comfortable there and you're able to help other people in that aspect as well. So that, that is just something that's super awesome. And for those of you that are listening, if you're ever in, what part of Virginia is it in? Is it in, Williamsburg or where's your cabin at?

Alex Brashears:

I'm in Lexington, Lexington.

Average Joe Finances:

Oh, Lexington, virginia. You ever in Lexington check out her, short term rental that she got there. I see it on social media all the time, especially in the wintertime with that hot tub and the view with the snows. It was very nice.

Alex Brashears:

Oh, awesome. Yeah, it was slam this winter. It really surprised me cause I'm like, who's gonna go up there in the middle of the winter. Oh yeah. There were people

Average Joe Finances:

All the stuff that you were using to market, it was like, Hey, look at the beautiful views with the snow and this really nice. Tub like that was like, I think that was the big selling point for people. Yeah, it's the winner. I'm gonna go chill in a hot tub and enjoy this. That's really awesome, Alex, cuz there's a lot of people out there right now. Like when you look at investing in real estate, you're trying to figure out a way, especially with interest rates going up the way they are right now, on the, on, on the government side, like Fannie Mae, Freddie ma Freddie Mac. So when you're borrowing these loans and you're buying these properties, your buying power has. Changed drastically. So people are looking at what are some other exit strategies that I can have when I'm purchasing these properties? And, if you're in an area where you could do a short term rental and it works like maybe that's something you should consider as well. So I know this episode isn't about short-term rentals, but, just to point out the fact that there are so many different exit strategies, besides just the, what you think typically I'm just gonna buy a, a. A rental property and I'm gonna rent it out and that's it. And if the numbers don't work well, then that's the only thing that I had going for me. No, there's other outs and there's other ways to make things work. But anyway, Alex, I wanna kind of circle back now, again, to your book and see if, is there you said this is a great thing for somebody that's getting started as a private lender. Now, as the book goes into more detail. So you, you said as you're reading it, you get to learn about, the different things that private lenders should be looking out for. Can you touch on some of those thingss like you, you talked about it a little bit earlier on, but what are some things that you see that are common, in private lending, especially for a new private lender? What do you see are like some of the common mistakes that people make that this book is going to help alleviate.

Alex Brashears:

A lot of people, shockingly are quite happy to hand over very large sums of money to like their cousin's best friend who decided they wanted to be a real estate investor. Oh geez. And there is no title policy. There is no hazard insurance. There is no lean recorded. None of that happens or in the case, like the short term rental? I, I know a very good friend right now. She did something like that, where she came in a second lie. I think she's actually in third lie. She discovered later she's actually in third lien. She's, I was like, did when did you send over the funds? And she told me, and I was like, which title company did you close with? And she's what do you mean? They already own the property? And I'm like, no, it still needs to go through title, search. It still needs to have all these things. And it was very fortunate that her borrower did keep their word and did record the lien. But she left up with a borrower to record the lien. If they didn't do that would've been a problem. So I always tell people two Cardinal rules, no money changes hands outside of closing. So if somebody is coming up to you and saying I'll fund a hundred percent of everything, we just need $5,000 to get started. That's a scam. That's not even a private lender. That's a total scam. Don't do that. And then second off only Duse a title company, closing attorney somewhere, because again, you're not having any money directly change hands before closing. So all of that needs to go through the title company. And if you have a decent, at least a decent title company, They're gonna help keep you in the guardrails. At the bowling alley, when you pull up the little bumpers for the kids, that's the title company for a new lender. They're gonna be able to pull title for you. You should be able to call 'em up and say, Hey, I don't know what all these paragraphs are on here. Can you talk me through, should this be something I'm worried about? Same thing with the hazard insurance, having a good hazard insurance broker, get 'em up on the phone, say, Hey, this is the policy they sold me. Am I adequately insured? If something goes wrong, this property burns down the day before it hits MLS because it's a fix and flip am I still covered? So it's another thing about private lending. I love it's very collaborative and you have tons of resources and places. You can go to ask questions. , but again, a lot of people don't even know who to go ask these questions to. They're just like, I don't know what to do, so I'm just not gonna do it as opposed to let's go find someone to answer these questions for me.

