The VC-method to build a growth venture is to come up with an idea, develop a plan and a pitch, go to a pitch competition or an incubator, seek access to angels and find angel capital, launch the venture, and get venture capital (VC). The VCs then hire a professional-CEO in up to 85% of the ventures, after which the investors exit the venture through a strategic sale or via an initial public offering (IPO) if the venture is successful.

This VC-method helps about 20 out of 100,000 ventures and was used by about 6% of billion-dollar entrepreneurs (Truth About VC).

Unicorn-Entrepreneurship: How Billion-Dollar Entrepreneurs Took Off

Among 85 billion-dollar entrepreneurs, who built companies with sales and valuation of more than $1 billion from an idea, more than 9 out of 10 took off without VC. 18% of them got VC but stayed as CEO. 76% avoided VC. Those who delayed VC kept 2x the proportion of wealth created compared with those who got VC early, and the VC avoiders kept 7x.

These 94% of billion-dollar entrepreneurs used Entrepreneur 360 skills, i.e., 9 skills (each skill representing 40 degrees) they needed to grow from idea to billions. The set of skills include 6 skills to takeoff with control of the venture, and 3 skills to scale up from takeoff to dominance.

Skill #1 to Skill #5 to Takeoff without VC

You may not want to build a unicorn, but if you want to build a growth venture and control it to keep more of the wealth created, these 6 skills can help.

Skill #1. Technical skills in an emerging industry.

Nearly every entrepreneur from Sam Walton (Walmart) and Bill Gates (Microsoft) to Mark Zuckerberg (Facebook) and Travis Kalanick (Uber) had the technical skills to start a venture in an emerging industry. Sometimes it is possible to find the right partners, like Jobs and Chesky did, but without the tech skills, you may be left behind.

Skill #2. Sales skills for the emerging industry.

There are 2 main ways to sell in a new venture – with lots of capital, or with skills and little capital. Most billion-dollar entrepreneurs from Dick Schulze (Best Buy) to Joe Martin (Boxycharm.com) had skills to sell with little capital.

Skill #3. Venture (not corporate) finance skills to maximize productivity per dollar.

94% of billion-dollar entrepreneurs took off without VC. They knew how to use each dollar to grow and launch their unicorn. This is what entrepreneurs like Niraj Jain (Wayfair) did.

Skill #4. Venture financing skills to raise capital for an unproven venture, to keep control, and to reduce dilution.

To keep control of their venture, billion-dollar entrepreneurs need to know how to finance growth and keep control. That is what entrepreneurs like Michael Bloomberg (Bloomberg) had.

Skill #5. Bootstrap strategy skills to find the key weapon to succeed and bootstrap elsewhere.

Finance-smart billion-dollar entrepreneurs knew how to grow more with less and build a real unicorn by using their edge to dominate and by bootstrapping elsewhere. That is what Bob Kierlin (Fastenal – Bootstrap to Billions) did.

Skill #6. Bootstrap launch skills to takeoff with a limited runway.

The most difficult phase of a venture is to takeoff with limited capital. These skills involve finding the right sales driver, growing at the right speed, and controlling the industry. That is what Richard Burke (UnitedHealthcare – Bootstrap to Billions) did.

3 Skills from Takeoff to Unicorn.

The next 3 skills to build ventures from takeoff to dominate include:

· Control skills to monitor your growing venture.

· Organization skills to build a competitive business.

· Leadership skills to dominate your industry.

The Final Degree: Entrepreneurship 361

Luck. Success in an evolving industry requires more than just skill; luck plays a role. Without at least a stroke of luck, you might find yourself competing with entrepreneurs like Bill Gates, Jeff Bezos or Elon Musk.

MY TAKE: Finance-smart billion-dollar entrepreneurs acquire 360-degree skills to start growth ventures, build strong companies, and lead them to dominance. These skills are the building blocks for successful and sustainable ventures where you control the business and the wealth created.

MORE FROM FORBESFrom $375 To The Newest Unicorn In Beauty: How Joe Martin Built Boxycharm.com Without VCBy Dileep Rao

David:
This is the BiggerPockets Podcast show, 839. What’s going on everyone? It’s David Green, your host of the BiggerPockets Real Estate Podcast, the biggest, the best, the baddest real estate podcast on the planet every week, bringing you the stories, how toss and the answers that you need in order to make smart real estate decisions now in this current market. And boy, do we have a show for you. Rob, what are some of the things that people should keep an eye out for in today’s show to help them on their investing journey?

Rob:
Darius is a very relatable, very inspiring fellow. He comes from humble beginnings, and I think a lot of people will just be a little relieved to know that he was able to achieve so much by taking baby steps and scaling accordingly. He doesn’t have a crazy story where he had trust fund parents, or he didn’t raise money. I mean, he was funding all this while he was working an hourly job. So I think for everyone at home, just to understand it is a marathon, not a race. And so, for Darius, he took steps.

David:
100%. Not only did he take steps, but he actually did the work. Darius was able to do this in a market that most people would’ve said, “Don’t invest in,” at a time when everybody was saying don’t invest. Basically, he had a lot of resistance and people going against him, which is the same thing that happens when you lift a weight, and it builds strength. This will all make sense later as you get into today’s show. But before we bring in the amazing Darius to share his story, today’s quick tip is simple. Go ask a question on one of the BiggerPockets forums. This was a game changer for Darius. He talks about how it really helped him in his own journey and stay tuned for some clever ways that he optimized his forum questions. Rob, anything you want to add?

Rob:
I guess I will say, quick tip number two, make sure you always bring a sewer camera to an inspection, because one day you might walk into your bathroom and find ramen noodles in your bathtub.

David:
All right, let’s bring in Darius. Darius Keller, welcome to the BiggerPockets podcast. Very glad to have you here today. Darius has been investing for nine years, owns eight rental properties, mostly single families, lives and invests in Michigan near an Amazon center, has used the BRRRR Method to snowball his gross. Currently makes $66,000 a year in gross rents and is on track to make over $100,000 in gross rents in 2024. And as a fun fact, Darius is an elite powerlifter that also played college basketball. Darius, welcome to the show.

Darius:
Thank you. Thank you for having me today.

David:
All right, before we get into your backstory, can you paint a scene for us about what you discovered when you bought your first property?

Darius:
Yeah, so when I bought my first property, it was back in 2014, and the thing I discovered was, there was no copper in the house. Assuming that there was a sink and stuff, and there was switches, and the walls were up, you would assume that there’s electrical in the house. But when I went to the basement, there was no furnace, no hot water tank, no electrical panel. What do I do at that point?

David:
Wait, wait, wait. So they had light switches on the walls, but no electricity running to them?

Darius:
Yeah, and homepath.com is much different than today. Back then, it was an auction setting type of purchase that I did.

David:
What was going through your mind when you saw that?

Darius:
At first, I didn’t realize how expensive it was, so that was actually a good thing. I didn’t put myself into shock, but I was questioning myself, like how am I going to get this done? So what I did is, I just kept a good mindset and reached out to people. So I had my wife’s dad, who was real handy, not real handy with the mechanicals, but he knew people who knew how to put work in with mechanicals.

