Using OPM for Deals – Episode 433

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[00:02] Hello, Prosperity Thinkers. Welcome to the podcast. Today, we’re going to be talking about OPM. Stands for Other People’s Money. And you’ve heard of it. This time, we’re going to be speaking about it from that prosperity perspective. Kim, welcome. Thank you, Spencer. Always a joy to get to have a conversation with you that benefits all of the thinkers out there. And I just love our new brand. It just really reminds us to turn our brains on and really look and listen. And one of the things that I’ve always been curious about, especially as it relates to OPM and how much it comes up in conversations, especially if you have real estate investors and or people that are borrowing against their cash value of life insurance, because technically that’s OPM

[00:51] also, since you’re using the insurance company’s money, is other people’s thoughts about it. And so it’s interesting just listening to the way people think about OPM and how it gets used. And some people, especially in the entrepreneurial thinking space, and of course, entrepreneurial thinking doesn’t necessarily mean that you have to own a business, it just means you have to own your own life and your own brain and your own brand and your own capabilities, your responsibilities, etc. But entrepreneurial thinkers are looking for OPM in lots of ways. And it’s not just necessarily even other people’s money in the literal sense of like capital, but it’s other people’s will have to come up with some other definitions of the M word, you know, it’s other people’s ideas

[01:50] and it’s other people’s skill sets. And this is a way to leverage and every single one of us can do something with that. But I’m curious, like, why did you bring up OPM? What was it that struck you when you thought about, what could we help our prosperity thinkers with today? Well, the backstory is, throughout the weeks, as I prepare, I’m always thinking, how can this benefit the audience? And how can this benefit every single person that’s listening? And so, in one of the small intimate groups I’m in, of just a few of us business owners, we were going through some different pieces and one of the guys owns a real estate company. And he did a recent transaction with another guy in our group. And as we were

[02:43] talking through that, we’re looking and he, you know, explained some of the intricacies of the deal. And the getting of money is the easiest part. Whereas people, when they’re starting out, they think that’s the hardest. And what really opens the door and the opportunities is, yes, the OPM, using other people’s money is great, but it’s getting those new connections. It’s the way that they think. And we actually had this conversation, we dived down it, we’re like, well, is getting the money the hard part? And they said, no. And then we started breaking out what are the hardest parts of that deal. And so, that’s why I’m bringing it to the table here. Because I think it’s something useful with what’s happening in the marketplace right

[03:28] now. Well, I just came up with the perfect other definition for the M. Minds. Oh, that is, that’s really good. Other people’s minds. Because you’re absolutely right. And I’ve got quite a few 20 plus year olds in my family right now. So I’m always listening to their conversations about what they’re going to do and what they’re going to work on and what their projects are and what they’re curious about. And you’re absolutely right. The thought is the initial thought is, I need money to do that. But we don’t. We just need other people’s minds, our own first, of course, our creativity, our connections, etc. But then other people’s wisdom and brains and thought processes. Absolutely. You know, let’s, let’s actually

[04:18] take a second to back through different deals of how this works. Because that may be helpful for listeners. So, you know, like in a real estate transaction, if you find something that looks great, and you go and you put in an offer and you tie that up, you now have a period of time that you have to perform your due diligence. And in that period of time, that’s typically where you’ll go and, you know, get the capital for it, you know, have that arranged. That’s where OPM comes in takes place. That’s right. And then buying a business, you know, it’s somewhat similar, where you’ve got this time period. But if we think of business, which is a little bit more complex than buying typical real estate,

[05:02] buying typical real estate, it’s easy. It’s funny because depending on who your OPM is, they care about the mind more than the money. That’s what’s interesting. Yeah, it’s mind, it’s mindset. It’s what do you bring to the deal in terms of creativity, and even experience. So I’ve got one of the kids, so I’ll just use that term loosely, includes nieces, nephews, etc. In our family is doing some small real estate deals and has had happen exactly what you described, where they were able to get a deal under contract, and then they had to go find the money to get the down payment completed. And they could have done it on their own. Like there’s a couple kids involved, and they actually had enough in their cash value of life insurance. Not that all down

[05:56] payments have to come from cash value of life insurance loans, of course, but in our family, they do tend to. And so they had enough, but it would have absolutely stripped them of all liquidity. Like it would have been a max max loan, and that would leave them nothing for the things that can occur when you own real estate, or like, oh my gosh, we’ve closed, and the next day we find that a renter is leaving, or that a roof has a leak, or the myriad of things that happen with real estate, and like you said, with businesses. And I love what’s happening with technology right now, because the act of business, the creation of a business, the owning of a business is way more simple than it used to be,

[06:44] and the definition of a business can be brought down to really elementary levels. And those types of simplicity aspects can enable more people to get involved. And yet again, what is usually the stopping point is the money. So back to this real estate deal, the kids just started asking everybody and cobbled together a little thousand dollar, and this was a small deal, but a little thousand dollar and then a couple larger amounts of money to put together, essentially, what formal real estate people would call a syndicate. And who knows whether they’ll take the steps to get that all formalized, but it was their minds, their mindsets, their determination, their grit, their capabilities, their contacts. That is what put this deal together, not the money.

