Will Pritchett is a full-time firefighter and real estate investor with 8 years of real estate investing experience. He has a portfolio of 18 rentals, private lending, and a couple flips a year. His wife was a teacher but now runs their real estate portfolio full time and they both believe if a teacher and firefighter can do this, that anyone can. They started this journey into investing because they wanted to supplement their retirement and help for future college tuition however they quickly found out they can use this to change their lifestyle.
Will Pritchett Real Estate Background:
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“The power of private lending is what changed our business and accelerated it dramatically” – Will Pritchett
Theo Hicks: Hello best listeners and welcome to the Best Real Estate Investing Advice Ever show. I’m Theo Hicks and today we’ll be speaking with Will Pritchett. Will, how are you doing today?
Will Pritchett: I’m great. Thank you, Theo.
Theo Hicks: It’s good to hear, and I’m looking forward to our conversation. Before we get into that, a little bit about Will. He’s a full-time firefighter and a real estate investor. He’s eight years of real estate investing experience. He has a portfolio that consists of 18 rentals. He’s also done private lending and does a couple of flips per year. He’s based in San Antonio, Texas and you can say hi to him at his website https://www.homeagainsa.com/blog/.
So, Will, do you mind telling us a little bit more about your background and what you’re focused on today?
Will Pritchett: Yeah, Theo. I’m a full-time firefighter, as you mentioned, and my wife was a full-time high school administrator. We decided to try rental properties as a supplement to our retirement and to help pay for kids’ college. We have two kids. And after a couple of years of doing it kind of the old fashioned way, scraping together down payments, we decided that we could change our lifestyle and my wife might be able to stay home. After proving the process, we learned about the BRRR strategy and using private money, and it was a complete game-changer.
My wife quit her job about three years ago. She loved her job, but she was away a lot of hours from home. Now she’s with the kids and I, and she runs our business day to day from home. Real estate has changed our lives, so we spend a lot of our time sharing what we’ve learned with other friends and acquaintances to try to help them get started, because we feel if a firefighter and a teacher can do this, anyone can do this. And it’s very powerful. It’s been life-changing to us. We’re on the road right now, about a month of travel this summer in the continental US, with our kids, just exploring the country and it’s changed our lives.
So we’re currently looking for more single families and multifamily properties. We are doing a little bit of private lending. We’re teaching some classes through the brokerage that my wife has her license with, and just continuing to grow the portfolio in whichever direction that might be. This year, we attended The Best Ever Conference and learned a lot about syndications, and that’s definitely on the table for us now. We started with single-family because it was accessible and it was a way for us to get our foot in the door. We did a net worth calculation one day and realized that we had become accredited investors, almost by accident. And that was a powerful moment. And we realized we were able to invest in some of these syndications and so forth. So single-family houses have gotten us started and we’d just like to share what we’ve learned with other people.
Theo Hicks: So those 18 properties – are those are all single-family rentals?
Will Pritchett: All except one. We have one with an accessory dwelling unit in the back. But the rest are all single families in San Antonio.
Theo Hicks: Are you a private money investor yourself, or are you raising money from other investors for these deals?
Will Pritchett: Both. It was really neat when we learned about private money. We attended a conference and we were asked to speak on the BRRR strategy, and before it was over, people had come to us, wanting to lend to us, if we ever needed a lender. We already had some private lenders, but we saw the power of private lending. So they became private lenders of ours, and then later they needed private lending and we lent some IRA money back to them. So we’ve been on both sides of the transaction now. We were often the borrower and we’re just beginning to dabble in the lending side. But the power of private lending is what changed our business, and just accelerated it dramatically.
Theo Hicks: Sure, so you had mentioned how you found this private money… Do you mind walking us through how these deals are structured? Maybe you could tell us by giving us an example of the first deal that you did with a private lender.