Rob:
Wow, that’s awesome, man. I cannot wait to hear how you resolve that and how you built your portfolio to over $1,000,000 today. It’s pretty crazy, man. But before we get there, and before we get this beautiful resolution, can you paint a scene for us about what your life looked like before you found real estate? What was your job? What was your living situation? Give us a little bit of a taste here.

Darius:
Yeah, so right before 2014, before I made my first purchase, I had to move in with family. I went from paying rent, into moving in with my wife’s dad. It was a two bedroom house, six other people in the house. You can imagine that it didn’t have a basement or nothing. So it was just one floor, two bedrooms. And during that time, I hit rock bottom financially. So I ended up totaling my car right in front of the house, and I was still a janitor at the time, so I was only making $10 an hour. I even keep my pay stubs still, just as a reminder of what it looked like before I started. That’s essentially what it looked like, and I was still getting my master’s degree at the time, so I can relate to a lot of the people that are out here watching today.

Rob:
Yeah. Well, what did it feel like? I mean, I know you said you were making $10 an hour. Was that at all a comfortable living at that time? Was it super, super tight, were you able to save money?

Darius:
I was able to save a little bit of money. I was doing little side jobs here and there, and while I was living with other people, everybody was sharing the bills, so that kind of helped me as well. So I ended up saving almost $10,000, and that’s when I went into my first home, and I purchased that at a $9,100. So it was just a single family, three bed, one bath colonial, and that was the one off of homepath.com.

David:
Did it have electricity or water?

Darius:
Yeah, so just to paint the picture of what it looked like, it had the sink, the walls were up. Like I said, there were switches in the walls. The exterior was pretty new, everything but the siding. So you had a new roof, new gutters, that kind of thing. I thought it was a move in type of situation. I bought it off the auction, I won. That’s it. Hooray, that kind of thing. But it wasn’t.

David:
Do you think the builder just decided it’s not worth putting money into it, or was it intentionally supposed to be a scam? How do you think this happened?

Darius:
I think it was listed for sale, and then somebody came in during the sale and-

David:
Stole everything.

Darius:
… stripped it out. Yeah.

David:
Okay, that makes more sense. It sounded at first somebody built a house and put light switches, but never actually ran electrical to it, because they intended just to make it look like something. But you think somebody came in and they stole the pipes, and the electrical, and everything while it was sitting there?

Darius:
Yeah, during that time, Pontiac was much different. There was a lot of vandalism in that time. It was going downhill. It wasn’t getting better during that time.

David:
This was during around the time of all the auto companies leaving or getting shut down, is that right?

Darius:
We were hit by the recession hard, so we had a lot of blight, boarded up homes, there were schools that were boarded up. It was more of that kind of situation. GM Chrysler were still here, but things got significantly better when Amazon showed up, which was in 2019 roughly.

David:
Well, I’m glad you made it through that. That’d be enough to make most people say, “I want nothing to do with real estate.” You’re clearly somebody who had been through some difficult times before, so you’re able to handle adversity like this. But I am curious, what got you willing to jump into an asset class that you didn’t know a ton about? What was going through your mind that made you want to do this?

Darius:
Well, I had a nothing to lose mindset. So getting a master’s degree, you are going to run up the debt. So I had $100,000 worth of debt at the time. So I was just trying to survive, that was literally my goal. I just needed a house to cut the cost. So I figured, if I owned my house, didn’t have to pay the mortgage every month, didn’t have to pay any rent, that was enough cushion for me to be financially stable. So I had no intentions of investing or anything like that. I was just trying to buy a home that I could live in. And that kind of pushes me into the second home, because that’s when I started to think, man, these homes are cheap. So like I told you, the first home was $9,100. The second home I bought for $2,500, which is two streets away. So what I did is, I moved my wife’s family into that home.

David:
You’re the first person I’ve talked to that actually bought real estate at that time. I remember hearing about the stories that houses were $2,000, $1,500, that basically the state just wanted someone to pay property taxes on these things. A lot of them had been foreclosed on by the state, and because they didn’t pay state property taxes, and they would give them away almost if someone’s willing to pay. What was the prevailing wisdom at the time? Were people telling you that this is a great idea to buy these houses, or were people thinking, why would you ever want to buy any of those things?

Darius:
So I had family members say, “Why don’t you just get a mortgage and pay the mortgage every month?” And actually, I couldn’t get a mortgage, it was very tough to get financing during that time.

David:
Well, yeah, you can’t get financing on anything that’s that cheap. Banks aren’t going to finance a $9,000 house. You can’t get a mortgage that low, which is also probably a big factor in how you ended up buying a house that didn’t have electricity or water, because normally that would’ve come up during the appraisal. They would’ve realized that was the case. But when you’re paying cash for it and it’s your first home, I can see that that being something that slips beneath the cracks. You were living in a two bedroom property with six people, right?

Darius:
Yeah.

David:
Was that just a powerful motivating thing that you’re sitting there, sleeping in a room with other people, and cramped that you were just thinking, “I really want to get my own spot?”

Darius:
Well, no, you don’t think of it like that. You’re living and you’re saying, “Hey, you’re a man. You’re living with your wife’s dad.” It’s like a moral kind of thing. Just, you don’t want to do that.

David:
It doesn’t feel good.

Darius:
Right. But to go back to your question, there were a lot of people that just were shaking their heads, like, “You’re just wasting your money.” There was no value to the properties I was buying at the time.

Rob:
Yeah. And Darius, you mentioned that you were $100,000 in debt. Was that all student loan debt or was it other debt as well?

Darius:
No, it was only student loan debt at the time.

Rob:
And what were you studying? What was the reason for even going and getting your master’s?

Darius:
Yep. So I started off in graphic design, and then I moved to business administration, and it was simply because I needed a boost in income. I understood that $40,000, $50,000 just wasn’t enough. And I’m one of those guys, I take things to the extreme. So somebody told me that I needed a master’s degree, so that’s what I went and did. That was my instinct. That’s what I was taught at the time, to go get as much education as possible.

Rob:
Nice. Did you end up finishing that master’s degree, just out of curiosity?

Darius:
Yeah. Yep, yep. I finished the master’s degree. The graphic design helped me get into the engineering area, in the corporate world, and then what happened is I became a design engineer. So that’s what I’m doing now at a Fortune 500 company.

David:
Okay. So you bought this first deal at an auction in 2014. You paid $10,000 for the property and you had to go through a bidding war. You show up to see your prize and you realize it’s got no water, no electricity. Walk me through what you were feeling and thinking when you go to look at the house, you’re flipping on the switch, and nothing’s coming on. You kind of realize that you’ve been had.

