Creating True Passive Wealth Through Private Money With Dan Zitofsky

FO 17 | Private Money

FO 17 | Private Money

 

When you’re doing fix and flips, it can be a hassle dealing with the contractors, the plan, and the townships with all the permits and building codes you have to comply with, so much so that switching to the passive side makes sense. One real estate investor who did precisely just that is Dan Zitofsky. Dan has done everything from little flips and rentals to high-end flips, commercial deals, land deals, and multifamily deals. He joins Paul Lizell on the show today to share how he transitioned from dealing with contractors, realtors, appraisers, inspectors, and properties to creating true passive wealth through private money.

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Creating True Passive Wealth Through Private Money With Dan Zitofsky

With me is a good friend of mine who I’ve known for years in the real estate investing business, Dan Zitofsky. How are you doing, Dan?

I’m great, Paul. How are you doing? It’s great to be here.

I’m happy to have you. I’ve been meaning to reach out to you to get you on here. I’ve been busy between this COVID time just like you have. Besides private lending, you’ve done fix and flips and owner finance. Tell us a little bit about your background when you first got into investing.

I’ve been at it since 1990. I started off with a rental property. The story goes way back, but I used to flip a lot. I was very transactional. I was flipping many properties. We’ve done over 1,000 retail flips, flipped to 3,000 transactions. Everything from your little flips, rentals, to high-end flips, commercial deals, land deals, and multifamily deals. The big part of my story on how we wrote up the book, Passive to Prosperous, is exactly what the title says. We went from a very transactional business where we were flipping 40 to 50 minimum properties a year for about ten years and netting anywhere from $50,000 to $80,000 on average per property. You could see, we were making multiple seven figures a year to passive income lifestyle. We were working a tremendous number of hours.

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The long story behind it is we had to reset and we had to come up with a way to change our lifestyle to do what we want to do. We’re sitting here now at the beach house and we’re able to work from here. We would’ve never been able to do that in the past dealing with contractors, realtors, appraisers, inspectors, and properties. We’re living in a passive lifestyle. That passive lifestyle is based on being the bank as seller finance, noteholders, and having a rental portfolio in emerging markets. We made that transition. The only way we could do that is back in 2008, 2009, is we decided at that point, we almost lost everything due to hard money lenders and the bank was controlling our businesses like they are in 2020. We had to make that transition back in 2009 to say, “At this point forward, we’ll never base our business around hard money lenders or banks ever again.” We want to control our own business so we put our head down and learn how to raise private money. Since then, we’ve raised over $30 million in new money and using it over $200 million of velocity.

That’s a great change. I switched too. I still do the fix and flips. I’m not doing nearly as many as I used to because it is a hassle dealing with the contractors, the planning and the townships. Townships continue to get worse and worse as far as permits and what they require, building codes and all that. Switching to this passive side makes so much sense.

I equate it to owning a franchise. As I said, you don’t own a business, you bought a job. I do 2 to 3 fix and flips a year now because they don’t meet any other parameters and they fit the box or a fix and flip. Even though they fit the box, I finished one in Charlotte, North Carolina, every single one becomes so stressful. It’s such a nightmare. There’s not one thing I enjoy about it anymore. Although you make the money, but it’s for transactional. It doesn’t do anything for you. Not to impress you, it sounds pompous but the $40,000, $50,000, $60,000 doesn’t mean anything for us now. If I could generate $300 a month, it means I get a lot more excited. I build generational wealth for my family doing that. That’s a lot more exciting to me than a fix and flip. There’s not one aspect. I don’t care about people saying, “I make the house look pretty.” I do the same thing on rentals. I do the same thing on my seller finance houses with investors. It’s just words. It doesn’t move the needle for me at all anymore. I’m not a fix and flipper even though I do a couple a year. I don’t want it anymore.

FO 17 | Private Money

Private Money: The problem with the BRRR Method is if banks stopped lending as they did, you can’t take the hard money lender out of a deal.

