August 2022

David:
This is the BiggerPockets Podcast, Show 648.

Pat:
But the difference is most people think that when they jump off a cliff, they’re just going to fall straight to the ground if they don’t prepare an airplane on the way down. You’ve heard that ad. It’s entrepreneurs jump off a cliff, and then they build an airplane on the way down. Well, most people think I’m not going to be able to build an airplane. So I’m not going to jump off the cliff. And what we’re saying is, look, it is scary to jump off the cliff and we’re not telling you to jump off the cliff. We’re telling you to jump off the cliff, but we have a bunch of trapeze swings that you could grab onto.

David:
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast here today with my co-host and good friend, Rob Abasolo, interviewing two mentors of mine. In today’s show, we bring back Tim Rhode and Pat Hiban, both OGs and juggernauts in the real estate space in their respective rights, who are incredibly successful agents at the top of the world in their prime and walked away from that job, quit it to find a better life for themselves that centered more around giving back to other people, working in nonprofits, pouring into others’ lives and making a whole bunch of money investing in real estate passively.
In today’s show, we dive deep and they share their story of the obstacles that they faced when trying to overcome their fear of quitting, as well as the audit that they did on their lives, that they call the soul-sucking audit to determine how happy they really were and what could be different. It is a fantastic episode. I think this is going to resonate with 99% of the people that are listening, who are here because they have their own soul-sucking issues in their life. And they don’t know how to get rid of those leeches that are dragging them down. Rob, any thoughts about the show before we get into the quick tip?

Rob:
Yeah, two thoughts. First one, this was really fun because we get to hear the David Greene origin story about how you started off as a gold miner for Tim Rhodes, with some clarification there later. And then two, this was really fun for me as someone who just quit my job about 16 months ago or so, because a lot of the systems and the tools that they talk about and the terminology is all a very official way to put everything in perspective for me when I was doing this, when I was getting into this, I mean, it was just crazy scattered brain thoughts in the ether. I wish I had talked to them so that I could at least have placed some sort of system in my mind to how to approach this because everything they said, I was like, oh, I did think of that. Oh, I didn’t think that. It was not nearly as organized or as cool as you just said it. I had to sort of figure that stuff out by myself.
So I think for anyone in their journey right now, who’s thinking about quitting and becoming a full-time, whatever it is they want to be, self-employed person, this will be a really good episode for you to really put things into, I don’t know, into tangible steps, I guess would be the best way to describe it.

David:
Moving on to today’s quick tip, consider BiggerPockets’ newest book written by Tim Rhode and Pat Hiban, The Quitter’s Manifesto. They’ve actually written a book that spells out tactical steps to quit where you’re at and get to where you want to be. This is not a feel good self-help, get y’all jazzed up and then say, go float your way into the ether and figure this out. No, this is actual step-by-step things that you can do, how to take an audit of your life, to decide if you’re happy, how to make changes so that you will be happy and get from where you are to where you want to go just like they’ve done and have helped countless other people, including myself to do the same. You can get that at biggerpockets.com/quittersmanifesto, or if you don’t like spelling, just go to biggerpockets.com/store and you can find it there.
All right. Let’s bring in Pat and Tim. Tim Rhode and Pat Hiban, welcome to the BiggerPockets Podcast. Welcome back to the BiggerPockets Podcast. We’ve got some return guest action going on.

Pat:
Yeah, man. Good to be here. Wow. Been a while. I was trying to figure out when I was on last.

David:
Yeah. So we had you on episode, I believe it was 188 and Tim, you were a little more recent on 353. Both of those were very highly downloaded episodes. So BiggerPockets saw it fit to have you two, write a book. And we’re going to talk about that a little bit later in the episode. But before we get into it, why don’t we start with how we know each other and what your backgrounds are in real estate? You want to start off there, Tim?

Tim:
Sure. My background is in real estate, started selling real estate, my goodness, in 1986. I sold actively till about 2000. And this is when I met David Greene, right around that time when he was actually working at Isadore’s Restaurant and then came to work for me as a prospector. So, that’ll be a funny story within all of this. But yeah, and then I went, gosh, I’ve been a quitter for some time now, quit many different careers. And now I’ve kind of quit my way to the top, if you will. So it’s been a long, fun ride all the way.

David:
And Tim, can you tell us briefly about your real estate holdings at this time?

Tim:
So my real estate holdings at this time, I probably have about 50 different income streams, anything from my gut, I think I’ve got like 15 apartment complexes with our gap acquisitions, and then a bunch of businesses, bunch of investments in other people’s assets, because I don’t believe in working myself and haven’t for about the last 20 years. So I have about 50 different income streams at this time.

David:
Pat Hiban, former podcast host of Real Estate Rockstars. I believe you were also the former number one real estate agent in Keller Williams at one time. Tim, I’m sure you’d be able to say the same about PMZ Real Estate, where you dominated the market. But Pat, tell us a little bit about your history and your background in real estate.

Pat:
Yeah. So real estate’s my life really or has been, I should say. It’s like in one form or the other. I graduated college with a degree in sociology. I got a 2.3 GPA and no one would hire me. So I went into real estate sales because there was no barrier to entry. I spent 25 years selling, slinging and I was at probably five different companies over 25 years, RE/MAX, KW, Long & Foster, everything you think of. I had my own company, I had my own mortgage company, title company. Just real estate sales, until I quit. I quit, I bailed, I collected the money off of the craps table and I went back to the room and I hid it under the bed. And that’s really what happened.
So after that I started investing and I invested in a bunch of single families. Then with Tim, we started investing in multi families. I think we’re up to over 2000 units now, multi-family wise that were on a GP level on. We had a shopping center that we just sold. We’re kind of on, not a lot, but a little bit of a selling spree. We’re selling some things. Then, of course, I had that podcast, which I sold to Aaron Amuchastegui, the only person in the world to ever be able to monetize and sell a podcast thus far, that I know of. What else? Started GoBundance with Tim and David and Mike McCarthy. And so, yeah, that’s where I’m at. I’ve got about 67 lines of horizontal income, which is income that’s coming in sideways, all different types of stuff. I’d say 55% of it today is real estate. 45% of it is random other stuff.

David:
Just to be clear, that was David Osborne you started GoBundance with, not me. [inaudible 00:08:30].

Rob:
Yeah, I was like, wait a minute. David, you’ve been holding this from me for so long.

David:
No, I’m not one of the godfathers. I’m like second generation there. That’s funny. But we do have two godfathers of real estate here with us. And I will say this, you two have both been a little modest there. Tim was a legend at selling real estate in Manteca where I grew up and that’s where the Isadore’s Restaurant he mentioned worked. If you guys want to hear more about my story there, you can look it up on the BiggerPockets Money, episode number 12. I get kind of deep into actually what I learned in that restaurant. And then Tim reached out to me from what he had heard about my work ethic and offered me a job. And that is why I am here today in real estate et al.
And then Pat was also one of the top real estate agents in the country. Like he was sitting at the top of the leader board for the biggest brokerages ever. And it’s a little odd that each of you sort of like Barry Sanders in his prime, just decided I don’t want to do this anymore. It’s not uncommon to see people quit when they suck. They just can’t get it going. They’re struggling. They’re not very good at it, but you two had empires that were built and you walked away. So why don’t we start by asking with you, Tim, what was the motivation to quit? And what were some of the fears that you had when you were thinking about it? How did you get to that point?

Tim:
I think mentioning Barry Sanders is really interesting, because he was at the top of his game when he decided to just tap out. I think he wasn’t even 30 years old yet. So from 26 to 35, I loved selling real estate. It was so amazing. I never thought I’d be in a place where I’m making a lot of money and doing the things I wanted to do. And then it started to oxidate. It was kind of like the rust had gone on and I just didn’t feel like doing it anymore candidly. And I looked up, I was in Belize and I was 40 years old and I was a millionaire and I was kind of like, whoa, dude, for once in your life, I’m proud of you. How did you get here?
And I went for a minute of kind of looking back through my career. And it was like, well, what do you want to do next? And it was like, I never want to sell another home. And it was like a just boom. It was like a punch in the face. And it was like, well, what are you going to do? And it’s like, well, you just flipped a home and you made a lot of money doing that. Why don’t we have a new game? I’m never going to list another home. I’m only going to invest. And I’ll only be my best client. I won’t have to worry about sellers. I can do this my way.
And I went back and I did that and it hadn’t happened overnight. It took a while from like 35 to 40 to get the courage to quit. But once I decided to do that, I never looked back and I did never sell another home after that. I invested for one more like from 2000 to 2007, and then I played another new game. What if I tap out and sell everything into the craze and never have to invest again? And then from 2008, till today, I’ve never personally invested in a property. I only water ski in other people’s lakes. So I’ve had a lot of fun kind of being the original quitter and then keeping, figuring out how can I use those tools to develop the next incarnation for whatever’s next in my life.

Rob:
Yeah. So Tim, let me ask you something because a lot of people, we’re all going for that big M goal, right, becoming a millionaire and you quit right at the cusp of realizing this. So when you did this, were you at a point where you said, yeah, I’m going to quit and I can sort of coast on this or was there a financial motivation to keep pushing on? Or was it more of just a personal self-fulfillment? Was money a big factor in making more money? Or was it just, hey, I want to go out and do this as a self-employed person and just keep crushing it?

Tim:
I’ll be honest. All the things we talk about in the book, which is very practical, very tactiful… tact… We’ll redo that.

Pat:
Tact, not strategic, tactical.

Rob:
There you go. Okay.

Tim:
Thank you.

Rob:
Teamwork makes the dream work.

Tim:
But all the things that we talk about in the book, I did not do. I tapped out when I didn’t have a lot of money behind me and I just kind of depended on me moving forward that I’ll figure stuff out, I’ll find ways to make money, but it wasn’t what it was about. Candidly, I went from working full time to skiing 100 days a year, to spend a lot of time up on the coast, abalone diving and just what I called getting the goods in the woods. And I’ve always played that game from then on just trying to figure out how can I make money, but that’s certainly wasn’t what it was all about for me.

Rob:
Yeah. That’s really great. Thank you so much for that. Pat, what about you? What was your motivation here? Was it similar? Was it different? Walk us through that journey.

Pat:
Yeah. Rob, that’s a good question. And I think mine’s a little different than Tim’s. So I was in real estate sales. I was on a listing appointment and I fell asleep. I was talking to this lady and it was like, I had a big fat lunch and it was hot. And literally, I just fell asleep. And she goes, “You just fell asleep.” And I said, “Oh! Oh! Oh!” And you know it. And then I went into the bathroom, I threw some water on my face. Then I came back and next thing you know, I like… You know how kind of fall off a cliff, like you put on the brake in a car, but you’re sleeping or whatever. So I put on the brake and I like kicked her chair. And I was like, oh god, I’m not getting this listing. So I rolled out of there and I’m driving back to the office and I’m like, man, I fell asleep twice on this lady. I was like, that is it. I’m out. I got to get out of this business.
As Tim said, I’m oxidated. That was terrible. I just wasn’t happy. The problem is that like, I went from such a manic state where everything I touched turned to gold. You know what I mean? We were doing television commercials and we would just do commercials. And immediately we put the commercials on the people would just start calling and say, “Come list my house.” It was so easy. And it was so fun to like everything stopped, and then all that happened was I was dealing with agents that were complaining about, why I wasn’t getting any leads for them and sellers complaining, why don’t I do an open house and all this stuff because the house is not selling at the price they wanted it to. And I was just like, you know what? I’ll just quit. I’m getting out of this. And so it was more of a visceral thing for me than it was for Tim, I think.

Rob:
I can already imagine the lady there was like, cutting to her and she’s like, “And this is the home that I saw my kids grow up in. Are you asleep?”

Tim:
That’s where my daughter took her first step, right there.

Pat:
I’m telling you, man-

Rob:
No, no, I was just resting my eyes.

Pat:
Yeah. I blamed it on the pizza I had for lunch and the heat and the house, because she wouldn’t turn on the AC. But anyway, so at the end of the day, I could still see that lady’s face. I could describe her. Like if you hypnotize me, I could draw a picture of her.

Rob:
And so was this something that you were, I know you said it was visceral, but had you already considered this for years? Were you one day kind of wiping everything off your desk and like, I’m done. And you’re like, no, not really. I’m going to give it a little bit of time or was it truly like a flip switch and, hey, I’m out of here?

Pat:
Well, I think it helped. So what happened was, like 2008, all the units were down, right? Which is something that is a whole nother subject, a number of units, because that’s what people don’t talk about enough, number of units. But that’s what happened in the last crash, right? The number of units just stopped, like the number of pendings and settlements. And I still had a lot of rent and I still had a lot of overhead and I had a lot of things that I was paying for because we were crushing it. I had a $5,000 lease payment on copiers that made postcards and stuff. That was like eight years long. I had a longterm lease on an 8,000 square foot office. I had all kinds of stuff. I had to wait like two years for all that stuff to expire and me to get out of it and out from under it, because I’d signed personally from it.
So then finally when I was done that and I was liberated from the pressure of all that, that’s when I wrote my book 6 Steps to 7 Figures. And then what that required back then was a book tour. We didn’t have podcasts. So I had to go city to city and talk to real estate agents. And I did a seven-month book tour, 53 cities in seven months. And basically I came back and my top agent, Mike Sloan at the time had been running everything while I was gone. And I was like, “Dude, you just take this. You know what I mean? This works without me. I don’t like it anyways. I’ve been free for seven months. I don’t want to come back in.” So, it was good for me. After the seven-month book tour, I was like, I’m not coming back in.