Darius:
Like I said, I talk to a lot of people. I don’t shy around, so I go outside my door and there’s other young guys who are investing as well. And what I did is, I was friendly to him. I asked the guy if he needed any water, I had water bottles and stuff available. If he needed anything, just let me know. His home was in the same condition as mine. Like I told you, there was a lot of vandalism at the time, there was a lot of boarded up homes, a lot of investors out there.
So what happened was when I introduced myself to him and was kind to him, he offered to look at the property. And he happened to be an engineer as well, an electrical engineer. So he ended up assisting with the furnace, the hot water tank, because this was my primary residence at the time, I was able to go through the permanent process myself. They allow that here in Pontiac if it’s your primary residence. And that’s really where, that initiated my learning experience, making friends with the guy across the street. I pretty much learned everything. Once you learn the electrical, the plumbing was like, I learned the plumbing within a day. And then I was able to learn the gas within a few weeks after that, learned how to do that as well.
So I learned all the trades pretty quickly. And then, like I said, when I bought that second house, you pay what you get, you get. So I bought a $2,500 house at the time, and it looked like a $2,500 house. And once I did that house, I pretty much could remodel the entire house by myself at that point. I had all the skill. Do I want to? No, but like I said, I had the skill. That pushes me up into 2017. It takes time to fix up the houses. I had no money at the time, I still had no money. So in 2017, that’s when I started moving up the corporate ladder. I started making a little bit more money.
I ended up quitting my janitor job at the time, and then I financed. Well, I took a HELOC on my primary residence and I bought my third property, and I bought that third property from auction.com for $35,000. And that’s also in Pontiac as well. So I’m harvesting, I’m a farmer in Pontiac, essentially. That property now is probably worth about anywhere from $150,000 to $180,000. So you can imagine purchasing that for $35,000 and the homes being worth nothing, to what you’re seeing them now. Just to give you some stats in the house, it’s like a three bedroom, two bathroom colonial. And at that time, again, back in 2017, the websites were not as sophisticated as they are today. Today they’re a lot more competitive to purchase properties on. So when I tell people the prices on the websites, they’re in shock, because they’re only seeing what the Zillows, Redfins, and auction.coms look like today.

David:
So you’re doing this sweat equity, you’re doing some of this work yourself on the property. What did that do for your confidence as a real estate investor, as you learn new skills you didn’t have before, and you realized that you could solve some of these problems?

Darius:
So once I learned how to fix everything, that took a lot of pressure off me, because like I said, I went to auction.com and I bought that property blind. I couldn’t go inside the property. So here I am, I pulled $40,000 of equity out of my primary residence, and that’s what I use to purchase the third property. So if there’s no pressure on me for repairing the property, then I can put all the money up to assume the property.

David:
So from there you use the BRRRR Method so you could get more properties. So you’ve got some confidence, you also know where to go get these properties. You kind of know what you’re stepping into at this point, so you feel more comfortable going big. What was the pace that you started acquiring properties at and how were you funding them initially?

Darius:
So I would say the second property took me almost two years to redo. Like I said, I bought it for $2,500. The third and fourth property, things got a little bit faster, but I would say on average it would take me about eight months to repair a property, then put a tenant inside, and then take maybe another month to get the financing to pull the equity out the property.

Rob:
So the order of properties, the first one was $10,000. That’s the one that you bought, I guess, at the auction that didn’t have all the stuff in it. The second property was $2,500. The third properties, did you say it was like $35,000 or $60,000? Which one of those?

Darius:
Yep, so the second property, the $2,500 property, the third one was the $35,000 property.

Rob:
Got it. Okay, cool, cool, cool.

Darius:
So that’s when I learned all the financing. I was really stuck in how the financing goes when I got to that third property. But also, I hit a wall during that third property. It had a big plumbing issue. So when I got to the third property, that’s when I assumed my actual non-family member tenant as well. So I would consider myself a real investor at that point, where I started to deal with a lot of the problems that normal investors deal with. So the plumbing issue I had was, the pipe had the snake coiled up inside of it in the yard. So we had to pay $5,200 for them to dig and put a T in the yard from the pipe. So we would call it a clean out drain.
And within that same two month timeframe, I also had another pipe break in my primary residence. And when pipes break, everything stops. The kids in the house can’t use the restroom, I can’t use the restroom in my own house. So that’s when I was like, “Okay, from now on when I buy these properties, I really have to take a sewer camera to the auctions, into these showings with me, when I do inspections.” Because I was doing my own inspections as well, just to cut costs.

David:
So what’s the process like of using a sewer camera to actually scope the line?

Darius:
So I use Forbest, it’s a cheap $500 camera. You can actually get a used one. It’s disgusting to say, but you can. It comes with a battery. You pull the screen out. As long as you have a fly trap, you can easily fish the camera from inside all the way out to the street. And you can see the cracks, you can see roots. It comes with an LED light in the front of it. You can record it and send it to the seller, to bring the price down. I mean, essentially it’s extremely important to have one, because in some cities it could cost $7,000 to $10,000 just to get the permitting, just to cut out the street if you have to repair a pipe. So that’s where I was going at with that. If I’m going to lose in this game, it’s going to become from construction, not because tenants didn’t pay me rent, or I bought a bad deal.

David:
What we’re talking about here is also called the sewer lateral. This is where the sewer line that runs to your house from where it ties into the city, typically goes under the front yard and you’ll get tree roots that can climb into that, or you can get different things that cause a problem. So when your house is trying to flush the waste out too tight into the city plumbing system to have it taken away, it could get back up. It can start leaking into the front yard and then you can’t use the plumbing at all.

Rob:
Darius, I relate a little bit to this, because when I bought the house that I’m in right now, there was an issue with the sewer. We got it scoped and they said that they agreed to fix it, and we did not get it re-scoped afterwards, because we’re like, “Well, they fixed it, so we’re good.” Well, they lied about it, and so we’re settling in, it’s been a week, we’re into this house, we’re enjoying it. And then I walk into my bathroom and there’s ramen noodles inside my bathtub, along with a few other non-aesthetically pleasing things. And man, yeah, when you don’t have a working bathroom, shower, kitchen sink or anything, oh man, it is pure agony and chaos in the household with kids.

Darius:
And of course, if they can’t use the bathroom, tenants can’t, you know they’re not paying you rent. They’re going to be fighting that.

Rob:
Which I think is not unfair.

Darius:
Right.

Rob:
So at this point, you said you had sort of learned a lot of lessons from your first properties, and you had worked on the electrical and the plumbing with your neighbor. Did that knowledge transition to this third house and this problem? Were you pretty aware of how to do it yourself, or were you outsourcing sort of right from the get go?

Darius:
Yeah, so the plumbing issue, you have to outsource that, just don’t have the tools to do that. But after the third property, that’s pretty much when I hit the ground running at that point. That’s when things got real interesting. I had an appraisal issue as well with the third house, the Quicken Loans. During that time, again, you had some houses that were appraising high and some that are low, but it’s still very tough for an appraiser when half the neighborhood is just distressed. So I would say it is like the baby Detroit. If you’re from the outside, you’re right.

David:
That’s a great point there. So you’ve got a property that you bought at a low price because it’s distressed, and now you put money into it and you fixed it up, and then it’s cash flowing really well. If you were to build it from the ground up, it would be way more expensive than what you’ve actually put into it. So there should be some equity here, but the appraiser’s looking at a whole bunch of abandoned houses in this same neighborhood that are maybe worth $2,000 or $3,000, that does look at their valuation, because how do they know what to compare this to? If you’ve got the only house that’s fixed up, is that kind of what the problem was?