[07:42] Yes, that’s, I love hearing that. And I would imagine that some of the people, we’ll call them investors and use that term loosely. Some of the investors that put money in on that deal were also putting in their feedback on, hey, maybe here’s a way to look at it or how it should be structured or what’s next. How can I help you? I would imagine that happened. Is that correct? It did. Absolutely. And it was so fun for the kids to expand their reach. And as it relates to money, sometimes, and I think on one of the earlier deals, they did this as well. The existing owner can still be a source for that money and that mindset because that existing owner knows the property, knows the renters, knows the capabilities. And it’s just super cool to watch what a can-do attitude

[08:40] can do. A can-do attitude can do to move things forward and to take baby steps and to not be afraid to try things. And the kids were super close to losing the deal. And, you know, so they would have lost a, I don’t remember how much it was X dollar earnest deposit. Well, that is part of the learning. And so that’s another aspect of money that I think a healthy attitude can create and a healthy mindset, which is the learning is worth the money. And the money is well spent on learning and education and even taking some courses or going to a conference or something like that, because other people’s money is that aspect that might get the deal done. Other people’s minds can contribute to that. But your own initiative, grit, time, sweat equity,

[09:44] and potentially money, like a little bit of education money, if you will, is usually what starts the deal. Oh, yes. So good. You know, as we kind of put a book into this, you know, we should probably cover a few of the OPMs just so that we give ideas to listeners and they know where they could source capital. And then let’s talk about what the window of opportunity kind of see, you know, what we kind of see right now. So you already mentioned using your life insurance policy and having that as a source of OPM. Can you think of a few others? Yes, I know businesses and real estate deals that have been started on credit cards. I don’t necessarily recommend that, but it does exist. Furthermore, as we know, interest rates are so low right now, so that is a very viable option.

[10:39] And if you create an LLC or you buy an off the shelf LLC, you will get offers in the mail. If your own credit is decent, you’ll get offers in the mail from these lending institutions that want to lend you money to start your business. And so that’s another source of other people’s money. And then of course, friends and families, existing owners, both of businesses and real estate neighbors. So one of the things that this crowd did is they went to some of the other owners in the area and said, Hey, wouldn’t you like to keep this local? And if so, we need some help. So their commercial neighbors were a beginning point for them. And then also local banks and of course, you know, the big national banks as well. But again,

[11:37] everybody’s so interested in community building and working locally right now that sometimes you can get a lot more done if you can take a person to the property as an example, or and you know, maybe it’s via zoom or what have you, but really involve somebody that’s nearby to get your project started. Absolutely. You know, you mentioned several pieces there that I think people would forget. And that ties back to having a can do attitude, you know, I don’t know how many people would have thought about going to the neighbors and telling the story of the property right now. We have a marketplace that is so hot, almost almost everywhere across the US that when you’re submitting your offer, you’re handing in a letter and you’re telling

[12:26] your story, you’re convincing the sellers that you are the best fit for that property. So what you just mentioned is is a key in for sure. What are some of the ideas that you have beyond that? So I’ll give you one of the most unique, crazy ideas that I’ve seen recently that I think is just awesome. NFTs. So non fungible tokens that happens to be associated with the blockchain. One I saw another podcast host that said, Hey, I want to try this NFT and raise some capital. So he said, I’m going to sell ad space on my podcast and that is going to be an NFT. And he went and did that and raised quite a bit of money. I have another friend that did that with some artwork. You know, he purchased an NFT for like 12 grand and then he promoted it

[13:20] and then is taking that artwork to have it, you know, obviously raise in value significantly. And then he’s going to donate all of the proceeds to one of our favorite charities. That’s cool things. I love where the blockchain is going. I’m so excited about the potential there. And really, when you think about it, that is also putting things back in what we would call local because though NFTs are digital and worldwide, they usually start with relationships. Absolutely. You know, the other teaser that I said is where we may be in the cycle, like the window of opportunity. And this is my perspective. I’d love to hear yours, but overall money is pretty easy to get right now. And so for a person to try and do a deal right now is great. Rates are really low. Money is easy

[14:19] to get. Do I think it’ll be that way forever? No, because everything’s a cycle. But because money is easy and the deals are easy, this is the most important time to start the relationships now because when money is not easy, it’s the relationships that will pull you through. What do you feel we are? Absolutely. You mentioned story earlier and it’s so valuable to have your own story created in a way that you can tell it quickly and impactfully. So I want to just add another resource. And there’s a lot of them out there, but story brand is one of my favorites. And you can go on their website or grab their book and just learn how to tell story better. And I know I need to get better at that. It’s

[15:08] something that I’m working at all the time. And it’s something that can help you get access to other people’s money. Absolutely. We’ve covered some things that seem very traditional and we’ve covered some things that maybe have created an aha moment for listeners. And that’s what prosperity thinking is. If we would have just checked off the box 123 ABC, how boring. And you’ve opened my mind with these conversations and I would love to hear from the listeners if this episode made an impact as well. The greatest way to do that is to send an email. It’s dedicated for the podcast at hello at prosperity thinkers.com and let us know how you’re using OPM or let us know some of your takeaways from this episode. Does that

[15:58] sound like a great way to get feedback? Yes. Thank you, Spencer. Thank you, listeners, for being on this podcast with us. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.