Will Pritchett: Sure. So the way we attracted private money originally was completely by accident. We were doing this the old fashioned way. We had turned my bachelor pad into a rental to try it out, and it was way better than everyone had told us about the horror stories of rentals. We had a great tenant, and we saved for down payments, but we saw it can be a slow growth.
So after two more rentals that we bought the old-fashioned way, one of which—the first one we bought needed paint and baseboards, I think… And we were pretty sure we deserved an HGTV show. We were overwhelmed and we thought we’d done this major renovation. Since then we’ve been complete gut rehabs. But starting out, that was pretty intimidating. But we talked with enthusiasm about what we were doing with people; we just thought it was powerful. And some friends from church mentioned that they had some money they’d love to invest if we ever had a deal we wanted to partner on.
So I read up on private lending and presented to them a 10% interest-only arrangement. And because my confidence wasn’t that high, I wanted to borrow less than I needed to give them more confidence, or lower loan to value. So we borrowed less than the purchase price and used our savings to pay for the renovations and part of the purchase price.
After that first deal, those lenders have come back repeatedly, and they always get first dibs on our projects because they were there and took a risk on us. Now, they’ll fund purchase price and renovation altogether and they don’t ask questions. So the private relationship has been great, but they’re really investing in us more than they are the property. So we saw the value there.
These other investors that I mentioned at a conference reached out to us and offered to lend, and we used their money when our primary lenders money was tied up into other deals and we needed a third lender, so we used their money. And they have been the recipient of two loans from us, from our IRA. So learning how to lend and how to teach people that they can lend their IRA money is really powerful. For those people that are listening and looking for private money, don’t ever assume you know who has money. A lot of our friends, they don’t fit maybe what we might picture as someone with a lot of money, but they have money and they’re interested in investing.
So the last two deals we have funded have been from my wife’s IRA. So all of those gains are coming back into your IRA and treated like gains from any other source of investment, whether it be mutual funds or other investments in an IRA. So that was extremely powerful to start, to build that account. So all of our lending has been out of IRA. Some of our borrowing has been from IRAs and some has been from people’s cash they had on hand.
Did that answer the question you’re asking, Theo?
Theo Hicks: 100%. Just a quick follow up question though. So you are offering a 10% interest only. Is that one year term? Does that expire once the deal is sold? What’s the term on that? When do they get their money back?
Will Pritchett: Yeah, great question. And I’ve got some articles on my blog about this for the ones who want to dig deeper into it. But basically, we’ll ask for a year term… And I try to be real upfront with our lenders, because we want a great relationship. We want them to know what they’re getting into, and I want them to feel that their investment is as safe as any investment they can make, which I believe it is.
So a year term, amd we’ll tell them that we’re probably going to refinance them in about seven months. And the reason for that is if you do the BRRR strategy and refinance with a conventional lender, most of them want you to season that loan or hold the property for six months before you refinance. So in six to seven months, I’ll be refinancing and paying off that lender, but that year gives me some wiggle room. I like to have multiple exit strategies. So if a BRRR doesn’t work, which is a rental, we could flip it and sell it and then pay them off at the end. Most of our lenders, we pay them monthly, simple interest, 10% interest, and we pay the principal at the time of refi, or if we were to sell the property, we’ll pay the principal at that time.
We also include a three-month prepayment penalty on ourselves. That kind of sweetens the deal. In case someone came and bought the house a month later, we want the investor or the lender to get at least three months worth of interest just for their hassle factor. So anything you can do to keep this investment that they’re going to want to come back and do more of, is a great thing. And it’s amazing how you only need a couple of lenders if you’re recycling that same money. And our experience after an investor gets their money back, they want to come back and lend again.
Theo Hicks: How do you officially make these partnerships? Is it the contract that you created yourself, do you download it offline, do you have a lawyer? How does that work?