Rob:
And so, David, if I’m not mistaken, I believe that these guys were responsible for you, quitting your job as well, right? I mean, I know that you started with Tim and you were mining for gold for him as a prospector, AKA cold calling. But what was it really? I mean, what was your turning point here? Because I know you had a similar experience as well.

David:
Yeah. As they were talking, I started thinking about this that when we explained why we did what we did and we’re sharing the story, there’s this tendency after you’re on the other side of it to express all the logical reasons why you did it. Well, I wasn’t that happy and I wasn’t making that money and the industry had shifted and I knew that I wanted something to happen. And sometimes you do have a moment like Pat described where you fall asleep and you’re like, okay, this is not for me. But I feel like the more accurate way, at least in my life that it’s happened is for years we’re knowing, I don’t like this. I’m on a treadmill. I’m selling a lot of houses. I’m making a lot of money, but this is sucking my soul and you don’t really know how to get out of it. But you’re just kind of running this marathon that you’re like, when is it going to end? When am I going to get to the end of this thing? And there really isn’t an end in sight.
And emotionally, your heart’s not there. It’s different when you first get into it. I look at it like that’s God in my life. When I’m super excited about something, I’m passionate about it, I have these very strong emotions that I can’t describe so often because I feel like he’s putting me in that position. He wants me to be learning it. Then when that goes away, I perceive it like he’s telling me it’s time to move on. There’s a new challenge. There’s something new to learn. He has a different plan for where I should be. The problem is I get scared. I get greedy. I don’t want to move on from the thing I’m comfortable with, from it’s better than what I used to have, right? I’m more worried about getting sucked back into being broke, not moving on from being a cop. I’m getting a lot of my needs met, like Tony Robbins six human needs. They’re all being met in the law enforcement world. And to think about leaving that is actually scary.
And so you get this weird tension of, I hate going to work every day. What it was like for me is I would get a call for service, that there was a person with a tummy ache. And all I have to do is drive there, get their name and date of birth and wait for the ambulance to come pick them up. And I’m done. The easiest call you could ever get. And I’m so mad that I have to go do this dumb thing that I’m just cussing out the world the whole way there. I should have been grateful like, oh, I got a easy one, but there’s this feeling like if I have to fill out one more listing agreement, which at one point was I’m on top of the world that I got a list, that’s the best feeling ever in real estate sales. You’re like, oh, another client wants to buy a house and give me money. Gosh, darn it. I didn’t want to do it.
So you have that feeling going on, but then there’s the fear of making the jump and it just grows and it grows and it grows. And I think a lot of people listening are like, that’s how I feel every day, going to work in my cubicle at this job I don’t like, but I got to make a car payment. I got kids to feed. I got a mortgage. I have to stay here. Well, the role that Tim and Pat played was they actually were involved in a intervention of sorts where we were… Tim was there for this. Pat came in a little bit later, but we were at our buddy Daniel Del Real’s cabin and he, and a bunch of other GoBundance guys were like, “David, you’re too smart to be a cop. You’re doing too good in real estate. You’re leaving this job. Like it’s happening. You’re not healthy. It’s not going well.” And I was like, but, but, but, and I had all these reasons and they basically were like, pick a date.
What the deal was, was that I was not allowed to work overtime for one year. That wasn’t mandatory. I could not. Because I was addicted to overtime, that was like the drug. That was how I was making good money. You’re not allowed to do it. You’re going to get your real estate license. You’re going to give it a try. After a year, if you can sell homes, you’re leaving completely in law enforcement. And I had to be held accountable to those guys. Now I hated every second of that because I was just internally afraid, but I needed that to get over that hump of making the jump. And so I ended up getting my license. My first year selling houses, I was the top agent in the Keller Williams office that I worked at. And then from there I just grew and grew and grew it. And then I built the David Greene team.
That’s how I got here, but I guess what I’m saying is that it’s not always a super logical thing. It’s a lot of emotions that you’re feeling, that the world is telling you it’s time to move on. And on the other side I was not strong enough to make that jump myself. I needed a support group, especially of people like Pat and Tim, men that I looked up to and respected, that were mentors in a sense that were telling me you have what it takes and you’re better than this. Quit acting like a little coward. It’s time to make the jump.

Pat:
That’s an awesome story. I forgot that story. That’s great.

Tim:
And David, I don’t remember it quite like that.

David:
How do you remember it, Tim?

Tim:
Yeah. I remember it more like, yeah, it was Aaron West, I believe, saying, “David, are you quitting Monday? Or could we give you till Wednesday when you turn in your resignation?” And I thought it was like, boom, next week we’re going to hear from you that you’re done with the force.

David:
He started it that way. I just didn’t agree. So Daniel Ramsey stepped in and said, “Fine, we’ll give you one year and you’re going to have to work both jobs, but you can’t work any overtime.” And that was sort of the compromise that I took on to give myself some runway, because I doubted that I had what it takes to sell houses.

Tim:
Yeah. I think it’s such a great story though. Because people know how successful you’ve been, but didn’t know how scared you were before that and how much you hated your job. We have a thing called the soul-sucking meter and it’s a thing of one to 10, how much do you love what you do and what would you say on this soul-sucking meter, if we had you on there, if it looks at number one to 10, how much are you making versus one to 10, how much do you love what you do, would you say you were a six and above or below six at that point?

David:
Oh, I was at like a two, man. I was-

Tim:
I’m asking you, David.

David:
Yeah. I was sleeping two and a half hours a night, working seven days a week, eating fast food nonstop. I was at like below a six. Every day was just dragging myself, how do I get to the next one?

Pat:
We look at five things. Number one, your compensation, which is all people usually think about. You’re probably making so much overtime and all that stuff that your compensation was holding you back. But we look at your respect, your respect of yourself and the respect that your boss gives you, right? Your fit, right? Whether you’re fit for your team or fit for your organization, the police force, whatever, your prospects for growth, how quick are you going to become the fricking police chief or whatever it’s called, and do you even want to be the police chief? And how do you feel in the morning every day? And we have you rate them on a scale of one to 10 and based on your results it really comes to fruition really fast, how bad you want to quit, how important it is for you to quit.

Rob:
Now, is there an actual numerical value that you’re looking for? Like if you were to rank 4, 5, 6, 8, 9, 10 on all these different bullet points, is there a number that’s like a failure score or is it really just more for self-reflection?

Pat:
7, 8, 9, and 10 is what you want. So anything below that… 7, 8, 9, 10, well, [inaudible 00:26:22]. If you can’t clear a six on average, then your job sucks and you need to quit. So if you can’t clear a six, you need to quit. If that makes sense. And so what Tim and I did with this book, just so you guys know is we found that a lot of people were at that stage where they were afraid, they were facing the truth like David was that day and we know that it’s scary and it’s like a jump off of a cliff. But the difference is most people think that when they jump off of a cliff, they’re just going to fall straight to the ground if they don’t prepare an airplane on the way down. You’ve heard that whole ad. It’s entrepreneurs jump off a cliff, and then they build an airplane on the way down.
Well, most people think I’m not going to be able to build an airplane. So I’m not going to jump off the cliff. And what we’re saying is, look, it is scary to jump off the cliff and we’re not telling you to jump off the cliff. We’re telling you to jump off the cliff, but we have a bunch of trapeze swings that you could grab onto. And throughout the book, we’re like, this is a trapeze swing. Here’s another trapeze swing. And if you complete and grab on eight of these trapeze swings, you’re going to successfully have quit and you’re going to be happier in your life and have a better job or have a better circumstance than you had before. Does that make sense?

Rob:
Yeah, it sure does. I think this is really interesting because a lot of people, quitting your full-time job, it’s a very emotional thing. And so there is no hot or cold… Or sorry, there is no lukewarm. It’s just hot or cold, your feelings on it. And I remember for me, when I quit my job so much was at stake for me, I hadn’t… Well, really the one thing that I was so scared of losing was health insurance, because I was like, it was going to cost me $2,000 a month. And I was like, I just can’t lose… I make so much more money with all my different side hustles and my Airbnb business, my real estate business, but I just could not get off of the $2,000 a month.
But I think, looking at the scale you talked about or the different bullet points, certainly being a fit in the organization was what I was really starting to realize at a very alarming rate. Because for me, I was a creative copywriter and I was good at it, but I was never going to be great. And I was always really nervous about that truth when I was in my job, because I knew that I just wasn’t going to be the can award-winning creative copywriter that’s producing the best commercials in the world. And I kind of saw this train heading for me that was years out where I eventually would get kicked out of the industry.
But luckily for me, I felt at that time that I had already started the real estate stuff and content creation and stuff. And I was like, I think I can be great at this. And that’s sort of where it started coming to life for me was this industry and this career, it’s a fine fit, but it doesn’t fit like a glove, right? It’s not me. It’s not who I am. And then eventually when I did quit, it was a very emotional day. I cried to both of my bosses and they were like, “Are you okay?” And I’m like, “Yeah, I’m just quitting. That’s all.” And they’re like, “Oh whew, thank God.” And I was like, “I know.” I felt so good. I was like, oh, whew. All right. That was it. Because I could really go full force into something that I was a fit for.

Pat:
Yeah. In the book, we have people give the worst case scenario, kind of like you did Rob, which is like, what is the worst case scenario? Like the worst case scenario is you’re living in your car and you’re going to die from starvation because you can’t buy any food or whatever. And we all know when you analyze it like that and you dumb it down and you reduce it to the ridiculous, you basically realize, well, truth be told, if I fail, I could probably go back to my boss and he’d probably hire me back in a heartbeat. Or truth be told, I can get another job. It’s not going to be the worst case scenario like I think it is. But the process of taking yourself through this failure path and saying, this is what it looks like if I do fail, and then asking yourself a really important question and that is, am I failing now?

David:
You mentioned a little bit earlier this idea of the trapeze, moving from one thing to the next. Do you mind sharing some stories either from your life or other people that you’ve seen pull this off and what that looked like?

Tim:
I think a good analogy is you, David. If you look at the trapeze for yourself, the first one was making your own real estate team and then keeping up your investments, and then getting with BiggerPockets here. And then you’ve just taken it from one trapeze to the next, to the next. And then the piece that goes with that is the net below. And that’s just to make sure you don’t fall and that you have something to catch you if you do fall. And that’s a great piece of our book is that net below. But the trapeze is what gets you from one step to the next. And the tough part is you have to have trust to know you’re going to let go of the trapeze and land on the next set of rungs. And that’s the scary part.

Pat:
Yeah, one thing leads to another.

David:
So Pat, how did you see that working out with your career? What were some of the steps that you made and what was the net you had in place?

Pat:
During my career? You mean like from the beginning?

David:
Well, I know you didn’t become a top producing realtor just on accident. There’s probably several steps that you had to take to get there. But then I would imagine the biggest release was after you went on that book tour and you got all this like, I’ve made it to the pinnacle of selling homes and I don’t want to be here. I need to climb another mountain. I believe that’s when you started Real Estate Rockstars and you got more into GoBundance and you started doing more investing. Would you say that was your biggest release on the trapeze?

Pat:
Yeah, that was a big one, but here’s the thing contrary to how you think the story might go. I had a lot of little things that I did that didn’t work out like right at that time. I had been doing real estate for 25 years and then I got out and I’m like, okay, what am I going to do now? And one of the things that I wanted to do is coach. I thought that I wanted to coach and start a coaching company of other real estate agents. And I started doing that. And then I realized that I hated it. Real estate agents, they take your advice and they write it down, but then they don’t do anything in between calls. And I was like, this is exactly what I was doing as a broker when I was dealing with other agents.
So I quit that. And then I did this… David Osborne was friends with Ricky Williams and he wanted me to be Ricky Williams’s whatever you want to call it, agent. And I flew him around the country trying to put him with marijuana companies so he could be an endorsement to the marijuana companies. I really thought that that was going to be my identity. And after like eight months, I was like, this is just not working out. The juice is not worth the squeeze. And I quit that. And then I probably did three or four goofy things, like started writing a book about how to be a boss and all this stuff and it didn’t work.
So finally, I did Real Estate Rockstars, and I said, I could do this. And the trapeze was my mentor, Howard Brinton had kind of done podcasting before it was podcasting and interviewing agents. So I kind of felt like I was taking the reigns from him and it made a lot of sense. And then I did Rebus University, which is where I was training agents in video courses. But what happened with that, too, David is, number one, it grew to a grind for me. And number two, I wasn’t making any money at it. And a lot of people might disagree with this, but I own… Part of what gives me joy in my work is making a lot of money when I work. And if I’m not making money and I’m working, I can’t stop thinking in my head I’m wasting time. I’m trading time for not even money, for like… I just can’t go. I just can’t do it.
Those companies were losing money for me every month and I wasn’t having fun doing them. So it just didn’t make sense. And it just made it even more smart for me to quit it. And then with the apartment buildings, that made sense, and we were making money and I was getting paid. With the rental properties, it made money. I was getting paid. With GoBundance, in the beginning we didn’t make any money, but then eventually we started getting paid and getting money. So it just made it for me 10 times more exciting that I was getting money and I liked doing what I did.

Rob:
Yeah. So you mentioned earlier, you had about 47 streams of income in the present day today. And I’m wondering, did you have any of those, were any of those present when you did quit your job? I know you said you had a couple of companies that were losing money, but outside of those, had you already been sort of forging the way for your financial future?

Pat:
I had single-family homes. That’s all I had, single-family homes that I rented. So they did pay me, but it wasn’t bombastic. You know how single-family homes are, especially if they’re older, you think you make 10 grand a year, but then once you do your taxes, you’re negative three grand.

