On today’s episode of Thought Leader Thursday, Matt Theriault speaks to Don Costa, a real estate investing entrepreneur and an author of Flip Talk podcast. Find out how he hit bottom and came back into the real estate business, his wisdom on how to attract potential investors, and why self-esteem is crucial for him.
What You Will Learn About Don Costa – Flip Talk:
- How Don hit bottom and came back into real estate business
- How his business looks today
- Don’s experience on re-starting a business from scratch
- Don’s wisdom on how to attract potential investors
- Why “Fake it till ya make it” is the wrong way
- Why self-esteem is crucial for Don Costa
- What Don’s first deal, after his business crash, looked like
- Why you should run your mouth and tell everybody what you’re doing
- Advantages of building a business on relationships
- The biggest mistake people make in real estate when they are getting started
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Speaker 1: This is Theriault Media.
Don Costa: I had to come to grips with the fact that the one talent I had was identifying a deal, being able to put it together and make money. And I had to get off the sidelines to get back into it or I was always going to be in this survival mode phase, and I did. Long story short, I put it out on Craigslist looking for somebody to partner with me with money, and I got six phone calls. One I ended up meeting with, and the rest is history.
Matt Theriault: Hey, I’m Matt Theriault. Welcome to Real Estate Investing and this is Thought Leader Thursday. Okay, so today I’m joined by a real estate investing entrepreneur. In 2012, he was broke to the point where he had to choose between groceries for the week or the electric bill. And we’re gonna talk about that today. And that year, he mentally hit his lowest point in life and then one day he looked in the mirror and had an honest conversation with himself. “What is it I really want to be doing?” And having had some experience with real estate, he decided to go all in and build a true real estate investment company and then 4.5 years after that day, he looked up [inaudible 00:01:12] that his company had become such a strong force in his market.
So, I invited him on the show today to discuss his climb back. So, please help me welcome to the show, Mr. Don Costa. Don welcome back to the show!
Don: Hey, Thank you for having me on, man.
Matt: Youbet. I guess not welcome back. I was on your show and now so it’s nice to welcome you back to communication, I guess, right?
Don: Absolutely, absolutely.
Matt: Don, before we get into your business and into real estate. What were you doing just prior to hitting this low point? What happened?
Don: So I actually have two lives in real estate, right. I started in 2003 knocking on doors, pre-foreclosure, going house to house, where notice of default and notice of trustee sale. And I got really good at talking people into selling their home. I made a lot of money before the market crash. It went to my head, I was a young guy. I had the BMW and the nice clothes, the fancy office, and thought everything I touched turned to gold. Started a restaurant and nightclub, was working on a sunglass line. You name it, I had my hands in it. As fast as the money was coming in, it was going out.
When the market crashed, it took me down so fast it was ridiculous. I went from my worst month being 30 grand in my pocket. I think my best month at the time was 120 grand in one month I had earned, to basically not being able to go to the grocery store without a calculator. So from about 08 to about 2010 I proceeded to lose everything and fear and anxiety and survival mode kicked in and I wasn’t able to hold it together and I went broke.
So, I had a restaurant and nightclub that I had opened. I focused on fighting for that because it was the last thing I had left to fight for and the summer of 2011 we closed that down finally. After going back and forth fighting with the city over permits, and CUPs, and everything else, it was all kinds of crazy stuff that I’m not going to get into. And I had nothing left to fight for.
I was at my lowest point, playing Russian Roulette with trying to keep the lights on, and the water on, and the kids fed and I had a Saturday where I just felt like I needed to take my family to go do something fun. We hadn’t really done anything fun for a while. Looked at one of my credit cards like the last one that hadn’t been turned off, and I had a $90 available, or it said $90 basically limit, right. And there’s a difference between available and actual balance. So I had an insurance payment that was trying to hit that card and so that money wasn’t really there. I didn’t know that. Took my family to Taco Bell, ordered food, had the humiliation of the card being declined in a packed Taco Bell restaurant. And I had to collect my family and walk out of the restaurant.