Average Joe Finances:

Yeah. That's all great points, Alex. I definitely appreciate that. And one of the things I could say, a hundred percent appreciate is just. How in detail you go there, cuz you know, for somebody that's just getting started out in private lending, this might not be something you're thinking about. You might not in the back of your head be thinking, oh, Hey, everything's good to go. But all of a sudden the house blew up the day before it was supposed to hit the MLS. And these are things that you need to be thinking about. And maybe somebody who's learned from some of those experiences like Alex, and she's able to, get out ahead of that stuff. And it's something that. Book is going to help guide you, to avoid some of these mistakes that other private lenders have made in the past. And also, things that she's learned over her time and her co-author have learned over their time due in private lending. All right, Alex, I'd like to transition the episode right now into something and it's gonna tie into everything we've been talking about today, but I wanna transition to what we call the final round. I'm gonna ask you four questions. Three of 'em are hard hitting questions and one of 'em is an opinion question at the end. And then, and then we'll go from there. But if you are ready to get this party started we'll start the final round.

Alex Brashears:

I'm ready. Let's rock and roll.

Average Joe Finances:

Okay, here we go. First question of the final round is Alex. What's the biggest mistake you've ever made, and this could be private lending related or just real estate related.

Alex Brashears:

I had a rental, a long term rental because I was an unwilling landlord cuz the military moved us when we weren't supposed to move. And I thought this property would be managed well by a property management company that came highly recommended from another investor. But this property was very different than anything else. The property manager traditionally handled, they handled. Lotton block single family homes in suburbs. We had, not that we lived, we were on an island. We had horse property. We had barns, we had fencing, we had the whole nine yards and they were just very ill-equipped to handle that. And back then, I didn't know, to ask what types of properties do you normally handle? Because they had not a clue about how to handle horse property. Nothing. They didn't know how to properly screen for, for tenants. They didn't know how to evaluate damage done to the property. Like it was just a nightmare. So I would. Having a long term rental and, or a long distance rental, make sure you hire a property management company that actually understands the type of property we're trying to rent.

Average Joe Finances:

Yeah, absolutely great point. And, good lesson learned for you there. So and you know what the military it does that to, to often to us is, and that's, make us accidental landlords. All next question kind of ties into this. And that is what is something that you have learned that you wish you knew when you first started? We'll keep this in the private lending realm.

Alex Brashears:

Oh, my God, I would've started earlier and I would've started making it more formalized earlier. We had done it just as individuals, again, that ven diagram of, people in re military people in real estate, it tends to be a very small circle. So any kind, any time we got stationed somewhere else, we would bump into other people who were in the military and investing in that area. And we would maybe JV with them or, just do an unsecured loan with them cuz. We've known them for 10 years, cuz we've bounced into them in the last three duty stations. And then it wasn't until COVID were just everything coalesced into the perfect situation where we're like, all right, it's time to do this for real. Like we've done this enough times. Just goofing off. Like now it's time to do this for real. And I wish I had done it for real longer ago.

Average Joe Finances:

No. Fantastic answer. Fantastic answer. And again, this is all gonna roll into the next question. And so with all this experience that you've had, I'm sure that there's many things that you've learned, for a complete newbie that's coming out, do you have any tips or tricks that you would recommend to them as they're just getting started in private lending?

Alex Brashears:

Oh my God. Trust. But verify because they'll meet you for coffee. They'll show up to Starbucks and they'll meet you for coffee, but guarantee you if they show up late or they just don't show at all, do not chase them down. Do not worry about it because chances are, they're not your borrower. So I would say really having an understanding of who they are. I'm the person, I'm the jockey type of lender. Like I'm going to go Facebook stalk you. I'm going to Google your name. I'm going to put you into a national database and check and make sure things are legit. Like I'm going to look on public records and see that every deal you're telling me, you have experience doing that you or your business entity is on title. And if they, and if you're not, I'm gonna come back and say, Hey, you had this address down as a property for experience what's going on. They. Oh, I was helping a guy out and I was mentoring him and I don't know that you're not on title to me. You have no skin in the game. So I would say, trust, but verify.