 

I understand where you’re coming from. It’s the stress and it’s transactional. You’ve got this whole stressful transition going from purchase to renovation, resale, appraisals going through, and make sure all the numbers all match up and then it’s done. You got your payday, but then you have to work on the next one, then stress becomes again. You have to find your next one if you’re doing it that way. Whereas you’re talking about mailbox money or what used to be termed mailbox money. Now, it’s ACH digital money right into your account automatically from whether it’s a seller finance notes that you hold or it’s rental income where it’s coming in without you having to do anything. That’s so much less stressful. That is a very important thing. You and I are young enough guys. We still have young kids but as you get older, you want less stress. You want everything to be a little bit more simple. You don’t have to manage all this stuff.

Your vision in life is a lot different. I go over this a lot with my students as well. We talk about vision, mindset, roadblocks, higher level, higher being, what are you, what are you doing and why you’re doing this. We dig deep into why people are doing what they do. Generally, for the most part, most of the people I work with that I mentor will tell me the reason they’re doing this is that they want time with their family, they want their spouse to retire and want to pay for their kids’ college education. They don’t want to worry about family in generations, their kids, and the grandkids one day. Everything they’re doing, their vision is this way and their actions go this way. They’re in left field on their actions. Everything they do is transactional. That’s the problem. At a certain age, we got to the point where I’ve driven. I don’t say it once again to impress anyone. I say it to impress upon you.

I’ve driven the nicest cars that people can imagine. You don’t see me posting them on Facebook. We own them outright. I have a watch collection that most people choke on. We don’t talk about that but that was important to me back in the day. If you broke down my vision, you would realize it’s not important to me. It was important to my ego. That’s all it was. It made me feel successful. That’s all part of my story in my book. When I speak at events, that’s what I speak about. Generally, we have the audience crying. My wife is there and I start crying looking at her because I thought I was being successful. I thought I was being that person I said I would never become when I was growing up. I became totally opposite of what I thought I was. I didn’t realize that. I thought I get my wife the cars, the jewelry, the boats, the vacations, everything she wanted. I still love vacations. There are some things I won’t give up.

That’s my experience and time I want but the cars, boat and watches, which I still have because I have them. I don’t go out spending like I would spend easily $50,000 to $60,000 a year in watches for no reason because I wanted to show off. I’d buy cars then after three months, I would lose the giggle and I’d get a new one and lose $20,000 just because I wanted to show off because it built my ego. I’m humble enough to say that now. I didn’t realize that back in the day. When my wife approached me and she said, “You’re not the best husband. You’re not the best father,” it crushed me down to my knees because I thought I was. I was just feeding my own ego. Unfortunately, that’s what I see most people doing. I look at it like this. I see a picture where they say a great investor and they show them driving a Honda Accord or something and some guru posting a check on Facebook and driving a Ferrari. I understand that because I’ve been there. That’s what I’m looking at.

I based my business a lot on hard money, lenders, and banks. I test that too. I equate that to having a franchise where you don’t have a business, you own a job. Hard money lenders or banks were controlling what you did with your business. I couldn’t build my business that way. I wasn’t comfortable fixing and flipping and being transactional. That didn’t work for my lifestyle, what I wanted and my vision was. I always said that the reason I was in this business is that I didn’t want to work in Corporate America anymore. I didn’t want to be stuck at a job. I didn’t want to have a boss telling me what to do. It wasn’t for me. I wanted to build a lifestyle and my lifestyle was by my vision.

My lifestyle by design does exactly what I’m doing now, sitting at a beach house with my kids, going out on the boat, and the sand. They working at beach jobs, me hanging out with my wife, drink coffee when we want, waking up when we want, going to the gym when I want, or go for walks. That was my lifestyle. Everything I was doing did not do anything for that lifestyle. What it did is afforded me to buy the nicest cars in the world, nicest watches and boats and it wasn’t my vision. Once I learned how to raise private money in 2008 and 2009, when hard money lenders back then and banks stopped lending, I almost lost my business at that point. I had no way to get money out.

I had 2 or 3 lenders out there. They will give me $50,000. It’s not enough to move my needle and I couldn’t go out and buy nonperforming notes back then. I couldn’t buy REOs from the banks. I couldn’t pick up big pools of assets with hard money. It doesn’t work. One is they won’t allow it. Two is a timeline doesn’t work economically. Nothing about it works. The only thing I can do with hard money lending was either the BRRR method sometimes or I can do a fix and flipping. The problem with BRRR method is if banks stopped lending like they did, you can’t take the hard money lender out of a deal, what do you do? I sat back in 2009. It’s where I got serious.