Now I’m an entrepreneur, I’ve always been an entrepreneur. I’m sure you relate as an entrepreneur. We have thick skin. We pride ourselves in the arrows bouncing off. I walked out with my head held high thinking I got this no big deal, I’m a hustler. My son, my oldest son at the time, he’s about six, hugged on my hand as we were walking to the car and he said, “Daddy how come the mean guy wouldn’t give us our food?” And that moment, it broke me. I realized in that moment that it wasn’t just about me being a hustler and holding it together, and everything. I was letting my fear and my anxiety rule me. I was failing my family, I was failing my children, I was setting a horrible example. And that’s when I had that mirror moment, where I had to look in the mirror and go “You are failing as a father, you are failing as a husband, you are failing as a person. You are failing yourself. You have to do something to change this.”
I was scared to get back into real estate. It was terrifying because I had lost everything in real estate, in my head right. I had really lost everything because I wasn’t running a real business. But I thought it was real estate. And I had to come to grips with the fact that the one talent I had was identifying a deal, being able to put it together and make money, and I had to get off the sidelines and get back into it, or I was always going to be in this survival mode phase. And I did. And long story short, I put an ad on Craigslist looking for somebody to partner with me with money, and I got six phone calls, one of them I ended up meeting with and the rest is history.
Matt: Wow, well congratulations on your climb back. I can painfully relate.
Don: A lot of people can.
Matt: Yeah. The one thing … I didn’t lose my money in real estate. I was in the music business and when that whole industry started going toward the digital download rather than walking to a store and buying a compact disc … that turned my whole life upside down. And I didn’t have kids thankfully, so I didn’t have to deal with that, I just had to worry about myself, and so I feel for you and I commend you for the strength and the willingness and the fortitude to climb back.
So, Don, what does your business look like today?
Don: So, today I run a real business. I have a 10 person team. We focus on our core competency which is real estate, flipping, rehabbing. My team is made up, I have three lead managers answering phones, I have a dispositions guy, I have two acquisitions people … getting ready to bring on a third. I have two project managers, an office manager, and a transaction coordinator. So we’re very sophisticated in what we do. Were very systematized in what we do, and last year we did 122 projects, 106 of em were rehabs, two of em were wholesales and the rest were hotels – which is the new big thing in the hot market right now.
Don: This year our goal is 200. We haven’t traditionally been wholesalers up until this year. I moved one my old acquisition guys to dispositions and were putting a wholesale model together. Because the only way was going to hit 200 is if we start wholesaling a lot more, and tying up more properties. So that’s the goal. That’s on the radar, and it’s a lot of fun. It’s a good business. I’m actually not even, like I couldn’t tell you what cross street the houses are that were flipping. I don’t even have to see them anymore I have such a phenomenal team. I’m in the office every day because I’m crazy like that, and I like tweaking on my business, but –
Matt: Mm-hmm (affirmative)-
Don: I don’t deal with the properties anymore.
Matt: Right. Got it. So, that’s quite a big difference from 4.5 years ago getting rejected at Taco Bell to what you’ve got going on right now. So, there’s a lot that obviously happened in between then and now.
Matt: Once you had this decision that you were going to start this new investment company, after you were still … I don’t know, maybe the wounds were really fresh from the last one that you had lost. What does that starting point look like? You touched a little bit about it on Craigslist, but what did that … can we just get like a little practical and go into detail of what that actually looked like?
Don: Yeah, I mean I think like anything else even when you’re green, brand new, and you don’t know anything about real estate, you have to have this proof of concept that it works right? And I needed my proof of concept that I could do it again. And I put an ad on Craigslist, I said, “Hey, I’m a flipper, I know rehabbing. I’m looking for a private money partner that can partner with me on deals.” I was looking for a JV partner because I couldn’t make payments or put a down payment. I was looking for somebody that –
Matt: Which part of Craigslist did you post that ad in?
Don: Financial services I think? I don’t remember now. I think it was financial services. But one thing I want to be clear is I said in the post, “You need to be close enough for me to meet you for coffee.” Like I didn’t want some king of some country telling me that my uncle died and there were a million dollars for me, right? That’s not what I was looking for.
