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A Comprehensive Look at Real Estate Investing With J. Martin

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Full transcript here:

Steve Rozenberg: Welcome to another exciting episode of The Mindful Investor podcast. Today we’ve got a good friend of mine and you’re going to love this story. That’s all I’m going to say. I’m going to save it so you can hear the story. First, Alex. Man as always, I feel like I just talked to you yesterday, Maybe I did. But thanks for joining me, my man.

Alex Osenenko: Well this is the podcast episode and those of you who are listening, it’s a real seat at the table with real meaningful conversation about a topic we’re all passionate about, which is real estate investing. But it’s also the human beings that actually went in it and we all get… I feel so privileged to be at the table. And guys, both of you, are obviously experts and you both have your own expertise and fields and this is going to be an amazing show. I am just here to learn and ask questions like a five-year-old. So mindful of that. If the question sounds too simple is because I’m pretty simple, but also it helps our audience kind of connect the dots, I hope.

Steve Rozenberg: Absolutely.

Alex Osenenko: I think that’s the dynamic people are looking in this show.

Steve Rozenberg: Absolutely. And so for those of you watching the show, this does come out every week on iTunes. So if you go to iTunes, The Mindful Investor podcast show. We also have a Facebook group, The mastermynd m.y.n.d, Mastermynd Real Estate Investment Club. There we have investors like me, Jay, all these other people that just talk about what’s going on in the industry and real life situations. So without further ado, I have my good friend J.Martin on the show today. Jay, thanks for joining me today, man.

J. Martin: Thank you for having me. Appreciate it Steve.

Steve Rozenberg: So this will come out later but where in the world are you today? It’s the first question I have.

J. Martin: Believe it or not, I am in the US. I’m actually… It’s funny I think I’m in Sunnyvale actually once we meet up last night and stayed at another investor’s house. So I think I’m in Sunnyvale. They left for work or it can be Santa Clarita, I’m in the Bay.

Alex Osenenko: Oh you’re in the Bay. I’m in Castro Valley, which is East Bay. I can’t afford a real Bay.

Steve Rozenberg: Now, as you’ll hear Jay’s story, you’ll understand why I’m asking that question because this guy prides himself on not having a home and real estate has given him that opportunity to have this ability in life, which is amazing. And Alex, you’re going to get some good takeaways and there’s going to be one major takeaway. I’ll just give you a quick synopsis of how Jay and I met. We met at a networking event. It was a Mastermynd in Maui that Terrell Yarbrough and Brandon Turner from BiggerPockets put on. And we were both there and we got to know each other and got to kind of learn about what he and how he does it and had a real… it was about a week long. I was just a think tank and it was great mixing with Jay and the other people. And I got a lot of respect for him, understanding what he’s gone through in life and more importantly, what he’s done since he had a pivotal turning point and kind of where he’s going in the mental side of it. Because again, anybody could buy real estate and be successful, but to do what this guy has done mentally and make that change is huge. So Jay, thanks so much for being here today, brother.

J. Martin: Thanks. Appreciated Steve.

Alex Osenenko: So lead us in Jay, tell us a little bit of a story. What are you about? Like the high-level and my pen is hovering over the paper so I can’t wait to get in the meet. But we’ve got to meet you first, tell me about Jay.

J. Martin: Yeah, absolutely. For everyone, I think there’s something that leads them into wanting to invest, whether that be real estate or something, right? There’s some motivation behind it, whether it be family, friends, volunteering, travel. There’s something that people want in their life that they’re trying to achieve through this financial needs. So for me, a really pivotal turning point of my life when I was 19 years old, I went to jail for selling cocaine. So I got arrested, I served 80 days on a 120 day sentence in jail.

J. Martin: So almost three months. And to be honest, I got in a fight in jail. It was a really tough situation for me. Ended up in solitary confinement and I’m laying in this tiny cell looking up at the brick walls going like, ” What the fuck? Oh, excuse me, what am I doing?” And looking with my life and I realized, first of all, I need to get my things together. And number two, I was like, ” I know there’s some legal way to make money. There’s a lot of people making good money in the United States outside of illegal things in the drug world.” And so as I was laying there in solitary confinement, I was like, ” You know what, I am going to get out and I’m going to find some way to legally make money and kind of bring my life together.” So for me that was kind of my motivation. I don’t encourage everyone to go to jail to get motivation to invest in real estate.

Alex Osenenko: Well, you do get some time to think between the fights, right?

J. Martin: Tons of time to think and read. But at least for me, that was a huge turning point in my life. And again, the motivation that got me willing to make some sacrifices to further my life in real estate. So I think whatever… I just encourage people to think of that motivation in their life, whatever it may be when they’re going through this process. That’s what it’s all about.

Alex Osenenko: This is what I’m incredibly curious about, Jay. What is the first step? Okay, you get out, the door opens.

Steve Rozenberg: You get out of jail is the first thing I would say.

Alex Osenenko: You get out, [crosstalk] 10 days, 5 days, 2 hours. How do you turn this?

J. Martin: What are you doing next? I’m going to Disneyland.

Alex Osenenko: Yeah.

J. Martin: No. I didn’t go to Disneyland. So basically, I’m getting out, I had a little bit of a tough time finding a place. I was fortunate to have some people in my family were really supportive and I was able to kind of bounce around, stay in different places. One of the huge challenges actually getting out of jail and I think hopefully this helps with anyone who’s had a problem or had to overcome something, is that it seems insurmountable at the time. When I got out of jail, so my thought process basically at the time is shit.

J. Martin: I’m not going to be able to find a place to live, I’m not going to be able to find a job let alone even thinking about investing in real estate at the time. I didn’t know anything about it. It was furthest from my mind. But I didn’t think I was going to be able to get a place and a job. With help from family and friends and this and that, I was able to find places to stay. I started working basically really menial jobs and went back to Community College at the time. Eventually, went back and went to San Francisco State. So I eventually transferred and eventually graduated from San Francisco State.

Alex Osenenko: From San Francisco State? Yeah, me too brother.

J. Martin: Oh, you’re a Gator too.

Alex Osenenko: I’m a Gator. Hey man, that’s great. Wow. I never expected to hear that.

J. Martin: Yeah, I mean that was the kind of process, right? It was really tough getting out and then getting back into school, getting motivated to go do something. And when I graduated, basically ended up in bank regulation for the State of California. So we were going bank to bank during the financial crisis and reviewing their real estate loans. So we saw people get wiped out, lose everything, millions and millions of dollars. And then we got to see the people who were picking up the pieces. And that was my first introduction to real estate. So it was a few years later but that’s kind of how I got my first-

Alex Osenenko: So you put yourself through school?

J. Martin: Yes. So I went back to school and went to San Francisco State. And it turns out actually the person… Maybe a networking story but I went to a class, one of the classes I had there, the teacher actually worked for the State of California. So it was a banking class and he did [inaudible 00:07:58]. And so I’d run into him and I did well in his class and he ended up recruiting me. So again, it’s really tough getting a job with a felony and this and that. Because I had some connection, I can at least go get the interview and then talk about this felony was for this, has nothing to do with this type of job.

Steve Rozenberg: Jay, let me ask you this. I don’t want to get too far down the story and back to when you’re sitting in jail and you’re thinking. You probably went through a lot of mental gymnastics of first probably anger and then maybe thinking it through and then okay, is it my fault? And then going… I’m assuming because many people have these types of situations. What was the moment that you kind of said… At some point, you took responsibility for what’s going on and you were like, “I got to fix this. I got to change this.” Can you just walk through how you mentally did that? Because I think that’s important for people to realize. I’m guessing you were at a point in your life you’re like, ” What am I doing here? How do I get out of this? And I’ve got to do it on my own.” Can you just expand on that a little bit?

J. Martin: Yeah, absolutely. And I agree. I think anytime we face a big challenge, right? We go through the seven stages, or for me, maybe it’s the 20 stages of emotions when I’m in jail. First literally, I was out partying one night. I wake up in the morning with someone banging my door and there’s six police officers or so holding guns over me in the morning, right? Go in and everything’s racing through my mind, what I’ve seen on TV or this or that. I don’t know what jail is like. So a lot of fear I think in the beginning to be honest. For a long part of that, I was really angry and wanted the revenge on the person. Someone ratted me out basically, right?

Steve Rozenberg: Right.

J. Martin: And so I wanted revenge a lot of the time. And it probably took me about maybe a month and a half in jail where I was like, ” You know what, I think there’s some saying like, if you’re going out for revenge dig two graves. One for that person, one for yourself.”

Steve Rozenberg: Wow, that’s sad.

J. Martin: It’s not worth chasing those kinds of things. And I was reading a book every single day in jail, working out three hours a day because I had nothing else to do. But honestly, I think the reading kind of helped me along. Reading these different stories, it’s like,” Yeah, revenge never helps.” And eventually I settled on the point where I was like, ” You know what, never mind about this revenge thing. I’m never going to think about this guy again and I’m going to progress on with my life.” Focusing that energy and attention on negative things or other people or whatever it may be, I just realized was not going to be something that was going to progress me with the path that I wanted to go down.

Steve Rozenberg: Wow.

J. Martin: So yeah, I definitely went through all those emotions and it took a while for me to come to kind of come to peace with the whole thing, take responsibility. It doesn’t matter who ratted me out. I was the one who was selling cocaine, right?

Steve Rozenberg: Yeah.

J. Martin: And I mean this is true and everything. It’s like you got to take that personal responsibility and I think that helped me move on to the point where I said, ” Hey, I’m going to do something positive with this instead of dwelling on it, latching onto it or trying to get revenge or something like that.”

Steve Rozenberg: Yeah. And I’ll tell you what, just that alone, you’d be Uber successful in a major as far as I’m concerned, like one of the top performing winners just thinking that not counting what you’ve done since then. But I just got to tell you, I’m so impressed that you were able to do that because it’s easier said than done. And a lot of people have a hard time not reverting back to that after especially they get out, the pendulum starts swinging and next thing you know, you’re kind of like, ” Maybe I’ll do a little bit or this or that.” And you’ve been able to just go full steam up the other way, which I got to say is hats off, man. Good for you.

J. Martin: Thank you. I appreciate it. I mean, to be honest, I don’t think I’d be where I am today, travelling the world full-time, spending time with friends and family and volunteering and doing this and that if I hadn’t gone through. If I didn’t get that strong kick in the butt to get me motivated. So again, don’t encourage everyone to do that themselves. But again, focus on that motivation what gets you like… what drives you and what makes you want to go do it.

Steve Rozenberg: Sure.

J. Martin: That’s part-

Alex Osenenko: So find your why and connect with it and let go of negative emotions. Instead, rechannel that energy into building up your own future. So that’s pretty profound easier said than done for a lot of us. But sometimes we’ve got to be shocked into it, right? And you got shocked and probably one of the worst possible ways. I don’t think we’ve had anybody on the show shocked this badly, Steve.

Steve Rozenberg: No, I don’t think so.

Alex Osenenko: In to action but there’s always some kind of a catalyst and yours was-

Steve Rozenberg: Yeah. I’m going to say everybody has a different drive and I’ve always learned people do what they must, not what they should. So he should have stopped, but he didn’t. Then when it went to that extreme, he had to stop. He must stop, right? And then it was a turning point, it was at pivotal point and you’re sitting there in a self kind of thinking this through going, ” Okay, I got to make a decision here.” I mean they-

Alex Osenenko: For you Steve. I also have to say for you, it’s 9-11 as a pilot.

Steve Rozenberg: Right.

Alex Osenenko: That’s a very similar concept even though it’s completely different scale, but it’s the same thing. It’s not shock which caused you… I’m going to do this every time those of you watching video, I’m flashing Steve’s book, which causes you to create a dumpster fire in Houston with your first 20 properties or something.

Steve Rozenberg: Yeah, exactly.

Alex Osenenko: Before [inaudible] now. But Jay, I want… Steve to took us away into the mind games and I loved that and that’s very important. I still want to know how you made your first move, man.

J. Martin: Yes. So first move. So basically working for the State of California bank regulation, we’re looking at, wow you can make a bunch of cash flow in the Bay area where it’s traditionally hard to do. I said, ” Hey, there’s opportunity here.” Started talking to all my co-workers and all of them were like, ” Jay, you’re crazy. Real estate is dangerous. Didn’t just see the hundreds of millions that just got lost in the fires from last year. What the hell are you thinking?” And so I almost didn’t do it. Fortunately, I met another real estate investor, co-worker who turned me on to biggerpockets.com, which hopefully everyone’s familiar with. Great real estate networking website. Got on there and here’s where things really changed for me in real estate. From going from knowledge, a little bit of knowledge and thinking about it, to really changing the game. I went to my very first real estate meetup. So someone’s scheduled it on BiggerPockets.

J. Martin: It was someone I knew from before, went to my first meetup and I learned that, ” Hey, I couldn’t just buy a condo with FHA. I could buy a fourplex with FHA. I could buy an investment property.” And from there that planted the seed. When I went to my first meetup, they never did one again. So I started my own because I thought it was so important to learn this stuff and that’s really what changed the game and ended up getting into my first kind of house hack fourplex. It was going at first meetup and networking with people just blew my mind and still does today every time I go out to meetups. So that’s really what kind of changed the game.

Alex Osenenko: Jay, any specific takeaways? Maybe one. Something you remember from your first event like, ” Okay, I know I got it.” So yeah, you could do a fourplex and not just dream bigger, but any other specific maybe tactical stuff that you took away.

J. Martin: Yeah, I think kind of going from big to small. I mean, the first thing I realized is ” Hey, there actually are a bunch of other people just like me doing the same thing.” So that was a great lesson on the technical side learning the fourplex. I think I learned a lot also about making offers and kind of the psychology of sellers and what works, what’s going to actually get deals closed and things like that. So that was another kind of tactical sort of thing I picked up beyond the high level. But I mean, every time I go out and network, you get one idea or meet one person. It kind of helped me along the way or mentor a little bit is so game-changing. You don’t even have to pick up 10 things every time you go. You get one thing or one contact to me. I mean I got two or three there and it totally changed the game for me.

Steve Rozenberg: And Alex, I don’t know if you know our mutual friend Terrell. He had told me that basically, and tell me if this is correct, Jay, is you are kind of the first one to ever do a BiggerPockets style conference and kind of the first one that ever started, is that correct?

J. Martin: Yes. So BiggerPockets did a conference in 2012. I missed it because I didn’t really know about them at the time. I actually met Josh Dorgan who came out to the Bay and he came to one of my meetups. I was kind of chatting with them. They were focusing on the online stuff. So they weren’t doing conferences at the time and I was so inspired, I wanted to basically go to the conference, but it wasn’t going on. So I literally just got on the phone, I looked up everyone starting with podcast number one on BP and went down the list and called everyone and said, ” Hey, I’m doing a conference, do you want to come?”

J. Martin: And a few people, excuse me, it was like, ” Who are you? What?” But I got one speaker. I said, ” Hey, I got Brian Burke coming out, my OG” And it just kind of fell in line. So again, I started the meet up because someone just did one and there was nothing else there. There was kind of a vacuum, at least for meetups that weren’t pitching. And then I wanted to get more people together and I couldn’t find what I wanted, so I created that. I mean, we’re coming up on the fifth summit just coming up here. But I think go find your crew, go find your people, your tribe. And if it’s not already there, go build it.

Alex Osenenko: That’s great. So walk us through your first deal, Jay. Let’s get so. So from a master networker, I think that you are today, back then you were just stumbling child just like me today. Just like me. And so how’d you put together your first deal?

J. Martin: So first deal, I’d made the offers a lot in Oakland and to be honest, there was a lot of cash buyers and I had an FHA loan. It was hard to do. I eventually ended up buying in Richmond. So the things I was looking for were, number one is close to public transit. I think in major metro areas where there’s a lot of traffic, being close to public transit is a huge benefit. Same thing I’ve talked to people on the East coast that do it out here. So I was basically looking near the BART station, do FHA, I’ve got $12,000 down basically on a $380,000 fourplex. It was a vacant home path property, which is a Fannie Mae Foreclosures.

J. Martin: And they gave the opportunity for the first 10 days on market, only owner occupants can put it in an offer. And that was one of the advantages that helped me get in the door so to speak. And that was above the 1% rule. Those who are familiar is basically the monthly rents are more, at least a 1% or more than the purchase price, which tends to be able to produce some cash flow it depends. It’s just a rule of thumb. So that was my first deal. That’s why I bought it. What I was looking for close to public transit. So only 40 minutes to get into San Francisco, close to Oakland.

Alex Osenenko: And you lived there?

J. Martin: Yeah. I moved in. So I moved from San Francisco out to Richmond, which is for those who don’t know is considered a little more dangerous city. I never really had any serious problems out there. And I walked back and forth to Barton, my suite, kind of through the hood every day.

Steve Rozenberg: Oh yeah. It’s street cred now, man. You’re[crosstalk 00:19:26]

Alex Osenenko: You’re going to walk like you own the neighborhood.

Steve Rozenberg: Yeah, man.

J. Martin: Well, yeah, that’s how I got into it. And it produces cash flow from the beginning. I moved into one unit. They were all vacant. Honestly, I didn’t know any… I hadn’t networked enough to meet contractors and this and that. Of course I could look online, but I ended up going down to Home Depot, pick up a bunch of supplies, recruiting some workers from there and literally went back and started working on it myself with the crew from Home Depot, called some friends to help paint and this and that. And that was my first house hack, doing it bare bones myself. To today, I will not touch a paint brush again in my life. But you got to get started, right? In the hustle at the beginning.

Steve Rozenberg: You’ve got to have a zero-

Alex Osenenko: So that property, financially… So walk me Steve, I’m sorry if I’m holding you from a question.

Steve Rozenberg: No complain.

Alex Osenenko: But I want to understand, the five-year-old in me wants to understand the mathematics a little bit, the basic math. All right, so what is your mortgage and what do you get rent? How did that work out?

J. Martin: I believe… I think it was $379 I believe, $379/$389 I purchased the property for. I think the mortgage on that it was probably $1700 or $1800 maybe. I think all in it was probably 25-ish or maybe 2,500-3000. Sorry, I don’t have all the specific numbers. It’s been a little bit. The rents, it was completely empty. So I had to do a lot of research on rents and that [inaudible 00:20:56], what the rents were in the area. It looked like it was about 1200. So I basically figured, ” Hey, I’m gonna live in for free in one of the units and the other three units are going to cover my principle, interest, taxes, insurance, maintenance, et cetera.” Turned out, the rents were going up, I was able to run it for a little bit more. So the rents were actually about $1300-$1400. And now the rents are about 1800, 5-6 years later.

Alex Osenenko: You still own the house?

J. Martin: I still own it. I’ve never sold anything actually. So I bought four properties. This was the first one and the other three with other investors, did 50-50 deals. Haven’t sold anything and man, basically the values have about doubled and the rents are up probably 50-60%, sometimes more from when I first bought them. So I think someone said, ” Don’t wait to buy real estate, buy real estate and wait.”And I think that’s been true for me.

Steve Rozenberg: Alex, this is a perfect example, man of why you need to buy a piece of real estate. Waiting and waiting Alex, I’m telling you, man.

Alex Osenenko: 10 years, man. I’ve been in this 10 years. I know everything there is to know. I think I ask questions and I learn a lot. But hey, it’s been 10 years.

J. Martin: Are you getting your PhD right now? I know some people who are just students. They love… No, I’m just joking.

Alex Osenenko: Yeah, I know. They over analyze it. Look, I got… My investments are a lot of it in equity of the organizations I work in, right? I try to raise them up and build them. So that’s kind of I’m a startup guy but this is not an excuse. This is BS.[crosstalk 00:22:34]

Steve Rozenberg: You’re talking to the wrong people, man when it comes to telling us that story.

J. Martin: Actually, I know I am the interviewee but I got a question for you Alex because I like to challenge everyone on this.It’s like what is your goal in life and if goal is to build those businesses, that’s where you should be spending your time and your money. For me, I wanted to travel more, volunteer more, more time with family. I wanted to kind of free it up. So I’m getting more and more into passive investments. So I’m investing passively in startups. But if you’re always invest, at least to me, if I’m always investing in my own business, where does the passive income come from? If you never invest it passively, it can never come back passively. So I guess my question to you is that your passion? And do you want to invest passively or do you want to invest in things that you’re going to be active with?

Alex Osenenko: Yeah, it’s very good point. So I guess, look, the investments I’m making a fairly risky, right? So if you think about it, but I do control them. And that’s maybe it’s a control issue.

J. Martin: Control?

Alex Osenenko: Right.

J. Martin: Let it go.

Alex Osenenko: Because I’m working. I’m busting my… Doing the best I can. I’m a chief growth officer of the company. I know we’re doing well, man. I know where we’re playing and I’ll do anything like mountains, there’ll be flat when I’m done. And Steve is there with me now we’re flattening more mountains. And so that seems to me as the pretty good way to gauge that in three, four, five years, we’ll get to the outcome we need to. But we’re still depending on the economy and other things going on-

Steve Rozenberg: You’re still intrigued by this real estate world of-

Alex Osenenko: And so that’s the bow. I don’t have a balance. For example, not saying anything bute my other enterprise, it grew very fast, very well. But I shifted gears into this new opportunity and now I’m sort of, I guess a passive investor in my own startup and previous one. But, it’s still risky it’s not real estate. And if I stop, and this is one very interesting one, I’m just unpacking it for myself. If I stop tomorrow, it’s like I can’t work anymore for some reason or I just give up or whatever, I’m poor, I’m screwed.

Steve Rozenberg: Yeah.

J. Martin: That’s actually I think an important thing for investing. But also I look at my own business as I say, if I died tomorrow, would the business still make money? Will all this stuff still go on. But it’s a good question. But like, yeah, if you don’t want to or you can’t work anymore, where’s this passive income coming in from? So at least the way I started and maybe again, everyone has a different path, but I started by building my W-2 income using that to get loans to purchase properties. That started bringing in it’s passive income. Use that to invest in my business and grew my furnished rental business, which is what I’m doing now. A bunch of Airbnb units at 20 something and then use that money now to invest in multifamily syndications, startups, this and that to really build that passive portfolio.

Steve Rozenberg: Wow.

J. Martin: Maybe for those that are out there who had a job. Just speaking a lot of folks on a job and who are trying to get out of their job and this and that and like, it can be a really beneficial cornerstone of building that. But at least that’s one of the methods that I took so that if I can’t or I don’t want to work, there’s still a range of investments that are going to bring in money. So at least that was my goal and kind of what I was trying to achieve so that I could have my own time.

Steve Rozenberg: Now-

J. Martin: In the middle-

Steve Rozenberg: What I’d like to unpack now, which I think is it’s very… I love what he’s doing because I’m a firm believer in leverage and scale. Because what he’s talking about in my opinion, Jay, what you’re referencing is you’ve learned how to leverage other people and you’ve learned how to scale to live the life that you want to live. So, I remember Terrell and Grace and I, where we are now, at, I remember they told us. They said, ” We had our life and we’ve worked it around our business.” And they said, ” We flip flopped it.” And we said, ” We want to have our life and our business has to operate around our life.”

J. Martin: Yeah.

Steve Rozenberg: And which is a different way to think about it, right? Normally whenever we have free time that we’re not working, then we go ahead and do stuff.

J. Martin: Yeah.

Steve Rozenberg: You just like Grace and Terrell, just like a lot of the people that we’ve met interviewing these shows, have the other way of doing it. They say, ” I have my life and the business revolves around my life.”

J. Martin: Yeah.

Steve Rozenberg: Let’s talk about that now because when I met you, you were just coming from, I think it was Malaysia and you were heading to Bali after you spent another two weeks in Maui. You’re like, ” Yeah, I’m coming over to Bali for a couple of weeks.” So let’s talk about that.

J. Martin: You see it’s funny too because I learned there was no flights from Bali to Hawaii. It took me a lot to get to that [inaudible]

Steve Rozenberg: First world problems-

J. Martin: Who the hell is flying from one tropical place to another tropical place, right? Why would you leave in the first place. So I mean for me, number one is the same pay it first or pay yourself first, right? So people talk about that in your business, right? You want to pay your own salary first or whatever. So you don’t end up living on the scraps from your business. I think the same is true for time. Pay yourself for your time first. Some people make a financial budget, make a time budget. How do you want to spend your time? So if you were a billionaire, how would you spend your time? And then you want to get as close to that as you can earlier. You don’t have to wait until you’re a billionaire, you don’t have to wait till retirement to start doing the things that you want.

Steve Rozenberg: You got to think like one right now?

J. Martin: Exactly. And if you pay yourself first with your time, budget out the time you want to spend with your family, that you want to travel, go do all those things and then say, ” Hey, how can I operate my business successfully within the time that’s left?” And that I think gets you focused, productive and again that pay yourself first principle. So I think that’s a great way to think about it. So just focus on your personal time first, use what’s leftover for the business and then like you say, leveraging other people’s time. So I have myt furnish rental business at 20 something units in the San Francisco Bay area.

J. Martin: I have three people that work in the Philippines. I wish I would’ve met you earlier, Steve, because I could use a lot of your advice for hiring people. So I did it the hard way without knowing, but I have three people. Basically one’s a manager and the other two, they run my entire business. So I just approve payments, review reports and every month or three I jump on a meeting with my manager. And so that’s why I’ve managed to kind of leverage my time up and be able to free up but I had to give up control.

Alex Osenenko: See, that is interesting and there’s different paths for different people, but real estate is still a very important vehicle to get us to our paths. But in my case and Steve’s case, look, who’s asking question? Those of you who are listening and have followed Steve for a while may already know those of you or not, Well let me just kind of get them naked out there in front of all of us, right?

J. Martin: Perfect, yeah.

Alex Osenenko: He’s got two full-time jobs, this guy. Okay. He’s talking about passive income and stuff like that. Steve’s got two full-time jobs, he’s flying for United and he’s vice president at a very fast growing startup.

J. Martin: Yeah.

Alex Osenenko: Well, what do you say to that Steve?

Steve Rozenberg: Well, here’s the thing, here’s my thoughts, and this is just my opinion. The flying that I do, that’s a passion. I mean, that’s something that when I was a little kid, I remember looking up in the sky going, “Man, how do they do that? I’d love to do that one day.” So people tell me all the time, they’re like, ” Hey, why don’t you quit flying? Could you quit?” They’re like, ” Oh, you’re probably going to quit after I sold my business.” They’re like, ” You’re probably going to quit flying.” I’m like, ” Why would I quit flying? This is a dream of what I want to do” Now, when it stops becoming the dream then and it becomes a problem, different story. But right now I’m like, I get paid to travel around the world and I get to fly up a $200 million airplane and get to do it.

Steve Rozenberg: You’re like a kid in a candy store. So that and then when it comes to educating and speaking and interacting with people like Jay and, Brandon Turner and all these people, that’s another dream because you’re interacting with like-minded people. So even though it’s working, I don’t think of it as working, right? I’m not in a nine to five where it’s like I got to clock in, I got to do this. I do it because I love doing it and that’s I think the only difference. I have a hard time. My personal thing is I have a hard time stopping and because I like it so much, I’m not kind of… It’s not controlling me, but I have a hard time shutting it off. I guess I would say, that’s the challenge I have.

Alex Osenenko: But that’s exactly how it feels Steve. I love what I do. I freaking… I come home, I can’t wait. Well last night I can’t say I can’t wait. But we put kids to bed and sometimes I have to work even before that. I’ll break for dinner and my wife’s like, “Yeah, make some money, man. Do what you need to do. I don’t need you around the house moping around, getting in the underfoot. You go in the little office.” Which is here where I’m at today and get work done so we can have the vacations, we can have the time we want and weekends on my own of course. But I work 14 hours a day and I love it.

J. Martin: Wow.

Alex Osenenko: I’m not joking.

J. Martin: Yeah. And I think, I mean, this is such a key thing though too. Is whatever the passion is… I was actually giving a speech the other night and originally someone labeled it. It was like, quit your job to travel the world with real estate and I actually changed it to quit your job and do whatever you want, right?

Steve Rozenberg: Right.

Alex Osenenko: Because everyone’s got a passion and just like you said Steve, your passion is flying and you do that right now. But you’ve set yourself up so that you don’t have to fly when you don’t want to. So if there comes a time when you decide, ” Hey, I’d rather be doing something else.” You’ve set up a way that you have financial independence and time freedom so you don’t have to do that forever. And I think that’s the big change, right? You can do whatever you want and then looking forward 10 hours a day flying a plane. One of my wealthy buddy does is he’s taking a year to remodel his unit because he goes out there and hangs drywall himself and I’m like, ” You’re crazy.” But he’s like, ” I love doing this. I’m okay.” But I think it’s important to just know what you like, know what you love, what you’re passionate about and at least spend some time on those things. And then if they don’t make a lot of money, either find a way to make money or make enough in the rest to support that passion.

Steve Rozenberg: Right. Yeah. And you know Alex, I’ll say the one thing I noticed that because I have real estate and then I’ve got other assets and stuff like that and doing the mind VP thing and stuff. When I get in the cockpit with other pilots, right? And pilots financially do very well. They make a lot of money and it’s not about the money, but when I’m sitting there talking with them and they are just complaining about the company and, ” Oh, did you hear about the union doing this?” And I don’t pay attention to any of that. I’m not on any union emails. I don’t get any information.

J. Martin: Yeah. You’re like, ” I’m flying to Sydney and I’m buying real estate.”

Steve Rozenberg: Exactly. I just want to go to Australia and have a good time and that’s what I want to do. So it’s such a different dynamic because they are clinging to that job and they’re bitter. And I’m thinking to myself, I always think of the Guns N’ Roses theory, right? Guns N’ Roses was making gazillions of dollars and they broke up. It’s not about the money, right? Because at some point the money, that motivation fades, right? It’s the why, it’s the desire, it’s what you want to do. I get in the car and I’m like, ” Dude, let’s go have a good time. Let’s go to Sydney and then let’s go golf and do whatever and talk to real estate. I do some speaking events down there, let’s enjoy this.” And they’re like, ” Oh man, did you hear that we’re not getting paid this ad pay or this or that.” And I’m like, ” Who cares man?” It’s such a difference because I don’t need the job, they do. That’s the difference.

Alex Osenenko: Thanks, Steve. You just busted my butt over your $2 of your bonus difference.

Steve Rozenberg: [inaudible] text you yesterday.

Alex Osenenko: I can show. It was like, ” Hey Alex [crosstalk 00:34:26]. I thought I was going to get $2 more.” I guess that’s Renne, she does that-

Steve Rozenberg: That’s my wife. She’s like, ” Wait-

Alex Osenenko: You’re not bringing all the bacon they promised.

Steve Rozenberg: That’s right.

J. Martin: But this, I mean to me, this really goes back to mindset, right? Not mind, m.y.n.d, mindset no. But it’s really about how you think about things, right? So for some people they’re just going to do the W-2 job. That’s what they’ve known for their entire life, that’s what they grew up, right? You go to school, you go to college, you get the job, you retire at whatever’s, 61 years old and die at 62. They’ve been going along-

Alex Osenenko: [crosstalk] life fishing man, nigga. At least few months.

J. Martin: Yeah. But I mean, I think it’s the whole mindset thing, right? It’s realizing that there’s more potential and I think focusing the energy on what’s important, right? So I was talking about in jail focusing on revenge or how I’m gonna find the path forward, right? And focusing on the things that are not working well or whatever. If that time and energy we’re focused on some income producing activity, it’d produce 10 times or a hundred times more than what was lost, focusing the energy on what was lost and some other little thing I think.

J. Martin: So I used that mindset and it’s really whatever you want, how much you will ever want to make, whatever you want to do in life. Again, someone coming from jail who thought I wasn’t going to be able to get a job or a place to live, to be able to travel the world. Whatever obstacle you have in front of you. I haven’t even had the most challenging. There’s other people who had much larger challenges than myself, right? So I think wherever people are at, I just want them to know, right? They can overcome that, they can go do that. And it’s just it’s all about the mindset. Don’t get stuck in that attitude as other pilots who just complain about their job.

Steve Rozenberg: That’s right man.

Alex Osenenko: That’s really good, Jay. That’s really good. So, let’s tell people… I think your event is coming up, but we’re likely not going to publish this show before the event shows up. So maybe tell people if they want to come see you, meet you, check out one of your events, where will they go to do that?

J. Martin: Yeah, absolutely. So I mean, number one just go out and network, right? So go hop on BiggerPockets in the community section or meetup.com and go find a networking event near you. Go to a conference, go check stuff out. Our event, again, a lot of folks from BiggerPockets and from the San Francisco Bay area and around the country. But our website is SFBsummit.com. We do it every year. So again, if you make it out another year, come check it out. But whatever you do, I really encourage people, network. Again, one idea, one contact, one person can really change your investing life. And I’ve met a lot of great friends I’ve traveled the world with too. So just go out there and go meet someone.

Alex Osenenko: Awesome, Jay, and I’ll look forward to… I’ll make sure I make it to the event that you’re putting on in a few weeks here. So looking forward to meeting you in person.

J. Martin: And we’re excited to have Steve out speaking to. So-

Steve Rozenberg: That’s right baby.

Alex Osenenko: [crosstalk] Somehow people love him. I don’t know what it is.

Steve Rozenberg: You’re just jealous and a little intimidated. Better be nice, I don’t know.

Alex Osenenko: I saw a guy who looks just like Steven Janell actually. The first time I met him I thought he was going to beat me up. But he’s just the sweetest lovable bear. So, yeah. I think there’s something to it. So those of you who are listening, we really appreciate your time. Hope you took a lot away. I think at the end of the day, Jay’s whole concept of winning revolves around networking and he’s doing, he’s living what he’s teaching and his incredible inspirational story. And if you want to meet him, go to Facebook, dial up Mastermynd with a Y, Real Estate Investment Club. Hopefully Jay will join and be active in that little group. BiggerPockets is a great outlet, SFB events, check him out. And thank you very much for listening and Steven and I really appreciate it. If you can go and give us a review. If you love the show, this will really help us out on iTunes or Spotify or however you get this podcast.

Steve Rozenberg: Yeah. And again, Jay, thanks so much man. And I think I’ll say that I’m just going to wrap this up that you don’t meet… People think you meet people like Jay and Alex and all these other people by luck they say, ” Oh, they’re lucky. Jay just got lucky. Yeah. He got juggled lucky.” It’s not luck, it’s intentional focus. And I think that that is the most important thing that I’ve learned is that it doesn’t matter the cards that you’re dealt. It’s the intentional focus you have in the people that you want to meet. I’ve gotten to meet Jay, I’ve gotten to meet all these other people through networking.

Steve Rozenberg: I mean that’s all it is. I mean, all the Brandon Turners and Ryan and, Terrell. I mean all the people that we met in Maui, we all came together and now that is exploded in the different areas and markets and stuff and it’s just networking. I mean that’s all it is. Being genuine and having focus to be better and mix with those kinds of people. So Jay, man, I got tons of respect for your brother. I really loved the story and man, I’m hoping one day we’re going to be in the same destination at the same time. That’s what I’m hoping, man.

J. Martin: Let’s do it. I’m all over the place. I’ll make a trip out to Sydney and see you there either way.

Steve Rozenberg: There we go. So on behalf of Jay, Alex, myself, thanks for watching. Make sure that you like subscribe to our show. I’m out there speaking all the time. Jay’s out there doing his meetup. So just get out there and network, right? You can hang out with us. We want to meet you too and that’s what this is about. So thanks everyone for watching. We’ll see you next week. Bye-bye.

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How AB 1482, or Statewide Rent Control, Impacts California Single-Family Rentals

The state of California is on the verge of joining Oregon as the only two states in the country to implement statewide rent control. Recently approved by the California Senate, Assembly Bill () 1482 is slated to become law on Jan. 1, 2020. 1482 legalizes statewide rent control and allows most property owners to only raise rents by 5% annually. But there are some exceptions. Does this newly-passed law impact your property as a single-family rental () investor?

Legal Expert Giles Imrie Discusses Rent Control’s Impact on Market

Today we’re discussing the implications of the recent passing of statewide rent control, known as 1482. You're going to hear that number, as a landlord quite a bit, and so what we want to do is talk through some of the potential implications and how you can make sure that you can protect yourself and your rental property from issues that may arise if you don't follow the law. My guest today is the vice president of corporate counsel at Mynd Property Management, Giles Imrie. Alex Osenenko: So, Giles has14 years of legal experience in real estate and the question we're going to tackle today is this: Is my single-family rental in California impacted by 1482?Giles Emery: The short answer is yes, Alex. Previously, single-family homes were carved out of rent control ordinances, but this Assembly Bill does impact your single-family homes in one way or another. It may be a minor impact or not. I'll explain what I mean by minor but assuming you don't qualify for one of the stated exemptions that are laid out in this bill, then your single-family home is now subject to both the rental cap that's imposed under this ordinance and the just cause aspect of it as well. There are some nuances that still allow you to maintain your protections as a single-family homeowner. Assuming you do qualify for those, and I'll go into those in a little bit, then you still need to provide notice to your residents. Going forward, you will need to add a provision to your lease that notifies your resident that the property is exempt. This specifically references the civil code and explains to them that your property is exempt from the rent cap and the just cause ordinance, assuming you do qualify for one of those exemptions.Alex: So Giles, are you saying that in 1482 impacts all single-family homes or there's a specific subset.Giles: Well, it does impact in that even if you qualify for an exemption, in order to maintain and get the benefit of that exemption, you now need to actually give the statutory reference in your lease and failure to do so could mean that you are subject to the rent cap when you otherwise would not be. So, yes.Alex: To finish my point, you can bypass this by having a specific provision with a release but then exempt you?Giles: Assuming you qualify for extra threshold.Alex: Which we're going to talk about in this next episode. So, but for now, let's get to the basics.Giles: The basics. Yes, I just wanted to carve out that there are some little gotchas in here that even though you do qualify for one of the exemptions, you’ve got to add statutory language that you previously didn’t have to your lease in order to maintain the benefit of that exemption.Alex:Gotcha. And the rent cap, some of the key takeaways from this law. So the rent cap is what?Giles: So, you are now limited on your annual rent increases to 5%, plus the price of inflation for the prior year. And that’s measured by the consumer price index (). There is a look back to March 15, which is basically intended to prevent landlords from spiking rents before it goes into effect. But the go-forward rent increase cap, they call the rent cap would be 5% plus the .Alex: Which is about 2 to 2.5% now as we speak today?Giles: 2 to 3%.Alex: All right, so I think this is the takeaway: Your single-family rental may be allowed for exemption, but you have to understand how to properly document this, and have a specific provision in the lease. Is that correct?Giles: Yes.Alex: So, can you give us a little more color on like how do you do that?Giles: Single-family homeowners are exempt from this ordinance. This bill applies to any corporation or real estate investment trust. My background in real estate is with REITs, so this is geared towards the REIT industry, which only constitutes about 3% of the single-family rental market in the U.S.Nonetheless, () corporations, REITs and limited liability companies. But if you’re an individual that owns a limited liability company, then this does not apply and you’re treated just like any other individual owner. You are not subject to the bill provided you include that newly required written disclosure in your lease, specifically advising your tenant that you are not subject to this ordinance or this bill.Alex: Gotcha. So they need to know upfront that this property would not comply with the rent increase?Giles: Correct.Alex: All right, Giles. That was good. On the next episode, we'll dive into the specific rental ownership entity type, individual versus entity and how that gets applied based on 1482. Thank you very much for watching. If you want to go to mynd.co, type in: 1482 mynd.co. That's our company. You'll see a series of interviews that Giles and I are doing on this subject. We hope this helped you out. Until next time, and thank you for watching.

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The Myndful Investor Podcast Show, Episode Zero

Steve Rozenberg and Alex Osenenko introduce themselves on Episode 0 of the Myndful Investor Podcast show and discuss how to overcome the fear of getting started when it comes to investing.