Will Pritchett: That’s a good question. So early on, I was overwhelmed when I started learning about real estate, about all these terms… And then I realized, there’s professionals that do these things every day, and let’s just lean on them. So what we do is we have a great attorney at our title company, and he writes up a note and all the legal paperwork, and they are a debt partner. The lender is strictly a debt partner. They don’t have any say in how we manage the rehab or what we do to the property. All the terms are written out and agreed upon… And that has worked great for us. We’ve never had to rely on the legal documents, but it’s been a great system for us. It’s very inexpensive to have them write up these documents. And we do all of our closings at the same company, so they’ve become a team member, if you will, of ours.
Theo Hicks: How much do they charge you for these contracts, if you don’t mind?
Will Pritchett: I want to say it’s about $300 to $350. It’s pretty negligible, in my opinion.
Theo Hicks: So in effect, except for those first deals, these are no money out of your pocket, right?
Will Pritchett: You’re right. So we divide them into perfect BRRRs and imperfect BRRRs. And we have several that we did leave a little bit of capital in, a little bit of cash in… But none of that money came from our pockets. It either came from a flip we did, or the business — after the first three rentals, we have not put a penny of our own W-2 income into this business. It’s all been reinvested.
So an imperfect BRRRs is where you don’t get all of your capital back. If I leave $5,000 or $10,000 in the property, it’s a heck of a lot better to me than leaving $35,000 or $40,000 in it. And on the best cases, we have gotten all of our money back. In the recent market, it’s been tougher and tougher to do a BRRR where we get every penny back, but it does still happen.
Theo Hicks: So for that first deal that you had a private lender on with an individual from your church, how much did they loan you?
Will Pritchett: It’s about $75,000 or $70,000 if my memory serves, and they had done some other investing and much higher risk investments that didn’t pan out. And we presented them kind of a deal deck I guess you would say on this particular deal; photos, estimate ARV. After that first deal – it was so formal and we were all kind of nervous, I think – they started to trust what we were doing so much that we would just text them an address and an amount, and they would wire the funds. It really became that easy.
I think that all comes back to your reputation and doing exactly what you’re going to say, and considering the other person’s perspective in every transaction, whether it’s a purchase or a loan. If my lender is happy at the end of the day, they’re going to come back and lend to us again. So there again, you don’t need that many lenders if you’re doing one or two deals at a time.
Theo Hicks: How many deals had you done yourself before you had this individual invest?
Will Pritchett: We had one house that we already owned, that was kind of my bachelor pad. And then we bought two more where we scraped together every penny. I was working overtime, and as a firefighter, overtime means you’re gone from home three full 24-hour periods out of four. So I was away from my young kids way too much, but I was scraping together every penny to put towards the down payment for this renovation. And it was exciting but it was also been discouraging, because we thought we were going to grow pretty slowly, and that’s where that private money was like turning on a faucet or something. Our growth was one property every couple years, and then in those last four years, we’ve done most of our growing. And it was a game-changer. So I can’t emphasize the importance of private money enough in our business.
Theo Hicks: Is your plan to ultimately follow your wife by quitting your job and doing this full time?
Will Pritchett: That’s a good question. Theo, I love being a firefighter. A lot of days I wake up and think I get to have every little kid’s dream. And it does allow some flexibility. Like I mentioned, we were on the road for about a month this summer; I work for a great department, and I’m very proud of my profession. So I’m not itching to leave my profession, but I definitely want to have that option. I don’t think I’m quite there financially yet. And even when I am there financially, I don’t know if I’ll take the leap. But I think it’s great to have the option. I think that’s what I’m after more than anything. It’s to know that I have that freedom should I need it or want it at some point in time. But I still love my job, and I still love real estate investing, so I can have the best of both worlds.
Theo Hicks: What is your best real estate investing advice ever?
Will Pritchett: It’s cliché to get started, but I’ve listened to podcasts and read books, and I’m a major consumer of education… But I think my wife has balanced me in that she’s an action taker. So I might still be reading books and not taking action if it wasn’t for her. You have to have both. And if it was just her, we might have made some investments we shouldn’t have made, so I think I’ve balanced her, too. But I think you have to get started.