Average Joe Finances:

That, that is a fantastic point. And again, there's a reason why we say that in the military all the time, too. You have to trust, but verify, otherwise people can get hurt or die. And in this case, people can lose a lot of money. All right. So the final question here, and this is the opinion based question. So I'm going to preface it with this, besides your own, that is coming out. Do you have a favorite business investing or real estate related book or podcast or both

Alex Brashears:

So the book, my absolute favorite book, it's not 100% investing based, but I think it's very applicable because it's about mindset. And if you, if your home base isn't a good foundation, any decisions you make past that point, including investing, aren't gonna be applicable. So it's an oldie, but goodie it's called psycho cybernetics by Dr. Maxwell Multz who was written, I think back in the early sixties. So it is a little dated, but basically it's a lot about visualization and kind. Picturing the way you want things to go, and then your subconscious kind of takes on. And it's basically if you have a bad dream and you wake up and your adrenaline's running and you're sweating, it's because your brain doesn't know the difference between what you have dreamt in your mind and what actually happened. And he discovered this very early on in the 1960s. So I say fantastic book again. It's another very actionable book he gives you exercises to go and do as you work through the book. So again, not necessarily investing book, but I'm very much the mindset. Has to be foundationally good because any decisions you make with a good mindset are going to be more successful than any decisions you make with a bad mindset.

Average Joe Finances:

No, that's fantastic. What a great recommendation. And I'll tell you right now, this surprised me very much. That was your answer, because this is actually the second time someone's recommended this book. Since I started asking this question and the first time the person recommended this book, he's oh yeah, you probably, this is probably not one you ever hear of too much and this and that. And I'm like, and now I heard it twice. So yeah, I wrote this one down. Was it psycho cybernetics? Yeah. Wow. Okay. I'm gonna have to check that one out. It's that's getting added to my list cuz now, like I said, this is the second time I heard about it. Now, Alex, I do have one more question for you. I didn't lie, but the final round is now complete, but I have probably the most important question Of all, because we've been sitting here having this awesome conversation and it was a very freelance conversation, as I knew it would be with the two of us, just about the personal, private money lending. And just what you're doing personally in your own journey. And then, we talked about your book and everything. So for the people that are listening right now, they're like, Alex, like the everything that she's doing is really awesome. And you had mentioned something about her Facebook group and everything like that. So people are like, Hey, I wanna know more about Alex Breshears and I wanna know more about her book. That's coming out with bigger pockets, so do you have a website you can share with us? Also any social media pages you'd like to share, especially that Facebook group. Please do so now.

Alex Brashears:

Yeah, I would say the Facebook group is probably your first go to I'm in there all the time. The group is called lend to live private lending lessons. So we're literally teaching people about private lending, everything in the group is free, but the other thing that we do in the group, like you mentioned, we have speakers come in, but we also have started doing open office hours. So twice a month, We spend an hour we're on zoom. Anybody can come and go. You can come ask questions, whether you're an active investor or someone that wants to get started in private lending, or you're already private lending. And you just want to find community. We are now doing this twice a month now. So please come by. Introduce yourself. We love talking to people. I'm on LinkedIn. So I, my URL. Live passively or invest passively to live actively because that is how I view the world. Now, instead of the return on my capital, I'm looking at my time commitment in projects because that's becoming more and more valuable now, as opposed to my return on investment is how much brain mental brain damage am I gonna have to go through to get this investment done? But definitely LinkedIn I'm on LinkedIn. Obviously I'm on bigger pockets. Feel free to send me a connection request or send me a message if you happen to be part of the bigger pockets community as well.

Average Joe Finances:

I love that. I love that, especially, your LinkedIn, link as well. So it's invest passively to live actively. That is just super awesome. And what a great way to look at it, investing passively. So you can live that active life and go enjoy life. So that's one of the benefits that you have being a passive investor. And especially with what you're doing. So Alex, this was a fantastic conversation, as I knew it would be, I'm super excited to get this one out there to share what you're doing and what you've, continued to do. Since the last time we talked back on episode 38 and you're just out there just. Killing the game. Now with this book coming out with bigger pockets, it's just super exciting time. And I'm glad to be a part of this with you and part of your journey as you're moving forward and just crushing it. Alex, thanks again so much for coming on the show to talk with us today.

Alex Brashears:

Thank you for having me and for educating everybody that you do. I do. I equally think you do a great job helping other people understand finance.

Average Joe Finances:

I greatly appreciate that. And we're outta here. Aloha from Hawaii.