Using Rental Properties to Build Wealth (Part 2)

Steve Trang: No. No. It's fun for me too. The other question I have because you got I mean, I think your organization is probably five to 10 times larger as far as headcount goes. One of the biggest struggle and people don't talk about this on social media or whatever.

Right? Like, I'm making all this money. They don't talk about all the headaches involved Yeah. In managing people. Yeah.

Right? People are crazy. Yeah. Does that come in is that does that cause you any stress? Or

Speaker 1: So if you say what is the thing that makes you different or separate you from others, I would say it's probably two things. I have a tenacious attitude that I don't think everybody possesses. But I'm a dog on a bone when I get to something. Mhmm. The other thing is is I have incredible patience.

I have terrible patience, but I have what's called I have high stress tolerance. Mhmm. I can tolerate a lot of shit, and most people can't do that. Like, I am chubby around the midsection. I can live with it.

It's not ideal, but I can live with it because I'm putting my focus on other stuff. Mhmm. That might drive some people nuts, and they have to go focus on that. Like, I can live with it. I can live with noise.

I can live with, you know, whatever you wanna call it. But an ability to be tenacious, to always want to seek more, and an ability to just be okay with what you deal with. So if you are a solopreneur and you're thinking, alright, I'm gonna go build something incredible. I'm gonna have this huge team. Allow me to share a secret with you.

You're gonna get credit for nothing, and you're gonna deal with every problem. That's what my job is. I deal with issues and problems. When people can't solve it, they bring it to me, and I justify the reason why I have the corner office. That's what I do, but I also like that.

So it's part of it. Now, you can't rob people of the opportunity to solve problems themselves or support them while they're doing it, but there's a lawsuit. There's a this. There's a that. That's what cop that's what I deal with.

Steve: Yeah. Yeah. No. It's it's it's it's very interesting. Right?

Because we do get pleasure from solving the difficult challenge. In some ways, we're a little bit, you know, sadomasochistic or whatever. We just love pain, but that's what

Speaker: we get paid to do. Sure. It's it's part of it. Yeah. I tell people like, I told I told Jason Medley this a lot.

I mean, they don't just hand out million dollar, you know, paychecks. You gotta earn it. You gotta have a skill set. There's a line in a country song that I love that talks about this woman who gets to be really famous as a singer. And he goes, you know, the singer goes, she knows that I got something they ain't got.

That's why I got there. Yeah. And it's the truth. It's like I live in a cool house. I have awesome experiences.

I got good things, but I started it. I grew it, nurtured it, and I problem solve a lot. Yeah. Plus, in my case, I signed for a ton of debt. Like, I got a 100 I got tens of millions of dollars in debt that's in my name.

If there's a problem, they don't call anybody else. They call me. Mhmm.

Steve: So the leadership team now at Collective Genius. Yep. Right? Jason Medley, Top Dog, you and Leon. Yep.

And now we got Eric and Mark Dela Toro as well. Why are you doing that? So you asked

Speaker: me earlier about, well, like, when did I become successful with direct mail? When I joined Collective Genius, I met a bunch of people there who were good at it. Mhmm. So CG gave me a ton. And I was in for three years before Jason said, Hey, do you want to join the leadership team?

So it wasn't very long, kind of like the whole Shonterri thing kind of happened pretty fast. So I like it from that aspect, you need a network. Kind of like, Could you quit? Sure. I have enough money, but what the hell am I gonna do?

Kind of the same mentality here. Could I do it on my own? I could, but I need a network, I think it's gonna make me better, and my relationship has changed. When I came to CG in 02/2014, I come home with seven and eight pages of notes. Now I might come home with three or four things, and that's it.

That's very different than pages and pages of notes. But I have a team and a staff where I can take those two or three things, I can implement them almost immediately.

Steve: Right.

Speaker: And I can make modifications to the business, but it isn't radical. So I think it keeps me on the edge that way. The other thing I love, and you probably see this through training, when you get to be kind of old, fat, and happy, you are very different than when you're hungry and you're scrappy. Like, look at the difference between Rocky in Rocky one and Rocky, you know, four when he's, like, got the, you know, the Ferraris and everything. Like, he was hungrier the first time.

Yeah. So when there's young, hungry people around, they see things that you miss. But I have enough staff where if I see someone who's got a great idea, I can then take it back and implement it in minutes to days. And that makes me sharp and keeps me in touch with all the new stuff. Yeah.

And that's the reason I do it.

Steve: You know, there's a Patrick Bet David. You know? I watched some of his content, and there was something that really resonated with me. And it was, can every year in his birthday, can 27 year old me beat 40 year old me, 41 year old me? And I think it's it's it gives you different set of eyes.

Yeah. Right? Because, yeah, like, 27 year old me could probably outwork me. Right? And 27 year old me definitely had a much higher risk tolerance

Speaker: Yeah.

Steve: Than I do today. But I can get done just like you said. In a matter of days, it'll take that guy months. Right.

Speaker: Yeah. Did you ever see The Last Dance with Michael Jordan? Incredible. Right. Do you remember what he do you remember how the whole thing started?

Steve: It was about them, I mean, with Pippen and firing But

Speaker: it's literally the first scene of that 10 part documentary was him in, like, 1997 in Europe with his kids. Yeah. And he's talking about, like, I can't do it the way I used to do it, but I'm better now than I was then.

Steve: Right.

Speaker: And he has all these distraction. He's smoking cigars. He's got kids. He's, you know, he's Michael Jordan. But that's the thing.

If you properly cultivate, you get better over time and not worse. You can accomplish more. For those of you that are young, you're like, I don't wanna lose my fastball. I don't wanna lose my edge. It's you're it's going to happen.

Unless you use drugs, like, it's going to happen. But what you wanna have is you wanna have tangible skill that allows you to accomplish more with less. Yeah. Your your energy is gonna come back, but your thought process, your intentionality, Wisdom. Those things increase greatly, and you can get further faster with less if you in fact, you know, you you mature the right way.

So are most of your listeners real estate investors that who listens? Or is that kind of

Steve: a problem? I mean, we have a a mix of, people who are trying to do their first deal, people that are doing deals, which I think is a greater chunk, and then a few that are crushing it and are just listening to grab a nugget or two.

Speaker: Alright. So I have a podcast. This is a quick shameless plug, but it's intentional. And it goes to what you just told me about. It's called Let Me Speak to a Manager.

I do it with one of my best friends. He was a top 20 executive at a publicly traded company. He had a 8 figure exit, like big, big exit. So what we talk about is kind of management and things. But what this comes back to is what I get a lot from younger people is like, you know, what's a career arc need to look like?

And what you just asked about is like the wisdom and things that come later. What I've seen is the most successful is people who are in their, you know, their teens and twenties. They learn a skill. For me, that skill was selling, estimating, and it was, construction. In my late twenties, I learned to manage.

In my so my twenties and my thirties, I learned to kinda manage. And by 35, in 2009 when I quit, I learned to own. But I could never own and own as well as I do now if I hadn't spent my twenties, my early thirties learning those skills. Mhmm. So what you everyone is a beginner at some point, no matter what you do.

And there's always someone better than you at something. So what you have to figure out is how do you give yourself the most opportunity to succeed? What do you spend your time on? How do you cultivate? Now, unless something tragic happens, we're all going to be fifty, sixty, 70.

So if you think of it from that perspective of I'm going there, how do you get there? And what do you do over the course of a year or a half a decade or a decade that makes you at 40 or 50 stronger and better. What I did is I pulled a ton off the table. Instead of realizing a bunch of profit in wholesale, I did the opposite. I would make as little as I possibly could, pay myself as little as I possibly could, and keep everything I could as an asset.