Podcast transcript

Alex Osenenko: Boys and girls, welcome to the first episode of The Myndful Investor podcast Show. Your hosts here, Alex Osenenko and-
Steve Rozenberg: Steve Rozenberg.
Alex Osenenko: Steve Rozenberg. Good buddy. This might not be episode one, this is episode zero. Why don’t you introduce the series do.
Steve Rozenberg: Sure.
Alex Osenenko: So, very quick background. Steve and I have spent the last probably decade plus in real estate in various-
Steve Rozenberg: various forms
Alex Osenenko: various forms. We don’t have to dig in too much into it, but the takeaways is we want to still provide on this episode and this very, very first, first episode is, how do you deal with fear of getting started? This is something that I think is in the way of a lot of people’s success.
Steve Rozenberg: Sure. It’s sometimes it prohibits them from success because they just don’t take action. And I don’t think it’s just real estate. I think it’s anything that they do whether it’s we’ll talk about us making decisions to you know, join Mynd and leave our businesses and join our companies together. And all the things that we’ve done. But those are big things that lack of action would not cause us to be here.
Alex Osenenko: Huge. Or there’s risk-tolerance. So let’s start unpacking this.
Steve Rozenberg: Yeah.
Alex Osenenko: So this is The Myndful Investor podcast show boys and girls. Our purpose here, our goal is to bring reality data, facts for real estate investors who are about to make an investment or can, will continue to be successful making investments, maybe pivot into different types of investments. We’re going to cover a lot of things here, but the underlying purpose for us is to make sure we provide you with data and fact driven stuff, but also in story format.
Steve Rozenberg: Yeah. And you know, the one thing I think that a lot of people have a challenge with is when they, they want to get involved in investing and they want to see and seek out how to get wealth. I think the biggest challenges is that everybody shows you kind of how to get the deal. You know, the sexy, how I can make a bunch of cash on cash return and investments. But there’s nobody there that actually shows you what do you do on day two? Once you own that deal, like you get a deal that says this is going to be a 30% cash on cash return and this is going to be these numbers. But the next thing is what do you do on day five when the tenant says, I lost my job and I’m not leaving. And so we’re going to talk to the investors in my opinion and discuss how did you guys as investors get around those kinds of things and how did you work through those problems?
Because as investing, I always tell people this is the sandbox that we play in. We’re in a sandbox where there are a lot of challenges. There’s a lot of, the good thing about real estate is there’s no rules. The bad thing about real estate is there’s no rules. So it’s, good and it’s bad. And if you know, unfortunately when you’re in this industry, there’s really nobody there. There’s no guidelines to tell you whether you’re doing right or doing wrong.
Alex Osenenko: You know what Warren buffet said, which is like stays with me forever. He’s like, he’s never, he would never make an investment in the business or company. He does not understand. Completely. He’s a smart guy? He understands a lot of things. But this is kind of the… This show’s purpose is to help you understand. Whether it’s a specific vertical you want to get into. But even before getting like super educated on a particular vertical, let’s call it, buy and hold or-
Steve Rozenberg: Flipping [crosstalk 00:00:03:53]. Or maybe
Alex Osenenko: and within buying hold, there’s single-family, there’s multi-facets-
Steve Rozenberg: Absolutely there’s so many ways.
Alex Osenenko: There’s Houston, there’s Boise, there’s Albuquerque, right?
Steve Rozenberg: It cascades down. I mean it’s, it’s such a deep cavernous column. People don’t realize. And that’s a good point cause I think a lot of people, they want to get into investing. There’s all these people that show them how to get the deal, but there’s nobody to show you how to create the wealth.
And they never, and I think that a lot of people, they don’t want to take the time to slow down, to speed up. They don’t want to take the time to educate themselves on how to actually get the wealth. They just want the wealth. And I think all of us want that, right?
We just want to make it happen. And unfortunately there’s people that have hands in your pockets, they want to make money off of you. They see the a-
Alex Osenenko: especially in this business,
Steve Rozenberg: absolutely.
Alex Osenenko: there’s a loosely say, there’s no rules-
Steve Rozenberg: there’s no rules. That’s the problem.
Alex Osenenko: You can put a syndication. You can announce syndication on this show and there will be people who will-
Steve Rozenberg: Absolutely [crosstalk 00:04:47]. absolutely. And you know the whole, like you had said, the whole goal of this show is not to talk about the glory of some of these investors that we’ve had on the show and going to have on our show-
Alex Osenenko: cause their shows like that. Everybody’s just coming in and-
Steve Rozenberg: everybody showing me how broke they are, how much money they make. I don’t want to know that. You know, we want to know and I want to know personally, like first of all, how did you get to where you are and how do you continue to drive yourself to be a better person, better?
You know, because a lot of people on the show are going to learn that a lot of the people that we talk to, the one common thread that you’re going to find with a lot of these investors is the balance of their personal life and how happy they are on a personal level, not just a fine, it’s not just a numbers thing of owning investments. They’re doing it to create a lifestyle for them and for their family. And it’s very interesting to see how people that are creating wealth and being wealthy, how they actually will continue to do it. They’ve already made the money. They don’t need the money. They’re doing it to keep the lifestyle that they want to have and the balance with their family, which is totally different than a lot of other fields and investment, industries that I’ve ever known of.
Alex Osenenko: But it’s also a gain.
Steve Rozenberg: Absolutely.
Alex Osenenko: Once you get-
Steve Rozenberg: it’s the thrill of the hunt.
Alex Osenenko: We spoke to Jay and we’re about to sort of J Scott, we’re about to announce like what this first series is going to be all about the first season I should say. But like the J Scott and I, he’s the thrill of the deal.
Steve Rozenberg: Oh yeah.
Alex Osenenko: he’s, well, he’s fine. He’s very happy like they, but like what are you going to do if you are not, if you’re not, if he is just sit there and enjoy me. I guess some people can go to the library and ski all day.
But the folks that will listen to the show, I think will find thrill of the deal. But also that, as you said, not just the deal thrill of the deal is like step one, but then it’s the day to day management.
Steve Rozenberg: Yeah. Yeah, absolutely.
Alex Osenenko: Of your portfolio. It’s-
Steve Rozenberg: It’s the all encompassing. It’s almost like you’re, you’re living not a mantra, but you’re living a lifestyle.
And we had a doctor, Dr. Steve on, right.
Alex Osenenko: Is an interesting-
Steve Rozenberg: [crosstalk 00:06:46] he’s a doctor and he owns a lot of real estate. Has no desire to quit being a doctor. Very successful. And so-
Alex Osenenko: wait, wait, no, no, no, no. He wanted to quit. That’s why the whole episode was about, don’t you remember? He actually-
Steve Rozenberg: I thought at the end he said he didn’t want to quit. So we got him there.
Alex Osenenko: But, so this is very interesting episode and look forward to that episode.
Steve Rozenberg: Yeah, that was a good episode.
Alex Osenenko: There’s the MD, like legit one of the best doctors- [crosstalk 00:07:09]
Steve Rozenberg: Put himself in medical school [crosstalk 00:07:10] on his own.
Alex Osenenko: Oh yeah, Oh yeah. Is this fascinating story. And what happens is he now wants to go real estate full time just because he loves-
Steve Rozenberg: he loves it.
Alex Osenenko: He loves the dynamic of it, he understood it. He is the kind of guy, like he went through the pilot school. He’s the kind of guy who put his mind to something and just get it done.
Steve Rozenberg: Did it.
Alex Osenenko: He’d be like a top 1%.
Steve Rozenberg: Yeah, absolutely.
Alex Osenenko: But he wants to quit MD and be… So eventually I think where we got with him, I’m not going to give too much away.
Steve Rozenberg: Don’t give too much.
Alex Osenenko: but there’s an opportunity for him to continue practicing medicine and a lot less intense way.
Steve Rozenberg: Yeah, because he doesn’t need the money. Cause he does it. He’s doing what he loves doing and money’s not a problem. And so that’s what you’re going to learn with a lot of these people. And what we’re trying to extract from the show with a lot of these guests is that you’re going to find, there’s a lot of people that have different work life balances that are very successful. Some that money is not the driver, but they are successful, but that doesn’t drive them.
And so it’s going to be a way that you as an investor or aspiring investor or experienced investor, whatever it is at your… Wherever you are in your stage of your career. You’re going to look at that and maybe do some self reflection and kind of go, Hmm, I wonder how this applies to me. I wonder if there’s some things that I could do better. I could do different. Maybe I can’t do any of these at all, but I think that you’re going to do some self reflection on that from these people that we talked to. I’m very unassuming but very successful and I think you’re going to get a lot of very good takeaways from that. Just like you and I did because you had a business, right? You owned a business, you removed yourself from that business and joined another company.
There a lot of self reflection that has to go on before you do something like that. Right?
Alex Osenenko: I mean it’s incredible. So let’s shift, let’s shift to that part of the conversation. By the way, those of you folks listening or watching, if you’re watching, thank you. You can just go into the next episode, if you want to get dig into the content and stuff. But Steve and I will talk about next is very quickly talk about how to actually get started. So I think those of you who have not, maybe you want to stick around a little bit, there’s a mental shift that has to happen. Like I didn’t use to believe in any of that Voodo sheesh, right? To me it was all, it was just like-
If you are smart enough if you work hard enough, you get there.
Steve Rozenberg: Right.
Alex Osenenko: You get there, you work hard enough. You’re smart enough, you’ll get there.
Steve Rozenberg: Yeah. It’s not always the case.
Alex Osenenko: No.
Steve Rozenberg: I know a lot of smart people that make [crosstalk 00:09:31] no money and they’re not happy either.
Alex Osenenko: It’s not even about money. Right? It’s like, you know what the doctor wanted to… Dr. Steve wanted to make a move. I think, I mean I clearly remember there’s a lot of administration stuff.
With his profession [crosstalk 00:09:46] that he just doesn’t… With real estate frees him up to do what he loves. With doctoring, he wants to cure people. He loves that.
Steve Rozenberg: He loves it. He loves… He was saying, he loved being there when a baby is born and even when somebody passes on, he feels like he’s a part of that. It’s something almost holistic. He said that you’re a part of this whole cycle of life.
But if you’re just sitting there trying to get a paycheck. You’re not even paying attention to that part of the job. Which is probably why you even got involved in being a doctor in the first place. Or you know, Jay Scott, right? He’s, got race horses, right? He spends so much time with his family. Brandon Turner, you’ve got all these people that we know that are just so focused on doing what they want to do. They can enjoy their family because they’ve taken those, I don’t even want to say calculated risks, but they’ve been so smart and understanding what their next steps are because they’ve watched shows like this. They’ve educated themselves. Sure, they’ve made mistakes. We’re all going to make mistakes.
You know, it’s not a failure unless you learn from it. If you learn from it, then it’s a lesson, right? I mean, but it’s just one of those things. And I think what we want to unpack in these shows is why these people are being successful and how you are just like these people. And you can be successful too. You’ve just maybe have to change your mindset and think a little bit differently. Would you agree?
Alex Osenenko: Yeah, I would agree and the passion plays into it. I’m just wondering like I want to first step this out or point 0.01 episode. I want to introduce our behind the scenes guy. Dan, I’m just curious, Dan, are you passionate about the video? I mean, you out there fill me-
Steve Rozenberg: You look passionate.
Alex Osenenko: You sipping on a Corona. You look a little passionate there Dan. Anyways, so Dan is our… You’ll see the quality of what we produced.
Steve Rozenberg: Yes, absolutely.
Alex Osenenko: That will be his top-notch quality.
Steve Rozenberg: It’s going to be top-notch quality. It’s going be the level of people we have, the thought processes we have, the access to educational levels that we’re going to be able to bring in. I mean, I think it’s going to be bar none, one of the best, if not the best shows that are out there with current constant education at a ground level. I think.
Alex Osenenko: Let’s talk about this. Let’s… we promise this, let’s talk about this. Let’s talk about your move that you made.
Steve Rozenberg: Why am I first.
Alex Osenenko: I don’t know cause I’m the one speaking.
Steve Rozenberg: Okay, fair enough you be first.
Alex Osenenko: I’m the one asking the question. And so you’ve made a significant move. So I’ll give a quick pre-story.
You’ve been an investor and I’m going to move out the chair for a second cause I want to grab your book. Oh, we’re using it as a coaster.
Steve Rozenberg: Yeah, They threw it on the floor. [crosstalk 00:12:16]. It was on the way and they threw it on the floor.
Alex Osenenko: So there was kind of-
Steve Rozenberg: A lot of respect-
Alex Osenenko: [crosstalk 00:12:21] to throw it in my face.
Steve Rozenberg: for my workings.
Alex Osenenko: Hey you sign my book, we’re not selling any books.
But the idea is, he was a failed investor, Steve, because it looked good on paper and they kept on buying it and when it didn’t work, you know what was a good idea?
Steve Rozenberg: Buy more of them. Buy more, why not?
Alex Osenenko: Buy more and so from there he said he couldn’t manage it. So started a management company, very successful Gouda company to 900 properties that can manage.
Steve Rozenberg: 900 doors. Yeah.
Alex Osenenko: In Houston and all of a sudden the things like he’s one of the fastest growing companies in Texas.
Got like 500s of five-star Google reviews. I mean, absolutely dominating. And guess what happened? Steve decided to make a move and partner with mine. So in other words, essentially sell his company to mine. In order for a chance to join and become host of this show. That was a big deal, wasn’t it?
Steve Rozenberg: Absolutely. It’s to me again… I’ve always learned in my life and this is something I think a lot of people can take away. What gets you here is not going to get you there. You and I have had these conversations and I think life and someone told this to me one time and it really resonated with me that life is like a book and you have chapters and there’s a chapter that could be a great chapter, but at some point that chapter ends and when that chapter ends, a new chapter begins and you don’t go back to that chapter again. And the company, Pete Neubig and I built and the team that we had. It was a great chapter and it got us to the next chapter and the next chapter is going to be better chapter.
And that’ll be a chapter after that. And I think that’s life. And I think that a lot of people never flip that page and they never move on to the next chapter. And maybe they slide backwards. And so I think the biggest challenge, the thing that I learned was this is just part of the growth cycle. It’s like leaving high school, right? We all know friends in high school that never left high school. They’re still, they’re mentally talking about the days of high school. They’ve never left there. And so a lot of people, same thing in business, some people just do not want to leave the comfort zone of their business. And look, you read these books, you do the audios and you hear like, you know what, you have to be comfortable being uncomfortable and that’s all well and good until you really are uncomfortable.
And now you’ve got, it’s like the rubber meets the road.
Alex Osenenko: That’s growth, that’s when the growth happens
Steve Rozenberg: It’s growth. You have to be okay. And at some point you’ve got to say, you know what? I’m going to trust the process. I’m going to trust my education. I’m going to trust everything I’m doing. I’m going to shut this chapter and I’m going to move onto the next. And that, that’s kind of what I did. I just… I trusted the process. I trusted you. The people at mind, everybody that was involved in helping us come over. I trusted it and I said, you know what? Based on educated calculated decisions based on everything that I think that mind will be able to provide for me and where the future is with mind. It was a no brainer. But there’s still that risk. You’re leaving your own company that’s doing fine. That’s very successful.
Alex Osenenko: No brainer. People say that in a rear view mirror, it’s no brainer. When you in the-
Steve Rozenberg: When you’re in the turn, it’s not as easy.
Alex Osenenko: Remember we talked about your role, so now you’re VP of investor education. We’ve talked about your role. We had a lot of back and forth. Those emotional moments. It’s difficult guys and girls it’s definitely difficult.
Steve Rozenberg: Not easy.
Alex Osenenko: Can I unpack something you said?
Steve Rozenberg: Sure.
Alex Osenenko: You said there’s a chapter. I love that, by the way. You always teach me new things. Oh, it’s mine now.
Steve Rozenberg: Dan quote that.
Alex Osenenko: So it chapters, how do you know this is, I sometimes have problems with this. How do you know when the chapter is coming to an end? Is it when you see a new opportunity, and it’s like, Whoa, you know, it’s it. Like how do you know when the chapters ending, how not to hold on for too long [inaudible 00:15:58].
Steve Rozenberg: You know, I think that’s different for everybody, but I think sometimes the chapter closes already and you don’t realize it. Like your chapter… you may have a chapter that’s already closed and you are just not accepting that it’s closed. Sometimes when we’re… When you’re in the heat of battle and you’re kind of in the weeds. And again, this chapter this… The books over the book, the movies over, right? The, the credits are rolling and you’re still sitting there not leaving the movie theater. Right. And so sometimes we may not want to it accept that that chapter is over in our life.
Alex Osenenko: Do you have an example, by any chance, can you think of an example of someone you know. You don’t have to name names. Or maybe yourself where you sort of overstayed your welcome per se? I mean-
Steve Rozenberg: I never overstayed my welcome.
Alex Osenenko: You wheeled in a bag today, your airline bag into my house
Steve Rozenberg: Yes, yes, yes to my house. And he said, are you staying here tonight?
Alex Osenenko: You did not tell me anything. Maybe we’ll cover that. But is there a chapter?
Steve Rozenberg: I don’t know that I have a chapter, I mean maybe I do that I don’t know about. But I think at… My thought… I’ve learned… I’ll give you a perfect example where I made a decision, a lot of indicators. So you know my, my being an airline pilot, right? So that chapter 9/11 that chapter ended, right? So for me now, I still stayed as an airline pilot, but after 9/11 there was a new chapter I didn’t want to… A lot of people did not want to accept it. So what did a lot of people do? They went down to South America to fly. They went over to Asia and they flew airplanes at a quarter of the income that you are making as a U S airline pilot. Why? Because they didn’t want to accept that things were changed and they didn’t make the decision to flip the page and start a new chapter.
I said, you know what, I love being a pilot. However, I’m not going to let this dictate me anymore and what I’m going to do is I’m going to take control of my future and start learning about real estate. A lot of other people said, I’m going to Korea. I’ll be there for three years flying small planes until this thing weeds itself out. To me, that’s not accepting that the chapter has ended. So that’s the best way I could describe how a chapter can change and you not accepting that it’s changed. Because all the indicators were that the airline industry as a whole will never be the same again.
Alex Osenenko: That’s very good.
Steve Rozenberg: So that, that’s how I would basically essentially say that’s how you know it, but enough about me. Let’s talk about you Alex.
Alex Osenenko: Dude, I can’t believe like, I can’t believe how like we’ve done podcasts in the past, but I can’t believe like how this is connected because I was just going to say, Dan, stop the recording for a second. Steve, why don’t you ask me about me now? We only have 20 minutes to this 0.01 episode. We want to be respectful to the audience. They don’t want… us yammer for 20 minutes. They want to get into the meat of what this is all about. Which is top-notch education validated with a couple of guys .
Steve Rozenberg: So based on this conversation, we’re talking about people making a decision and moving on and things happening, right? So you had a company, right? You had a very successful company, still do, still have the company and you made a decision to basically essentially remove yourself and join mine. Right? Essentially he’s my boss, so I got to be somewhat nice to him, I guess. But you know, basically you, you made a decision, right? And calculated or not the chapter ended, right? Some chapter ended and again, it’s not just you, right? You’ve got a wife, you’ve got children, there’s a whole trail behind you that are affected. There’s a ripple effect, right.
Alex Osenenko: There’s also people in the current, in the company I left
Steve Rozenberg: in the company left. Yeah. The allegiance going, Hey, where’s Alex? Alex, you know, and so there’s, maybe a guilt factor at some level to go, man, how do I do this? Am I doing the right thing? Am I being selfish? Am I being, am I doing the right thing for my family? How did you unpack all that and go through those iterations mentally?
Alex Osenenko: Definitely a lot of guilt. Definitely a lot of sort of second guessing yourself. That’s, I think that’s all normal. But like you will laugh. Maybe a stoicism is something that I am sort of investing in right now. My sort of mental resources and Tim Ferriss is my favorite podcaster and he’s big. He wrote this book, the Towel of Seneca and anyway, it’s very interesting philosophy on how to sort of deal with change. But the way I think about this is, one life. I think I learned it from you. Like you only have like 4,900 whatever however many-
Steve Rozenberg: 4,400 weeks is the average person lives.
Alex Osenenko: Yeah. 44 that’s it?
Steve Rozenberg: 4,400 weeks is the average person [inaudible 00:20:29].
Alex Osenenko: Blink of an eye baby. So yeah, if you not like take an action now. Like when opportunity came about Mynd CEO and I had a great podcast on my previous show, The Property Management podcast, and we connected really well.
We’ve sorted started talking and we will find out this company is going to crazy things. Somebody is going to figure out how to do… How to become like the South West of property management. Zappos of property-
Steve Rozenberg: There we go. I mean I don’t fly for Southwest so [crosstalk 00:20:59], but I get it. I get your point. The Google of the search engine how’s that.
Alex Osenenko: Yeah… I like to be… Yeah… Okay… So yeah… Not we work. Different, but too soon. Yes. Somebody is going to figure this out. I loved the team, I loved the direction. I loved the company. They have access to capital. Smart people. Smart boys and girls work with us. And look, Steve and I have a chance to create amazing things and my passion is to teach. I love teaching, running company is, I love it. But the creative part of directing the strategic… I guess direction of the company and teach and coach the team.
And our future customers or just listeners or just audience. So anyway, that’s why I’m passionate and so for me like just let me take a quick shortcut cause I could talk a lot about this. This was very difficult decision but, and I left a lot of people behind. I don’t necessarily feel great about everything that I’ve done, but I think, I think to me the important thing is no fear. You can’t, you’ve got to remove fear and being more deliberate about this. That’s number one. And number two, it’s a game. It’s a game. You get 4,400 weeks to play it.
Steve Rozenberg: That’s right. That’s it.
Alex Osenenko: I will make the moves that I need to make for my family. But as well as I’m not going to be 39 to 40 again.
Steve Rozenberg: Yeah. You can’t go backwards and you can’t be afraid to step off that ledge. You educate yourself and you learn how to step, but you cannot be afraid to take that step. Now you’re going to have, critics are going to have criticism. You’re going people that second guess you. You’re going to have all of that.
Alex Osenenko: Just the comments on the show. We’ll show that there’s a lot of people really unhappy with my decision. A lot of people that wished me well and very, very happy but-
Steve Rozenberg: Yeah, I think more the latter. I think a lot of people want to wish you well. I think all of us, I mean, I think, you know, there maybe there’s some people that kind of go, man, I kind of wish I did that. Deep down. I mean I think there’s a lot of that. So, I think just to kind of wrap this up, I think what we’re trying to get across as Alex and I are really going to dig deep in these shows with these investors. We’re going to ask them those questions-
Alex Osenenko: Hard questions.
Steve Rozenberg: Hard questions. We’re going to ask them some self-defining questions and we are going to have some definitely solid industry players that are here. Maybe not here in this studio, but in our studio. We, we’ve got some, some bigger pockets content. We’ve got a lot of stuff that’s really going to unpack and really asked people, how do you do it, why do you do it, how do you keep doing it and how are you getting better? And those are the kind of concepts that we’re going to go through.
Alex Osenenko: So until then, enjoy the rest of the season. We love to have you as a listener to drop us a line or comments to this show. We’re always happy to hear if you… There’s any specific thing learn what’s our Facebook group.
Steve Rozenberg: The Mastermind Real Estate Facebook group. Definitely join that. Cause there’s a lot of people in there.
Alex Osenenko: It’s a private group though. So you got to go through a little bit of a quick here interview questions. I need to ask questionnaire. We want to make sure like real people-
Steve Rozenberg: We want quality people. We don’t want people selling stuff in there. We want people to actually want to learn or want some resources to answer some real estate questions cause that, that’s what it’s about.
Alex Osenenko: And speaking of selling that one thing, you can be assured, we’re not selling anything yet. The beauty to be funded by a large company and growing and thriving company like Mynd, we don’t have to sell anything. Nobody is going to sell you crap on this show. Mark it now and enjoy the rest of the season. Thank you very much for tuning in.
Steve Rozenberg: Make sure you subscribe to our show and make sure you go to our landing page. We’re going to have shows dropping all the time on Fridays is when our shows are going to drop. Make sure you’re paying attention. Join the Facebook group and you’re going to get a lot of good content information from all different walks of life and all different types of investors. So again, make sure you subscribe it, write it on your hand, do what you got to do, but make sure that you know, our shows are coming out here.
Alex Osenenko: Write it on your hands.
Steve Rozenberg: We’ll see you guys.
Alex Osenenko: See you later.


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J Scott on the value of time

Steve Rozenberg and Alex Osenenko are joined by J Scott while in Nashville attending the Bigger Pockets Convention 2019.

J Scott is an entrepreneur, technologist, investor, and advisor. Host of the BiggerPockets Business Podcast. Author of four BiggerPockets books, including “The Book on Flipping Houses,” “The Book on Estimating Rehab Costs,” and “The Book on Negotiating Real Estate.”

Watch the Podcast Here

Full transcript


Alex Osenenko: Boys and girls, welcome to the first episode of The Myndful Investor podcast Show. Your hosts here, Alex Osenenko and-
Steve Rozenberg: Steve Rozenberg.
Alex Osenenko: Steve Rozenberg. Good buddy. This might not be episode one, this is episode zero. Why don’t you introduce the series do.
Steve Rozenberg: Sure.
Alex Osenenko: So, very quick background. Steve and I have spent the last probably decade plus in real estate in various-
Steve Rozenberg: various forms
Alex Osenenko: various forms. We don’t have to dig in too much into it, but the takeaways is we want to still provide on this episode and this very, very first, first episode is, how do you deal with fear of getting started? This is something that I think is in the way of a lot of people’s success.
Steve Rozenberg: Sure. It’s sometimes it prohibits them from success because they just don’t take action. And I don’t think it’s just real estate. I think it’s anything that they do whether it’s we’ll talk about us making decisions to you know, join Mynd and leave our businesses and join our companies together. And all the things that we’ve done. But those are big things that lack of action would not cause us to be here.
Alex Osenenko: Huge. Or there’s risk-tolerance. So let’s start unpacking this.
Steve Rozenberg: Yeah.
Alex Osenenko: So this is The Myndful Investor podcast show boys and girls. Our purpose here, our goal is to bring reality data, facts for real estate investors who are about to make an investment or can, will continue to be successful making investments, maybe pivot into different types of investments. We’re going to cover a lot of things here, but the underlying purpose for us is to make sure we provide you with data and fact driven stuff, but also in story format.
Steve Rozenberg: Yeah. And you know, the one thing I think that a lot of people have a challenge with is when they, they want to get involved in investing and they want to see and seek out how to get wealth. I think the biggest challenges is that everybody shows you kind of how to get the deal. You know, the sexy, how I can make a bunch of cash on cash return and investments. But there’s nobody there that actually shows you what do you do on day two? Once you own that deal, like you get a deal that says this is going to be a 30% cash on cash return and this is going to be these numbers. But the next thing is what do you do on day five when the tenant says, I lost my job and I’m not leaving. And so we’re going to talk to the investors in my opinion and discuss how did you guys as investors get around those kinds of things and how did you work through those problems?
Because as investing, I always tell people this is the sandbox that we play in. We’re in a sandbox where there are a lot of challenges. There’s a lot of, the good thing about real estate is there’s no rules. The bad thing about real estate is there’s no rules. So it’s, good and it’s bad. And if you know, unfortunately when you’re in this industry, there’s really nobody there. There’s no guidelines to tell you whether you’re doing right or doing wrong.
Alex Osenenko: You know what Warren buffet said, which is like stays with me forever. He’s like, he’s never, he would never make an investment in the business or company. He does not understand. Completely. He’s a smart guy? He understands a lot of things. But this is kind of the… This show’s purpose is to help you understand. Whether it’s a specific vertical you want to get into. But even before getting like super educated on a particular vertical, let’s call it, buy and hold or-
Steve Rozenberg: Flipping [crosstalk 00:00:03:53]. Or maybe
Alex Osenenko: and within buying hold, there’s single-family, there’s multi-facets-
Steve Rozenberg: Absolutely there’s so many ways.
Alex Osenenko: There’s Houston, there’s Boise, there’s Albuquerque, right?
Steve Rozenberg: It cascades down. I mean it’s, it’s such a deep cavernous column. People don’t realize. And that’s a good point cause I think a lot of people, they want to get into investing. There’s all these people that show them how to get the deal, but there’s nobody to show you how to create the wealth.
And they never, and I think that a lot of people, they don’t want to take the time to slow down, to speed up. They don’t want to take the time to educate themselves on how to actually get the wealth. They just want the wealth. And I think all of us want that, right?
We just want to make it happen. And unfortunately there’s people that have hands in your pockets, they want to make money off of you. They see the a-
Alex Osenenko: especially in this business,
Steve Rozenberg: absolutely.
Alex Osenenko: there’s a loosely say, there’s no rules-
Steve Rozenberg: there’s no rules. That’s the problem.
Alex Osenenko: You can put a syndication. You can announce syndication on this show and there will be people who will-
Steve Rozenberg: Absolutely [crosstalk 00:04:47]. absolutely. And you know the whole, like you had said, the whole goal of this show is not to talk about the glory of some of these investors that we’ve had on the show and going to have on our show-
Alex Osenenko: cause their shows like that. Everybody’s just coming in and-
Steve Rozenberg: everybody showing me how broke they are, how much money they make. I don’t want to know that. You know, we want to know and I want to know personally, like first of all, how did you get to where you are and how do you continue to drive yourself to be a better person, better?
You know, because a lot of people on the show are going to learn that a lot of the people that we talk to, the one common thread that you’re going to find with a lot of these investors is the balance of their personal life and how happy they are on a personal level, not just a fine, it’s not just a numbers thing of owning investments. They’re doing it to create a lifestyle for them and for their family. And it’s very interesting to see how people that are creating wealth and being wealthy, how they actually will continue to do it. They’ve already made the money. They don’t need the money. They’re doing it to keep the lifestyle that they want to have and the balance with their family, which is totally different than a lot of other fields and investment, industries that I’ve ever known of.
Alex Osenenko: But it’s also a gain.
Steve Rozenberg: Absolutely.
Alex Osenenko: Once you get-
Steve Rozenberg: it’s the thrill of the hunt.
Alex Osenenko: We spoke to Jay and we’re about to sort of J Scott, we’re about to announce like what this first series is going to be all about the first season I should say. But like the J Scott and I, he’s the thrill of the deal.
Steve Rozenberg: Oh yeah.
Alex Osenenko: he’s, well, he’s fine. He’s very happy like they, but like what are you going to do if you are not, if you’re not, if he is just sit there and enjoy me. I guess some people can go to the library and ski all day.
But the folks that will listen to the show, I think will find thrill of the deal. But also that, as you said, not just the deal thrill of the deal is like step one, but then it’s the day to day management.
Steve Rozenberg: Yeah. Yeah, absolutely.
Alex Osenenko: Of your portfolio. It’s-
Steve Rozenberg: It’s the all encompassing. It’s almost like you’re, you’re living not a mantra, but you’re living a lifestyle.
And we had a doctor, Dr. Steve on, right.
Alex Osenenko: Is an interesting-
Steve Rozenberg: [crosstalk 00:06:46] he’s a doctor and he owns a lot of real estate. Has no desire to quit being a doctor. Very successful. And so-
Alex Osenenko: wait, wait, no, no, no, no. He wanted to quit. That’s why the whole episode was about, don’t you remember? He actually-
Steve Rozenberg: I thought at the end he said he didn’t want to quit. So we got him there.
Alex Osenenko: But, so this is very interesting episode and look forward to that episode.
Steve Rozenberg: Yeah, that was a good episode.
Alex Osenenko: There’s the MD, like legit one of the best doctors- [crosstalk 00:07:09]
Steve Rozenberg: Put himself in medical school [crosstalk 00:07:10] on his own.
Alex Osenenko: Oh yeah, Oh yeah. Is this fascinating story. And what happens is he now wants to go real estate full time just because he loves-
Steve Rozenberg: he loves it.
Alex Osenenko: He loves the dynamic of it, he understood it. He is the kind of guy, like he went through the pilot school. He’s the kind of guy who put his mind to something and just get it done.
Steve Rozenberg: Did it.
Alex Osenenko: He’d be like a top 1%.
Steve Rozenberg: Yeah, absolutely.
Alex Osenenko: But he wants to quit MD and be… So eventually I think where we got with him, I’m not going to give too much away.
Steve Rozenberg: Don’t give too much.
Alex Osenenko: but there’s an opportunity for him to continue practicing medicine and a lot less intense way.
Steve Rozenberg: Yeah, because he doesn’t need the money. Cause he does it. He’s doing what he loves doing and money’s not a problem. And so that’s what you’re going to learn with a lot of these people. And what we’re trying to extract from the show with a lot of these guests is that you’re going to find, there’s a lot of people that have different work life balances that are very successful. Some that money is not the driver, but they are successful, but that doesn’t drive them.
And so it’s going to be a way that you as an investor or aspiring investor or experienced investor, whatever it is at your… Wherever you are in your stage of your career. You’re going to look at that and maybe do some self reflection and kind of go, Hmm, I wonder how this applies to me. I wonder if there’s some things that I could do better. I could do different. Maybe I can’t do any of these at all, but I think that you’re going to do some self reflection on that from these people that we talked to. I’m very unassuming but very successful and I think you’re going to get a lot of very good takeaways from that. Just like you and I did because you had a business, right? You owned a business, you removed yourself from that business and joined another company.
There a lot of self reflection that has to go on before you do something like that. Right?
Alex Osenenko: I mean it’s incredible. So let’s shift, let’s shift to that part of the conversation. By the way, those of you folks listening or watching, if you’re watching, thank you. You can just go into the next episode, if you want to get dig into the content and stuff. But Steve and I will talk about next is very quickly talk about how to actually get started. So I think those of you who have not, maybe you want to stick around a little bit, there’s a mental shift that has to happen. Like I didn’t use to believe in any of that Voodo sheesh, right? To me it was all, it was just like-
If you are smart enough if you work hard enough, you get there.
Steve Rozenberg: Right.
Alex Osenenko: You get there, you work hard enough. You’re smart enough, you’ll get there.
Steve Rozenberg: Yeah. It’s not always the case.
Alex Osenenko: No.
Steve Rozenberg: I know a lot of smart people that make [crosstalk 00:09:31] no money and they’re not happy either.
Alex Osenenko: It’s not even about money. Right? It’s like, you know what the doctor wanted to… Dr. Steve wanted to make a move. I think, I mean I clearly remember there’s a lot of administration stuff.
With his profession [crosstalk 00:09:46] that he just doesn’t… With real estate frees him up to do what he loves. With doctoring, he wants to cure people. He loves that.
Steve Rozenberg: He loves it. He loves… He was saying, he loved being there when a baby is born and even when somebody passes on, he feels like he’s a part of that. It’s something almost holistic. He said that you’re a part of this whole cycle of life.
But if you’re just sitting there trying to get a paycheck. You’re not even paying attention to that part of the job. Which is probably why you even got involved in being a doctor in the first place. Or you know, Jay Scott, right? He’s, got race horses, right? He spends so much time with his family. Brandon Turner, you’ve got all these people that we know that are just so focused on doing what they want to do. They can enjoy their family because they’ve taken those, I don’t even want to say calculated risks, but they’ve been so smart and understanding what their next steps are because they’ve watched shows like this. They’ve educated themselves. Sure, they’ve made mistakes. We’re all going to make mistakes.
You know, it’s not a failure unless you learn from it. If you learn from it, then it’s a lesson, right? I mean, but it’s just one of those things. And I think what we want to unpack in these shows is why these people are being successful and how you are just like these people. And you can be successful too. You’ve just maybe have to change your mindset and think a little bit differently. Would you agree?
Alex Osenenko: Yeah, I would agree and the passion plays into it. I’m just wondering like I want to first step this out or point 0.01 episode. I want to introduce our behind the scenes guy. Dan, I’m just curious, Dan, are you passionate about the video? I mean, you out there fill me-
Steve Rozenberg: You look passionate.
Alex Osenenko: You sipping on a Corona. You look a little passionate there Dan. Anyways, so Dan is our… You’ll see the quality of what we produced.
Steve Rozenberg: Yes, absolutely.
Alex Osenenko: That will be his top-notch quality.
Steve Rozenberg: It’s going to be top-notch quality. It’s going be the level of people we have, the thought processes we have, the access to educational levels that we’re going to be able to bring in. I mean, I think it’s going to be bar none, one of the best, if not the best shows that are out there with current constant education at a ground level. I think.
Alex Osenenko: Let’s talk about this. Let’s… we promise this, let’s talk about this. Let’s talk about your move that you made.
Steve Rozenberg: Why am I first.
Alex Osenenko: I don’t know cause I’m the one speaking.
Steve Rozenberg: Okay, fair enough you be first.
Alex Osenenko: I’m the one asking the question. And so you’ve made a significant move. So I’ll give a quick pre-story.
You’ve been an investor and I’m going to move out the chair for a second cause I want to grab your book. Oh, we’re using it as a coaster.
Steve Rozenberg: Yeah, They threw it on the floor. [crosstalk 00:12:16]. It was on the way and they threw it on the floor.
Alex Osenenko: So there was kind of-
Steve Rozenberg: A lot of respect-
Alex Osenenko: [crosstalk 00:12:21] to throw it in my face.
Steve Rozenberg: for my workings.
Alex Osenenko: Hey you sign my book, we’re not selling any books.
But the idea is, he was a failed investor, Steve, because it looked good on paper and they kept on buying it and when it didn’t work, you know what was a good idea?
Steve Rozenberg: Buy more of them. Buy more, why not?
Alex Osenenko: Buy more and so from there he said he couldn’t manage it. So started a management company, very successful Gouda company to 900 properties that can manage.
Steve Rozenberg: 900 doors. Yeah.
Alex Osenenko: In Houston and all of a sudden the things like he’s one of the fastest growing companies in Texas.
Got like 500s of five-star Google reviews. I mean, absolutely dominating. And guess what happened? Steve decided to make a move and partner with mine. So in other words, essentially sell his company to mine. In order for a chance to join and become host of this show. That was a big deal, wasn’t it?
Steve Rozenberg: Absolutely. It’s to me again… I’ve always learned in my life and this is something I think a lot of people can take away. What gets you here is not going to get you there. You and I have had these conversations and I think life and someone told this to me one time and it really resonated with me that life is like a book and you have chapters and there’s a chapter that could be a great chapter, but at some point that chapter ends and when that chapter ends, a new chapter begins and you don’t go back to that chapter again. And the company, Pete Neubig and I built and the team that we had. It was a great chapter and it got us to the next chapter and the next chapter is going to be better chapter.
And that’ll be a chapter after that. And I think that’s life. And I think that a lot of people never flip that page and they never move on to the next chapter. And maybe they slide backwards. And so I think the biggest challenge, the thing that I learned was this is just part of the growth cycle. It’s like leaving high school, right? We all know friends in high school that never left high school. They’re still, they’re mentally talking about the days of high school. They’ve never left there. And so a lot of people, same thing in business, some people just do not want to leave the comfort zone of their business. And look, you read these books, you do the audios and you hear like, you know what, you have to be comfortable being uncomfortable and that’s all well and good until you really are uncomfortable.
And now you’ve got, it’s like the rubber meets the road.
Alex Osenenko: That’s growth, that’s when the growth happens
Steve Rozenberg: It’s growth. You have to be okay. And at some point you’ve got to say, you know what? I’m going to trust the process. I’m going to trust my education. I’m going to trust everything I’m doing. I’m going to shut this chapter and I’m going to move onto the next. And that, that’s kind of what I did. I just… I trusted the process. I trusted you. The people at mind, everybody that was involved in helping us come over. I trusted it and I said, you know what? Based on educated calculated decisions based on everything that I think that mind will be able to provide for me and where the future is with mind. It was a no brainer. But there’s still that risk. You’re leaving your own company that’s doing fine. That’s very successful.
Alex Osenenko: No brainer. People say that in a rear view mirror, it’s no brainer. When you in the-
Steve Rozenberg: When you’re in the turn, it’s not as easy.
Alex Osenenko: Remember we talked about your role, so now you’re VP of investor education. We’ve talked about your role. We had a lot of back and forth. Those emotional moments. It’s difficult guys and girls it’s definitely difficult.
Steve Rozenberg: Not easy.
Alex Osenenko: Can I unpack something you said?
Steve Rozenberg: Sure.
Alex Osenenko: You said there’s a chapter. I love that, by the way. You always teach me new things. Oh, it’s mine now.
Steve Rozenberg: Dan quote that.
Alex Osenenko: So it chapters, how do you know this is, I sometimes have problems with this. How do you know when the chapter is coming to an end? Is it when you see a new opportunity, and it’s like, Whoa, you know, it’s it. Like how do you know when the chapters ending, how not to hold on for too long [inaudible 00:15:58].
Steve Rozenberg: You know, I think that’s different for everybody, but I think sometimes the chapter closes already and you don’t realize it. Like your chapter… you may have a chapter that’s already closed and you are just not accepting that it’s closed. Sometimes when we’re… When you’re in the heat of battle and you’re kind of in the weeds. And again, this chapter this… The books over the book, the movies over, right? The, the credits are rolling and you’re still sitting there not leaving the movie theater. Right. And so sometimes we may not want to it accept that that chapter is over in our life.
Alex Osenenko: Do you have an example, by any chance, can you think of an example of someone you know. You don’t have to name names. Or maybe yourself where you sort of overstayed your welcome per se? I mean-
Steve Rozenberg: I never overstayed my welcome.
Alex Osenenko: You wheeled in a bag today, your airline bag into my house
Steve Rozenberg: Yes, yes, yes to my house. And he said, are you staying here tonight?
Alex Osenenko: You did not tell me anything. Maybe we’ll cover that. But is there a chapter?
Steve Rozenberg: I don’t know that I have a chapter, I mean maybe I do that I don’t know about. But I think at… My thought… I’ve learned… I’ll give you a perfect example where I made a decision, a lot of indicators. So you know my, my being an airline pilot, right? So that chapter 9/11 that chapter ended, right? So for me now, I still stayed as an airline pilot, but after 9/11 there was a new chapter I didn’t want to… A lot of people did not want to accept it. So what did a lot of people do? They went down to South America to fly. They went over to Asia and they flew airplanes at a quarter of the income that you are making as a U S airline pilot. Why? Because they didn’t want to accept that things were changed and they didn’t make the decision to flip the page and start a new chapter.
I said, you know what, I love being a pilot. However, I’m not going to let this dictate me anymore and what I’m going to do is I’m going to take control of my future and start learning about real estate. A lot of other people said, I’m going to Korea. I’ll be there for three years flying small planes until this thing weeds itself out. To me, that’s not accepting that the chapter has ended. So that’s the best way I could describe how a chapter can change and you not accepting that it’s changed. Because all the indicators were that the airline industry as a whole will never be the same again.
Alex Osenenko: That’s very good.
Steve Rozenberg: So that, that’s how I would basically essentially say that’s how you know it, but enough about me. Let’s talk about you Alex.
Alex Osenenko: Dude, I can’t believe like, I can’t believe how like we’ve done podcasts in the past, but I can’t believe like how this is connected because I was just going to say, Dan, stop the recording for a second. Steve, why don’t you ask me about me now? We only have 20 minutes to this 0.01 episode. We want to be respectful to the audience. They don’t want… us yammer for 20 minutes. They want to get into the meat of what this is all about. Which is top-notch education validated with a couple of guys .
Steve Rozenberg: So based on this conversation, we’re talking about people making a decision and moving on and things happening, right? So you had a company, right? You had a very successful company, still do, still have the company and you made a decision to basically essentially remove yourself and join mine. Right? Essentially he’s my boss, so I got to be somewhat nice to him, I guess. But you know, basically you, you made a decision, right? And calculated or not the chapter ended, right? Some chapter ended and again, it’s not just you, right? You’ve got a wife, you’ve got children, there’s a whole trail behind you that are affected. There’s a ripple effect, right.
Alex Osenenko: There’s also people in the current, in the company I left
Steve Rozenberg: in the company left. Yeah. The allegiance going, Hey, where’s Alex? Alex, you know, and so there’s, maybe a guilt factor at some level to go, man, how do I do this? Am I doing the right thing? Am I being selfish? Am I being, am I doing the right thing for my family? How did you unpack all that and go through those iterations mentally?
Alex Osenenko: Definitely a lot of guilt. Definitely a lot of sort of second guessing yourself. That’s, I think that’s all normal. But like you will laugh. Maybe a stoicism is something that I am sort of investing in right now. My sort of mental resources and Tim Ferriss is my favorite podcaster and he’s big. He wrote this book, the Towel of Seneca and anyway, it’s very interesting philosophy on how to sort of deal with change. But the way I think about this is, one life. I think I learned it from you. Like you only have like 4,900 whatever however many-
Steve Rozenberg: 4,400 weeks is the average person lives.
Alex Osenenko: Yeah. 44 that’s it?
Steve Rozenberg: 4,400 weeks is the average person [inaudible 00:20:29].
Alex Osenenko: Blink of an eye baby. So yeah, if you not like take an action now. Like when opportunity came about Mynd CEO and I had a great podcast on my previous show, The Property Management podcast, and we connected really well.
We’ve sorted started talking and we will find out this company is going to crazy things. Somebody is going to figure out how to do… How to become like the South West of property management. Zappos of property-
Steve Rozenberg: There we go. I mean I don’t fly for Southwest so [crosstalk 00:20:59], but I get it. I get your point. The Google of the search engine how’s that.
Alex Osenenko: Yeah… I like to be… Yeah… Okay… So yeah… Not we work. Different, but too soon. Yes. Somebody is going to figure this out. I loved the team, I loved the direction. I loved the company. They have access to capital. Smart people. Smart boys and girls work with us. And look, Steve and I have a chance to create amazing things and my passion is to teach. I love teaching, running company is, I love it. But the creative part of directing the strategic… I guess direction of the company and teach and coach the team.
And our future customers or just listeners or just audience. So anyway, that’s why I’m passionate and so for me like just let me take a quick shortcut cause I could talk a lot about this. This was very difficult decision but, and I left a lot of people behind. I don’t necessarily feel great about everything that I’ve done, but I think, I think to me the important thing is no fear. You can’t, you’ve got to remove fear and being more deliberate about this. That’s number one. And number two, it’s a game. It’s a game. You get 4,400 weeks to play it.
Steve Rozenberg: That’s right. That’s it.
Alex Osenenko: I will make the moves that I need to make for my family. But as well as I’m not going to be 39 to 40 again.
Steve Rozenberg: Yeah. You can’t go backwards and you can’t be afraid to step off that ledge. You educate yourself and you learn how to step, but you cannot be afraid to take that step. Now you’re going to have, critics are going to have criticism. You’re going people that second guess you. You’re going to have all of that.
Alex Osenenko: Just the comments on the show. We’ll show that there’s a lot of people really unhappy with my decision. A lot of people that wished me well and very, very happy but-
Steve Rozenberg: Yeah, I think more the latter. I think a lot of people want to wish you well. I think all of us, I mean, I think, you know, there maybe there’s some people that kind of go, man, I kind of wish I did that. Deep down. I mean I think there’s a lot of that. So, I think just to kind of wrap this up, I think what we’re trying to get across as Alex and I are really going to dig deep in these shows with these investors. We’re going to ask them those questions-
Alex Osenenko: Hard questions.
Steve Rozenberg: Hard questions. We’re going to ask them some self-defining questions and we are going to have some definitely solid industry players that are here. Maybe not here in this studio, but in our studio. We, we’ve got some, some bigger pockets content. We’ve got a lot of stuff that’s really going to unpack and really asked people, how do you do it, why do you do it, how do you keep doing it and how are you getting better? And those are the kind of concepts that we’re going to go through.
Alex Osenenko: So until then, enjoy the rest of the season. We love to have you as a listener to drop us a line or comments to this show. We’re always happy to hear if you… There’s any specific thing learn what’s our Facebook group.
Steve Rozenberg: The Mastermind Real Estate Facebook group. Definitely join that. Cause there’s a lot of people in there.
Alex Osenenko: It’s a private group though. So you got to go through a little bit of a quick here interview questions. I need to ask questionnaire. We want to make sure like real people-
Steve Rozenberg: We want quality people. We don’t want people selling stuff in there. We want people to actually want to learn or want some resources to answer some real estate questions cause that, that’s what it’s about.
Alex Osenenko: And speaking of selling that one thing, you can be assured, we’re not selling anything yet. The beauty to be funded by a large company and growing and thriving company like Mynd, we don’t have to sell anything. Nobody is going to sell you crap on this show. Mark it now and enjoy the rest of the season. Thank you very much for tuning in.
Steve Rozenberg: Make sure you subscribe to our show and make sure you go to our landing page. We’re going to have shows dropping all the time on Fridays is when our shows are going to drop. Make sure you’re paying attention. Join the Facebook group and you’re going to get a lot of good content information from all different walks of life and all different types of investors. So again, make sure you subscribe it, write it on your hand, do what you got to do, but make sure that you know, our shows are coming out here.
Alex Osenenko: Write it on your hands.
Steve Rozenberg: We’ll see you guys.
Alex Osenenko: See you late

