Avoid This Major Mistake as a Real Estate Investor

Michael Daniels (00:00)
I Had like 20 properties all in my personal name, you know, my credit was good at the time I had all them properties in my name and I realized that you got to have properties in your

in a business name and you know I would say unless you’re doing like a building or something that’s going to generate revenue I would say put each property in a different LLC each and every time that way if something goes wrong with one it doesn’t affect all at the same time so that was a huge lesson I learned you know all of a sudden you’re trying to borrow money but you get the income ratio upside down because you got all this personal stuff on your personal credit

and that weighs your score down. So that was a huge mistake. And I didn’t have anybody to necessarily tell me that until after the fact. then that, so that was one of my biggest mistakes. And I would tell anybody you want to start investing, get your business set up, get it set up correctly, and make sure you’re efficient in your bookkeeping and record keeping and for tax purposes as well.

Erika (02:34)
Hey everyone, welcome to the Real Estate Pro Show. I’m your host, Erika, and today I’m thrilled to be joined by Michael Daniels, who’s been crushing it in the real estate space. Michael, it’s awesome to have you here.

Michael Daniels (02:47)
Thanks for having me.

Erika (02:49)
So let’s dive on in. Michael, for those who aren’t familiar with your world, give us the rundown. How did you get started in real estate? And also explain what else you’re doing in real estate besides being an agent.

Michael Daniels (03:02)
Okay, I got started in real estate about 23 years ago in Indiana. I bought my first house and then at that point, ⁓ I used to buy those carton sheets, ⁓ CDs and books. And so I would read those and then I started watching and he started having all these programs about how to buy a property, no money down for an investment.

And after I started learning that, that’s what I started doing. Going to homeowners, going to different institutional investors and creating deals with no money down. That was a big thing about 20, 23 years ago. So that’s how I got started as an investor. And then I eventually ⁓ evolved into being a real estate agent, which I was for about 20 years. And then I finally became my own real estate broker.

Georgia homes for sale here in the state of Georgia. So I’m my own broker now I’m still an agent but I am a broker and have my own firm at this point and I’m also a loan officer with a federally chartered bank called Texana Bank and we lend in all 50 states

Erika (04:14)
That’s exciting. Michael, was there a moment in your career that you knew this was the path that you were going to take that you were like, this is it?

Michael Daniels (04:24)
Yes, it was. ⁓ Early on, I just love making deals. And I was kind of like a big Donald Trump fan at the time, too, reading the art of the deal and things like that. So I just love deal making, bringing certain things to life. I just love making deals and making things happen. I love the excitement of writing a contract up, to going to closing, to taking a loan application. I still get

you know, so happy when somebody fills out a loan application. It just makes me so excited. And to pull the credit and to go through the whole process is just something that’s just amazing. So

it’s just a feeling that I have and I’ve enjoyed for the last 20 plus years. And I still love it to this very day.

Erika (05:58)
Excellent. Is there a deal in particular that you’re proud of that you can share with us?

Michael Daniels (06:04)
Yes, it is. ⁓ Toward the end of, it’s it’s been, it’s over 20 years ago, but I was able to buy commercial property and it used to be an old bank, believe it or not. It was an old bank building. It was called the Howell Bank back in the early days. It was at 3000 Broadway Avenue in Evansville, Indiana. And I was able to buy a building that was a bank and it had, still had the safe in there. It still had ⁓ safer deposit boxes.

And so that was probably the biggest, most exciting deal I’ve ever had.

Erika (06:39)
That’s really cool. ⁓ When it comes to real estate, ⁓ what markets are you serving and where do you know to focus your efforts?

Michael Daniels (06:40)
Yeah.

Well, I’m gonna start, I’m gonna answer that backwards. I kind of focus my effort whatever coming in. Like nowadays you kind of kind of take whatever deal is coming in, whether it be a loan that you’re doing for someone, selling someone a house or doing a construction deal. So whichever comes in, that’s the one I’m more focused on at that particular time and place. So, and I served the entire state of Georgia as a loan officer and excuse me, as a ⁓

contractor and as a real estate realtor and broker, but I can do loans in all 50 states. So those are the areas. So the state of Georgia for construction and real estate brokerage and the entire nation for loans. So if you any kind of loan anywhere in America, I can do it for you.

Erika (07:42)
Excellent. Man, Michael, that’s a lot of plates to keep spitting. What’s been key to managing that workload?

Michael Daniels (07:48)
Just long days, know, 6 a.m. 630 all the way until the phone stopped ringing. So every day of the week. there’s no there’s no necessarily an off day. You call me. You got a question. I’m going to try to answer it. You want to try to make a deal happen if I can go see a project. But one of the good things is I’ve been able to do a lot of things virtually lately. So.