Now that I own over 300 houses, like, it's it's worth tens of millions of dollars. My life is very different because I decided not to take and scrape early, and I held on to it. But what are the things that we don't we kind of, you know, that we don't give credit to? You know, taking that job, learning, listening to this podcast, doing things to educate and enrich yourself. You're planting a seed.

Where does that seed go? Where does that seed go in six months to twelve months to five years, ten years, forty years down the road, especially if

Steve: you take that seed and you take action around it. Yeah. Well, that's the key is taking action. So let's go to the questions, and I think we got quite a few here. So on Instagram, I don't know how to say this name because it's got numb numbers and letters.

So, consistently generating leads. You've got multiple lead sources. Yes. At this exact moment, what is the best lead source for you? TV.

Perfect. And then the next question by Jay or I'm sorry, Javi. Do you have any videos where you're speaking on market cycles? I do. Where would I go about finding that?

Speaker: Oh, that's a very good question. Most of it's private, but, if you send us an email, I can release I'll put something out there.

Steve: I can do that. What's the email? Oh, I'll I'll send you an email.

Speaker: Got it.

Steve: Okay. We'll do that. Yeah. And then Jeremy Davis on Facebook wants to know, they have a portfolio currently on a contract. Debt service ratio is two two plus.

However, they just learned these are slumlord properties. So would you consider this for something in your portfolio knowing that you're gonna do some work and then become a slumlord?

Speaker: Okay. So I hate the term slumlord. Let's get over slumlord. You have mismanaged properties. So a lot I've bought how many are in that portfolio?

20?

Steve: He says he just says portfolio, he didn't say how big.

Speaker: Okay. So I bought a portfolio of 30, that sounded like that. I bought a portfolio of 75, that sounded like that. But what we did is we took them in, and we are not slumlords. We're not perfect, but we're not slumlords.

What we did is we inherited the renters that were in the properties. We allowed them to get through the lease or we gave them incentive to break the lease and get out early. We renovated them, then we took them back to market, and then we brought the quality of the property up. A debt service coverage ratio of two is awesome. My guess is there is a ton being left off of the p and l, because if these are low end properties or slum properties or whatever you're using as terms, it usually means there's a lot of neglect around things that need to be fixed, and if there's a lot of neglect around things that need to be fixed, you're spending a ton on, you know, upkeep when it actually happens.

Steve: Yeah. The turnover

Speaker: It's a mess. Yeah. I

Steve: was talking about this, and I can't remember which episode recently. It was like, when I first got into real estate, it's like, oh, I wanna at least I wanna own in these areas because the the return is way higher. No one tells you in the books, at at least not the books that I read, that collecting rent in those areas are not as friendly. That's right. And there's a lot more repairs Right.

Whenever you turn the property over.

Speaker: What I would look at for the person who's brought up this question about the properties that are slumlord properties at the moment, are things around it selling? That's really important. Look at the comps. Are there properties that are selling around it? If the case is no, I would look really hard at portfolio and think about buying it, because it might mean that it's not smart money going in after it.

If properties are in fact moving and you're buying with enough discount where you can actually do something with it and then still get out multiple ways, Rent it out, refinance it, sell it, turnkey it, whatever. If you've got a couple of exits, and it's a vibrant market that surrounds it, then I think you should be fine. And then you need to know who you are. I'm not a slumlord. I can't like, things keep me up at night, that would keep me up at night.

Knowing that I have 93 retention year over year with my renters, people don't move out.

Steve: That's really good.

Speaker: It's really good. And, we treat them great. We treat them like human beings. We give them what they need. We service the properties the right way.

Now, it isn't perfect, but we do a lot of these things because that's who what I want to be as a business and a company. And if you do that and know who you are, then you should be fine with those properties.

Steve: Perfect. And then Michael Santiago on Facebook wants to know, are you doing any subleasing?

Speaker: It's a sublease. What do you mean?

Steve: Like I'm guessing, you know, someone rents it from you, and then they rent it to someone else. Or the the the tenant No. Sublease it to somebody else.

Speaker: Maybe. But very, very, very, very rare. I'd rather them come to me, and I'd let them out of their lease and lease it to somebody else.

Steve: Right. And then on YouTube, Marcello wants to know, he's ready for a career change at wholesaling, but struggling with mentorship. Any advice on how to find a mentor?

Speaker: I would find people you know who are actually doing deals and are successful and ask them who they learned from. That's big. There's a bunch of people out there that are charlatans. There's a bunch of people we know and we interact with who know all the gurus. And Mhmm.

Most of the gurus don't do this business. They haven't done it in ten or twelve years. Right. They're telling you about stuff that they used to do. The thing that Toback did was lease option.

Steve: Okay. Which I

Speaker: couldn't think of. But, like, I like Toback. He knows what he's doing. But there's a bunch of great coaches. Steve's really good.

There's others. I'm a huge fan of Sean Terry. I'm a huge fan of Tom Kroll. I don't even know if they know that I say that about them, but whenever anybody asks me, I like both those guys. One's a former military guy.

One's like your uncle. But they're both really good at what they do, and they teach you well.

Steve: Yep. And I think there's the one thing I always like to add to that is as far as, the the mentor is finding someone that you resonate with. Yes. Right? Like, if you want a Lamborghini, fine.

Go go follow the guy with a Lamborghini. But if you want a balanced life, if they exist, if you want someone that is a good father, you want someone that's traveling all the time.

Speaker: So let let me put it to you this way as well. So, like, I offer coaching as well. I curse a lot on my own guys. Steve offers coaching. He does it his way.

Find someone who's in a market that's similar to you as well. Yeah. The Phoenix market and Richmond market are very different, just like the Colorado Springs market and the Denver market and the LA market they're all different and if you don't understand what's different about the markets this is where you go in and say okay who taught you real estate in wherever you live. That's really important. The other thing is this find someone who knows what the hell they're talking about I said it again and who's currently doing this.

Like, I'm doing 400 deals a year plus I offer coaching. Yeah. I don't offer coaching because I used to do deals. So I'm relevant and I'm current. So find someone who's relevant and current.

Here's the other thing. I am not a huge proponent of doing things for free. I am a kid who used to have a TV guide and is used to the thing you can push the button on and the TV, the menu pops up for you, and you can read it. Navigating YouTube for me is curious. I don't get it.

It's like there's algorithms and it's if you like this, you're gonna like this and they wanna feed you with a commercial. So you go to like BiggerPockets or these other sites and things are not linear. If you pay someone for a course, and you can probably get a good course for under a grand, and you go from beginning to end, you're gonna understand the entire process. I knew real estate, and I knew it insanely well. But I didn't take a course, so I didn't know wholesaling.

I damn near thought I was going to jail. So, what you should do is invest a little bit in yourself, find a system and a process, and follow it from beginning to end. You can't like, I don't bake because I don't follow instructions well enough. I can't bake. I bet you could bake.

Steve: No. Oh, really? Well, I can do the thing in the box. Okay. Alright.

The ice rocker.

Speaker: I still screw that. But the point of the matter is this, baking is really, really sensitive to timing and steps and numbers of ingredients. Like, you gotta do the exact right stuff. You put in too much starch and poof, it pops or it doesn't pop or whatever. Real estate investing is very similar.

You can screw up your cookies if you don't do it the right way. So find somebody who's doing it in a market similar to yours and is, you know, gonna show you step by step.

Steve: And then Kai wants to know on YouTube, getting his license, do you need a license at a do you need to hang your license or broker to wholesale?

Speaker: So the answer to that is it's up to you, and this is how I answer that question. We had lunch together with a billionaire that started Priceline. I had breakfast with him too. And I asked him, if he knew who started, Priceline because that guy started Expedia, which which came from Microsoft, and he actually did work with him together. Mhmm.