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Fitting Work Around Life with Tarl and Grace Yarber

Tarl and Grace Yarber discuss putting their life goals first with Steve and Alex in Nashville attending the Bigger Pockets Convention 2019.

Fixated Real Estate (Tarl and Grace) is a Seattle, WA based real estate investment company specializing in volume fix and flip, buy and hold, and BRRR single-family properties throughout the Pacific Northwest.

Watch the Podcast Here

Full transciprt

Alex Osenenko: Boys and girls, welcome to another episode of the Myndful Investor Podcast Show, Steve and Alex here. Very excited. On the show, we have a phenomenal guests line up. We went to Nashville.

Steve Rozenberg: Yeah, BiggerPockets Convention.Alex Osenenko: BiggerPockets Conference. Those of you… If you are on Investors World and you don’t know who BiggerPockets is you’re not really serious.
Steve Rozenberg: You’re not in Investors World.
Alex Osenenko: Yeah, you’re not serious about it.
Steve Rozenberg: Yeah, not at all.
Alex Osenenko: BiggerPockets is a community. Enough said, everybody should know that name. Millions of people do in fact. But we had the interview with your friends.
Steve Rozenberg: Yes, Tarl and Grace Yarber.
Alex Osenenko: One of the key takeaways I had from the interview experience was how to operate as husband and wife. How do we separate the work, how to be passionate, enjoy the work, but don’t… Find a way not to butt heads, find a way not to dominate the other person. It’s real true partnership. To me that was fascinating because my wife and I worked together in a previous company and we still may work together. We are in a similar business, right?
Steve Rozenberg: Yeah.
Alex Osenenko: In marketing, broadcasting and stuff like that.
Steve Rozenberg: I think what you’re going to take away from this is, number one, how they can assign-
Alex Osenenko: That’s number two by the way. I know, I just gave number one.
Steve Rozenberg: Okay, so number two. But mine’s number one for me. You’re going to learn how they, as Alex said, how they operate together on work, on their strengths. But more importantly, the thing that you’re really going to take away from this is the fact that they have their life first and they have their business wrap around their life. Most of us do it the other way around. They’re very cognizant of that. They take over a hundred days a year of vacation, they’re very, very successful in the real estate industry, they have fixated on real estate group, and they have a huge events company. They do these huge expos on top of everything else. I mean, they’re like the dynamic couple man.
Alex Osenenko: Without further ado, let’s get into the show. Here we go.
Steve Rozenberg: All right, we’re here at BiggerPockets and one of the best things about coming to these conferences is you get to hang out with some amazing like minded people, and I get to talk to my very good friends that I’ve known for years. We talk real estate, we all know real estate, we’re involved in it. Tarl and Grace had been a… They’ve been a huge impact for me, we’ve been great friends. I’ve spoken at their conferences in the Pacific Northwest. Very good friends. Guys, thanks for being here today. I just enjoy every time the energy of you guys. It’s really cool. I really appreciate you guys always blessing me with your day. I guess I…
Tarl Yarber: Well, it’s almost like we’re the best thing that ever happened to you.
Steve Rozenberg: You are the best thing that ever happened to me.
Alex Osenenko: As for me, I don’t know Tarl and Grace at all, but I’ve heard a lot of good things about them. As our audience, they’re probably sitting on the edges of their chairs now figuring out, “What is this episode going to be about?” What it’s going to be about is this. You guys seem to be a power couple, they say, but you work together. This is interesting. You probably had jobs in the past, you quit those jobs and you decided to do business, decided to do it together. You’re doing it well and you seem like at least tolerate each other. Which is obviously-
Steve Rozenberg: At least for this episode.
Alex Osenenko: No, but you seem like you’re really into each other, which is awesome. So maybe other couples out there can learn from you. We want to sort of explore that out.
Steve Rozenberg: Let’s just start. You guys are in the Seattle area, Pacific Northwest, and you guys have different avenues that you do, right?
Tarl Yarber: Mm-hmm (affirmative).
Steve Rozenberg: You guys do… Well, are you doing the flipping and rehabbing or what do you guys actually doing now at this point?
Tarl Yarber: Right now we’re still focused on single family, fixed and flipped with an emphasis on keeping them at the end. We do a lot of what’s the birth strategy. Buy it, rehab it, rent it, refinance it, repeat. We haven’t changed much in our business model over the years. We’ve done little close to 600 flips so far, but at the end of the day, over the last two years, we’ve been keeping more and more of them. It’s basically, instead of selling it at the end, we just refinance it and keep it as a rental. It’s a different strategy for us, but we’re actually doing less volume than ever because we decided to live a more lifestyle business. So we travel a lot for the last two years.
Steve Rozenberg: Yeah. You guys are everywhere. But before we talk about the lifestyle, what was the reason that you guys went from the selling to the keeping it holding?
Tarl Yarber: Well, ultimately, we both have our different reasons. But ultimately I was working a ton running the company, Grace was a C level at a tech company and she was working with them. We just got to a point in our lives where we were just going different paths and all we… If you ever asked us what we wanted in our lives at that moment, it was just to be together as much as possible. I, at that point, realized I was doing real estate for no other reason just to do real estate and just make money. I’m like, “What can we do to change our lives? What can we do to change our path so we can actually live a happy life, where we actually enjoy each other’s company and go be together all the time?” We sat down over the course of a few weekends and we figured out what we really wanted out of life. It wasn’t much the financial side, it was more the experiences and life side. We made a plan then for…
At that point, Grace to quit her job and then… Well, it was only like, two weeks later. She went full-time in the business but with an emphasis that we would actually reduce her volume, go straight passive as much as possible and then go live our life every day more in the travel aspect and fun aspect. I mean, you don’t need to make a lot of money to be able to live the life that you really want for most people.
Steve Rozenberg: Sure.
Grace Yarber: If I may, I thought if I can add to Tarl’s thing. We really have that why reasoning to… Some investors that I began networking when I came to real estate about four years ago when Tarl and I, we started getting together as a couple. A lot of people, I think, have association saying like, “Hey, W2 job is bad.” Investments are good. I think I want to emphasize this. Whatever that is, your end goal, whatever where you’re headed, I think that’s what important is for couple or an individual to emphasize what that is, right?
Steve Rozenberg: Yeah.
Grace Yarber: Versus being like, oh no. You have to quit W2 job in order to be happy and to really have that end game. I think what it was to us in our relationship, it was like a little bit delayed because I was actually happy with what I did. I was challenged at the job because I get bored so fast in any activity that I do. I was working for a software company and I was actually enjoying. Then people used to ask me, “When are you quitting?” I’m like, “Why would you would I want to quit?” They say, “Because your wife Tarl Yarber. You guys do investments.”
Steve Rozenberg: You’re the wife of.
Grace Yarber: Yes. But I can still part-time manage our rentals while I’m being very fulfilled in my full-time job. But then it was like a big aha moment and be like, “Okay.” We merged our… Like two separate people together as a couple in marriage that all we want is just to be together.
Steve Rozenberg: Right.
Grace Yarber: That was the ultimate an answer to us. We’re like, “Wait.” Okay, even I enjoy my life as in W2 job, plus the investments, but the wake up call was like life is yucky and sticking, right? Will we be happy a year or two years from now if our day-to-day life how it is today. That was a thing, that ticking point. I’m like, “As much as happy as I am, my top priority is to be together.” I said, “We have to plan exit strategy how do I get out of my job.”
Steve Rozenberg: Wow.
Grace Yarber: That’s my [inaudible 00:07:41].
Tarl Yarber: And everyday since then we’ve been together. Everyday except when you went to Europe for three weeks with your mom.
Grace Yarber: That’s right.
Tarl Yarber: And I went to Mexico with Buddy and [Stach 00:07:49]. But other than that, for the last two years we’ve been together every day.
Alex Osenenko: That is fascinating. You’re setting as a company would set these large goals, these five year goals. As a family you got together. I just listened recently to one of Tim Ferriss’, I’m a big fan of Tim Ferriss and his podcast. Yet I can’t remember… I’m terrible with names. But the guest was talking about this family planning same as business, same level what you guys just did. That fascinated me. You’ve done this. Takeaway’s number one, sit down with your significant other and decide what matters to you most. It could be the W2 job. Could be, or it could… You just decide to do-
Grace Yarber: Or it could be a business partner. It could be anyone that you work with. Like, what is your end game? What is important to you?
Tarl Yarber: The key factor for us was a moment at the end of 2017, where I’d come to a crossroads on a lot of our business. I was burning out and Grace was… Grace and I wanted to be more together. But it wasn’t until a buddy of ours named Stach, that we really, really, really respect, very, very successful. He had transformed his entire life to be more of a lifestyle as well, but he had said something like… You hear statements in personal development, business and if you’re not ready for that statement, you just kind of pass on with your life. Whatever rate you don’t hear it.
Grace Yarber: So true.
Tarl Yarber: It was at a moment in October, 2017, where he’s like, “The problem is most people plan out their entire business, design their entire business and have a plan for that and then whatever’s left over, they put their life into that.” So they plan their life around their business versus-
Alex Osenenko: Sounds familiar.
Steve Rozenberg: Yeah, think we all do that.
Tarl Yarber: He’s like, “It’s so easy.” He was like, “Why don’t you plan out what you want in your life first and figure out what do you want your life to look like and when do you want your life to be, and then go plan that out and whatever’s left over, make your business fit that.” And I’m like [crosstalk 00:09:43].
Alex Osenenko: Profiling.
Steve Rozenberg: Yeah, it is.
Tarl Yarber: Make your business fit the life that you want? I’m like-
Steve Rozenberg: Is that possible?
Tarl Yarber: As soon as he said it, I’m like, “I could do that. We could easily do that actually. Why aren’t we doing that?” That’s what lead to us sitting down over a few weekends.
Grace Yarber: That was… Yeah.
Tarl Yarber: We designed everything we wanted and now we actually live like… There’s a bit of times where, be careful what you ask for too because we planned out exactly what we wanted and then, I remember four, five months later, we lived everything we wrote out and we were bitching about it. Because we were like, “We got this to do. We have to… Oh my God, we have to do this now. Now we have to go there, we have to do that.”
Grace Yarber: As in we have to-
Tarl Yarber: I’m like, “Wait a second.”
Alex Osenenko: This is not a to-do-list?
Tarl Yarber: Yeah.
Steve Rozenberg: What is the point?
Tarl Yarber: But this is exactly what we wanted.
Grace Yarber: It’s like coming to for actions. There was the recognition and awareness, that mindset.
Tarl Yarber: We started laughing about it too. We’re like, “All right, we need to chill out.” Let this [inaudible 00:10:31].
Grace Yarber: To me, that to embraces and be much happier even though we were having so many things in business successfully happening. Everything we wrote on [inaudible 00:10:40].
Steve Rozenberg: Now you guys, before you we’re saying, you guys traveled so much that you’re kind of tired of traveling, right?
Tarl Yarber: Mm-hmm (affirmative).
Grace Yarber: That’s right.
Steve Rozenberg: Pair that back a little bit.
Tarl Yarber: Over the last two years, last year, 2018, we traveled 102 days, pretty much all for fun. Then this year we’re on track for… We’re at 89 right now. We’ll be at 127 by the end of the year. Based on-
Alex Osenenko: 127 what?
Tarl Yarber: Days.
Steve Rozenberg: Days.
Alex Osenenko: Oh wow. Okay, days a year.
Tarl Yarber: Days of the year.
Steve Rozenberg: Let me ask you this, how do you guys… For people that are married and they want to get to where you guys are at, what advice would you give a married couple that, let’s say they’re both W2’s and they’re like, “Man, I want to start my own business.” Whether it’s real estate or not. Real estate is just the product of what you guys are doing, but there’s still the marriage of you guys coming together and having that conversation. Where do couples even have that initial conversation to realize that they’ve got to take a step further?
Grace Yarber: I think the most important thing is like, a lot of people get attracted by the highlights, by the HD TV. That’s how you flip the house fast, right?
Steve Rozenberg: Yes.
Grace Yarber: It’s really just being true to yourself and allowing that space to really think for yourself and then bring in that significant other. Whether it’s your business partners or a spouse, in our case.
Steve Rozenberg: Sure.
Grace Yarber: I think that’s super, super important. We even met one couple in Seattle, very successful jobs, but they were just very attracted to investments and they have a capital. They want to be investors but then you start challenging them. Be like, “You guys are doing so well what you already do. What is your why?
Steve Rozenberg: Right.
Grace Yarber: Why you even want to do that, right?
Steve Rozenberg: Mm-hmm (affirmative).
Grace Yarber: Do you want to be a passive investor? Do you want to give your money to syndication? It could be any of the exit strategy. I think that’s a number one thing. Then, it’s really finding out, do both of you need to be in a business, right?
Steve Rozenberg: Sure.
Grace Yarber: It could be just one really taking charge and just leading the way.
Tarl Yarber: And what are your strengths?
Grace Yarber: Strengths and weaknesses.
Tarl Yarber: Absolutely. The big thing for us, what makes us work well as a couple is that we have very clearly defined lanes. When Grace was going to quit her job, she was just like, “I am not coming to work for you. It was business.”
Grace Yarber: Oh, before we planned on the exit strategy I’m like, “I’m not leaving my job.” Because I’ve seen that and I think a lot of couples can relate to that.
Steve Rozenberg: Right, then it gets to resentment and that’s, yeah.
Grace Yarber: Yeah. My marriage is my number one thing, I don’t want to create a challenge so that we are no longer even friends, right?
Steve Rozenberg: Yeah.
Tarl Yarber: Mm-hmm (affirmative).
Grace Yarber: That was a big, big wake up.
Tarl Yarber: I’m very, very, very fortunate to have a wife like Grace that can sit there and like… It’s challenging for some people to turn off the work mode and be husband and wife mode. For whatever reason I’m able to switch like, “Oh no, you’re my wife now. Now you’re my business partner. Now you’re my wife, now you’re my business partner.” Grace is very good at that too.
Grace Yarber: I’m getting better.
Tarl Yarber: She’s getting better everyday.
Grace Yarber: I’m more business-like, I get so driven. I’m like, “Oh, let’s just go and do this too.” I get very fired up.
Tarl Yarber: Yeah, we’re able to sit there and talk to each other and be like, “Hey, can we be husband and wife right now?”
Alex Osenenko: Guys, I mean, this is fantastic. This is, I think, a very advanced kind of tactics and strategies for families, or for husband and wife, for couples to plan. I want to get to the grind. I want to understand how you got here. This is a privileged spot to be able to plan these kinds of things and have you exited the C level job and probably… It’s not like you were making minimum wage. I mean, there was a… We have to replace that income or at least decide to live with less of an income. I want to understand the grind. Guys, give me some of the stuff here you grind through to get to that point.
Tarl Yarber: Okay. How about flipping 600 houses [crosstalk 00:14:23]?
Alex Osenenko: I have a question follow up, flipping 600 houses. Yeah, that’s a lot of work. How big is your team?
Tarl Yarber: Oh, right now?
Alex Osenenko: Well let’s go… Yeah, let’s go [crosstalk 00:14:33] progressively.
Steve Rozenberg: Let’s talk about how we got there then they pair down to be more strategic.
Tarl Yarber: The story though, truth be told, is like… Most of the story though is my story coming into it. Then Grace and I, when we got together, she met me when I was in the thick of a lot of stuff. Then she already had… She was a very independent woman. She already had her career. She’s like, “That’s great.” I’m like, “Cool, I got my thing, you got your thing.”
Grace Yarber: I’m like, “You do Tarl, I do me and then we’re very happy.” But then it was like the number of hours limited every day.
Tarl Yarber: She has her story when it comes to getting into real estate. But it started with… Basically, in a nutshell, there’s a lot of story here, but the short story portion of it is full-time in 2012 in real estate. I never did just my first flip, there was never that story. It was like our first eight and six or whatever. It just went. I was a partner in a service area management company for Fannie Mae based out of Phoenix, and I was living in Washington. I started running the Washington area for them. We started just doing a bunch of REO, REO fixers for Fannie Mae so that they would get them ready for listings for the REO agents during… Just tons of REOs at every grade. We started opening up in multiple states and we got to a point where we’re in seven states and I was flying around the entire US just opening up these markets. Because I wasn’t married, I didn’t have kids and I was really, really good at networking. I can fly into an area and open up.
Grace Yarber: You’re still good.
Tarl Yarber: Yeah, still good.
Steve Rozenberg: Still good.
Grace Yarber: He’s like a [inaudible 00:16:03].
Steve Rozenberg: Yeah.
Tarl Yarber: We were building all these relationships with all of the top real estate brokers in all the different states for REO. All the Fannie Mae, Bank of America, Wells Fargo, all the different ones out there. We were [inaudible 00:16:16] when and we were building all these relationships. Then we had all these contractors that we would have anywhere. In any state, we’d have 20 or 30 general contractors that were underneath our license to be able to work with Fannie Mae. We had all these boots on the ground, we had all these systems and then we just, me and my partners at the time, said, “Why aren’t we flipping any houses?”Then we just started buying houses but we didn’t understand how to raise capital. So we are giving away 80% of the equity to people and splitting it three ways, the 20% three ways thinking it’s cool. Because money was hard to get. We just kind of stumbled to this whole system of just buying all these properties in different states and that grew and grew and grew.
Then in 2014 in February we had a business partnership fallout. Where the other two business partners that were in the new entity, which was for flipping houses, pretty much, for lack of a better word, backstabbed me. It felt like two brothers that I’m like, “I’m going to go to war with forever.”
Steve Rozenberg: Yes.
Tarl Yarber: I was the naïve one apparently. It just… It rocked my world big time and it made me to where I’d never want to do real estate again. We had already done a hundreds of properties by them. It is a very short, condensed period of time. We would just go in. In 2014, February, that business partnership collapsed with me leaving it. I said I’ll never do real estate again. Grace and I were together then, she saw me that day when that happened, when I got… When I figured it out and I told the guys I’m out. I just didn’t know what to do with myself, so I went-
Grace Yarber: The worst of all was seeing how he was crushed.
Tarl Yarber: Oh, it was horrible. Yeah, this is like brothers.
Steve Rozenberg: Yeah, sure.
Tarl Yarber: I had to go on IKEA that night and just bought a bunch of Ikea furniture [inaudible 00:17:48].
Alex Osenenko: I think so.
Tarl Yarber: I didn’t know what to do with myself.
Steve Rozenberg: That’s the best thing and they [crosstalk 00:17:51].
Tarl Yarber: Grace comes over and she sees a bunch of drawers and things together.
Grace Yarber: Furniture.
Steve Rozenberg: Drawers and certain things together.
Tarl Yarber: I’m just fixing stuff, drinking and stuff.
Steve Rozenberg: I think that’s about the time I met you, right? Is that… 2015, I think, is when you and I met.
Tarl Yarber: Yeah, this is 2014.
Steve Rozenberg: It was after.
Tarl Yarber: I was out, I was never going to real estate.
Steve Rozenberg: Oh, okay.
Tarl Yarber: Six months later after traveling, drinking and playing video games, I got sucked back into real estate by some buddies, and that led to us creating Fixated Real Estate. I started on my own, but I was just helping buddies out with some stuff. Then eventually, some opportunities came out to where we just started buying a lot more properties internally for my own company, then Fixated Real Estate got created. For the first time in my life, I did one thing and one thing only in 2015, and that was flip houses. All the other years prior, I always had multiple businesses going on, multiple consulting things, multiple like ventures. I was successful, but I didn’t achieve great success until I only focused on one niche. And that was Flip. Then I got really good at that and now we’re adding onto it and it just progressed. When I get bored I start new things. Like, we started an events business too and [inaudible 00:18:55].
Steve Rozenberg: But all the things that you’re doing are very good. Because I think because you, I’m guessing, because you focus on that one thing that you’re doing at the time, right?
Tarl Yarber: Yeah.
Grace Yarber: I think the lesson is really like, we as humans if something happens, even the moments when he was crushed and the partnership falls, he was like, “Oh shit, this is so bad.” But I think it’s like as a human, sometimes it’s good to reflect. There’s a very famous video, it’s called Good, by Jocko Willink, it’s like what is good… Just YouTube it.
Tarl Yarber: Yeah, what bad thing that happened to you that you can actually look at as a good thing.
Grace Yarber: That you can turn into what is good out of it, right? It’s like a… I think it’s a big lesson that we always… Anything that’s unpleasant happens in our lives.
Steve Rozenberg: Sure.
Grace Yarber: Personal business, we always switch around. It’s like, “What do we get good out of it?”
Steve Rozenberg: Right. What lesson.
Grace Yarber: Yeah, but surprisingly how our mind then begins focusing on good stuff.
Steve Rozenberg: Right.
Grace Yarber: Because we can be in the rabbit hole, in the circles like, “Oh, my life sucks. Oh, it’s so bad.” Like under depression, all those things come up and, “Hey, investment world, investor life is not always a…”
Steve Rozenberg: Yeah, it’s a sand box of pain. Yeah, it’s [crosstalk 00:20:01].
Alex Osenenko: This is what a stoicism… I’ve been learning stoicism.
Grace Yarber: Stoicism is huge, yeah.
Alex Osenenko: It’s an amazing set of technique or…
Grace Yarber: And raise the good, there’s so much…
Tarl Yarber: Or even…
Alex Osenenko: Just mental model. Like it’s not happening to you.
Tarl Yarber: Except through you.
Alex Osenenko: Right. You just need to be outside of it and just sort of explore it as you would outside of your own body and there’s a lot of points to the philosophy. But it helped me through some hard things. It certainly did. This is something that I think folks can look up. I mean, again, Tim Ferris is big on stoicism.
Grace Yarber: Stoicism.
Alex Osenenko: He has got this book that is given away for free, that people can read and will cite it in, show notes. But…
Tarl Yarber: I just want to emphasis one thing on what you just said. The best thing that ever happened to me want me was my partnership falling out, right?
Alex Osenenko: Ah, interesting.
Steve Rozenberg: Yeah.
Grace Yarber: That’s my point, yeah.
Steve Rozenberg: Later, that same partnership, the guys that got left it to they’re destitute now. I mean, they messed their entire one… One got into-
Grace Yarber: Drugs.
Steve Rozenberg: Major drugs and
Tarl Yarber: One got into a major drugs and prostitutes, not that he was prosecuted-
Steve Rozenberg: Now it got tough.
Grace Yarber: Not that you know of, right.
Tarl Yarber: Bad, bad drugs, the other person’s supervisor and he just ran the company to the ground. The best thing that happened I would have never created, but we had, if it wasn’t for them backstabbing me. You never know.
Alex Osenenko: They would always hold you back.
Steve Rozenberg: Yeah.
Alex Osenenko: What’s the premise behind fixated real estate and what’s the name? Where does the name come from?
Grace Yarber: That’s funny.
Tarl Yarber: Name came from a random word generator because I just needed an entity to be able to run some of our profit through from our other business. The sound like fixated or whatever that sounds cool. That’s pretty much all came from and then it just adapted to its thing. Now we have a meet up that we run called Fixated On Real Estate.
Grace Yarber: We had a… on.
Steve Rozenberg: Yeah.
Tarl Yarber: We got really creative there and then there’s no other backstory besides that.
Alex Osenenko: What’s the premise behind the entity? Is it just sort of your fix and flip entity?
Tarl Yarber: Fixated real estate right now is just our branding and we run no real estate through whatsoever because we used to and then but for asset protection purposes it’s too popular now. We run all our real estate into our other entities and stuff too, which we’re not going to say.
Grace Yarber: [inaudible 00:22:110].
Tarl Yarber: But for [crosstalk 00:22:09] is a branding now, so it’s already Ben’s business. It’s what we’re known for. You Google my name, it pops up everywhere. It’s what it is for our branding purposes only.
Alex Osenenko: Let’s talk about events. Steve, sorry.
Steve Rozenberg: Yes.
Alex Osenenko: Just one thing I want to dig a little deeper in-
Steve Rozenberg: That’s actually where I was going to go on this.
Alex Osenenko: Perfect. Maybe our listeners are thinking, okay I attended a lot of meet ups. Maybe I have some connections. I want to have deeper relationships with people around me. I want to create events. I ran three events myself. You are what, on your third or second?
Tarl Yarber: For annual. We’re going to have fourth.
Alex Osenenko: Annual fourth so you have some experience. What do you-
Steve Rozenberg: Then he does a lot of the-
Grace Yarber: Monthly meet ups.
Steve Rozenberg: Monthly meet ups as well in multiple cities now too.
Alex Osenenko: Very interesting. How do you peg the success? Because in my view, it’s hellish labor with zero appreciation, no love and no money.
Steve Rozenberg: That’s true.
Alex Osenenko: How do you-
Tarl Yarber: A little bit funny.
Alex Osenenko: I’m sorry, how do you judge it? Like is it good for you, as it has been? Have you guys figured it out yet?
Tarl Yarber: Awesome.
Alex Osenenko: Be honest.
Tarl Yarber: In the beginning, no it sucked. It was a lot of work. Like just you said, very little to no money.
Steve Rozenberg: Whoever came up with that idea and do an event.
Steve Rozenberg: That all right. [inaudible 00:23:23] since business started.
Grace Yarber: If I was never for profit, like, “Hey, you going to do it because you’re going to make huge margin.” That wasn’t like not a popular invention ever.
Tarl Yarber: Truth be told the only way to make real money in an events business for real estate is to sell from the stage.
Steve Rozenberg: Yeah.
Tarl Yarber: That’s the only… And we’ve done a lot. Our last event-
Grace Yarber: [inaudible 00:23:41] that they sell on stage and we liked it.
Tarl Yarber: There’s a lot of money to be made there. Our annually event, we’re at a 50% expense for it, so were 50% profit ratio on our annual event.
Alex Osenenko: I don’t know how you do that.
Steve Rozenberg: That’s great.
Tarl Yarber: Yeah, and one day we’ll talk about it, but there’s a lot to it. Now what we had learned from the last event, even though, we’re at a 50% profit for it, the amount of time, energy, effort, everything come from it, right.
Alex Osenenko: Hourly rate, you still get it at eight bucks an hour.
Tarl Yarber: Yeah, that’s right. What I’ve learned from it, we get more out of the indirect approach from doing the events, from all the different tertiary things than from the relationships and all the different strategic partnerships and everything than this next one that we do in 2020 for our annual event. We’re going to be more hands off in a sense where all hire marketing companies and do instead of us to be in the market for instance. And so, things that we can take off our plate to make it more of a cookie cutter approach and go like, “Okay, I don’t need to have a 50% profit right ratio. When have like a 20% instead.”
Steve Rozenberg: And had nothing to do with it less. Yeah.
Tarl Yarber: Have less to do with it. And the-
Grace Yarber: You’re buying time that we can be using for something else.
Tarl Yarber: To then emphasis back into our personal business and get the… We can spend more time focusing on promoting our stuff within the event versus, just promoting the event. So that’ll change things for us to make our lives a lot happier. We also turn our event to a profit. Obviously our nonprofit, a charity fundraiser as well, so we raised $230,000 on the last one.
Grace Yarber: Thanks to Steve [inaudible 00:25:06] has a given his time too.
Steve Rozenberg: Yeah, twice in this. The first one you guys did great, right? The first event, the first time you raised your money last year.
Tarl Yarber: 120,000 in the first year and 230,000 the second year.
Steve Rozenberg: Yeah, that’s great.
Tarl Yarber: That’s not including the profits so that’s all donation.
Alex Osenenko: That’s really cool.
Steve Rozenberg: Yeah.
Alex Osenenko: Grace, what do you think about events? It’s a lot of work. It’s very, very busy. Are you getting tasked with this or like who does most work?
Grace Yarber: I absolutely love events.
Alex Osenenko: I know.
Grace Yarber: I think that’s why we have such a good team. My main role in our investment business is managing our rentals, so events is another aspect where we’re both brought together and our team like we absolutely love. It’s a huge reward where you create any event that you can give back to community. We really believe in choosing to raise money for something like a local organization that we do due diligence on our end as well, such as Travis Mills Foundation that helps veterans post 9/11 that have maybe some ailments and amputees to come back to doing different adaptive sports or we really believe in that versus going and helping children in Africa as much as like here. We would like to spread, help everybody. But I feel like we need so much help at home here in the United States. That’s where our mission and the future organizations we will choose will be locally based.
Steve Rozenberg: Yeah. And Travis Mills, he’s got a home up in Maine. A whole thing that… Yeah. You guys had been there a couple of times or-
Tarl Yarber: Twice.
Steve Rozenberg: Now, is that when you got to fight Jocko or what was that?
Tarl Yarber: Yeah, I got Jocko. I almost had him.
Steve Rozenberg: Yeah, I saw that. That’s close.
Tarl Yarber: Yeah, it’s funny. Yeah, whatever. I let them get this one, because you don’t wanna roll with it. Dude, you’re just here with your idol. I’m like, “Man, stop it.”
Steve Rozenberg: Yes.
Grace Yarber: I’d like to give credit to Toro, like we listen to a lot of podcasts. One of Toro’s favorite podcasts is a-
Tarl Yarber: Besides this one.
Tarl Yarber: Besides this one of course.
Grace Yarber: Besides this one of course.
Tarl Yarber: Is Jocko Released [crosstalk 00:27:04].
Grace Yarber: Jocko Released and Jocko was interviewing Travis Mills actually who’s the founder of the organization that we raised the funds for. I remember Toro was so fired up. He was like, “I have no idea how, but we’re going to help this organization.”
Steve Rozenberg: That’s cool.
Grace Yarber: The power that podcasts have and reading that space and time to listen and learn from it, that’s so important.
Tarl Yarber: And we found out too, actually when we were just in Maine a few weeks ago for… That’s where Travis and Jocko was there. That one podcast episode that Jocko did for Travis Mills raised $500,000 for the Travis Mills Foundation.
Alex Osenenko: Wow.
Tarl Yarber: And we were at 350,000 of it, yeah.
Grace Yarber: That was two-three years ago?
Steve Rozenberg: That was awesome.
Tarl Yarber: But anyways, beside point. The event that goes full circle back. One day I woke up and I said, “We should do our own meet up, right.” We did a meet up two weeks later, we had 110 people show up to it because… And we just decided, I’m gonna just go do the meet up that I want to go to as an investor. Taking the Tim Ferriss approach of the audience as one first so Tim Ferriss talks about that with his podcast. He just wanted to do his own podcast for himself, like to interview people that way. Then I’m like, “All right, we’ll do the same thing where I meet up.” Then 110 people showed up the next month, 220 people showed up. And then I’m like, “All right, well I guess people want to do this.” So it just became a regular monthly thing and consumed us… Consumed me and Ashley because she still worked at her job at the time and as she took away from our real estate business and actually hurt us a little bit, right?
Because I was taking my eye off the ball because I was so focused on the new shiny object. And that we learned to adapt through that. It wasn’t actually until Grace was really full time that the events business started figuring itself out, because I might be able to bring the people but she’s the glue to everything, so she-
Steve Rozenberg: Grace runs the [crosstalk 00:28:47]. She does a great job.
Tarl Yarber: Yeah.
Alex Osenenko: A question, you manage events and that’s a lot of moving parts. I know it could be exciting, thrilling but it’s also like you got to be super well organized.
Tarl Yarber: Yes.
Alex Osenenko: Okay. Managing properties is kind of similar. What do you like more? Do you like manage… Managing properties is your thing or are you doing it because you have to and you’d rather do events?
Grace Yarber: Do you mean like real estate there’s not much excitement about it like I think that why [inaudible 00:29:13] be like so together on the same page, to me it’s a vehicle to our freedom. My end goal is like, “Okay, we would like to have a family and future children. I want to hustle and work to create that passive income.” Then I have a choice whether to work or like spend X number of hours with the kids or not. That it becomes a choice. Saying that like events, I think it has a lot of similarities when it comes to property management. Events are so much more exciting I think, because that’s where meeting Steve meeting you, anybody-
Alex Osenenko: Is that a complaint counter necessarily?
Grace Yarber: It’s so much lethargic.
Alex Osenenko: It’s not as bad, right?
Grace Yarber: He’s like, “Hey, I shared information. What I have learned. Like you sharing what’s happening in your life.” I’m very social so events business, it becomes like it’s not like a job or work.
Steve Rozenberg: It’s a fun thing.
Grace Yarber: Yeah.
Steve Rozenberg: I mean let’s face it. Property management, I don’t want to say necessary evil, but it’s people call when they have a problem. They don’t call you to say, this is great. When you’re doing an event, you’re building up to an exciting thing-
Tarl Yarber: [crosstalk 00:30:18].
Steve Rozenberg: Well, from my perspective, I’ve never put them on, but-
Tarl Yarber: Yeah, it’s exciting once it’s done sometimes.
Steve Rozenberg: Yeah. [crosstalk 00:30:29] at the events.
Alex Osenenko: You’ll see that you move people, but it’s like you always give back to the people that you are there. They’re upset of vendors didn’t get the right location. I mean, gosh, there’s so many things, like the chicken is not right, somebody who quit like it was in the middle of it. There’s so many things going on, but if you want your properties managed, we know what property manager in Seattle that can help.
Steve Rozenberg: Yes.
Tarl Yarber: Cool.
Alex Osenenko: Cheers.
Grace Yarber: Awesome, I can-
Steve Rozenberg: Enrique you ever heard of him?
Tarl Yarber: Yeah, Enrique [inaudible 00:30:56].
Grace Yarber: Cannot wait to hear. Can I give you want an example?
Alex Osenenko: Yes.
Grace Yarber: We were flying to BiggerPockets conference and that’s in Seattle. TSC agent you looks at me. He’s like, “Oh my gosh, you look so excited. You must be going on vacation.” I am flying to BiggerPockets Conference.
Steve Rozenberg: Yeah, I’m going on vacation.
Grace Yarber: So, I guess to answer your question a little bit, events are amazing. Especially like when you attend to other people’s events. It was like not, not as much stress like when we are hosting ours, I guess.
Steve Rozenberg: Sure.
Tarl Yarber: And even as investors or other people. If there’s not a networking, so important. If you’re not finding any place to go network, then you create your own thing. That’s what I believe in and just make it. Who cares about catering to everybody else. Just create what you want to go to. Then the people that are interested in the same things as you are, we’ll show up through it. The people that aren’t aren’t going to show up, why would you want them to show up because they’re not interested.
Steve Rozenberg: Yeah, true.
Tarl Yarber: Just create your own thing.
Steve Rozenberg: I think that when you go to these events and you meet people like Grace and Tarl, we’ll use your event. BiggerPockets Guys were there Brandon, I met Brandon. I met all the people.
Tarl Yarber: Scott was there.
Steve Rozenberg: Scott was there, and the next thing you know that led to doing a mastermind. And so, then two months ago, three months ago, we were all in Maui together doing a mastermind. Getting to know each other much more in depth and having conversations.
Grace Yarber: That was like one family [inaudible 00:32:11].
Steve Rozenberg: Yeah. Now everyone’s here and you know them and these are all people from all walks of real estate but doing something. But it was the event that actually got that whole thing started. So without that event, I would’ve never met all of the other people and it would not have led to what we’re doing today. So I see that as the plus of the events, but I don’t see the back end of what’s going on.
Alex Osenenko: Does the takeaway for the listeners here is like, “Hey, attend these high quality events that people recommend, like go to BiggerPockets, go to PNW.” Go to the respected events and from there you can network out to see other events. But my little tidbit on top of this would be, see if you can become a speaker because that’s the best. You don’t want to be invent host trust me, it’s hell. You guys are making painting, a pretty picture. I know there’s a lot of problems. You’ll love it, good luck finding somebody who loves it like that. But to be a speaker at an event, if you’re good at something, you probably need it. That would be the best status. You attend as a speaker, you get instant credibility, respect and you meet higher caliber people. You have deeper conversations. Steve’s always a speaker. Everywhere you go. Tarl, I don’t know if you speak a lot.
Steve Rozenberg: Yeah.
Grace Yarber: Besides my-
Alex Osenenko: Grace, you do speak?
Grace Yarber: Yes I do. Besides my husband, Steve is one of my other favorites.
Steve Rozenberg: Oh, look at that. Thank you.
Alex Osenenko: He’s heard this [crosstalk 00:33:27], he does not need to… Okay.
Steve Rozenberg: Yeah, I think, but it’s a good point. I mean, not even as a speaker, just going and being open to meeting people. I think a lot of times when people go to events, they always want to put on a persona that they’re bigger and more successful than they are. But it’s-
Alex Osenenko: Top dog.
Steve Rozenberg: Yeah, but if you go to an event and you’re just open with people and you can just talk to them. And you’re open about what you’re doing or where you want to go.
Grace Yarber: That’s the key.
Steve Rozenberg: People will be very receptive to helping you. And especially when… Again, just going back to the theme of this whole thing was you get a husband and wife doing something. If husband and wives want to go, they should go together because what happens? The husband comes back from an event and he tells his wife, we’re doing this, this, this and this and the wife’s like, “Oh, you went to a conference again.” But if the wife goes with him, then all of a sudden she starts seeing it, she gets it, she understands it, and then they do it as a team, right.
Grace Yarber: I agree. I met two couples today who approach like how I’m talking to my girlfriend and, do you remember the one guy from Ohio? He’s like, “Oh no, like she’s not in it.”
Steve Rozenberg: Yeah.
Grace Yarber: That’s because he’s here alone.
Steve Rozenberg: Yeah, exactly. But even if they’re not into it, but if they’re just here and they see what you’re seeing and they get the vibe and they get everything, at least when you go home, you understand it’s a support system and it’s irrespective of what if Tarl was doing all this and you didn’t want to know anything about it. And TarL was off running around doing BiggerPockets and conferences, you’d be like, “What are you doing? Where are you going?” And so there becomes the disconnect, right?
Grace Yarber: It might become friction into some couples as well because then it’s time spent elsewhere and you could be like a little kids and like football games are missed whatever, right? Then we realized like how much it takes-
Steve Rozenberg: Sure.
Grace Yarber: [inaudible 00:35:08] that business.
Steve Rozenberg: Absolutely.
Grace Yarber: And networking is the key, it has been for us.
Alex Osenenko: Just Piggyback on that. The number one reason why I believe anybody should go to these things is networking more than anything.
Steve Rozenberg: Yes, I agree.
Alex Osenenko: I think that I can say right now, 100% or 99% of the reason why I think I’m successful is because of networking and just meeting people and harvesting those relationships and building those relationships. And it’s been so huge over the years for our company in so many ways.
Steve Rozenberg: I couldn’t agree more. I mean, just your last event, the amount of people that I’ve met, that was what, six months ago, your event?
Alex Osenenko: Yeah.
Grace Yarber: April-
Steve Rozenberg: You guys had 900 people there.
Alex Osenenko: 950.
Steve Rozenberg: 950, sorry. But I mean, but the people that I got to meet and just from that elevated me to another level of getting to know the people. You got to go hang out with Forbes Riley. I mean just the people that were there and you got to, where were you? You were in Idaho with Ken.
Tarl Yarber: Oh, Ken McElroy.
Steve Rozenberg: You got to meet Ken [inaudible 00:36:03]. I mean that was all-
Tarl Yarber: I became friends with Ken McElroy, the author of ABCs of Real Estate Investing because of our event.
Steve Rozenberg: Because of your event.
Tarl Yarber: Now, we’re buddies and stuff like that. But even then, it’s like, it’s all even when something bad happens, this is what I leveraged most of my networking for. Is that when something really bad happens to us in real estate, I call other investors that I’ve met, worked with that have had the same experiences and be like, “Hey, when this has happened to you, like what do you do?” We had a house burn down for the first time a few weeks ago and I’ve never had a house burn down. So besides my insurance company, I call on other investors and be like, “Hey, have you ever had a house burn down?”
Steve Rozenberg: What do I need to know? Absolutely.
Grace Yarber: Yeah.
Alex Osenenko: He did so you’re his book, so here is a good book.
Steve Rozenberg: Yeah.
Grace Yarber: You’re smiling so long.
Alex Osenenko: It was a while back, right? I just read his book on a plane right here, which is very educational by the way. Those of you listening, Steve Rosenberg pick up his book, How I failed My Way Into Millions.
Steve Rozenberg: Failed my way into millions.
Alex Osenenko: Failed my way in a millions, some really good stuff. It’s a short read but impactful. Let’s finish with this-
Tarl Yarber: Failed my way as a debt or [inaudible 00:36:57].
Steve Rozenberg: In millions, I never said dollars. I just said really a million.
Alex Osenenko: One thing I wanted to… Fantastic interview, I think everybody’s learning a lot. You guys have passion for each other, which is I think-
Steve Rozenberg: Awesome.
Alex Osenenko: I think that’s where you’d start with, like you want to spend time with each other. If you listen and you don’t want to spend time with your significant other, I don’t think whatever you do, it’s not gonna work. Right? So you’re passionate for each other, but then from there you work it out. You start with why and you build it out. I want it, you are like master networker and this is something I want to take away from this interview as well as the audience. How do you keep track of all those relationships? You also have to prioritize them, don’t you? You don’t want to just be keeping track with everybody because then you have no time. How do you do that?
Tarl Yarber: That’s a great question. I used to actually keep CRNs on people and stuff. And keep notes and what not and even take pictures of the business cards and go from there. Over the last two years, I’ve become really lazy with that because it’s just too many people on a sense. I haven’t needed this. It sounds bad, but like I haven’t needed to build the company as much as I used to instead, I’m really good strategic networker now and so I focus on the ones that I’m going to build relationships with because there’s time’s limited. I will still keep track of people will still, keep cards, do all that stuff. We’ll still have social media relationships and all that great stuff. But the people that I know, I’m like, “No, I’m actually going to build a relationship with this person because they’re somebody that I want in my life in some capacity.” Then I just absolutely put the effort into it as much as possible. And so-
Steve Rozenberg: Is that why you don’t call me?
Tarl Yarber: I think so, yeah.
Alex Osenenko: It’s not quantity, it’s quality.
Tarl Yarber: Now it is.
Alex Osenenko: It’s like trying to get wide, it’s trying to get narrow and specific.
Tarl Yarber: Honestly, it’s like I want to go for the people that know all the people, right? Why do I need to know everybody when I could just know a few people that know everybody. I’m more of a strategic aspect on that. So like, okay, if I’m going to sit there and well, I don’t want to go down the hole because I might call some people out. Be like why did I [inaudible 00:38:54].
Grace Yarber: That’s how [crosstalk 00:38:56] right?
Tarl Yarber: But ultimately, yeah. Like okay, I’ll give you a case in point, right? Just a simple business example. When I was opening up like, states for our service area management company for Fannie Mae. We had to open up Chicago, right? Case in point, I’m friends with most in Washington, I’m friends with the VPs for Fidelity National Title and all that stuff. I think one of the most underutilized resources is your title reps in your title companies for networking purposes specifically because they know who’s doing business.
Steve Rozenberg: Yeah, that’s closing deals.
Tarl Yarber: I always love it. Anytime I opened up in another state, I’d always reach out to my Fidelity and I became really good friends with the Florida Fidelity National VP and stuff there. Anytime I opened up anywhere I was like, “Get me in touch with whoever the people are in that state or that city.” Then so in Chicago I had to hire, I had like one week to hire a whole bunch of contractors for Fannie Mae. I reached out to the Fidelity manager there after getting introductions from two different Fidelity people from different states and I leveraged them to say, I need to meet as many builders and contractors as you know. Who are your clients that are your builders or your clients that are contractors that we work with and other investors, [inaudible 00:40:08]. I started selling them on the fact that like, “This is going to be good for Fidelity as well.” He looked cool.
I interviewed something like 65 or 68 contractors in three days and I did nothing for it. All I had to do is just show up and Fidelity had all those contractors there for me because I found who knew everybody and then built a relationship with them, shows valuable then they go. Then they went out there and got all the work done for me so that I can just show up and do my thing, right. But that’s a business aspect on it. But even then, how can you do that with… For me, I’m like, “Okay, if I want to become friends with the people at BiggerPockets, is it good to go to the person that just started MVP or do I go straight? How do I get into friends with Scott [inaudible 00:40:46] and all those other guys?”
Steve Rozenberg: If I had your confidence-
Tarl Yarber: It’s those kind of strategic leveraging and networking that I try to focus on, but it’s genuine too. Worst cases, we’re friends with his friends, we just hang out. I don’t know. It’s like there’s nothing other than that.
Grace Yarber: If I may add, those relationships of the real shakers and movers has really opened our eye like me. We’re not a big thing because of like five, ten years from now I think of hanging out like who your sphere of influence is has made a huge impact to us. Like we became friends and we have a couple of couples, like [inaudible 00:41:26]. Such an amazing couple like our besties. We look up to them of how they led their lives, how they build not only in business but like what they are shopping if you like. As a people we get so much satisfaction and as mutual like we have the patience to minded people who are crushing in this business.
Tarl Yarber: Like, like-minded people.
Steve Rozenberg: Absolutely.
Tarl Yarber: There’s zero chance I will network and become friends with somebody that don’t want to be friends with, like it’s just like if they are like-minded, if they’re the same type of drive or more or better then I want to be friends with them anyways.
Steve Rozenberg: Right.
Tarl Yarber: Why wouldn’t I? I think most people that are… Most people like to be around people like themselves or people that are better than them. Well actually that’s not true. Not everybody likes to be around people that are better than them because of an ego situation.
Steve Rozenberg: Sure.
Tarl Yarber: But once you can get past that, it raises you up. That’s what I do now. It’s more strategic focused networking than anything.
Alex Osenenko: That’s been absolutely fascinating you guys. Thank you very much for dedicating your time. I know you’re busy. You’re networking, you got to know who you know, you got to know people who know other people and hopefully, I mean you sharing this information out there will come back to you in many ways. So thank you for taking the time.
Grace Yarber: Thank you so much for having us, such a pleasure guys. Thank you so much.
Steve Rozenberg: Thanks guys. You guys are awesome. All right, we’ll see you guys. Thanks everyone.

