RG 255 – Taking Banks Out of the Equation w/ Keith Baker

Keith Baker is with us here this week to share his wealth of knowledge on private money lending and real estate investing. Keith is the co-founder of Asset REI, LLC, a company that finances buyers and investors that are neglected or overlooked by the too-big-to-fail banks, providing them with investment opportunities that they would otherwise fail to get. He is also the host of The Private Lending Podcast where he helps listeners achieve financial freedom through alternate investing, truly committed in sharing his knowledge with others to help them succeed.

Keith is no stranger to hard work, having worked in fast-food restaurants, oil fields, construction, and a lot of other jobs in between. He changed the course of his career by taking a leap of faith and converting his 401(k) into a self-directed IRA, which he used to start private lending. For this episode, he shares some valuable tips for listeners who want to do the same and finally start investing in real estate or becoming a private lender themselves.

We talk about how Keith chooses the people he lends to, the type of investors that he learned from when he was just starting out, and the difference between hard money lenders and private money lenders. Having made a lot of mistakes in the past, Keith also shares some of the things that YOU should avoid when starting in this type of business, especially with a self-directed IRA—otherwise known as your retirement funds!

If you’re one of the many people who don’t know where to start with private money lending or real estate investing using your SDIRA, this is an interview you wouldn’t want to miss.

Key Takeaways:

• When trying to learn from other real estate investors, look for people with gray hair.
• Start with a conservative approach to keep yourself safe until you can learn how to invest successfully without getting into danger.
• Trust and transparency are key in real estate relationships.
• In private lending, relationships are more personal.

Be Bold, Be Brave and Go Give Life a Crack!

Keith Baker (00:01):

Anyhow, my criteria, our return of investment return on investment, and then the really big one, no second lean starting out. I don’t care how big the returns can be, stay away first position liens only. And that means that after the county, uh, and the municipalities can take the house back from taxes. It’s the mortgage company that usually has that first, what they call the first lien. And that’s where you want to be. And that’s going to keep yourself, um, that, and then keeping your numbers, your loan to value and your, uh, after paired values and all those things, keeping those accurate and conservative is what’s going to keep you safe and it’s, um, it’s going to help you be there to live to the loan. Another day,

Reed Goossens (00:48):

Welcome to investing in the U S a podcast for real estate investors, business owners, and aspiring entrepreneurs looking to break into the U S market join Reed, as he interviews go getters risk-takers and the best in the business about their journey towards financial freedom and the sheer joy of creating something from

Reed Goossens (01:07):

Nothing. Get eight ladies and gentlemen, and welcome to another cracking edition of investing in the U S podcast from Los Angeles. I’m your host Reed. Goossens good as always every with us on the show. Now, I’m glad that you’ve all tuned into learn from my incredible guests and each and every one of them are the cream of the crop here in the United States. When it comes to real estate, investing, business, investing, and entrepreneurship, each show, I try and tease out their incredible stories of how they have successfully created the businesses here in the U S how they’ve created financial freedom, massive amounts of cashflow, and ultimately create extraordinary lives for themselves and their families life by design. As I like to say, hopefully these guests will inspire all of my cracking listeners, which are you guys to get off the couch and go and take massive amounts of action.

Reed Goossens (01:55):

If these guys can do it. So can you now, as you know, I’m all about sharing the knowledge with my loyal listeners, which is you guys, and there’s absolutely no BS on this show, just straight into the nuts and bolts. Now, if you do like to show the easiest way to give back is to give us a review on iTunes, and you can follow me on Facebook and Twitter by searching at Reed Goossens. You can find the show, every podcast on iTunes, SoundCloud, Stitcher, and Google play, but you can also find these episodes up on my YouTube channel. So head over to Reed goossens.com, click on the video link, and it’ll take you to the video recordings of these podcasts. You can see my ugly mug for the beautiful faces of my guests each and every week. All right, enough of me let’s get cracking and into today’s [inaudible]

Reed Goossens (02:41):

During the show of the pleasure of speaking with Keith Baker. Now, Keith is a private money lending expert, and here’s the host of the private lender podcast, which you can find on iTunes or wherever you podcast cake began in the private lending space with his self-directed IRA and quickly developed an appetite for this type of investing and started his company asset REI, which focuses on providing owner financing to buyers and properties that are neglected and overlooked by the too big to fail banks. Keith also serves on the board of the oldest non-profit real estate investment association in Houston, and he’s super passionate about helping others overcome self-doubt in order to take control of their financial future by starting to invest in real estate, I’m really pumped and excited to have him on the show today to share his incredible wealth of knowledge and experience. All right, enough of me, let’s get him out here, guy, Keith, welcome to the show. I didn’t tell you, mate,

Keith Baker (03:33):

I’m doing, doing really well. Thanks for you for having me on, um, it’s a, it’s an honor to be here, uh, uh, be an interviewed on your show, your years. Uh, investing in the U S is one of the first podcast I started listening to, uh, some time ago. So the honor is all mine. Thank you.

Reed Goossens (03:48):

Well, Mike, thank you so much. Uh, I know I was on your podcast a little while ago, and it’s good to be able to do, do the podcast swap. I love, I love that when we can, you know, meet each other and other folks in guys and gals who are in the podcasting world and just passionate about providing knowledge to it, to everyone. So I know you have that in abundance, but before we get into what you do in the nuts and bolts, let’s rewind the clock. And tell me how you made your first of a dollar as a kid.