Darius:
Yeah, they came back and said the house was worth $55,000. I’m looking at them, like there’s no way. Absolutely no way. And so what I did is, I went and got a second appraisal, and it was worth that little $500. It was worth the money, because they said it was worth $85,000. So I was able to take the 75% loan to value. That got me around $63,000, and I bought a fourth property, which is a condo, which was pretty much what we would call a turnkey at that point. And I bought it at HOA.
I mean, I had that thing rented out within a few months. Literally. I had issues with the HOA and the ticketing, and I didn’t understand that they were giving the tenants nearly the same amount of power as the landlord. So the tenants could actually show up to the board meetings just like the landlord could and stuff. That rubbed me the wrong way. So what I did is, I sold the condo and I replaced it with a single family home. And I got the single family home from my actual wholesaler, and I got this right on time. It was like in 2019, the same month as Amazon came in, and I bought it for $42,900. Like I said, the wholesaler got it for $10,000, and it’s worth probably about $150,000. It sits next to a $200,000 house. It’s literally less than a quarter mile away from Amazon, less than that.

David:
Now, appraisals can be tricky, and part of what makes it even trickier is, real estate is worth what someone’s willing to pay for it. Which means that that doesn’t fit in as a value on a spreadsheet very well, and people don’t like that. They want to have a number attached to what something is worth in dollars, preferably. But with an appraisal, it’s so subjective, the appraiser gets to decide. I have a cabin in the Blue Ridge Georgia Mountains that I bought, and I basically built a second cabin on the property. The appraiser came in and gave me an additional $50,000 of value when I doubled the square footage of the property that was on that lot.
It doesn’t make any logical sense, but that’s just what the appraiser gets to say. I think that they look at what you bought it for, and they try to keep the new price as close to that as they can. So for everyone that hears this, it’s easy to get discouraged by that. It’s easy to think you did something wrong. Oh man, I never should have done this. I only got $50,000 of value. That’s not true. If I were to sell this thing to someone else, they would pay way more than just $50,000 more than what I paid for it, and I’ve doubled what the property will be able to generate in revenue. So there’s lots of different ways to value property, appraisals can be tricky. What do you think, Rob?

Rob:
Yeah, definitely. When I built my tiny house in Joshua Tree, it was really tough, because I was like the first tiny house, so I actually had to fight for three different appraisals. The first one, they’re like, “No, that’s way too high.”
The second one was insanely low, and I was like, “Listen, we’re tied here. We got to get a third appraisal.”
And they were like, “Okay, that’s fine.” So third appraisal came in right at the amount that allowed me to take 100% of my money out. I would’ve been fine leaving some in, because that’s just how the nature of the game with BRRRR is. Sometimes you might leave $10,000, $15,000, $20,000 in the deal, but man, yeah, appraisals, it’s not as objective as you’d think.

David:
But in areas where there’s a lot of comps, you can start to get an appraisal that’s somewhat predictable. That’s maybe a better thing than saying accurate, because who knows what the house is worth. It’s just worth what someone will pay for it. But when it becomes predictable, it could benefit you. So areas like Phoenix or Las Vegas, they have a lot of track housing. The appraiser’s like, “There’s a million 4 bedroom, two bathroom houses for me to pick from.” They get a very tight number that comes in, and then you can kind of plan your BRRRR or your flip based off of that. That’s one of the reasons that you just want to understand the area that you’re investing in. I’ve said you don’t have to invest in your backyard, but you got to understand the backyard you are investing in if you’re going to do long distance. So Darius, you’re in a specific area. How do you feel that just buying the majority of your portfolio in that location has been a benefit to you?

Darius:
Oh, I mean, you’re creating an infrastructure around you. I’m using the same contractors though, the populating tenants in the properties, it becomes like word of mouth. I have a good eye of the rent flow, so I know exactly how much the rent is for each property that I’m buying. At that point in 2019, that’s when I took off, because I don’t have to do as much of research as anymore. I don’t have to rely on Zillow, and Redfin, and stuff for the data. I’m getting the data live, because I’m actually in it.

David:
I know you had mentioned that you were working as a janitor when you bought that first house, which I love. Because I had a same blue collar approach, where I just worked blue collar jobs, saved my money, worked as hard as I could, put it into real estate, and started to climb my way out of that hole. At what point did you switch from being a janitor to taking that corporate position that you mentioned, and did real estate play a role in helping you make that jump?

Darius:
So in 2014, I was still only making like $14 an hour. I was a contractor at the time at Chrysler. When I made the bigger jump in income, it was probably in 2017, so that was right after I bought my third property, which makes sense because you need income to qualify for the loans. Real estate helped when I refinanced that third property, because now I had the equity plus I had the monthly net profit to use for repairs and purchases.

David:
I’ve noticed that, in my journey, I think Rob’s might be a little different, because my understanding is that Rob scaled his initial portfolio with partnerships. So that might not be the best example, but I’ll let you weigh in a second here, Rob.
I noticed that there is a relationship between the money that you make at your job or your business, and the real estate that you buy. And what I mean by that is, when you develop some kind of passive income, you can take risks in the job that are not as risky. If you go for another job and it doesn’t work out, or if you leave the security of a W2 to go to a 1099 opportunity or whatever, it’s easier to do when you got a little bit of cashflow coming in.
And the same is true for some of the risks that go with real estate. They’re easier to handle when you’ve got a steady paycheck coming in and you live beneath your means, right? There’s this kind of, both hands work together to make the wealth building journey a little bit easier. Did you notice a dynamic like that, Darius, in your world, where you’re working as a janitor, you’re getting some momentum getting real estate, then you’re doing some physical labor on the house, your confidence is going up because of what you’re learning, you buy another house, you’re learning stuff about the loan process, now that’s giving you confidence in the job again, or did you see these as completely different independent tracks?

Darius:
No, I saw them completely independent tracks. I didn’t look at it that way. I looked at my nine to five as something that gives me stability, and I still look at the real estate like, okay, if this thing turns out well, it could give me the financial freedom. The job is great, but when you turn on the Instagrams and the YouTubes, and you see people buying the cars and stuff, they’re using passive income. They’re not using the money that they’re working for, earned income. So I really pushed that. I just spent over $50,000 in a year on vacations, and there’s no way my nine to five would be able to support that. The passive income is what supported that. So I look at it separately, yeah.

David:
But you were getting loans by these properties, so having some kind of steady income helps you get the financing that you were able to use to build a passive, right?

Darius:
Yes.

David:
Okay. You also have a perspective here on live data. So when you’re at an auction and you’re bidding, you’re looking at live data versus someone on Zillow that’s looking at stale data. Can you go into your perspective on that?

Darius:
Yeah, yeah. So between 2021 and 2022, I bought five properties, okay? I went to Flint, I went to entire 40 miles out from Pontiac. Flint is not, it is very distressed. They had the water crisis, they had the recession, we had COVID out there. I mean, there’s a lot of things that hit Flint. They got different kind of problems out there. So I went to a high risk area to buy properties. I had a lot of people out there who were saying, “Oh, don’t buy in Flint because it’s a bad area.”
And what I did is, I actually went to the auction, stood in line, saw how many people were waiting for the properties, and I started telling people, “Hey, that data that’s on Zillow is not real. That’s not live data.” The live data is when you’re in the auction, you’re actually seeing it happen right in front of you. The live data is when I’m in the auction online, getting beat and putting blind offers at $60,000 for two bedroom houses in rough areas.