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Chad Gallagher on Real Estate and Technology

Alex Osenenko and Steve Rozenberg discuss real estate and technology with Chad Gallagher in Nashville while attending the Bigger Pockets Convention 2019.

Chad Gallagher is the Chief Investment Officer & Co-Founder of SlateHouse Group. Chad is originally from Lititz, PA. Chad graduated from the University of Virginia with a Systems Engineering Degree. He launched Advertising.com mobile, which is now a $100M global advertising business and helped it eventually get sold to Verizon.

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Full Transcript

Alex Osenenko: Boys and girls, welcome to another episode of The Mindful Investor podcast show, Steve Rozenberg, Alex Osenenko here for you, for you because we want to bring you the latest and most interesting, the most valid and fact-based information on investing in real estate so you can find your way in this wild and amazing world of real estate investing. Steve, who do we have on the show today?

Steve Rozenberg: So today, as you know, we’re still at the BiggerPockets Conference. We’ve got a lot of information. We got to sit down with Chad Gallagher, owns his own property management company. Guy’s grown his company exponentially fast to 4,000 properties.

Alex Osenenko: In two weeks.

Steve Rozenberg: Yeah, I mean it was amazing how quickly he did it. He’s got nine offices and you know, what you’re going to get out of this is how he understands that there needs to be less friction in the property management industry and use artificial intelligence, use technology to speed up the ease of use of owning a property and having it managed by a company. So he really gets a bigger picture stuff that a lot of people don’t see yet and you’re going to really be able to dig into what he thinks, how he thinks and understand his perspective of how he grew to 4,000 properties in a very, very fast time.

Alex Osenenko: Essentially he is the real estate investor who was just not happy with property management.

Steve Rozenberg: Exactly.

Alex Osenenko: What was available at the time. Let’s get into the show and find out what Chad thinks.

Steve Rozenberg: Hey Alex and Steve here. BiggerPockets man. What an amazing conference.

Alex Osenenko: It’s been good man.

Steve Rozenberg: It’s 2019, they haven’t done that one in seven years and here we are. I didn’t expect to have that kind of a show with 1200 people showing up. But also it’s the caliber of investors, caliber of people we meet. We can record a 43 podcasts.

Alex Osenenko: There’s some talent here. There’s some knowledge in this building.

Steve Rozenberg: Yeah, and I think our guest is one of the one of the most interesting people we’ve met.

Alex Osenenko: Yeah, he’s like under the radar too. Never heard of his company. Didn’t know anything about him.

Steve Rozenberg: Like imagine being in the property management world and not knowing you have a 4,000 unit company.

Alex Osenenko: [crosstalk 00:02:21] 4,000 units.

Steve Rozenberg: That’s quietly killing it in four States that we didn’t even know about. So Chad Gallagher, welcome to the show buddy.

Chad Gallagher: Oh man, this is awesome. I love the setup. For those of you on the audio waves were in this hotel room in a bat cave, side of the conference doing a podcast. But we have like lights and you guys…

Alex Osenenko: We’ve got a video guy. Doesn’t everybody have a video guy? You don’t bring your video guy with you when you go to a conference?

Chad Gallagher: [crosstalk 00:02:45] This is like a thing.

Steve Rozenberg: Yeah. It’s a thing. The beauty of a podcast is our audience gets exposed to this really kind of private conversation between sort of thought leaders or people who at least have a lot of knowledge and background.

Chad Gallagher: Or pretend to at the very least.

Steve Rozenberg: Or pretend to, correct. And then they get exposed to this. So this is interesting. Let’s jump right into the topics. So Chad, you’ve built this fantastic company in a very short period of time, probably 4,000 units under management.

Alex Osenenko: Five years?

Chad Gallagher: Yeah, we started from four and a half years ago. We opened up the doors.

Alex Osenenko: That’s insane, man.

Steve Rozenberg: Yeah.

Chad Gallagher: Yeah.

Steve Rozenberg: It’s called SlateHouse Group, by the way, those of you listening.

Chad Gallagher: Yeah, it’s called SlateHouse. My best friend growing up, we started investing actually in 2012. We both had full time jobs. He was a math teacher. I was heading up a mobile advertising business unit, traveling all over the world, talking to CMOs about mobile ad tech, which is a whole other story. We started to invest in 2012 acquired some units and honestly we needed a prime management company. So we interviewed a bunch, this is like 2014.

Alex Osenenko: How many times do you hear that story? We needed a management company so we started our own. That’s my story that’s yours, it’s so true.

Chad Gallagher: Yeah. And honestly, so I left those interviews, pissed off, I wasn’t excited, I was pissed. I was like, Nate…

Steve Rozenberg: Can you tell me why? What was some of the things?

Chad Gallagher: So look, I’ve got an engineering background and so for me it was, like in 2014 I was saying, the world of property management is going to be tech driven and if we’re going to try to scale, we need a partner who lives, eats and breathes tech and is into transparency and is also just passionate about, that’s what I wanted as a partner. And I went 0 for 3. I didn’t see any tech, no one believed in tech that we talked to. On the transparency front, I thought prices were way higher. I mean I was hearing management fees of 9% to 10% of collected rent. I was like, that’s crazy. Your pricing hasn’t changed in the last 25 years. And then three, and I’m just a believer in this, I think you got to be passionate on what you do. And I saw a lot of people who were really grumpy.

Alex Osenenko: Just worn out.

Chad Gallagher: Yeah, just it seemed like they were running companies for the last 40 years. Some of them passed down through generations and they just seem to hate their life.

Alex Osenenko: I think a lot of property management companies, the property manager, the owner of the company, they identify themselves as property managers. They’re not business owners, so they don’t look at tech. They don’t look at ways to leverage. And this is just my opinion.

Steve Rozenberg: A few do, but most don’t.

Alex Osenenko: Very few do it. But the ones that, the majority, they identify, I’m a property manager, I go walk properties. I do, it’s all I, it’s not a, “Hey, what do we do as a company? How do we scale?”

Chad Gallagher: Yeah. And the problem with that is when the leader is in the trenches, they’re not excited about growing, number one. And they’re not set up to scale because it’s all based on them.

Alex Osenenko: And they’re really not giving good service to an investor because they’re not there. I’m going to say they’re being selfish in regard as far as if I was an investor, because they’re not up the world of technology of what could be. I’m limited by whatever the property management company is willing to invest in their own company. We don’t invest in technologies. So you don’t get technology. So as an investor I’m going, “Well that’s not fair. I mean if mine wasn’t in all the locations that they are, how do you go and invest in these other locations? Well you don’t. With mine, you would have to go with another company and that’s the challenge when you get these mom-and-pop operators as an investor, you’re stuck. What you went through is the same thing, man.

Steve Rozenberg: This is one of my friends. I’m kind of like, he’s invested, he’s a serial investors, buying properties. I buy based on the property manager relationship. I go into the town…

Alex Osenenko: Integral, man.

Steve Rozenberg: I would go into the town, I do my interviews, I find a company that I can trust. I do reviews. He has a whole matrix on how he does that and if he finds that company, he then puts the effort into researching it and start looking for houses.

Alex Osenenko: Which is ridiculous in real life.

Chad Gallagher: But that’s how it has to be.

Alex Osenenko: But it’s necessary.

Steve Rozenberg: So property management first absolutely is a smart investors’ mentality, by the way.

Chad Gallagher: It’s interesting there’s this phrase that you hear in real estate, which is you make your money on the day that transaction, right? If you buy at the right price. I don’t if I can swear, but that’s bullshit. Like I don’t agree with that. Right? I mean, yes that’s one approach, but the operator is really important. Really important. Especially if you’re trying to be at arms length and you’re trying to go out and just be the asset manager or you’re trying to actually grow a portfolio. I mean the operator, how that thing is operated is going to matter just as much as the price you buy it for.

Alex Osenenko: Yeah, I mean it’s funny, I always tell people, I’m like, “Anybody can get a good deal,” right? You can bargain with 200 owners and you could get a great deal.” Getting that return day after day, month after month, year after year, there’s no books that show you how to do that. They all show you how to get the deals. Like you see the Instagram, I made this much money on a purchase, but how do you get the 10%, 15% return?

Chad Gallagher: You have a property management relationship.

Alex Osenenko: You have to have somebody running the business.

Steve Rozenberg: So let’s pivot. Let’s pivot this conversation into now, what are the innovations that you are seeing your implementing and you’re looking to implement that’ll benefit investors, that benefit people that need this kind of help and transparency as you call it.

Chad Gallagher: I mean, look, I think it sounds kind of like an overkill, but I think it’s all about tech and with tech you can actually scale up processes and you can scale up across different geographies in a way that the experience feels the same. We have investors who will invest across a couple of different states and obviously the people who are doing the plumbing repair are different. But it doesn’t feel different. The reporting feels the same. The maintenance coordination feels the same. The way we handle leasings feels the same. Our company’s strategy and philosophy and how we treat owners, all that feels the same.

Alex Osenenko: [crosstalk 00:09:03] So the client and the client facing portion is the same for them. They may use different PVC piping and galvanized piping in there. That’s irrelevant, right? I mean it’s what the clients see, it’s the same experience. You’re selling the same experience basically, right?

Chad Gallagher: Yeah. And so I think that’s kind of interesting because, and we were talking about this a little earlier, is like as an investor, I mean the other thing I kind of run contrary to is everyone says like “Real estate is local, real estate is local.” And I just say, “Yeah, used to be.” I mean there’s still a local component or always will be, there’s always a building in the ground locally, but now you can actually invest across different areas. You can have teams spread out across different areas. I mean, our company, we’re four and a half years old and we cover four states. I mean, 10 years ago that didn’t exist. I mean not that I know of at least.

Steve Rozenberg: Five years ago it didn’t exist. I didn’t know anybody who scaled that fast to this day.

Alex Osenenko: I know, I don’t think I have either.

Steve Rozenberg: I’m very surprised to hear, well there are people that have operations, so the RentVest model is, you know, you put in a portfolio manager in the area and so you just throw some leads their way and until it grows out into something meaningful, it’s one manager. You actually guys have a physical whole operation set up?

Chad Gallagher: Yeah.

Steve Rozenberg: Or is it more of a virtual?

Chad Gallagher: No, we have eight or nine offices. So there’s an office and then there’s local property managers. And then one thing that we do is a little different, I think it’s really important and it comes with scale, I’ve got full time maintenance guys that are employees on with SlateHouse.

Steve Rozenberg: On staff?

Chad Gallagher: Yeah. And it’s not just carpenters, it’s carpenters and cleaners and roofers and HVAC. So you say like, “Why does that matter?” It’s a couple of things. One, if there’s a catastrophe, a big problem and I need someone out there tomorrow, I can get someone out tomorrow because this is my employee and I can tell him “I need you there tomorrow”, you know, or today, right? That you can only do that with scale. If you’re managing 50 units, you can’t have a full roofer.

Alex Osenenko: Right. Well let me ask you this is because we tried to go down this path and we weren’t big enough and so we backed out of it. But, what we realized is that’s another business. Did you actually have to create a… I mean maybe not entity wise, but it’s a different business model, business plan. I mean now you’ve got staffing and hourly to tag to a property. How do you do all that?

Chad Gallagher: Yeah, his name’s Nate Jones. Yes. So the other co-founder of the company, he heads up all of our just brutal blocking and tackling of really managing both our kind of day to day operations, but also our maintenance team and their teammates. And they’re employees of ours. And look, anyone who’s ever hired any maintenance tech to do anything, it knows that there’s days that’s not easy. I think there’s some things we do that are a little different. So we offer healthcare to these guys. We’re just rolling out 401k. Right. And so as an investor you say, “Why do I care?” What that creates is continuity with the team.

Alex Osenenko: Quality work done on your property.

Chad Gallagher: Yeah. And look, man, right now the market’s hot in a hot market, it is hard to retain contractors and find contractors. Right? And so it’s really nice to our investors to say, yes, like property owner, we’re happy to use a subcontractor if they want to use someone they like, Billy the plumber. We have this long list of subcontractors that we work with, but we also have full time maintenance guys are employees that have been employed with us for three, four years that I know I can trust to go fix a roof.

Alex Osenenko: You know their strengths and their weaknesses. So you know what, don’t send Joe because he sucks at that, send him to this job, send this one to that you know?

Chad Gallagher: Yeah. It’s hard. Yeah, I mean, I totally agree and I think it’s going to be really interesting. One thing I’m super passionate about is this, like what we’re calling like the next generation of real estate. So I didn’t come from a real estate family. Seven years ago I was a renter, my parents were school teachers, the co-founder of the company, his parents were a school teacher and a factory worker. But I think what tech and transparency enables is for people to get into real estate and invest in properties and create meaningful wealth who didn’t know anything about this before.

Alex Osenenko: You don’t have to learn how to frame a house now. Back in the day, as a kid, I mean my parents didn’t own real estate, but you know, you hear like, “Oh, I had to work on the properties with my parents.” That’s not as relevant now. Now, like you said, you can own something and what’s interesting is it’s not even around the country. You could own stuff in other parts of the world, you know? I know people that own stuff down in South America, they own stuff in Australia. So technology gives you that ability or people in Australia that own stuff in the US that never used to be the case.

Chad Gallagher: That’s what I’m excited about is that person who today has all of their money in a 401k somewhere making 4% a year, right? Can start to get in, I mean I’ve been posting on Facebook a lot about this is like just go buy one single family home. There’s a lot of talk about multifamily and we manage some multifamily and we love multifamily investors, but we don’t need to overcomplicated this thing. Go buy.

Alex Osenenko: [crosstalk 00:14:11] Keep it simple man.

Chad Gallagher: A hundred thousand dollar single family home and over the course of 20 years that thing gets paid off. You buy one of those a year that is literally life changing to the average American.

Alex Osenenko: It works, It just, it works. It’s simple and it works and it’s worked from the beginning of time and it’ll keep working. Everybody needs a roof over their head.

Chad Gallagher: Yeah. And I’ll tell you that. So something I’m passionate about is so my wife, her grandmother owns this portfolio in Florida and it’s a cool story. She started investing at the age of like 65, a baller by the way, all by herself. So and over the course of like 10 years built up a portfolio of like 50 units. Super cool story. But here’s the sad part. The sad part is it was all in Panama Beach, Florida and a hurricane came through and basically decimated her portfolio. And the point of that story that I tell investors is what technology enables is for you to truly diversify. And so I tell our investors, “Yeah, buy a property in Baltimore and then buy something in Virginia Beach and then buy something up in Lancaster, Pennsylvania and, and you can then own stuff in different economies, different states, different areas.” And man, that is really powerful because now when that big strong comes through and hits, it’s hit, you know, 5% of your assets, not 100%.

Alex Osenenko: It’s like similar to owning stock, right? You may have stock in tech, you may have stock somewhere else. It’s just stock. It’s a map. You know? And what I think a lot of people don’t understand, and I think why a lot of people think they need to invest locally is because they think because you live in a house, they equate that to owning a rental property. That’s the worst mistake. If it was a pizza shop, you wouldn’t equate to living in a pizza shop. You would know they have to pay rent. But when you live in a house, you go, “Well I live in a house, they live in a house, so I’m going to run it the way I would live in my house.” It’s like owning a stock. When you own stock, you don’t go and stick your head in the building of Chase and go, “Hey, what’s going on guys?”

Like why was the board of directors meeting going on today? No, you buy based on dividends, PE ratios, all that. And that’s the same thing in real estate.

Chad Gallagher: You wouldn’t just be, “So what’s your for retirement? I’m going to own Chase stock.”

Alex Osenenko: Yeah, exactly. Exactly.

Chad Gallagher: Like I live in New York and Chase’s headquarters are there.

Alex Osenenko: I can see the building. That’s where I’m going.

Chad Gallagher: That’s it. I’m just, people would say that’s crazy. Yet that’s what they do in real estate, right?

Alex Osenenko: Absolutely.

Steve Rozenberg: So that’s fantastic. So let me ask your opinion on something. So there is a tool, we here at Mind recently sort of merged with, acquired a company called HomeUnion and their tool is INVESTimate. It’s online marketplace for buying, selling investment properties. There’s Roofstock. There’s a population of these kinds of startups coming up. What are your thoughts around it? Have you thought about sort of plugging in into that ecosystem? You building something over your own? What are your thoughts?

Chad Gallagher: We’re not building our own, but we are starting to work with them. So I was actually here at this conference talking to Roofstock being one of their preferred property management companies. So that’s where I think we’ll do is, by the way, I put Zillow in that bucket too. I don’t know if they quite had the product there yet, but they will.

Alex Osenenko: They will. It’s just a matter of time.

Chad Gallagher: Right. So I think you’re going to see four to five of these things. And I’m totally a fan. Look, if you can buy a pair of socks online, you’re darn well should be able to also buy a piece of real estate.

Alex Osenenko: I love when people say…

Steve Rozenberg: I like your analogy though, “If you can buy a pair of socks, that’s complicated enough.” What, Alex?

Alex Osenenko: Whenever I hear somebody say they could never do it in this industry, that is the next thing coming.

Chad Gallagher: [crosstalk 00:17:41] That is the most awesome opportunity. That’s the unicorn right there.

Alex Osenenko: Yeah, exactly. Like really, you don’t think they could like Uber couldn’t have knocked out the taxi cab industry.

Chad Gallagher: I’ll tell you who’s in trouble. I’ll you who I would not want to be right now is a real estate agent who is not buying into tech and is not creating a differentiated value for him because in this world where people start buying things online the information flow is there. And so the value of the real estate agent drives diminishes greatly.

Steve Rozenberg: It’s a very powerful organization, real estate. A lot of people are taking chunks, try to bite out of this real estate industry. You know, us included. Let’s face it, like stodgy, you know I love property management. There’s a lot of players like you. And you guys are going to be great and many others, maybe 100, 150, 200, 300 others will be great, but most are just not interested in improving their.

Chad Gallagher: I actually don’t think there’s going to be 300 so I actually think if you…

Steve Rozenberg: Project management companies?

Chad Gallagher: If you look at what tech has done.

Steve Rozenberg: Interesting.

Chad Gallagher: So right now, how many project management companies are there? It’s like crazy, right? 40,000 or something?

Alex Osenenko: Yeah, there’s a lot.

Steve Rozenberg: 30,000 but realistically maybe 10,000.

Chad Gallagher: But you know what that sounds like to me? It sounds like there used to be a lot of taxi cab companies.

Steve Rozenberg: But there’s still a lot of taxi cab companies.

Chad Gallagher: I don’t know.

Steve Rozenberg: I mean, every town. Castro Valley. That’s my town has a freaking Castro.

Alex Osenenko: If you want to go out with your wife, would you take Uber or your taxi?

Steve Rozenberg: Well that’s not [crosstalk 00:19:07].

Alex Osenenko: That’s the point. That’s what technology has done. Right? They’d taken your…

Steve Rozenberg: I got it. I understand, so I want to hear your thinking.

Chad Gallagher: So I think that the days of it being every town has 30 property management companies. It’s just going to go away.

Alex Osenenko: I agree with that.

Chad Gallagher: There’s going to be, in every town, there’s going to be three to four.

Steve Rozenberg: But that’s like 50 major markets.

Chad Gallagher: But then we’re going to see is these scaled property management companies where country-wide, I mean this is just a hypothesis. I know, but I think it’s going to be like 50, 100.

Steve Rozenberg: 300 rather. That’s what I’m calling 300 in 10 years.

Chad Gallagher: Yeah.

Steve Rozenberg: But let’s take a step back for a second. That is an interesting aspect. However, there’s one other thing I hear a lot about and that is yes, we want tech, we want radical transparency, all those good stuff. Most investors will want that. But a lot of investors want personal service too. It’s important for people to get a call like Memphis Invest, get a call from your portfolio manager every month and say hello.

Chad Gallagher: So our style is, in with all of our tech, you still have a day to day property manager who’s your point of contact.

Steve Rozenberg: Relationship?

Chad Gallagher: Yeah. And that’s the person that you can ping, you can email. We actually, we prefer tickets. And I know it sounds crazy.

Steve Rozenberg: But we have to operate on tickets.

Chad Gallagher: You got to scale.

Steve Rozenberg: What is the number of properties that you expect a property manager to manage?

Chad Gallagher: It’s about 120.

Steve Rozenberg: We try to drive 500, right?

Chad Gallagher: That’s a lot.

Steve Rozenberg: Right? But there’s layers, right?

Alex Osenenko: But there’s supporting staff.

Steve Rozenberg: We have a hub, the asset, we go asset management. So they solve all these problems.

Chad Gallagher: [crosstalk 00:20:40] There’s different versions.

Steve Rozenberg: Yeah. But you can’t, like you can’t, and there’s property assistance and all that. But if you expect your PM, like realistic, if you expect your PM to be on call at any time, you’re not going to be able to scale.

Chad Gallagher: Here’s the bigger problem. The bigger problem, you think about today’s day and age, if you’re prime manager, you’re getting pinged through text message, you’re getting phone calls, you’re getting emails, you’re getting that random tenant who stops by the office.

Steve Rozenberg: Freaking walk-ins, yeah.

Chad Gallagher: I mean the passenger pigeons coming through pretty soon, right? And so the reality is…

Alex Osenenko: And how many of those are nice messages and phone calls.

Chad Gallagher: Most aren’t. The reality is even your best property manager to stay organized is so hard. So what we’re trying to do is say, “Look, let’s funnel all of that into a ticket” and the ticket is something very simple. The ticket might just say, “Hey I need a copy of my five leases because I’m about to do a refinance my building.” Okay, great! So it’s a ticket and then the property manager just resolves a ticket and when it’s done tickets closed out.

Steve Rozenberg: Well the team resolved the ticket but you’re right. But the customers not trained that way yet. They want to pick up the phone and call to Steve Rozenberg, Steve Freaking Rozenberg because his name was on the bill.

Alex Osenenko: I disagree though. I think that the reality nowadays, they don’t even want to have to make the call. If you can do it through a ticket or a non contacting way. And this is what we’ve seen where…

Steve Rozenberg: I’m just saying there’ll be subset of people who would still want the personal service, they will pay the premium and those property management companies, good ones are going to be an exist.

Alex Osenenko: But that’s not the bulk. The bulk are the people that they would much rather have it in a text message and say it’s done.

Steve Rozenberg: So the way I think it’s shaping up, in my opinion, initially yes, we’re going to start taking market share away from, we meaning tech enabled PM companies, market share away from these old people who don’t want to improve, these overpriced who just basically running the business as a cash cow and just don’t want to improve. Then we going to start taking some people who never hired a property manager right now. The bulk of investors don’t hire property managers. So we’re going to start taking some of those people away. And so that is going to be huge market. So right now 70% of people self-manage. So there’s going to be this, there’s going to be that. And there’s going to be a layer of boutiques that are going to do really well with an off the shelf technologies but also personalized service. That’s how I see it.

Chad Gallagher: It’s right. I mean the only thing is, we have clients who are Amish. I mean we have people who are not always tech enabled, older generation of folks. And what we tell them is they can actually call in and we’ll create the ticket for you. So look, I mean the reality is being tech enabled does not, I think there’s this, there’s this missing point that is being tech enabled does not mean you can’t be personal. It doesn’t mean you can’t solve problems and help different people out.

Steve Rozenberg: That’s interesting.

Chad Gallagher: All that means is if that guy calls in and I still want it turned into a ticket cause that’s how I know things get resolved.

Steve Rozenberg: Yeah, you could track it.

Alex Osenenko: It’s the old adage, you know, systematize 80% humanized 20 yeah. So you’re going to have that 20% humanization factor that every business has to have.

Chad Gallagher: Uber still as a person driving the car. Even though [crosstalk 00:23:43]

Steve Rozenberg: For now. For now.

Chad Gallagher: Sure. That driver, they do everything they can to get somebody who is awesome and does the above and beyond, has the little mints in the car.

Alex Osenenko: Yeah, I like the mints.

Chad Gallagher: Right. Aren’t the mints good?

Steve Rozenberg: I never had the mints.

Chad Gallagher: Oh, what!

Alex Osenenko: The mints and the water.

Chad Gallagher: It’s different. It’s a differentiation.

Alex Osenenko: It’s a different experience.

Steve Rozenberg: Yeah. Well so anyway that ranking system, I get it. But you know Uber is not really built for continuation of the human driving the car. Like that company’s going to make it based on automation, automating the driving.

Chad Gallagher: I look at project management the same way, right? Every year we take another task and we figure out a way to automate it.

Alex Osenenko: Systemize it.

Chad Gallagher: But it’s not all or nothing. You don’t go from zero to a hundred. You go every year we just take one more little piece and say, “How do I turn this into tech and code that will not screw up.”

Alex Osenenko: And if you are an investor or a property manager, property management company, and you were to look at this whole area 10 years ago and see how it’s changed, five years ago.

Steve Rozenberg: I was there 10 years. I was there 10 years ago.

Alex Osenenko: I mean, but think about it.

Steve Rozenberg: I was in the founding, well, I was employee what, 18 and AppFolio which changed the landscape like AppFolio single handedly changed the landscape of property management in my opinion, they went public. They’re doing really, really well.

Chad Gallagher: I’ve heard of them.

Steve Rozenberg: You know, because of that. Yeah, you’ve heard of them.

Chad Gallagher: We use them.

Steve Rozenberg: You use them. Yeah, exactly. Maybe now you can start thinking about replacing parts of AppFolio modules but back then [crosstalk 00:25:08].

Chad Gallagher: We just augment.

Steve Rozenberg: That’s smart.

Chad Gallagher: So we take AppFolio, but then we use a piece of tech called Property Meld for maintenance coordination.

Steve Rozenberg: Very familiar with that.

Chad Gallagher: We use ShowMojo to do online bookings, right? We have Freshdesk which has our tickets.

Alex Osenenko: I think the challenge is there’s all these third party widgets and apps. You think somebody would just kind of bring it up, and I don’t know if that’s possible. Maybe not because there’s different entities.

Steve Rozenberg: Well we’re growing in the house solution, right?

Alex Osenenko: There’s an in house solution.

Chad Gallagher: But that’s a challenge in itself.

Alex Osenenko: Everything is a widget in a gadget in a zap, zap it this and that.

Chad Gallagher: But I will say this from an owner perspective, all these tech we use, they don’t, to them it does actually pretty well melt together. They don’t need to know that when they submit a ticket it’s through Freshdesk.

Alex Osenenko: It’s the experience. The forward facing experience that they’re getting.

Steve Rozenberg: I get it. But it does add a little bit of a cost layer because you have to pay for the software. If you develop yourself like we’ll pay for dozens of engineers working on our stuff. There’s definitely a bank cost.

Chad Gallagher: I’ll say this, there’s also Mindshare of not when the code, you know someone has to make sure that code’s working and the tech working and the bugs and that kind of stuff. You know it’s nice that AppFolio just works. I don’t have to worry about QAing. I mean I’ve got enough problems with my plumbers and roofers.