I still remember the conversation. I told my wife, “I would never let my business be based on a hard money lender or a bank ever again.” If I do use banks, I don’t use them all the time, but if a bank stopped lending as they do now, it’s okay. I’m generally raising private money at 6%, 7%, 8% in that range, interest-only, no points for 3 to 5 years. Some of my lenders, it’s a year, but most of my lenders are in their 30s and 40s. Most of them are self-directed IRA, solo 401(k)s, health savings accounts, Coverdells. They don’t need the money every year. They have a lot of money and they’re living off it. I’m using their money sometimes 20 to 30 years before they can touch it at 59.5. The only ones that touch it earlier are kids that are going to college.

I focused on that point. I built myself. When you build a business, you have to take control of your business. I decided I’m going to do anything in my power to raise private money. I put my head down and I stopped doing what everybody else is doing, slapping crap against the wall and hoping it sticks. I built a private money presentation. I built my bio out. I built a brochures. I wrote my book. I was very intentional about who I partnered with. I didn’t hang out in the same murky waters that everybody else hangs out with at REIA groups, meetups, and those kinds of groups. I started laser-focused on who do I want my partner to be?

I tried to look at them as partners on deals. Who do I want to hang out with? Who do I want to have a deal with whether I make money for them or not? I get laser-focused on who I wanted to be around. I speak at a lot of events like real estate types of events, wealth advisory events, family office events, IRA events, some of them I raised money, and some I don’t on purpose. You’ll never see me raise money at a REIA event. People come up to me all the time and ask if they can fund my deals. I’m like, “I’m probably not the best bet for you. There are a lot of other people here that could use your money,” because they want 15 to 20 more.

They’re not going to be in this for 6% to 8%. They’re active investors, they’re not passive. I deal more with the business owners and professionals. Since 2009, I’ve raised $30 million in new money and use it a $200 million of velocity. It’s not saying to impress anybody, but I haven’t done it with a lot of people. I only have 42 active investors in my list. There are people with a lot more. I know people with a lot more than that. I don’t have a lot so it doesn’t take a lot. I’m very careful to tell people how much I’ve raised because people think you have to raise that much. Most people don’t. Most people can get away with $500,000 to $600,000 and they’re set for business.

They’re fix and flippers. They can only do 2 or 3 houses at a time. How much are they into a fix and flip for? Maybe $150,000 to $200,000. As that first one is selling, the third one is coming in, the fourth one is coming in. They’ve got to figure out what they want in their life. Here’s the problem I see with most investors. Nobody entry into this business. They get in easily. They go to an event. There are some people lending money around there as hard money lenders. They never learned how to build the business because they go the easy route. “Let’s go to the hard money lenders, to banks, and if they fund our deals, great.” Once again, this pandemic that happened, most hard money lenders pulled out. The ones that didn’t pull out changed their terms.

They make you put a lot more money down. They make you have twelve months reserves in the bank. It’s good for them, they should protect themselves. I’m saying that’s the best thing in the world for them. They only worry about their business. They’re not worried about your business. I always tell people, “This is my program. When I bring you in to fund my deal, you’re coming into my program. I’m doing you the favor. You’re not doing me the favor.” I believe that because I know what I can provide them. I’m giving them better than average returns. I’m going into a deal very conservatively. I don’t guarantee anything because everything is a risk. If everyone tells you it’s not a risk, they’re lying to you. You better run, not walk.

I also have a SEC attorney on our team. I don’t go out there. You’ll never see my post on social media, “Who wants to fund my deals?” It’s illegal. First of all, you look like you’re hard up for money and you look like you don’t know what you’re doing. Most real investors and lenders are not going to be on social media funding your deals. If you ever want to raise big money, you got it. You’d be intentional about raising big money. If you raise private money, think about all you can do. When banks don’t lend even 6%, 7%, 8% interest, you can hold those loans for a while. Pay your investors and lenders back without a problem. Keep those loans until the banks stopped lending and start lending again. You’re not stuck by a hard money lender or a non-QM bank telling you they’re not going to lend on a BRRR method. That works towards my passive income.