If a client got a question or I need to give a quote, I can do it virtually versus having to go physically. So that has helped quite a bit. So the pandemic shifted to where being online has been very, very helpful.

Erika (08:27)
Yeah, yeah, that’s great. Do you have teams or systems that help you manage this too?

Michael Daniels (08:34)
Well, yes, I have a great support team. My manager and our processor doing loans. I mean, they’re fantastic. Anytime something comes up, if I got any problems or get bogged down, they’re right there to help. And as far as as far as showing houses and being a real estate broker, I take care of that. And then I have a cousin of mine anytime I need anything on the construction side, you know, he’s always there to give insight or instruction or to make sure the project goes smoothly.

So that’s been very, very helpful, having that kind of support.

Erika (09:08)
Yeah. You know, Michael, every real estate expert has had a moment where things got real. Maybe a project went off the rails or a client threw a curve ball. Can you share one of those moments and how you handled it?

Michael Daniels (09:17)
Yeah.

How many you want to hear about? That’s the question. That’s a common occurrence. But I give you a mortgage example. We are the, this goes back a few years right before the market crashed. And so this was the thing, the lender ended up giving me a call and saying, hey, Michael, I was working as a real estate, excuse me, a loan officer at a real estate brokerage at the time.

⁓ mortgage brokers rather. And so he called me up and said, hey, you know, we’re about to go out of business,

but we can, we’re trying to fund as many loans as we can before we go out of business. in Atlanta Metro is huge. So I had the client on one side of town, the, his daughter on the other side of town. And we, they had to weave through traffic to make it to the attorney’s office before 5pm.

before the other company went out of business and still able to fund the loan. And they got there right at about 450 and they start signing the papers and the lender was able to go in and fund it. But we actually sent the paperwork over a little bit later. Well, by the time they got done doing all the signing. So that was a unique situation with a lot of pressure because, you know, she was planning on moving, but she had no idea that the lender we was using was about to go out of business during the.

the big market crash back in 2007 and eight. was, was wow. Yes. Yes, it buried well.

Erika (11:29)
That is wild. What’s

one lesson from that experience that you still carry with you today?

Michael Daniels (11:39)
Logistics. Never schedule a closing, a real estate closing late in the day. Do it as early as you can in the daytime to make sure if something goes wrong, you got enough time to adapt. Because anything can happen, a flat tire or traffic or anything. So schedule it early. That way if something goes wrong, you you’re not at the end of the day and have to take it into another day. Yeah, yeah. So logistics matter.

Logistics matter a lot.

Erika (12:10)
Yeah, and with those logistics too, you know, you gotta have that ⁓ in mind if you’re looking to scale. Michael, what do you see on the horizon? What’s your next big move?

Michael Daniels (12:23)
My next big move is going to be trying to do more loans in more states. Obviously we can do lending in all 50 states, but I want to make my presence known that, if you were in Texas, if you were in Oklahoma, you were in Maine, Oregon, Wyoming, wherever, you can give me a call right here in Georgia. We can get on a part, excuse me, a video call, just like we’re doing right now, and I can still walk you through the process.

So it doesn’t matter where you’re at in this country, I can do the loan for you. So ⁓ that’s what I want to do going forward.

Erika (12:59)
Awesome. earlier we were talking, you do a lot of loans for investors. What kind of advice would you have to a new investor that you’re working with?

Michael Daniels (13:11)
Okay, about maybe have your paperwork ready. Before you want to make an offer, make sure that you have your company set up. Make sure you have your tax ID set up. Make sure you have your operating agreement. Make sure you have a real down payment because they’re there and have some cushion in between because you never know what conditions the lender may come back with. So for example, if they tell you you’re going to need

$40,000 at closing as your down payment make sure you liquidate at least 60,000 just in case for other expenses or if they want to make you escrow some things makes but at the same time don’t do a deal that’s gonna Have you to where you don’t have any more capital either. So you want to manage your expectations? you don’t want to try to hit a home run unless you know, you got the wherewithal and the capital to do so and

Make sure you call somebody like me first to go over the process with you instead of taking the word of someone who’s never done it.

Erika (14:17)
Yeah. Yeah. How, how would you say, what, what do you bring to the table that is, is unique when you work with an investor?

