In this episode of Tactical Empire, Shawn Rider and Jeff Smith discuss the importance of leveraging debt for financial growth, the nuances of private and hard money lending, and the significance of building strong relationships in finance. They emphasize the need for financial tools and strategies to navigate life's challenges and opportunities effectively, encouraging listeners to take massive action towards their financial goals.
In this episode of The Tactical Empire, hosts Jeff Smith and Shawn Rider discuss strategies for fighting complacency and achieving high performance. They delve into the importance of having a sense of urgency, particularly within their inner circle of men. The conversation shifts to leveraging debt for long-term investments and financial freedom. Jeff reveals his strategies for using different types of debt, including mortgages, commercial loans, lines of credit, and private money, to grow his portfolio. They discuss the importance of building relationships for private money and the differences between private and hard money. The episode concludes with advice on building financial security and wealth through understanding and utilizing leverage. The importance of being a good steward of money and planning for a prosperous future is emphasized.
00:00 Introduction to The Tactical Empire
00:29 Introduction to Shawn Rider
00:34 Life's Puzzle Pieces
01:30 The Importance of Taking Action
02:28 Credit Card Strategies
02:54 Leveraging Debt for Financial Freedom
03:49 Personal Debt Portfolio
06:43 Vehicle Financing Tactics
11:34 Private Money vs. Hard Money
12:49 Building Relationships for Private Money
17:29 Servicing Private Money Debt
23:05 Scaling Your Investment Strategy
25:39 Conclusion and Final Thoughts
203 Full
[00:00:00] How do you find the will to fight back against a world that wants to keep you sedated, averaging, stuck in place? Join us for the tool and strategies you need to create a life of abundance, discipline, and high achievement. This is The Tactical Empire, with Jeff Smith.
Jeff Smith: Welcome to another episode of the Tactical Empire. I am joined by Sean Ryder. How are you, sir?
Shawn Rider: Here we go. Just, piecing the puzzle pieces together. Not literally a puzzle piece, it's interesting, Right when you ask that question, I could go a million different ways, but like right now, just with things going on in life, it's like things always happen and you literally just have to figure out the next thing to do.
And I think that simplifies life and it simplifies some of the previous stress I've had in [00:01:00] other times. When I was younger, I would sulk on sit on things and be a little bit more emotional for long term. But like right now, it's just what information do I need to make an informed decision? What, how many options do I need to get on the table?
And then what do I need to do to pick the right option? And if nothing's in my control, then I just move on. But no, life's good, man. We're just putting the puzzle pieces together with how things are going to look for 2025. We're just trying to execute the plan.
Jeff Smith: Oh yeah. Oh yeah. We're a month down, man, a month down.
I'm doing great. I'm doing great. I'm trying to just make sure that I'm reminding myself constantly that we have to be on the gas. On the gas right now. It's an important very important time to grow and Continue to make moves like you this is the year of like massive fucking action.
Shawn Rider: It's gotta be
Jeff Smith: Yeah
Shawn Rider: It's gotta be whatever that looks like in your life.
And that's what i'm excited about we weren't going to get on this topic, but that's what i'm excited about for like the men I feel like the men [00:02:00] in the inner circle have Had more of a sense of urgency over the past 90 days and we're not 90 days into the year. I'm talking back to like right before the holidays when we started doing annual planning.
I feel like their sense of urgency has been heightened, so to speak going into this year. So it'll be fun to record an episode in six to nine months and talk about some of the progress the men have taken.
Jeff Smith: For sure. For sure. I love seeing it.
Shawn Rider: Yes, sir. All right, brother. We just dropped an episode on personal and business credit card use.
And you could use it for a million different ways, but that episode was definitely more focused on how to utilize credit cards in the short term. I did talk about what I did over the past year with them, but still a year short term. But now let's shift. And again, these episodes aren't about an all encompassing episode on credit cards or.
In regards to this, today's episode and all encompassing episode on higher level [00:03:00] strategies to leverage debt. These episodes are for you and I to tell people how we do it and what we use. Whatever you're comfortable with at this point in the realm of like your financial or investment strategy, what does your debt portfolio look like?
Like what uses. What types of debt are you utilizing to execute your plan
Jeff Smith: man? Ba currently I don't want to lie so I don't know what I have Right now i'm trying to think back to everything. I've got a lot of fucking debt
Shawn Rider: You guys he's just gotta remember what he's got
He just pays the bills
Jeff Smith: That's exactly right. That's why I'm trying to give it some thought for a minute because I don't hear these questions before Sean presents them to me.