Keith Baker (04:13):

Uh, first dollar was probably, um, pulling weeds out of my neighbor’s flower bed. If I can, I can think back. Um, I was fortunate enough to really dislike my parents growing up because their attitude was, if you want something, go get it, do what it takes to go get it. Um, and you know, as a kid, I hated it. And now as an adult, I’m so grateful that they did that. Um, but both sides of my family come from a very entrepreneurial, um, space. Um, my mother, um, granddaughter daughter sharecroppers, actually, who, uh, owned a broom factory, made brooms by hand and then later a grocery store. And then on my dad’s side, a, um, my grandfather, uh, fell in love with medicine when he was 10 years old and decided he was gonna be a doctor and started his own clinic and then own know it was co-owner of the hospital and small town, Oklahoma. So there’s always kind of been that with me in that background. And then it just, you know, typical suburban kid, mowing grass, taking care of plants and dogs while people are on vacation and then really got entrepreneurial and started buying bubble gum from the sample wholesale club or Costco taking it to school and selling it for a nickel, a piece without the teachers or principals finding out. So that’s, um, in a nutshell, how I I’ve always kind of had that little, you know, hustle side of me, I guess

Reed Goossens (05:30):

It’s interesting you bring up the, the pain point of go out and get it right. That I was definitely raised the same way. If you want something, we’re not just going to give it to you, you have to go out and earn it. So I think that is, is super important when raising kids, I don’t have kids personally, but I know as a recipient of that type of attitude, it forced me to be resourceful and learn to roll up the sleeves and not be afraid of getting your hands dirty, which I think is super as a young adult young teenager, when you’re going through puberty. I know I certainly hated my parents from the like, go get a summer job and laboring building pools or doing something that was a, you know, backbreaking work. And you’re like, yeah, now you now know the backbreaking work, get to university, make sure your, you do your studies because you don’t want to be doing that for your job for the rest of your life. So, yeah,

Keith Baker (06:17):

Exactly. And you know, it was, it was an expectation for me to go to college and, uh, you know, I can tell you when I was a, you know, I graduated high school. I, I couldn’t tell you what I wanted to do with my life. I’m 46. I still can’t tell you what I want to do with my life, but I can share, I’ll tell you what I don’t want to do with my life based on those experiences. So yeah, it was, it was very good. And then in my formation, uh, you know, just personal character and business. So

Reed Goossens (06:39):

I love that about you. And, and I guess a lot of people out there that don’t know what to do with their lives, and it’s a little bit of a, um, like a, like a, you know, a balloon in the wind, you know, so to speak and, and, and, but it’s, it’s somewhat poetic because we all are trying to figure it out over time. And, and, and we’re told to do, you know, go to school and go to university and get a job and retire at 65. But if we, as humans way, you know, we have an innate ability to be curious about everything and want more and want to go and, you know, scratch that itch. So I think it is, it is a good trait to have that, you know, you’re constantly looking for what is that next thing? And, and I know you’re really passionate about it, and we will get into that in a little bit, but I want you to, to start by telling the folks about, you know, how you got involved in the private money lending space in and around your self directed IRA. And what was that pain point when you decided, Hey, enough’s enough of my job. I want to start taking control of my life.

Keith Baker (07:36):

Yeah, well, um, uh, you know, not knowing what I wanted to do, I, I followed my heart at university and I studied, uh, German and philosophy. You have a double major, um, which basically meant, I, uh, spent a lot of years preparing to say, would you like fries with that? Because when I got out of school, nobody was hiring, you know, philosophy students or majors. Uh, so I went into construction, um, you know, cause I had already kind of been into that path. So it just kinda made sense. Like that’s the only place I’m really going to make any appreciable money would be in the construction. And then, um, fortunately, uh, the oil field down here in Texas has got, um, got desperate enough. They hired me at Schlumberger and I got to, I got the taste what making real money was about. And, uh, of course there’s a trade off with that.

Keith Baker (08:19):

Yes, I had a beautiful bank account, but my, my lifestyle was, was crap. It was nothing. It was just work, work, work. That was about it. Uh, so when I left the oil field, I came in to the office, I started doing insurance adjusting for the oil field. And I had a couple of old 401ks that were just kind of sitting there and I’m like, I need to do something that was nagging and nagging me like, you know, idle money doesn’t grow. So I need to do something. And I really took an, it I’d always been interested in sort of real estate. Uh, my grandmother told me buy land. They’re not making any more of it. And that’s always stuck in my head. And so the construction background I’ve painted houses in and whatnot. But when I got to the corporate world where, you know, quote unquote, I made it, um, I really got into real estate investing.

Keith Baker (09:03):

So I bought a, a rent house and quickly learned that I’m not a landlord. And I just kind of fumbled my way, um, into private lending because, uh, as an adjuster, we have a bag that’s packed by the door at all times because in the oil field, anything can go boom at any time. And it usually goes booms on a boom on birthdays, anniversaries, Christmas, and new year’s. So you guys gotta be ready to move, um, you know, sort of quickly. And I found that that was a real, a big hindrance in me being an active real estate investor. So the one way I had to sort of be relevant and to provide the community here in Houston with, with anything was, um, you know, I wasn’t a wholesaler. I wasn’t a flipper. I mean, I was, I was flipping, I was house hacking, you know, my flips take a very long time.

Keith Baker (09:48):

I’d like to move in, fix it up, uh, move on. So my first flip was eight years. Um, best investment I ever made, by the way, uh, ROI wise percentage. It was great. Uh, it just took eight years in a flood to get there. Okay. Um, so I fell into this private lending and then, uh, I, so I started, you know, I sought experts out. I, I, I got a self-directed IRA. I went to all the classes that they gave for free. And I, you know, I just stood at the back of the wall. I never took that first step. And I did this for about two or three years. And, and um, one day I, I got fed up. I said, okay, I need a set it and forget it type of investment approach. So I called a hard money lender who walked me through his old process.