So right now, Zillow is very, very good, but it is not the MLS. The best data you are gonna get is from the MLS, bar none. I've hired several people from competitors in my market who do acquisitions. And they're like the biggest differentiating factor that I have is an ability to be in the MLS. The MLS is the truest data.

It's the most up to date. It's going to give you the most professional view. So do you need it? No. If you're going to wholesale and you decide to get a license, I got a license in 2009.

I got a long time ago. Do it. You just must disclose. Now, your state is going to be different than mine. Talk to an attorney, but you must disclose in my state on every single piece of mail, contract, everything that you're licensed.

And don't miss it. Like literally, one of the things that's missed the most when an agent sends me a contract is that the buyer or the seller is a licensed agent in the state of Virginia. So, you have to disclose it. If you do want to in fact be a professional, I think you need to have less access. It's my opinion.

I I you could do it a different way. But to me, the people who are the best have the best data, and the best data for looking at what's his property worth, what's it going for, are people who have MLS data or access. Yep.

Steve: It's a great answer. Different than how most people answer. So I appreciate that. So we had lunch with a billionaire. Yep.

Before that, he spoke for two hours Yep. On stage. Yep. What was your biggest takeaway today in listening to him?

Speaker: Why don't you tell us who it was for a minute while I'm thinking?

Steve: It's Jeff Hoffman. So he was a founder. So he was his company was, the all those check-in kiosks at the airport. Right? Because he got frustrated trying to check into a flight.

It took an hour, so he missed his flight, and they charged him the they they charged him the full flight anyway. So he was pissed off about that, pissed off enough to start a kiosk company. So he's the inventor of that, sold that for a 100,000,000 plus. And then he got involved with Priceline, UBid, and there was something else super impressive too. Right.

But what was interesting for me was not only was he been involved in all these things, but he talks to Jeff Bezos. Yeah. Right? Was friends with Tony Hsieh before he passed. Yeah.

He's connected with a lot of really smart, successful guys that went from literally zero to unicorn businesses. Yep.

Speaker: What I thought was really interesting about him is there there's a lot. Now billionaires, they're normal people just like us. They're just richer. Their friends are way cooler than ours. There's no doubt.

Like, the names that they can drop are just insane. You know, my friend Dan, who, you know, who owns the cavaliers, or, you know, I'm friends with so and so who just happens to own the Tampa Bay Lightning, or, like, like, alright, give

Steve: me Their toys are different than our toys.

Speaker: Yeah. And their circles, and, like, you know, when Evander was fighting Tyson, I was in the corner with him, and, like, in the like, the stories are just, it's stuff that we plop down tens of thousands of dollars to have the opportunity to do.

Steve: And when you're

Speaker: a billionaire, you get to do that stuff for free. I would think the things that I was most impressed with were this. We had him do two separate speeches. Speech one was how to how to attain in business, and step two was how to give back and how he gives back. And that's summarized.

It's not exactly how we did it, but it's close. This is one of the most humble dudes I've ever met. Like he was so freaking humble. Yeah. I don't know if I've ever known anybody who knows themself better than him.

Yeah. He is so incredibly self aware. He's someone who understands what he's good at, He understands what he's bad at, and he has an incredible discipline to focus on what he's good at and hire great people to do the things he's bad at. I thought that was incredible. He talked about being impatient.

He was told at four he was impatient. He's currently 61. He says, I'm just as impatient today as I was then. His the fact that he was pissed off and impatient about the lines at the airport served him because he created the kiosk company. Yeah.

He has a real vision. He always was chasing something. Now, it wasn't it wasn't money. In in one instance, he talked about having a goal to be in 50 countries and have dinner at 50 different people's houses in those countries. Like, you wanna go to 50 countries and be with have dinner with 50 with the family in each one of those countries, which is a really cool goal.

Right? And it's understating the fact that I wanna travel. I I want to see 50 different places. I want to actually have real intimate conversations with people. He talked about something that I thought was just cool.

He talked about finding your gold medal skill. And he said, You don't usually turn on the Olympics and see someone who wins a gold medal in swimming, track and field, and also discus. Like, you don't do that. It's like that how it works. So it's usually, you know, Michael Phelps doesn't just, he used a great example, he's like, You know what's Michael Phelps doing?

Well, he swam for thirty minutes, and he did CrossFit, and then he shot some hoops, and he went and played some golf. He just went in the pool for eight damn hours and swam. Then he stretched, like that was it, and that's how he became Michael Phelps. So I thought that was really, really, really, really cool. There was so many other things he talked about that were cool, but the other thing that I'll kind of close with is he wanted to make an impact, and he talked about how when he empowered others to make an impact, it changed.

So he would go out and do things and write checks. That's a big deal. That that's given back in a big way when you have that kind of a bank account is awesome. But what he learned is that when he empowered his people to spend money that the company set aside for projects, they took ownership of it and they really chased to do it. They wanted to make more bonus or put more money in because they were universally aligned around a task, which was awesome.

They were having it you know, he didn't really go into details of this, but he ran a bunch of startups. Startups are cash strapped. Now I don't think he's been cash strapped for decades, but most startups are cash strapped. So he said, hey, I don't have any money to put into this project, but he had empowered his people. They said, that's okay.

We're ahead of you, boss. We know that it's a bad quarter, so we're not gonna ask you for any money, but what we're gonna do instead is we're going to go find places where we can do things for free and still make an impact. Yeah. And I'll close with this. He figured out to go where they ain't.

And what I mean by that is this. He needed someone from HR. So he went to a 1,200 person event with the best HR people in the country. And instead of interviewing 1,200 people, he went directly to the speakers list, and he said, okay. Here's the top nine because you don't ask the the worst people to speak.

He asked the best. Mhmm. And then there was some woman who had won an award, and she was For executive of the year. Executive of the year in HR, and he basically just teased her with ownership stake in a business and some points and some equity, and he got her. And She worked for him, he didn't say exactly how long, but like literally like thirty years at four startups, and he found her there.

So he was really intentional with movements, and he scheduled in How all this happened, is he put in his schedule free time. He wasn't looking at email or doing other crap. He's like, this is time where I could go be intellectually curious, and that was a big note for me of go be intellectually curious and take some time off to really focus on some stuff that you wanna solve. Yeah. So it was awesome.

Steve: He's definitely a creative problem solver. He does he he he's definitely an outside the box thinker. I mean, it's funny. Right? He he he keeps mentioning that he was an in former engineer.

So an impatient engineer. I've got a problem. What does he do? He goes and solves it. Right.

Speaker: Solved everything himself. Now he didn't tell you how smart he is where he went to college, which I got at Google. The dude's smart.

Steve: Yeah.

Speaker: Like, real smart.

Steve: Alright. So Johnny Cordova wants to know, on Instagram, wholesaling or flipping, if you were starting today, which would you do? So Johnny Cordova from Instagram, what I would tell you is this. What's more important to you?

Speaker: Is it cash right away or a bigger hit? Cash right away is easy to get with wholesale. A fix and flip is gonna require skill and precision and having a team and cash, So you have to pick and choose what you have available, what are your resources, and then make a good decision from there.

Steve: Yeah. So it's a very custom answer. Depends really on your situation.

Speaker: Yep. But but but this is where that answer isn't custom. It's the same answer for all of you. The answer and the direction is different based upon you personally. Right.

But, you personally need to be honest with yourself. You need to pick. Most people do not have a construction background, and you are going to get eaten alive today on fix and flip. Like it's going to take forever to get a permit and then subs and everything else, material prices are going through the roof. Managing contractors.