I've got millions and millions of dollars worth of debt. Most of it all is centered around mortgages and commercial loans that I've got [00:04:00] on businesses, real estate, holdings, all of that, right? We've got some, I've definitely got life insurance loans out right now because we use infinite banking in the cycle.
This is really just, we're talking about step four of liquidity or step, step three or four of the seven levels of financial freedom. And like really just thinking about how much access you have to capital. And for me. I use it specifically. I try to keep it very simple as much as I'm like, I can't fucking even remember all the loans I have because I do owe millions of dollars of debt.
And but I have leverage on real estate. I use lines of credit occasionally for different things. And I have private money loans on different things. Storage facility has private money on it. The burr property that I just did has private money on it. That should be gone in the next whatever, as soon as I can get insurance on that [00:05:00] house.
And then, so I use predominantly life insurance loans, business lines of credit, and private money. Those are my three overarching holds that I have on a regular basis. I financed my truck because I didn't want to outlay. 100, 000. We financed the RV because it is tax deductible. The interest on it is tax deductible as a second home or whatever.
So I did leverage both of those just because I didn't want to throw out that amount of money, certainly in cash and have it just be gone. It makes no sense to me. So the truck will get me a tax credit because it's over 6, 000 or 8, 000, whatever it is. And then the, like I already mentioned, the interest on the RV is all tax deductible as well, and that's a 20 year note, so it's substantial on the interest side of things, [00:06:00] and I use leverage all the time is the bottom line.
And it's, what's allowed me to grow really fast to, to like the size and scope of portfolio that I have. So if I had to wait to save 10 million to buy all the shit we have, like I'd be dead. And I'd be whatever years old and not have anything and still be saving.
Shawn Rider: You'd be 75 years old and you'd have paid off real estate, but you would have been you would have been living like no one lives to lives like no one lives or however.
Yeah. Yeah. It says it. No, man, I'm going to try not to get too far ahead of ourselves because there's a few fun things there that I want to pull out. So with your vehicles. These are business vehicles or LSD vehicles. Did you put any money down on those
Jeff Smith: the RV I put Laughably seven thousand dollars down on and I won't tell you how much I [00:07:00] can't tell it was a couple hundred grand So like a minimal amount of money And then the truck, I didn't put anything down. Scott Simons shipped it to my house and I, it was just done. I didn't put any money on it.
They just sent me a bill from Wells Fargo.
Shawn Rider: That puts a big smile on my face because we just bought new vehicles through LLCs and I didn't even run this by you. I normally do run some things like this by you, but I put absolutely no money down on those motherfuckers. So on day one, they're underwater because you roll that in, you roll a few warranties and some fees in day one, they're underwater.
But again, they're over 6, 000 pounds. So they are 100 percent fully depreciated. On a business immediately, and then you can run all your car expenses on an Amex on a credit card moving forward and you get all those benefits. We just did that. Yeah, we finance vehicles. We put absolutely zero dollars down on vehicle purchases.
That's [00:08:00] number one. Number two I own a few million dollars worth of debt. Most of that is mortgage debt. Just traditional. You got. You got the commercial loan for the commercial building, then the Airbnbs, one was a second home mortgage, and the other one was a DSCR loan, so a little bit more creative, but still just a loan against real estate, and then with the Burrs, we, I, because I'm the financial partner, I utilized loans and a HELOC on our main house to do the first two properties.
Those have been paid off with the cash out refi. So now those properties are DSCR loaned out. So again, debt back by a mortgage, back by real estate. I have very small, I guess we could call it private money, family, friends, whatever. Nothing crazy there. Just people that had money sitting in a bank earning 0.
[00:09:00] 01 percent and they wanted six to 8 percent over the next little while. So I took that for one of the purchases we made when I had to come out of pocket more than I thought. I have lines of credit open on. Some businesses, I did utilize an equipment loan for the new brick and mortar business. And you're looking at again, six figures, but the payment on that is four figures, right?
So like we, we do have an episode somewhere in the past where we talk about the most, the only thing that really matters about debt is servicing the debt. We don't care what your interest rate is. We don't care about really the terms, but if you're creating a business, can you service the debt?
And can you make more and up and above that? So we're servicing that debt. So people might see the number and be like, oh shit, but the principal amount doesn't matter to me servicing the monthly payment does. And it's being serviced on month one. So that's a good thing. One thing I haven't tapped.