David:
So what’s the advice that you’d give to somebody who tends to make their decisions about where to buy, what to buy, what to pay off of data that they get from the internet, like sources like Zillow?

Darius:
I would say actually go and see the properties. People think they can sit behind the computer and do everything. You can’t fully inspect a property from behind the computer, you actually get up and go to the property. And sometimes it pays off too, because you may see something to use as a negotiating factor to bring the price down with you and the seller. So sometimes I’ve been able to take the price down by like $10,000 on a property because there’s some minor repairs that are needed that are not shown online.

David:
Are you still buying properties at auctions?

Darius:
Yes. Yes.

David:
Okay, what about that? If somebody isn’t sure about it, hasn’t done it before, can you just describe how that’s different than buying properties traditionally using a loan, and maybe who this is good for and who it’s not good for?

Darius:
Yeah, so there’s some auctions where you can use a loan. The auctions I go to, generally you cannot use a loan. You have to use used hard, hard cash. The auctions, for example in Flint, the good things about those is that you can actually go and see the property. Many times the online auctions don’t allow you to physically go and see the property. So there’s a disadvantage to those types of auctions.
The prices of the properties, they’re not evaluated, so they’re just pretty much, they get the properties and they put them up for sale for whatever they’re owed to the city, because they know the city owns the properties. Where if you’re going to Zillow, or if you’re going to MLS, the open market, you look at a property, at that point, the point you’re starting at, somebody has already evaluated the property, they evaluated the condition of the property, that kind of thing. So you’re likely to not get as good of a deal.

Rob:
I mean, buying four properties, or I guess four or five properties in a year, that’s pretty crazy, man. A lot of people work their whole lives to just get four to five properties in general. So the fact that you were able to scale at that level, that quickly into your career, I think it shows that you figured it out. But from my understanding, when you were trying to figure out how to scale, you took that question to the BP forums. How did that help you?

Darius:
Yeah, so really when I go to the BiggerPockets forums, I’m looking for reassurance, and I think that’s how other people can use the BiggerPockets forums. If you’re investing in real estate, you’re already a smart person, that says a lot about you. But if you’re looking to know if you’re doing things right or if you’re organizing your portfolio correctly, you can go to the forums to find credible people for help. My issue was, I didn’t know how to scale, and somebody told me what they did is they refinanced their four unit and bought a bunch of single family homes. I didn’t have a four unit, I only had single family homes. So what I did is, I did multiple refinances and then I bought a spread of single family homes in a smaller period of time, which is what I did in 2021 and 2022.

Rob:
And can you recap for us what your cashflow in your portfolio is looking like now, and what’s on the horizon?

Darius:
Yeah, so nine total properties, one I live in, three are currently being remodeled right now. They should be finished at the end of the year, and then five are actually occupied and rented. So those five bring in about $66,000 annually. And after those other three are remodeled, we’re looking at a total of $102,000 roughly a year from the rent. And I don’t have any partners. I only partner with the bank. So generally I use the same lender for the investment properties and I go to a credit union for my primary residence.

David:
What’s the cause of why the rents are going to jump by that much? It’s like a 40% increase.

Darius:
Number one, my rent is actually, because most of my tenants still been staying in my properties for a long time, so I’m very conservative on the rent increases. And the rent is still going up, values are still going up over here. Like I said, we have GM, Chrysler, and I have Amazon that just arrived here. We also have United Shore. They’re very big as well over here. So that just happened in the last couple of years.

David:
But are rents increasing by 40%, or are you having new properties coming into the portfolio that are also going to be bringing rent?

Darius:
Oh, I see. So the current rent is, between the five properties, a total of $66,000, but those additional three properties are going to bring in another $36,000. Sorry about that.

David:
That makes sense. So you’re adding a lot more cashflow because of these remodels that you have going on.

Darius:
Yes.

David:
Pretty sweet to be coming on as we may be heading into an economic recession, you’re going to be making more money.

Darius:
And just to bring more clarity, those additional properties that I purchased, those have no debt on them.

Rob:
Whoa.

Darius:
I went to auction, I bought them pretty close to zero.

Rob:
Wow, that’s crazy. So at this moment, on the $66,000 per year, what’s the actual cashflow? Like the net profit to you?

Darius:
Yeah, I would say about 60%.

Rob:
Wow. And then will you get even more profit once those other three are live, because you own those outright?

Darius:
Yes, yes. But my plan is to refinance everything and put debt on them, number one, because it protects you. And number two, my original plan was to buy a spread of homes really quick, and then refinance all the homes once I get my cash flow up. That way my DTI is a lot lower when I go to the bank.

Rob:
So now that you’re pretty seasoned in all of this, are you still DIYing any components of your rehabs?

Darius:
Yeah, so what I try to explain to people, we look at just the houses, but I also own the refrigerators, I own the process as well. I own about $20,000 in power tools. So what I’m trying to do is build my own internal team. So right now I have one person working part-time. My plan is to make them full-time eventually in the future, just for the repairs and as my own internal property manager, to take some of the load off of myself.

David:
So you’re thinking about creating a property management slash rehab internal team to work on your properties?

Darius:
Yes.

David:
And are they going to be salaried people

Darius:
Right now? Hourly.

David:
Okay. And then they’ll just work when you have work, and then when you don’t have work, they can do something else?

Darius:
Exactly.

David:
So have you thought about extending this into a business once you’ve got these people that are working under you, that maybe you have other investors in the area that need a crew, and you just charge the difference? Or keep the difference between what you charge that person, what you pay the people?

Darius:
Exactly. And that’s where I actually got my employee from. I actually was able to refer to someone else for help.

David:
I love that. I think that’s the future, going into this new market, that’s how everyone should be thinking. It’s in Pillars of Wealth, I talk about how we have to be thinking about investing as a way to make money, but also offense. What are you actively doing in the business world, or in your job, or in a commission space, whatever it is to make more money? And you’ve got a great synergy.
You’re going to save money by having people that do the work on your own remodels, because you don’t have to pay a contractor who’s going to keep a profit. And then in addition to that, you’re going to make money by actually making that profit yourself, by having these people work on other people’s jobs, because you’re willing to build this expertise and do the work. Which, I will add, you probably have the confidence to do that because you had to step into that nightmare project in the beginning, and learn how to do it. So while that looked like a reason to quit, you turn that into a possible business that you can use to make money, and scale your portfolio even more.

Darius:
Exactly.

David:
Good job on that.

Darius:
Thank you.

David:
Yeah. What’s the total equity across the portfolio?

Darius:
So it’s $350,000 in debt, of real estate debt, and $1,100,000 is probably what the portfolio is worth.

David:
Not bad at all, man.

Rob:
That’s not bad. That’s amazing.

David:
Yeah. Do you feel proud about that? What are your thoughts? Are you trying to grow it?