Don: I had six phone calls. One of them I ended up meeting with, and it was crazy because this guy was a talker and I was scared. At the time, I didn’t want to go in for the close. I wanted to, but I didn’t. You know the fear right. So, we met and we talked like probably 10 times and he hadn’t committed to funding me, and the last time we met when he committed to funding me, I was sitting there talking to him and I got a text and I looked at the message and my wife was like, “Our water just got shut off.” And, I remember, I can still feel the anxiety. Do I leave and go deal with this right now, or do I close this guy? And I made it a point, I was not leaving this meeting without this guy telling me that he was going to back me in a deal. And I got him to commit to backing me on a deal. And then I went home and because I had been in real estate before I knew how to turn my water back on. So I turned it back on, and I ended up paying the bill anyway but I went home and turned it back on, and half celebrated what I could for the night.
Matt: Got it. Okay, so you met … I don’t know, I think you said maybe five or six people responded to your Craigslist ad right?
Don: Right. Mm-hmm (affirmative)-
Matt: And I want to focus on this because a lot people I think are in this mindset, like how do we raise private money? And this is you raising private money at your lowest point without a whole lot of credibility on your side. So, go through that process of that conversation, or that progression of conversations. What do you think was that happened that guy actually make that investment in you?
Don: You know, the secret to private money is not the deal, and I’ll be straight out to tell anybody. The secret … don’t bring your credibility packet, don’t bring the deal you’re trying to fund right then and there, don’t bring any of that to the table, because honestly, they’re not there to evaluate the deal. How profitable the deal is great, but if they don’t believe you can get it to the finish line, it doesn’t matter what the profitability of the deal is.
Matt: Mm-hmm (affirmative)-
Don: You’re the horse they’re betting on.
Don: And that’s the one thing that in that last meeting I was able to muster up as I was the man for the job, I was gonna to get it done, I was gonna to see it though. No matter what, I was gonna to fight to make sure the project worked.
Matt: Mm-hmm (affirmative)-
Don: And when I was able to communicate that, that’s when he committed to me. And, you know, I learned something at that moment, and I enter every meeting the same way. I always … and this is the way I tell people, when you’re raising private money, go in there with a conversation about what each of your goals are, and see if you’re both on the same page. They’re interviewing you, you’re interviewing them, and you wanna make sure that you’re both on the same page, and you’re goals align. Don’t go in there to pitch your project. Go in there to show them that you’re the horse they can bet on. And if you can do that, you walk in there knowing that you’re both bringing value to the table, that you’re both bringing opportunity to the table, and you’re their equal. You’re not better than them, and they’re not better than you. And you have that conversation, and you show them that you’re the man or woman for the job, you’re gonna get the money every single time.
My close on every meeting is, “Let’s do one and see how it goes, and if we like each other, we’ll do more. Let me look at what I have in the pipeline, and if I see something that fits your criteria, I’ll send it over.” And it didn’t matter if I was desperate to fund the deal tomorrow, or if I didn’t need the money right then and there. I closed it the same way. Because they will sense desperation on you, and that’ll be a turn-off.
Matt: Sure, sure.
Don: So, if I had to close it tomorrow, I’d go back to my desk and I’d wait an hour, and I’d send the email and say, “Oh, you know I noticed this isn’t my pipeline, it fits your criteria, are you interested in funding – we can actually close tomorrow.” So –
Matt: Mm-hmm (affirmative)-
Don: And that’s the way I’ve done it ever since.
Matt: So, there are two schools of thought on that.
Matt: Yeah, there are two schools of thought on that. I actually come from a different school. But, you could actually just finish up that, what you had just said there at the end, was actually … something that I, that’s how I’ve raised private money … is that I’ve had that conversation, and I might not have had a deal – or maybe I did, I just wasn’t gonna share with them right then. But asked how much they wanted for the return, what were their expectations for the return, how much would they have available for that type of investment? And, “Hey if something comes up, I’ll give ya a call. I don’t have anything right now.”