Keith Baker (10:29):

I was like, yeah, I’ll be happy to take your money. You can invest in the fund or you can, you know, do the, uh, put your money into the, directly into the deed of trust or the promissory note, however you want to do it. And that was a, and I’ve actually, I was Tom Berry. Um, I’ve actually interviewed him because I, I, I, I credit him with getting me to that point and I’ll never forget that day in my office. I was like, I can do this. And from then on, I sought out, uh, I described, I’m very discriminatory. I look for people with gray hair and lots of experience, right. I don’t care what color their skin is, but they want, I got to have gray hair, lots of experience, and sought those people out and began lending and taking that leap of faith from the free classes at the a self-directed IRA custodians office to, okay.

Keith Baker (11:13):

Uh, my deal was, I’m going to loan to you at a very reasonable percentage, no points, 8% interest, six months, but you’re going to take my hand and you’re going to walk me through every aspect of this investment vehicle that you’re doing. And I did that with enough, uh, older fellows and found some younger guys and ladies that, um, were, were quite successful. And, um, next thing, you know, people are like, we’ll ask Keith, he knows about private money and, you know, ask him, ask him. And, uh, of course the bad thing with that is everyone thinks that they hear private money. They think you’re a broker or a hard money lender. And no, it’s my money. It’s my retirement. Right. It’s and I’ll use another fee. I’m not using taking someone else’s money. This is my money that I’m, you know, investing, um, with other investors.

Keith Baker (11:52):

So, uh, that’s, that’s how I got into this, um, this space. And the thing that, the thing I loved about it was I could, I could be private lender now, look, I’m not going to make the $50,000 wholesaler fee. Right. You know, those pie in the sky, things that some people actually do, but, uh, you can’t count on as an investor, but I get nice, consistent money every month. I would say the mailbox, but it goes back into my IRA at the custodian, but I get an email and there it is, boom, the payments are there. Uh, I kept me relevant Kemi in the game, got me known as a lender. And then people started asking me to speak on it and my, my experience and, you know, what, what, what I suggest people, um, avoid, which is pretty much everything I had done up until that point, because I did it wrong.

Keith Baker (12:35):

I got lucky. So, um, you know, private lending allowed me to keep my day job, keep, uh, my, my medical insurance for my family. Uh, and, uh, but I can still stay relevant in, uh, in my community and active as well. So, and that led to my partner and I forming asset REI. So it was just this kind of nice little, um, way. I just fumbled. Like I said, that balloon in there, I just kind of followed my way, kept trying to take steps into, you know, even if it was the wrong direction, just keep moving forward. And now here I am.

Reed Goossens (13:04):

Cool, man. Well, I think it’s so important that, that you’re able to find something that resonates with you and you can take it as your own and then make it your own in the way that people then look at you as a key person of influence. So stumbling into the space of private money lending using a self directed IRA is enabled you to be that thought leader and within your little community that you serve. And I think that’s really important and it’s a good reflection of where you come from because it shows that people do value your opinion. And all you did was just ask enough people with gray hair to see how the hell do you get involved with it and use your own money, um, to start investing. And, and it’s just a great little white to start for those people out there who are listening, who don’t know how to get started in real estate, investing, using a self-directed IRA at your company and do private money lending and learning along the way. So you mentioned before Keith, some of the, the failures, what, what sort of advice do you have for people getting started in the private money lending world, particularly when it comes to your self-directed IRA?

Keith Baker (14:09):

All right. So this is, and this is where a lot of people have, you know, we, and I had a, to that, that fear, that leap, uh, it, it it’s, you know, this is your retirement, right? So you want to make sure that, you know, the first, the first lesson or the first pillar of private lending is, is ROI return of investment. So whether it’s 20,000, a hundred thousand or a million dollars, whatever you’re lending out to whatever project, your number one priority is to get that amount back. Then the second priority is, okay, how much interest, you know, what was my return on that investment? Um, so it, you know, I come from a very conservative place of protection and, and to, to use kind of a, uh, something that’s in the, uh, in, in our vernacular today, I like to lend and teach people how to land from a place of lack, right?

Keith Baker (14:52):

Like be safe. I mean, you are going to take risks, but if you start with a very conservative, conservative approach that is going to give you, um, the, the repetitions that you need, uh, it’s like going to the gym. If you want to build muscles, you got to lift weights, you got to do pushups. Right, right. So, but you want to do it safely. So the more conservative you are in the beginning, the more loans you’re going to be able to make, and the more opportunities you’re going to be able to have to learn how to do it successfully and what to avoid without getting into that, into that danger. And especially with the self-directed IRA, because custodians can’t give you advice. They can’t tell you I wouldn’t invest in that. Or, oh, I would definitely invest in that, but I can, I’m an independent third party and I can lay out my criteria.

Keith Baker (15:31):

So anyhow, my criteria, our return of investment return on investment. And then the, the really big one, no second lien starting out. I don’t care how big the returns can be, stay away. First position leans only. And that means that after the county, uh, and the municipalities can take the house back from taxes. It’s the mortgage company that usually has that first, what they call the first lien. And that’s where you want to be. And that’s going to keep yourself, um, that, and then keeping your numbers, your loan to value and your, uh, after paired values and all those things, keeping those accurate and conservative is what’s going to keep you safe. And it’s, um, it’s going to help you be there to, to live to loan another day.

Reed Goossens (16:09):

And how are you vetting different sponsors, not sponsored, but guests, guests, different deals and operators who are, you know, I presume you’re pretty much in the fix and flip world, right?

Keith Baker (16:21):

Yeah. A lot of it was, yeah. The beginning. Um, a lot of, um, guys would, or people come to me and hold a loan for, uh, six to 12 months, so they could season it with their commercial lender. Right. Right.

Reed Goossens (16:31):

So, so how do you know to bet on that person and make sure that they have the experience? So they’re not going to excuse my language, it up.