People don’t understand when you get into the hard money lending when you’re talking about 12% to 15% rate, 3 to 5 points, what that does to your profitability deal, it turns something which could have been profitable that made $30,000, now you’re down to $15,000 and $17,000 when you talk about those. When you get back to your rates that you pay 6% to 8%, most people in the stock market, that is their going rate when you talk about fees and all these charges that they have to pay, they’re getting 6% to 8%. What’s more secure, something with real estate, backing it or a stock, which can go down to zero? It does give you a good sales pitch and everything as well. I’m 6% to 8% all day long.

If it was all you’re looking for, you’re right on what the commissions are on your financial advisor. You’re right about stocks. People don’t even look at it. You’ve got to get a little smart about this. We’re in finance. You’ve got to understand the difference between active and passive investment. It’s tax savings. What is the benefit of tax savings? On a stock, you don’t appreciate anything. You have pure capital gains. In real estate, you write off, you have debt reduction, depreciation, the possibility of appreciation, rent increases, and cashflow. Where can you put down $20,000 to $30,000 on a property if you don’t make $1 for 20 or 30 years? Let’s say a tenant pays down your property, you’ve got all that depreciation and you have $100,000 property. If you did nothing else, if you didn’t make $1 and you have $100,000, that doesn’t happen in the stock market.

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I’ve got to be careful. I want to keep it light. One of my best friends is a CFP and he cannot invest way out of a paper bag. Because they go and take a test, it doesn’t mean they understand the market. They don’t even understand how self-directed IRAs work. They don’t understand how solo 401(k)s work. They don’t even know what a Coverdell account is. They’re trying to sell people 529 plans. It doesn’t make sense. I’m going to tell you, you can invest in real estate. I have to do a ton of conference calls with them. I said, “Mr. and Mrs. Smith is buying 123 Main Street. I need you to wire funds to the attorney.” “We can’t do that.” They’re misleading. I used to ask people all the time, “What are you investing in?” I would get people that would give me the Ameritrade, Charles Schwab, Merrill Lynch, whatever it is. I’m saying, “That’s who’s holding your money. It’s like a bank account. What are you investing in?” It was a funnel. Everybody knew that. They know it would come down a little bit and they would say, “I’m in a mutual fund.” “What’s in that mutual fund?”

The funnel is getting smaller and smaller. Most of them at this point didn’t know what was in a mutual fund. The couple that understood that was in the mutual fund started asking, “What were the dividends? What was the P&E on it?” Almost nobody knew that. I still remember all these times I’ve questioned people, nobody knew that. I got to some people, I said, “This is what it is. Let’s pull your statement.” We looked at the statement and like, “What is the commission you’re paying?” Not one person ever told me. I’ve asked these thousands of times. I used to speak all over the place. Not one person has ever known the commission they paid that financial advisor. When you start looking at that and you start seeing that the cost of living increases, I’m going to be conservative and say 3% a year.

Financial advisor commissions generally are at a low end at 1.5% to 3%. You’ve got to make anywhere from 4.5% to 6% to break even. You’ve got to pay high end, short-term capital gains tax on stocks that you buy and stocks that you trade-off. You don’t get any depreciation on it. You don’t create any wealth. You don’t own Apple. You own a piece of Apple if you buy it. You own a piece of Microsoft if you buy it. You don’t own the property. You can’t turn around and do what you want. You can’t seller finance it. You can’t create passive income with it. There’s nothing you can do with it. You can live off dividends. What are the dividends? People are happy as all heck getting 2% or 3% dividend. They’re going crazy with 2% or 3% dividends and you get taxed on it. What kills me is that people don’t take the time to learn finances. They’ll spend more time learning about a car or a family vacation.