Jeff Smith: Go [00:10:00] ahead. What we're talking about here guys is long term. Debt leverage but more so than the last episode which was like credit card short term debt how do you finance stuff for six to 18 months type thing was last like last episode. How do you get the ball rolling there?
this stuff is like what I think we're talking about what we're describing here is significant investments To move yourself forward meaning like you may go take a line of credit for multiple six figures And the idea would be that you go acquire some sort of asset That produces a multiple of that above and beyond what the payment is to, at the end of the day, you have the asset, the debt paid back, and the cash flow.
And that's what we're targeting here, which is larger, longer term liquidity. That's
Shawn Rider: exactly right. And I want people, if you didn't listen to the last episode on credit cards, go back and listen to it because both of these episodes, even though the credit cards [00:11:00] more short term, like 18 months and less, and this one's more long term years both of these episodes revolve around utilizing the money to build your financial freedom through the seven levels of financial freedom.
We didn't talk about credit cards in terms of like materialistic consumerism in the United States, right? That's not what we're talking about. We're talking about how to utilize your money to buy assets, how to utilize bigger term debt, longer term debt to buy assets as well. So the one thing I want to shift you said about private money, I don't know about you. It's like private money and hard money is used interchangeably, or if you have a distinct difference between those two. So I guess that's a question. Do you view hard money, private money literally as the same thing? It's just two different words. The extension of that is like, when you say you have private money, like, where do you get that private money?
If it's an individual that you have a relationship with, you don't have to use their name, but like just say, Oh, I built a relationship with an individual. But where does your private money come from that you can just be like, Hey, [00:12:00] so and so I have a property. If you have capital available, we can do these terms or whatever, like how, walk us through that for your stuff.
Jeff Smith: Yes, the names are interchangeable. Hard money, private money, whatever. Hard money is usually through an institution where a group of guys like you and me got up and we decided to pool our money. I said, I've got a million bucks. You said, I've got 2 million bucks. I said, let's start a bank. Sure. And we just became lenders.
You have to go through the SCC and jump through some hoops there, but hard money is generally like a brokerage lender in your area. Usually they're local. I say that's why I say in your area, but like they're mostly fixed on short term debt, like 12 to 24 months. And you generally don't know those people, right?
Private money, however, is built through relationship capital, which is like one of the things I spend a lot of my time on building relationships that are strong [00:13:00] and that are mutually beneficial. When the time may work, right? Like I'm friends with a lot of entrepreneurs. I'm friends with a lot of high net worth individuals, and they are like very focused in their specialty, but they know that I invest in real estate or whatever, right?
So if I'm able to come to them and I have something that says, Hey, like I've got a deal for you here in today's environment, you've got to go double digits Four years ago, you didn't even have to go double digits with interest. So like people would salivate over 678 percent four years ago, where now we're in the 10, numbers on some of these returns.
And it depends on a variety of things. First of all, what they're looking for. Second of all, like what kind of deal you have and the risk associated with it? How were you collateralize it? For me, I've been able to put together a pretty standard operating procedure that's super clean. And [00:14:00] so there's not a lot of variability in it because what I'm doing is I'm trying to raise a hundred percent of the capital and, but I back it with real estate.
So my lawyers write up the paperwork that you are the actual owner if I should default on these particular deals, right? So if I don't pay you have an asset that's worth over and above what i'm borrowing from you and so that protects the lenders in a really nice way and so if we just share the storage numbers, I borrowed a million dollars and we got a broker came back with a desktop appraisal on that storage facility last week for us that it's 2.
2 million dollars. If I default and don't pay my lenders on that million dollars, they could go out and sell that storage facility for 1. 2 million dollars tomorrow. They could give a million dollar discount on the storage facility just to get rid of it and get their money back. So they are very protected in that deal, right?
And so I try to do every [00:15:00] one of them like that. I just, I borrowed 108, 000 to do a burr property. And the house appraised for 165, 000. That lender is the actual titled owner on that deed. And so the, their first position. So if they foreclose on me, they just take the keys to 165, 000 property.
They are out 108 right now, but it's obviously backed with something that's worth more than that. So for me, like from an integrity standpoint. I just prefer to do it that way. I don't want to get over leveraged. I don't want to get out over my skis. Like we've seen a bunch of people in the last few years that got a little too into their lifestyle and things like that.
And they started spending other people's money on things that it wasn't intended for. So they'll co mingle funds or use it for other things. And like they are, it's not a good position to be in. [00:16:00] So I keep it super clean. It's very there's very little variability. I keep the money in that particular bank account.
It goes to that particular project. And I also try to do them fast. I try to get my lenders in and out of the transaction quickly so that there's very little stress. So all I'm looking for lending on is the. Is the rehab and the actual asset. And so as soon as I can get it stabilized, like the one I'm talking about for a house, I've had the money, I think 56 days at this point or something.