All of that's a pain in the ass. And if you don't have a whole team to do it, or you don't know how to do it, you're not a project manager yourself, wholesaling is probably a better answer for you. But, if you are somebody who can buy a house, will put in sweat equity, you know how to rip the drywall down, do the electrical, the plumbing, the HVAC yourself, or some of those things. You're going to put the drywall up, you're going to hang the cabinets. There's a guy around the corner from me when I lived in downtown, and he told me how much he bought the house for, I'm like, he's going to lose his ass.

Turns out he did okay, he didn't do great, he didn't do nearly as well as he thought, but he self performed a lot of the labor. So he was able to pay more than I could pay for the house, because I looked at it, it was literally two doors down, but I was like, I can't make money on that thing, I'm not going to do it for practice. And he was skilled. He had a team of people and he was gonna self perform. So whatever advantage you have, utilize that advantage.

And, if you don't have an advantage, be honest and just take the easy money.

Steve: You you bring something up or triggered a a thought for me. The I've dealt with a lot of flippers who do deals that are either super skinny or break even just to keep their crew busy. That was new. You've got people to feed. Yep.

What are your what is your opinion on that?

Speaker: Well, the good news is I have 300 plus rentals, and with everything I manage for others, it's over 400 and something. So if we get slow, we put people back into the rental pool. And we prioritize, but that means someone's not working, right? So, we'll move people across platform going from flips to rentals or whatever, but bad decisions beget bad decisions. And, like, I if people are like, oh, I had a lot of fun, or I learned a lot, or that's great.

Please come to my buyers list, and I'm thrilled to sell you property. But if you want to make money in this business, you have to have the discipline to say no. And that discipline might mean I need to let a couple people go because I'm not going to make bad decisions. Bad decisions can Malcolm Gladwell did something in one of his books where he talked about seven bad decisions. It it requires seven bad decisions or mistakes for a plane to crash.

Seven. That's seventeen, seven. I'm gonna chase after this bad deal. It doesn't work. I need to do this house to keep somebody busy.

Like, it's not hard to go from flying beautifully in the sky to being smashed down on Earth, and you need to have the discipline to say no.

Steve: Yeah. Let's see. Jeremy Davis again. This is the first time he's listening to you speak for longer than an audio clip. I he really appreciates your your mindset and experience.

So, yeah. So he was just saying thank you. My pleasure. And then Jaden Garcia, what with what's Frank focused on today, and what are you focused on in the future?

Speaker: So I have a huge staff. Yes. You do. What I'm focused on am I one of the larger staffs you talk with?

Steve: Yeah. I think by far because there you've got one of the biggest businesses Yep. But you also have all these other bolt ons. Right. So, yes, I think so.

Speaker: So what am I focused on? I'm focused on so alright. I I'm gonna answer this question differently. I started off thinking about staff, but I'm focused on doing all the things that are best for the business right this minute, a couple weeks, couple months from now, and a couple years from now. So for me, I look at what are the inefficiencies in the market.

Three months ago, I stood in front of CG and I did a presentation, and during that presentation, I asked, you know, is it a good time to buy lots? And several people raise their hands like, yeah, it's a great time to buy lots. Like, that's wrong. You're buying lots for six or seven times that you could buy a lot for six years ago. So if you can buy a lot and you can get the pricing right or you can get it rented and then you can get take advantage of financing.

It might not be a bad time, but it's not a great time. But it's a great time right now to take easy money. Easy money is wholesale. So focus on some of that. For me, with as many rentals as I own, now's a great time to refinance.

So I'm focusing on that. I'm also focusing on cash. We have some cash, but, like, if we do this right, we are going to have a boatload. I mean, like an absolute metric ton of cash.

Steve: So I want that cash at refi?

Speaker: Yes. So we're gonna take that. We have profitability and all these other things that weigh into it as well, but we're gonna take a bunch of chips off the table and just settle over on the side, and we're gonna utilize it strategically. I'm in the process of renovating some office buildings that are a big deal. We're gonna move our office into one of those.

I'm working on some land assemblage pieces that Steve saw me do a presentation on that yesterday that give me some real advantage long term. And what I'm trying to do is set myself up for kind of Q2 and Q3 of life. Flipping and wholesaling got me here. Owning rentals got me a little bit further. I'm looking at deals that are sensible where I'm not gonna over swing and end up broke, but things that set up the next phase of my life.

Bigger deals, deals that are, you know, instead of $10,000 deals, I did a 2 and a half million dollar profit deal on one wholesale deal at one point, And I show the examples of two deals where I make could make upwards of $10,000,000. Now these things take longer, and they're a little bit more complicated, but that's the kind of stuff I'm focused on for the future.

Steve: That sounds incredible. What does that deal look like to do the or what was that 2 and a half million, and what is involved in maybe doing 10 mil?

Speaker: Okay. So bigger projects are the numbers. Right? So the $10,000,000, there's a way I can make 30 to $40,000,000 or as little as 10. But But what it is is I put together a handful of different parcels of land.

So these land deals that are all kind of next to each other, and then what I'm gonna do is rezone. And while I rezone them, I'm gonna have the ability to go vertical with something enormous, apartments, those types of things. So these are parcels of ground that are driven by every day by me and people on my team. One of the parcels of ground is literally I do not have to turn. I pull out of my driveway and I go straight two miles and it's right there.

And I've been driving by it for eight years and now I own a bunch of it. So it's an assemblage kind of a deal, but what it is is you have to have the vision to be able to put the deal together, buy it, have some patience, and then while you're collecting rent and you stabilize it, you collect rents, and while you're doing that, you rezone what you own, and then you can either go vertical, like build an apartment building, or let's just say the apartment building is worth a $100,000,000 stabilized, done, built, but you don't have the experience in that. You can probably sell that $100,000,000 building parcel for somewhere between 1025% of the total value if it's entitled, which means you got plans and everything done in through the city Mhmm. Or you missed a valley. So that's something that for very little money, it just requires time, patience, and strategy.

Steve: And know how from experience. Yes. Alizette on YouTube is asking, are there any books that you would recommend to help become a better manager?

Speaker: Whoo wee. What's the person's name?

Steve: Alizette.

Speaker: Alizette. I would do this. I think podcasts are better for management than books. I would also think about the best managers you've ever had and the worst. Write down what are the things that good managers did and what are the things that bad managers did and focus on the good ones.

To me, every management class I ever took was kind of reinforcement of what I already knew. Confronting problems and getting things over with quick and early is something I had to learn, but everything else was kind of inherent. So what I would tell you is find a manager who is similar to you, who has been a good influence for you and see if you can't mimic some of those behaviors Find some podcasts on management I mean we talk about a ton on ours That's big stuff.

Steve: What was the name of your podcast again?

Speaker: Let Me Speak to a Manager. That's a

Steve: great title. Thank you. And then what are you storing for your cash reserves? Or I guess what's the reason for starting storing the cash reserves?

Speaker: So there's a bunch of ways to store cash. Right? You can hide under a mattress, bury it in the backyard, leave it at a bank. When you own as many properties as I own, you can also own a bunch of stuff debt free. And then what you do is you put what's called a revolver over the top of it.

So I'll do some combination of these things. There's no better thing to have than cash if you ever need it. Do you have any idea how much cash Apple has?

Steve: It's like 3,000,000,000 or something like that?

Speaker: It's enormous. Yeah. Does Apple need 3,000,000,000? Nope. But they're what's Apple's market cap?

I don't even know anymore. It's

Steve: 500,000,000,000?