Steve Rozenberg: Lets you run your business.

Chad Gallagher: Let me ask you this as we kind of wrap this up and we need to do another one with him cause I want to dig deeper into what he’s doing.

Steve Rozenberg: There’s a lot there. There a lot more Chad.

Chad Gallagher: Yeah, more Chad, we’re definitely going to have you back on but as we wrap this up what would you say in your opinion is going to be coming during 2020? Wat do you see is on the next frontier for the investor, for the property manager? What do you see is the next kind of like “Wow, didn’t see that one coming.” In your opinion.

That is a really good question? By the way I ask that question. I ask that question and close out most of my podcast is, what are you most excited about in the next 35 years? I don’t usually get asked that question. What I’m most excited about? The short answer is continuing to digitize things that still require the people element that just have flaws in them.

Alex Osenenko: And you think it’s going to be bit by bit. You don’t think it’s going to be a big, big grab.

Chad Gallagher: I do. I’ll give you a couple of things that I’m in the back of my head thinking about that are still very people driven. Showing an apartment, it is ridiculous how much time is spent getting someone to show an apartment. I’m just not convinced the average person really needs…

Alex Osenenko: There’s no value.

Chad Gallagher: Right?

Steve Rozenberg: What do you need somebody to tell you where the kitchen is. This is the kitchen.

Alex Osenenko: Let me open the door. Couldn’t have guessed that one.

Steve Rozenberg: Your kids could look out of this window. Well, thank you.

Alex Osenenko: Yeah, gee. Very enlightening.

Chad Gallagher: So right now at SlateHouse a tenant could go on their phone and they can book a showing time online, which is great. We are using some digital lockboxes and people can get in. But to me that experience gets a lot better when on their couch they can actually start to…

Steve Rozenberg: Like a 360 tour.

Chad Gallagher: Like start to actually walk through that unit without even going.

Steve Rozenberg: The Matterport and all that.

Chad Gallagher: I tell them the person at some point goes, but by the time they’ve gone…

Steve Rozenberg: They’re pre qualified.

Chad Gallagher: They know they’ve seen other phone, they’ve probably even applied before going. So now it’s like I’ve already applied, I’ve done the immersion tour and I’m calling offering some Facebook goggle headset or Oculus or.

Steve Rozenberg: I have that, I don’t know.

Chad Gallagher: You have an Oculus.

Steve Rozenberg: No I have PlayStation VR. It’s okay.

Chad Gallagher: But I think that’s really interesting to me because it just, it’s a time saver for everybody. And I think that the tech isn’t like, this isn’t Star Wars 20 years in the future tech. This is like, I mean, I think in the next year you’re going to see more and more people be able to have realistic showing experiences, apply online, and then when they go, they’re still going to go see it. But that point is almost a foregone conclusion as opposed to right now I might have to do 15-20 showings to get someone to actually book. That’s a lot of wasted time for everybody.

Alex Osenenko: Yeah. Well Chad, thanks so much man.

Chad Gallagher: Yeah man.

Alex Osenenko: It’s just been a flood of information.

Chad Gallagher: I think we touched some stuff.

Alex Osenenko: Yeah, we just barely touched.

Chad Gallagher: This was fun.

Alex Osenenko: Thanks for being on with us.

Chad Gallagher: By the way, if you’ve never been to BiggerPockets Conference, next year you got to go. This conference was awesome.

Alex Osenenko: 1200 people, it was legit. They did a good job.

Chad Gallagher: Super high caliber and we’re big fans of BiggerPockets so probably give a shout out there to those guys.

Alex Osenenko: Yeah, they did a good job.

Steve Rozenberg: Before you go, if people interested in more of what you have to say, how they find you?

Chad Gallagher: So my email address is Chad, C-H-A-D @slatehousegroup.com that’s S-L-A-T-E like a slate roof. And then we’ve a podcast called Real Estate Hackers where we really focus on a lot of we talked about here, which is the intersection of real estate in tech and people that are doing cool things and kind of where the world’s going. So they can check out our podcast Real Estate Hackers or email me.

Steve Rozenberg: Awesome. It’s great to have.

Alex Osenenko: Great. Thank you.

Chad Gallagher: Cool man. All right, see ya.

Steve Rozenberg: See you guys.

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Chris Clothier on Turnkey Properties | Real Estate Investing Advice

Alex Osenenko and Steve Rozenberg are joined by Chris Clothier from Memphis Invest at the Bigger Pockets Convention 2019 in Nashville and talk about the right investor for turnkey properties.

Watch the Podcast Here

Full Transcript

Alex Osenenko: Boys and girls. Alex here and Steve, the Mindful Investor Podcast show is on for episode number… I think we have official song. This wasn’t the song. This is [inaudible 00:00:11].

Steve Rozenberg: This was not the song, that was just your voice.

Alex Osenenko: This is the next episode and we’re still on tour in Nashville with BiggerPockets crowd, amazing conference, amazing show. We had some real, real talented people. We got a chance to interview. Today we’re going to introduce an amazing interview of Chris Clothier. What’d you learn from Chris?

Steve Rozenberg: Man, I’ll tell you what, Chris Clothier, he’s a co-founder of Memphis Invest, turnkey operation for people that don’t know. And if you don’t know the guy, you gotta look him up. Amazing guy, a true gentlemen. But basically what we learned is they basically are the people that, I’m going to say they’re kind of the godfathers of bringing the turnkey operation to the masses.

Alex Osenenko: And the turnkey is essentially, you just put the money down and they got-

Steve Rozenberg: It’s that, they have the house for you-

Alex Osenenko: All redone, remodeled. And what we found out is like, my courses were like, who is it for? Why isn’t everybody getting a turnkey? It turns out-

Steve Rozenberg: It’s not for everyone.

Alex Osenenko: … it fits a particular category of customers, and he knows his customers so intimately. And it’s very interesting, he talks about red flags. How do like if… Turnkey and turnkey could be different depending who’s who’s providing the service.

Steve Rozenberg: Absolutely. Reputation.

Alex Osenenko: Man, the information I got in this show is amazing. Why don’t we let you guys in on it. Let’s get into the show.

Steve Rozenberg: Hi everyone. So we’re here at BiggerPockets’ 2019, and there has been really some amazing people. One of the gentlemen that’s most amazing is right here with us. Pretty cool guy that we’ve gotten to know from your conference. And then, obviously amazing how paths cross.

Alex Osenenko: They do. And so Chris Clothier is a VP of sales and marketing. He’s also the owner of a company called Memphis Invest. I think you what? Top 5,500 units?

Chris Clothier: Yeah. We’ll end the year about 5,800.

Alex Osenenko: 58. And so one of the most spectacular family owned companies in this sphere of real estate investing. I think if you have never heard their name, you really haven’t been in real estate that long. Like you have probably come across and I think-

Steve Rozenberg: They may not have known that it was their company.

Alex Osenenko: This is like, I think of Memphis Invest as a spearhead for this whole kind of turnkey investment movement. And so a lot of people in your wake. But what I want to talk about today is some of the more harder questions that you may be getting, because I know a lot of investors, a lot of my friends are investors. Even conversations today, people seem to think that turnkey is for the beginners, turnkey is for the, somebody who just kind of really does not want to take the time to learn and have somebody else-

Steve Rozenberg: The lazy investor.

Alex Osenenko: … assume all the work. Right. The lazy investor. Like how do you combat that, Chris?

Chris Clothier: Well it’s, I guess, the easiest way to combat it is to look at our investor profile. The investors that we’ve worked with, and certainly some of them are new to the real estate game. They have a lack of depth when it comes to really deep understanding about how to invest-

Steve Rozenberg: Experience.

Chris Clothier: Yeah. Well, and they may not even necessarily always be experienced. They could be experienced with real estate and investing. It’s just the whole idea of-

Steve Rozenberg: Sure.

Chris Clothier: … doing it passively. They just don’t have a real deep knowledge of. But at the same time, many of our investors, especially with our company, they are experienced in life. These are not people that aren’t inquisitive. These aren’t people that are looking for an easy way out. They’re not people that say, I don’t understand this or I’m just going to go, dump my money into some poor man’s investment that it has a low chance of being successful. So this idea that these are new investors always and that they’re unsophisticated and they don’t know what they’re doing, so it’s the dummy’s investment that’s-

Steve Rozenberg: Not true.

Chris Clothier: It couldn’t be further from the truth. But those are the investors that say that are the investors that wouldn’t work with a company like [inaudible 00:04:26].

Steve Rozenberg: They’re not your profile.

Chris Clothier: Not even close.

Alex Osenenko: So let’s talk about the industry as a whole, because I don’t think anybody said that particularly about Memphis Invest, but people say that in general to the category. So the question is like, is Memphis Invest, are your customers different or do you think it’s a category kind of selection?

Chris Clothier: I think that us in particular, our particular client is different. Now there are, so as with any investment, not even with investment, with any business. There are those that choose it because it’s the easy path and it’s a lazy path. It’s the path of least resistance for them getting started. They’re also the ones that tend to go for a low price investment. So they’re looking for kind of their loss aversion. They don’t want to lose money, and they don’t want to learn either something to buy this really low pricing, inexpensive property. And there’s a lot of people that had been and will continue to be taken advantage of. And it’s interesting.

Steve Rozenberg: And that’s kind of to me, like people that do that. Like I think what’s great about in my opinion about turnkey is two things. Number one, people that value their time and they say, you know what, I don’t have the time to deal with this. I’d rather put people in place that know what they’re doing and they can do that. So it’s a time value. And number two, it’s a location value. So let’s say you’re in San Francisco and they’re in Memphis and Memphis is a better market for your goals. It’s easy, right? You don’t have to go there and find the contractors. You don’t have to go there and figure everything out. It’s in place.

Alex Osenenko: But you do pay the markup for people who do. Right?

Chris Clothier: Well, of course. And-

Steve Rozenberg: What’s your time worth?

Chris Clothier: Well, and it’s the age old question. And I will say that the investors that are the most successful at this particular strategy, that look, let’s be clear, it’s simply passive investing, is what it is. So it’s just investors that are passively investing. Turnkey becomes the marketing catch all word. So it catches the good and the bad.

Steve Rozenberg: Sure.

Chris Clothier: It catches the ones that are going to be successful and the ones that are going to fail. It catches all of the investors in the companies that are in that passive mode, if that makes sense. That it’s, you’re going to own the deed, you’re going to own the property, we’re going to do the work for you. But everyone uses the same word, turnkey to market their service. It’s the investor that spends the time that gets to know who they are investing with.

Steve Rozenberg: Absolutely.

Chris Clothier: And that really gets to know themselves because there’s two types of investors that you say don’t have time. The ones that have the time and they’re just… They’re not going to put it into it. They’re going to be busy doing maybe not even more productive things.

Steve Rozenberg: It’s just busy stuff.

Chris Clothier: Yeah. I’m not going to learn real estate. So I’m just going to go do this. And those that know that the value of my time and money is to leverage someone else’s knowledge and their time to [inaudible 00:07:14].

Steve Rozenberg: And they’re willing to pay for that.

Chris Clothier: You’re exactly right.

Alex Osenenko: Going back to unique abilities like, we had, Kara and Brit on the show-

Steve Rozenberg: Brittney.

Alex Osenenko: … and then these two wonderful ladies they’re doing their own fix and flips and they’re in there, they’re painting, they figured out the construction management. Like they actually are doing it, they’re loving it and they’re passionate about it. But like that’s their unique ability. They really wanted to do this and now they using Instagram as a vehicle to sort of promote that and really getting more successful.

Chris Clothier: Of course.

Alex Osenenko: But like for example, I’m a very busy executive. He’s a pilot. Presumably if you wanted to you can take more routes and just be like real estate wouldn’t be top of mind for you. So what you’re saying is turnkey sort of attracts this level of a professional who knows they need to invest their time if they’re to be successful, but they don’t just choose not to in real estate. They choose their time because-

Chris Clothier: You got it. You nailed it. They’re choosing to where they’re investing their time is what they do best, their unique ability. And then they’re taking whatever their revenues, whatever their money is, their investments, and they’re finding those that are best at their unique ability, which is building a portfolio and managing it properly and delivering, executing for that investor on the return and the investment that they want.

Steve Rozenberg: It’s like if you said, hey, I want to start buying real estate and I think I want to buy something, the numbers in the Midwest or in Tennessee look good. Would you have the time to go to Tennessee, find the deal, source the deal, find the vendors and the contractors, set it all up, get the flow going, or like you talked to Chris and go, hey, Chris goes, I got a deal. It’s ready to go. It’s turnkey and you’re going, you know what? I don’t have the time. Do it. Done. That’s who it’s for.

Alex Osenenko: So that’s very, very interesting.

Steve Rozenberg: Is that correct?

Chris Clothier: Absolutely. And those are the investors that are finding success. Those are the investors that kind of laugh behind the scenes when someone says, turnkey is for the beginners because they’re like… In your case, you’re not a beginner.

Steve Rozenberg: Right.

Chris Clothier: You know you’re a business builder, you’re an entrepreneur. You by no means would look at yourself in the mirror and say, I’m just this beginner. No. Not even close.

Alex Osenenko: But I wouldn’t, like I’ll be honest with you right now on the show and I want to make this admission like, I have no interest per se to dig and understand every single aspect about every single house that I’m about to sort of put money into-

Chris Clothier: Correct.

Alex Osenenko: … and try to get partners to do stuff with me-

Steve Rozenberg: Nor should you.

Alex Osenenko: … or for me or me trying to fly and like I have my kids, I have my job which I love, but it demands all of me. All of me. If I don’t give it all, it’s like, why bother? So for me it works. For me it works. For you maybe not as much, because you know your stuff, like you’ve done this.

Steve Rozenberg: But a perfect example, like I’m talking to some guys about doing something with some mobile home parks. Some guys here at BiggerPockets, and investing with them. I don’t want to learn mobile home parks, but I like the returns and I’m willing to go in on with them. So I’m just saying, I don’t have the time, but I’m willing to put the money into this thing. But I do have a question. What kind of… And you’re big into education, because you’re huge with BiggerPockets and everything.

Chris Clothier: Sure.

Steve Rozenberg: What kind of education do you give or do you suggest people take before getting into a turnkey? And do you have some kind of, not a curriculum, but is there something like setting expectations with them prior?

Chris Clothier: So with us, we try and be deliberate and we try and be, purposely slow. So we want to spend time getting to know the investor on the other side. And the very first thing that we want to get to know is, do they know the reason that they are investing in the first place? Why did they call us? Why are they looking for-

Steve Rozenberg: What’s their why?

Chris Clothier: That’s right. What’s this passive investment that they are looking for? We will oftentimes uncover that being a passive investor is not for them. And that’s what we want to do.

Steve Rozenberg: Absolutely.

Chris Clothier: We’re looking to-

Alex Osenenko: Proper discovery to qualify or disqualify.

Chris Clothier: Exactly. It has nothing to do with us. Everything to do with them.

Alex Osenenko: Can I ask a qualifying question there? Can we keep that thread? Just remember this thread. I do want to have because running a business-

Chris Clothier: Sure.

Alex Osenenko: … you have salespeople.

Chris Clothier: Sure.

Alex Osenenko: Salespeople are typically compensated on performance.

Chris Clothier: Right.

Alex Osenenko: So how do you deal with this balance where your job is to disqualify potentially a customer? How do you train Salesforce?

Chris Clothier: Well, because-

Alex Osenenko: This is a selfish question from me.

Chris Clothier: No. With us, so our repeat client, the client that comes back and is going to continue to build their portfolio. We know and we track this for going on at least five years at this point, that roughly 62% of our monthly sales go to an existing client building their portfolio. And so should you fail to qualify a purchaser on the front end and they do not continue to purchase down the line, you’ve taken money out of your own pocket. You’ve made your life more difficult and-

Steve Rozenberg: You got to go pay some more.

Alex Osenenko: So you pay your sales team on repeat transactions?

Chris Clothier: Of course. We continue-

Alex Osenenko: So it’s they’re recurrent, they’re building a book of business.

Chris Clothier: Their job is to continue to touch base with and discuss performance. How is the portfolio doing for you? When would you like to do a review? Would you like to speak again? What else have you been doing out there in your investment world? Are you ready to continue to build?

Alex Osenenko: They’re consultants. They’re not really salespeople.

Chris Clothier: No, absolutely.

Alex Osenenko: [inaudible 00:12:39].

Chris Clothier: Absolutely. They’re consultants. And now they are licensed real estate agents. So there’s no other licensing. They’re not giving any other financial advice.

Steve Rozenberg: They’re not CPAs or financial planner?

Chris Clothier: Not at all. Nor do they pretend to be.

Steve Rozenberg: They do more strategy sessions of saying, hey, you know you… And I love that because, whenever I talk to investors, I’m always like, “Look, nobody gets into real estate to own one property.” Never. You work for multiples, but what happens is it about number two to maybe three life starts happening and you slow down and you get busy and you lose sight of why you even got into it.

Chris Clothier: Well, you mentioned earlier that, and we do, we grabbed the mantle of being the leader of this industry with both hands. That’s what we set out to do. We take that seriously and we-

Steve Rozenberg: And you are.

Chris Clothier: We lead that way. One of the things that we’ve done is we will not sell an investor of one property. An investor comes in and says, “I’m ready to go. I’ll love your company. I’ve read everything, whatever. I’m ready to buy a house.” But they only have the ability to purchase one property. That is a losing proposition for them and us. What we found is that, that investor, and we’ve done that through the years, but we ended the practice because that investor that does not continue to build a portfolio, they put themselves on a roller coaster.

That when the property is occupied and they’re getting their monthly call from our customer service team, they’re happy. Everything’s great. But when a maintenance issue occurs, when there is a move out and we have a turnover and they’re not receiving the full rent, suddenly they go from being perfectly satisfied to, this is the worst investment I’ve ever made, because I just had to write a check for my mortgage and I didn’t have any income.

Steve Rozenberg: And they’re making it based on emotions because they’re emotionally tied to that.

Alex Osenenko: How is building a portfolio? Isn’t that so that I imagine there’s a piece for the diversification that, your four houses are rented, one is not, it’s not that big of a difference. Right? So you have a little bit of a cashflow-

Chris Clothier: Sure.

Alex Osenenko: … cushion, right?

Chris Clothier: Sure.

Alex Osenenko: But beyond that isn’t like you just getting from like isn’t getting worse with more houses? Like explain that to us.

Chris Clothier: Which part of it getting worse?

Alex Osenenko: Well, just the whole like you said-

Steve Rozenberg: If you have a dip.

Alex Osenenko: … you won’t let him buy one house. Like what’s the difference if I have six?

Chris Clothier: So the difference is the mentality of the investor on the front end. Number one, we simply choose to deal with investors that can and desire to build a portfolio. That’s a business decision. That’s a side that we know it makes it easier for us. We know that it builds in longevity. If you have a client that’s going to build a six property portfolio over the next three years, you have transactions built into your beginners.

Steve Rozenberg: You’d be customers.

Chris Clothier: So it’s a business decision number one that comes with size and ability. We’re able to make that decision. But number two, for the investor themselves, when you’re building a longterm relationship, which passive investing should be longterm, especially when you’re buying out-of-state, and you’re speaking with us like on a monthly basis, when there are issues that come up, two vacancies at the same time, three vacancies at the same time. A property is vacant and three other ones have maintenance issues. You built a relationship, you built a certain level of trust. If that occurs in month 39 down the road and you’ve got 38 months of-

Steve Rozenberg: Goodwill.

Chris Clothier: … how you build trust, then it’s an understanding that hey, this does happen. But we are going to take care of this for you. There’s a certain level of, again, ability to be able to step in and say, we’re going to handle this at cost. There’ll be no markup. Or we’re going to cover the price of that particular issue or we’re going to not charge you for the next resident if they didn’t fulfill their full lease. It gives you a lot of… I guess success gives you a lot of freedom to build and make those decisions and do those things.

When you have an investor that has six properties and you can say, these all six I’ve done perfect over time. You had a little issue here, a little issue there. Now we have this big hiccup, we have the ability to say, look, this is what we’ve already earned. We’ll get it back on track and get you back in that lane and-

Alex Osenenko: Got you. So Chris, to me it sounds like, there’s really distinctly like two, I’d say the biggest scattered two types of investors. There’s people who are like scrapping and they don’t really have… like we just had a medical doctor on the show, like the last show right. Now he’s definitely, because different income levels, different kind of a motivation for investing. It’s a lifestyle choice. It’s not a desperation.

So I guess what I’m hearing is like, a turnkey is really for some professionals who make significant income to be able to, well, let me just finish this statement. To be able to invest in real estate without dedicating their time, but having the ability to take care of any problems if the problems arise because real estate is not like a, it’s not just this flat line. As you say, there’s issues that come up. Like tenants move. Like it’s people in houses. And so you need wealthy people basically to work with you. You can’t have-

Steve Rozenberg: Well, that’s their target.

Alex Osenenko: You can’t have a college student that basic just scraped up the money for the down payment and they’re coming to you and say, here, Chris, take care of it now. Now I’m rich.

Chris Clothier: That is not what we’re built for you. You’ve nailed the concept of us as a company. That’s not what we’re built for. We want to help that particular college student invest his money in what we would call a wiser way. So possibly close to home, possibly something that he’s actively doing some other way to build a larger ability in a portfolio. So now you can actually, because one property far from home, is an expensive headache.

Steve Rozenberg: Absolutely.

Chris Clothier: It’s not, can it be an investment? Sure. But in our opinion [inaudible 00:18:21].

Steve Rozenberg: It’s not scalable.

Chris Clothier: No.

Steve Rozenberg: I think what he does with what I’m hearing is, is they’re very big on building the relationships with them, with the client. And I think the difference is from your person to their target is, is they’re explaining to the person, correct me if I’m wrong, basically they’re running a business. And in that business you’re going to have ups and downs, hills and valleys. And in that part of your business model is you’re going to have vacancies, you’re going to have maintenance. But because they’re building the relationship with the client on the front end is, they’ve got that Goodwill in the bank so that when that phone call does happen, and what I liked about what you said is every month you do like a check in.

Chris Clothier: Yes.

Steve Rozenberg: So every time, normally every time a phone call goes to a owner, it’s bad news. Well, now it’s peppered in with good news in the relationship building. So now it’s like, hey, how’s it going? Hey, we’ve got a challenge. We’re going to work through it. Just like you know, this is part of the business. This is part of the gig. My other question though is though, is that correct?

Chris Clothier: Yeah. And it’s often before you get that question it’s often peppered with, last time we talked, you said your grandson was coming to visit. How did that go? Was it good?

Steve Rozenberg: It’s relationship.

Chris Clothier: Or your wife was getting ready to start a new job and she enjoyed it. How’s that going? That’s great. We’ll call you next month and check in again. Let us know if we do anything for you. The vast majority of phone calls are, I have nothing to tell you. But I’m here, you’re there, your investments are good. Your money it’s just that-

Steve Rozenberg: The news is, there’s no news.

Chris Clothier: Yeah. The news is, there’s no news, but you can sleep well tonight because you know.

Steve Rozenberg: Absolutely.

Chris Clothier: Rather than being, there’s no phone call. I haven’t heard from my manager in six months. I think everything is good. Now it’s a case of every month, they’re there-

Steve Rozenberg: That’s great.

Chris Clothier: … everything’s good. And so when an issue occurs, it is much easier to let them know that, hey, this has occurred, but we haven’t handled.

Steve Rozenberg: Absolutely. Now my second question on a business marketing, was that a strategy to bring your client acquisition cost down? Because if you’re paying to get the client, but now the repeat business of them six times, now your acquisition cost goes down tremendously. Right?

Alex Osenenko: Well, the acquisition cost, I think the lifetime value of a client goes up and compare to it, the customer acquisition cost is probably, a lot smaller percentage. That’s how it works. But you guys spend a lot of time and effort, which are on education like I’m super passionate about.

Steve Rozenberg: They invest.

Alex Osenenko: So you have a huge, huge top of the funnel that people eventually trickle down into. And those on top of the funnel, you just help. Like if they never trickle down, you just help them.

Chris Clothier: I really want every person that comes into our funnel makes contact with us to say, I had a good conversation. I didn’t buy from them, but the conversation was helpful. They’re good people. They truly care. When and if someone ever says that I was completely sold by them, they just sold me from start to finish, that’ll be the day that whoever that was gets a readjustment on our side and possibly even out the door, because we are not here to sell anything. This is, we-

Alex Osenenko: And yet you are massively successful. Maybe that’s a lesson. There’s a lesson there’s somewhere.

Chris Clothier: Well, and many people would say that in actuality we’re selling constantly, and sure here at this event we’re selling, we’re selling our family. We’re selling the idea that-

Steve Rozenberg: The concept.

Chris Clothier: Yes, the concept of what we’re doing. The homes, the properties themselves are not the product. The product is the care and comfort that you will receive.

Alex Osenenko: The relationship [inaudible 00:21:55].

Steve Rozenberg: And the why in helping them find their why. Because look at the end of the day, four walls and a roof does nothing for you. It’s the business running in that four walls and the roof that actually is going to make or break your business and your future.

Chris Clothier: That is correct.

Steve Rozenberg: So they’re doing a great job building the relationships and the education and on BiggerPockets. And you said this at PM Grow and I looked after you said that, whenever they talk about Memphis Invest on BiggerPockets just as a reference, it’s all good because they’re there as an educate.

Alex Osenenko: [inaudible 00:22:28].

Steve Rozenberg: Because when you educate it’s about them, when you sell it’s about me. So they do such a good job of pushing that model out there. I mean-

Chris Clothier: I want to give, I’m going to take a moment here to make sure I get proper credit. That I do have partners. I’ve got, a brother, a younger brother. I’ve got an older brother that’s not, a partner in the business, but he certainly has been very influential on helping us develop the company. And then of course I’ve got my dad. Every business that my dad has ever started has been predicated on customer service. The experience that the client has. And every business. We’ve been in multiple different industries, but they’ve all been predicated on the experience that the client has because they will come back and they will tell others. And so-

Alex Osenenko: But so easy to say, it’s so hard to do. [inaudible 00:23:16] we’re trying to scale this property management thing and it’s like there’s so many hidden facets. You know the business intimately. But people who are listening, like there’s so many facets to property management, there’s so many different client types. There’s so many different housing types, like it’s crazy complicated.

And to deliver on that promise like the saying, it’s like, we’re a customer service company. Everybody says, but you guys have been delivering and which is fascinating to me. I’ll be honest with you. But I do want to poke at something. Not poke at something. But I want to understand, and maybe our listeners have this takeaway. I want you to be honest and talk about good turnkey and bad turnkey, because we see a lot of not so successful turnkey relationships, not with your company, but there’s a bunch of others. Can you give us a guideline or like how do people decide, like if it’s not Memphis Invest, let’s just say they have no appetite in Tennessee and Texas, wherever you are, four states, right?

Chris Clothier: Right.

Alex Osenenko: Let’s say they want to do Ohio.

Chris Clothier: Sure. I think there are red flags. And so-

Alex Osenenko: Let’s go through them.

Chris Clothier: Let’s touch the red flags. Number one. One of the issues that we all know is that, oftentimes it’s the sand states. It’s California, it’s New York or these places where wealth exists, that you see companies go to. And it’s a constant battle that you’re always promoting to the California investor to come invest in the heart land. And so you’re taking advantage.

Alex Osenenko: So those free seminars that we get advertised all the time.

Chris Clothier: Yes.

Alex Osenenko: Okay. Got it.

Chris Clothier: And so one of the things that happens is that when you are from an area where the cost of housing, the median price home might be four or $500,000 and it’s a three bedroom, two bath home, or one bath. It depends on where you’re at.

Steve Rozenberg: Depends on where you’re at.

Chris Clothier: There may not be a garage. There may not even be, just a sliver of yard that you have.

Alex Osenenko: You’re just describing my life.

Chris Clothier: All right, so there you are. So when you are presented with a very pretty picture of a three bedroom, two bath, fenced in yard, two car garage, beautiful little bungalow in wherever, middle America-

Alex Osenenko: Wherever.

Chris Clothier: … that costs $79,000 to get in, it automatically looks like a deal.

Alex Osenenko: It is to me like you painted the picture and I’m salivating right now because that’s-

Chris Clothier: It’s how quickly can I get started. And so I try and show people all the time that, that $79,000 deal to the investor that we just described, it looks like I need to get going and I need about 12 of these today. Where in reality that property, the real value of it, where it is might be $37,000 because there’s 27 more on the streets and half of them are boarded up or-

Alex Osenenko: Wasn’t that in your book? I read exactly [inaudible 00:26:07].

Steve Rozenberg: That’s story of my life. That was my life.

Alex Osenenko: If you guys want to read Steve’s book, he describes exactly what Chris did.

Chris Clothier: I love it. Well, that’s the issue that, to use the word turnkey, it’s easy. You can use the word turnkey. I made this very turnkey and easy. When in reality, as I talked yesterday on stage that, the red flags are that cheap is relative. Don’t buy cheap.

Alex Osenenko: So low priced, overpriced. That’s something to look into.

Chris Clothier: So it’s to aware of. So the house that costs $79,000 today, understand in middle America five years ago costs 29,000. And eight years ago it could be picked up for 4,000. In many scenarios.

Alex Osenenko: I can’t believe numbers like that existed. But keep going.

Chris Clothier: Well, you might have a company. I try to explain all the time that we’ve done real estate before. They’re just the economy. Economics doesn’t work with these low prices. It’s very difficult to make it work-

Steve Rozenberg: It’s tough.

Chris Clothier: … in this low cost properties in that it has been purchased, it has been renovated properly, with all the codes, all up to standards and proper, and that it’s going to function as a ongoing investment the way a passive investors should want, meaning headache free. I’m not going to have a lot of issues with these homes. And then at the same time to put profit in for the whoever is selling it and who did all the work and took the risk. I mean, there’s a lot of hands in that particular. And so the lower the price is, you got to start [inaudible 00:27:43]. There’s things that have been cut and no one’s going to do anything for free. So what’s been cut, it’s been the work.

Alex Osenenko: The quality.

Steve Rozenberg: The quality.

Chris Clothier: And then if you, let’s say the quality of the work hasn’t been cut but the price. So then the purchase price of whoever picked it up had to be cut. Well, not if you’re buying homes for four, $5,000. An investor has to think, why? Why was that home sold that inexpensive? Is there a lack of demand? Is there a lack of interest? There’s a lack of something, and who’s going to pay the price for that? Me. I’m owning the property in the backend. So really, really cheap is something that I think investors have to avoid. And price is all relative. Just because it’s way lower than what you’re accustomed to seeing where you live, that doesn’t mean it’s probably price for where it is.

Steve Rozenberg: The one thing I’ve always learned is, and someone taught this to me long time ago [inaudible 00:28:27] ever forget. The reason people fail is laziness or greed. And what you just said was the greed. You sit there and you say, you know what? I’m getting something and they’re not looking at it logically. They’re not doing their homework.

Alex Osenenko: It’s both. Laziness and not doing their homework. And you’re thinking, gosh, I could get-

Steve Rozenberg: [inaudible 00:28:44].

Alex Osenenko: … rich quick.

Chris Clothier: And here’s the third. I’ll offer a third to it. It’s loss aversion. If somebody comes in and says, this is too good to be true. So I’m probably going to lose money. But if I’m going to lose money, I’d rather lose a little bit. So I’m going to buy the thing that’s too good to be true because then my loss won’t be very big. Rather than buy say $150,000 a turnkey property, that is absolutely going to-

Steve Rozenberg: Man, that was my life.

Chris Clothier: … succeed.

Alex Osenenko: Perform.

Steve Rozenberg: You just described my life when I first got involved in investing.

Alex Osenenko: It’s fascinating.

Steve Rozenberg: That was it.

Chris Clothier: No, I don’t know if you mean that that’s what you bought.

Steve Rozenberg: That’s what I did.

Chris Clothier: I did.

Steve Rozenberg: That’s what I did.

Chris Clothier: I have 26 of them.

Steve Rozenberg: We had like 30 something, but same thing. We bought these low income properties and they killed us.

Chris Clothier: Yes. Before I understood that these basics, I made the same mistakes. I imagine you and I are the same way in that at this point I’m trying to operate, our family is trying to operate in a way that says, I don’t want other people to have these same mistakes-

Steve Rozenberg: Absolutely.

Chris Clothier: … nor do I want manage-

Steve Rozenberg: Exactly.

Chris Clothier: … those mistakes. So that’s number one. The other things to look for-

Alex Osenenko: So red flag number one is low price-

Steve Rozenberg: Too good to be true.

Alex Osenenko: … be aware.

Chris Clothier: Yes.

Alex Osenenko: Too good to be true. Be aware.

Chris Clothier: Yeah. Understand the economics. I mean, it’s hard to make low price properties actually operate the way you expect. Number two, this is a big one for me. It’s really length of time in business. You’re looking for a little gray hair. I told the story yesterday about the pilot. I don’t know if you heard it, where my father is really funny. If he gets on an airplane, he’s not turning right and walk into his seat, before he gets the chance to stick his head in the cockpit and just say hello to the pilots.

Steve Rozenberg: I didn’t hear that.

Chris Clothier: And he says, he’s like, “I’m looking for a little gray hair. I’m looking for the knowledge as I go sit down and I’m fine at 500 miles an hour or 30,000 feet that, should there be an issue, the person in front has the time and the wisdom and they’ve dealt with issues that they’re going to be able to safely handle whatever comes my way.” The same thing is true in real estate that if you’re dealing with a company, and you’re dealing with someone who says, “I’ve been extremely successful, I’ve had seven properties that I’ve owned and managed myself. Now I’ve decided to sell them to other investors. I’m managing 27 different properties now, so trust me, I know what I’m doing.”

You have to question that, when there is a correction, when there is some form of economic crisis or should there be another 2008, how are they going to handle my investment properties? Do they have the knowledge in business, not necessarily just in real estate, but in business in general? Have they been around the block a few times to know how to handle it when things get really hairy? And there’s just not enough.

Steve Rozenberg: And it’s funny is when I was doing a lot of the sales and stuff, I would tell people, I’d say, “That’s like going to a doctor that also does dry cleaning and he’s having a 50% off sale for surgeries today. What’d you go to that doctor? No.” So why would you trust your investment money, your life savings to go the cheapest way possible? Like does that make any sense?

Alex Osenenko: But people do that all the time.

Steve Rozenberg: They do it all the time.

Chris Clothier: And you just, you have to make sure and do a little investigation of who am I doing business with?

Steve Rozenberg: Laziness and greed.

Chris Clothier: What’s your background? Tell me what your successes have been. Ask the question. What’s going to happen if suddenly 50% of the portfolio that you’re managing goes vacant? How are we going to handle it? Have you ever been there before? And when there’s, don’t worry about that, that’s never going to happen. It’s never happened. Walk. I mean, because it has happened.

Steve Rozenberg: Well, and more importantly, my opinion is, is when you ask those questions, if they don’t know their numbers. What is your vacancy rate? What is your eviction rate? Those things like, what is your average rent price? If you have a property that’s $5,000 a month and they manage properties that are $800 a month, maybe not the quality you want.

Alex Osenenko: I have an idea. Do you guys have a document somewhere on how to interview a turnkey?

Chris Clothier: Yeah. I’ve published that multiple times.

Alex Osenenko: Can we please-

Chris Clothier: Of course.

Alex Osenenko: Can you please send us [crosstalk 00:32:37]. We’ll actually link it in the show notes-

Steve Rozenberg: That’d be good.

Alex Osenenko: … and have people because there’s probably a lot of different things.

Chris Clothier: I’m happy to do that. Happy to do that.

Alex Osenenko: Appreciate that.

Chris Clothier: I’ll give you two last red flags [crosstalk 00:32:47].

Alex Osenenko: So we have low price, length of time in business. So experience.

Steve Rozenberg: Gray hair.

Chris Clothier: Experience. Yes.

Alex Osenenko: Gray hair.

Chris Clothier: If you cannot purchase this property using the lender, if you must pay cash for a turnkey property, that is a major red flag.

Steve Rozenberg: Now, are you talking hard money too or?

Chris Clothier: I’m talking if the company says-

Steve Rozenberg: Cash only.

Chris Clothier: … you must pay cash.

Steve Rozenberg: Got it.

Chris Clothier: So they don’t care where the cash comes from, but you have to pay cash. Now what the typical explanation is that we’re moving too quickly. We don’t have time to wait on lenders. There’s high demand for what we do. So this has to go. It’s generally in my experience, a couple of things that you really have to have your red flag up for. It doesn’t mean it’s all bad. It doesn’t mean that there’s not somebody out there that operates that way that’s on the up and up. It just raises your risk as an investor because it generally means that the property, that there’s no opportunity for comparable sales. So it’s, I picked a price, a bank is going to say it’s worthless, but-

Steve Rozenberg: Were an encumbered title.

Chris Clothier: There could be-

Steve Rozenberg: You know.

Chris Clothier: There could be [inaudible 00:34:00]. I’ll say there can be good people doing this. [crosstalk 00:34:04].

Steve Rozenberg: I mean those are the things that you go, okay, I mean-

Chris Clothier: Why?

Steve Rozenberg: … why?

Chris Clothier: You lose the opportunity to have a disinterested third party that-

Steve Rozenberg: Look at this.

Chris Clothier: That is protecting their interest, review it for you to make sure that everything is-

Steve Rozenberg: Absolutely.

Chris Clothier: … proper. So that’s number one. The other thing about the cash transaction is that, it generally means it’s a low price property and so banks wouldn’t finance it anyway. So now you’re back to what we talked about earlier in price.

Alex Osenenko: Number one.

Chris Clothier: Now you’re back to, if there’s just reasons that a bank says no, we’re not touching that, maybe I as an investor should slow down. Because again, what we’re talking about here is risk. Is not necessarily good or bad, it’s that the more risk I have, certainly the worst, or the longer time I should spend before I make this mess.

Steve Rozenberg: And this is also barn that you, if you’re an out of state, now you don’t know the area. So you’re two dimensional basically because you’re not there.

Chris Clothier: Well, the vast majority of people that do purchase turnkey, they’re not local to the property themselves.

Steve Rozenberg: Correct.

Chris Clothier: And it’s that there’s various reasons for that. Some of them are absolutely personal and the investor just doesn’t want to see it. I don’t want to go and look at the property. I just want to make my investment.

Steve Rozenberg: It’s a mathematical equation.

Chris Clothier: Which is fine. Yes, exactly. But being that is the case, that is a big one. And the fourth one, the last red flag is just as big because we’re seeing more and more companies do this, where you can hire a third party inspection either. It comes with our certified-

Steve Rozenberg: Guaranteed.

Chris Clothier: … in the box, guaranteed. This is perfectly packaged up. We’ve done all the work for you. It’s almost like putting a big sign on that says trust us. And I say this all the time. I tell people about my own company. You can take nothing on faith.

Steve Rozenberg: Absolutely.

Chris Clothier: Make Memphis Invest earn-

Steve Rozenberg: Trust the verifier.

Chris Clothier: … the right for you to trust us. Exactly. And here’s the big thing about that. So we encourage the third party inspection and we use it as a check and balance against our own team, because we’re human. Our team makes mistakes every single day. When you’re doing 100 properties a month, we want to be perfect, but we’re not always perfect. There’s a certain number of properties every single month that we grade, the home inspections as average at best. And that’s not good enough. So we get these home [inaudible 00:36:32] back and we bring it back to our team as a number one, we fix everything. But number two it’s, how did we miss this?

Alex Osenenko: [crosstalk 00:36:40]. Is that [inaudible 00:36:40]?

Chris Clothier: 100%. That how we grade our team. They know that when you bring in a perfect home inspection where, and we’ve had these, when the inspector says, “I literally can’t find anything. The home is ready to go, there’s nothing that needs to be fixed.” I mean, you’re popping champagne in a party. That’s big for our team.

Alex Osenenko: [inaudible 00:37:00].

Chris Clothier: It’s rare. But like for us it might be, you’re talking about 1%, less than 1%. I mean, it is rare because they are really going through the home.

Steve Rozenberg: They’re looking for things. Their job is to find-

Chris Clothier: That’s right.

Steve Rozenberg: … what’s wrong.