Rob:
Yeah. Yeah, we do know.

David:
I’m laughing because there’s so many people that think that the way they’re going to get out of the job they don’t like, or the life they don’t like is cash flow from real estate. And there’s always a guru that’s going to come along and say, cash flow, cash flow, cash flow is going to change everything and you can bake on cash flow. And then all the guys like you, Pat, that own a lot of real estate, I know we’ve all been there that we realize it’s very unreliable. You could have a great year or you could have one thing break and it crushes your whole year. So, that’s a very good point.
And I think that just goes to strengthen the argument that investing can grow wealth, but it shouldn’t really be your foundation that you’re living on. There’s got to be other things that you’re doing and quitting your way out of the ones that don’t work and getting into the ones that do is probably what’s going to bring more joy into someone’s life. So where did you settle? Where did you realize, okay, this is what makes me happy, this is what I like doing?

Pat:
I’ll tell you what, where I learned a lot, David and Rob, is COVID. I was very unhappy at points during COVID and I came to a realization of really what I like and what I need are people. I had no idea. Like I’ve always been a party guy, right? I’ve always been gregarious and liked to go to parties and liked to talk to people. My wife will invite one couple and then I’ll go and text like three more and tell her, “Hey, I invited these guys too.” And she’s like, “What the hell did you do that for?” I’m like, “It’s just natural. I can’t help it. I want a whole bunch of people around me.”
And so during COVID I realized that’s what I miss. I just wanted to go to the coffee shop and talk to randoms. And I couldn’t. And so now I realize that at GoBundance, I just got back from Detroit, there was like 75 GoBundance guys there. I talked the whole time. I was energized the whole time. I just loved that. But I don’t think I actually was conscious of that until I actually had an opportunity to have it taken away from me.

David:
Yeah. What I like about that is you often, it’s not going to be like a clear, like the trapeze transition, right? Sometimes life works it out to where your next, whatever the bars are called that they swing on in the trapeze world, comes right up to you, you let go of one, you grab the other one. There’s a brief period of like, oh, I hope that I catch it. Otherwise, I need that net. Other times, you’re just letting go and flying through the air and hoping that something shows up or hoping that you like the trapeze you grabbed. And then you realize I don’t like this one either. And you’re swinging to another one. It’s not 100% success.
When we tell the story with hindsight, we’re like, oh yeah, I was here and I jumped over and now look where I am. It’s amazing. But there might have been 10 to 15 different attempts before you found the right one to be swinging on. And I like that you’re sharing it’s okay that it’s messy. It’s okay that it’s ugly. You work these jobs that didn’t make money or there’s opportunities that didn’t fulfill you. And so you kept swinging and then you realized what your thing is, is people. That’s probably why you did so great at real estate sales. It wasn’t the real estate. It was the people. And when it wasn’t fun and you realized I’m letting people down, I’m falling asleep in the middle of a listing appointment is when you knew it’s time to move on. And now you’re finding another way to connect with people, just it isn’t selling houses.

Pat:
Yeah, absolutely. Absolutely. And like I said, people and money, like it works, right? I did a lot of little things after I got out of real estate that didn’t work. And I think we all do that, but nobody hears about them. And then we buy an apartment complex and after three years we sell it and then you make a couple hundred grand and you’re like, hey, this is good. I’m going to stick with this. I’d be stupid not to. You know what I mean? Or whatever. And so, yeah, people, and then obviously the benefits that come with that. Because you could always find people, you could find people anywhere, but I guess it’s, here’s the answer, like-minded people.

David:
I would say, Rob, would you agree that getting around like-minded people, people that are on your frequency is a huge component to being happy in life?

Rob:
Oh my goodness. Yeah. I mean, that’s how… Well, like-minded, but preferably significantly smarter than you. So like-minded to who you want to be kind of thing. Because I think for me, I’m thinking through the trapezes, right? And it’s very easy to say, yeah, like side income, side hustles. All those different income streams to me seems to be the only trapeze you need, because if you make enough money, you’re going to be fine if you quit your job. But in reality, I think the people and the personal and the social component is really as equally important, because those people can help you establish a lot of those different side incomes and businesses and everything that you want to go with.
So for me, when I was quitting, I had those people that I basically talked to like four or five different CEOs and quote, unquote, quitters, if you will. And I would Zoom with them and they were all founders of relatively successful companies. And they would say, “Wait, you’re taking a call right now during your… I didn’t know you had a job. Why are you still working?” And I was like, “Oh, I don’t know, because of health insurance.” And legitimately every single one of them, they told me, they said, “I watch your YouTube channel. I know how much money you make because you talk about it and you make good money. So I think it’s time to quit, pal.” And I would go and I’d report back to my wife all the time. And I would say, “Hey, this person said I should quit.” And she’s like, “Yeah, they’re right. You should quit.” And I was like, “No, no, no, don’t be silly.”
And I was hoping that my wife would be the one that was telling me no, that I couldn’t quit. But everyone in my sphere of influence, they were encouraging me to go full force at the thing that I love the most. And so getting to know them really, after I quit has shaped who I am. We were kind of talking about the messiness, right? Well, a lot of people see me and they’re like, “Oh, you got it down. Your success is going well. I’m really happy for you.” But what they don’t necessarily always realize is that it’s still really hard. And the only reason I have any level of success today is because of all the catastrophic failures I’ve had over the last year. Finding the people in my influence that could relate with that, that’s how I grow because we can all fail together and be honest with each other and help each other grow.

Pat:
Hey, Rob, I got a question. How minuscule does that seem now that you were worried about health insurance?

Rob:
Honestly, it was instant because my bosses, because like I said, I was a little crybaby on the Zoom call and my bosses were like, “Well, are you going to be okay, like financially?” I kind of looked up and I was like, “Yeah, I make way more money doing this other stuff.” And they’re like, “Then why are you crying?” And I was like, “I don’t know.” And so I really instantaneously mathed it out and it is very funny and you know what, I still pay that $2,000 a month because I carried that over for my company. It’s a funny thing to have gotten hung up on because it really wasn’t the $2,000 payment, it was just that little… I think it was symbolic of the safety and the stability in my life, knowing that I had health insurance. And so if I ever got super sick or anything that would cover me and I felt by losing that, I now had no safety net. Obviously in retrospect, yeah, it’s funny. Yeah. It’s funny that that’s what held me back for about four or five, six months.

David:
Pat, you mentioned some tools to evaluate where somebody’s at. I think a lot of the emotions that Rob was just describing the stuff, I felt you get used to it. This is just life and you don’t think about it. You’re like the frog in the water that slowly gets hotter and you’re not aware of it. And then you and Tim are talking about how people can kind of audit their life and figure out where they’re at and maybe find if they’re happy or not. So can you share what some of those tools that you’re using to evaluate are?

Pat:
Well, there’s the soul-sucking audit, which is basically the one that we talked about where you got to get a six or more. And what we’re encouraging people to do is to kind of stop not quitting, right? Every day you don’t do something that’s not different is essentially a commitment to not changing. And so what people are doing is they’re just not quitting. Every day that Rob wasn’t there, he was not quitting. So the tool would be to sit down and journal and look at your life now and say, what am I not quitting? Right? And just stop, not quitting. Look at the worst case scenario and the worst case scenario for him as ridiculous as it sounds was he wouldn’t have health insurance. He seems like a young guy, so I don’t know how big of a deal that was. Me, I imagine he didn’t have six kids at the time or something he had to worry about health insurance. You know what I mean? It just comes out to be absolutely ridiculous.
One thing that we talk about, David, is creating a quitting team and we actually have a chart that we have everybody fill out in the book that is a square and with four blocks and in there are stakeholders, partners, mentors, and coaches. And what a stakeholder is, is like your wife, like your loved ones, your spouses, your family. So, that would be one. So you want to fill up that box with loved ones who say, David, I got your back. Rob, I got your back. I’m with you. I think you should quit. I think you’re going to do great. I believe in you, that sort of thing.
Then the other is partners. These are going to be actual partners like investors, suppliers, maybe general partners of your business, whatever you’re going to do. These are actual people’s names that you’re going to go into partnership with. Then you fill in five or six mentors. And a mentor is not like this Rip Van Winkle type guy that sits under a tree, that’s like a long beard and a mustache. The mentor is like, whatever business you’re going to go into, this is someone who’s actually been there, cut their teeth, got their head kicked in, and has tactical things that they could teach you of how to do it. The American way is to go to work for somebody else and then copy them and start your own company. That’s essentially what a mentor is, someone you’re going to learn exactly how to do your specific business, who’s going to teach you how they did it.
And then the last box that you fill names in with is coaches, and these are actually people that you pay money to, right? We’re starting a coaching company to coach people how to quit. BiggerPockets is a coaching company, right? You pay your dues to BiggerPockets and you can go in there and be coached by a million different people that are already doing it. And so once you have those boxes, once you have that team built, your chance of success is so much higher. It’s incredible.

Rob:
Yeah. You can’t do it alone. You really can’t. I mean, that’s what I’m saying. The financial aspect of it, that was solved for me. But in retrospect now I realize that it’s exactly what you’re saying, all those people along the way that are on your team, that’s, what’s changed my life, not the financial stuff.

David:
Well, I could second that. I would say I knew I wasn’t happy and I knew, I knew real estate, but I was not going to let go of that one trapeze bar. I had a white-knuckle grip on that thing, unless I had Tim and Pat and these other guys prying my fingers off of it. It was like, we’re going to break your fingers or you can let go on your own. I think there’s some personalities that probably need that. That’s probably the same reason I’m good at the stuff I do is because I commit really hard, but that makes it hard to let go. And there’s other people that have an easy time bouncing from job to job, but they have a hard time committing to the job that they’re at. Pat, what would you say is the right person to read a book like this? If they’re listening to this show, what thoughts would they be thinking? What feelings would they be feeling?

Pat:
Somebody who knows deep down that they’re unhappy, who doesn’t like going to work. I saw this graffiti. I couldn’t believe it. I just saw this yesterday, it was on Instagram. It said, “It’s not Mondays that suck. It’s your job that sucks.” It was on a bus stop. Yeah, it’s someone who just hates Mondays and you hate Mondays because you hate your job, right? If you have a job you love, then Mondays is like sweet. And someone who just can’t get over the fear, right? We put a quote in the book, we put, “There’s no risk-free plan that will get you what you want.” So someone who really knows what they want. They want to teach art to kids, but instead they’re an accountant, right? They know what they want. They know what they would love, but they just can’t get there.
And so this book takes you, again, like Tim said, it’s not a strategic book. You’re not going to look in this book and it’s going to be a bunch of cliches where we’re requoting other people and giving you inspiration. It’s not that book. Specifically, it’s a tactical book. It is a one step, two step, three step, four step, all trapeze swings. And you could just like fill them out right there on the pages. And you could just write it all out. So when you finish the book, you’ll be ready to jump off the cliff because the plane’s already built for you. You didn’t have to build it on the way down. The trapezes are there and not only are they there, but they’re locked in with handcuffs so you really can’t fall off the trapeze because you’ve written it all out and you built it all out. So, that’s the person.

David:
Oh, that’s so good. Yeah. I love what you’re saying. There is no risk-free path from where you are to where you want to go. And you got to accept that, especially if you’re listening to this podcast because you want to invest in real estate and it works the same way. There is no risk-free way to invest in real estate. There is no risk-free way to do anything that is of any kind of substance in this world. And so reexamining that relationship with risk, making peace with it, rather than just running from it is big, not just to build wealth, but to live the life that you really want to live because you only get one of them. Thanks for sharing that, Pat.

Rob:
Pat, as someone who is obviously very pro quitting, are there any things that you believe you shouldn’t quit in life?

Pat:
Yeah. Rob, that’s a great question. And that’s kind of hard too. There’s cliches that I could say, like relationships and things like that, but there’s always exceptions to the rule. I think that what comes to mind is hobbies. I think that hobbies make a lot of people happy and I think that everybody has a different hobby. Like some people just love gardening. Some people love music. And other people love sports. And I don’t think that any of those three are right or wrong. They’re all right, because everybody’s an individual. And the reason that they chose those hobbies probably wasn’t because their mother put them in gardening classes when they were two years old, like piano and told them that they had to learn it. Right? They chose them hobbies naturally. Just kind of their soul gravitated one day to picking a weed and planting a flower. And they’re like, I love this. I’m going to do another one. So I would say to them, do not quit a hobby unless you replace it with another one that’s just as joyful, if not more joyful.

Rob:
So Pat, with all that in mind, what are things you wish you would’ve quit or left behind a little earlier in your life?

Pat:
From a financial standpoint, I wish I had not spent as much money on non real estate investments and just stuck with real estate. I think that all through the ’90s, like I got licensed in 1987 and I bought like three houses between 1987 and 1990. And then from 1990 to 2000, I didn’t buy a single house. And I often look back on how flat that time was. Like the market didn’t go up. It didn’t go down. It was just flat. Nobody really bought rental properties. Very few people did. And it was easy to do, right? You put 20% down and you just bought it. And the 1% rule worked all day long. It was easy to do, but no one did it.
I wish that I had not quit buying like I did when I first got my license. I wish I had bought at least a house every six months or a house a year, one little single-family a year I could have easily done rather than investing the money in the stock market or something. And I didn’t. And I look back on that as a mistake. I really wish I had just dollar-cost averages houses and just had them because I’d be killing it now. Those things would be worth so much more and the rents would’ve just gone up so much more. It would’ve just been nice and I regret not doing that. I wish I hadn’t quit. I quit too soon. Now, granted in 2000s, I started buying again, but there was that whole decade I didn’t buy.