And sometimes it was an hour later when I made that call. So, I get it. So, and again, I just wanna get a little more practical and granular on this, so when you’re having this conversation you have to convince that you’re the jockey to that [inaudible 00:12:29], right? Is it a fake it till ya make it, at that point? What were you thinking about? Fake it till ya make it is a lot easier said than done in that situation.
Don: Fake it till ya make it I think is the wrong way to look at it. Owning your value and knowing what your goals are, and knowing that you’re the man or woman to see it through … even if I gotta learn it, I’m gonna see it through. I’m not there yet, but I’m the person to take you there. It’s, you know, I talked RIA last night, that’s one of the ways I raise private money, is I go talk at [00:13:03], so, and I talk about this because it’s one of the things I learned in my low point of the Taco Bell story, right? My failure point was I needed to own my value, I needed to own who I was, what I was gonna become, what my goals were, and I needed to basically be that person. It’s not fake it, because you can be that person. You may not have the money yet, or the experience yet, but you can still be the person that’s gonna get it to the finish line. And I think it’s just mustering that belief in yourself.
You were in the military, you know how they kinda ship you down and build you back up, and before you get to your point of strength, you’ve gotta believe you can get there. You gotta own who you’re gonna become, and that’s more what I’m talking about.
Don: There are people who will back you, even when you have no experience if they believe that you’re willing to get to that finish line, that you’re willing to fight that battle, that you’re willing to crawl through the mud if you have to, to see that project through. If they see that in you, that heart, there are people that will go on that journey with you, you know?
Matt: Mm-hmm (affirmative)-
No definitely, there definitely are.
Matt: Thanks for sharing that, I think that’s a good point. There’s really only two reasons that people do fail in real estate, is one, they don’t believe real estate actually works –
Matt: Or believe that they themselves aren’t gonna work, so, yeah, you must bring that belief in yourself, I think is key for sure.
So, you have a financial backer, so you know if you go find the deal, then you’ve got someone there that’s gonna back you and support you there. But I imagine there wasn’t a whole lot there left for a marketing budget, or lead generation. So how did you start finding those initial deals?
Don: So, I basically, networking was huge for me. Okay, so, I was telling everyone what I was doing, I run my mouth, I tell everybody I talk to when they ask me, “How do you get started in real estate?”, I was like, “Run your mouth, tell everybody what you’re doing.”
Don: OPM is huge for me, and I’m not talking about the traditional OPM, I’m talking about Other People’s Marketing. So, every [00:14:55] sign I saw I called, every Craigslist post I saw, I called. I introduced myself, this is who I am, if you’re a wholesaler I’m looking for properties. I called, at the time, in 2012 there were still REO agents they were handling all bank REO’s, I was calling them, I was making friends, and I don’t mean I was calling saying, “What are you gonna give me?” I was calling and saying, “How can I add value to you? How can I add value to your business? Can I take you to lunch, can I take you to coffee? Can I build a relationship with you?”
My first deal in 2012, it came from an agent, it was something that had been listed on the MLS, just listed on the MLS. It was an REO … and actually, that agent ended up working for me after that, ’cause we have a little real estate ARM, a few years later we set up, and she came working for us … she brought the deal and she was able to get it closed for me and I used this gentleman’s … as a money partner … and we did the deal.
My split, we did a split, my split was ten grand. We made 20 grand on it, nothing sexy, but I got ten grand, and that money was gone before I got it, but there was proof of concept, and I was back in business.
Matt: That’s awesome. Congrats.
Yeah, I think a lot of people underestimate the power of the relationships that you need to build in real estate to –
Don: Mm-hmm (affirmative)-
Matt: To go far. You know what I mean, you can buy your lead generation, and go fast, but really it’s the relationships that help you go far, right?
Don: Mm-hmm (affirmative)- Absolutely, my business is built on relationships. Networking was huge for me, I didn’t have any money, I didn’t have a choice, and still get deals today from those relationships I built, six years ago. I call em fall in my lap deals, they call me up and they’re like, “This one’s falling out of escrow, you know, if you can make this offer, it’s yours.” I get those kinds of things all the time.