Keith Baker (16:39):

It’s, it’s a very good question. And it’s, it’s one that, uh, that’s why I started with, with old older folks who had been in the community. I started getting active in the community and, and, and quickly finding out, you know, who are the major players, uh, and, and not to people that, not the flash in the pan folks that come in and tell you how to make a million dollars. I’m talking people that haven’t had a W2 since the 1980s or nineties, right. They’ve got 20, 30, 40 years of real estate investing experience in this area. Right. So they know from an investor standpoint, um, what, you know, what’s going on. So I, I just started asking questions, you know, who were people that serve on the board of RIAs or who owned RIAs, um, was sometimes a good start, uh, because I also would also like to do, is I like to loan to people who have a reputational risk to where if they screw me over, I can, all I gotta do is go to one meeting, open my mouth, and I make life very hard for them.

Keith Baker (17:34):

It keeps their skin in the game. And most people, if they’re honest with integrity, they accept that. And they’re like, they’re fine with it. You know? Uh, and those are the types of folks that I want to lend to. Uh, I have loan to people who were at their second Rhea meeting and, you know, found lucked into a flip or whatever. Um, I have loaned to them and I’ve, I’ve made some mistakes, not vetting them properly. Uh, so, you know, and to answer the question, how am I vetting it now? It’s I want to see, I want to see experience, especially as we’re sort of pivoting into, or we have pivoted into uncertain times. Um, I don’t want to alone to a rookie, so to speak. That’s what hard money lenders are for. I, you know, I realized that loaning, um, I’m taking a risk, I may lose money, but I’d rather lose money with somebody who’s been around the block a few times then, um, you know, someone who just walks in and doesn’t know what they don’t know. Right.

Reed Goossens (18:24):

And I think it’s, it’s important to define the difference between private money lending and hard and hard money lending. Right. And, and so do you want to just quickly define the difference between the two? I think you really hit it on the head before, but I just want to make sure that listeners are hearing it again.

Keith Baker (18:39):

I appreciate that. I do draw a very, a big distinction between a private money lender and then the hard money lender slash broker. Uh, let’s, let’s start with hard money lender, conventional hard money lender, or a broker ABRO. They are, they vet the deal. They match the borrower with, uh, the lender and they will use the lenders money to the borrower, take the points, sometimes a spread on the interest rate, but mostly they’re just there to do the points they get paid. The more loans they do, the more points they get, the more profitable their lending business is, but a hard money lender. Broker is truly a third person in a transaction between the lender and a borrower and private lending. I’m using my own money. I’m not using anyone else’s well, okay, starting off, I’m not using anyone else’s money. I’m only using mine.

Keith Baker (19:26):

I stopped myself because I do partner with other people’s IRAs to do deals, but I’m not borrowing their money or I’m not doing, I mean, I am doing a deal with their money, but there they have just as much or a percentage of the skin in the game as I do, whereas the hard money lender, again, he’s just there and there’s nothing wrong with that. I just want, I love hard money lenders. They, they, they have helped a lot of people become old and gray and experienced, you know, that I can lend to them. So there’s definitely, I love that about the hard money lenders and brokers, the private money, it’s my money. It’s, it’s generally retirement. And the relationship that the lender has with the borrower is personal. Right. So I have, um, I could call anyone that I have loans out with right now.

Keith Baker (20:07):

You know, we, uh, they’re on speed dial, right? Um, there’s a personal relationship. Uh, let’s say they’re on my Christmas card list. You know, they got to do a good loan. They got to, you know, honor their loans and they get on my Christmas card list. I’ll put it that way. But the point being is it’s a private relationship and it’s not a commercial relationship, like a lender, hard money lender or a broker would be. And that’s what makes it, uh, private, like for example, uh, if race asks Chris Fanta and my partner, uh, Landon calls me right now and says, here’s the deal? Here’s the numbers I’ll agree to it on the phone because I know and trust them. And I know their business models and how they work. I’m still gonna require all the, the same due diligence, you know, um, that I would, uh, you know, on any other loan, but at least there’s a comfort level.

Keith Baker (20:50):

They know, you know, I’m not going to go out, you know, I’ll do 60% of after repaired value all day long. But when it gets up into 65 and whatnot on a flip, I get nervous. They also know that I’ll do 75%. If we’re doing an owner finance right. Or wrapping an existing or something like that. So they know where I’m comfortable lending. I know their business models and that all kind of insulates me in one way, um, from all the newbies. But, um, it’s also my education. That’s my, it’s my master’s degree. So to speak, dealing with these folks and just learn, it’s trying to soak up as much as I can, not just about real estate, but also, you know, office systems and processes and stuff like that. And just how to deal with your kid. I mean, I’ve learned a lot from real estate investors. Who’ve had some pretty wild kids, so yeah, it’s, um, it’s not just money, but it’s all around

Reed Goossens (21:42):

Such a great way to get started for those people who are just so unsure where to get started in, in, in the world of real estate, investing, taking a 401k, self-serve making it self directed and then investing, and then going ahead and learning as you go. And you great gain that experience by being on the lender side and looking over the shoulder of the person, actually doing the fix and flip or doing the deal. So I think it’s really, really powerful what you do. Tell me how you pivoting in the world of COVID today. And I know we spoke a little bit in the green room about your new mission in and around helping those who have lost their jobs or are struggling to do I talk a little bit about that?

Keith Baker (22:20):

No, absolutely. Yeah. I’ve um, you know, we’ve been speaking for a while and I’m, you know, I’m, I’m trying to put together a course on lending and, um, you know, perfectionism is really creeping in, uh, just another word for procrastination, but nonetheless, I am trying to put something out there to share with the world, but my mission is, uh, and I’m on my family was affected with the COVID layoff and all this. And, uh, you know, everyone’s kind of wondering what are we doing? And I just sat down one day with a bottle of bourbon and figured out what I wanted to do with, uh, the next five years of my life. And, um, it came real clear. I just, out of the 40 million people that got laid off or whatever it was during COVID, I’m going to take a million of them and show them how to be a successful private lender, take banks out of the equation and put some of the power of a wealth preservation and building wealth back in our, in our own hands.