Rob:
Okay. So a follow-up to that question, what are some of those things for you, Pat? Like what are your actual hobbies?

Pat:
That’s great. I set myself up for that. My hobbies are working out. I got three hobbies: working out, which I do regularly. I have a house in Maryland and a house in South Carolina and I have a trainer in Maryland and a trainer in South Carolina. I just pay them both two grand a year in January, and I could just text them and show up to them sometime that day or the next day. I’m also a hiker. I just love hiking. I just clear my head. I just feel so much at peace with nature. And I like to hike. I just get out there and explore. I’m always on an adventure.
And then the third hobby, and a lot of people might not find this a hobby, but I find it a hobby because so many people don’t do it, so it has to be a hobby and that’s counting my money. It sounds like a joke, right? And you can cut this out if you want, but I’ve always been a counter, like mathematically something in my left brain is always counting. So I’m always counting my net worth, counting the rental income, counting things. And I get a lot of dopamine from that. And I just enjoy it. Like, I’m constantly looking at my bank accounts. It’s just something that I enjoy doing. I don’t know what else to call it, but a hobby. So I would say those three things.

Rob:
I like it because it is honest. And a lot of people try to pretend like they don’t do that. Not even from the financial aspect of it, but it’s just a way to feel proud of what you’ve accomplished. So thank you for that.

David:
Yeah. I would say [inaudible 00:57:27].

Pat:
You’re welcome.

David:
Definitely it keeps you motivated to keep going. Sometimes I’ll go look at my portfolio and I’ll just look at all the properties that I have in it, and I’ll see what’s performing and what’s not, and I’ll see the equity that I’ve created and I’ll see what’s cash flowing and it’s not necessarily so I can twirl my mustache and say, look at the… It’s more of, man, that feels good. And then I want to go buy more houses.

Pat:
Twirl your mustache. Is that what you do?

David:
I’ll actually… Little known fact, that’s why… Yes. Just like that. Brandon does that with his beard. That’s the only reason he grew it is so that he has something to twirl when he counts all his money like Scrooge McDuck.

Pat:
Oh my goodness.

David:
All right. Well, we have lost Tim to technical difficulties, but we still have you here, Pat. This has been fantastic. I really appreciate you guys bearing your soul and sharing what your experience has been like, as well as your heart to help other people to quit the life that they don’t like to start one that would be a much better fit for them. Any last words about who should get this book and who you had in mind when you wrote it, that we can leave our listeners with?

Pat:
I feel for the people who are at that bus stop or are at the Monday morning checking in or waking up on a Monday and just being like, I hate this. You know what’s funny, my kids are 26 and 28 years old, and I talk to them about their parents. I guess I have this comparison thing going on, it may be good or bad, but they’re like, such and such and he hates his job or she hates her job. And I think to myself, man, that is so foreign to me. Having somebody that hates their job or being a kid, knowing that your parent hates their job, it’s so foreign to me, right? Because I’ve always been lucky enough to pretty much love what I do or at least find something within it that I love that I could just go to.
And so this book is for anybody who has ever had a Monday morning that they woke up and just dreaded that it was the start of the work week, that’s who this book is for. Again, so we’re going to map out how you can do it. Whether you do it or not is up to you, but if you know how to do it, maybe you’ll think twice, and maybe you’ll feel stronger about quitting, should push come to shove and you decide to quit.

David:
You can find the book at biggerpockets.com/quittersmanifesto. That’s Q-U-I-T-T-E-R-S-M-A-N-I-F-E-S-T-O. And if that’s too much to remember, just go to biggerpockets.com/store, and you can find the book there. And that was our show with Tim Rhode and Pat Hiban. Rob, you got to meet my friends. What do you think?

Rob:
I think I got a really beautiful glimpse into the early years of David Greene. It’s really nice to hear the origin story. We see the origin stories on superhero movies all the time. And I feel like I got to finally see the origin story of my real estate superhero, David Greene himself.

David:
What an answer. I’ve never heard anyone describe it as an origin story, but I’m not mad about that.

Rob:
You should have asked me that. You know how you always ask me at the end of the podcast like, “Any last words?” And I’m like, “No.” I guess this was it for me. I did it. I gave you a profound answer.

David:
You did. And see, the only key was I had to ask you after the show ended in an outro, not right before the outro.

Rob:
Right.

David:
I’m learning where you like to get the ball so you can score. I wanted to ask you, because we kind of briefly touched during the interview about the emotions that go behind when you know it’s time to quit. And I wanted to see if you could dive a little bit deeper into… You explained the emotions when you actually quit the job, when you had to show up on Zoom and you admitted it was so emotional that you actually cried, because it was such a big thing. But what emotions were you feeling up to that point that you knew was a signal that it’s time for you to leave and go full time into your content creation project?

Rob:
Well, if you just break down my actual schedule every day, I just had my daughter, well, my wife had my daughter. I was just there for support, but I was a new dad, right? So that was really tough because I was working a full-time job and this was during the pandemic. So it’s like work from home and you’re sort of figuring out how to do that with kids and then the dogs and everything. And I would basically get off of work at 5:00. And I had just started my consultation business back when that was going that no longer exists now, but I was booked out basically, at first, from 5:00 to midnight every night. And I would take like a 30-minute break at one point so I could go put my daughter down, give her a kiss and read a book, all that kind of stuff. And I remember that it was wearing on me every single day. And then I was like, you know what? I can’t stay up until 1:00 in the morning, consulting people anymore. This isn’t going to work.
And so I cut that in half and I thought, okay, if I cut that in half, it’s still really good money. I’ll raise my rates and I’ll be okay. But just day in, day out, it was the same thing. I would wake up early because newborn and then I would get ready for work. I would go to work and then I would take consultations during my lunch break and then I would go to work again. And then I would take consultations all night. And just after doing that for several months, I was just physically getting drained and I said, something has to change. And that’s when I sort of mathed out, if I went full force at my consultation business, I was actually making a lot more than I was at my other job, but I wasn’t working nearly as much.
And I think I just was so, so tired. I was so tired and I was so anxious and I had been putting off quitting for so long, until finally, like I said, a bunch of those CEO and founders of the companies that I was talking about, they just sort of kicked my butt a little bit and they said, “You need to quit.” And then I was like, “Okay.” I was very anxious, very, very anxious when my bosses answered the phone. It was really awkward because one jumped on the Zoom first and they’re like, “What’s up? How you doing?” And I was like, “Oh, you know, good.” And it was clear I was trying to stall. It was clear probably where the conversation was going to go. And then the other boss joined and then that’s when I started crying. So it was really weird, really weird, but really fun in retrospect to psychoanalyze myself.

David:
It sounds like you had mentors, too, that were saying, hey, it’s time for you to move along.

Rob:
I did and that made it a lot easier. What about you, man? I know that you were sort of, it sounds like you were forced into quitting.

David:
Yeah. And that’s what I needed, to be fair. I have that personality that I really think long and hard before I jump into something. But when I jump in, I have just like a vice grip on whatever I’m doing. I want to be the best if I’m going to do it. If I’m going to sell houses, I want to sell them as good as I can. If I’m going to invest in real estate, I want do it as tight and as good as I can. The One Brokerage, I want us to be the biggest loan company in the country at some point. And so I have to be careful about what I commit to, because I don’t let go very easily.
And I had committed to law enforcement with everything I had. I was trying to be super cop. I was wanting to take every single course that I could, learn every single thing, get certified in all of it, trying to lead the department in the different stats that we used to measure our performance, but my soul was dying. It was more than just practically speaking, oh, I could use my time for something else. It was more, the relationship with the community had deteriorated so badly, that’s not a surprise to anyone who’s listening to this that watches the news, and you weren’t really able to do the good that I thought I was going to be doing when I got there. And the people that I worked with were so negative and so cynical and it wasn’t getting better. The writing was on the wall that every year was going to be worse than the year before.
It was like buying an investment property that your cash flow shrinks every year. It’s the opposite of what we’re looking for. Like, you still got to manage it. You still got to do all the work, but the return is smaller every year doing it. And I knew I don’t want to be here, but I was just terrified of what it would look like if I left. Would I still be able to buy rental properties? I was making very good money. I think my best year I worked, I took like two days off for the whole year. I worked 363 days. And most of those days were between 15 and 20-hour shifts, but I made $300,000 and that was like 2015 era. So it was very good money to be working in law enforcement.

Rob:
Wow. That is. Yeah.

David:
Could I do that anywhere else?

Rob:
Wait. That was as a police officer?

David:
Yeah. And that was in 2015. So that was like seven years ago or eight years ago before inflation. So that’s probably more like 400, 450,000, I’d say by today’s dollars. But that was when I was sleeping in my car. All I did, like I only took time off to go wash my uniform and just be… I was like a firefighter. Just lived at the police station. I would buy properties from work. I would sign the documents on my lunch break. I’d have a notary come to the station and I would just sign the paperwork. It was 100% all in.
And when these guys saw the Tim Rhodes, the Pat Hibans, the Daniel Del Reals, Aaron West, Daniel Ramsey was, if you put that same effort into this, it’s going to be so much better for you. And I’m glad I listened. I don’t listen to everyone, but I’m glad I listened to them because that put me in this position of BiggerPockets where now I want to have the best podcasts in the world. And when I write books, I’m trying to write the best book that I can possibly write. And real estate pays you back for what you put into it more than anything else. Outside of God, real estate’s the only thing I’ve seen that pays me more than I could ever put into it.
I remember what those emotions were like. And you know, this is funny. Last night, I actually had a dream and I get these all the time where I’m back working in law enforcement or I’m back working in restaurants. And I’m getting all of the former anxiety that I used to have. It’s like, oh, this sucks. Like in my dream, I have to go back to work as a cop. And I’m like, I was so close to getting out of this. I’m getting sucked back in and I wake up and like, oh wow, wait, that’s done. My life isn’t like that. I’m never going to have to go back to it.
And I think sometimes that happens just as a reminder like, key, don’t forget where you came from. And those risks you took were worth it. So that now where I am, I will continue to make those jumps, right? There’s some new jumps that I have to make in my career, getting out of my comfort zone, starting new companies, getting out of the weeds and letting other people do stuff and letting people fail that I think I’m the same David. I’m scared of what would happen if I make the jump, but I need to quit it. I need to move on.

Rob:
Wow. Well, I hope you don’t ask me for a final word after that, because that was a truly profound statement from you.

David:
Yeah. We just don’t talk about this very much, right? We’re usually focused on tactical stuff.

Rob:
Yeah. Yeah. I think that’s the tough part is sometimes we just want that. We do try to be metaphorical and symbolic and like, hey, the bigger picture. But I think the small nuts and bolts really, at the end of the day, that’s a lot of the stuff that we legitimately need to put into practice before we quit outside of the actual mindset of it. So this was really fun.

David:
Yeah. And the messiness of it, right? We’re not perfect. We make mistakes. There’s people that don’t get the service they want from someone in one of my companies. There’s times where I record a podcast and think, oh, I didn’t do a very good job with that, or I didn’t explain that well. We are making mistakes and feeling pain or knowing that we could be doing better in areas of life and holding back just like everybody who’s listening. We’re actually all on the same journey. We just may be on a different part of the mountain than where they are, but we’re on the same mountain and we’re dealing with the same stuff.
So if you’re listening to these shows and you’re thinking, oh, I wish I could have Dave and Rob’s life. Like we, at one point were thinking the same thing about the Tim Rhodes and the Pat Hibans and the David Osborn’s and the people whose lives that we saw that we wanted. And there’s still people that we look up to and think, oh, I wish I could have that person’s life. So don’t be discouraged. It’s okay that it’s messy. It’s okay that it’s hard. Sometimes you got to quit. And sometimes letting go of that trapeze bar that you’re hanging onto is scary and you’re not doing it wrong if it feels scary. Rob had so much apprehension about letting go of that job that it expressed itself through tears. And I remember I’ve been in situations that was just like that. Having to tell my boss I was quitting was the hardest thing ever, because so much of my heart and soul was wrapped up in that. But I’ve never looked back and said, that was a mistake.

Rob:
Oh, man, I really don’t know a lot of people who have done this, who have quit to pursue their passion and went back to their nine to five.

David:
Yeah. That’s a good point.

Rob:
Usually it works out because people find out how to make it work. Because I think once you break out of the nine to five, it’s sort of a… Like when it’s your choice, I think it’s just one of those things where you’re like, wow, this is hard, but it is really gratifying. You would never want to click into someone else’s life. You don’t want to look at someone else’s life and say, oh, I wish I could just push a button and be there because you wouldn’t enjoy it. You didn’t earn it. For me, I can look back at all the hardships I’ve had over the past two years and I’m really proud of where I am because of how difficult it was and how many things I had to overcome along the way. So that’s what makes it more gratifying, not the actual number in the bank account. But as Pat said, once you’ve done it and you can go count your money and you can be happy and you can be proud that way too. But I think that’s also symbolic of just the hard work you put in.

David:
Well, I’m proud of you too my man, because I get to record podcasts with you and you get to be a part of my life and that never would’ve happened if you wouldn’t have made that jump on your own trapeze. So thank you for doing that.

Rob:
Thank you.

David:
And to everybody listening, keep listening, keep fighting the good fight, keep inching forward and then taking the leaps when you can. You will never regret what you pour into real estate. This is David Greene for Rob “still paying his own medical insurance” Abasolo, signing off.

Winnie Wu of the investment bank discusses China’s economic outlook and the right short- and long-term approaches to the country’s real estate troubles.