When we were doing that first deal and we thought we were Chip and Joanna Gaines, and we thought “We might lose a little money…”, we asked my 92-year-old grandmother at the time, “What happens if we lose money?” And she says, “It’s just tuition.” You pay tuition to go to school to learn, and if you lose a little money, you won’t make that mistake, again. It’s just tuition.
I would say take action. There’s certain lessons you can’t learn until you do something. As much as you read, try to learn online and listen to things. You’ve got to take action, and if you do lose money, it’s just tuition, and keep going.
The only thing I would say is get started and take action.
Theo Hicks: Alright, Will, are you ready for the best ever lightning round?
Will Pritchett: I am.
Theo Hicks: Alright. First, a quick word from our sponsor.
Theo Hicks: Okay, what is the best ever book you’ve recently read?
Will Pritchett: The best ever recent book was the Go-Giver. And it’s almost a parable type. It’s about the value of just giving other people what they want. And I have found that to be so valuable. When we teach these classes for free and just give out information, we write this blog to share what we’ve learned, good things happen. And that’s basically the synopsis of the book, The Go-Giver, but I totally recommend it. It’s not about real estate investing as much as it is about a business principle that I believe in.
Theo Hicks: If your business were to collapse today, what would you do next?
Will Pritchett: I would start right over. I had a good friend, we were growing and growing and, I was like, “What if we’re going too fast? What is going to happen?” And he’s like, “How long did it take you to build this?” And I told him, and he said, “Do you think with all you’ve learned you could do it faster next time?” And I thought, “Absolutely.”
So I would start over with exact same model. Once we learned about private money, it didn’t take much of our own capital, and we would grow faster this time. And I would lean on those relationships. Our business is based on relationships and reputation. I would lean on those reputation and relationships that we’ve fostered over these years.
Theo Hicks: What’s the best ever deal you’ve done?
Will Pritchett: The best ever deal I’ve done, I like to call it “the midnight infomercial”, because one day if I have a cheesy – they don’t sell DVDs anymore, I guess – commercial in the middle of night, it would be this house.
We were renovating a house on the street and we always knock on the neighbor’s doors. One of the neighbors said they were interested in selling, but their house was pristine; it wasn’t a distressed house. And I looked at it and I advised them they probably should list it with a realtor. They were retirement age. And I think it’s always good practice to give people options, and sometimes I’m the best one and sometimes I’m not, but my offer was about 70 cents on the dollar. And I didn’t hear from them for a while, and assumed it was a done deal, they sold it to a realtor. And then they called me back and said they’d like to sell to me. And I said, “Well, you remember, my price was pretty low, and I told you you could sell it as it is, or quite a bit more.” And they said they understood that, but they wanted to stay in the house. They wanted to rent the house back. So they essentially wanted access to their equity, because they had no heirs.
So we gave them a cash offer. Our rehab budget with about $10 for a doorknob. This house was beautiful. They’d lived in it for about 20 years. So they got their access to a big chunk of their equity, and we agreed to not raise rent, other than a percentage based on the property tax increases. That deal was a zero money down deal. We walked away from several hundred dollars. It was a $10 rehab, and they’re still there to this day, and it was a true win-win, including a private money lender who won on that deal. So a win-win-win deal, which we love to do… But it was almost too good to be true. That’s the best deal I think we’ve done to date; the easiest, smoothest. We’re dragging our kids to that house, and they got to know our kids… It was a great deal. I wish I could find more just like it.
Theo Hicks: What is the best ever way you like to give back?