Keith Baker (23:10):

And, um, that’s, my goal is to, is to, is to teach. I’ve always wanted to be a teacher. Um, and, uh, fortunately more people want to learn about real estate and private lending than they do about philosophy or German. I can speak equally on all three, but I’m passionately on all three, but, uh, I’ve really come to this, uh, for a guy who couldn’t even pass his, uh, college algebra or nightcap pass college algebra, but business, uh, math the first time, uh, who doesn’t do numbers, that this is, uh, this is a great space to be in. And that’s, like I said, my mission is to, is to create private lenders because it starts in your local area and this is a great way to get, like, just like me. I stayed relevant. I stayed in front of people, you know, um, for years and sort of became one that expert.

Keith Baker (23:54):

But to, during that time, I met, uh, people and got into other investment opportunities, you know, uh, not just the single family fix and flip, but, you know, into multifamily, I just got into my first can we just closed my first commercial partnership about a month ago that I’m taking part in. So, um, um, and that we pushed, we, we did during COVID, uh, because the, the deals, the terms for us just kept getting sweeter and sweeter, um, uh, w with the bank and whatnot in our, our payback period in our interest only period was extended. So, you know, just being in there, um, and, you know, using an old 401k, uh, and you don’t have to use all of it, but just, you know, use a chunk of it. Uh, you can really, it, it, it, you can get a lot of mileage out of that and you don’t have to start off wholesaling or figuring out what list to mail to, or, you know, do I only do three to a brick house?

Keith Baker (24:42):

You know, that you just find out what you’re comfortable lending, you know, if is it a fix and flippers, is it, you know, maybe, uh, a three-year owner finance, um, my best bet or my, my recommendation, anyone who wants to get into it right now, and doesn’t really know is go find a hard money lender, go, you know, get on the zoom calls now, because we’re not having RIAs face to face, but find out who the hard money lenders are in your area, you probably already know, call up and say, Hey, I’ve got X amount. I’d like to start doing some private lending. You know, are you taking lenders? Can you match it up with somebody? And that way you have a third party whose job it is to vet loans and deals all day long to look at it, right? It doesn’t mean they’re going to, it’s going to be a hundred percent success rate, but it’s going to be a hundred percent better of what a rookie coming in would be.

Keith Baker (25:27):

Right. And you don’t know somebody, who’s got some experience and that’s, um, that’s a very, very powerful, powerful way. And even if I can just tell people to do that, you know, and just start that ball rolling for them and to be, you know, I don’t need all million of them to pay me. I just want a million. I’d like, it don’t get me wrong, but I just want to get, I just want to have it, you know, to the point where people like we don’t need banks and, um, and we can just use each other, you know, and, and, you know, we still vet, we still do our due diligence, but, you know, I don’t care how digital we get deals are still done with handshakes as far as I’m concerned. Yes, no, I completely

Reed Goossens (26:02):

Agree. I think it’s very real estate is inherently mano, a mano, you know, very person to person contact and, uh, it’s people want to touch and feel the deal. People want to touch and feel the sponsor. People want to touch and feel, um, what are you going to do with that money? And ultimately the reason is because as humans, we invest in the person first and foremost, not necessarily the deal like the deal is the cherry on top of that makes sense. Like they want to trust you that you’re going to know what they’re going to do with their money and things go wrong, which they sometimes do. They’ve got your back and they’re willing to dip into their pocket if they have to and, and make you whole. So, uh, I think it’s, it’s super important to emphasize that because it is, it is really important in today’s world, integrity, uh, trust and transparency, and being down to earth and approachable in a way that people can trust you so they can invest in you in the longterm. So, so, um, Keith, what is the biggest piece of advice you can give to someone starting out? Like you just aren’t, you just told them to go find a hard money lender, but how do you know you’re going to deal with the right one? Like, cause it’s not, not all hard money lenders have made the same

Keith Baker (27:02):

Troop you want again, you know, let’s, let’s look for gray hair and not so much in the, in the person, but look for how long has that company been around. Right. So, uh, down here in Houston, we have some that are owned by individuals in the community, and it’s very easy to ask, you know, who’d you use for your flip? What did you like about using them? What did you not like about using them? And anytime I found that the complaint was, you know, they were, they were picky on the inspections before they would release draws. Um, that is, I was like, oh, really? Oh, that’s, that’s terrible for you. Who is that? I want to know who is, you know, who’s has that level of detail in there and their business model, you know, and that’s, and that’s who, so if I’m, let’s say I’m not in Houston, I’m in, you know, wherever.

Keith Baker (27:49):

Uh, I would definitely just ask around and not do like I did and just sit on the back wall for years and years, just get out there. Um, you know, don’t say you’re a private money lenders. You’re looking into it, right? Because if you tell people your private money, they’re going to ask you how much to terms, blah, tell him you want to learn, right. And you want to be, you want to loan to a hard money lender, um, is one way, but the other way is by not people who have used them for the fix and flips or, you know, their acquisition loans and turned them into a permanent financing or whatever, um, look for those people that have been in your community for a good long way. And I always suggest people start off in their backyard. Yes, I could loan in California and Florida and you know, all these places and I will, I’m getting there.