Speaker: I think it's over a trillion. Yeah. So if you look at this isn't the perfect analogy, but if it's worth a trillion and they have 3,000,000,000, they got about 3% of their value in cash, which is it's a ton of money, they shouldn't run out, but at the same time, it's not a huge percentage. Know who you are, what kind of business you operate, and what's important to you, and then set yourself up so you can become bulletproof. The other thing you can do is if you do it properly, you can set yourself up so you can be ready the next time the market adjusts to pounce.

I wanna say this because this is important. I'm guessing if you're listening to a podcast on real estate, you're on the newer side. This is incredible good times. If you're curious of what good times look like, these are they. These are really good times.

I've seen bad times. There is so much flipping money out there, it's not even funny. Like, I tried to raise four and a half million bucks at a normal interest rate that was fair. I raised twice as much as we needed in days. It's ridiculous.

The market is flush with cash. It's not always like this. You build the ark before the rain. So if you're trying to quit your job, you're trying to make enough money so you can do this full time, you're in a very different spot than Steve and me because we've got established businesses. You gotta be true to who you are.

I get that. But as soon as you can start pulling some chips off the table, you need to do so. I have been flying very close to the sun for twelve or thirteen years. Well, if I go back twenty something years because I was trying to build something, but I have enough now where I need to not be greedy. I need to set myself up.

My risk threshold is different as a 46 year old with kids than it was as a 26 year old without them. So you gotta be honest with who you are and where you're at in life, and you gotta really pay attention to it. But that's the reason I'm doing it.

Steve: Shoot. I was gonna have a follow-up question with that. Oh, Jeremy on Monday Yeah. Was talking about Fiat and Yep. What's going on.

And what was the most interesting takeaway for me? Well, there's two. One was that we were gonna go back to the gold standard. That's an interesting concept. Right.

But the other one is that the interest rate is only going to go lower. Right. What are your thoughts on that?

Speaker: I don't know. I don't know. Like, I think Jeremy's a nice guy. Yeah. And we haven't used his last name, right?

So I think we shouldn't. But, he's a nice guy. He came from Australia. To my knowledge, he does not have a PhD in finance from Harvard. Mhmm.

I think he's just a nice guy to put some slides together. You read a couple of books by some people who are kind of alternative in their thinking. He might be right. Yeah. But he might not be right.

I don't know the answer. What I know is this, and this is universal. You don't have to be perfect. You just gotta be closer to right than wrong most of the time. Yeah.

And Jeff Hoffman talked about this a lot at lunch. People were asking about, you know, how to find balance. He's a billionaire. He didn't have balance. He had insane amounts of imbalance.

Now, he's probably making up for that now with charity and other things because he's slower and he's older, but he didn't have balance. Yeah. Just like with these things, like, he was you you gotta get close enough. Right? You can't be a perfect parent at every second.

You gotta give as much as you possibly can, and the body of work needs to be impressive. When the kid really needs you, you gotta be there. You need to be present. You need to talk to him. But it's if you really boil it down, it's somewhere between fifteen and forty five minutes a day where you really have a chance to shine.

Why do I use this reference around this? Because there's no right answer, but it with interest rates, get close. Like if I refinance my portfolio to an average cost of under three and a half percent interest, I make an extra million dollars a year over what I'm making now. My debt service coverage ratio goes up by 30 basis points. Everything's good.

It's a good decision. Could there be another one? Yes. There could be a better decision around the corner, but right now I'm making the best decision I possibly can based upon the decision at hand. Can I go a little deeper on this?

Yes, please.

Steve: Do you

Speaker: ever heard of the forty seventy rule?

Steve: Not forty seventy. Not that great.

Speaker: Again, another topic we talk about in my podcast. You guys like podcast. So 40%, you don't know enough. Mhmm. 70, you probably know enough.

Over that, you know too much. Mhmm. That's paralysis. So in military parlance, they're like, do we know at least 40? Do we know more than 70?

More than 70 is a sure thing, which usually doesn't work out that way. But somewhere in that middle is that spot where you have the sweet spot. I've got enough information. It could go right. It could go wrong, but I'm fairly well educated to make a good decision based upon what I know right now.

If something changes, you can you can alternate. So if interest rates go to one and a half, okay, what does that mean? Did my portfolio just go up in value another 35%? Does it matter if I refinance 2,200 basis points higher? No.

Yeah. So there's all these things that come in factors wise, but you can sit on the sidelines and say, okay, houses are too expensive right now, I'm gonna wait till they come back. Are they? You don't know. Mhmm.

What that is is paralysis. Make the best decision you can. At least 40, no more than about 70, and make a good decision. So for me, what I heard him say is there's an opportunity for things to go even lower. He used an example, and I did it, I said it the wrong way.

I said it four x, didn't four x. It grew exponentially by a factor of four. What it means in English, a a house was $150,000 in 1980. In 1990, it was worth 300,000. This is in Australia.

That same house was worth 600,000 in 1990. In 2000, was off 2000 it was $600,020.10 it was worth 1,200,000.0 and 2020 it's worth 2,400,000.0 so that's what happened there and that was kind of the exponential growth that happened with that property But who knows? So like, you can say like, Alright, I'm gonna wait. You might be renting until you're 80. So make a good decision.

If you don't own a primary residence, interest rate is doesn't matter. You're paying rent, may as well accrue equity. Like I say you don't get on to the merry-go-round in real estate until you own a primary residence. That is a game changer.

Steve: I think just to add on to your forty seventy, rule, which I I remember Colin Powell talked about this a long time ago.

Speaker: Exactly. That's what we call

Steve: If you know 85, 90%, you know way too much. Way too much. And just one other component, I like to add to that is is this decision irreversible? Right. If this decision is irreversible That's right.

Then go with what you got. That's it. That's all you that's all you need to know. Just gotta take action. Just gotta move forward.

So let's see what else we're I wanna talk about this tenacity. Right? Because you're coming forward. You're I think I I look around the room. We got you.

I look at Wren. He's got tenacity. There's a handful of guys in our room that is just like bulldogs, and they're coming forward.

Speaker: Mhmm.

Steve: You had that your whole life?

Speaker: I think so.

Steve: Okay. Yeah. So that's wired into your DNA. That's not something that you train. So

Speaker: I have a tenacity. Like, I don't walk around the house like this, and I I I don't interact with my wife like this. Like but I have a tenacity of business because of these things. If you use the forty seventy rule, I know closer to 70, if not more than 70 about the things that are happening in my business than I do 40. It is so freaking hard to get this well educated on something.

I can't see around corners. I like alright. I'll I'll tell you a funny story. So COVID happens. I have a car.

Interest rates dropped a little bit. And I'm like, the market's gonna go to hell. I'm gonna be broke. So I was like, I'm gonna go buy a new car. And I went and negotiated and I navigated and I bought a new car and I bought it the May.

I bought it on the last May and I bought it for $18,000 under sticker. Stole it. I drive a decked out, Tahoe LTZ. It's beautiful. But I bought it for, like, $46.

It's, like, a 70 something thousand dollar sticker price. Yeah. I timed it perfectly. But while that happened, I missed Tesla, Apple, Amazon. I didn't put any money in the stock market, not a penny.

I sold a bunch of real estate that I could have held on to, but I just thought about it. So you can't be right all the time, and you can't see around corners all the time. But in my particular business, I did not always have this clarity that I have now. So the clarity that I have now and the ability to see things and be right the vast majority of the time leads me to believe that I should be bullish because I work really hard, I'm surrounded by good people, Naturally, I'm a good decision maker, and I see opportunity, and I think it's foolish not to capitalize on it, because I remember being someone who didn't see things like this. I didn't just find leads.

Like when people are like, Oh, I'd buy that deal if I bought it for $80. Like, yeah. No. Crap. Everyone would.