They’ll spend months planning the Disney trip, “I’ve got six months in advance to call up because I’ve got to get to Chef Mickey’s. My kid wants to see Chef Mickey for breakfast,” but they’ll spend no time learning financial literacy. That’s what it is. The bottom line here is, what is your goal? What is your vision? If your vision is, “I want to buy myself a beautiful Ferrari,” I’m going to say there’s nothing wrong with that but is that your vision? I get it and it wasn’t my vision. Why are you doing it? I was doing all of this business because nothing in my vision said I wanted to own a Ferrari, Bentley or Lamborghini. Nothing ever said that. Everything I said, “I wanted to spend time. I wanted to wake up at the beach. I wanted to go out on the boat in the morning. I wanted to go to the sand in the afternoon. I want to sit there with my wife and watch the sunset and go to dinner.”

That was in my vision. I could not do that doing what I did. That’s why even now, I’m very careful. I’ll spend a couple of hours once or twice a week doing these interviews and these podcasts. No matter how much money I can make with students, I don’t do it. I cut out who I work with because my vision is not to make money with students. My vision is to live my life by design and I still work with students. I still work with mentors. We had a conversation about this that I do it a little differently than I did in the past. You evolve and you realize that I can make a lot of money coaching as you can. We’re very intentional about who we work with and who we mentor. There are a lot of people out there just for the money. For us, it’s not about the money. For me, it’s 100% none. I know for you, it’s 100% none.

We’re not transactionally based. We’re looking to live a lifestyle. Let’s say we don’t want all these fancy cars and all these fancy things, we’re looking to buy time. Time is what we want. Time to be able to do what we want. Spend it with who we want, our family and our kids while we can. Every year, when I look at my numbers every single year, I coach travel baseball. Quarter two for me sucks every year because I spent so much time and day coaching, doing lineups, and traveling here to there so I lose a lot of my day. If chopped 50% compared to the other quarters, it’s unbelievable but that’s my lifestyle. I want it to be that way. It’s intentional and I’ll never regret, never look back saying, “I had the opportunity to do it, but I didn’t do it.” I’m taking advantage of coaching kids at basketball, football, travel baseball, all these different things.

I went through years of coaching, travel baseball, state championship baseball, football and I coached all these years my daughter’s softball and I’m back to coaching. Hopefully, we can get at it. I’m finally coaching high school football back at it again. You don’t do it for money. You don’t make any money coaching. I’m not the head coach. The head coach only gets paid a couple of thousand a year. The assistants get paid nothing and it costs me money. You have to spend time. That’s in my vision. I love doing it and I love coaching. Guys like us, we love mentoring at all levels. I love this industry.

This industry has afforded me an amazing life. There are a lot of ups and downs. It’s afforded me the life that I can not only live the rest of my life the way I want but I can teach my kids to do the same thing. I can help them build a legacy for my kids and my grandkids and help all the people do the same but they’ve got to want to help themselves. I don’t ever believe in selling somebody in coaching or mentorship. Years ago, that’s why I tried to sell a coach. I’m not selling coaching anymore. I don’t sell people on funding my deals anymore. They have to sell me on why they should work with me. Some people might say that’s pompous and I don’t see it as pompous. I have a mentor as well and I see this as valuing the deal. If I don’t value myself, why would you value me? That’s who I am.

I find out that a lot of people say, “We shouldn’t pay for mentorship.” You’re doing such a disservice to yourself because your mindset is so screwed up. It’s a scarcity mindset. That’s limiting beliefs. Through our mentorship, I teach a lot of people mindset, beliefs, vision but it’s such a screwed-up mindset and such scarcity. If I don’t work with people who value themselves, I’m doing them a disservice. If they don’t invest in themselves, they’re not going to take action. They will never take action. I can’t even tell you how many people I’ve coached for free. I have a 0% success rate. I’ve probably hurt people that could be very successful. What happens is if they don’t invest in themselves and they don’t see value in it, they won’t do anything.

FO 17 | Private Money

Private Money: Hanging out and talking with people in meetups is not where you’re going to grow. You’re going to grow when you’re challenged.

 

They’re not doing it with intention. They don’t value it. It’s like, “No big deal. It didn’t work out. I didn’t put anything into it.”

We were changing back to our group coaching like we did years ago. If I was to bring people into my group that will want newbies, they didn’t invest in themselves to be in that group, how would anyone get value in that group? That group would be a bunch of freebies and nobody would care. Did you ever play Fantasy Football?

Yes.