Darius:
I wasn’t looking at it like that from the beginning. Like I said, I was buying $2,500 and $10,000 houses. That was not my motive originally. Like I said, when Amazon came here, that’s when things got interesting, because Pontiac was more so of a lower class city as far as the home values, the income per household, and stuff. So back in 2014, rents were probably around between $550 to $700. Now for, like I said, a two bedroom rent’s like $1,400 a month. I’m thinking that the rent is going to get to $1,800 per house for a regular three bed, one bathroom house.

David:
So in order to get to the position you’re at three quarters of million dollars of equity, massive cashflow in this portfolio. A couple of things you did really well that I just want to highlight. One, you jumped in and you took action, and when it went wrong, most people would be completely wiped out if they had found out that they bought a house that doesn’t have electrical or plumbing. You found a resource, which was the neighbor, and you jumped in and you did a lot of the work yourself, which built up a lot of skills that are now helping you at this point. You kept going. You said, “Hey, I’m going to buy another one.” And you were always finding stuff below market value that you added value to. That’s a very good principle. Just to take in mind that you were always paying less than what you could have by going to an auction, and then you were adding value to it by doing the work.
And you got in there and did the stuff. You didn’t just get frustrated that you couldn’t find a contractor, or the person that you hired didn’t do it on time. You went in there and did a lot of the stuff yourself. Then you used the BRRRR Method to scale once you had a good thing going with every single one of these properties, you’re adding equity, adding equity, snowballing, snowballing, snowballing. Now that you’ve got a really good thing going, you’re expanding. That’s the last thing that I just want to highlight. You’re looking at getting your own crew so you can buy more properties, and building a business. And then as a little bonus thing here, you picked the right location, whether it was on purpose or whether it just worked out.
Now you intentionally know, you say, “Where are the jobs going? And I want to go there, and I want to own that.” Because you’re looking at this as a property manager would, how can I get rents and how can I get a steady stream of employees? Which was buying into a market that at the time was incredibly distressed and everybody was saying to stay away from, you went against that, and you were able to build a pretty impressive snowball. So well done, my man. That’s an inspiring story. Rob, anything you want to add?

Rob:
Yeah, I mean, you’ve come a long way, man. A janitor making $10 an hour to having somewhere in the neighborhood of $750,000 in equity, plus some pretty generous cashflow here. What has this been able to afford you and your family? I know that you mentioned taking $50,000 worth of vacations, but what else has this done for you?

Darius:
So it is given me a peace of mind. And then one of the things that I’m proud of is, it helped my wife a lot. She’s been able to be a stay at home mom and assist with the real estate. She’s also a realtor as well. She’s the one who sells me some of the properties as well, and gives me some tips there. But I’m able to spend the passive money without pulling out that scrap sheet of paper every month, and seeing if I have enough money to pay my bills. It just takes a lot of pressure off me.

David:
Well, thanks for sharing your story with us today. We don’t hear about these too often. This is a great one. I am sure a ton of people are going to be reaching out to say, “I want to do what you just did.” Where’s the best place for people to go if they want to find out more about you?

Darius:
You can simply Google, Re with D. That’s Real Estate with Darius. I have my own website as well, so rewithd.com, I have coaching on there. You can also go to my Facebook, that’s RE with D, and you can also reach me on Instagram at Darius_oneofone. And that’s all spelled out, no numbers.

David:
O-N-E O-F O-N-E. Darius, O-N-E-O-F-O-N-E. All right, thanks Darius. Rob, how about you? Where can people find out more about you?

Rob:
Fine me on YouTube at Robuilt R-O-B-U-I-L-T, and on Instagram at Robuilt as well. I post content many, many times a week, and I teach you guys all this stuff and more. So go follow me there. What about you?

David:
Much like Carmen San Diego, Rob is traveling all over the place, so if you do want to find him, you’re going to have to do it on social media, not in real life. He’s recording this from a hotel room right now at a conference. Busy man, traveling all over the place.

Rob:
Hey, but I made my bed though, if you can tell, because I got in trouble on the Barbara Corkin interview by all the YouTubers. All the YouTube comments, they’re like, “Bro, make your bed.” And I’m like, listen, it’s just not the first thing I do every morning.

David:
You can find me at davidgreen24.com, or you could go online on any social media platform and find me at DavidGreen24. So please go give me a follow and reach out. Darius, thank you for being here, man. Awesome story. Love hearing this, and I just can’t help but state that you have an incredible portfolio and you’re a powerlifter, not a Fitbit Walker. I know causation isn’t necessarily creates correlation, but in this case, I really think it does. So Rob, just think about how rich you could be if you did more than just walking. Any last words for you, Darius?

Darius:
No, no. I think you covered everything. I really appreciate you for having me. I remember being on BiggerPockets back in 2015. I didn’t think I would’ve own as many houses as I own today, and having BiggerPockets is really helpful.

Rob:
Awesome.

David:
That’s it. Well, thank you for sharing your story. And if you’re listening to this, remember you too could have a result just like Darius is. It’s just about finding the right pieces, putting them all together and staying focused on the goal. All right, Darius, we’re going to let you get out of here. This is David Green for Rob. Where in the world is Carmen San Diego? Abba Solo signing off.

Hosted by Brian Sullivan, “Last Call” is a fast-paced, entertaining business show that explores the intersection of money, culture and policy. Tune in Monday through Friday at 7 p.m. ET on CNBC.

As with the natural cycle of all things, businesses are born and when the time comes, they die.

Safestyle UK, is the latest large company to enter administration in the UK.

After trading for almost 31 years, the company collapsed last Friday due to factors including poor consumer confidence. Interpath’s Advisory’s managing director Rick Harrison said “After seeing strong sales during the Covid lockdown periods, many companies are seeing trading being impacted by the cost-of-living crisis and soaring costs.”

Whilst around 70 of the company’s 750 workers are being kept on in the short term to complete closing down duties, more than 600 employees have found themselves without a job.

What Can Businesses Do To Avoid Redundancies?

When faced with financial problems, there are a number of steps to take before resorting to sudden redundancies.

Flexible Working

To save on office space and utilities costs, consider allowing employees to work flexible hours or fully remote. Continue to foster a team atmosphere through in-person and virtual team building activities, and frequent good communication practices.

Cross Training

To boost operational efficiency, and reduce the need for new hires, you could train existing employees to perform multiple tasks. Make sure your requests are reasonable or it won’t end up being an efficient solution.

Feedback And Appraisals

Identifying areas for improvement and promoting a culture of learning can be easily done by regularly assessing employee performance, and giving them constructive feedback.

Government Support

Search for and consider using government programs, loans or grants that exist to support small businesses through financial difficulties.

Raise Finance Privately

Applying for loans, grants, lines of credit or starting a crowdfunding campaign could successfully reduce the need for redundancies.

Shift Focus

Within your business, there are likely some offers that are more profitable than others. Placing more focus on selling these is a way to trim the fat and make more profit.

Improve Your Offer, Customer Experience And Advertising

Take a deep look to analyze existing strategies and update or put in place new ones. The offer, customer experience and advertising are areas of your business that have huge potential to change the balance sheet for the better.

Save Where Possible

Review your budgets. Are there areas where reducing costs won’t sacrifice quality or productivity? If so, make the required cuts.