Andrew Lim of the real estate investment manager says “we can’t be a leading Asian real estate investment manager if we are not significantly invested in China.”

David:
This is the BiggerPockets Podcast show 647.

Juliet:
Communication is going to be key and the ways that you communicate with various types of people, whether that’s listing agents, lenders, anybody you’re meeting that’s an investor, letting people know what you’re doing and what you’re here for and how you can maybe help, what’s the best way that you can apply yourself, those are things that I’ve been learning as a real estate agent and investor that’s what I am all the time. I’m just that person. This is what I do. This is who I show up as and that has led to opportunities for me in various ways.

David:
What’s up everyone? This is David Greene, your host of The BiggerPockets Real Estate Podcast here today with my co-host Rob Roberto Abasolo. And we have a banger, as Rob would say, of an episode for you. I also need to figure out some way to work in POV into this intro because that’s another one that Rob likes to drop a lot. I’ve been watching him on YouTube as you should be as well. And I’m picking up some tips here about my new co-host as we develop the chemistry that Brandon and I used to have in order to bring you the best freaking podcast we possibly can, which we do today. In today’s episode, we are interviewing Juliet Lalouel, who is a real estate agent in Hawaii, who also works in Denver. Has had several businesses in the past and is crushing it in the real estate agent space and teaches us what she learned from her past that led to her being successful today and how she helps her clients make money. Juliet is also involved with Heavy Realty, which is an organization that is designed to help bring musicians into music, which is very cool because the more musicians or other people we can get into the BiggerPockets space, the better. Rob, what were some of your favorite parts of today’s episode?

Rob:
First of all, let me just commend you because every time you give these intros, it sounds like you’ve pre-written their bio and you’re just reading it off your screen but I know you’re just riffing all that. It means you were paying attention during the podcast. So you are doing your job well, my friend. But yeah, today was awesome, man. Juliet was really, really great and opens up. I really like whenever people open up on the podcast. She talked a lot about tonality, which is actually something I don’t really think we cover a lot, but basically how we talk to people, whether it’s via text or on the phone, how we relate with them. How we can be more empathetic with people versus just trying to get a sale or trying to be too pushy. She gives us a couple of really cool tips on how to cold call and actually be effective in that capacity.
But she also went through a lot of her story about how she got her start as a new realtor and how she joined a team who I think you said is top 1%, 2% of teams because they were pulling in I think $75 million a year or something like that. And she was like, “You know what? This is really great, but I’m going to go off and do it on my own.” And then she was also crushing it on her own. So really just overall inspirational top to bottom.

David:
Yeah. And this stuff is applicable to people in many different facets. You have a job, you want to get a raise and do better. You want to have a stronger communication with your romantic partner. You want to have better friendships. You want to start off as an entrepreneur. You are an entrepreneur and want to do better. There’s tons of scenarios here where this information can really help you succeed. And thank you for the comment about my riffing. I have been called the Eminem of real estate and it’s because of my freestyle ability. Today’s quick tip is-

Rob:
Well, and you know what? My POV on that is that it’s really … You did a good job.

David:
Very nice. Thank you. For today’s quick tip … And we’re back. Head over to biggerpockets.com and check out the forums. In the forums you can get a free education. Check out the questions that people have written there, as well as ask your own questions yourself. This is a huge resource. I don’t think that there is a website in the world that has a forum that is as well developed and intentional as BiggerPockets. You may be able to go to a website like Reddit, where they have a whole bunch of different things, but BiggerPockets is the only place I’m aware of and may always be the case that you get this much free information. And you could just check it out. Super easy to see. Ask any question that you want.
All right, Rob. Before we bring in Juliet, do you have any last words?

Rob:
Not today, David Greene. You’re not stumping me on this one. Let’s get right into the episode.

David:
Juliet Lalouel, welcome to the BiggerPockets Podcast.

Juliet:
Thank you so much for having me. I’m so excited to be here. I’ve been watching this podcast for so long, so thank you.

David:
Yeah, that’s cool that we get to interview today and you’re coming from the state of Hawaii where Brandon and I both spend quite a bit of time. Rob, I don’t know. Have you ever been to Hawaii before?

Rob:
I’ve been one time. I went to Maui and it was very, very beautiful. It was as beautiful as they say. We just hung out on the beach literally the entire time.

David:
I think Hawaii is one of those places, I guess depending where you go, but I’ve never seen a place that wasn’t, that you can’t overstate it. A lot of places, you’re like does it really live up to the hype? Hawaii 100% does.

Rob:
So really quick, can you actually just give us a quick rundown of what Heavy Realty is?

Juliet:
Yeah, of course. Heavy Realty is where the music industry and the real estate world combine. I’m trying to create a community where we can educate musicians and music fans in anybody that’s affiliated with the music industry in some way, shape or form on the importance of real estate, real estate ownership, investing. This is that space for them. I had found that this wasn’t really existing before. And a lot of people, whether they’re musicians or creatives, were maybe king for a day with income and then broke for a month and they didn’t really have a proper place to really allocate money that they would get, whether it be from on tour or selling some form of art, things like that. This is where I’m trying to create a place to educate those folks so that they can really understand the importance of real estate and really turning them on to BiggerPockets. Getting them aware of what we’re all about and trying to build wealth here is what I’m trying to really connect them with.

David:
I understand you sell a lot of houses and you’re doing it from Hawaii, but they’re not all in Hawaii. So do you mind telling us a little bit about what your business looks like right now and how you’re able to do this from Hawaii?

Juliet:
Sure. Yeah. I have been doing real estate in Hawaii since 2018. I have been part of a team. I was a founding member of a team here that was a top 1% in production and we did over about 150 million in sales. And I recently branched off to become a solo agent following the path of why I always got my license, which was to primarily work with investors and then become an investor myself. So that’s what I’ve been focusing on is really working with that group of people while still also very much serving the retail sales type, but really branching out into more investor work this year. And starting my first flips in Hawaii, which has been very exciting. I’ve opened escrow last week on a project and we just had a home inspection yesterday so those are some of the things that I’ve been working on.

David:
That’s fun. So are you still working on that team now?

Juliet:
No. I’m not on that team now. I went solo in about September of 2021 and I’ve been solo since then.

Rob:
Juliet, did I hear you correctly saying that your team that you were on from the real estate side, you guys were clocking in about $150 million in transactions every single year?

Juliet:
Not every single year, but that was over the last two and a half years that we did. It was basically a small team that I was partner on and we would bring in newer agents and then build up a lot of production over the last two years.

Rob:
Yeah. That’s still pretty impressive. David, how common is it for a team to be pulling in those numbers two years in, or over a total of two years?

David:
Would this be 150 million over two years? So around 75 million a year?

Juliet:
Yes.

David:
Yeah. That would put you in the top 1%, 2% of all teams in the country most likely. It also depends on how many agents they have. There’s a handful of teams that have 70 agents and then they brag about that numbers or there’s some teams that do it with three. So I think that matters too.

Rob:
Yeah, that’s amazing. I’m curious. I mean, you guys were obviously crushing it. You’re in the top 1% or 2% as David said. What made you branch off and do your own thing?

Juliet:
I had been helping build the team up, which was something that I had not necessarily seen myself doing long term because I wanted to always branch out to become an investor and work on my own things and work in that direction. I felt like it was just the time was right for me to branch off and do my own things. I had started out on this team intentionally after I had mentored for six months under a very, very high production agent as well, and then was recruited onto this beginning team. Learned everything that I felt I needed to at the time. I really wanted to be on a team when I was new and grew my business. And then I started to look at where all of my business was coming from. And it was really from my sphere of influence and a lot of the work that I had been pulling in. So I realized at a certain point, I didn’t need a team any longer. I was getting a lot of the leads on my own, that type of a thing. And so I felt like it was the right time to branch off and start to build my own thing, which was the goal.

Rob:
Right. I think that’s even then still pretty tough for an agent to be pulling in so many leads. So I’m curious. I’m sure there are a lot of realtors that could get some value out of this. What was that tipping point for you? Was it social media? Were you paying for marketing? Were you partnering up with different businesses? What was that funnel to get those leads over to you?

Juliet:
Sure. I actually did a few different types every single day, whether that was going to be cold calling. Early on I started doing that right away. I just felt like it was something that I needed to really dive into. And then I was doing some pay per click leads, so online leads that would come in, which is something that I feel as a script I developed very well to retain leads that didn’t know me at all. Especially living in Hawaii, you have so many people calling from the mainland from all over and just getting really good at nailing those first five seconds and basically acting as their agent and retaining that lead. That was something that I was really interested in trying to be good at as well. And then networking. I didn’t know anybody when I moved here so really networking was very important.
And honestly, one of the first ways that I made business for myself was just simply making friends in my sphere. And I used Bumble BFF, which is actually a dating app for friends. And that was naturally how I just wanted to try and make friends here instead of going to bars or something like that. So I naturally made connections and I was always remembering to not be a secret agent. So I would just let people know what I did, what I was interested in and that flourished into business and then referrals came from that.

Rob:
I think people really underestimate the power of putting yourself out there. We just had Amy Mahjoory on the podcast and she talks about how she has a four second power pitch. If I remember correctly, it’s 13 words and it was something like I teach real estate investors how to make double digit returns or something like that. And it’s funny that you say that. That you have a five second pitch to get in there and make it known. A lot of people will be very surprised because at the end of the day, your circle of influence and your friends and your peers and everything like that, they want to support you so if you make it known that you’re in real estate, whether or not they’re looking to buy a house, they’re probably at the very least going to send someone over your way. So that’s really cool that you were able to do that. I’m curious. Obviously going off and doing your own thing is a very scary thing, especially if you’re leaving a team and everything. Was there any dissonance or any … I don’t want to say resistance. But difficulty transitioning and going into just a one person show?

Juliet:
I think that I had mentally prepared myself early on to what I would do if I went solo and I was thinking about all of the tools that I would need to carry on myself that we had in our team and then find new tools that maybe work better for what I was trying to do. Tools being like dialers and all of those things. The proper CRM. And really actually asking questions to people that were doing it on their own. What they would advise. And some of the best producers … One of my colleagues on Maui, he does an incredible amount of production and he’s a solo agent and he’s just got an admin. An assistant that’s helping him with all of the day to day and paperwork and things and I realized that was going to be the best way for me to scale properly was to not necessarily, not build a team, but build certain types of assistants and admins for specific things so I could be in multiple places in a sense at one time.
For example, getting a VA that was going to be helping me with a lot of admin and backend stuff. Operations manager, to make sure that I’m where I need to be and that my schedule’s looking proper. Those types of things were what I felt like I would need to have going solo. And I think that came from just understanding that this was going to be still a business that I needed to run and operate, and it would fail if I didn’t do it correctly. So it was in a sense intimidating, but it was also very exciting and it was something I felt like I was ready to do with the right people. I knew that I couldn’t necessarily in a way do it literally all by myself, but I still needed to ask for help and leverage myself.

Rob:
Totally. So you’ve mentioned VA. Can you just define that for the people at home and what that VA does in the capacity of your business?

Juliet:
Sure. Virtual assistant. That’s somebody for mine … For me, pardon me. They live overseas. They’re from the Philippines and they’re doing a lot of my work on my CRM system. So basically helping me with sending out messages that I type up and I navigate them on how to communicate with some of my people. And they send a lot of emails and text messages making sure that people are getting responded to because timing is everything. In this market and always, it’s always important to be very responsive. So they help with that. And then a lot of cold calls and things like that. Again, I’ve had VAs in the past where I’ve let them go because I don’t think they understood the importance of tonality and all of that. That’s incredibly important over the phone. So having a VA that’s good at that. That’s what I’ve been hiring as well to help me with cold calls and helping me build up those types of leads.

Rob:
Awesome. Okay. So you were part of this awesome team. Top 1%, 2%. You branch off. You do your own thing. You start putting yourself out there. You’re on the Bumble BFF app, which is really great. I don’t think I’ve actually heard that one before. Pay per clicks, all that stuff. And you’re assembling this team around you that is going to enable you to really start propelling. So I’m really curious. How did this end up leading to your first deal as an investor?

Juliet:
Ever since I’ve been in real estate I had in my mind’s eye that I was going to be an investor. I had owned my own house prior and I really saw the value of working on a home, selling it and the profit that can be made. So when I got my license I was on this team knowing that was going to be the type of projection that I was going to go. And so I basically put myself in situations where I’d be around investors. I think opportunities came to be where I would meet the right person at the right time and take advantage of that. I was showing somebody a property who I knew was an investor, and it was a total fixer upper property. And I just made sure to make the connection and do a mini little interview right then after the showing. I was like, “I know that you might work with other realtors. I understand that. But I’d love the opportunity to really help you.” And with that in mind, I wanted to try to wedge myself in that direction. And it naturally navigated that way.
I’ve had a number of deals with this one investor and still to this day do. And as I became more involved in this network of investors and being an investor friendly realtor, I met more investors like that. And agents then would start to realize that’s the type of properties that I go after. So other listing agents started to call me for a fixer upper property that they had because they knew that was something I was interested in. And that’s honestly how I got my first deal is I had an agent that was letting me know about a property that was coming onto market because she had received an offer from me prior and I had a really good connection with her. So she let me know of this listing that was coming onto the market and I put that all together, put a package up and in a competitive situation, got that property. And that’s how I’ve gotten under contract for my first flip and getting into that direction. So it’s been very exciting.

Rob:
Yeah. Just so I understand this, with the investor that you worked with the first time, did you do a deal with that investor and then that led to you then going off and doing your own deal? Or was it just the overall interaction with this investor that got you fueled up?