And he should have it back by day 70. So like I'm trying to turn that money very quickly. That 108, 000 will go back to him within 70 days. And so for me, that builds a lot of trust. I can take my lenders down the road with me because they're like, okay, let's do it again. And cause they're obviously making an interest.
They're making interest on their money as we go to.
Shawn Rider: Like mortgages are pretty straightforward, right? Someone lends you the money and you have your [00:17:00] monthly payment. There's nothing super creative about that. So my next question with the private money is, let's say, whether it's a hundred thousand, five hundred thousand, or a million.
Your standard way of doing it. Is your private money person getting serviced and paid the first month? Do you have that outstanding debt and you're servicing it using cash flows from other areas because you're obviously buying these properties, fixing them up, there's no cash flow coming in from them, and you're not going to refi for.
Three to six months, whatever it may be. So are you servicing them using something else, knowing that you're going to get most likely paid back because you underwrote it that way Hey, I'm going to pay a thousand dollars a month or the person that you have a relationship with, are they foregoing monthly interest and just getting the nut at the end?
Jeff Smith: It's two different ways that we started offering it now, full disclosure. We started saying, hey, we'll pay you if you're looking, it depends on what you're looking for. So if I have a conversation with Sean, Sean could say, hey, I've got money burning a hole in my [00:18:00] pocket. I've got 200 grand. I want to do burrs with you, whatever.
And I say, okay I only do debt. Which means I'm only going to do a transaction like I just described. Some guys do debt and equity. I think that makes it too blurry. People don't really understand. You want to come in and tell me what color the drapes should be and shit like that. And I'm not looking for that type of relationship.
I say, what kind of return do you want? What's acceptable for you, you may say whatever, 10 to 15 percent somewhere in there is what I'm looking for. I say, okay, do you need monthly cash flow or are you fine with deferring until the exit of the project? And you're like, I don't need this money on a regular basis.
And so I'm fine with deferring and it gets you two different interest rates. I may say, okay, you want monthly payments, there's an admin cost to that, our bookkeeper's gotta cut you checks every month, we gotta keep track of that, we gotta make sure you cash them there, there's just a headache to that, and you're I'll offer 10 percent for that, and but if you'll defer to the end, the project is [00:19:00] 12 months, if you'll defer to the end, I'll pay you 14%.
And I'll give you the whole 14 percent at the exit. And so you get a choice there. That's just a flavor of how I've put it together. Literally you can do whatever you want. And like you can't solicit people like on social media and shit like that. Cause then you're getting into some goofy rules, but I mean if you're on social media and you're friends with the person then I guess there's a connection I don't want to get too deep into the like sec Rules, and i'm not trying to get my fucking self in trouble.
I know everybody that's giving me money And I knew them before and There's there is some nuances to it that you can get in trouble depending on the size of deals that you're messing with and stuff Like that and whether they're accredited investors or non accredited that's mostly why I don't do syndications anymore.
Because they're just too complex and complicated for the size of deals that I'm doing, which are like under 5 million, like if you're going to go buy 185 [00:20:00] million apartment complex maybe you could do something like that. I'd rather just go get eight of my friends and JV it. And let everybody have I'd do a debt and equity play on that on something like that, because you'd need 30 million bucks or something like that cash to get it under contract.
And so you'd need some hitters in there that we're dumping some money in and if I brought a million bucks, we still got a long way to go. But if you all split it and you own 14 percent of the property or whatever the breakdown would be. That's a big ass asset and I would still rather do that as a JV play than doing a syndication.
Syndications are they're super complex and complicated and you just deal with a lot of limited partners, which are like the people that invest from like passive positions that have day jobs or whatever. They're super lucrative and fun to do for the GP. Which is the general partner who runs the syndication and who put it [00:21:00] together because all you're doing is going out and presenting to a room full of people and trying to get a thousand people to give you a hundred grand or whatever but you also have to communicate with all those people.
And they are your business partner during the process. And so you've got to keep them pacified throughout the whole thing. So now I'm way off topic, but like we're talking about private money and how to raise it. You definitely start with friends and family, I would say. If that's not your jam, friends and family are off the table, whatever.
Then I look for like strategic partnerships, strategic relationships that may be a good fit. I'm, I run around with a bunch of business owners, like I said, so like those guys are generally sitting on some money that they don't want to lose focus on their primary thing. And so they're like, Hey man, like if I got a hundred grand, if you want to put it into something, and so I can put their money to work and I can get them turn that into 150 by [00:22:00] the end of the year or whatever for them.