Chris Clothier: So what is more likely is, here’s some very minor things that we found. And even though those are great and we reward our team for those, it’s still minor things had been found. We want to train our team up to be the inspector themselves. So when you are denied the ability to do a home inspection, that’s a-

Steve Rozenberg: Like, don’t look behind this wall. There’s nothing to see here.

Chris Clothier: That’s a major red flag. And I won’t put through this very much, but I will just say that, there are more and more, we’ll call them I buy companies. I think that’s what they’re calling themselves where you can buy across the internet and it’s dangerous. It’s dangerous when the company says, “You can’t inspect this property, that we began. We’ve done all the inspection for you, so you can’t look at the property,” and they’re using the word turnkey to [crosstalk 00:38:04].

So now this is going back to the turnkey is a marketing word, but I’m going to create a scenario where it’s been fully certified by me and you can’t look behind the curtains to see how it looks. These are things that, it’s a newer trend and it’s one of the reasons why I bring it up as a red flag. These are things that the investor has to watch out for and really kind of demand for their own good that we’re able to do this third party inspection, this disinterested in the sale. They’re just coming in to sure that, because even if the property has a few issues and on the front end, whoever’s selling it says look, “It’s as is.” At least now as an investor, you know.

Steve Rozenberg: You make those decisions.

Chris Clothier: So I have some CAPEX decisions that are down the road. This is minor, but without the ability to know that, you really are flying blind.

Steve Rozenberg: Now I have a question for people that are learning about the turnkey. You do all this stuff on the front end. Now the management side, is that part of it where it… because you do things where you’ll sell the property and not manage them or do you always manage them?

Chris Clothier: So it’s completely separate. That’s a good, it’s not really necessarily a red flag, but it’s a good point to bring up and understand. Are you able? Is it your property? Are you able to hire your own management company? Because if you’re not, there’s [inaudible 00:39:21].

Steve Rozenberg: There’s another chance.

Chris Clothier: There’s a problem somewhere. There’s a reason why you must use our management in order for it to perform and us to give you guarantees you have to use us. Well, that’s a red flag. I guess that’s another one [inaudible 00:39:33].

Steve Rozenberg: That’s another one.

Chris Clothier: So like on our side, you don’t have to use our property manager. These are two separate contracts. You purchase and then you hire a manager.

Steve Rozenberg: Then you want to earn their business as a management company.

Chris Clothier: In a vast majority. I’m talking as close to 100% they use our management company-

Steve Rozenberg: Absolutely.

Chris Clothier: … on the front end due to our experience and longevity. But it’s not required.

Steve Rozenberg: Got you.

Chris Clothier: What is required for performance.

Steve Rozenberg: I had a situation, in Houston, there was a lady reach out to me, she was in San Francisco and she says, “Can you help me? My parents live in Hong Kong and they bought this house and they haven’t gotten rent for nine months from the management company.” I’m like, “Yeah.” So I started doing some homework on it. I look up the tax records and basically the whole subdivision was people in China that owned the properties and bought it from a turnkey and basically they weren’t giving them the rent money.

Had been like two years on some people. They had not gotten any money. And they were in China and they didn’t know who to call or contact. And they went over there and did a dog and pony show over there in China. They placed their funds over here and it was a turn key.

Alex Osenenko: That’s a really bad apple though.

Steve Rozenberg: Absolutely.

Alex Osenenko: So let’s kind of, I think, let’s sort of wrap this up and say, look, if you want to learn more about Memphis Invest or at least how they do it, Chris, where would they go?

Chris Clothier: Right to our website, memphisinvest.com is probably the easiest and simplest way. There’s what I’m not sure what they’re called, buttons on the side where they can go and they can learn more about our company or they can learn more about turnkey in general, to be educated first. But they can schedule a, what we call a one to one consultation where one of our team members will take the time to sit down with them and get to know the investors, see if we’re the right fit for them and they’re the right fit for us.

Alex Osenenko: Sounds good. Well, I hope this was educational and helpful. It was for me. I think I have a good understanding how to at least look into it, and what is turnkey and the right way to do this. Chris, thank you very much for your time.

Chris Clothier: My pleasure. Absolutely.

Alex Osenenko: We appreciate it very much.

Steve Rozenberg: All right guys, we’ll see you next time. Thank you.

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Dr. Charles Steve Shaffer, Doctor or Investor or Both?

Alex Osenenko and Steve Rozenberg sit down with Dr. Charles Steve Shaffer and talk family, investing, and quitting one job for another.

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Full Transcript

Alex Osenenko: Boys and girls. Welcome to the next episode of the Mindful Investor Podcast Show.

Steve Rozenberg: Nice one.

Alex Osenenko: It’s pretty good. Today we have Dr. Steve Shaffer. Man, this one we teased out an [crosstalk 00:00:15] introductory episode. Yeah. Man, how exciting. This guy is an amazing personality. Like I’m talking about emotional, like if you watch this on video, his eyes light up. He’s so passionate about medical, he’s a doctor MD about curing people, and real estate. Equally, as passionate. And we talked about him potentially quitting. Actually, he’s really seriously considering quitting being a doctor in the interest of being real estate investor full time. Steve, you consider quitting your [pilot 00:00:44] so this was near and dear to you [crosstalk 00:00:46]. You took over this show.

Steve Rozenberg: We actually had some great conversations. And you know what you’re going to learn here is, putting himself through medical school, the guy bought a triplex, worked his way through and ended up leaving medical school debt free. How many people you know do that?

Alex Osenenko: That’s incredible.

Steve Rozenberg: That’s incredible. And the guy now he’s a doctor, and he just loves being a doctor, because he enjoys doing what doctors do. Bringing in life, being there when life ends, the full circle. He just enjoys what he’s doing and doesn’t have to worry about money. I mean, what a nice life that would be.

Alex Osenenko: It’s amazing. Let Dr. Shaffer save himself. Let’s get into the show guys. So we hear it, 2019 BiggerPockets Conference met a very interesting group of people, a lot of folks in different stages of real estate investment, adventure, career I should say, and this is what we’re going to talk about today is the adventure versus career. A lot of people get into real estate investing with a vision of passive income, with a vision of freedom for their families, for themselves, whatever the case is. But a lot of people who get into are professionals and today I’m blessed to have my co-host here, Steve Rosenberg, who’s an airline pilot, flies for United. And I have Steve-

Dr. Shaffer: Shaffer.

Alex Osenenko: Shaffer. That’s easy. I can pronounce that. Steve Shaffer who was a medical doctor. Both of them are successful real estate investors and have a little bit different paths. But at the end of the day, Steve Shaffer is going to talk today about the decision that he’s about to make. On whether to keep his day job, or transform it into something else. So, he can focus on real estate investing full time. This is fascinating topic and I’m sure many of you listening-

Steve Rozenberg: I think there’s a lot of people that either are in this boat or could be in this boat, like Steve and myself that you focus your whole life on one path. And all of a sudden for whatever reason and everyone has different reason, but their why changes and now they do a shift. And so, I’m curious to hear your story as to what happened and what caused you to, to actually even think of doing that shift, let alone doing the shift.

Dr. Shaffer: Sure, absolutely. No, that’s a great question. My story is probably a little nontraditional as far as the path of medicine, right? I don’t come from a long line of medical people. And my dad was a police officer and my mom’s a teacher and nobody medical in the family. And I grew up in West Virginia. And I wouldn’t at all say poor, like we were great. But I didn’t realize until I was much older that like, “Oh my goodness, like we had the nice house. And it costs, this house that we paid for forever, it costs half of what medical school costs.” So, I went to a private undergraduate institution in South Carolina for my undergrad. And it was kind of hoity toity, a lot of people there had some dollars. It was a private school.

Steve Rozenberg: [inaudible 00:04:08].

Dr. Shaffer: Yeah, they were doing great and I was not in that boat. And so I worked four jobs all the way through undergrad. And they were all food service. So, you know. And when I was a manager, when I was a cook, when I was a server. And was just grind-

Steve Rozenberg: Just scrapping and grinding.

Dr. Shaffer: Just grinding. And was able to graduate debt free, which is wonderful.

Steve Rozenberg: Oh wow.

Dr. Shaffer: And then again, looking up at the mountain of the med school debt. And so, I actually did an air force scholarship.

Steve Rozenberg: Okay.

Dr. Shaffer: And so I was a doctor for the air force for a while. But yeah, somewhere in there, into high school really. Even before I got to college, I read Rich Dad Poor Dad just like everybody else. [crosstalk 00:04:46]. Got bit. So, in medical school I bought a triplex, lived in the big unit, rented the other units to classmates. It pretty much covered the mortgage.

Steve Rozenberg: Based on that book? Based on what you’ve learned basically?

Dr. Shaffer: Yeah kind of, I mean just based on assets, liabilities.

Steve Rozenberg: Okay.

Dr. Shaffer: Right? Trying to wrap my head around that. Even at that stage where everybody’s just accumulating the student loans. And I accumulated some student loans that I shouldn’t have, especially in light of the air force scholarship. I’ve made a lot of mistakes along the way. But that was the first thing, that triplex looking up and being like, “Oh I live for free.”

Steve Rozenberg: Right?

Dr. Shaffer: Like the rent-slash-mortgage is covered. And that was in the good old days where I walked into a bank and they were like, “You’re in medical school?” And I was like, “Yeah.” They were like, “What’s your income?” I was like, “Absolutely nothing.” They were like, “Well sign here, we’ll give you a house. [crosstalk 00:05:31] Here’s your triplex.”

Steve Rozenberg: Yeah.

Dr. Shaffer: And then you know that shift, 2008 happened while I was in medical school. And so, when I came out I was on the back end of it. So, I bought a foreclosure for residency and did a live-in flip. And that was really the second deal. And then worked with the air force a little bit, got transitioned to a station in New Mexico.

Steve Rozenberg: Okay.

Dr. Shaffer: And did a flip down as well. And so like this, you know, primordial, starting with the single families and working my way up with the idea of always passive income.

Steve Rozenberg: Right.

Dr. Shaffer: So, I would say that the grind stuff for me, that shift was… It’s old.

Steve Rozenberg: So, now were you actually… You started doing real estate as a doctor?

Dr. Shaffer: Yeah.

Steve Rozenberg: It wasn’t a doctor first and then real estate.

Dr. Shaffer: Correct.

Steve Rozenberg: It was both running parallel.

Dr. Shaffer: Absolutely. And I mean I think it’s valuable the way that it worked out for me. So, like I house hacked in medical school. So, this time where some people were starting to eye the BMW and stuff, I was able to pull the reins back on that and be like, “Hey listen, you know, if we live for free, we can get out of this thing and not really have a lot of debt.”

Steve Rozenberg: Yeah. That’s some huge insight. I mean that that alone, just to think that way is, I mean talk about contrarian, I mean your complete opposite of what society thinks.

Dr. Shaffer: Sure.

Steve Rozenberg: Which is probably where you are today because of it.

Dr. Shaffer: Yeah, a little, I mean I have to be careful because that’s my thing, right? Is that contrarian side and that chip on my shoulder.

Steve Rozenberg: Right.

Dr. Shaffer: And so when I was in undergrad, I am sure that it was not actually as bad as it is in my mind. Where these guys, all of these rich guys, making fun of me for smelling like French fries. It probably wasn’t that bad at all.

Steve Rozenberg: Sure.

Dr. Shaffer: But that’s the way I remember it. That like that was-

Steve Rozenberg: So, that’s how it was.

Dr. Shaffer: Yeah.

Steve Rozenberg: If that’s what you think that’s what it was.

Dr. Shaffer: Right, right. But that was my chip. That’s what kept me going. And so I could not afford the Kaplan course to study for the MCAT, this admissions test to medical school. I couldn’t afford it. And there was no possible way I could afford it. Well, everyone else went and I remember showing up to the MCAT, a lot of them rode together too, and I wasn’t invited.

Steve Rozenberg: [inaudible 00:07:45]

Dr. Shaffer: That’s in the back of my head. Yeah. And so I showed up and it was me and a pencil. Because, that’s what you needed to take the test. It’s not a big deal, right? These guys had the layers that they teach you to wear in case the room is cold. They had the salty snack. They had Gatorade. They had like a system-

Steve Rozenberg: They’re in teams.

Dr. Shaffer: And they looked at me and I mean that was the one memory that I’m pretty clear on. That actually happened and they gave me a really hard time about it.

Steve Rozenberg: Really?

Dr. Shaffer: Yeah. And then I ended up doing quite well on the exam and got accepted to medical school first. And that was my thing, I was just like all right, well.

Steve Rozenberg: That’s awesome.

Alex Osenenko: That’s a pretty cool story. So, that sounds like you are basically putting… You’re scrappy, right? You’re entrepreneurial.

Dr. Shaffer: Yeah.

Alex Osenenko: That’s what it is. And you don’t see a lot of entrepreneurial doctors, nor pilots per se.

Steve Rozenberg: No.

Alex Osenenko: It’s interesting. So, let’s explore that a little bit. For those who are listening. Maybe they’re maybe an accountant, maybe it’s some other job.

Steve Rozenberg: Engineer.

Alex Osenenko: Engineer. So, your passion from what I understand, your passion for real estate is not really for real estate. Your passion is for independence. Is it building that-

Dr. Shaffer: Yeah, exactly.

Alex Osenenko: Building that wealth? And real estate is just a vehicle or you actually are passionate about real estate?

Dr. Shaffer: It is both. So, it is definitely in that financial independence, retire early mindset. And I consume a lot of content in that space. I love that stuff. I love thinking that way. I’m more of that… If you’ve talked to many of these people, the [fat fire 00:09:15], like I don’t want to be extremely frugal. I want to be able to enjoy my life. But yeah, it’s freedom. That is the driver. Real estate is an excellent vehicle. And heard other people say this so I don’t get credit at all. But like it’s not get rich quick. It’s get rich for sure. And especially in the market that I’m in.

Alex Osenenko: [crosstalk 00:09:29] I haven’t heard that before.

Dr. Shaffer: Yeah. So, the market that I’m in. Fargo, North Dakota, 2008. They didn’t know that it happened.

Steve Rozenberg: Yeah.

Dr. Shaffer: Because, every year you’re going to get that 2 or 3% plod. You’re never going to get 30% appreciation.

Steve Rozenberg: It didn’t swing far, so it didn’t swing far the other way.

Dr. Shaffer: It never went up a ton. It never went down a ton. It just, it just plods along and the population increases. You have a diversified employment base, like those kinds of things. So, I don’t know if he’s been on this podcast yet, he’d be an excellent guest? Neal Bawa offers a lot of insight into demographics and those kinds of things in areas as a multi-family guy. And like that is the part of real estate that I love.

Steve Rozenberg: So, you like the data, you like the data side of it or?

Dr. Shaffer: I like the data side, but it’s just really, yeah, I actually really liked the nitty gritty, but the multi-family reposition.

Steve Rozenberg: Okay.

Dr. Shaffer: So, this building is a small business.

Steve Rozenberg: Absolutely.

Dr. Shaffer: And it’s failing and I can fix it. So like Shark Tank, The Profit, those kinds of shows. That’s my jam-

Alex Osenenko: I love those too.

Dr. Shaffer: Yeah, right. [crosstalk 00:10:33].

Alex Osenenko: In Shark Tank-

Dr. Shaffer: Oh man.

Alex Osenenko: Every episode, every time. There’s not enough of these shows out there.

Dr. Shaffer: Yeah, sure. And the funny thing is they’re quite popular, you know? And so, Shark Tank’s doing great. But yeah, I mean Marcus Lemonis goes into this business and people, process, product. And fixes it, that is fascinating. And I don’t know enough about the [small 00:10:53] business.

Alex Osenenko: [crosstalk 00:10:54] Major dumpster fire.

Steve Rozenberg: [crosstalk 00:10:57] I’d like to backup.

Dr. Shaffer: Yeah, yeah. Sure.

Steve Rozenberg: So what I’m curious… Especially for people watching. How do you think differently today? Because, I want to go to where you are today.

Dr. Shaffer: Yeah.

Steve Rozenberg: But for people that are thinking of doing this, how do you think that you were able to change your mindset from what you thought of back in med school, right? You were on that path, but how do you think you are different today than you were then? And if you were talking to yourself, what advice would you give yourself back in the day?

Dr. Shaffer: Yeah, that’s an excellent question. I would say the reason I led in that way. The reason I laid that groundwork was I didn’t change that much. And so I think that if somebody is coming to this kind of a podcast from the medical community or whatever, they may have a bigger mountain to climb as far as mindset.

Steve Rozenberg: Yeah.

Dr. Shaffer: Because I was there mindset-wise, the things that I would do differently… I mean this is very candid, very personal stuff. But I used to gamble too much and I didn’t have money because the [macro 00:12:00] I was excellent in. You know what I mean? Like, “I’m not paying for a house. My car costs $3,000 and it’s great.” I’m doing all these different things to start revenue streams and all this stuff that’s smart. And then you go and give money away to the house.

Alex Osenenko: You have to live with little though too. Right?

Dr. Shaffer: You got to live a little.

Alex Osenenko: I was going to ask you-

Dr. Shaffer: Yeah.

Alex Osenenko: This is my question. When you had four jobs.

Dr. Shaffer: Sure.

Alex Osenenko: You went through medical school.

Dr. Shaffer: Yep.

Alex Osenenko: Air force scholarship. What do you do for fun? That was my question.

Steve Rozenberg: Gamble.

Dr. Shaffer: Not anymore.

Alex Osenenko: I guess there’s a little bit of a life has to be left. So, when people are listening, they might be wondering like, “Hey man, I can’t do that.” I mean Steve Shaffer is a monster. Like he’s smart, he learns stuff. He passes the tests, you know, without layers, what have you. But how do you blow off steam? How do you actually mentally get back on?

Dr. Shaffer: Yeah, I think, I’m glad you brought that up, I think that is a glaring weakness of mine. I’m not good at it because I had that chip on my shoulder still. You know what I mean? I’m the kid from West Virginia, I moved, the nobody believes in this thing or whatever. It’s really a lot of artificial now. But that’s what drives me and I’m not good at it. I’m not good at relaxing. I’m not good at unwinding and I actually have to work on it.

It takes work for me to be like, “Okay, I’m going to do nothing for a few days.” And I read, I mean, I really enjoy that. And so some people might get on me for that, “Hey, well that’s not really taking time off.” Or whatever. Like you’re still the… I love reading and I don’t get a lot of time to like sit and read. I consume a lot of content via audio because I commute. Back and forth [crosstalk 00:13:44]

Alex Osenenko: Yeah. We all are the same. I’m an avid podcast listener, and audio books.

Dr. Shaffer: Right.

Steve Rozenberg: But I will say much like him… And so I did a, over the summer, I did a mastermind with the BiggerPockets people.

Dr. Shaffer: Awesome.

Steve Rozenberg: Some very high successful people in this mastermind. And the biggest thing I got out of it was that I never celebrate my wins.

Dr. Shaffer: Yeah.

Steve Rozenberg: I’m always any win I get, it’s in the rear view and I’m looking at the next thing.

Dr. Shaffer: Yep.

Steve Rozenberg: It’s a fault, I think, of mine because I never, I mean, airline pilot, real estate, built a business. I never stop and enjoy any of it. Anything I do it maybe a dinner, but that’s it. And it’s moving on to the next.

Dr. Shaffer: Yeah.

Alex Osenenko: Yeah. I agree with that. So, celebration, let’s put a pin in this because this is an interesting topic. But you have a hobby. You ride a Harley, don’t you?

Steve Rozenberg: I do, yes.

Alex Osenenko: I fish. Fishing for me is that.

Steve Rozenberg: Clears your head.

Alex Osenenko: I’ll listen to a book. Like I wait. I’m not one of those OCD bass fisherman. I sit there and let them come to me. I like set it all up. What do you do? Do you have a hobby?

Dr. Shaffer: Yeah, kind of. I mean I actually really enjoy, I don’t know if this is obvi or not, it’s more work I guess, but I really enjoy working on the properties. So my-

Alex Osenenko: That can be therapeutic.

Dr. Shaffer: It’s really cathartic. And so, I have outsourced much. I have learned a lot. I held on to too many things for too long. But painting? Painting is mine. Painting is catharsis. And so, man, cutting in those lines and it’s so transformative in such a short amount of time for just [crosstalk 00:00:15:18]-

Steve Rozenberg: You’re seeing [crosstalk 00:15:19] You’re reaping the rewards of you’ve done.

Dr. Shaffer: Yeah you step back, and you’re like, “Oh.”

Steve Rozenberg: “I did that.”

Dr. Shaffer: “That’s pretty.” Yeah. And so, I really enjoy painting, but like painting houses. I wish I could paint people. That’d be awesome. I can’t-

Steve Rozenberg: You can [crosstalk 00:15:32].

Dr. Shaffer: No, absolutely not. Like I, yeah, I go to the painting classes. I really enjoy those.

Alex Osenenko: You do that? Wow.

Dr. Shaffer: Yeah, I really enjoy those. Those are fantastic. So, that kind of stuff. Like I, I want to do things. And so like the painting classes, the cooking classes, learning new things that is my relaxation. Like I love learning juicy stuff.

Steve Rozenberg: Do you tinker with stuff?

Dr. Shaffer: Yeah, some.

Alex Osenenko: Do you, let’s shift gears a little bit, let’s talk about your decision to now forgo or mostly forgo this hard earned profession that you’ve built a career-

Dr. Shaffer: Sure.

Alex Osenenko: You’ve built this, there’s progression, there’s opportunity where you are, right? And is a medical doctor.

Dr. Shaffer: Yep.

Alex Osenenko: Talk us through that decision. When was that initial thought occurred in your brain and how you developed it?

Dr. Shaffer: Yeah, I mean again, I have always been looking down the barrel of freedom. You know what I mean? From the get go. And so I took a step back and I was like, “Okay, science, I like people, how do I make money?” And then that’s how I ended up in medicine. Which is really difficult to put out there in the universe because that’s judged pretty harshly, right?

Steve Rozenberg: Sure, there’s a stigma to it.

Dr. Shaffer: Yeah, right. The answer in the interview is to help people and it absolutely is to help people. And the things that medicine has afforded me have just been outstanding. I mean, fabulous. And being there when babies are born and being there when people die and this amazing profession. I love it. And I think that’s an important point to make is that I don’t dislike medicine. I don’t hate my job.

And there’s a lot of doctors who do, they’re burned out. And that might be some of this audience, they’re burned out. They’re tired. Paperwork, insurance companies, their staff, billing. There’s so many things in medicine that that can cause you problems. And just like anything else, I selected my job on purpose. And so the job that I’m currently doing is perfect for me. Like schedule wise and the pay’s great. And the people that I work with.

Alex Osenenko: So, how do you leave that?

Dr. Shaffer: Well and that’s the question, right? So, I mean I am not-

Steve Rozenberg: You’re not like pushing to go, “I got to get out, I got to get out.”

Dr. Shaffer: Exactly. I am not leaving out of a sense of frustration or bitterness or anything like that. I’m leaving out of the ability to do so.

Alex Osenenko: Yeah, it’s intentional. I get it Steve. But what I’m trying to get to is why?

Dr. Shaffer: That’s all right, let’s get there. Yeah.

Alex Osenenko: Right? So, are you… The opportunity costs, right? So you leave that, you leave your professional behind, the opportunity cost is significant. Like what are you going to do with that time?

Dr. Shaffer: Right. Excellent. And I think that, to throw it back on you would be, why not? And like you bring up opportunity costs. And I would counter with sunk cost fallacy.

Alex Osenenko: [inaudible 00:18:31].

Dr. Shaffer: So, like 11 years of my life, so four of undergrad, four of medical school, three of residency. And I did this air force scholarship, which genuinely… I mean I’m entrepreneurial. The military is a bad place for entrepreneurial people as Steve made out. So, I did not have a good military experience and most of that, almost all of that was entirely my fault. And so there’s a lot of lessons that I learned there. But you have this massive cost in the rear view mirror and now you have this great salary. And honestly, the hardest part for me in the fire discussion is 401k, 457 some of these tax deferral vehicles for that income. I don’t need it. So, I think that-

Alex Osenenko: Hold on, let’s just take a second here.

Dr. Shaffer: That’s okay, yeah.

Alex Osenenko: That’s really interesting. So, your aspiration is not to make more money, but then this is where I’m confused. You are an incredibly driven person. I think a rare breed I’ve met, top the top 1% of people I met. And I meet some high powered people.

Dr. Shaffer: Sure.

Alex Osenenko: Very driven. Where is that drive going to go? I’m wondering like, okay, it’s not the money necessarily. You’re not going to all of a sudden start making 10 times as much in a year or so. But-

Steve Rozenberg: I think what you’re asking is, is you’re asking destinations [crosstalk 00:19:56] and I think he’s saying he’s doing it for the ride.

Dr. Shaffer: Yep.

Steve Rozenberg: And I think that’s a bit of the difference because I’ll tell you very similar, just like an airline with airline pilots, I fly with guys all the time that are miserable. And they would be miserable if they were sitting on their couch flying from home. They would still, whether it’s the company screwing them over, or the union, or this, and it’s just nonstop. And whenever I hear that, I’m sure, just like with doctors, I always think of the Guns and Roses story, right? Guns and Roses was at the top of the world and they broke up because basically they didn’t get along. And you’re thinking these guys were on top of the world. They were making the money, they were living the life. But to us they were living the life. To them they were miserable and unhappy.

So, the fact that like I… Same thing with flying and maybe the same thing in your position. I love going to work because I don’t need it. I go to work and fly, but I don’t need to be there. So when I hear people bitching and moaning all the time, I’m thinking to myself, you can complain or you could change your environment. You’re choosing to be unhappy. You could do what I did. You could buy real estate. You could do these things you choose not to. So, this is the environment you’re in and you go to work and it’s like, “Oh, did you hear about the union? Did you hear about this?” And I’m like, “No, I didn’t hear anything.” I don’t get any of those emails. I don’t get anything. Because I want to go to work and I just want to fly and enjoy it. And is that similar?

Dr. Shaffer: It’s very similar. And we can get into… I have some questions for you with that too, that Alex kind of clued me in on. Because you kind of hacked your job.

Steve Rozenberg: Yeah.

Dr. Shaffer: You’re doing the what? This two route thing, right?

Steve Rozenberg: Yeah. Two times a month.

Dr. Shaffer: That’s awesome. That’s amazing. And like it exists out there for a certain number of pilots. And some of these guys are grinding it out and they’re miserable. Charlotte to Dallas and you’re like, “Listen man, switch gears. That’s all you have to do.”

Steve Rozenberg: Just change your perception.

Dr. Shaffer: Yeah. And so, I was a primary care physician. I’m family medicine trained. And so I was a primary care physician and I loved primary care, you have this sense of ownership and these are your patients. And you get to see the progress because they’re coming back. I really enjoyed it. There’s also a lot of challenges in primary care. It’s not extremely well compensated. There’s tons of paperwork, there’s a lot of frustration. There’s frustration around noncompliance. And so, it gets into this huge ball of bitterness where you spent 11 years of your life to like help people. And you have lost it.

Steve Rozenberg: [inaudible 00:22:16].

Dr. Shaffer: You have 0% of it. Now, you hate these patients. Some people. You know what I mean? They’re coming in and you hate it or whatever.

Steve Rozenberg: And that feeds upon itself.

Dr. Shaffer: How did we get here? It’s 100% the wrong way. And so I have been very fortunate where I’ve been offered opportunities in my life, and been able to take advantage of them. But I started moonlighting at this, [inaudible 00:22:44]. I’ve got a second job. Because the job that I’m currently doing now, I started as a moonlighting position. And I’m a hospitalist.

And what that means is when the ER calls to admit somebody to the hospital, I’m that guy. So I go down to the ER, I admit the person at the hospital and then I’d take care of the people that are in the hospital overnight. Overnight only. I only work nights. And there’s a couple of reasons for that. But that was one of my conditions when I came on to that position. That position had never existed before. But several of the doctors that were there didn’t want to work nights. They don’t like it, you know?

Steve Rozenberg: Right. They probably want to be with their families.

Dr. Shaffer: Yeah. They’ve got families. That’s great. And so I love it. And so it’s, it’s seven on, seven off, 12 hour shifts. I have half my time off to myself. 12 hour shifts if I am not busy, I get to sleep.

Steve Rozenberg: Now is some of that because you don’t have to be around other doctors? And you can just do what you want to do, which is take care of people.

Dr. Shaffer: Absolutely. And then the cool thing with that is, I mean I’m really hesitant to put this out on a podcast just in case it ever goes anywhere. But I had an administrator from the hospital the other day literally run into me like physically in the hallway and he’s, “Oh excuse me.” Because, I was in this kind of employee stairwell. He’s like, “Hey, are you lost? I can get you back to the main area or whatever.” And I was like, “I work here.”

Steve Rozenberg: “I work here.”

Dr. Shaffer: Yeah. He’s like, “Oh cool. What do you do for us?” I was like, “I’m a physician.” And he’s like, “Oh neat man. Did you just come on?” I was like, “I’ve been here two years.” But that was the secret sauce to me.

Steve Rozenberg: Absolutely.

Dr. Shaffer: I don’t go to a meeting.

Alex Osenenko: Are you thinking then, this is going to be your gig moving forward?

Dr. Shaffer: No, no. So, this is the gig that I’m potentially hanging up and it’s great. It’s wonderful. I love it. But just like the flying two routes or whatever, it is wonderful to know that you can lay it down.

Steve Rozenberg: Yeah. It’s funny, you know, I did a trip one time where I was about three, four years ago. I was going down to Rio de Janeiro and we had the chief pilot with us and we’re flying down to Rio and he’s like, “Stevie, how long have you been here for?” And I said, “About 15 years.” And he’s like, “Really?” He’s like, “I’ve never met you.” And I said, no offense, “I don’t want to meet you.” Because that’s the 10% that are always in trouble. And I said, “Do you know what’s even more funny?”

I said, “When I was based in Guam, you are the chief pilot in Guam. And I never met you there either.” He’s like, “I get it.” He’s like, “I get it.” But that’s, again, I don’t want to be in that crowd. I go to work, I love what I do because I love to fly. And then I love to go home and I leave it all there. And so, a lot of people they take that home with them. And that’s when it starts eating them up and it eats them up from the inside and then they’re miserable at home. Then they’re complaining, then they’re this and that’s the challenge.

Dr. Shaffer: Yeah. And I think the one thing that, and Alex was probably going there, but like pilot and doctor. And you mentioned engineer earlier.

Steve Rozenberg: Yep.

Dr. Shaffer: It’s interesting to me because like I have met so many engineers in real estate investing. And several of them that have gone full time and now they’re realtors and there’s a lot of that. I have, and I’m sure their family gave him grief or whatever, that doesn’t seem as big a deal. But if you are a doctor and you said that you were going to quit medicine to be a real estate investor, everyone thinks you are. [crosstalk 00:25:46].

Steve Rozenberg: You got on the podcast.

Dr. Shaffer: Yeah. Right. I got on this podcast, they were like, “This guy’s an idiot.”

Steve Rozenberg: “What is he thinking?”

Dr. Shaffer: Absolutely. Because it’s this massive income and you’re potentially landed down for something that is perceived as risky.

Steve Rozenberg: Sure.

Dr. Shaffer: But the thing with pilot and medicine and engineer and a couple other professions, it is so woven into your identity.

Steve Rozenberg: Absolutely.

Dr. Shaffer: And I mean you are a pilot. You have a thing-

Steve Rozenberg: It’s who you are. [crosstalk 00:26:13].

Dr. Shaffer: You have the cool hat.

Steve Rozenberg: I got the hat.

Dr. Shaffer: I got the white-

Steve Rozenberg: I should wear the hat from now on.

Dr. Shaffer: You should wear the hat from now on. Be the captain. I’ve got a white coat. I’ve got a stethoscope.

Steve Rozenberg: Yeah. That’s the identity.

Dr. Shaffer: That’s it. That is your identity. You know what I mean? And so laying that down, that is, I think the climb that most people in medicine would really have a hard time with. You are-

Steve Rozenberg: You have to change who you are.

Dr. Shaffer: Sure.

Steve Rozenberg: Yeah, absolutely.

Dr. Shaffer: And it’s not even the people who like, correct you when you say Mr. because those people are a special breed. “Dr. If you please.”

Steve Rozenberg: “It’s doctor.”

Dr. Shaffer: Yeah. You don’t like those people. But not even just those people. I mean you’re a doctor. It’s a lot of work. It’s, it’s one of the hardest paths there is, right?

Alex Osenenko: So let’s sort of take it all the way.

Dr. Shaffer: Yeah man.

Alex Osenenko: I still am struggling to understand why.

Dr. Shaffer: That’s okay. Yeah.

Alex Osenenko: I want to get that. I want to leave here-

Dr. Shaffer: Sure.

Alex Osenenko: And the audience with understanding. All right, what’s next for Steve Shaffer? What is that next thing? Is it more freedom?

Dr. Shaffer: Yeah.

Alex Osenenko: More freedom to do what you want. Because you’re a driven guy you’re going to do stuff.

Dr. Shaffer: Yeah I know.

Alex Osenenko: You’re not going to paint.

Dr. Shaffer: Oh, yes I will. To your point the… When you asked about relaxation earlier, that is actually the part right now that I am figuring it out. And that’s the part that scares me. Because if I get to the point where I’m satisfied with my passive income and I don’t have a full time job anymore. But I mean I have three kids and absolutely love them. I love chasing them around and occasionally I catch one of them.

Alex Osenenko: You have three kids? There’s new things-

Steve Rozenberg: Keep popping up.

Dr. Shaffer: Yeah. Yeah, no.

Alex Osenenko: 24 hours a day. Do you have more?

Dr. Shaffer: Yeah, no.

Alex Osenenko: Do they teach you more than school? [crosstalk 00:27:57].

Steve Rozenberg: Time travel.

Alex Osenenko: Time [hockey 00:00:27:59].

Dr. Shaffer: Yeah. The same amount of time. But I, to answer your question directly, I am scared about what’s next. Because I’m not good at taking my foot off the gas. I’m just not good at it. And I am sure that it will pivot into something. Like you asked the tinkering question I wanted to like take off on this whole, like I got a grant for this STEM education thing that I came up with.

There’s stuff in my head that I haven’t had time to act on, but like I am genuinely… Us three at the table. I would love to go to culinary school. Why? Because I don’t-

Steve Rozenberg: Why not?

Dr. Shaffer: Because I don’t know how to do it yet. You know what I mean?

Steve Rozenberg: So, you’re a problem solver. You like to solve problems.

Dr. Shaffer: Love solving problems.

Steve Rozenberg: Puzzles?

Dr. Shaffer: Yeah, absolutely. My daughter inherited it. We did an escape room for her birthday the other day and it’s… She is the best. So my daughter is-

Steve Rozenberg: I’d love to go to a game night at your house.

Dr. Shaffer: Oh my gosh, my daughter… Oh, no you wouldn’t.

Steve Rozenberg: It’s probably pretty intense.

Dr. Shaffer: It’s cut throat. Yeah. So, my daughter is a testable, verifiable genius. Like literal genius. People call, they want to put her into programs. Like she is off the charts smart. I hope she never hears this. She’s off the charts smart. And I love that kid so much because she doesn’t know it yet.

Steve Rozenberg: Right.

Dr. Shaffer: And she’s still very grounded. And so, we walk into this escape room thing. And it is minimum four people per team because of the size of the rooms. And it’s her and I. And like she is below the age limit, everything. And the guy was like, “Hey man, well come on in and have a good time.” But whatever, we got out.

Steve Rozenberg: No kidding.

Dr. Shaffer: Oh yeah, absolutely she got out. That kid is so awesome at solving problems and whatever. And like seeing that, I mean that’s what’s next.

Steve Rozenberg: So, I have a question. Quick side note, kids.

Dr. Shaffer: Yeah, yeah, go for it.

Steve Rozenberg: How are you going to and are you going to instill this freedom mindset? Because I think what you’re asking and what he’s done. And like myself what you’re actually doing is it’s not necessarily… I don’t know if it’s necessarily a destination. I think what you’re doing is you’re buying your freedom or you’re getting your freedom. You’re getting the ability to make a decision on what you want to do.

And that is very hard. When you’re a pilot, when you’re a doctor, when you’re any of those things, you’re very conformed. And you can’t move out of these huge organizational structures. And now with him, he could do what he wants. He could say, you know what, tomorrow-

Alex Osenenko: He hasn’t done it yet so-

Steve Rozenberg: But he has the ability to say, “You know what, I’ve got real estate. I’m going to punch out. I don’t need this.” And so my question is are you going to instill that in your kids? And if so, how?

Dr. Shaffer: Yeah, excellent question. Absolutely. I don’t know how yet. I mean, exactly. And the, the interesting thing for me, I might get a little emotional. I’m going to try not to. My daughter, verifiable testable genus. My son, my middle son, so my daughter’s the oldest she’s 12, my middle son that that kid is awesome. I just really enjoy him. He is so fun. He’s 10 and he is perfectly normal, like upper tier of normal but normal. And then my youngest is six and he’s autistic. And so like you take those three kids somewhere and try to keep everybody busy for a minute, good luck.

And so, it’s been fascinating to find the things that they can all enjoy. And so solving problems, building, that kind of stuff, that’s one of those things. And so there’s these… That’s kind of where the STEM education concept was born when I was working on that. A little more full. Like you can take them to these places, these Lego STEM kind of plays where they build things. There you go. The smart ones over here like, you know, constructing a skyscraper. And then my little guys like patterns, and so. But, you can keep everybody busy. And so my thing is I don’t have a book. I don’t have a program. They’re going to be very individualized. So, my daughter has already read Rich Dad Poor Dad.

Alex Osenenko: So, that’s an interesting. How old is she? 12?

Dr. Shaffer: She’s 12. And so the Rich Dad Poor Dad thing for me is interesting because I love that book very much. I read it every year. And there’s a lot of problems with it, holes in it, and people poke holes in it all the time now. But that inspirational piece is invaluable.

Steve Rozenberg: It’s a mindset shift.

Dr. Shaffer: It’s a mindset shift. It’s a great mindset book. And the cool thing for me is I am both, I’ve done both. I’ve climbed the academic mountain and I’m willing to lay it down to be the poor dad. Because he wasn’t the poor dad, right?

Steve Rozenberg: He wasn’t.

Dr. Shaffer: He wasn’t. And that, and that mindset shift, I want my kids to always be empowered to quit. Yeah.

Steve Rozenberg: Yeah. To have the freedom to make a decision.

Dr. Shaffer: Absolutely. I want them to be monsters that are absolutely persistent and never quit and like work so hard, until they should quit. And I want it to be their decision.

Steve Rozenberg: So one of the parts of that book, and I believe it was that book where he talks about minding your own business.

Dr. Shaffer: Yeah.

Steve Rozenberg: And basically you know where you work your job, but you mind your business. Meaning you run your business at nighttime and on the weekends to build up that empire basically.

Dr. Shaffer: Sure.

Steve Rozenberg: So, that’s obviously… So, I’d like to go into where you’re at now. So, that’s kind of what you did. You basically minded your own business.

Dr. Shaffer: I did.

Steve Rozenberg: You ran your real estate up. So, take everyone to where you are today in this cycle, and what you’re doing and where you want this to go.

Dr. Shaffer: Excellent question. Thanks.

Steve Rozenberg: You notice I get the excellent questions, he hasn’t said that about you.

Alex Osenenko: I’m just fascinated processing.

Dr. Shaffer: It’s because excellence’s not a good enough word for you Alex.

Steve Rozenberg: Oh wow.

Dr. Shaffer: We need a better superlative. [crosstalk 00:33:41]. Right now I am at 42 units. If I close, what’s in front of me, we’ll be at 61 by the end of the year. I say we a lot, it’s just me. And so I own 100% of the equity right now. I used my own money up until this year.

Steve Rozenberg: Okay.

Dr. Shaffer: And I have started taking in some outside money but as debt.

Steve Rozenberg: Sure.

Dr. Shaffer: And so just saying, “Hey listen, I’m going to give you a return on your money and I’m using that for down payments and renovation.”

Steve Rozenberg: And there’s nothing wrong with that.

Dr. Shaffer: No, no, no. And the thing for me is like the only deals that I’m doing right now are grand slams.

Steve Rozenberg: Right.