But you don't know how to go find it the way you Steve and I do. Yeah. So those are the things that keep me tenacious. When I embraced it and I committed to something, whether it be school, football in high school, fitness in my twenties, I always would have something in front of me that I wanted and I knew I needed something to chase. Like, I've got something I'm chasing right now that I think I can hit by the end of next year, which is fun for me.

And then when I get there, I can do one of two things. Say, okay. Great. Let's celebrate. I can set a new goal.

Mhmm. Because for me, the chase is what's fun. That makes life great.

Steve: Well, and that's kinda what we talked about on, on Monday too. Damon brought that up. Right? He's like, I keep chasing. I I feel like I should stop chasing.

And that was a it was it it it drummed up a conversation in the room Yeah. Where either correct or incorrect, or basically everyone says, like, that's normal. That's why we're in this room. Correct. We're I wouldn't say necessarily broken, but we're wired in a way where it's never enough.

At this someone laughed at me. I brought this up in a mastermind, and I said that, there's that song in The Greatest Showman where she's singing, right, Never Enough. It's like, I felt like that song was written for me. Yeah. Right?

And so So one of

Speaker: the things I'm really good at is and I'll I'll say it this way. I my friend, Ian, who's Mike Potteac, Cask host, he's better at it than me, and he taught me this in the last fifteen, twenty years since I've known him. He doesn't worry about having abs at 46 years old. He doesn't worry about going to bars and partying like he did in his twenties. He doesn't worry about those things.

What he worries about today is a 45 year old with two kids being a good husband, and spend as much time as he possibly can at his kids sporting events. And he gets up every day five, 06:00 in the mornings in the batting cages with his son, in the batting cages with his son at night. He's the most involved coach, and he has the most talented son at this age because he's spending time on it. But the important thing is he doesn't wish he was somewhere else. He wishes he was right there because he enjoys it.

Now he works a little bit and does some other stuff, and he was very, very smart in how he got to where he got. But the point of driving at is you've gotta understand where you are, what's happening in your life, and you have to enjoy that. Like even the bad times can be some good stuff can come out of it. Like my wife and I watch Life is Beautiful, like the guy ends up in a concentration camp

Steve: Yeah.

Speaker: And he figures out how to have a great life in the concentration camp because of mindset. So what I think that's really important is this things a ride. Nobody really knows what the hell is going on. We're all guessing every single minute of every single day. So the best thing you can do is just embrace it and enjoy where you're at.

And if it isn't exactly where you are, change it. And if you love where you're at, celebrate it. But too much of either is is not good. Yeah.

Steve: What do you struggle with most right now?

Speaker: I have a couple of decisions that I'm making. I've entered into a new point in my life, and some of the things that have helped me get from there to here, I wonder if they're gonna get me from here to there going forward. So there's some struggle in those things of, like, what decisions do I make around, you know, different things in my life, you know, different associations, things I do, some of that stuff. Because, like, my business has gotten to a point where there could be more, but what do I need to do to get there? And it's growth is it can be very uncomfortable and you chase all these things, you hit all these incredible numbers and it's just like, it's a new set of problems.

And if you don't iterate and grow, well, then Jeff talked about that today several times. If you're not iterating and growing, you go with the way to of Kodak or Best Buy or not Best Buy, the other one, Circuit City or Blockbuster. Yeah. Some of these other places because they just didn't adapt.

Steve: You know, I think that's it it is an interesting idea because, like, the skills you need to get your first deal are different than skills you need to do two deals a month, are different than the skills you need to do five deals a month. Yeah. It's different than the skills you need to do 10 deals a month. Yeah. And it's and we are right now doing 40 plus deals a month.

What skills do you need to get the sixty, seventy, or 80 deals a month?

Speaker: Right. Or do I still do deals? Do I do this? Do I do something else? Do I pivot into something different?

What does it look like? Do I just aggregate leads and sell them? Like, these are questions that you have to ask. Mhmm. Like, and, you know, how much deeper can I go into the Richmond market?

You know, you know, our MSA has 200 and Richmond proper has 220,000 people. Our MSA is 1,200,000 people. Like, there's only so many distressed properties.

Steve: Mhmm.

Speaker: So what do we wanna do? Do I still wanna be doing this? Do I wanna go into like, these are all the things that you have they're it's awesome. In the beginning so this is kind of I don't know. It's cerebral, but I'll say it anyways.

I quit my job. 2,009 through '12, it's really slow. I had tons of free time because I was I didn't have a very busy business. I didn't have a lot of money. I didn't have a lot of momentum.

I didn't have a like, none of those things were coming in. But I remember thinking, there will be a point if I get successful where I will want to have the mindset and the time that I have now. But I didn't. Now I have all the things that I wanted back then, so I don't take them for granted. But now, excuse me, I also try and figure out how to make sure I do get some of that free headspace that I had back then.

And I would need to spend it with my wife, my kids, my friends, and those are the things that I should continually focus on. And that's part of it, man. It's like problems are here to stay. It's our it's our goal to find a higher class problem, and that's what we're trying to do.

Steve: What is your superpower?

Speaker: My superpower is decidedly not not coughing. I don't know if I have a superpower. I think my superpower is to realize I don't really have a superpower, have some humility. None of this stuff came to me by accident. I have great parents who are still married.

They did everything they could to get me a great education. They did everything they could to set me up in the right way. They taught me an incredible work ethic. I always had love. So gratitude is part of it.

An ability not to quit and to keep going is part of it. I always joke. I still do sometimes, like, alright. Screw it. I'm just gonna cash in all my chips, go be a barista at Starbucks, and live under a bridge in San Diego, and surf.

Like that sounds glorious. But I didn't give up. I didn't throw in the towel, and I just kept going. So I would think gratitude and an ability to to overcome and persevere.

Steve: Yeah. I could definitely see that. I would add on top of that what I said earlier is your ability to take complex concepts, put it on paper where it's not a repeatable

Speaker: Mhmm.

Steve: Business. Gary Harper came in here, and I think when he came in here, it was right after he visited you or sometime around there.

Speaker: Yeah.

Steve: Right? And he said, we came in, and Frank just kinda set me aside and talked to Susan for, like, two days and literally process mapped 30 different processes. Yeah. That's not a normal thing.

Speaker: Right.

Steve: And I don't think he's ever experienced 30 processes.

Speaker: I think we did 39. It was a lot.

Steve: But who's counting?

Speaker: Right. I don't remember it was a lot. He told me it was, like, by far the most he's ever done in two days.

Steve: Yeah. So I would say that's probably a superpower is the ability to create a process out of because flipping a house, there's a a 100 moving parts.

Speaker: So let's talk about how that happened. So Yeah. Gary Harper is a guy that Steve and I both have a lot of respect for. He's, with sharper companies, and they do all types of different thing from business coaching to in this instance, I use them the process map. Mhmm.

So Gary is very popular, so it takes time to get him on the schedule. And he isn't cheap. I mean, it's not terribly expensive, but he's not cheap. But I told him, I said, look. If I'm pulling my people out of the field for two days to do this, we're doing a shitload of prep.

It's all there is to it. You need to walk us through a bunch of this, and when you get here, we can get all of this done because that's a really big agenda. I go, well, we are going to get it done. So what we need to do is we need to set time up for your staff, whoever it needs to be to get with my team, so when you come, we can get all this done in two days. He's like, alright.

We can try. So they gave us, like, three sessions ahead of time. I go, that is probably not gonna get it done. Like, we probably need two to three times that. So we took five I think we ended up with five or six sessions.

