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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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