Keith Baker (28:29):

But as, um, you know, since I have taken on this kind of the responsibility of a podcast, I want to make sure I’ve got everything nailed down under Texas law first, before I start, um, you know, telling, telling people how to deal with other, with other states. But there’s plenty of opportunity in your backyard wherever you live, even if you’re in the middle of nowhere, Idaho. Okay. Maybe not nowhere I, to hope, but if you’re near a metroplex, there’s plenty there going to be plenty of hard money lenders and also investors who have used them to, um, to, to query into, you know, find out, um, starting, you know, and the better the question, obviously the better the answer. So, you know, in the beginning, you’re probably, you’re not going to know what to ask, to start the conversation, you know, and then, you know, get a little more in-depth as to, you know, were they easy to work with, you know, did they do as well? My big thing is, did the hard money lender do, as they said they would, you know, they honor the contract, like any borrower and those that do, you know, um, they go up in my esteem and those are the ones that, um, that I work with. Awesome.

Reed Goossens (29:24):

I think the RIAs, which I’ve harped on a lot about on this show and on other people’s shows, there’s so much availability to education here in the United States and take it from me coming from Australia, there ain’t the system set up, like the RIAs are here in the U S across major metroplexes, you will find one. And through what you just said before, being confident in your backyard and having a community around you, that is what the re is do. And I, you know, I’m not being paid by the rear seat, real estate investment association, but that was such a great launching pad for me. And the wealth of knowledge you can find within those rooms is super valuable to then go on and start taking action. And don’t, as you said, don’t be that guy against the back wall, uh, talk to people and get there and start interacting with the people who are in the local community doing deals. And that’s the most important part because, um, without those people surrounding you, you will not know where to start and you will not know how to be successful. So I think really, really good piece of advice. Um, Keith coming into the end of 2020, what are you, what are you focusing on right now?

Keith Baker (30:29):

That’s a very good question. Um, I am, I actually, I’m sort of on the sidelines right now. I’ve, I’ve got some loans that have come due that, um, I’m, I’m, I’m going to cash right now. I, um, you can never time the market, right? Well, back in late March, I, I, I made a hell of a move on the stock market and so far so good. So I I’m waiting to see what happens with this next round of funding at some point, um, the evictions and foreclosures will come back and I’m all, I’m very interested to see where the economy and the market is going to be when that happens. Um, I, you know, I, honestly, I oscillate between everybody just chill out. It’s going to be fine. Uh, one minute and the next minute, um, I do want to run down my street and tell everyone we’re all gonna die.

Keith Baker (31:22):

And I kind of oscillate in between these, these extreme, so, and trying to stay in the middle. Um, I’m going ultra conservative right now. And, um, I’m looking at deals. So I’ve turned to down recently, uh, one because I’m holding money. Uh, but I did look at them and if, if they were good enough, I was going to, I was, I would have loaned on them or lent on them. But when I say good enough is for me in a time of uncertainty, the 70% ARV all in does doesn’t work because in a year from now, we could be looking at, uh, you know, house pricing could be down 15%. Right. So what does that do to that 70% ARV, uh, lowers it down. You know, somebody comes to me with a deal right now, all in, in, you know, under 50%, I’ll look at it.

Keith Baker (32:11):

And, and it, depending on, you know, if it’s a quick flip or, you know, the, the duration of it, uh, if it’s got great numbers, I’ll look at it and consider it all day long. Uh, but if it’s quote unquote to conventional, you know, um, if it’s been put to you this way, if it’s a Daisy chain wholesale deal, don’t even bother calling me that I don’t. Yeah. It’s not gonna, the numbers have got to be just beautiful for me, for me to loan my retirement money out on them right now. Um, you know, if it’s that good of a deal, a hard money lender, we’ll, we’ll, we’ll snug it up. Right, right,

Reed Goossens (32:42):

Right. Right. And I think it’s, it’s, it’s, it’s super important to have those sliding scales in uncertain times. So you can still be active, but it forces these operators and, and deal finders to make sure they’re finding a cracking deal. Right. So it’s super, super important. Um, Keith would come to the end of this show, and I know you’re, as you said, in the meeting, you’re an avid listener. Um, we’re going to dive into the top five investing tips. You’re ready to get into it.

Keith Baker (33:06):

No, cause I, I still don’t know what I’m going to say.

Reed Goossens (33:09):

Well, my let’s start with the first one. What is your daily habit? You practice to keep on track two, we’ll do goals.

Keith Baker (33:15):

I get up. Um, I try to get up every morning. I’m going to put my feet on the floor. I try to say thank you for the day three times with full and full thanks. I find that when I wake up in the morning, um, mentally tend to be on edge, I guess. Um, and my morning is very important. My day is dictated by how my morning goes, so I get up and I think it, uh, the thing of the day, and then I immediately write down, um, my five things I’m grateful for. Uh, I have a little app on the phone. I put down my gratitude. Um, then I, I list my goals, uh, and that they’ve been the same, uh, four goals for, uh, you know, for a while actually launched private lender academy at some point, but that’s not smart specific yet, but those two, um, those two things are the really big thing is just, it’s just to be thankful and grateful.

Keith Baker (34:06):

Um, and then I go get my coffee, um, go outside. I’m old school, I’ve already given my age. I was born in the Atari and in Tinder generation. So I still prefer to read my wall street journal, um, with paper. So I go out to my driveway, I get my paper, have my coffee, and I read the paper and a book for 30 minutes. Uh, at that point, then I can, if my kids are up, I can put out a family fire. Or then at that point I can look at my email and say, okay, how am I going to construct my day? Whereas I’ve found if I wake up looking at emails, it just confuses me. And my productivity goes to crap. And my, I use, I’m usually in a bad mood at the end of the day, which that does bring in the bourbon. So I found that, you know, if I start my day proper, um, and, and it’s with anything, it’s, it’s finances it’s dealing with my kids or families or business, whatever. Um, starting the morning office is such an important thing, a hundred percent.