And I had different people from each different department in my business work with someone in her business. So the first thing that happened was I decided we were gonna do it. I committed. After I committed, I got everybody on my team on board. I talked to him about what we needed to do upfront in order to not miss the opportunity.

And then when he came in, I said, well, alright. What's it gonna look like? What are our two days? Are we gonna have enough time? What do we have to do?

How do we need to be prepared to get this done? And he told me, and Gary talks way more than Susan. So I had to let Susan talk because I knew we were never gonna get through it if Gary talked. So I did what I do. I saw the problem.

We were proactive. We got everybody on board, him, us, and we were prepped. He showed up. We were ready. We were early, and we rolled.

And I did what I do. I kept it on track. Are we on track? Do you need me? No.

I'll go back to my office. Keep going down the track. And we did it. But that was from the standpoint of understanding the problem and being disciplined about setting up a plan to get it done.

Steve: And that's why you're so good at flipping. It's that you have everything set up on a timeline. Everyone knows where they're supposed to be at what time.

Speaker: Right. Yeah. It's a repeatable process in multiple things in business, and that's what we do.

Steve: What is the greatest lesson that you have learned?

Speaker: Mistakes are inevitable. You're gonna make them. Nothing is irrevocable. I've gotten into trouble with all kinds of different stuff, and some things are really a pain in the ass and problematic. As long as it isn't illegal and you're not gonna go to jail, you can probably get through it.

It's gonna probably cost you some time, some effort, some sleep, some money. And I've had all kinds of different situations that have been unlike that that I've had to work my way through, but nearly nothing is insurmountable.

Steve: Is there a favorite, best, or most interesting failure?

Speaker: There is one that's really, really long, which I'm not gonna get into. But when I was in my twenties, mid to late twenties, I had, an issue. And I thought it was insurmountable. It was tons and tons of money. It was a major, major, major problem, and I let it consume me.

And what I did is I internalized it and didn't talk to anyone about it. What I've done since with similar or bigger problems is I comprehend it and process it. I would typically talk to my wife. I would talk to some friends. I'd seek counsel, most likely my legal team, and talk to them about here's the problem.

What are we doing? What are we looking at? What's going on? And I'd work through it. And I would and I have a I have two business coaches.

I have several attorneys. I've got a good network of people. I would talk to them about the problem, what I see is the problem, what we what do we wanna do with the problem, and what's the outcome. And what I can do is I can say, okay. We're here.

Where do I wanna land with this? We had someone that literally called 911 on us and, reported that we, you know, are stealing a house. Like, no shit. Like, we got some good Samaritan who sent us an email, like, something's coming, just FYI. And they were like we give us some details.

They're like, no. You seem likable. This guy doesn't like you. There's something coming. And, like, a week and a half later, like, literally, it was a 911 report.

Like, you didn't call an attorney. You literally called 911. We had to work our way through it. Like, we didn't do anything wrong. We had all the proof.

Cost me a couple of grand. Cost hours. But the point of the story is I'm on the phone with the police detective. The husband is a second or third husband. He's not on the deed, and he's getting sticky fingers, and he wants part of the deal.

Mhmm. His wife did it without him. He got pissed. He called the police. She, while this was all happening, has called us a couple of times and said, you know, I still wanna sell you the house.

So the police officer calls me up. I was on vacation with my family. I pick up the phone, talking to him, and he's like, what are you gonna do? Or he he said, this is not a criminal case. This is a civil case, so I'm dismissing this.

I just wanna give you a heads up. Thank you for being cooperative. I was like, of course. He's like, just as an aside, are you gonna pursue the house? I said, yeah.

And he goes, even with all this? I'm like, all this? This is just noise. This isn't a problem. I'm on the right side of the law.

I did everything right. I did all the right stuff, and I still have a path forward. Now you can decide, like, I don't wanna pursue it. It's too much of a pain in the ass, but we didn't need to at that point. We can keep going forward.

So you have to make those decisions, but you're gonna make mistakes. Like, what I do with mistakes, I process them. I apologize. I get prepared, and I figure out how to get out of it as quick as I can. And, you know, sometimes you just gotta say, you know what?

I'm gonna get smashed for a while, and I gotta work my way through it.

Steve: I think some irony there. Because when you first did wholesale, you're like, one of these days.

Speaker: Yeah. Police are gonna go. When the police did show up on this one, I wasn't scared or nervous at all because I knew what I was doing, and I wasn't scared. Like, he called like, he just so happened to know someone who worked for us and said, hey. This thing just came in.

I gotta process it. You're gonna hear from me in couple of days, but you and I haven't known each other for years. She called me up and said this is coming. I'm like, alright. Call the sales rep.

Call the manager. Did anything happen? Did we do anything wrong? Yeah. TV lead, they called us.

We went out. Okay. Seems pretty much above board. Told the two attorneys, hey. This is coming.

Like, okay. It just sounds like this is just a pain in the ass, but it doesn't sound like you did anything wrong. And sometimes you do stuff wrong. But these are things, like, I was confident on this one. I wasn't confident on that one.

Yeah. Is

Steve: one thing I do appreciate, again, being in your room, when someone's got this situation or that situation and most of the problems can be resolved by someone else in the room. But But every once in a while, it's a complicated problem. And Frank doesn't necessarily have the answer, where Frank knows someone outside the network, whether it's this attorney or this person or whatever in this part of the country. Yep. It's amazing the network he built.

Speaker: Wow. I don't think of it that way.

Steve: Is there a book you've gifted more than any other?

Speaker: Lots of questions. So I gifted my company three books recently. One is the one Oliver Seidler wrote, Renegades.

Steve: Rules of Renegades.

Speaker: There you go. One of them is a book by the guy who took over Ford, Alan Mulally, called The American Icon. I bought 20 copies of each and gave them all out to people on my staff, and the other one is Succeeding When You're Supposed to Fail. It's a very thin book. It took weeks to get 20 copies of it.

It's awesome. I love those. Those books are great. I love the book Radical Honesty. There's another book called Radical Candor that's actually a little bit more PC or p or PG that's, equally as good.

But those are books that I gift a lot.

Steve: What was the book the American Icon? What was so powerful about that book that you gave it to your staff?

Speaker: So do you know who Alan Mulally is? I don't. Alright. So he was Ford. He was with Boeing.

He was, like, he wasn't CEO of Boeing. He was, like, COO or some high up at Boeing, very high up. This is early two thousands. Ford's going through hell. They're basically out of money.

Everything's broken. Like, the company's about to go bankrupt. It's a freaking mess. Do you know the only company that didn't take a bailout from the US government on the auto Ford. It was Ford.

Because they hired the right guy five years before there was this problem. So he did all of his stuff. He worked with the United Auto Workers Association. He worked with the Ford family. There's a ton of legacy money there.

When you work with families that have had money for hundreds of years, there's some mismanagement, so it's a mess, it's kind of fraud. He had a bad culture, a lot of decision making, people who were afraid of admitting failure because they're afraid they were gonna get fired. So he did a few things that I thought were incredible. First, he was insanely confident. He came in and reads like a thriller.

He came in I read in, like, a pool over a weekend. And my friend, Ian, is, he's a big anything from Detroit. He loves he grew up in Detroit. So he told me about it. But he came in with confidence, and people were giving him a bunch of crap.

Ford's tough to figure out. And, he said, yeah. I get it. It's complicated. It's a car.

He goes, you do realize I used to work at a place where if there was a screw or a bolt out of line, the plane came flying out of the sky. I'd get the stakes, and he would walk away. He encouraged team. He encouraged communication. He encouraged talking.

He encouraged the stoplight. We use the stoplight in our business. Do you use the stoplight in your business?

Steve: I do not use the stoplight.

Speaker: You know what it is?