If you’ve ever been in a Fantasy Football League with nobody, they don’t even pay and it’s free. They did work and it’s free. Once somebody is out, you’ll have a guy in the office get around and find the other one that doesn’t know what they’re doing. Take their best and pick Tom Brady for a kicker. They don’t care. It’s the same exact thing. It’s the free Fantasy Football League that nobody does real trades. Nobody cares because there’s no value to it. If you have somebody putting $20 in a Fantasy League, they’ll study it, spend time, make lineups and do what it takes because they’re invested in it. It sounds small but it’s exactly the same thing that people don’t understand.

It’s absolutely 100% truth and you see it all the time. I still buy education. If there’s a program out there, I’m like, “I want to learn and do more with that,” I’ll buy that program. I’m sure you’ve done it over the years as well. I’m constantly repaying for education. You never stop learning. You’re always looking to learn and there are different things you want to get into. “I’ll kick it down the road.” If you do that, you’re screwed and you’ll never end up doing it. You’ve got to be able to do it at that point. If you’re going to put the money down, then you’re going to be dedicated to doing it. At that point, you’ll be fine. If you’re thinking I’m going to do it down the road, it doesn’t work. I’ve seen that too with people and students of ours that were trying to get in and they’re keeping an eye on here. They’re keeping a short eye here on what we’re teaching them and it doesn’t work out. They have to stay laser-focused.

One of my mentors, Greg Reid, he talks about the disease of the ‘Once I’s,’ “I’ll do this once my kids go to school. I’ll do this once I have enough money. I’ll do this once I have time from my job. I’ll do this once my wife retires.” He’s like, “Draw that line in the sand and step on the line and say when is my time?” This is my time. When is your time? You don’t know what you have. I started this years ago. I wish that I had the ability to have a Paul Lizell teaching me what you do. You would do exactly what I want to do and I do.

I like passive income, you teach that. We’re both in the note game. If I had a Paul Lizell years ago, I would have done anything in my power to wash cars. Done anything I could do to build up enough money to live in newspapers, to make sure that I had enough money to pay you to be in your group. If I didn’t have enough money, I would bring a tremendous amount of value where I would take no money back on a deal just like I learn for free from somebody like you. There are all the ways to do it. The problem is this, “Can I take you to coffee and pick your brain thing?” is terrible. I could eat breakfast, lunch, and dinner and coffee for the next three years for free if I let everybody pick my brain.

When people aren't willing to put the work in to learn how to do things the right way, it causes some issues. Click To Tweet

I would be stealing time from my family. I’d be a hypocrite because all I have is time. I also look it like this. The bottom line is if you think of education as a cost, you have the wrong person. If you think of it anything other than an investment, you have the wrong person because it is an investment. You do too. I spend over six figures a year between my two mentors and the events I go to, not events I speak at but events I go to and pay. I pay mentorship. I pay mentors $35,000 and $30,000 a year, plus I pay about $5,000 to go to their events. I’m doing about six of those a year plus this money I spend out there and travel.

It’s the best money I could spend. It’s better than any car I’ve ever bought. It takes not just my financial business but my personal business, coaching business, business, and note business to another level because I’m dealing with people that are on the same page. I like to be the dumbest person in the room. I don’t go to a room showing off and pound my chest and say, “I’ve done all these deals.” Nobody cares in those rooms what you do. Everyone is an expert in their own field and everybody holds you accountable. That’s where you grow so much and it’s the higher level you want to be at. If you’re somebody that likes to show off, have your ego stroked, and people tell you how great you are, that’s not a group for you. You’re better off hanging out at the local REIAs, local meetups, real estate investor meetups.

They’re good to go to once in a while, hang out, talk to people, and get to know them but that’s not where you’re going to grow. You’re going to grow when you’re challenged. Every time I have a call with one of my mentors or I have a retreat that I go to, I used to feel a little stressed out. They’re going to hold me accountable for what I said. It’s almost like I’m going to the principal’s office. I told them last quarter that I was going to do such and such. I told them I was going to lose 25 pounds or I was going to put systems in place in my business, or I was going to hire an assistant. I didn’t do it yet. What do I tell these people? That’s the events I like. That’s the masterminds and the groups I like being part of from mindset and for business. I’m in one for mindset, one for business. That’s how I look at it. That’s what a mentorship should be.