Juliet:
I did many deals with him. And I’ve done many deals with him throughout the last couple of years. And that has then catapulted into working with other investors in the area and just being part of this network and this community. So it’s just naturally woven itself to where I am now.

Rob:
Right. And so when you got into this deal, were you … Because I think this is something that a lot of realtors come to a moment of realization where they want to be real estate agents, but they also want to be investors. And there’s this moment where you have to ask yourself, how do I pay myself? Do I pay myself all of my commissions? Do I start breaking off some of those commissions to start investing? So I’m curious, how were you able to fund a deal like this?

Juliet:
I was able to fund a deal like this because of a HELOC actually. HELOC was one of the first things I learned about when I was working on my property and I learned it quite late after I’d owned my home for a long time. I finally learned what HELOC was. So for this specific deal, I’m using a HELOC now because I’ve got a property in Waikiki that I own that has a lot of equity and so I’m able to pull from that and be a part of this transaction. I also have good relationships with hard money lenders and private lenders and things like that that I’m probably going to utilize for my next one.

Rob:
Okay. So that’s a little tease for the deal deep dive a little later. I’m curious as someone who is both an investor and a real estate agent, have you read any of the late great David Greene’s books? He’s got several books on how to scale and how to develop your skill as a real estate agent. I’m pretty sure that’s correct.

Juliet:
I actually have read Skill. I have Skill on Audible. Yeah, it’s really good. Because I feel like I’m doing that in real time. This book is very, very helpful for exactly what I’m doing, what I’m trying to build and is going to be so helpful for people I’m trying to help down the road. Giving them a copy of this. Being like, this is pretty much exactly what you can do. So I’m reading that one.

Rob:
Nice. I’ve been trying to get a signed copy from Dave for about four months now, but he just … He’s very exclusive with who he gives his signature out to.

David:
That’s exactly right. Keep working at it, Rob. I just want to see how bad you want it.

Rob:
I know. I text you 10 times a day. So Juliet, I mean obviously you have a very storied past here and a lot of experience, so I’m curious, can you share with us some of the lessons that you’ve learned as this dual real estate agent, real estate investor out in the world today? I know that you’re investing and doing real estate in a bunch of different states, so I’d love to hear from you anything that you’ve picked up along the way.

Juliet:
Yeah. As a real estate agent and investor, all of this is operating your own business and I have really learned that communication is going to be key and the ways that you communicate with various types of people, whether that’s listing agents, lenders, anybody you’re meeting that’s an investor, letting people know what you’re doing and what you’re here for and how you can maybe help, what’s the best way that you can apply yourself, those are things that I’ve been learning is as a real estate agent and investor that’s what I am all the time. I’m just that person. This is what I do. This is who I show up as. And that has led to opportunities for me in various ways. And I have been able to meet some wonderful investors that are helping me learn this path, including watching things like BiggerPockets and things like that. But it is in turn helping me to help either newer agents or people that do want to get involved in investing like I do. And also helping communities that I feel are maybe not getting the reach of the importance of building wealth through real estate.
I’ve started a network that basically is … Well, it’s more of a community that is focused on helping musicians and music lovers alike really understand the importance of real estate and building wealth that way. So that’s something that I’ve been working on. And then I had a bicycle business before that really helped me understand what it was to be an entrepreneur and waking up every morning and just having your head on straight and having a schedule, having a routine, doing all of those things to build your business. That was very important. I had business to business relationships at that time as well that were very important that lead to what I do now because a lot of it is just a lot of moving parts between people. And I really enjoy the marketing side of those things too. And that’s what you do as a realtor. You’re marketing yourself in such a way.

David:
I’m a big proponent of taking a big goal and splitting it up into smaller steps. So what that would look like practically, someone listens to a podcast like this and they say, “I want to get 50 rental properties in this area.” And that’s their first goal. Well, you probably don’t have the skillset, the experience, the confidence, a lot of the different pieces you need in this recipe to go own 50 rental properties. That doesn’t mean you can’t do it. It means it is a journey to get towards the goal. And really that’s when things are the most fun. But if no one ever explains that to people, they go try to do it, it doesn’t work out. They don’t raise money, then they quit. They’re like, “Oh, I guess I suck.”
But what I find is successful people have a story much like what you’re saying, Juliet. They went through several different things, had varying degrees of success in those, but all of those became a stepping stone that helped lead them towards the path where they really wanted to go. So do you mind sharing a couple practical examples from different enterprises or businesses that you either owned or worked in and how those experiences or lessons led to success in another area so that we can paint a picture for people that they can understand it’s okay to go through several different phases before they hit their ultimate goal.

Juliet:
Yeah, I mean, absolutely. I agree completely that what I’m doing now had so many stepping stones that I did not see connect whatsoever in the past. Had you told me that those would’ve all lined up to what I do now, I would’ve never thought. But early on I had been working at a restaurant in the service industry and I had been doing bar and that type of work for a very long time. And those types of skills of just communicating extremely clear and being really good at reading people and providing excellent customer service because it was a higher end restaurant, those types of things were very crucial that I did not realize. It was a job I knew I had to grow out of one day because I, like you’re saying, I had a very far away goal of what I wanted in life. And I had no idea how I was going to get it. And at that time it didn’t really seem like I was going to ever get out of this position.
But as a server, as a bartender, I was going to do my best to learn everything I could to be great at it. And then that honestly opened up … Literally opened up a door into my first business opportunity, which was a bicycle brand and bicycle shop that I started selling out of a three car garage and was doing that nationally and had to learn all of that. It was a three car garage in a house in a nice neighborhood, but still a garage no less. And so I learned everything about online marketing, online sales, what that looks like and the communication that’s very crucial there. And all of the marketing for that. Photography, even I was doing. Just all the hats. And then I outgrew that three car garage and I was able to move that into a brick and mortar shop and turned that into a retail store.
And I was able to really understand how that works and the retail side of things. And I mean, that led into working as a realtor in a sense because it’s sales and the psychology of sales and I was studying a lot of that at that time. And it’s basically … A lot of it with, say, buyers for example, is it’s a product. Whether it’s going to be a bicycle or a house, you’re helping them purchase something. You have to know what it is that they like, the styles, how are they going to use it, how long do they want this for, that type of thing. And you build it up and then you help them throughout that process of obtaining it.
So it was on a bigger scale that my bicycle shop led me to really be a good realtor. And all of those skills prior led me to be decent at real estate because I understood the value of reading people really well, understanding how to position myself, my tonality, all of my body language, everything that’s incredibly, incredibly important. All of those things matter severely. I still, every day, even with people out and about, that’s something I’m always thinking about is the tonality that someone else has, I have reading into that and how can I position either myself better. All of that is really important.

Rob:
So Juliet, you actually mentioned this earlier with your VA and I think you mentioned that you maybe had to let a VA go due to just not really understanding the importance of tonality. So I actually want to just jump into this a little bit more and ask what do you mean by this? Do you mean actual verbal tonality that’s in our voice or tonality that is relayed through text or both? How does this actually pertain to your world as a real estate agent and investor?

Juliet:
Both definitely, in text and in tonality. And it works whether you’re trying to do wholesaling, being an investor, being a real estate agent, all of this stuff. I mean, in today’s world, you have so many people coming at you with robots and bots and all of this stuff that makes you seem not like a real person. And so how can you be human as fast as possible to these people? You want to come off like you’re a real person actually trying to help them, which is the big, big key that a lot of people maybe don’t have projecting out of them in the beginning because you need to come from a place of service. Seeing how you can genuinely help people, having them read that right away and not have them feel like you’re just trying to get after them for something or low ball them in some way. I mean, all of those things. So that’s really important in both text and over the phone, in person, all of it.

Rob:
Yeah. So it’s basically reading the room and trying to empathize with people instead of keeping it strictly transactional. Is that what you mean?

Juliet:
Yeah. And having a sense of emotional intelligence is extremely key. Having a control of your own emotions when you’re having these conversations and being able to indeed, yes, read the room and then how can you respond best that’s going to be the most strategic to either get them to understand that you’re coming from say this place or to get you to … Whether it’s a listing appointment, getting them to a yes in some way. All of those things are going to be really, really important and on a micro level all the time, in my opinion.

Rob:
Right. It’s it seems like it’s somewhat of a tight rope. Where you want to push the sale a little bit. I mean we’re in business, but you also don’t want to be too pushy. David, I’m curious on your end, man. I know you train a whole real estate team on your side of things and a lot of that goes back to the David Greene name. And obviously how your agents work and how they perform their jobs is a reflection on you. So is there any training or mentorship or anything like that that you instill in your realtors to make sure that tonality is always being … I don’t know. I guess passing the David Greene test as extensions of you?

David:
That’s always the hardest thing is when you start a team … And Juliet, I imagine with the success you’re having, you will probably go from being on a team to being solo, to starting a team. And that’s what the last book in the series that I write for agents will be about. It’ll be called Scale and it’s about how you build a team and have passive income. You’ll find that the biggest hurdle is that most people don’t realize it, but subconsciously they have what I call a W-2 mindset. Which is it’s someone else’s responsibility to do everything and my goal every day is to get paid as much as I can to do as little work as possible. And I know that sounds funny to say it and when you’re in the matrix and you live in the W-2 mindset, you don’t realize that. People might even be offended that I would’ve even said it. But when you escape the matrix and you become the business owner, it becomes very clear how everyone is trying to put as little effort as possible to not get fired while getting as much money as possible.
And it’s actually the opposite of what successful people do is they say, “I’m going to do as good of a job as I possibly can and when I get good at this, I will then ask for more money because I brought more value.” That’s the biggest problem that you have when you have employees that they’re fighting that urge to try to do it legitimately. You look like you have something to say. I’m going to let you jump in actually.

Juliet:
Yeah. I couldn’t agree with you more on that W-2 mindset. I was just talking about this the other day. To me, I call it just the employee mindset where you’re just happy to clock in, clock out. You don’t want to think about anything after you’re done. And sometimes the workspace needs that. Sometimes I need employees that basically are going to stay. They’re going to be good worker bees, all of that. But I mean, that makes a significant difference in real estate. As a realtor, to me, you have to have this CEO mindset. The entrepreneurial mindset. You have to be thinking big all the time. That’s how I think. I think about how can I maybe own this type of business myself? How can I grow? How can I scale? When I have noticed that there are certainly people that I have had on my team or in my bicycle shop that are just employee mindset, didn’t have any sense of growth, didn’t want to take responsibility for anything.
And I mean, something that I learned from that that applies in real estate also as an investor, is when people have that mentality for me, I want to let them go. I like to have the fire fast policy. Hire slow in a sense. But I think it’s important to weed that out and maybe see who’s going to work for you, who isn’t? Who’s going to work well with you, I should say.
And if it’s not working, you can only try so much with some people, but you’ve got to get rid of it. Same with a contractor. If you have a contractor that’s giving you red flags or what have you, you got to get rid of them in my opinion early so you don’t run into a problem longer. I mean, and that’s the same thing that can ruin your business is keeping either bad employees or bad team members that are going to weigh you down in some way.

David:
Yes. Now, when it comes to the training that I give people, I often find … This is why I started with that. There’s this wall of resistance that they don’t want to get training about their tone, how to connect with somebody. I believe it comes from this deep seated subconscious belief that it’s not my job to make them feel welcome. It’s not my job to anything. I’m just here to sit at my register and punch in. When they choose the bike they want, I’ll say, “Okay, I’ll make sure they pay.” If you think about how much value you’re bringing to a company to make sure that the credit card goes through, it’s not very much versus what you’re looking for as the owner of ask questions to find out what bike they would want. See if you can maybe upsell them to a better bike by showing the values that it would have. These are all the things that make a company make more. And when a boss sees that someone’s doing that, now they can afford to give them a raise because that person has justified it by bringing more revenue into the company.

Juliet:
I mean, on that note for me, whether it’s real estate or say retail or the bicycle shop, it’s also the experience that you’re providing to the buyer. The experience that they have say, walking into the store or doing showings with you and going through a transaction, really going above and beyond and making them really like you and like everything about you. Even if the transactions say went sideways on a couple points. By the end of it, the whole goal is that they liked you so much and even if it was crazy, they’re going to refer you out. They’re going to come back for more, those types of things. I mean, that’s how I’ve been able to work with investors on repeat. Having that type of repeat business. Because I dedicate myself to making sure that it’s going to be a really good experience, even if it’s a difficult situation and that sets people apart.