Reed Goossens (34:59):

And I completely agree. It’s just getting into that habit of waking up and getting straight on the phone or struggling to email is just gives you that sense of anxiety all the time. And then taking that time in the morning to wake up, have a bit of, self-reflection have some time to yourself, reading physical things, not online on the phone, away from screens. And, and again, just being, you know, the, the gratitude and thankfulness around what you have in your life is, is super, super important. Uh, question number two, who is the most influential person in your career to date?

Keith Baker (35:34):

This is going to be interesting. Um, cause it falls two people. Uh, and one, one is the quick, easy answer. My dad, the other one is Neil pier, drummer, lyricist from rush who passed away this January. Hm oh, I guess I’m almost 50. And so I’ve, I’ve looked back on a couple of things and I realized that most of the stress and anxiety in my life is caused by me. Not by outside, there are outside influences, but the stress is definitely caused by me. Um, and you know, so in my career, you know, the work ethic that my dad gave, you know, and, and he was a hard on me. Um, you know, and all the things that a father teaches his son, but the drummer from Russia because, um, oh man, I I’ve talked about this on other shows, but he all three of those musicians, which is bad-ass and I wanted to be a drummer.

Keith Baker (36:22):

And the thing I liked about him was I saw in an interview very early on where he admitted at the height of his career, that he was never a confident player after thousands of concerts, um, headlining thousands of concerts, he said he might be a showman. He might overplay, you know, he might ham it up every now and again behind the kit, but he was never confident. And I’m thinking this guy is the best rock and roll drummer. I mean, look the subjective. I know, but he’s in the top five, arguably for the, you know, the last quarter of the 20th century. And he, he didn’t have confidence every night that he went out there, you know, that he was the best, want to, when it came to fame, he said, uh, he never understood why people wanted to meet their idols because he’s a very shy person and people that come up and gush on him made him embarrassed and a lot of fit folks, how can a rock and roll artists be that way?

Keith Baker (37:18):

But he very much was he’s very private. But the one thing I saw in an interview, he said that was the best that hearkens back to what my dad said growing up was Neil said, I never wanted to be famous. I just wanted to be good. And my dad always told me, he goes, master the subject, your grades will come master the business. The money will come. Right. And so from that, you know, don’t have money as your focus, you know, focus on doing what it is you’re going to do and doing it well. And, um, I mean, I could go on a lot more.

Reed Goossens (37:48):

It sounds, it sounds date night. I love it.

Keith Baker (37:51):

So bill Pierce, the reason why I have a degree in philosophy, you know, a rock drummer who dropped out of high school. Right. Anyway. Yeah. That’s I’ll, let’s let, I’m gonna let that nugget sit there for an audience. Please go check it out. Unfortunately, you can’t see rush live anymore, but, um, they are the greatest band ever lifts, sorry, Beatles. Anyway.

Reed Goossens (38:10):

Oh, you, you bring up a really good point of just like the self doubt and even rock stars have self doubt and you know, your, your, your statement. I never want to be famous. I just want to be good. Is, um, that’s a pretty, pretty powerful stipend. So I’m gonna let that, that, that flow over everyone listening to the show today, uh, question number three is what’s the most influential tool in your business? When I say tool, it could be a piece of software. It could be a hardware, a phone or a diary. What is it

Keith Baker (38:38):

A gut? Listen, we’re learning

Reed Goossens (38:41):

To listen to your gut is it is a completely different,

Keith Baker (38:43):

What is it that the whole course in and of itself? And I think somebody named Jim quick be able to do that or something, but it’s, for me, it’s it all started. Um, that was, uh, I was a collector of, of, um, gadgets, so to speak, right? So if there was a wholesaling calculator available, uh, in Excel or whatever, you know, I used to use all of those things. Uh, as I thought they were the greatest tools because they, they, you know, they made things efficient, they made processes quicker. And then I thought the other people, um, that I learned from were the greatest tools and they are, but at the end of the day, and you know, once anyone who, you know, um, you know, I’ll just, wait, are you in your forties yet? Read? No, I’m not day. You realize that. Yeah, I need glasses and that hair up there on my head’s never coming back.

Keith Baker (39:29):

You, you start to look at things a little different and, um, and it’s so, so true, but now it’s, it’s, um, I still have the same feelings of anxiety and nervousness. When I go look at a deal, as I did back the first time I went with somebody to a house and looked at it, it’s just now, like you said, learning to listen to your gut. It’s, it’s, it’s knowing what is, um, an unfounded fear and what’s something that needs more investigation. And so for me, that has been, say my gut, because my gut is the first thing that puts no or yes. Into my head. Right. So once I make that decision and that’s

Reed Goossens (40:06):

Okay, four you’ve even made that, like it’s already told you and your brand hasn’t been registered yet. Right. So it’s super, super powerful.

Keith Baker (40:16):

You back to your point earlier, my gut instinct tells me what jockey to bet on. Right? So like you said, that the property is, is the icing on the cake or the cherry on top, if it’s a good deal, you know, it’s that jockey, it’s an operator that flipper, you know, that my gut is investing with everything else my brain invest with. Right,

Reed Goossens (40:34):

Right. No, I love it. And then this sort of segues into question number four, which is what has been the biggest failure in New York in one sentence, what has been the biggest failure in your career? What did you learn from that failure?