Matt: Mm-hmm (affirmative)-
I think you’re the first person … I just wrapped up a course, on this very thing, ’cause this is the … you and I have very similar stories, this is how I started. I had no marketing budget. So you have to go out and create the relationships, you have to run your mouth, that’s the only other option. You buy your way in, or you earn your way in, right?
Don: Mm-hmm (affirmative)-
Matt: I think you’re the only person that I’ve ever had on this show that actually kind of supported that, ’cause I felt like I was kinda out there all alone, and everyone out there is, you know, supporting or advocating the newest, shiny lead generation activity. Or the system, or the technology. And I was just like, “You guys are getting it all wrong.” It helps, it absolutely helps –
Don: It does.
Matt: But you’re gonna have to do that forever, if you rely on that –
Don: Mm-hmm (affirmative)-
Matt: But if you’re building relationships, you get to rely on that forever, and it pays you back.
Don, that’s why I got you on this show. I knew I liked you when we first started talking. We’re almost out of time, but let me ask you, now that you’ve gone through this process, and you have a podcast of your own, called Flip Talk … right on iTunes, you can check that out there … I don’t know if you are educating, but I would imagine once you reach that level of success, you can’t help but educate in some capacity because people ask you for advice, they ask you for your opinions. What’s the biggest mistake you see people make investing in real estate when they are getting started?
Don: You know, there can be a lot of them. I think that … if I had to really pinpoint it, you know not taking the time to understand the numbers. Getting ahead of themselves. Real estate, when you really think about it, this can be one of the hardest businesses you’re in, if you let your fear and different things get in your way. But, at the same time, the fundamentals are so easy, it’s not complicated, right? The numbers are the numbers. The numbers are the numbers, the ARV is ARV, rehab budget is gonna be the rehab budget, you can get it down if you have relationships, if you’ve been in the business a while you can get those numbers down a little bit, you know. You can’t fudge that ARV, and I see people sometimes trying to square peg round hole. I think really is the mistake at the end of the day. If you get your numbers right, you get your numbers dialed in, and you execute properly, and you plan, and you execute and you get it to the finish line properly, you’re always gonna be successful.
I haven’t lost money on a deal, knock on wood, because the numbers are the numbers. And I don’t deviate from those. Trying to make something, a deal that isn’t a deal, I think is the mistake. And that can happen to people that get excited, and they wanna make something happen, or they get too ahead of themselves, so they’re willing to plug anything in to make it work. That, and letting fear get in their way. Not getting out there and talking to people, not getting out there and taking action. Those are the two things I see really are issues.
So, trying to force a deal, right? Compromising your minimum deal standards, doing a lot of what-ifs, if I can get this, or if I can do that, then it’s gonna be a home run, so let’s just hope and pray that type of thing absolutely, totally agree. And then the fear, right?
Matt: Once you get that first deal under your belt, you look back like, what I afraid of? That wasn’t rocket science, that was no big deal, right? So I couldn’t agree more.
I can always tell when I’m talking to somebody if they’re the real deal or not, and you, Don, you’re the real deal. It was a pleasure to have you on the show. If someone wanted to reach out to you and get in contact with you, learn more about what you do in your business, what would be the best way for them to do that?
Don: Yeah, you can reach out to me [email protected]. I do answer those emails, we have the podcast, like you mentioned, it’s on iTunes, iHeart Radio, Libsyn, it’s everywhere. Actually, I am not selling a course, I’m not, I’m at a point in my business where I don’t have to be here every day, so I’m more in give-back mode. I actually enjoy the podcast and the audience interaction. I love getting those emails from people that say, “I listen to your show, and I was about ready to give up on real estate. Guess what, I just did my first deal! And thanks, thank you.” That means a lot, I’m sure you get those and it’s … that’s better than any dollar anybody can give you.
Don: Change somebody’s life. So, I do get a thrill out of that and enjoy it, so email me, on Facebook a lot, hit me up. I’m real easy to get a hold of.
Alrighty, so yeah! That’s it for today, thanks for tuning in to Epic Real Estate Investing, God bless to your success, I’ll see you next week, on another episode of Thought Leader Thursday. Take care.