Sometimes there is no other choice. However, if redundancies are necessary, let workers know well in advance, organize severance pay and support them in finding new employment. In the case of Safestyle UK, this didn’t happen which has added to the discontent from their now redundant workforce.

Lee Parkinson, GMB Union organizer, said, “More than 600 workers have been cruelly cut off from work, weeks before Christmas, with no guarantee that they will even get last week’s paycheck.”

Ashley:
This is Real Estate Rookie, episode 335. My name is Ashley Kehr and I am here with my co-host, Tony J. Robinson.

Tony:
And welcome to the Real Estate Rookie podcast where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Today, we’ve got someone who’s like a born, bred, raised in the bask of all things BiggerPockets. We got Tim Yu on the podcast and he’s been a faithful listener for quite some time. He said he listened to the podcast every day for almost two years, but really use everything he learned in the podcast to really kickstart his investing journey. The guy closed on 10 deals in a year. A little less than a year actually. And you’ll get to hear exactly how he made that happen.

Ashley:
Yeah, I love how we go through every single deal. So listen to him talk about all the ways he was able to finance these deals. Not one was funded the same exact way, so he is going to break down each deal he did and how he was able to get financing for them or get a very creative… One deal, he only paid $2,000 out of pocket and didn’t have to go and get a bank loan. So he explains how he was able to do that.

Tony:
He even got paid to buy a property. He went to the closing table and got a check back. So you’ll get to hear how he made that happen. But overall, Tim is just, I think, a shining example of what happens when you’re a big part of the BiggerPockets community. He was active on the Real Estate Rookie Facebook group and the YouTube channel on the actual podcast itself and the forums. And it’s like when you do those kinds of things, good things typically happen.
So if you’re part of the rookie community and you haven’t yet, we would love if you could leave us an honest rating and review. We’re at 1,595 ratings as of this recording. So hopefully by the time it airs, we’re at like 1,700. We should be there at least. But take a few minutes, let someone know what you think about the show because honestly, the more reviews we get, the more folks we’re able to reach. And hopefully that leads to more stories like Tim’s. So take a few minutes, leave that review for us.

Ashley:
And if you have a story like Tim’s or you just completed your first deal, we would love to hear about it. Please apply to be a guest on our podcast by going to biggerpockets.com/guests. And I will tell you that if you don’t think that your story is good enough, it probably is good enough and we’d love to have you on. I’ll also tell you a little secret that when our producers go through the application, they love, love extra detail. So really take your time and give us all of the nitty-gritty about how you got into real estate investing and we would love to have you on if you would take the time to share it with the rookie community and inspire others. Welcome to the show. Thank you so much for coming on with us today. Can you tell us a little bit about yourself?

Tim:
Yeah. Hey, I appreciate you guys bringing me on the show. I’m Tim. I’m 30 years old. I’m actually a full-time Army officer stationed at Fort Knox and I live in Louisville, Kentucky. I started investing back in November 2022, and I kind of dabbled in a lot of different things throughout the last year. At first, I wanted to do long-term rentals through BRRRRs, and then I ended up having a love and passion for fix and flips. And then I went into the creative space and that’s where I’m right now.

Ashley:
Awesome. So before we go any further, just give us an overall picture of what your portfolio looks like today.

Tim:
Yes. So I have two duplexes. I have three single families in Louisville, Kentucky. I have two partnerships in Oklahoma. They are two single families as well. And then we also have a fix and flip partnership in Atlanta, Georgia. I’m currently working on a fix and flip right now in Louisville, Kentucky, which we just started renovations and then we’re closing on a property in a couple of weeks, which is a seller finance deal.

Ashley:
So you had said 2022, so this was all within a year.

Tim:
Yeah. So November will be my one-year anniversary.

Ashley:
Wow, awesome.

Tim:
… of real estate investing.

Tony:
That is amazing.

Ashley:
Yeah. It’s very cool.

Tim:
So it’s been so fun.

Tony:
I just want to ask something because… Let me ask this question first. Before you got that first deal in November 2020, how much time would you say you spent educating yourself, getting yourself mentally to a point where you were like, “Okay, I’m ready.”

Tim:
So there was a lot of things that I did. I was always an investor of some sort. I had that mindset with stocks. So I did the 401(k), I did the Roth IRA type thing. My brother-in-law is actually a big investor with stocks and stuff, so he would teach me, “Hey, if you make $50 mowing a lawn, put half of that away in a 401(k) and then you can keep that half to spend it.” He told me that when I was 11 years old. As soon as I started working a full-time job, I always decided to put money away into my investment accounts, which we’ll go into that probably later of how I used it to invest in real estate.
But prior to that, I live in Louisville, Kentucky. So if anyone is in the military, especially the army, you know that all the duty stations are terrible locations. I was single at the time, so I wanted to live in a city, so I had to commute to work every day. So I drove 50 minutes each way every day for two years and I got started on real estate by listening to you guys. So I listened to the Rookie Podcast every single day for almost two hours a day for a year and a half. And I’m sitting-

Ashley:
So you’re sick of us by now.

Tim:
I still listen to you guys. It’s absolutely incredible because I sat in my car one day and I realized I was listening to you guys for a year and a half and I never did anything about it. I always wanted to say, “Hey, I wanted to buy a house now, but maybe I’ll just do it later.” I ran into a real estate agent by chance when I was trying to get out of my rental lease. So I was asking the lady, “Hey, when do I need to tell you I’m moving out?” And she’s like, “Why are you moving?” “Well, I want to go buy a house.” A real estate agent literally walked around the corner and was like, “Hey, I’m an agent. Do you want to work with me?”

Tony:
No way.

Tim:
And I still work with her to this day. She’s incredible. And I was like, “Let’s do it. Let’s go get a property.”

Tony:
That’s a lesson learned for all of our agents that are listening to the podcast. Just lurk around corners and just wait until you hear someone say that, “I want to sell my house.” But Tim, so you have this year and a half journey of educating yourself, which is what I’ve found is the typical time range for people that really take action is somewhere between a year to two… Six months, a year and a half is a good timeframe typically, but you close on that first deal and then you just go on a rampage where you’ve got 10, 11 deals done in a year. I know we’ll get into the specifics, but just at a high level, was it your intention going into it to move this quickly from the beginning? Did the motivation or the momentum just build after one deal? What was it that allows you to move so quickly?

Tim:
This was definitely not the plan. I wanted to do one property every couple of years because I am a veteran, so I wanted to use my VA loan. So I wanted to do house hacks. That was the big strategy that I wanted to start off with, which, “Let’s house hack a deal or let’s renovate a property in BRRRR and just slowly grow from there.” I think they call it the real estate bug. I bought one house and I was like, “Oh my gosh, this is so fun.” I think the most fun I have now is going to the closing table. So I think it’s just been a rush. It’s been so much fun and the people you meet in real estate world is incredible. So I think it just snowballed from there.

Ashley:
So let’s talk about being able to fund all these deals in a year. Where is all of this funding coming from? Let’s start out with the first deal and then maybe walk through how you were able to fund the other ones.

Tim:
Okay. So the first deal originally was going to be a BRRRR. So it was around Thanksgiving time. I was walking in the park with my girlfriend at the time who is now my fiance.

Tony:
Congratulations.