David:
That’s another problem you have on the team is the I have a person that comes to me and I really want to make sure they get what they want and I have a skilled person who has all the knowledge, however, that person thinks, “Hey, it’s my job to close this deal and get paid.” They’re not thinking about it’s my job to make sure this client comes back to me again for a referral. And that’s one of the things that makes scaling a business very difficult is it’s honestly the attitudes of the people that work there. Which is funny because this is why automation software … Like why McDonald’s is trying to replace their employees with this kiosk type of a situation. That attitude is what leads to it. But to answer your question, Rob, there’s a book called Pitch Anything that I think is fantastic when it comes to the psychology of sales. The title is a little bit off putting. I don’t really love it. That’s why I didn’t read the book for a long time. But he talks about basically how to communicate your message to somebody else in a way they will understand.
And one of the concepts in the book has to do with the way that the human brain receives information. I’m going to throw this to you Juliet to expand on it. The first is what he calls the croc brain. This is your reptilian brain. This is the part of your brain that just makes sure I’m not going to die. The only concern it has is I’m not going to get hurt. I’m not going to die. So the first time we receive any form of stimulus … You walk into a bicycle shop and a person says, “Hello, can I help you?” The first thing they think is, “You just want my money. I’m fine. Thank you. Leave me alone. I don’t trust you. I don’t know you.” That’s normal. That’s what the croc brain does. You hear a loud sound, everyone jumps. They don’t get all excited and say, “Oh, Santa’s coming down the chimney with presents for me.” They go, “Oh, someone’s breaking in my house to kill me.” It’s always the first thing that you think.
If you can get through the croc brain, the next part is the mid-brain. And the mid brain’s job is to take that stimulus. Compare it to other things in the same environment or in a social setting and then gauge, how does this compare to other stuff? So example, you hear a really loud noise and then the croc brain jumps. The midbrain goes, “Oh, that was a bang. It’s the 4th of July. That’s normal. You can calm down.” You heard that same noise not on the 4th of July at three in the morning, you might, “That’s gunshots. I need to be worried.” So the midbrain needs context. And this is something realtors screw up with all the time. They find the best deal ever. They send it to the client right away. The client’s croc brain goes, “Ah, I don’t want to buy this deal. What if it’s a rip off?” But they finally get past that and they go, “This looks great, but what if there’s something better?” They haven’t compared it to all the other houses out there. Whereas if I send you 10 houses that are mediocre and then you get the deal of this century as the 11th one, it looks like the best option for you versus if I just sent it first. Realtors screw this up all the time.
The last part of your brain that processes information is called the neocortex. The neocortex operates in logic, reason, math. What we’re talking about right now. And it only happens after you’re safe and after you’ve compared this stimulus to everything else, which is where most people start. They go, “Hey, I’ve got a deal. It’s got this much ROI. It’s in this great of an area.” They give you all of the initial information. Maybe your employee at the bike shop says, “Hey, welcome to the store. Let me show you the best bike we have. It’s the best deal.” And they go into this, “Here’s the metrics of it. Here’s the stats. Here’s why it’s a great bike. Here’s why it’s better.” And the person listening’s like, “I don’t trust you. I don’t know you. I’m not hearing anything you say.” They haven’t satisfied the croc brain and the mid-brain before they got to the neocortex. So if you can get employees to understand that, they will be super successful. The W-2 mindset gets in the way and then you have to be disciplined enough to work your way through those steps. Is that something you found similar in your business Juliet?

Juliet:
Yeah, absolutely. It reminds me of the Thinking Fast and Slow by Daniel Kahneman. All those types of things. But that gut reaction that people are going to have and disarming that is very crucial right away. Disarming people the best that you can. And then indeed packaging whatever it is that you’re presenting. I couldn’t agree with you more. Whether you’re going to show them five mediocre homes and then the one that you’re going to show last is the big bang type of a product. Or you’re going to have everything built up in such a way after you disarm them to get them to reason and understand why this is going to be a really good option and deal for them to move forward on. You’re going to package it up all the right way. To me, needs to completely be premeditated. These steps, just like you’re describing, need to be premeditated on how you’re going to communicate with people almost in anything that you’re trying to get done. Understand that this is going to be their initial reaction. How can you disarm them? And then how can you package whatever it is that you are trying to convey with them in some way?

Rob:
Yeah, that makes a lot of sense. I mean, I think this probably goes back into one of the things you talked about when you were first getting started as a real estate agent. You were doing a lot of cold calling. I’m curious, do you have any tips or tricks here as far as how to really, I don’t know, warm up someone. I know you said you had a five second pitch, but also any tips or tricks here that we can tactically apply from a tonality standpoint?

Juliet:
Sure. Well, first tip is before you even get on the phone, it’s going to be your mindset. Always. It’s going to be what people say. Get your head in the game in the right place. And for me, I’m going to be probably blasting some type of music to get me into a power place. And then I get on the phone with these people. And the first thing is to, exactly what David was saying, get through that reptilian brain. They’re like, “Who is this? Why are they calling?” And I introduce myself in such a way … For me, I personally never say their first name on the phone right away, because I try to think of it from my perspective. Would I like somebody being like, “Is this Juliet?” I don’t like that so I don’t think that most people might like that. And so I usually try to execute the conversation by introducing myself quickly, say exactly why I’m calling. And then I like to even apologize. Like, “I’m sorry for the call out of the blue, but I was calling because …” And then I say, why I’m calling to, again, disarm them. Because some people get really upset right away if they don’t know who you are. So I always say, “Hi, my name is Juliet. I apologize for the call out of the blue, but I was calling because blank.”
And that opener has worked for me every single time. I’ve never gotten hung up on. And I say it purposefully with a very human tonality. Friendly. I’ve got a smile on my face, all of that. And then once I start talking to them, I gauge their tone and do that mirroring, matching. Try to see where they’re at. But I always have that friendly opener and it works for me. And I discovered that early on that was very important. So I just kept doing it and it’s been working.

David:
Yeah. Because you’re dealing with the croc brain. I can’t stress enough what you’re saying there. The importance of that. This is what I’ve noticed. When I start talking to you, I’m speaking out of my neocortex. I’ve already felt safe. I’ve already looked at everything else and I’m giving you logical reasons why this is the best thing. But it’s narcissistic, because I’m not thinking about what state of mind you are in. When I go to call you and I make this offer to buy your house, I’ve already run numbers. I’ve looked at it. I know that this is the best option for me. I feel good. But you’re like, “Who is this person?” And you don’t hear a thing I’m saying until you feel like I trust why I know your motive. And by saying I’m calling because, you’re just putting your motive right out there on the table, which shuts up the part of their brain that’s like, “Who are you? What do you really want?”

Juliet:
I always try to answer their questions first before they can even ask me. I know that they’re going to be asking these things because I put myself in their shoes. What would I be thinking? What would I be saying to myself? What would I want to say? So I just structure it that way. How would I want to be spoken to? I’m sure this is what they’re probably feeling. And I will admit a lot of the stuff is feeling based. A lot of this stuff is so human. So we really need to navigate through their emotions and how to help them with their emotions about us. And that to me also works for clients and everything.

David:
So when it came to that emotional intelligence of putting yourself in someone else’s shoes and understanding, this is probably what they’re feeling, I honestly think there’s some human beings like me for most of my life, I just didn’t understand that. I did not know how to tell what somebody else was feeling. I only knew how I worked and I just stumbled my way through life, butting my head against brick wall after brick wall, not being able to understand it. Books like this is really what helped me. Did you have an experience, a mentor, something that opened your eyes to this fact that maybe seems natural to you, but to people like me, I just never got?

Juliet:
This is maybe going to sound a little bit odd, but I think as I’ve been analyzing myself … Because I’m always trying to think about what I’ve been through and what could I do better. And I think that a lot of this maybe emotional intelligence comes from a lot of the trials and tribulations that I’ve had since early on. I come from being raised by a single father. My mother left when I was seven. I think I struggled with a lot of things at an early age that way. And then as I got older, I always felt a little bit lost, but I was very sensitive to knowing that I wanted something more for myself, but I didn’t have a role model. And then when I started working at one of the last restaurants I worked at for many years, I met my mentor and she was an incredible person that was really teaching me a lot on where I wanted to be in life because I was very aimless and I was honestly in a very dark place. I did not see a lot of things for my future.
And I think as I’ve collected a lot of these hard experiences, including abusive relationships, things that I’ve been through and then gotten over, those things have helped me to be a better realtor, person. To understand maybe where some people might be coming from. To know how hard things can be. That type of thing has opened my eyes to other people. I think it’s given me probably a sense of humility that sometimes I carry too much but that’s something that I’m often very hyper aware of is other people in this sense. Because I know how it can be when maybe you don’t know where you want to go in life and what you want to do or maybe there’s people that just need help with their assets and they don’t know what they can do with them.
And that’s one of the reasons why I also started Heavy Realty was to help people who might not understand that they can do something with real estate that’s going to give them a bigger drive in life. Because for me, I didn’t know what I was going to do until I found real estate. I found real estate and it all of a sudden became something I was naturally really good at. Dealing with people, understanding business and that type of a thing. And it honestly gave me a lot more purpose. So that’s been something I’ve been hyper aware of and trying to help people with.

Rob:
So a lot of people have difficult pasts and that will a lot of the times get in the way of ever really following a dream or pursuing real estate. Obviously you’ve become very successful in the world of real estate. Whether it be realty or investing. So I’m curious, when you were wanting to get started in the world of real estate, was this something that was holding you back or had you already conquered a lot of this and that’s what led to your success?

Juliet:
I’ve been trying to work on a lot of the problems as they arise. I like to try to put out fires as they come. The things that I’ve been through I’ve honestly tried to work on and not dwell on. I don’t ever try to be a victim of circumstance. So really taking ownership of things that I can, and then honestly, working through things that maybe was something that was external. I think that seeking therapy and having the right friends and being around the right groups and influences of people is incredibly important. Having a mentor in business was crucial for me and in a way saved my life because I was able to really focus on the good and fun things about what it could be to be a business owner and those types of things. And that motivation to become that type of person and have financial freedom … Something I never thought possible was … It was so strong that I wanted to make sure that I dealt with anything that might hold me back as I went on.
So whatever that was, if it was something that might require therapy, might require the right group of friends, might be reading the right books. All of those things were very important to make sure that I squashed and learned from all of these experiences. And to me, that’s what I’ve done is I’ve learned from all these hard things. I remember them and you learn from your mistakes, just like you do with investing in real estate experiences. There’s so many things that can go wrong, but learn from it. Don’t do it again and carry it with you and then teach others about those things that you’ve been through and what you learned and how you overcame those things.

Rob:
100%. I make mistakes all the time, every single day. I’ve made many mistakes in my real estate journey and I still make them today. And a lot of people are like, “What are the big ones? What are the ones you’d take back if you could go back and change that one thing?” And I’m always like, nothing. I wouldn’t take it back. I’m a lot smarter for it and today when things happen … We have a lot of things going on. We just bought a 20 unit hotel and me and my partner, there are a few things we missed here and there, but for the most part we got it to the finish line. And every time there was a moment where we felt like, “Oh man, we should be freaking out.”, I was just like, “No, it’s cool. It’s cool. Because it’ll never happen again because we’ve learned from it.” So I think very, very wise and very profound. So I appreciate you opening up-

Juliet:
I think on that, something that really has helped me with things like that, whether it’s in the work or personal space has really been, I love stoic philosophy and trying to always have emotional intelligence that way and learning from experiences and not regretting things that have happened. Having a sense of regret and just carrying that with you is just so damaging. It can really limit you in any type of business that you try to expand on or any type of relationship you try to build. So really just analyzing it. Looking at maybe what you did wrong, what went wrong that was out of your control and then moving forward from it. But never forgetting fully, but not regretting it. Just understanding that this is something that happened. I won’t make these mistakes again. If it does arise, this is what I’ll do instead. Those are very important things to do.

Rob:
Yeah. I mean it’s very necessary and it’s the only way we can grow. I sometimes wish I had a board of my mistakes on the wall just so I could be like, “Yeah, I remember that day. It was a bad day, but today I can laugh about it.” Not everything is something I can laugh but for the most part, I am thankful that … We’re lucky, right? We’re lucky to be in the position that we are being able to pursue our dreams in real estate and some days are good, some days are bad, but overall I think pursuing your dream is where it’s at. Again, thanks for sharing on that. I’d like to actually move us into the deal deep dive.

David:
All right, Juliet. What type of property is it?

Juliet:
Single family home.

Rob:
Okay. And how did you find?

Juliet:
Driving around. Driving around and saw a sign for sale by owner out front.

David:
And how much did you pay for it?

Juliet:
It was 179 and I had negotiated, I think, $20,000 off the purchase price.

David:
So you ended up paying 159?

Juliet:
Yes.

Rob:
Okay. And how did you negotiate it?

Juliet:
It was somewhat easy because it had been sitting for a long time for sale by owner. They didn’t have any good photos of anything. It was a very dark and gloomy looking house. So I was able to negotiate because it had been longer days on market.

David:
That’s the key. And how did you fund this deal?

Juliet:
This was a cash purchase.

Rob:
And what did you end up doing with this? Did you flip it? Was it a rental, a BRRRR?

Juliet:
This is actually something that was a primary residence of mine that I lived in for quite some time, but it took a moment to really chip away at it. It was definitely a fixer upper and that was what I had purchased it for in the first place. I thought I was going to flip it. I ended up living in it. And it had layers and layers of wallpaper. It was extremely well lived in. And I basically needed to remodel everything, exterior, interior. Everything, except for the roof. And I chipped away at that slowly. Then I was able to discover what a HELOC was. And I took a HELOC out to renovate that home after maybe owning it for about five years. And the house was in a really good neighborhood. It had started to already gentrify and cute homes were popping up and people were moving into this neighborhood. So I fixed it up and put it on the market and it sold I think in two days.

Rob:
So that was the outcome. What lessons did you learn from this deal?

Juliet:
I learned first of all and foremost what a HELOC was, because I didn’t know what that was at that time. I learned that and I also learned working with vendors. Hiring people to work on the home for a decent amount that did really good work. Interviewing a lot of people for that and starting to do project management since I did that on that property.

David:
All right. So in this deal, who is the hero on your team?

Juliet:
In this deal I would say that the heroes on my team were probably honestly all of the construction team. They were so easy to work with and I really had a great experience just because I’ve heard of so many horror stories of having the wrong people. So that was really probably what helped me the most was having a really good team working on the property.