And, then everyone's happy. What kind of questions do you have specifically about it? I don't know that I hit what you were trying to get out of me
Shawn Rider: No, you hit what I was aiming for. Because that's I think that's gonna be the next step for me and my partner with the burrs like obviously i'm the financial partner, but I, like I was perfectly fine using our money, but if we can make numbers work by creating a relationship with one to three people that are sitting on six figures and they just are perfectly fine with a percentage and not equity, then I'm at that stage now where I'm going to be comfortable using other people.
So that's really just I probably need a call with me, my partner and you, and just see You know who we can be connected to and what that partnership looks like. Cause I think that's what I'm ready to move faster. And I think we have, I have the money to do that, but I also don't want to be like thinning the capital reserves for myself and my family too.
Like I'm perfectly fine with using other pieces [00:23:00] of money. So I just, I think I'm there. So that I liked hearing what you were, you're saying about that.
Jeff Smith: And the fact of the matter is it's an evolution of Kind of growing in investing and things like that you at some point you will run out of your own fucking money There's just no way around it.
And so usually the evolution is I'm going to do one to five rental properties the first year. Okay. I'm good at that. I get to 20 rental properties in the second year, but then you really understand like the cash crunch that happens in that period of time. Now you're talking about, you've already thrown out four to 6 million, or, you've leveraged four to 6 million.
You've probably thrown out a couple million. And like you realize the limitations to that, but now your company has grown to the point where you've taken some licks, you understand things, you buttoned up some of the systems and processes that the holes come in, and now you want to do 60 next year. And you understand that the reality of financing 60 by [00:24:00] yourself is not, it's just not the way to move.
I was just telling you on one of these fucking episodes if I had to sit around and get 15 million dollars to, to buy 15 million dollars worth of real estate and I had to save it every month by squirreling away in my sweep account from my own income, I, it would take me until I was dead. You can have a pretty good salary.
You still can outrun you, you should leverage it as fast as you can. And as fast as you're capable of cause if you're going to stay in that game, which your partner is going to stay in that game, he should go to 500 or a thousand houses as fast as he can get there. And because you can fix all the holes on the way, but like within the next two years, he should be at two 50 to 500.
He should be and because I've watched the evolution and I've been with him through that evolution of the five house to 20 house to 50 house and this year is gonna be huge for him and next year should be twice what he does this year in volume [00:25:00] and it's just a matter of having the liquidity available to him and so it's not super complicated.
You just got to have. The ability to keep the wheels on it and keep the fucking car on the tracks once things start moving at that velocity. You get the speed wobbles at some points during that journey.
Shawn Rider: Yeah I had a two minute conversation with him earlier today on something else.
And he had mentioned that they're down in Texas and the. The ice people are out and about. And so no one's working on homes this week. And so his projects slow down not to change topics. I like the route that this conversation went, but I do want to pull it around full circle and we can button it up here.
The lesson that we teach the men in the inner circle is you need to have all of these tools. In your toolbox, you need to have the lines of credit open. You need to have the credit cards. You got to have the relationship with [00:26:00] your local bank, the local credit union. You got to have people in your network that are sitting on money.
And we're seeing that unfortunately with some people that didn't have those things lined up. And then, they get in a spot here or there and then no one wants to give them money or whatever it may be, right? Like you got to get these things lined up. You don't know when you're going to need them or use them, but if you got a plan in place, you can pour gasoline on the fire by using OPM, other people's money.
Keep your money in your system, leverage the seven levels of financial freedom, create your own family banking system, and I promise you, you will be happy with the rewards that come to you. I have been from what Jeff taught me, and that's what we're teaching people. Jeff, send the men and people, the ladies, out.
Jeff Smith: No, I love it. It's what we've been harping on the whole time. I think the next two years to four years are the most important years of your life. From a perspective of building your wealth. And I believe that in, [00:27:00] with conviction. And so for you to make as much ground as you need to make, you have to understand finances and you have to understand utilizing leverage.
So don't waste time, utilize leverage, be a great steward of money, keep your word, pay your bills, do all the right things and just keep cycling it through over and over because like it is time to go out and really create some certainty within your financial system for you and your family and your legacy and get yourself the freedom of choice to do whatever you want to do with your life so that you could spend more time with.
The people that are important to you right now and subscribe to us on the YouTube channel send people to the tactical empire community on facebook Let us know if you have any questions. You can always hit shawn and I up on instagram. We answer all our questions on there let me know if we can help you have a kick ass week And all the [00:28:00] prosperity to you and your family