It creates accountability and you need accountability. We always need to have goals that we’re trying to reach. We need something to push it. If it’s not always ourselves, peer pressure is one of the best ways to do it. You can go into the meeting and say, “I was going to do 500 pushups a day or three days a week.” I said, “I was going to hire a VA to do this or a VA to do that. Hire an assistant,” or whatever you’re trying to do. You don’t do any of those things where you’re going to look an ass when you’re there. It’s important and those things are great. You get more out of them than you put into them. They push your business up to a level that’s more than paying for what you’re paying for those things. You’re also building all those relationships with those people. They’re tremendous. I love the mastermind groups.

It’s happening to me. We do private lending training mentorship with people. We have people that come to us and they ask us to help us build the list. It was students at first, but now we have people come in and say, “I know you built a potential private lender list. People that not have lent before but accredited type of investors, can you build us a list?” It started coming to me left and right. I said, “I’m going to put my team on this to build out a list nationwide for people.” I told them I was going to do this. The team dropped the ball. What I did is I went out and got my virtual assistants. I said, “I’ve got to do this.” I would’ve never done it. I would have just asked and grown it. I’m not making any money on it. The money came in and it goes right to my team for the time. I know I have to go back there. I told them I was going to do this.

What I did is I got one of my VAs and I said, “Your job is only to develop lists for the counties and states people want.” People are telling me the states and counties they want, I’m building the list, we sell them the list and that’s it. At least I’m accomplishing. I would have never done that if it was in a REIA meeting. “It didn’t work, the guy screwed up, the people on my team didn’t do it, and they dropped the ball, I’m not doing it.” I’m doing it because I’m not making money on it. The money is going to my team. They make good money and I’m paying my assistant to do the work and my systems. I’m doing it because I want to show up there and I want to say I accomplished this. You’re held to a higher standard. Back to the whole thing about private money, that’s why private money is so important. Back to the whole vision of what your business is and what you’re doing. Private money is the only way to do it.

I don’t care what you say. You can talk about the BRRR method but you’re still relying on banks. If banks stopped lending, you’re done. Banks could stop lending for a number of reasons. They don’t like the risk factors. They don’t like the area. They have too much in their portfolio here, your credit, you have too much going on that you can’t deal with residential banks, you’ve got to go commercial, got to go non-QM, your tax returns aren’t showing enough money. There are a million reasons why you might not be able to do that anymore. With private money, you control it. It’s your program. You protect your investors, but you do what you want. You say, “This is my program. I borrowed the money at these terms, these many years, this rate, these types of deals. Are you interested?” If they’re interested, they fund you. If they’re not, you don’t change what you do. Go on to the next investor. The problem is people aren’t willing to put the work and to learn how to do this the right way so it causes some issues.

It’s important to be able to learn how to do it the right way and have the right paperwork set up in a place so you don’t get yourself or your investors in trouble. It’s easy as you said a lot of people know they’ll advertise on social media if they need funding for a deal. The next thing you know is you’re in trouble with the SEC. We don’t want them up to your backside. It’s important to know how to do these things the right way. You teach people how to do these things the right way. You have a program that shows people how to do this and with all the correct paperwork and everything to do. If somebody does want to reach out to you and learn more about that, where can they reach you? Is there a website?

They can go to PassiveWealthAcademy.com/42k. They’re going to get my free cheat sheet in there. They can also follow me in my Facebook group, not my personal page because I’m at that 5,000 friend limit. They can go to Become A Real Estate Investor With Dan Zitofsky. They could follow me on YouTube. Our YouTube page is Zitofsky Capital Management. Everything there is free. There’s no need to pay for anything. If you’re interested in learning more about how to raise private money, we could set something up there and I can provide a link.

FO 17 | Private Money

Private Money: With private money, you control it. It’s your program, and you do what you want.