Steve: I imagine this is like, Hey, we blow the whistle like everyone needs to stop right now. Red, green, yellow.

Speaker: Yeah. Right? So red, yellow, green. Everything in our business is coded in four colors. There's green, which is good.

Now, I work with a guy named Daniel Marcos, who's from Mexico, and I don't know if this is a thing in English, but they have what's called super green in Spanish. Sometimes we'll use super green if it's really good, but it's meaning exceeding goals, but green, things are good. Yellow, problem. I've introduced orange. Orange means it's trending towards red.

It's not red yet, but it's trending there, and red is there's a massive problem. So we use this as a score piece in many many things in my business. 15 people have walked up to me reading the book. They're like, did you get that from this book? I'm like, yeah.

It's a great book. So we use that in our business every single day. The first person to go into a meeting and score something in red was the guy who ultimately replaced Malawi, and he became CEO of Ford. He came in. He's like, this is a major problem.

And Malawi was pissed. Nobody was coding everything red because the culture used to be don't talk about your problems. He's like, you're going bankrupt. You got problems. Like, let's talk to me about the problems.

And everybody was just petrified. So I can't remember his name. I think it was Fields. That guy came in. It was in red.

He goes, Malawi stood up and clapped. He was like, this is incredible. This is great. This is leadership. And he clapped, and, like, everybody was dumbfounded because it's completely opposite of the culture that Ford had before that.

Fields went through the problem. He talked about it. Mulally said, thank you for sharing. Who has dealt with this problem? Someone in Europe had dealt with this problem eight years earlier with some with some car over there.

It's like, boom. You two are meeting. Solve it. Solve the problem. Next meeting, it was more red, more red, more red.

Ultimately, what ended up happening is there was a ton of red and started to go to yellow and green. And then five years later, when the entire auto industry goes to hell in a hand basket and literally the US government was handing out checks so people would buy cars so the auto industry didn't go out of business, what happened? Ford didn't need a bailout, so they did all this incredible work on that. Yeah. It's It's an awesome story.

Steve: Yeah. Definitely need to check that out. So I want to think about a thought you wanna leave the listeners with while I make a couple announcements.

Speaker: Okay.

Steve: Guys, if you have value today, please like, subscribe, share, comment. It helps us help more people. And then, in a week and a half, we got an all day sales training. If you guys are interested, click the link below. Send me a DM.

And then we got Nick Elrude coming in, I believe, from Boston. Boston. I know Nick. Yeah. Coming in next week to talk about his business in what I've heard is also another crazy market.

Yep. So what are some thoughts you wanna leave everyone with?

Speaker: So we didn't talk about a $2,500,000 deal.

Steve: Yes. Let's do it. Okay.

Speaker: Alright. So this deal happened. I was approached alright. I'm a go backwards. I bought a 30 unit package, and we have a business paper in our market.

And I hired a marketing company. I said, I wanna get in the paper. I don't know how to do it. So So the marketing company goes, okay, this is how you do it, gave me some coaching, and ultimately, they set up a call for one of the writers at the paper who called me and we got written up. So, you know, Regisal Estate Investor buys $3,000,000 portfolio, whole thing.

That was 2,017, maybe. So you never know what these things are gonna do when you put them out there. You you know this. Right? You talked about this yesterday with Eric.

So you put it out there. I get a bunch of emails, bunch of phone calls, pretty cool. We get the little placard made, we hang out in the office. Somebody texts or emails me and says, Hey, I got a bunch of houses. I think we email back and forth, but nothing really came of it.

A year, year and a half later, they they follow-up again. I never heard of them, so I'm like, okay. I'd like to get on the phone. So we started wheeling down the deal, and we got it to the right number. It took us, like, thirteen months to get to the right number.

We drove the deal down to fifth $5,500,000 on the purchase price for 75 houses, and we ultimately closed, I think, like, 12/20/2019. What I did is I did a structure where I built an entity that somebody else ran, and I was a pledged I did everything legally. We ran it through. But I was gonna be hired as the manager, but he was gonna be the, owner. Mhmm.

Like, we were gonna provide all the service and be the operator. He was gonna be the manager. That's how it was labeled. And what we did is five point five to eight million. We charged a 2 and a half million dollar assignment fee.

It was labeled as a a, development fee. Mhmm. So when that deal closed, I was wired $2,500,000 a day closed. Now that's a cool story. 2,500,000.0, boom.

Closes the December 20. I got 75 houses to work through. I gave myself twenty four months, and I raised $2,000,000 worth of equity. This is a complicated deal. And then we got a bunch of money from, Lance of an anchor, actually.

So we close, we're starting to work our way through this, and then COVID happens. Like, oh, crap. And, like, everything screeches to a halt, people stop paying mortgages, they start paying or stop paying their rents, like it's a mess. So ultimately I took it, and I took a huge chunk off the top upfront, and we borrowed money from people, and I had Lance to deal with. So I'm like, oh crap, like I'm gonna have to give this back or I'm gonna have to buy this thing or something.

But ultimately what happened is we adjusted our strategy. We were going to do value add or really big renovations and flip a bunch of these things. And what we did instead is we just turned all of them into rentals. We sold a bunch turnkey. We put a bunch on the market.

By July or August year, the market was hot as hell. So we got these things kinda spruced up, and we got them out the door. And then in the end, I sold a package of 35 of them to the investor on the back end and got through the entire portfolio in thirteen months. So That's really good. Got through 75 houses.

Now, why did I tell you about this? Most of you just wholesale. I wasn't good enough to do that deal when I thought I was gonna go to jail for that first one. Right? Like, I didn't know how to structure the deal.

If you find a big deal, find someone who knows how to handle it. Leads are the most precious thing. There's a solution on it if you can get the right price. This was a life changing kind of a deal. A normal wholesale fee is like $25.

This was a 100 times that.

Steve: Yeah. A

Speaker: big deal. So it turned into something that was just incredible where we got one huge fee. I talked to you about those deals that are gonna be worth $10,000,000. Someone literally walked up to me yesterday because you got another 2 and a half million dollar deal? I'm like, I'm gonna show you 2 tens.

If you do it right, life gets progressive. Mhmm. Those small deals where you're making $273,700 bucks on a wholesale deal where you think you're going to jail can turn into flips, rentals, wholesales, businesses. And if you keep fighting, and it's not easy to get there, but if you keep fighting, the opportunities can continue to get much bigger.

Steve: Yeah. So it it can be a long journey, but it gets better as you go through as you level up, as you scale up, as you grow as a leader Yeah. As a business owner.

Speaker: Yeah. And that's the stuff that's exciting for me. The Yeah. Little deals don't make a big, you know, I don't really I care, but I don't. But the

Steve: big deals are fun. Yeah. If someone wanted to get a hold of you, how would they do that?

Speaker: So there's a multitude of ways. I have a company website, but you can go to frankkava.com, or the podcast that I referenced several time is Let Me Speak to a Manager. You can go to any one of the podcasting services out there that's there and we talk about real estate, but we talk a lot more about business and management. We We talk about how to hire, how to fire, how to deliver bad news, how to deliver good news, how to build a staff, how to build a culture. A lot of the stuff that we saw in the last couple of days with these great presentations between Ian and me, we've hired more than 2,000 people, and we talk about how to do the human capital side.

Sometimes we're goofy, but that's the beauty of podcast. You don't have to listen to all of it. But, and if you wanna find it on YouTube, it's, let me speak to a managerpodcast.com.

Steve: Awesome. Thank you very much.

Speaker: My pleasure. Did we set a record?

Steve: We set a record. Two hours and ten minutes.

Speaker: Damn. Thank you

Steve: guys for watch.