Will Pritchett: We love to teach and share what we’ve learned. As I mentioned, if I’d started it earlier, I’d be so much further ahead. And I talked to people who discouraged real estate investing, I talked to some realtors… They’re great realtors, but they didn’t understand real estate investing, and they kind of discouraged me when I was younger. I didn’t take advice from the right people. I listened to the wrong people, and I want to be a voice that says, “You know what? Being a landlord can be really great.” We have great tenants; our tenants are amazing, and they’ve been our customer, so we treat them right and they treat us right. And if you provide a good product, you can attract good customers.
So we like to teach and share as much as possible. It was in-person, now, a lot of it is online due to the COVID crisis. We’re teaching classes on property management, on private money, showing people how accessible private money can be. We write about it on our blog… So teaching, blogging, sharing as much as possible about this, because we think it can change lives. We know it can change lives. It’s changed our life… So we’re kind of on a soapbox about it. But we want to inspire other people that are on the fence to say, “Hey, give it a try. It’s a lot better than a lot of people will tell you, and it’s changed our lives.”
Theo Hicks: And then lastly, what’s the best ever place to reach you?
Will Pritchett: I would say probably to reach us directly on Facebook @HomeAgainProp. And then our blog is where I post a lot of the things we’re learning. I don’t sell anything. I just post stories about what we’re learning and the deals we’re doing, and that’s https://www.homeagainsa.com/blog/. We’d love to help anybody that’s on the fence or has questions about private money or about how to manage your own properties. We self manage everything, and we like to help people and it’s amazing when we see someone we’ve helped go through and do a deal that’s successful. So please reach out to us.
Theo Hicks: Perfect. Will, thanks for joining us today and telling us your best ever advice and your journey, your tips for raising private money. So we talked about how you were able to raise private money. It really came down to just talking about what you were doing with enthusiasm. So you’d only done two deals before you were able to raise that $75,000 from someone at your church.
You mentioned that on that first deal with them you were kind of nervous. You had a formal presentation, a formal package where you had case studies and things like that, and then after that investment, because you did what you said you were going to do, because you gave them their money back, it got to the point where now you just text them an address and they’ll wire you the funds.
And then you also mentioned that you’re able to raise money from people who actually came up to you at a conference you presented at, and you’ve also invested in their deals as well. You mentioned that these earlier lenders get first dibs on their deals. [unintelligible [00:23:56].08] the purchase price, they fund the purchase price and renovation. So you’re not putting your own money in the deal.
You mentioned more specifics on the structure. So 10% interest only, with a one-year term. Typically, refinance within six to seven months to pay them back. You have multiple exit strategies, so you can flip it and sell it. If you’re unable to do the refinance, you pay them monthly, and then you have a three-month prepayment penalty because you want to make sure you provide them with at least three months of interest.
You said that you have an attorney at a title company that you use for closings that helps you write up the note and all the required paperwork, and it’s about $300 to $350. You mentioned that there’s the perfect BRRRs and then there’s the imperfect BRRRs. And for the imperfect BRRRs, you might put a little bit of money in there.
You also mentioned that when you’re going out there raising money, don’t assume you know who has money and who doesn’t have money, because you never really know who can be your next investor.
And then your best ever advice which is twofold— or actually, it was threefold. Number one was to get started. Number two was to have that balance of education and action. If you have too much education and not enough action, you’re not going to go anywhere, but too much action and not enough education and you’re likely to make a lot mistakes.
And then lastly, your lesson from Grandma, I believe it was. You asked her what happens if we lose money and she’d say, “Well, it’s just tuition.” [unintelligible [00:25:11].29] pay a lot of money, and probably a lot more than what you lose on a real estate deal to go to college in order to get the education that they in turn can turn into money in the future. So Grandma told you to think of real estate the same way that you’re doing these deals, and ideally, you make money or at least breakeven… But if you do lose money because you made a mistake, then the lessons learned from that mistake will help you in the future.
So the lesson there is that – going back to the education versus action balance – some lessons you can really only learn by taking action, and sometimes that means you’re going to lose money.
So, Will, I really appreciate you taking the time to speak with us today, especially on your vacation in a hotel room. Best ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.
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