 

People don’t realize, they think the market’s kicking back, things are settling down and going to be normal. It’s not normal. I know some of the lenders are starting to lend again like Lima One Capital, LendingHome. What’s driving everything is the Payroll Protection Plan or PPP. People and businesses still have money from that, the unemployment. When this stuff runs out, people run out of money, and there’s not another PPP payment coming in, you’re going to see a lot of bankruptcies, a lot of businesses going down. You don’t want to be dictated like Wall Street and hedge funds control these lending on these from LendingHome, Lending One, and Lima One Capital. As soon as they shut down, you’re off. That’s why private lending is so important to learn how to do what you do, to borrow the money at a better interest rate so you’re more profitable and you can control these deals and constantly be able to buy because you want the opportunity to buy when the market starts to take a downturn which is inevitably going to do. At some point or another with 40 million-plus people unemployed, it’s going to go down.

It’s unfortunate but it is. There’s going to be a bloodbath out there and it’s going to be a huge transfer of wealth. My asset managers called us and talked to us and see what we can do as far as how much we can take down in goals. They’re expecting a huge amount of assets coming available beginning of 2021. In 2012 and 2013, I used to hear people say, “I wish it was 2009 again.” If you learn how to raise private money in the right way and you stay consistent, you’re going to do very well.

I’ve got to say my best year in real estate and the most profitable was 2009. The amount of money I was making on some of these deals and I was picking up a bunch of REOs at that time, wholesaling and getting $55,000, $50,000, $45,000, $40,000. These were wholesale piece of these things. It was unbelievable. That opportunity is going to come again so you’ve got to be in the right position. If we didn’t have private lending, I wouldn’t have been able to do that. Luckily, we have private lenders and put us in a position to be able to do and take advantage of that. In retrospect, I wish I would have held some of them for a little while longer but it is what it is. The money is great. You’re doing other things, some fix, and flips, but it’s so important. That’s why I wanted to have you on around this time because people need to prep now. 2021 is going to be tremendous opportunities for people to buy in real estate and all kinds of asset classes. I love cryptos. There are going to be opportunities in cryptos potentially in that market as well.

I have a student that raises money to buy Amazon stores and another student that’s raising money to invest in businesses and take an equity share. I have another student that raises money and buys old watches. He’s buying a certain type of watches. He buys and sells them on eBay. It’s a little harder to protect your investors and lenders on that but they’re still raising private money for that. You can’t do that with hard money. No banks are going to fund your deal to buy Amazon stores. I haven’t looked into it, but this is what they’re doing. You can do a myriad of things with private money. It’s your program. You decide what you want it to be for it.

Opportunities are coming. It’s going to be coming in abundance here. Dan, it was awesome talk with you. It’s always great catching up with you again.

Paul, thanks so much.

Thanks, Dan. I appreciate it

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About Dan Zitofsky

FO 17 | Private MoneyFor well over two decades, I’ve specialized in working with clients to build equity in their wealth portfolios through investments, savings, IRA’s, and 401K’s. Here at Zitofsky Capital Management, we perform extensive due diligence to protect every investment for our investors as well as our lenders.
I’ve closed over 800 fix-and-flips, 650 rental properties, 800 plus doors in multi-family projects, and over 1,000 private money and Non Performing Note transactions. My niche in the business is to turn a non-performing asset into a performing asset, creating true Passive Wealth becoming the bank.
I personally help investors by offering guidance on building their long term wealth with turnkey rentals properties in Emerging Markets, but more importantly how to create “True Passive Wealth.” I’m also a featured speaker at many national gatherings of investors and wealth groups Internationally which is now my true passion bringing real content in a mix of so much smoke in this industry.
One of my specialties is training investors on how to create long term passive wealth for themselves by turning nonperforming assets into long term performing assets by “Becoming The Bank”. I‘ve also traveled to multiple events teaching others how to fund their real estate projects by packaging their portfolios in order to present to private lenders. and finally launched our first Online Training Series on “Creating True Passive Wealth”, where I personally coach investors at all levels, specializing in my online training for “Raising 1 million dollars or more in 90 days or Less” and “Building a 10K monthly Passive income approach with Rental Properties in Emerging Markets”. One of my biggest accomplishments which took me many years to complete is becoming the best selling author on my first book “Passive to Prosperous” and using the funds to create so many great opportunities for others as well as my first movie as an Executive Producer titled “Wishman”, which is the story of the founder who created the Make A Wish Foundation, Frank Shankiewicz.