Michael Daniels (14:27)
⁓

exit strategy. Not only can I help you get the loan, I can actually be the contractor for you on the loan. I can help you through the entire process. We can use my resources, my vendors. In addition to that, me being a loan officer, I can make sure I pre start pre qualifying buyers for that property even before it’s done. And being me being a broker, I can make sure that

I can put the property up for sale and market it to a wide range of people. So I bring all of those unique aspects to the table. Being a

contractor, a broker, and a loan officer, that puts me in a very, very unique situation.

Erika (15:56)
Yeah, absolutely. When we were talking in the beginning, you said that when you started in this industry that your focus was investing. Were there any lessons in there that you think of with all the work you do today?

Michael Daniels (16:12)
Yes, ⁓ how long you got but I give you give you I’ll give you the short version I’ll give you the short version any investor I made a mistake because I wasn’t aware of it at the particular time in place. I Start putting properties in my personal name.

Erika (16:14)
We’re done ⁓ time!

Michael Daniels (16:31)
I Had like 20 properties all in my personal name, you know, my credit was good at the time I had all them properties in my name and I realized that you got to have properties in your

in a business name and you know I would say unless you’re doing like a building or something that’s going to generate revenue I would say put each property in a different LLC each and every time that way if something goes wrong with one it doesn’t affect all at the same time so that was a huge lesson I learned you know all of a sudden you’re trying to borrow money but you get the income ratio upside down because you got all this personal stuff on your personal credit

and that weighs your score down. So that was a huge mistake. And I didn’t have anybody to necessarily tell me that until after the fact. then that, so that was one of my biggest mistakes. And I would tell anybody you want to start investing, get your business set up, get it set up correctly, and make sure you’re efficient in your bookkeeping and record keeping and for tax purposes as well.

Erika (17:35)
Yeah. Yeah. Wow. Michael, as I’m sure you’re already very familiar with networking and building relationships in this industry is so important. What’s one piece of advice you would give to someone looking to build their network?

Michael Daniels (17:51)
have a diverse fear. and what I mean by that is, ⁓ you may want to have two or three contractors you work with two or three loan offices you work with one or two real estate brokers you work with and make sure that you understand pricing, ⁓ and that everything is not always going to be the same pricing across the board. So, ⁓ not only

dealing with individuals, but different sources in order to get different things. So if you want to go to, let’s say ⁓ a place that sells ⁓ a Hardy board or vinyl siding or anything like that, diversify that too. Make sure you have more than one source just in case one is not available and you still got somewhere else to go. So your networking matters among individuals, but it also ⁓ matters among different businesses as well. You want to build a networking

with individuals, but a network of businesses that you deal with. So it’s kind of, goes hand in hand. And don’t be like me and be shy and start being a recluse. It’s good to get out and meet different people that does the same thing. And one thing I have learned is you never ever want to be in the room where you’re the smartest person in the room. You in the wrong room at that point. You want to make sure you can learn something from the people in the room with you.

Erika (18:57)
Yeah.

Yeah, was there a particular relationship or networking group that was a game changer for you?

Michael Daniels (19:25)
Yes, there was a gentleman that I first met when I got into ⁓ investing and you know, I had I went to him and just told him hey, you know, I see your I see your name everywhere and Can I learn real estate from you and he took me on his wing and started showing me? Different things, know showing me how to structure deals Showing me what banks to go to to get these which particular loan

how to do owner financing at the time, the structure deals. So yeah, he gave me a huge advantage just getting into it.

Erika (20:01)
That’s awesome. ⁓ look where you are today.

Michael Daniels (20:02)
Yeah.

Yeah, and I was a complete stranger. yeah, yeah. And I tell people there’s never a ⁓ question that shouldn’t be asked because maybe even if I don’t know the answer, that’s actually a good thing. So that way I can learn something too in the process.

Erika (20:21)
Yeah, yeah, I love that. Michael, before we wrap up, if someone listening wants to connect with you, collaborate, learn more about what you’re doing, what’s the best way for them to reach you?

Michael Daniels (20:33)
Reach me by phone. I’d call me You want me to get my number out of you gonna do it? Okay. Yeah, call me my numbers are four zero four five zero three seven one four eight seven days a week Six a.m. To usually around midnight to 1 a.m. Every single day. So I’m always available It’s a simple this pick up the phone if you want to text ahead of time and say you’re gonna call me. That’s fine

But you know, a phone call is still the way to get the most direct information.

Erika (21:05)
Awesome. Michael, thanks for being on the day sharing your story and insights.

Michael Daniels (21:09)
Yes, ma’am. Thank you for having me.

Erika (21:11)
for everyone tuning in. If you got value from this conversation, make sure that you’re subscribed to the Real Estate Pro Show. We’ve got more episodes coming up with operators like Michael who are building impressive businesses in the real estate world. We’ll see you on the next episode.