David:
Well, thank you for that. Remember, you too can do more deals with the help of BiggerPockets deals and resources, which you can find at biggerpockets.com in the tools, in the nav bar. Thank you very much for that Juliet. We’re going to move on to the last segment of our show, which is the world famous-
(singing).
In this segment of the show, we will ask you the same four questions we ask every guest and see what you have to say. Question number one, what is your favorite real estate book?

Juliet:
My favorite real estate book is actually Never Split The Difference by Chris Voss, which is a book on negotiating. Because I’ve applied that specifically to my real estate work. All of the conversations that you have as a realtor with other realtors, with buyers, sellers, everything, you’re always in some type of negotiation and conversation ping pong. So that book has been very influential for me in real estate.

Rob:
And what about your favorite business book?

Juliet:
My favorite business book is Robert Greene’s 48 Laws of Power. I love that book just because it really involves so much of the human nature of things and that is so applicable to any business that you’re trying to operate. That would be my favorite business book.

Rob:
Awesome. And when you’re not out there investing and being an agent for people, what are some of your hobbies?

Juliet:
I am currently relearning how to play the piano and trying to work on musical instruments here in Hawaii. But otherwise I love hiking, doing things outdoors. But a lot of my favorite hobbies are going to be listening to music, watching good movies and reading books. Some of those sedentary hobbies, but I love them.

David:
In your opinion, what sets apart successful investors from those who give up, fail, or never get started?

Juliet:
I would say fear is probably the thing that separates those that are successful and those that are not. Fear just limits people so much and can put off good opportunities. If you don’t take a chance on something you might miss out on something amazing. So I think that removing fear and having the right attitude and surrounding yourself around people that are going to make you feel more confident is extremely crucial in order to really become a good investor or realtor or business owner, any of those things.

Rob:
Awesome. And lastly, Juliet, can you tell people where they can find out more about you on the inner webs?

Juliet:
The best place to find me is on Instagram, @JulietLalouel, and also @HeavyRealty.

Rob:
What bout you, David? Where can people find you if they want to seek your internetal knowledge bombs?

David:
Internetal. I like it with these new words that you’re coming up with. You’re filling in Brandon Turner’s seat very nicely. He used to do this all the time. You can find me online at David Greene 24. On YouTube at David Greene Real Estate. Or you can message me on BiggerPockets. Rob, what about you?

Rob:
Oh, you can find me on YouTube at Robuilt or on Instagram, @Robuilt.

David:
Juliet, thank you very much for sharing your story, your success, the ups, the downs, and most importantly, what you’ve learned. I’ve found it fascinating hearing you talk about the psychology of sales, emotional intelligence. How to disarm someone right away, which from my vernacular would be how to get through the croc brain. But that’s so, so important at every level when you’re talking to motivated sellers, when you’re trying to find new people to work with. If you’re a vendor in this space, if you happen to be the contractor, or if you happen to be the lender, this is all really important stuff. Love to follow your career and hope things keep going well for you. Do you have any last words before we let you get out of here?

Juliet:
No. Thank you so much for letting me be a part of this today. I really, really appreciate it.

David:
All right. This is David Greene for Rob, if he was a dinosaur, he’d be thesaurus, Abasolo, signing off.

Oisin Hanrahan, Angi CEO, joins ‘Closing Bell’ to discuss the company’s quarterly earnings results, the softness in the company’s roofing business and how closely Angi’s revenues are tied to housing prices.

Those not living under a rock for the past year could skip these opening paragraphs as they are well aware the real estate market has been on fire. They are also aware that inflation is out of control (and likely to stay that way), having hit 9.1% in June, the highest since the early 80s. On top of that, GDP shrank 0.9% in the second quarter of 2022, meaning we have had two negative quarters in a row, i.e., the United States is in a recession.

Add the stock market being down almost 20% year-to-date, the crypto collapse, near record low consumer confidence and labor force participation, along with strong indicators that the Fed will continue to raise interest rates.

Yet, as noted, real estate prices have skyrocketed in the middle of all this economic turmoil. In June of 2022, the median list price was up 16.9% year-over-year and up 31.4% as compared to June 2020! This chart really drives that point home:

So, are we about to see the real estate market collapse like it did in 2008? 

Well, for those who skipped the first few paragraphs, the short answer to whether 2008 is about to repeat itself is almost certainly not.  

Why This Time is Different (Although Still Bad)

There’s a cautionary saying amongst military strategists that goes something like “armies prepare to fight their last war, rather than the next war.” Indeed, there were calvary charges at the beginning of World War I. Then the French attempted to build an impenetrable super trench called the Maginot Line to prevent a German advance if a second world war broke out. When it did, the Germans were able to simply blitzkrieg their way around it through the Netherlands and Belgium, marching their way into Paris within six weeks.

A similar effect goes on when thinking about economics. Having lived through the real estate bubble of the late 2000s and subsequent Great Recession, this is the economic calamity at the top of everyone’s mind and thereby what many believe will see itself repeated in 2022. 

But our current woes bear much more resemblance to the stagflation of the 1970s and early 1980s. That “lost decade” saw low growth and high inflation throughout. And it required a pretty nasty recession in 1982 to get out of after Federal Reserve chairman Paul Volker jacked interest rates up into the teens to “break the back of inflation.” 

High inflation and low growth (or even shallow recessions as we have now) are probably what we have to look forward to for the foreseeable future. But an all-out collapse, particularly in real estate, is unlikely. 

For one, many of the scary headlines out there lack a lot of context. For example, as you’ve certainly seen in the news, mortgage defaults rose from 0.6% in April 2021 to 1% by the end of the year, but they are still way below what they’ve been over the last decade.

Property sales have also fallen 14.2% year-over-year from June 2021. But once again, starting at a date in such an extreme seller’s market is misleading. Sales are still above what they were in 2020 and about equal to 2019. The market was hot in 2019.

The real estate market was so ridiculously hot in 2021 that it had only one way to go. It literally had to cool off before prices outpaced all semblance of affordability. Fortunately, there are several major factors that should prevent any sort of collapse.

1. General Inflation

Living through the current bout of high inflation makes it as good a time as any to learn the difference between real and nominal prices. Nominal prices are just what they appear to be. Real prices take inflation into account. So, if inflation is 9% and real estate prices go up 10%, in real terms, values have only gone up 1%.

In other words, general inflation makes nominally high real estate appreciation rates less meaningful. Prior to the 2008 financial crisis, inflation rates were low. They most certainly aren’t low today.

Indeed, nominal prices for real estate were never negative during the 1973-1982 stagflation. They were, however, negative in real terms for several years and for the economically troubled decade. Overall they just about kept pace with inflation; not good by any means, but not a catastrophe either.

We’re likely to see something like this again. 

And while it’s not good for home prices to grow slower than inflation, a fall in real value is better than a fall in nominal value because of the way debt works, as will be elaborated on below. 

2. The Lending Environment is Different (and Better) than 2008

Everyone remembers the insanity that preceded the 2008 collapse. If you had a pulse, banks would lend to you. It was not uncommon to get 100% of the property financed with an 80/20 loan (80% LTV on the first mortgage and 20% second). Stated income loans (where you simply stated your income, verification optional) were all the rage, and the infamous NINJA loans (No Income, No Job, No Assets) were being handed out like candy.

I mean, why not? Housing always goes up, doesn’t it?

Then there were the teaser rates. Many unscrupulous lenders would offer very low starter rates for a few months or a year, and then they would rocket up four or five percentage points after that. On top of this, many loans started as interest only or were even negatively amortized, where the principal balance grew with each payment. These homeowners relied strictly on appreciation to have any equity in the home. 

So, when the music stopped, they had nothing to lose. 

Fortunately, with the exception of high LTV loans, most of this nonsense has stopped. The teaser rates are mostly gone and Investopedia notes, “NINJA loans largely disappeared.” 

The quality of borrowers has also indisputably gotten better. Before 2008, subprime loans were being made en masse. The Credit Union National Association states, “While ‘subprime’ isn’t easily defined, it’s generally understood as characterizing particularly risky loans with interest rates that are well above market rates.” 

The Credit Union National Association uses the Home Mortgage Disclosure Act data to determine how many subprime mortgages are taken out each year, and the number of such loans being made has plummeted since the crash:

Even the loan-to-value ratios aren’t as bad as before for two reasons. One, just about the most you can get is 96.5% with an FHA loan, which is at least something down. Two, given how much appreciation has occurred just in the last year, anyone who has bought a home a year or more ago has a substantial amount of equity in their property.

This means that even if the market fell 20%, the vast majority of people would still have positive equity in their homes. In 2008, with so many people having near-100% mortgages on properties that were collapsing in value, many fell “underwater,” where the property had more debt attached to it than it was worth. Thus, a vicious cycle began as many homeowners opted for “strategic defaults” because it simply didn’t make sense to pay for a property that was worth less than nothing. This caused the market to fall even further.

But as noted above, in a high inflation environment, it’s highly possible that real estate values could go down in real terms without going down in nominal terms. (For example, real estate values go up 3%, whereas inflation is 7%). Given that mortgages are unaffected by inflation, a nominal loss can make a strategic default the rationale option for homeowners. But a real loss that is still nominally positive will never make a strategic default the rationale option.

And again, we are in a high inflation environment, unlike the low inflation environment that preceded the 2008 financial crisis.

The other factor that made loans unpayable were the interest rates that shot up after the teaser rate expired. As noted above, those are mostly gone. But in addition, there are fewer adjustable-rate mortgages than there were in the years before the crash. As The Financial Samurai points out, only 4.7% of mortgages taken out in 2021 were adjustable-rate mortgages! The rest were fixed-rate.  

For comparison, back in 2006, almost 35% were adjustable-rate mortgages.

Thus, if the Fed continues to raise rates as expected, it will soften the market by making it more expensive to take out a mortgage, but most current homeowners won’t be affected. 

We’ve spent the past year refinancing all our investment loans with fixed-rate terms until at least 2027 to hedge against rate increases. My personal home mortgage is at 3% on a 30-year fixed rate. Obviously, I’ll never refinance that one.

Indeed, as many people now have incredibly low-interest loans fixed for 30 years and nearly every landlord’s rent increases have not kept up with rapidly increasing market rents, and more cities and states limit the amount landlords can increase rent; you have to wonder whether anyone will ever move again? But that’s a topic for another time.

The last point is that if unemployment shoots up, people won’t be able to make their payments even if they have great interest rates. This is true, and a recession would undoubtedly increase the number of foreclosures. But we’re already in a recession, and unemployment is only 3.6%. If anything, employers can’t find enough people willing to work. 

That could change, but it would seem the dynamics of this recession are much different than in 2008, and reaching 10% unemployment is unlikely. But even if that were to happen, plenty of well-capitalized investors, including on Wall Street this time around, are looking to buy. And since sellers will have equity in their homes, high unemployment is unlikely to set off a spiral of foreclosures like in 2008. 

But moreover, many more property owners don’t even have mortgages to begin with. The percentage of cash buyers versus those buying with a mortgage was 30% in 2021 according to Redfin, the highest its been since 2014. In the three years preceding the 2008 crash, the rates were 23.1%, 21.6%, and 23%.

Since 2008, it’s been at least 25% each year and often over 30%.

It’s hard to get foreclosed on when you don’t have a mortgage in the first place.

3. There’s Still a Housing Crisis

However, the biggest reason a housing collapse is unlikely is because supply and demand are still undefeated.

And when it comes to housing, demand is blowing supply out of the water.

According to Freddie Mac, in 2020, the United States had a record 3.8-million-unit shortfall.

Before the 2008 Financial Crisis, the U.S. faced the opposite situation. Indeed, the country was littered with “recession ghost towns” and all-but-empty, newly built subdivisions. Nowadays, 50-plus people show up to an open house.

What happened was very simple; we stopped building. Prior to the 2008 crash, there were over a million housing starts each year since 1991 and over two million between 2004 and the bubble bursting.

Housing starts cratered to 500,000 in 2009 and only topped 1.5 million in 2019. Then Covid hit and virtually every project was significantly delayed.

All the while, the American population kept growing. And all those people need somewhere to live.

Unfortunately, houses and apartments can’t be wished into existence. The entire process, from permits to move-in, often takes over a year. In other words, this is not a problem that can be ended quickly.

For the housing market to collapse, it would have to collapse in spite of demand being far higher than supply. This would be an exceptionally odd thing to happen.

Closing Thoughts

We are undoubtedly reaching the limits of affordability for Americans to buy a home, especially with rising interest rates. This by itself should cool the real estate market off (which we’re already seeing) and could cause a correction.

But everything else, from lending standards to economy-wide inflation to the ratio of fixed mortgages to adjustable-rate mortgages to the still massive housing shortage make a 2008-like collapse highly unlikely.

And there’s one more factor to consider. As I noted in my previous piece, inflation will likely be around for quite some time in part because there is little political will to stop it. That’s because really putting a stop to inflation will likely throw us into a significantly deeper recession.

Right now, the political divide is as wide as it has been in many years. Washington does not want to throw fuel on this fire.

If somehow a housing crisis started anew, the evidence indicates that the political class would stomach as much inflation as necessary to prevent another collapse. In other words, expect the Fed to drop interest rates back to zero and the government to bail out homeowners and Wall Street this time around and not just Wall Street with as much quantitative easing as necessary. Also, expect banks to learn their lesson (at least partially) and do more short sales and deeds in lieu of foreclosure than last time, especially in the early going.

But alas, the evidence also indicates that such decisions won’t need to be made as a housing collapse does not appear to be around the corner.

Of course, that doesn’t mean the economy is good. It wasn’t good in the 1970s and is not good today. But it’s not 2008 either, and we can at least be thankful for that.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.