Keith Baker (40:44):

Not thinking I was worth it, not thinking I had it and it’s something I still fight with is self-doubt, it’s self doubt. We all have it. Look, I’m a, I’m a private money lender. Y Y you know, a few years ago, people were like, do you want to speak? I’m like, why would I want to do that? You know, and people are clamoring, I’ll get on stage, I’ll get on stage. And I was like, what? No, it’s just something that I do, you know? And it wasn’t until I started explaining it to people in the corporate job and whatnot, and then they started taking an interest. And then, you know, the, the, the, the real real estate investors, you know, taking an interest into a Intuit and just doing it. So it, for me, it was, um, knowing that, yeah, I could lose money, but I had to take a leap because I w I T I made a promise to myself and I wasn’t in a cubicle. I actually had an office, but I made a to myself. And I realized that I was like, I could sit here for the next 25 years and ride this out. And that’s the most scared I’ve ever been in my life, you know, just going on cruise control. And so then that was the push, like, okay, I want to try this. I’m going, this is different. It’s new. This is not stocks. It’s not bonds, you know, the

Reed Goossens (41:50):

Fear of regret

Keith Baker (41:52):

Or fear, the fear of regret and everything. So I just, I, you know what, I, I’ve got to take a leap and, um, you know, I just finally pushed myself, you know, I didn’t bet the farm, you know, I didn’t bet all my money, but I bet a bit more than I should have. I can say, I can tell you that, but yeah, I say, bet, it’s not betting if you do, if you do it right. It’s not betting, it’s not a gambling, but that’s, I use the betting analogy with the jockey and the horse. Yeah, sure.

Reed Goossens (42:16):

No. Understood. And I think it’s, it’s also important to realize the self doubt comes from lack of self-worth and knowing that you have something, you are standing on a mountain of value too, to provide value to others. And thus people are asking to come on stage and speak, and that would put you outside your comfort zone. And so I think I can completely hear he, you and being there when people do that, but it’s also then nearly a drug, because you realize with teaching others, you can become more knowledgeable in your craft and thus continue to snowball down on this knowledge, train and, and become more self-aware and become more grounded and, and, and fight the demons within the old mind in order to be more and more successful. And I think that is, it just, it’s a Pandora’s box. Once you start, uh, unraveling it. And, uh, it’s, it’s an incredible journey. Cause then you start to learn to enjoy the journey, rather than always looking to what’s gonna happen tomorrow. What’s gonna happen in 10 years, you know, you know what I mean? So

Keith Baker (43:13):

I have an analogy. This is like re this is like refurbishing a 200 year old house. You think it’s going to be 150 grand to rehab it. Right. But as soon as you tear into it, what Nope. Hurdle number one, let’s get over that hurdle. Number two has nothing to do with the house. It’s just getting through the hurdles. Right. And, and if you teach it, you learn it twice. Right?

Reed Goossens (43:33):

I love it. Love it. My last question, where can people reach you to continue the conversation they want to be in your sphere? Where are they going?

Keith Baker (43:40):

Private lender, podcast.com is the best place there. You can get, um, a little cheat sheets, amortization tables, if you sign up, um, like you said, the podcast is on iTunes, Google podcast, anywhere, uh, you know, you can listen to a podcast. I believe it’s on, uh, Spotify now. And, um, and I just got to get it confirmed that it’s on, get it on iHeart radio, but, um, also yeah, anywhere you listen and the private lender podcast.com and if you have any questions, uh, you know, I I’m a one man shop. I still answer my own emails about three months late, but send me a, an email at info at private lender, podcast.com. Awesome, bro. Well,

Reed Goossens (44:15):

We’ll look, but a super fun conversation with you. I just want to reflect some of the things that I took away from today’s show. I think the first thing that I took away from today’s show is idle money doesn’t grow. And knowing that you’re, there is idle money sitting in your account somewhere, if you’re in a gig or a corporate gig where you have a 401k, and that can be the stepping stone to getting started in the real estate space, by being a private money lender. I also loved how we defined the difference between hard money and private money lending, because it is your own money. It is your self-directed IRA. It is your retirement money. So you’re going to be pretty bloody frugal with it and understanding what you want to invest in what you don’t want to invest in. And I think at the end of the day, you know, your, your self-awareness, and it seems to be to me after, you know, a couple of times in chatting with you, that you have grown as a human by pushing your barriers, by understanding you are standing on a mountain of value and thus teaching others about the benefits of what you do has helped you grow as a human.

Reed Goossens (45:14):

And I think that’s as an entrepreneur, as an elite and probably as a father. Um, so, so well done, but, uh, in saying that, uh, did I leave anything out?

Keith Baker (45:23):

No. No. Uh, oh, thank you. I mean, we, you know, it’s true. We, we only grow when we’re uncomfortable. Um, and so, you know, learning, learning to be comfortable becoming uncomfortable and staying uncomfortable is something I struggle with, but it, I will say it has, um, it hasn’t paid me financial dividends, but let me just say with mental health, um, and, and everything else and just, you know, overall outlook on life, it pays tremendous dividends. Right. So yeah, no, it’s, it’s, uh, get uncomfortable. I mean, if you’re, if your audience are listening, they they’ve already, you’re already halfway there, you know, just, just by listening to these podcasts. So that’s a good thing. And I, and I’ve liked the, again, the pleasure has been all mine. I’ve really enjoyed this. Um, and yeah, I mean, thanks for, uh, thanks for this interview slot, man. I really do appreciate it.

Reed Goossens (46:09):

Pleasure right back at ya. I want to thank you again for jumping on the show. Enjoy the rest of your week. Remember to wash your hands and we’ll catch up very, very soon.

Keith Baker (46:17):

Sounds good, man. You take care. Well, they have another

Reed Goossens (46:19):

Cracking episode jampacked with some incredible advice from Keith and just about his humbleness and down to worth ability to share his vulnerabilities with us in and around how he’s created his business. And really created something from nothing through his local community, through local res and understanding that he’s really standing on a mountain of value to provide to others so they can learn and having a new mission in the COVID space of trying to help a million people unemployed use their self-directed IRAs in order to become private money lenders. So really, really powerful stuff. If you do have any questions for Keith, make sure you do go check out his podcast. It’s all over iTunes and all the show notes from today’s show will be on my website as well. I want to thank you all again for taking some time out of your day to tune in, to continue to grow your financial life view, because that’s what we’re all about here on this show. And we can do it all again next week. So remember be bold, be brave and go give life a crack.