Dr. Shaffer: And so, I’m able to be a little choosy. I’ve closed on a couple of decent multi-families. And in Fargo, North Dakota, there’s probably 50 people that trade everything. It’s just-

Steve Rozenberg: It’s a small community to begin with. And then you get-

Dr. Shaffer: Sure. So, if something’s coming up, I’m on the list of people who get called, you know what I mean? And so, that transition. That shift is enormous. And so, and I don’t know if you guys have experienced it yet, in your businesses and stuff. But I mean, yeah, you get to that point where people start bringing you deals. And then it’s picking gold up off the beach.

Right now my baby is a 15 unit building. I love it. It’s gorgeous. I’m so excited about it. But it is my problem solving just masterpiece. So, the thing in multi-family is you buy on [actuals 00:35:00], right? You do not buy in [proforma 00:35:00] period. Understood, this building, the actuals were horrible and no one bought it because no one went to look at it with their eyeballs. And so I walked in and did this massive renovation. It was ready. It was a release project.

Steve Rozenberg: Oh wow.

Dr. Shaffer: Yeah. And I mean management wasn’t where it needed to be and all this stuff. So I mean, I just stumbled into it and it’s awesome. So, by the time we closed that… When I bought… When I put it under contract, there were 40 units that were full out of this building. You know. So, when I closed there were nine, now we’re full a couple of months later.

Steve Rozenberg: Nice.

Dr. Shaffer: Yeah. But they have this massive attic space upstairs that is an attic. That’s what it is. It’s going to be a three bed, two bath showpiece.

Steve Rozenberg: A penthouse type?

Dr. Shaffer: Oh, it’s going to be great.

Steve Rozenberg: Nice.

Dr. Shaffer: And so, like that kind of stuff. There’s this massive boiler that fed the building, but it’s been decommissioned for 30 years. I found a gentleman, an enterprising gentleman with a sledgehammer and a [settling 00:35:53] torch and now the boiler’s gone. So, there’s going to be a unit in the boiler room.

Steve Rozenberg: Nice.

Dr. Shaffer: And-

Steve Rozenberg: So, you’re seeing opportunity where other people don’t.

Dr. Shaffer: Oh man, the multi-family reposition stuff, juice in the [NOI 00:36:03], getting to where it needs to be and then how that translates into the value of the building. I love that.

Steve Rozenberg: Now when you’re taking in capital, what’s the exit strategy on those deals? Or is there an exit strategy?

Dr. Shaffer: Yeah, it’s a great question.

Steve Rozenberg: Great question again.

Dr. Shaffer: He got it again. Yeah, no. So I been refining out-

Steve Rozenberg: Okay.

Dr. Shaffer: All this stuff has enough meat on the bone, right? I’m coming out like 70/30 paying everybody back.

Steve Rozenberg: Nice.

Dr. Shaffer: Yeah. And it’s, yeah, it’s been pretty great.

Steve Rozenberg: That’s awesome.

Dr. Shaffer: Yeah.

Alex Osenenko: So guys, I feel like two of you can sort of sit on a plane, fly to what’s the furthest destination? Is it Sydney?

Steve Rozenberg: Sydney, Australia.

Alex Osenenko: 17 and a half hours. Talk one way. Talk to the other way and just like barely get to know each other. So, so why don’t we, why don’t we call this? It’s been a fascinating experience-

Steve Rozenberg: Yeah, great story man. Awesome.

Dr. Shaffer: Thanks for having me.

Alex Osenenko: I think the underline here is like the is the passion. You have the drive and the passion for all these things you do. So, I think in this people have this term for something like this, whatever you touch turns to gold. Because you have full attention and intent and focus behind it, which is quite fascinating.

Steve Rozenberg: Yeah.

Alex Osenenko: But let’s see how this story develops. So Steve, I’d love to have you on the show maybe what six months from now. Do you think that-

Steve Rozenberg: Will evolve by then?

Alex Osenenko: The job will come to an end.

Dr. Shaffer: So, we didn’t get into specifics. The job, what I’m looking at. I signed a couple of sign on bonuses when I came on and there’s really no reason for me to pay a penalty. I love my job. So 20 months.

Alex Osenenko: 20 months.

Dr. Shaffer: 20 months is what it is right now. There’s a step off point. So it’s basically, is it going to be one year or two years? There’s a step off point in nine months.

Steve Rozenberg: That’s when we need to talk to him, is in nine months.

Dr. Shaffer: Yeah, eight, nine months.

Steve Rozenberg: Yeah.

Dr. Shaffer: So eight, nine months I’ll be at a decision point.

Steve Rozenberg: That’s-

Alex Osenenko: That’d be a good show.

Steve Rozenberg: That would be a good [crosstalk 00:37:48].

Alex Osenenko: Let’s have a conversation then. And I’m so fortunate to go to this conference and meet people like you. Steve it was incredible.

Steve Rozenberg: Yeah it was awesome.

Alex Osenenko: Thank you for your time.

Dr. Shaffer: Thanks a lot fellas.

Steve Rozenberg: See you next time guys.

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Brittany Arnason and Kara Beckmann on the Power of Instagram

Alex Osenenko and Steve Rozenberg wrap up season 1 of The Myndful Investor Podcast Show on location at The Bigger Pockets Convention in Nashville with Brittany and Kara. The roundtable discussion is about social media, the power of Instagram and overcoming gender stereotypes.

Full Transcript

Alex Osenenko: Boys and girls, welcome to another episode of The Mindful Investor show. So good to have you here. Steve, don’t we have a show for-

Steve Rozenberg: Man, we’ve got to good one. So, on this show we have Kara and Brittany. These girls are Instagram wonders. Kara is out of Phoenix, she’s got over 40,000 followers on Instagram. Brittany is in Saskatoon, Canada, and she has 85,000 followers on Instagram.

Alex Osenenko: But they’re both real estate investors.

Steve Rozenberg: They’re flippers. They’re in the heat of battle.

Alex Osenenko: They’re serious. They’re out there. They’re actual investors.

Steve Rozenberg: And so in this episode, what you’re going to learn is basically number one, how they use social media to basically get all of their deals. All of their business comes because of social media, number one. Number two, you’re also going to learn how they get sponsored by suppliers to give them supplies because of their dominance in the social media arena.

Alex Osenenko: When you’re flipping your house, your tile could be free because you just mentioned who the tile is by.

Steve Rozenberg: Exactly. And these girls do an amazing job. You’re going to learn basically not only how they do it now, but kind of how they got started. And you know, Kara gets other business, not just flipping but design project business because of her reputation. So it just goes to show how powerful social media is and how strongly they feel that social media has been a major player in their success story.

Alex Osenenko: This show is unique and their passion is fantastic. Let’s get into the show.

Steve Rozenberg: [inaudible]

All right guys, so we are here at BiggerPockets and you know one of the reasons you come to these conferences and these events is you get to meet like-minded people. You get to hang out with them, you get to talk to them. And so we couldn’t have two better people to talk to now on that are just known out there in the industry is our good friends, Brittany and Kara.

Alex Osenenko: And the theme, if I may add, the theme of the conversation is going to be like one of the things I’ve heard from Kara, she said, “all my clients came from social media,” and antenna goes up like, “what’s [inaudible 00:02:15], how does that possible?” And so we’re going to explore that. We’re going to dig in and unpack some of the stuff. But by the way, Kara, to my left, 43,000 Instagram followers, I don’t know how to even possible. 10 homes she renovated herself. She does a lot of work for the clients as well. And every client came from social, which is amazing. Britt is right in front of me to the right of Steve, those of you watching on video, but smart and very articulate. But 83,000 followers on Instagram and 13 rental properties. Britt that’s amazing. So today we’re going to talk about how to use social media, how to leverage social in rental properties business. So you guys, maybe give us a little bit of how’d you get into it? What was the moment where you said, okay social works. How do you even come to that?

Steve Rozenberg: And I think just also maybe where they’re working, operating out of, cause they’re completely different markets and that’s important to know as well. Different countries. Tell me a little bit about you and where you’re from, where you operate, and how you got into this.

Kara Beckmann: I’m from Scottsdale, Arizona, which is a great market right now, and I started real estate investing in 2016, I was 28 years old, and when I went into real estate investing, I knew nothing about real estate. So everything has been self-taught. And that was also before I found BiggerPockets, that would’ve been helpful back then. And that’s when I started my Instagram, Beckmann House, and I started it just to have a place where I can keep my memories. So when I started early on, it was my way to, okay, I bought my first investment property, and so it’s really fun to see that progression. And then I started featuring more of the before and afters. And it started off slow, the growth was very slow. And on my third investment property, I hired subcontractors to teach me how to do a lot of the work because I thought this is what I want to do full time and I don’t want to jump into this full time not knowing construction.

And so by hiring those subcontractors, they taught me how to wire can lights, properly demo walls, rip up baseboards, rip up tile. And so I was starting to feature more of that on my Instagram and that’s when it really started to grow. I think people like seeing, wow, if she can do it, I can do it. And that really is the message that I want to relay that anyone can do this. And I think it’s fantastic and there’s a lot of different ways to invest in real estate. And then I would feature more before and afters and more extreme before and afters and then it would grow and people would feature my posts, which would in turn grow both accounts. And that is really how it started to grow immensely when people were sharing mine. And more interaction too. I noticed the more I interact with my followers, the better it is for everybody.

Alex Osenenko: How long did it take, Kara? Sorry to interrupt, but how long did it take? I’m just super curious. How long did it take when you felt it crested? It was a point where somebody actually started sharing.

Steve Rozenberg: A tipping point. You got to a tipping point where it started going.

Kara Beckmann: I was probably on my fifth property.

Alex Osenenko: It took awhile.

Kara Beckmann: It did. It was a very slow growth.

Steve Rozenberg: Look, 2016 that’s only three years though. So it’s-

Alex Osenenko: Only three years? That’s like a lifetime. These girls are in their [inaudible 00:05:35] So that was pretty awesome. Do you mind if we just shift to Britt and get what is your, how’d you get started and where?

BrittanyArnason: I’m in the middle of nowhere in Canada, right in the middle on the prairies. I’m not actually from that city originally, but there’s cheap properties there. And I bought my first property in Saskatchewan when I was 18 years old. So that was how I got my start. But my mom owned rental properties, so I would help her do DIY renovation stuff as well. That’s where I get this mentality from. So I’m like DIY everything. So it actually took me a while after I bought that first property to really get all-in on real estate. I didn’t even realize like people were doing it full time as a job. So I found BiggerPockets and I’m like, wow, this is a whole new world. So then once I started investing full time, that’s when I started posting a lot on Instagram. But I would tag, cause I look up to Brandon and whoever, so I tagged them in posts and get attention that way.

Alex Osenenko: Are you guys listening? That’s a tip, that’s a pro-tip.

BrittanyArnason: And I try my best to add value to people. I don’t want to just be constantly taking, I want to be able to give back. So it’d be like, “Hey, like I read Brandon’s book, it’s so awesome” and I’ll do that for Steve and my friends as well, just to give some value back to them by promotions or whatever. So instead of just tagging them being annoying, asking questions, I’m tagging him like, “Hey everyone, you should read Brandon’s book, you should listen to this podcast episode” and I’m able to talk to people I never thought I’d have conversations with and look at where we are now. It’s so insane who you could meet over social.

Alex Osenenko: So what is your crest, where did you feel that moments, like five properties for you Kara? Like how would you picture it?

BrittanyArnason: I guess with mine, it would have actually been around five as well. But it was weird because it was the same thing because it was really slow and once I started really getting big on Instagram–

Steve Rozenberg: And did you intentionally start to post stuff with that plan or no?

BrittanyArnason: No, not at all.

Steve Rozenberg: So you were, just like Kara, you’re just posting to post.

BrittanyArnason: Yeah, exactly. But one of my really good friends actually started making money through Instagram and I was like, “Oh, this could be another stream of income, right?” So, that was in the back of my head too. I had a few different ideas, but I never would have imagined what it is now. But back in the day, I was thinking about, cause I love to travel as well, so I always wanted something that I could do online as a business or I could make money like wherever I am in the world. So that was another thought I had, but then it went like really just to investing.

Steve Rozenberg: So is it happening now? The people who are listening, is it happening now? Are you making money while traveling?

BrittanyArnason: Yeah, and lots of product sponsors too. So a lot of companies will sponsor, just give me free product.

Steve Rozenberg: Is that common? Do you get that as well?

Kara Beckmann: We’ll partner with companies; I do a lot of tile partnerships, which is amazing. And you’re having fun. You’re doing what you love to do.

Steve Rozenberg: Now, I noticed you guys do different types of videos though. So you do the, I don’t know if you’d call it a time lapse type video and you do more of like showing the product. Is there one versus the other?

Kara Beckmann: I don’t think so. A time lapse is nice cause you can show a lot more of the process much quicker. So if Brittany’s demoing, or laying a whole floor of tile, she can show that whole process where I have to “this is what I’m doing now, this is the before, these are a few steps, this is after.” So it’s just different. And I think it’s fun to do a few of those different, to do some maybe slow-mo. I like slow modes when I’m punching walls or something. And then time-lapse is great for longer videos and then it’s nice just to have, “here’s it before, here’s an after.” So constantly changing.

Alex Osenenko: So Kara, you’ve learned construction management you’ve said, which is very interesting. That perked my ears, because not a lot of people want to get into it.

Steve Rozenberg: And so does she [Brittany]. She does the demos and everything too.

Alex Osenenko: You do that too?

BrittanyArnason: Yeah.

Alex Osenenko: So I guess that’s one takeaway for the listeners; you have to not only learn it but love it, right? [crosstalk 00:09:40] Like I see your passion-

Steve Rozenberg: You have to live it.

Alex Osenenko: [inaudible 00:09:42] have this amazing tile sponsorships, to me, I’m like, [inaudible] Who’s got tile sponsorships, come on, but hey, that’s a passion. I guess take away number one, learn it and then be passionate about it. What are some of the other takeaways? What have you seen being successful in that social media real estate play, which, by the way, I’ll just set it up, like Property Brother — there’s some shows on TV, people do it, but to me that looks like not real. It’s very hard to connect with real. You guys are real.

Steve Rozenberg: They’re doing the work. The other ones, it’s virtual TV, but you know, there’s some staging.

Alex Osenenko: Reality TV.

Steve Rozenberg: Reality, I’m sorry, but you know there’s probably some staging going on sometimes.

Alex Osenenko: That’s what I’m thinking. It’s very hard to believe what’s on TV is real.

Steve Rozenberg: But when they’re doing it, I mean, it’s videos of them actually doing the work. Let me ask you this, have you seen, and I know it’s an ever-changing industry, how have you seen it change as far as what you did before, I’m guessing wouldn’t work — what you did in 2016 probably would not work today, is that a safe statement?

BrittanyArnason: Yeah.

Kara Beckmann: As far as investing?

Steve Rozenberg: No, no, I’m sorry, as far as on social media, gaining traction and doing what you’re doing. How do you stay up on that? Cause if not you become irrelevant and you get kind of pushed aside, right?

Kara Beckmann: Well, I really think it’s just being consistent. You know what I did back in 2016 I’m still doing that same stuff. I’m just doing more of it and more consistent.

BrittanyArnason: And getting them to know you and let them into your life. People like to see that; they want to get to know you. So I think that’s important too.

Alex Osenenko: Here’s a question I have, a percentage split between female and male followers, what would you say yours is?

Kara Beckmann: I know mine. Mine are 75% female, 25% male.

BrittanyArnason: Really? Mine’s opposite. Completely opposite.

Alex Osenenko: That is so interesting.

Steve Rozenberg: Well Canada, I mean, what’s there, right?

Alex Osenenko: These are just interesting stats. Those listening out there, it really varies within your content. Okay, so next question, we have Dan, our director here. He’s talented, he’s setting up this whole routine, pictures; we don’t have to learn about it and do it. How did you like this photography and video? Like did you learn that stuff?

Steve Rozenberg: She was showing me her phone of all the things the phone did last night and I was thinking like, “wow, how would you even learn this?”

Alex Osenenko: So let’s talk through that. What are some of the apps are you using?

Kara Beckmann: I don’t use photo apps, so I use my iPhone, all of my pictures, before I hired professional photographers to capture my homes, they’re all done on my iPhone. You have iPhone editing, so you can enhance the brightness maybe, play with the contrast a little bit, but that’s it. And it’s funny because sometimes I’ll notice that pictures that look like they were homemade or on my iPhone versus a professional get more likes, and I think it relates back to, “I can do that.”

Steve Rozenberg: It’s within their grasp. They’re like, “I can do what she’s doing. It’s not impossible. She doesn’t have this huge budget and a film crew following her around. It’s just her.” Got it.

Alex Osenenko: So when you thought about, and, Britt, before we come back to your strategy on this, have you thought about elevating the game? Now that you’re gaining momentum, what are your thoughts on next stage?

Kara Beckmann: I’m always thinking about my next stage. So through Instagram I’ve also met another investor who’s in the Phoenix-Scottsdale market, and he does a lot in the commercial side. And that is really where I want to end up going. And so we’ve been talking a lot through Instagram and also talking about partnering on a deal, whether that be commercial or whether we partner and he funds a flip, and that would give me more just more capital.

Alex Osenenko: But that’s venturing into a different avenue of the business, not necessarily changing, sort of upgrading your presentation or your content. Have you thought about actually upgrading? You said iPhone things work, but have you thought about getting more professional stuff done?

Kara Beckmann: Not yet.

Steve Rozenberg: Because it’s working.

Kara Beckmann: It’s working, right. And a lot of people, once they start to grow, they have someone manage their social media accounts. And right now, I love managing my social media accounts and I think it’s important for me to do that because I see what my followers are wanting. They’re messaging me, “oh, I want to see this, can you talk about this, what are your exterior paint color go-to’s, or what is this?” And that gives me more content. This is what people want to learn. The other day, I was walking through a house and I walked through the reasons I didn’t end up investing, and the amount of messages I got, “thank you so much for saying the reasons you didn’t invest.”

Steve Rozenberg: Sure. I’ve always learned that when you’re on social media, everyone always hears the successes. They want to hear the reasons you don’t do something or the mistakes or the top landlord failures or what could get you sued because nobody ever talks about that stuff. They always talk about the fame and “I made this much money on a flip and I did this,” as opposed to “this was a horrible situation, I can’t believe this happened to me and I X dollars” or whatever the case may be. And I think a lot of people like that. They like the fact that you’re able to go in and say, “hey this is good or bad and this is why I didn’t move forward in it.” I have a question-

Alex Osenenko: Hold on a second, I want to give Britt a bit of a stage to discuss it because this is kind of interesting. We are in content production, it’s very professionally interesting to me. How do you think about quality? Cause Dan is obsessed with quality. He won’t let Steve and I be too creative without him overseeing and that’s not a bad thing, it’s a great thing. Thank you. We need some, we need discipline. Britt, how do you do it?

BrittanyArnason: Yeah, well I was going to go back to the apps thing because I do have a few video editing apps and stuff like that. So for photos I use Snapseed. So like Kara was saying-

Steve Rozenberg: Kara-

BrittanyArnason: Shoot. It’s the Canadian accent, you guys, I know her name, we’ve been friends forever. I’m sorry. So I use Snapseed-

Steve Rozenberg: Snapshoot? Seed?

BrittanyArnason: Yes, Snapseed. So I really like that one. And like you said with the brightness, it’s really important to increase your brightness because when people are walking around, maybe they’re outside or something, you really want your photo to stand out, so I think that’s important. With video, there’s a few, if you have an iPhone, like iMovie, Clips, and then my favorite is called Splice. But I had it for free and someone told me recently they started charging. So, shoot, cause it’s so good. It’s a really awesome app.

Alex Osenenko: What’s with people not paying? Sorry, just, it’s a little bit of a intersection here. But, $8 for an app? $8 for an app? Like somehow we have a problem with that. We’ll dump, we’ll get a venti in Starbucks for 14 and that’s okay. Anyway, go ahead.

BrittanyArnason: So true. So those are really good and time-lapse on my iPhone and that’s all I’ve used, just on the actual camera.

Steve Rozenberg: On what you guys have done, how do you think it’s, I mean, we know it’s helped you, right? You guys have said it’s opened up a lot of doors, but could you specifically say, this is because I’ve met these people or I’m afforded this ability or deals, because how would you guys relate that to actually going, “this is why I’m doing so much on social media?” Because at some point, you may go [crosstalk 00:17:05].

BrittanyArnason: It’s a full time job.

Steve Rozenberg: Some people go like, “man, I don’t have the time to do it.” But you’re saying you don’t have time not to do it, because this is actually what’s getting you business.

Kara Beckmann: Right. You have to make time to do it every day.

Steve Rozenberg: So how much time would you say you guys allocate for social media?

Kara Beckmann: I do about two and a half hours a day.

Steve Rozenberg: Two and half hours a day?

BrittanyArnason: Yeah, I would say, for my videos and stuff, to edit, it takes a lot of time. But I would probably say even maybe three hours a day.

Steve Rozenberg: Okay. So now you guys are on one channel, on Instagram more than Facebook or anything else. Is there a reason you guys picked that channel?

BrittanyArnason: I think Instagram is like the popular app.

Kara Beckmann: I just get so many more comments and interactions through Instagram.

Steve Rozenberg: I believe you get like access and you get things like “swipe-up for this,” that we don’t have access to those things.

Kara Beckmann: Right. So you have to have 10,000 followers for the swipe-up.

Steve Rozenberg: 10,000 okay, So you’re [crosstalk 00:17:57] you’re not, cause I was talking to her about, I’m interested, I’m trying to learn.

Alex Osenenko: Oh I get it. I get it. So can we do a little bit of a coaching here? So you use two and a half hours a day, Kara, you use three hours a day. But I think it’s a lot of it is video editing as well. What is your unique ability? Both of you, I want to hear from each of you, please. What is your unique ability and what’s the next thing you’re going to outsource? [crosstalk 00:18:22] What are you going to hire for, what are you going to keep?

BrittanyArnason: So for me, I’m really passionate about renovations. I’ll do that all day and forever until I’m dead. [crosstalk 00:18:31] But I just love being creative and hands on. I’ve always just thought I would love to retire and do woodworking or metalworking or stuff like that. That’s what I love to do. Because it’s my creative outlet. It’s fun for me, it’s relaxing. So that’s what I’m passionate about it, and that’s, I think, how I grew my account because I love this stuff and people can see that.

Steve Rozenberg: The passion.

BrittanyArnason: [Inaudible] so like that. But when it comes to paperwork and property management and things like that-

Alex Osenenko: Oh we know a property manager.

BrittanyArnason: Do you? In Canada?

Alex Osenenko: Not in Saskatchewan.

Steve Rozenberg: Saskatoon.

Alex Osenenko: Whatever. I’m bad at it, but yes. Over there we don’t have it.

Steve Rozenberg: You can let Kara answer and then I’ve got a couple. I’ve got some investing questions for them.

Alex Osenenko: Well that’s actually very, very good cause we want to sort of tie it in and give our listeners the whole idea. These girls have amazing portfolios as well as Instagram stuff. So Kara, what are you going to outsource next?

Kara Beckmann: So, hi, I’ve been working a lot with Steve on this because I do so much of it. I do a lot, I’m managing my, well, not managing but managing the construction aspect of a lot of my jobs, the design work as well and I enjoy being at my job sites. I like what’s going on. I like the interactions with the contractors, making sure we’re on budget. That’s very important to me and they know how tight I am on that. And so I would probably outsource accounting. I actually enjoy doing spreadsheets and that’s why I take it on myself because I like it, but it’s not the best use of my time. Designing is a better use of my time than working on my spreadsheets and I need to outsource that and possibly bring in someone who’s more full time for the client aspect as well.

Steve Rozenberg: The client experience.

Alex Osenenko: Can you hold your questions for another follow-up question?

Steve Rozenberg: Sure.

Alex Osenenko: I have to have this one. [inaudible 00:20:34] I don’t think there’s enough women doing this. We all know that. Right?

Steve Rozenberg: Believe it or not though, on Instagram, there are a lot of women-

Alex Osenenko: It’s amazing and it’s happening, but you guys leading the way, right, so you’re spearheading this. Tell the women that are listening, how do you manage like highly male-dominated trades contractors? You said that’s one of the favorite things to do. Like I imagine, you come in, you’re blonde, I mean, how did they take you seriously? And if they don’t, how you make them take you seriously.

Kara Beckmann: You don’t take any BS. And you have to set that precedence right away, because as soon as they start to pull one on you, I told my contractor, “don’t pull that on me,” cause I caught him in something and he said, “I’m so sorry. I’m so sorry.” Didn’t happen again. But you have to set the precedence. You are the boss. Things will go accordingly or you’ll call them out on it. You have to set your expectations right off the bat. And that does come with some experience. When I wasn’t experienced, you don’t know what you don’t know, and that is exactly why on my third property I hired subcontractors to teach me how to do things because now I can say that’s wrong or right, or you’re charging me too much, or if you’re taking too long, because I know now. And also the more you work with that contractor, my contractor tells me a lot, “you know, I really respect you. I have a lot of respect for you” and-

Steve Rozenberg: Because you’re out there doing it and you know it, is that-

Kara Beckmann: Yeah.

Steve Rozenberg: Yeah that makes sense.

Alex Osenenko: Because you don’t set unrealistic expectations probably, but you also push them to be their best. Right?

Kara Beckmann: Right, right.

Alex Osenenko: Britt, do you have another view on this?

BrittanyArnason: Well, I think it is extremely intimidating for women in the industry, but I’ve always kind of grew up in trades and whatever, so I never really felt that. But I think, even through Instagram too is a really cool way to green the credibility because like people see, and they want their company, like if you’re hiring a plumber or whoever contractor, they want you to give them some shout outs or whatever on your Instagram. So you have this level of credibility now.

Steve Rozenberg: [crosstalk 00:22:38] you’re helping them, yeah.

BrittanyArnason: So I find that to be really helpful.

Alex Osenenko: That is a good tip.

Steve Rozenberg: Okay. So let’s go into the investing job that you guys do, right. Getting into this-

Alex Osenenko: By the way, I do appreciate your patience.

Steve Rozenberg: Thank you very much. I appreciate that.

Alex Osenenko: As soon as you got the word in.

Steve Rozenberg: All right, so Kara, you had a job and you quit your job, right?

Kara Beckmann: Right.

Steve Rozenberg: And so it wasn’t in real estate at all, right?

Kara Beckmann: No.

Steve Rozenberg: So how do you think differently today than you did? So there’s other women out there that are going, “”man, I would love to do what she does, but I just can’t. And they have all the reasons why, but you did it, you took that step, you cut the rope and you jumped to this new thing. And there was, I’m sure a lot of fears.

Kara Beckmann: There were. It took months before I finally said, “okay, I’m taking a huge leap of faith.” And that is what it was. It was really trusting God and saying, “okay, I’m going to do this and here we go.”

Steve Rozenberg: So what advice, and for you too Britt, what advice would you give for, let’s say women that are out there working that say, “man, I would love to do what these girls are doing, but I just can’t do it.” They have all the reasons in the world, which a lot of times those are just made up in our heads, but what would you tell them that they need to do and how would they execute that plan talking to you three years ago?

Kara Beckmann: Well, I’m actually really thankful that I started investing while I was working a full time job for multiple reasons. Having that full time income, I was able to qualify for loans, which helped me purchase the home. My backstory, my degree is in patisserie and baking. And so I wanted to have a bakery, and for years I’d been saving money to eventually open up a bakery.

Steve Rozenberg: Vegetarian bakery — a vegan bakery. Very important.

Kara Beckmann: Yeah, I wanted to do wedding cakes and that was when the economy started to go down. And then long story short, I ended up in retail. So I’m working in retail. I needed a creative outlet and I thought I’m going to take this money that I’d been saving for years and years, put 20% down, because it was an investor loan, so you have to have your 20% and then I got a mortgage on the property and then I funded the rehab with the money I was making from my full time job.

So I did this a few times, so I got the hang of it while I’m still working. So it’s a lot less fearful when you have a steady paycheck coming in and you know you can pay your contractors, and you know you can purchase supplies and everything. And so I think that helps to build the confidence rather than quitting your job jumping into it; now you’re going to have to fund it fully cash, get hard money. It’s a lot; it’s a higher risk.

Steve Rozenberg: It’s a high risk. I would say it’s a higher risk when you don’t know what you’re doing. When you know what you’re doing, it’s low risk. But what’s interesting is it’s the same risk. You’re doing the same thing. It’s just your knowledge is actually what’s taking it from high risk to low risk, right? Because now you may look at this and go, I would do this. Like when you look at a deal, same as you, you look in a deal and you go, yep, I would do this, this, this, and this. Where if you’re someone new, you’d be like, wow, I don’t even know where to begin. Maybe I’ll just keep my nine to five, you know? And that kind of thing. Now for you, Britt, you came from the industry with, like you said, with your mom and everything, but for you, what were some mental blocks that you had to get over and to do what you do? Cause now you’re, you go and live at the property sometimes, right?

BrittanyArnason: Yeah, all the time.

Steve Rozenberg: All the time. Well now you’ve got the bus, right? You follow on Instagram, she has a school bus now she’s living in, yeah.

Alex Osenenko: I’m not even on Instagram.

Steve Rozenberg: You seen her in the school bus? [crosstalk 00:26:09] Yeah, but it’s a converted short bus, is that what you said?

BrittanyArnason: Yeah, short school bus.

Steve Rozenberg: But yeah, so she goes and actually lives at the properties that she’s doing the rehabs on. So I mean talk about being into this, right?

Alex Osenenko: That struck me. We should have a better pre-show briefing. I had no idea.

Steve Rozenberg: So what would you tell women that want to get it? Especially, they want to get into this, maybe not even go into a career and they want to start doing this. What would you guys give them advice-wise?

BrittanyArnason: Yeah, I mean, I guess obviously you want to be educated enough so you don’t make a bad choice. You want to make sure the property is going to make you money in the end, that’s so important. But I also always thought what’s the worst case scenario? Because in my market, I’ve been buying really cheap properties, so under like $25,000 around-

Steve Rozenberg: Canadian? Canadian dollars?

BrittanyArnason: Yeah, Yeah. So like nothing for you guys, so come on over.

Steve Rozenberg: So it’s like three bucks?

BrittanyArnason: Yeah, pretty much. Yeah, so for me, the risk didn’t really feel like anything cause I was like, “all right, I know this property is going to make money,” cause after renovation it runs for around $900.

Steve Rozenberg: So the numbers make sense. [crosstalk 00:27:22] And you’re totally redoing the house, so you’re giving someone a brand new house.

BrittanyArnason: Exactly. Yeah, so I don’t know, I felt like-

Steve Rozenberg: The risk factor was low.

BrittanyArnason: Yeah, and for me it’s like worst case scenario, I have to go get another job if this doesn’t work out. Like it felt fine to me.

Steve Rozenberg: Now the price points where you are, are different. [crosstalk 00:27:41] So you’re taking off a bigger, you’re getting a hard money loan or something that’s a bigger, you’re taking a bigger bite there.

Kara Beckmann: Oh yeah, a couple of hundred thousand dollars.

Steve Rozenberg: So there’s a limit, I mean, at some point, especially when you’re new, there’s a limit. You’re getting trust with the hard money lenders and stuff. But initially, till you get that track record with them, there’s a limit on the amount of funds that you can borrow.

Kara Beckmann: Right.

Steve Rozenberg: So that’s a factor.

Kara Beckmann: That’s true. And maybe, as a first timer, it’s not a bad idea to partner with someone.

Steve Rozenberg: Absolutely.

BrittanyArnason: Yeah, I agree.

Kara Beckmann: Take a lower percentage of the deal, just to get the knowledge. That lower percentage is going to be worth so much more.

Steve Rozenberg: Oh yeah, totally. Now let me ask you this, so you guys doing what you’re doing right now, this is a strategy, right? This isn’t a goal, you guys are going to a destination, right? What do you guys think is your end destination in real estate? You guys are in real estate, you’re not going anywhere. You guys are going to ride this wave. Is it rehabbing and flipping? Is this it? Or is this leading to something else?

BrittanyArnason: Well, I think we’re kind of on the same path with this, but I have all single families and duplexes right now, but like I want to go bigger because it just makes more sense. Right now I have properties spread out all over, and I just want to get one building and take control of that.

Steve Rozenberg: And you’re looking at a commercial deal right now.

BrittanyArnason: Yeah. So I have one pretty much under contract, we’re just working on some seller financing details, but it has 22 units and seven commercial spots on the bottom. It’s a cool, it used to be an old bank. I love it. It’s such a cool place. But it’s the brass handles going up and the marble staircase and all the vaults, like all the old things.

Kara Beckmann: That’s amazing.

Steve Rozenberg: Oh nice.

BrittanyArnason: It’s super cool. It’s a cool place.

Steve Rozenberg: But now, that’s a strategy.

BrittanyArnason: Yeah.

Steve Rozenberg: What’s the end goal?

BrittanyArnason: The end goal…

Steve Rozenberg: So you guys are doing this and is it to say I want to have assets that are producing revenue for me, right? Is it, I want to have a company that’s doing rehabbing and I’m just running the company, like what is the end goal? Cause the end goal is money coming to you without you having to do it, right?

BrittanyArnason: Exactly. Yeah, I think that’s definitely it. The point where I can step away is really important because I love to be involved, but I also want to be able to have my systems down and under control so I can be able to step away if I want to. Canadian winters are really cold, so, I want to get out.

Steve Rozenberg: Go to Phoenix, go to Phoenix, snowbirds.

BrittanyArnason: I’ll come visit you.

Steve Rozenberg: So what about you, Kara? What’s yours?

Kara Beckmann: I mean, I have a number, for sure. That I want to make per month. So that’s my goal. I love the fix and flip strategy. I love it. But I am doing more BRRRR investing. So rather than, actually the-

Alex Osenenko: Can you explain BRRRR?

Kara Beckmann: Sure, so you’re going to buy it, you’ll rehab it, rent it, refinance it, pull cash out, and then repeat the process. So I just successfully did my first BRRRR deal. I’m so excited because, and this is a good thing. I thought, “oh I bought a property specifically to BRRRR it. I didn’t know, I don’t have two years of tax returns.” Because I was still so new, and so I didn’t realize without two years of tax returns you can’t do a refi. So I went to four different lenders, finally someone was going to lend on the refinance, so-

BrittanyArnason: That’s great.

Kara Beckmann: I just got the check in the mail before I came, so it’s very, very good. It’s been a long process.

Steve Rozenberg: Oh, nice.

BrittanyArnason: Congrats.

Steve Rozenberg: That’s great.

Kara Beckmann: Thank you. And so now I’m taking that money to finish the rehab on the one I currently purchased and I purchased that in a wholesale deal.

Steve Rozenberg: Was that your first one? Cause I saw online that you posted something about your first deal you did or-

Kara Beckmann: No, the one, no, this is recent. This is the one that I just purchased. I purchased that to flip and now we’re halfway through the renovation and I think I’m going to hold it.

Alex Osenenko: Look at that, we’ve got a holder. That’s awesome. So you flipped 10 but you have to make that little cash, stack of cash, so you can ride deployed into the rentals. Right. You’ve been renting them. Have you flipped any?

BrittanyArnason: No. Haven’t sold one yet.

Alex Osenenko: So you keep them.

Steve Rozenberg: She gets them and fixes them.

BrittanyArnason: All BRRRRs.

Steve Rozenberg: Yeah. Now. Okay, so one final, I know you have a question that you wanted to ask, but let me ask you this. So what would you say in all of this, is your weaknesses that you guys have been able to identify on your own that you could give advice for other people out there watching and just say, “Hey this is my weakness and this is how I’m going to fix it.”

BrittanyArnason: Yeah.

Steve Rozenberg: So what would you say?

BrittanyArnason: Oh man, I have a lot of weakness, especially talking to you, I’m like [inaudible]. No, I definitely think I’m the big picture thinker and I didn’t realize how important Instagram was going to be to my business. So I’m really good at connecting with people and the big picture stuff. But when it comes down to like the details and it’s like, all right, how are we actually going to do this?

Steve Rozenberg: Make this happen?

BrittanyArnason: Yeah. It overwhelms me; it’s a lot.

Steve Rozenberg: But you do that with your houses though. I mean, you do that.

BrittanyArnason: With the rehab stuff that’s fine, but the paperwork and the finances and figuring that out and being like, all right.

Steve Rozenberg: How are you doing that now?

BrittanyArnason: Well, we did hire an office manager, so that’s been very helpful. And that was recent, because I had such a hard time hiring. You know how it is. But we’re looking more into like the BA’s and stuff as well, which I have a part time on helping with social a little bit. So looking to get more into that. But yeah, I guess just like-

Steve Rozenberg: So detailed work and the details.

BrittanyArnason: Yeah.

Steve Rozenberg: Okay, and what about you Kara?

Kara Beckmann: I would say there’s two main ones that come to mind. I like to control. I like to have a lot of control over the whole process because you’re building this business and your name is on it and so it is important that all the details are not being missed and I do need to step back a little bit and bring some more people on and just have that faith that it will be okay to bring people on. And then I also, there’s so many things that I want to do. And I have to hone in on, and get really good in this field and then stay.

Steve Rozenberg: Stay in your vertical.

Kara Beckmann: Right, right.

Steve Rozenberg: Got it.

Speaker 1: Yeah, they call this, I think Gary Keller, his book, the unique ability-

Steve Rozenberg: The ONE Thing?

Alex Osenenko: The ONE Thing, yeah.

Kara Beckmann: Oh, I’m reading that now. It’s really good.

Alex Osenenko: [crosstalk 00:33:45] that unique ability is really important to discover and just focus on that. That’s why my first question was what would you outsource? But I think Steve took it full circle. You guys weren’t ready to answer that question, and now I’m hearing you admitting to Steve like, “Oh yeah, I’m going to do this. I promise you.”

Steve Rozenberg: I kind of know a little bit about what they’re doing.

Alex Osenenko: Unfair advantage, yes.

Steve Rozenberg: Doesn’t have to be fair. Just had to be an advantage.

Alex Osenenko: So one last question. This has been a great interview, but let’s give our listeners like this final nugget of wisdom and actionable advice — finding deals. Top one, two ways you find deals.

BrittanyArnason: So I’ve found deals mostly through MLS or realtor.ca, whatever, I don’t know about guys, that’s what I use. So I actually just look out of my city so I’m not like stuck in one spot. I’m going to look all over the place to find the best numbers where the numbers work. So I think that’s really important. You can travel to your deals. I’ve driven–

Alex Osenenko: Hence the bus.

BrittanyArnason: Yeah, hence the bus. Exactly. But I think a lot of people get stuck in their specific city or their market and they’re like, “Oh well I can’t buy a house here. It’s $400,000, whatever.” They have to start looking outside and find, even if it’s even further out of state or something like that, find where it works, because people just get overwhelmed and they don’t do anything.

Alex Osenenko: So go where the deals are.

BrittanyArnason: Yeah, go where the deals are.

Alex Osenenko: Kara?

Kara Beckmann: It’s so funny cause mine is the exact opposite.

Speaker 1: [inaudible]

Kara Beckmann: I hone in on my areas because I can run the numbers faster. I know the zip code. I know what a good price per square foot is to enter in. I know what I can sell. I know what the ARB should be. I know what I can exit at price per square foot. And I’m constantly getting the highest price per square foot when I’m selling. My last five flips were in a two mile radius of each other.

Steve Rozenberg: Really?

Kara Beckmann: Yeah. So I love these neighborhoods and now my mom’s my real estate agent and I get 90% of my deals on MLS.

Steve Rozenberg: Nice.

Kara Beckmann: I always say put in an offer, you never know.

Steve Rozenberg: You never know. You don’t know their situation. It’s so true. Absolutely.

Kara Beckmann: You just never know. And I’ve never lost money on a deal. And a lot of them have been on MLS. And the second way is wholesalers. So I get wholesalers that know I’m targeting these zip codes.

Steve Rozenberg: You’re just hyper focused in that area that they know this girl knows her stuff, she knows her numbers. Let’s give it to her what she wants.

Kara Beckmann: Yeah. He’ll text me, he’ll say, “I have a deal. It’s yours. You are the first investor to see this deal. Other investors are coming in an hour.” And so I walked in, I said, “yeah, I’ll take it.”

Alex Osenenko: Fantastic.

BrittanyArnason: I love it.

Kara Beckmann: And I had my lenders say, “Kara, there’s this great deal in Mesa,” which is out of my zone.

Steve Rozenberg: It’s out of your area.

Kara Beckmann: And I said, “those numbers might be fantastic, but the deal is not for me. I don’t know that neighborhood. I don’t know the buyer.” I would rather wait to get a good deal, a solid deal where I know those numbers really well.

Alex Osenenko: Really, really good advice.

Steve Rozenberg: Absolutely.

Alex Osenenko: Really good advice. So I guess to sum this up is, “Hey social works, be passionate, learn the biz {business}, get in the construction, ask your carpenter how the nails go in, whatever the case is. I, you know, I’m trying to be- [crosstalk 00:37:07].

Steve Rozenberg: I don’t think that’s what you do, but anyways.

Alex Osenenko: That’s a really good tip too. And going back to women who want to get started, but don’t know how, if you can’t be involved in your renovations as much as you’d like, every time you go to the job sites, I’ll do this with my client projects too, every time I’m at their job site, I’ll ask the contractor or the tradesman something that I didn’t know before.

Steve Rozenberg: Oh, so you use it as a learning lesson.

Kara Beckmann: Yeah, it should all be a learning lesson. So every time you’re walking away from that job site, you learn something.

Steve Rozenberg: Oh yeah.

BrittanyArnason: And then that’s less of a chance to get taken advantage of because people truly don’t — we know what we’re doing.

Steve Rozenberg: Yeah. And eventually you’re going to learn all the things and they’re going to be like, okay, they know what they’re talking about.

BrittanyArnason: Yeah, exactly.

Alex Osenenko: So, if I list the takeaways here, just to sum this up, it’s going to take another episode, so maybe we’ll do a comeback episode.

Steve Rozenberg: A recap.

Alex Osenenko: And we wish you success with your commercial beginnings and with your buying hold beginnings, and we’ll come back maybe in a few months and check you guys out and see how you’re doing.

Steve Rozenberg: Yeah, and obviously, how do they, I’m sure everybody knows how to find you, but how do they find you?

Alex Osenenko: Yeah, good point.

BrittanyArnason: I’m at investor girl brit on Instagram, my main.

Alex Osenenko: Investor girl brit.

BrittanyArnason: That’s right.

Alex Osenenko: All right. Kara?

Kara Beckmann: And I’m at Beckmann house.

Alex Osenenko: B. E. C. ?

Kara Beckmann: B. E. C. K. M. A. N. N.

Alex Osenenko: Beckmann house.

Kara Beckmann: Yes.

Alex Osenenko: Awesome. Well, thank you so much for taking the time. Let’s get back to the conference.

Steve Rozenberg: Thank you ladies.

BrittanyArnason: Thank you.

Kara Beckmann: Thank you so much.

Steve Rozenberg: We’ll see you guys. Bye.

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Jett Buys His First Rental Property at 14 Years Old

Jett and Steve Rozenberg talk with Alex Osenenko about how Jett, at 14, not only purchased a rental property but was excited to do so.

TRANSCRIPT

Alex Osenenko: Well, hello there and welcome to the next episode of the Myndful Investor show. It’s great to have you here with us. Steve and I are continuing to explore the single family investment realm and we are in this season trying to understand what it takes to be successful in single family investment. Luckily my cohost Steve Rosenberg has deep expertise in this field and he’s failed and won a lot, so but want to unpack, want to bring people, interesting people here who have done it or are doing it, unpack their experience and see if our audience, you guys and girls can learn something and so can we as well. Steve, how’s your day today?

Steve Rozenberg: It’s good. It’s good. We’re down here in Houston, which is rare that you get to come down to Houston. We’re in the headquarters of Empire and special guest, we have my son Jett here. Jett?

Jett: How’s it going?

Steve Rozenberg: Thanks for being with us today. But yeah, we’ll talk about a lot of people were very interested hearing about the story of Jett buying a rental property when he was 14.

Alex Osenenko: Well, don’t give it all away.

Steve Rozenberg: Well. Okay.

Alex Osenenko: There’s a special reason why Jett is here.

Steve Rozenberg: There is a special reason.

Alex Osenenko: Jett is 16 which is not defining him as an individual, but it is a factual statement. Is 16 years old and he’s not ashamed of it are you?

Jett: I am not.

Alex Osenenko: You know he’s not because you know what? He’s probably ahead of a lot of people including myself. He owns a rental property.

Steve Rozenberg: He does own a rental. Yes.

Alex Osenenko: He actually owns a rental property and this is exciting. We’ll get it in the show in just a second. If you want to get more, find us on Facebook, we have this new mastermind, real estate investment club. Would love to have you join this private group. Doing a lot of meetups. Would be great to meet you and of course if you need property management help, it’s all Mynd.co, M-Y-N-D.C-O.

Alex Osenenko: Well let’s get into the actual introduction. So, a little bit about Jett. Steve, I know you know your son but I’m just going to give a quick overview. So, he’s 16, 10th grade, lives in Houston. His hobbies are cool though. Drummer, knife flipper, rugby player and he bought a rental when he was 14. Steve, why don’t we start with you? Like our kids never want to do, like in my experience, my daughter, oldest daughter is 10.

Steve Rozenberg: Yeah.

Alex Osenenko: So she still likes daddy but like as they become teenagers they want to be the opposite. Like so if you’re a pilot like he builds like he goes into the ground.

Steve Rozenberg: Yeah. [crosstalk] Well, you know it’s funny you say that because a lot of times I’ll ask him, “Hey do your friends at school know what I do?” “Yeah. You own a business.” I say, “Well, they don’t know about me being an airline pilot.” “No.” Doesn’t tell them. So, very much to your point they kind of do go opposite. He seemed to resonate with the me owning a business and with empire and being involved in investing maybe because he was around it. We would kind of include him in meetings and bring him into conversations and when I’m on the phone in the car, he’s kind of immersed in it whether he wants to be in it or not. He’s in the car.

Jett: Yeah.

Steve Rozenberg: And I think that’s what kind of got him more understanding of it. Not like, “Hey, sit down and read this book.” Initially it was more just, I think him listening to conversations is what started this whole process for him.

Alex Osenenko: Yeah. So as the theme of the show, and you may be wondering what is this going to be about? Well, I think it’s about to help our children, our kids to be successful in whatever they want to be successful in but I think buying a rental property and becoming an investor can just help with whatever else they’re going to do. It doesn’t need to define them.

Steve Rozenberg: Sure.

Alex Osenenko: But it’s great experience doing it. I wish like if we were in United States, if I grew up in United States and my dad was doing this, like this would be like by now I’m 40 which you think is super old, but like in reality is like super young. Right?

Steve Rozenberg: I’m older than you so I don’t know-

Alex Osenenko: You’re also super young but the point is like we have a whole life ahead of us. Had I had capture four or five, seven [inaudible] of houses by now or reinvest that money like I’d be a lot better off than I am today. So, in anyway enough talking for us. I want to sort of understand like what was the first thing as a first time, Jett, that you thought, hmm, maybe I should do this on my own?

Jett: Well the first thing is like my dad said like just being in the car with him and listening to the audio books. Half the time I wasn’t really paying attention, but it was still going through in my ear and sitting in the back of my brain. So, I’ve always had an interest in it and how you can do what seems like a little work and get a lot of profit out of it. There’s still work to be done it’s just different work. I don’t specifically know why, I just liked it.

Alex Osenenko: So, as far as I remember at 16 years old-

Steve Rozenberg: 14.

Alex Osenenko: 14. Even 14, 14 you would get a job permit. So, if you want to have your own money-

Jett: Yes.

Alex Osenenko: Like I was 16 here and what I had to do is get a permit from my school, work and flip burgers at a restaurant, which was great, I actually enjoyed it a lot. You could do it still, but the point is like that was my option.

Steve Rozenberg: Right.

Alex Osenenko: Like go flip burgers only like so many hours a week and I had to come in on this time. Like there was a lot of restrictions so is this a way for you to make money and finance your hobbies or did you think of it as future opportunity?

Jett: I thought of it as both. I thought of it as well now it’s just the beginning point so I can just like keep reinvesting into savings, put some of it into my hobbies and then later when like the mortgage is paid off and you’re getting a lot more income from it, then it’s more of an opportunity thing to do it now when I’m younger so that I can have all that when I’m older.

Alex Osenenko: Do you even know how smart it is? You’ll listen to this podcast a few years from now and be like-

Steve Rozenberg: Well you know it’s funny because when we first started having the conversations and one of the things that I think was really helped and it wasn’t necessarily real estate related is you know we had the Grant Cardone University for the sales team and part of that you got the whole package of stuff and one of the things in there that he has is a hundred ways to stay motivated. And so what I started doing and they’re little five minute segments and so that was part of his chores is every day he had to listen to a five minute segment of Grant Cardone a hundred ways to stay motivated. And I think it just started, I’m assuming it just started getting him more in-

Alex Osenenko: Subliminal messages.

Steve Rozenberg: Yeah he just started-

Alex Osenenko: You programmed your kid.

Steve Rozenberg: Well it was part of his chores so-

Alex Osenenko: For success. [crosstalk]

Steve Rozenberg: And you had said it when I started talking about a mortgage and taxes. Well he doesn’t know what any of that was and he’s like, “What’s a mortgage?” So then now we had to go back to basics of a deed, a mortgage, buying a, so you really had to get very basic for him to understand appreciation, stuff that we kind of assume he’d never heard those words before. He knows rental, cashflow doesn’t really know what they mean so we had to say, “Okay, your mortgage is this, this is what a tenant will pay. The difference is what we get.” You know, really had to get very rudimentary for him to understand it and maybe he did or didn’t understand it at the time, but we kept working through the process of trying to understand it, which I think was key.

Alex Osenenko: Did you do it on purpose Steve? Like was your goal and we’ll come back to the first time you thought about buying a house by the way, I didn’t think I got an answer, but like did you do it on purpose? Like did you want your son to buy a property at 14 or you just wanted to educate him? Like what was your end goal?

Steve Rozenberg: No, I mean actually he came to me and said that he wanted to buy a rental property. I mean obviously everybody would want their child to be successful and carry on buying something that I’m in, real estate, but no, he actually was the one who came to me and said, “Dad, I want to buy a rental property.” And I was just like, “What? Like, how do you even know about that?”

Alex Osenenko: So let’s go unpack that moment like maybe it’d be interesting for me and our listeners to hear like what was the pivotal point for you? What was the trigger for you?

Jett: I don’t really think it was a trigger or like anything that just kind of causes a snap. It was just a steady thing over time and then I was like, “I guess I’ll just ask him and tell him that I want to buy a property.”

Alex Osenenko: So you were thinking about it?

Jett: Yeah.

Alex Osenenko: You were brewing it?

Jett: Yeah. It had been stirring in my mind for a couple months.

Steve Rozenberg: You know, he and I had talked about it and he had the money in savings that he had saved, which I didn’t know he had that much, but he did. But you know, then his thoughts, what he said to me is, “Well, it’s not going to make anything sitting in a savings account.” So, he was smart enough at the time to realize that he didn’t really know that it was called a return but he knew that it was not going to make him any money just sitting in a savings account.

Alex Osenenko: Let me ask you this. On the savings account, personal interest, how old were you when you had your savings account first?

Jett: I don’t quite remember exactly how long-

Alex Osenenko: So, that young?

Steve Rozenberg: I think he had had it. Yeah. I mean we had opened it when he was young.

Alex Osenenko: Like how young?

Steve Rozenberg: I mean probably like three. You know what I mean? Yeah.

Alex Osenenko: Three?

Steve Rozenberg: We started a savings, you get birthday money and you get this and you know, we’d always put money, we had like some he could have and a ratio. And that’s actually, you know, speaking of that, that’s what he does with his cash flow. He has to divide it. He gets 60% he can use and 40% goes back in to save for another rental or whatever so of his cash flow, he gets some that he can use and he gets some that no matter what it goes reinvest back in.

Alex Osenenko: So let’s talk about now that you’ve had an ask, like, “Hey, can we do that together?” I listened to your podcast on Bigger Pockets and sort of, I know some of this, but I want to unpack this for the audience, too. There’s more to buying a property than just wanting buy it. There’s a lot of people who are listening to us who want to buy property who can’t or won’t or like there’s a lot of blocks. It’s a complicated.

Jett: It is.

Alex Osenenko: And to me the first thing I think about is down payment. Like have to have that. So you had some savings, was that enough to-

Jett: No, definitely not. I ended up going in splitting it with my parents.

Alex Osenenko: Splitting so they gave you part of it and you had part of it?

Steve Rozenberg: We didn’t give him part of it. We partnered with him and invested part with him.

Alex Osenenko: Tell me more.

Steve Rozenberg: So you know, we had the discussion and he didn’t have enough. He had like $10,000. And so it was like, that’s not enough. And I don’t know how much he remembers of this, but it was like, “Well, how do I get more? How do I make it?” And I’m like, “Well you need about 20 minimum.” You know?

Alex Osenenko: In Houston.

Steve Rozenberg: In Houston, yeah. [crosstalk] And I’m like, “You need about at minimum of 20, you know? Not counting if there’s a make ready that needs to be done or anything like that.” And he was like, “Well that’s going to take me forever. I mean, I’m 14 and this is what I have.” And I’m like, “Yeah I agree it’s going to take you forever.” You know? And the one thing he asked me that I remember is he said, “Well how can I do it? How do I do it?” And I thought that’s a pretty smart question, right? Because he’s actually asking how, and instead of that’s not fair, whatever.

Steve Rozenberg: And that’s when we kind of went down the path and I was like, “Well you can partner.” You know? And that’s when we started unpacking the thing of, “Well, you know, would you partner with me?” “Well, what’s the deal?” You know? And so we had to talk through the deal and of course, first I had to explain to him how a rental property pays money because again, I go back to if I was a young kid growing up in Los Angeles and my parents had the ability to buy me 10 houses, right? No offense, but you and I probably would not be sitting here right now. But you know, if he can get that now 30, 40 years from now, I mean, where will he be? Right? And so my thoughts were, I don’t want to give him all the answers, but I want to have him understand the dynamics of owning a rental property, the cashflow, they appreciate.

Steve Rozenberg: So, I had to explain to him that how you make the money? Of course he’s thinking cash flow of what he’s going to make in lieu of maybe getting a job or whatever he wants to do with it but I’m trying to explain to him like, look, there’s more to the story here. Like this is for your future and this is going to go up in value. So, I had explain why is it going to go up in value and I remember we sat down on the kitchen table one day, right? And I drew a map and I showed him what appreciation does on the East coast and West coast of the US and the Midwest and all this and I wrote all these numbers down and showed him, kind of walked him through the numbers and then it was probably month or two or a couple weeks later when I went into his room and it was actually up on his wall.

Jett: Still is.

Steve Rozenberg: Still is on his wall and I was thinking, wow, like he actually listened.

Alex Osenenko: Give us a shot for this podcast, we’ll put it in the show notes or something. I think it’d be cool for the listeners to actually take a look at it.

Steve Rozenberg: Yeah. Oh, a screenshot?

Alex Osenenko: Yeah.

Steve Rozenberg: Yeah. I mean, I’m not the best artist in the world for the record, but I did a pretty good job.

Alex Osenenko: You can’t be best at everything, Steve.

Steve Rozenberg: That’s true. That’s true.

Alex Osenenko: You know, having 16 things be best at, that’s enough. [crosstalk 00:14:16].

Jett: He got his point across and it’s all I needed.

Steve Rozenberg: Yeah.

Alex Osenenko: Exactly. And then you just put that as a reminder?

Jett: Yeah.

Alex Osenenko: And that’s probably like when we talked pre show and I said, “Hey, couple of things you get out of the hundred ways to motivate yourself,” and you like had a little bit of a like hesitation is probably a lot of things you’ve learned out of there?

Jett: Yeah.

Alex Osenenko: But maybe looking at your goal, visualizing every day, that’s probably out of there somewhere.

Jett: Yeah. Persistence is a big thing.

Alex Osenenko: Yeah. So, that’s good. I have a question for you, a little bit of a challenging question. So, you know we’re right now-

Steve Rozenberg: No I’m not buying you a house.

Alex Osenenko: No, no, no, no. It’s not like, “Yeah, let’s partner. Let’s partner.” No, seriously. It’s along the lines of what we’re currently educating on and we’re big on out of state investing.

Steve Rozenberg: Sure.

Alex Osenenko: Right? You do a lot of presentations. We acquired a company called HomeUnion Investment. You can go there and actually just like you would on your bank account or something or something like you can look at properties and you know, bid and acquire an investment property. So, question is like if you had 10 grand, why not go to like Indie or Detroit or somewhere where the medium price of the house is say $110,000 versus $220,000 or whatever. Or is 10,000 this little money? Like your loan to value needed to be what? Like over 20%? Like why not buy somewhere else where it’s cheaper?

Steve Rozenberg: So, okay. So, that’s a good question. Some of the reasons were I’ve got a local network here, right? So, of course we bought this before Mynd was in the picture or Investment was in the picture. Right? And so for me, we know Houston, right? I know I’ve got a large connection in Houston of investors and everything so when I put some feelers out to people that I know that were for a rental property, “Hey, when you get one, let me know. You know, I’m looking for something that,” I didn’t want to get him a property. I didn’t want to find a property that had a lot of problems. I didn’t want a project for him to get, right? I wanted him to learn the numbers and not learn the working side of it, per se his first one. So, I wanted a property that was pretty much, we buy it and it’s ready to go for the most part. Right? And that’s pretty much what we found. Now I was able to do that through connections and through people I knew that were able to find me a deal that had those numbers.

Alex Osenenko: What about the listeners that don’t have those connections? People who are just starting out. So if I’m thinking if I’m just starting out like, Oh, that’s great Steve, you had all these connections-

Steve Rozenberg: Right.

Alex Osenenko: Super good. How do I do it?

Steve Rozenberg: Well, I think now, I mean, look, you’ve got the investment software. Now, the guy that sold me or sold us the house, I didn’t get a fantastic deal. He had a house that he needed to get rid of. I had money that I wanted to buy.

Alex Osenenko: But you knew the type of deal that he needed to get into to qualify for your specific goals, which is not giving him a deal that requires a lot of work.

Steve Rozenberg: Yeah. I didn’t want to get a major rehab for him first property to take a property go, “Okay, now we’ve got to knock down walls. We got to do this.” I wanted something turnkey. I think to answer the question is, is that’s where education comes in. That’s where someone who buys a property needs to be educated in the area, in the prices of all that before they buy something, they need to know what are they buying. Like again, could we have bought a total rehab and bought something for pennies on the dollar and done it together? We could have, but then we’re trading time for money.

Alex Osenenko: Ah, so this is an important extrapolation that I want to stop here and unpack this for a second. I think it was J Scott, I think multiple guests talked about you have to have time, money and what’s the other one? There’s three things, time and money is specifically stick out to me so if you are willing to invest time and go rehab the house, because if you had a construction business for example, and you were like spending summers working there, you guys would probably do different things.

Steve Rozenberg: Exactly.

Alex Osenenko: You throw in the five grand or on like a dilapidated house and rebuild it together.

Steve Rozenberg: Yeah.

Alex Osenenko: That’d be cool too.

Steve Rozenberg: And there’s a lot of very successful people that have that as a model that do that and very well that could have been a way to do it, but that’s not my specialty and not my educational knowledge. So, I could have, but it also could have turned into a disaster.

Alex Osenenko: Sure.

Steve Rozenberg: Because of that I’m not educated. So, for me to do that, that’s like me buying a deal in an area that I don’t know in a price point that I’m not familiar with, with clientele and all that. I’m going out of my circle of knowledge and so it would be on me. If it fails, it’s always going to be on you. Right? But I wanted him to get, I don’t want to say a layup. Right? I don’t want him to get a softball, but I didn’t want him to have a problem where now he’s going, “I don’t like real estate. All this is doing is costing me more money, more money, more money.” Again, I look at real estate, especially for him as very longterm. Right? So, I wanted him to get a deal that he could get. I mean, I think in this property, I think we rented it like, well, we handed over to Empire. Right? And how many times have you seen the house?

Jett: Just once.

Steve Rozenberg: One time. Okay? It’s been rented ever since. What are the problems that we’ve had?

Jett: We had to rebuild a fence.

Steve Rozenberg: Rebuild a fence when the tenants moved in and we had an AC call, I think.

Jett: Yeah.

Steve Rozenberg: That Empire took care of.

Jett: AC issues.

Steve Rozenberg: But other than that, he’s learning from here up, which is what I wanted him to learn. I want him to learn the education side.

Alex Osenenko: Right.

Steve Rozenberg: And again, not that there’s anything wrong with rehabbing a house but that’s just not my specialty.

Alex Osenenko: I understand. Like this is really well explained. Thank you Steve. Because like people who are listening in different circumstances-

Steve Rozenberg: Absolutely.

Alex Osenenko: And so the understanding is like look, for example for me, I’m in San Francisco Bay area, like you were in a super investible town like why go outside if you able to make this work?

Steve Rozenberg: Right.

Alex Osenenko: You have a network here and all that. I’m in the San Francisco Bay area. I will probably call you.

Steve Rozenberg: Yeah because this is marketable, right?

Alex Osenenko: Right.

Steve Rozenberg: But if you were saying, “Hey Steve, I want to get a property and rehab it and do this and do that and I want to tear it down, I want to rebuild it,” I’d be like, “I’m not that guy.”

Alex Osenenko: I wouldn’t be calling you.

Steve Rozenberg: You wouldn’t be calling me. Right?

Alex Osenenko: But you’d probably give me a card or give me a phone number.

Steve Rozenberg: But to your point I think is if I was doing that and that was the way that he and I were going to get involved in real estate, then that would be the avenue that we took and look at the end of the day, you’re not buying it for the rehab, remember you’re buying it for the long term 30 year goal still, or 40, 50 year goal for him. So, it’s still the education of him understanding why are we even buying a rental and how does a rental even work? Like how does that work where you’re getting cashflow and oh, every year the tenants renew and the rent goes up and his cashflow goes up or expenses go up and your cash flow goes down. And so he’s learning about finances and all of a sudden it’s like, “Hey Jett, we had an AC issue this month.” It’s like, “What does that mean?” It means no cashflow. You know what I mean? There’s a maintenance call, you know? So he’s learning about that where he wouldn’t have learned, I don’t know how you teach that in modern day.

Alex Osenenko: It’s invaluable. It’s invaluable. I mean kids these days put money in the piggy bank and I’m just impressed about the savings account. Like I’m thinking, I’m like seven years behind because my daughter is 10 and then the other one is five so it’s like I better get on it because I think they’d love to see the bank balance and like really start understanding like, “Hey, I can spend it now. Get the candy, eat the candy, have nothing. Or I can look at my little app bank account and see that number grow.”

Steve Rozenberg: Yeah.

Alex Osenenko: But you’re right, there’s no interest. Like you’re not earning any money.

Steve Rozenberg: You’re not earning anything and that’s what he took out of it was, again, once he realized that the savings account, and that’s what he said we had the conversation was, “I’m not going to get anything out of the savings account.”

Alex Osenenko: So what’s your plan Jett? Let’s talk about like what are you thinking-

Steve Rozenberg: Yeah, that is a good question. What is your plan?

Alex Osenenko: Right now, you know, I know it’s like you haven’t lived through college or anything yet. But like when do you want to get your first Ferrari?

Jett: Whenever I can. When I can afford it.

Alex Osenenko: That’s what I want to know.

Steve Rozenberg: Is it the Ferrari or what is it that you were talking about?

Jett: It’s whatever car I’ll be happy with when I can afford it.

Alex Osenenko: Interesting. So, it’s just a car?

Steve Rozenberg: Here’s a question. So, he gets his cashflow so maybe you can explain a little bit about what you do with your cashflow and how much you get and all that stuff so that you can break down the actual numbers maybe tell them what we bought the house at, what it was worth, all that stuff.

Alex Osenenko: Oh yeah, let’s do some math. That’d be great.

Jett: All right. Let’s do some hard numbers. So, the house we got, we got it for what, 150?

Steve Rozenberg: 159.

Jett: Yeah, 159 and the house was worth 180. So, for the math I was told for putting a good rent price we set our rent at 1500 per month.

Alex Osenenko: What was the down payment?

Steve Rozenberg: I think we put-

Alex Osenenko: Like 20%? let’s just percentage-

Steve Rozenberg: I think it was about 20% I believe. Yeah, I think it was about 20%.

Alex Osenenko: What about financing?

Steve Rozenberg: I got the financing.

Alex Osenenko: So, he’s not mentioned on the loan?

Steve Rozenberg: He’s not mentioned on the loan.

Alex Osenenko: Okay, got it. Okay. Then there’s no way to [crosstalk 00:23:29].

Steve Rozenberg: Under 18 yeah. Yeah.

Alex Osenenko: Do you have a trust? I know that’s a separate question.

Steve Rozenberg: No.

Alex Osenenko: Okay.

Steve Rozenberg: No.

Alex Osenenko: So, this is one of the things that I’m thinking about, like setting up a trust and then having the house in a trust name instead of your own personal name.

Steve Rozenberg: Yeah.

Alex Osenenko: I’m not an attorney, so. But go ahead please. So, 1500 rent.

Jett: 1500 rent and then since we split it halfway, they would get half the profit, we would get half the profit. So after mortgage, taxes, HOA, all that stuff, that’s a total profit is about 500.

Alex Osenenko: Cool.

Jett: So then we split it 250/250.

Alex Osenenko: That’s good money.

Jett: Yeah it is.

Steve Rozenberg: But then he’s got to break that down into a ratio.

Jett: So, then I got to break that down 60/40 where 40 goes into savings and I keep 60. So, 60%, $150 I keep that and then a $100 goes back into savings for another house, say.

Alex Osenenko: Gotcha.

Steve Rozenberg: So, I taught him a lesson over the summer is he uses his money to buy knives, right? He’s big into flipping and all that stuff. And what you were trying to do earlier, not very successfully, but you’re trying. But-

Alex Osenenko: We’ll see about that. Better than you.

Steve Rozenberg: Yeah, I don’t even try. But so he uses that money to buy and sell knives and do all the stuff that he does. So, I took him to a knife show and he wanted an advancement on his cash flow because he wanted money to go to the-

Alex Osenenko: Don’t tell me you charged him interest?

Steve Rozenberg: I didn’t the first time. So, he wanted the money to, you know, to ahead and so we gave him the money and said, “Okay, well this will be the next quarter’s worth and here you go, here’s your money.” And then he wanted another advancement on top of it and I said, “Okay, here’s the deal. We’ll loan you again but that’s it. After this you got to start paying interest on the money that you borrow because you’re defeating the purpose of the waiting for the cashflow to come through. So you want to borrow it? That’s fine. Now you’re going to pay a percentage of interest against what you borrow moving forward.”

Steve Rozenberg: So, it was kind of a secondary again, that’s why people get in debt. They borrow and borrow and borrow, and all of a sudden he could be six months behind going, “Hey,” and now let’s say the house goes vacant but there’s a maintenance.

Alex Osenenko: Yeah.

Steve Rozenberg: Now all of a sudden he’s in a bad negative position.

Alex Osenenko: Hey, let me ask you a question. This house sounds like a screaming deal, like I hope it turns out that way for you. Why would somebody sell it? Like you said a guy had to get rid of it. Like why would somebody do that?

Steve Rozenberg: Yeah, so the guy that I bought it from was a rehabber.

Alex Osenenko: Oh.

Steve Rozenberg: He bought it for, I think he told me he bought it for like 130, he rehabbed it, made it basically immaculate, perfect inside and he called me and he said, “Hey, here’s the deal. This thing is turnkey. It’s ready to go. I did all the work.” He told me, he said, “Listen, this is what I bought it for. This is my profit and this is what I’ll sell it to you at.” And he said, “If you don’t want it, I’ll throw it on the open market.” But he said, “I know you’re looking for something.” He goes, “This is perfect. And it’s in a great area that’s it’s a solid area that’s going up in value.” So I’m thinking this is a good lesson for him. Right? And so to me, working with flippers and rehabbers, it works. I mean the model works.

Alex Osenenko: I just bought a house that was rehabbed. It’s awesome, I don’t have to do any work.

Steve Rozenberg: You don’t have to do anything. Same thing. That’s the same thing with the rental property. So, it’s very much along those lines and it just goes to show, he met the guy, we’re at closing, we took a picture with him and everything and you know what I mean? We’ve got a good relationship and he calls me, he’s like, “Hey, you want another one?” I’m like, “Do you want one?” He’s like, “No, not right now.” I’m like-

Alex Osenenko: Next time he calls you call me.

Steve Rozenberg: Well there you go.

Alex Osenenko: You’ve heard it here first.

Steve Rozenberg: But to me that’s the thing, is he’s seeing how it works. Yeah. Did I pay, did we pay a little bit more than probably I would’ve liked to? Yes, because I didn’t go find the property myself. Right? I didn’t do the rehab myself. I probably could’ve found the house for 130 myself, put all the time and energy and effort. You know, we have crews. We could’ve gotten it done, but I’m thinking that’s not the lesson I want him to learn. I want him to learn the lesson that you can get this, you’re going to pay for it but do the numbers work? The numbers still worked at the price we bought it at.

Alex Osenenko: Hey Jett, how busy are you? How many hours a week you go to school? What’s your situation?

Jett: Five days a week, seven hours a day I go to school. After that I got rugby practice two days a week for three hours. Three hours a day.

Alex Osenenko: Have you thought about getting like a part time job? Like is that a thing?

Jett: Yes, I have been thinking about that more and more recently and…

Steve Rozenberg: Yes. Yes.

Alex Osenenko: I’m just curious. Like right now, like I know I’m putting you on the spot a little bit, but I’m just curious like, hey yo young people these days, there’s different situations, there’s different things. It doesn’t look like things are just given to you.

Jett: No.

Alex Osenenko: Like they probably got the jeans for you but that’s as far as it goes. Right?

Steve Rozenberg: Yeah. I mean he works for his stuff. He understands, he gets it, you know, he’s a good kid. Good in school and he drums in a band and he does the rugby and I mean, he’s out there, he’s being a kid, which is what we want him to do but he’s also learning. I mean, I asked him and you could ask him about teachers, your teachers that-

Jett: Yeah.

Steve Rozenberg: I asked him, I go, “Do your teachers know that you’ve,” so he’s in a class about money. It’s called money matters.

Jett: Yeah.

Alex Osenenko: Oh really?

Jett: Yeah [crosstalk 00:29:05].

Jett: Yeah they have that now it’s-

Alex Osenenko: I never learned that.

Steve Rozenberg: No.

Jett: It’s pretty much just a class that tells you how to invest your money properly, how to finance it correctly and just how to make sure you don’t go in debt.

Alex Osenenko: That’s really cool.

Steve Rozenberg: It is cool. But I said, “Do they know like kind of about your history and you owning a rental?”

Jett: No, that’s not their business to know.

Alex Osenenko: All right, so-

Steve Rozenberg: So he doesn’t tell them.

Alex Osenenko: That’s interesting. Let’s talk about this for a second. You don’t say that your dad is a pilot and you don’t say to you own or rental property. I could see multiple reasons for that but what are your reasons?

Jett: Because I don’t want to seem like the guy that just shows off everything that’s like, “Oh yeah, my parents do this, I do this, I’m better than you.” I don’t want to be that guy.

Alex Osenenko: That’s really smart. Humble. Humble, mind your own business, do your thing. I need to learn from you man. Sometimes. Sometimes I show up in a M3 and that’s how it is man. It’s a stick shift and it’s very loud.

Steve Rozenberg: Yeah. I mean look sometimes you want to show and let people know that you’re doing well.

Alex Osenenko: Yeah.

Steve Rozenberg: He’s more reserved. I mean, he’s very reserved. He doesn’t talk about it, doesn’t say anything about it. I mean, being able to be a pilot, we’ve traveled all over the world and seen a lot of [inaudible] He’s gotten to experience a lot. Like you, he’s done martial arts. I mean he’s got a second degree black belt. I mean he’s done a lot.

Alex Osenenko: One degree above me that’s for sure. That’s awesome.

Steve Rozenberg: He’s done a lot but he understands the work ethic and maybe martial arts taught him that, to be humble about it.

Jett: Yeah.

Alex Osenenko: That has a lot to do with it. This is what I learned. Like I sold my M3 three years ago as soon as I start getting like really into it. And I think it’s part of it. I think it’s true. There’s a little bit to it, but I’ve looked at like a lot of people I know and I read about and I’m an avid podcast listener, love podcasts and I found that like most real, true, successful people are more like you.

Jett: Yeah.

Alex Osenenko: Right? It’s not the talk, it’s the walk. Right? You do your thing, somebody asks, free to give advice, you’ll discuss it, you’ll be transparent and honest, but you’re not going to volunteer, you’re not going to go, you know-

Steve Rozenberg: So, let me ask you this. So, your friends, do a lot of your friends know that you own a rental or do you… Like how do you have that conversation with them?

Jett: Just a couple of my closer friends know and that’s just, I mean, because you hang out, you talk-

Steve Rozenberg: Have conversation.

Jett: Yeah. Just in conversation. You talk about your interests and whatnot, so that-

Steve Rozenberg: But it’s not a, yeah.

Jett: I don’t make a full conversation over it. It’s just a-

Alex Osenenko: Gloss over?

Jett: Yeah. Just kind of gloss over.

Steve Rozenberg: So, I’ve got a question. So, if you’re in high school and kids were to come up and talk to you and ask you advice, what advice would you give them?

Jett: Don’t spend your money on stupid things and put it into a savings account.

Steve Rozenberg: Start putting money away?

Jett: Yeah. If you think you need the money, you don’t need the money, it can wait unless it’s a big emergency, you don’t need it because if you’re still a dependent, then all the major things are still covered for you.

Alex Osenenko: Learn how to work with your parents.

Jett: Yeah.

Alex Osenenko: That’s what I would say. Hey, if my daughter vacuums, like I’m happy to pay, like somebody is going to wash this table, like it’s either going to be my time or her time, you know. It’s a glass table, it’s a pain in the neck. Like you know, my wife, she’s going to sit there and like 15 minutes, maybe she does it and then she vacuums, she does those things. Like there are jobs to do in the house I’d say that parents are willing to pay for-

Steve Rozenberg: And you know the other thing too is-

Alex Osenenko: That’s money.

Steve Rozenberg: He’s learned like with his knives, right? He buys them, he sells them, makes money, buys them, sells them-

Alex Osenenko: That’s a side hustle, there’s money involved?

Jett: Yeah, that’s actually why I am happy that I did take out that advancement earlier is that because now I’ve gotten the collection to be where if I want something else then I can sell something off again, get that and then it’s just a constant circle of-

Steve Rozenberg: So, he’s learning how to use money and start moving it around and flipping it, no pun intended, flipping it over.

Alex Osenenko: Dan, how old is your son?

Dan: Three.

Alex Osenenko: Are you downloading here? [crosstalk] Are you recording?

Dan: My son has a savings account already.

Steve Rozenberg: See?

Alex Osenenko: But it’s pretty cool. That’s smart.

Steve Rozenberg: Yeah.

Alex Osenenko: This is something that I need to even myself get behind is getting a hobby where your things are worth something because, and knowing so deeply, like because I go fishing, like you know, I spend money on fishing, I go catch the fish, I eat it. There’s really no value in it but like if you were collecting knives or I suppose cars, if you’re in that position, like that’s a lot of money. Like that’s value.

Jett: Yeah.

Alex Osenenko: Like asset.

Jett: Yeah. That’s one of the big things that I got from Grant Cardone and the Rich Dad, Rich Kid, Poor Dad, Poor Kid books is that always look for opportunity. So, that’s the first opportunity I saw and said, “I can buy these and then sell them for just a little bit more,” but that little bit more still profit and over time that piles up to be more and more profit.

Alex Osenenko: That’s really good stuff.

Steve Rozenberg: I mean because pretty soon that could become cars.

Jett: Yeah.

Steve Rozenberg: It can be become houses. I mean, he’s learning the concept of, in my opinion, he’s learning the velocity of money. He’s learning how to get something. He plays with the knives, he does whatever he does for a while then he’s like, “Okay, now there’s a better one out. I’m going to sell this one. Use the money for that, make a little profit and keep it rolling.” You know?

Alex Osenenko: Be honest with you, like this is sort of a definition Rich Dad, Poor Dad and I’m not saying that you’re a rich dad or anything like that-

Steve Rozenberg: Yeah I get what you’re saying.

Alex Osenenko: But it’s like-

Steve Rozenberg: It’s a mindset.

Alex Osenenko: I grew up in Minsk, Belrose like socialist country. You know, two years ago before I was 16 and when I say I’m 16 now, it’s a little capitalism, but nobody knows anything much less your parents.

Steve Rozenberg: Sure.

Alex Osenenko: You know? And so I never learned any of that but when I came to US I got really hungry, started learning. But to me it’s like associating what I’m reading to reality was very, very difficult. Like it’s really good to have an example and then it’s interesting because before the show you couldn’t really tell me exactly what you’ve gotten out of this Grant Cardone book.

Steve Rozenberg: Yeah.

Alex Osenenko: And now it’s just coming out. It’s like, think about it. Those knives are an asset and I make a profit on those. That’s amazing.

Steve Rozenberg: Go ahead.

Jett: So what I was going to say is like, just like to kind of help with how I saw how I can do this with knives is that I would just like see something in school. I would pick an object and I’m like, “All right, what can I do with this?” And then I’ll just do that with other things. Like, just walking around like in the mall, I’ll look at that. I’m like, “All right, what can I do with that?” And it’s just constant thinking.

Alex Osenenko: That’s an entrepreneur mindset.

Steve Rozenberg: That’s a muscle, right? I mean you’re working that muscle to figure out, okay, is there something here? One day he’ll see, I mean, he’ll probably see something that I wouldn’t see and go, “That’s a deal right there.” I may be looking at a plot of dirt, right? And going, “I don’t know what he’s talking about.” You know? And he may see it where it’s something there that he’s going to go, “That’s opportunity.” And you know, the thing that I always think about is, you know, as entrepreneurs of all of us out there grinding and trying to be successful, we’re so busy being successful, we forget about them, right? We forget about the kids.

Alex Osenenko: Oh yeah.

Steve Rozenberg: And so we’re so busy trying to make it, we kind of forget to show them what we’re doing and help them and that’s why, you know, again, I can’t say that I did this on purpose, that I realized that he was learning all this Andy Frisella and all these podcast shows and audio books that I’m constantly hearing. But it was, and I remember one time we were in the car and you know, I take him to the gym, we’re going to the gym together and we had a friend in the car, I’m taking him to the gym also and I think we’re listening to Andy Frisella or something, one of his podcasts, and he goes, “Oh Jeff, this is the guy you were telling me about.” So I’m thinking, oh, okay, so he’s listening and then he’s telling other people about these podcast shows.

Alex Osenenko: Yeah.

Steve Rozenberg: So, it’s resonating.

Alex Osenenko: I’ll tell you when in life. This is really good. This has been really, really, really good. And I think the takeaway for those that are listening is learn yourself and then invest in your kids and let them invest, not give-

Steve Rozenberg: Yeah.

Alex Osenenko: Invest. Invest, that’s very important. I really like your mindset young man. I think you’re going to go places, but for now to wrap it up, why don’t you and I show a trick.

Steve Rozenberg: I do not partake in these.

Alex Osenenko: And mind you, I just learned this today. Steve doesn’t know how to do any of it.

Steve Rozenberg: I do not. I’m waiting for the fingers to be cut. You could maybe get a job at Benihana.

Alex Osenenko: That’s big man.

Steve Rozenberg: Maybe Benihana, I’m not sure.

Alex Osenenko: Like Nations was where I grew up and that’s how-

Steve Rozenberg: I don’t know that-

Alex Osenenko: Nice burger spot.

Steve Rozenberg: You didn’t give him the sharp one did you?

Dan: No I did not. [crosstalk 00:00:38:41].

Steve Rozenberg: This is the practice knife.

Alex Osenenko: This is pretty cool.

Steve Rozenberg: So, if you want to find us on iTunes, we are there. We are on Spotify, we’re on YouTube, the Myndful Investor Podcast show. Also, you can find us on Facebook, the Mastermind Real Estate Investment Club. Make sure you find us on both, like us, join and subscribe. Everyone, thanks for watching today. Appreciate it, and we’ll talk to you guys later. Bye-bye.

Jett: See you.

Additional Links

HOW CAN YOU TEACH YOUR KIDS ABOUT REAL ESTATE INVESTING?
How to Teach Your Kids to Be Self-Made Millionaires

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