Tim:
Thank you, man. I appreciate it. And she was actually yelling at me saying, “Hey, get off your phone. We’re outside. Enjoy the weather.” I’m creeping on Zillow the whole time. It was on the MLS and a house was $100,000 and it actually dropped to $50,000 overnight. So we went to go see it. There was definitely something wrong, but there was a squatter in the property that the seller had to get rid of and he was out of state. So I offered $40,000 cash to purchase the property. They accepted the contract the next day and I realized I didn’t have that money in my checking account.
So I asked my agent, “Hey, what do I do?” She’s like, “Look at hard money loans.” I had no idea what they were, so I went on YouTube and became a YouTube warrior and was just watching videos on hard money loans. I ended up linking up with a hard moneylender at one of my local real estate meetups and he was like, “Hey, if this is your first deal, I’ll fund you.” Because I actually had some issues getting some hard moneylenders to approve me just because of my lack of experience and they weren’t exactly confident on the property, but he actually took a chance, so he loaned me 90% of the deal and I had to find the rest to close.
So I begged my parents, I was like, “Hey, loan me some money. This is going to work out.” And they actually said no. So they’re very old school. We don’t have a financial background. They had all their money in a checking account and for the last 20 years, so they didn’t really feel comfortable with this type of investment. So what I did was, I was like, “Well, if you don’t lend me the money, I’m going to sell my 401(k) off and I’m going to fund this deal myself.”
That’s what I decided. It’s like we talked about earlier, my whole foundation was stocks and invest for 30, 40 years and retire off that money. I’m sitting in my room contemplating, liquidating the account.

Ashley:
Pushing that button.

Tim:
Oh my gosh. They had to call me and say, “Are you sure you want to do this?” I literally was like, “I need another day to think about it.” But at the end of the day, I think I took a chance and took a gamble. And I think a lot of investors and entrepreneurs have to take that leap one day. I said, “I think I’m going to make more money doing this than sitting in my retirement account.” And that’s pretty much how I decided to press the button and sell it all.

Ashley:
So first I just have to acknowledge this, you threatened your parents to give you the money or you’re going to liquidate your 401(k). Did they say, “Go ahead, I don’t care, that’s on you”?

Tim:
They basically told me like, “Hey, you’re an adult. If you really believe in this, you doing that shows that you’re serious.”

Ashley:
Yeah.

Tim:
Don’t support me.

Ashley:
Which I think is a wonderful response. Yeah.

Tim:
They support me in what I do.

Ashley:
Exactly.

Tim:
Do they agree on everything? A hundred percent, no.

Ashley:
It’s the support that is important that they weren’t saying, “Don’t do it at all. You’re making a super stupid decision.” It’s that, “If you’re really passionate about this, you want to do that, then make that investment.”

Tony:
Sorry, before we move on, I just want to ask one question because you mentioned this, Tim, about the hard moneylender, and you said that because you didn’t have any experience that a lot of hard moneylenders weren’t necessarily excited to work with you, which is true. A lot of hard moneylenders tend to favor working with folks that have a bit more experience. But you said you found this hard moneylender at a real estate meetup. Were you just going around shaking hands saying, “Hey, someone give me some money.” Or how did you broach that conversation? And if I’m a new investor in a similar situation, what should I be doing to find that hard moneylender?

Tim:
So I watched a video a long time ago on YouTube. It was one of the big investors out there and he said, “Hey, if you go to a meetup, don’t just go to a meetup to just network.” He said, “Have an intention and have a plan.” So I went to that meetup looking for a lender of some sort. I wasn’t sure if it was going to be a private person where it was a friend and one to just lend on the deal or if it was going to be an entity, like a hard moneylender or something like that.
So I asked everybody, “Hey, do you know any lenders? Do you know any hard moneylenders?” And that’s how I got connected with a couple of them. Throughout the week, I called every single one of them and they were like, “We have a minimum amount of money that we want to loan out.” And my deal was under that threshold. So a lot of those hard moneylenders wanted at least a hundred thousand dollars loaned out and I was asking for 70.
So they were like, “Well, it doesn’t meet my requirement and also, you don’t have a lot of experience, so we don’t really want to lend on this.” And luckily this one guy said, “Hey, I’ve been in your shoes before and as long as you can show that you have some sort of money in the back.” So I leveraged the 401(k). I said, “I have this money in a piggy bank and I’m willing to let it all go if this deal goes south.” And he was like, “Let’s do it. Let’s close.”

Ashley:
So with that first one, was it more just the experience part or was there something actually with the deal they didn’t feel good with?

Tim:
A lot of it was the experience and the amount of money I’m asking to borrow. So because it was under a hundred thousand, they’re like, “It’s not worth it for us to take the chance.” And also they asked me how many properties have we done? I was like, “This is my first, zero.” And it wasn’t in the best neighborhood either.

Ashley:
Okay. That’s what I was wondering, just because sometimes the hard moneylender will actually do their own analysis of the deal and curious as to if they said, “We don’t like the numbers on this property at all.”

Tim:
Actually, the guy who agreed to do the deal actually sent out his own appraiser and then it ended up appraising for 118. So we were all in on the deal for 70, and it appraised for 118, so then he was like a hundred percent good to go on it after that.

Ashley:
Okay. So let’s just go into how you funded some of the other properties real quick, and then maybe we can go into one of those deals and work through the exact numbers on it. But I think what a lot of people want to know, “Which I want to know is how were you able to get these 10 properties within the year?” So what were some of the ways that you scraped up money? So your first deal liquidated your 401(k), and then you had your money guy, but what are some of the other ways you’ve had to fund the deals?

Tim:
So after we purchased the first property and we were renovating it, or I had the real estate bug, so I was looking for another deal. Since I liquidated the 401(k), I had about $30,000 left just sitting in the pot. So we found a duplex on the MLS that needed a little bit of work. So I went full traditional. I did the 20% down on that property and I did the light renovations myself, and then that’s just a long-term rental. And then as we moved forward, I was out of money, so I used pretty much all my money on that down payment.
So then I started looking to use my VA loan. So the next property was the duplex. That’s the house I’m in now. We got the 0% down with the VA loan. And then we also had sellers concessions where the seller actually paid for the down payment. So I actually got paid a couple hundred dollars to close on that. So I live in one unit, and then the other unit in the duplex is actually a midterm rental for nurses because Louisville has a crazy nursing market out here.
There’s like five or six hospitals around here. Now, I’m completely out of options. I have no money, no VA loan. And I was like, “Let me try wholesaling.”

Ashley:
Real quick, Tim, before you go forward, for anyone that doesn’t know what a VA loan is, let’s just break that down as to no down payment. So you didn’t need any money for that. Did you qualify to have no closing costs or did you have to pay closing costs on it?

Tim:
Yeah. So you have to pay closing costs with the VA loan, but you can negotiate what the seller to have sellers concessions, which you can use that money to either buy points down on the loan or you can go towards the closing cost, which is what I did. And the really great benefit about the VA loan compared to the FHA is you don’t pay the PMI, so you don’t pay the mortgage insurance, which saves you a lot of cashflow. So that’s what the VA loan is awesome. And also you can use it for any residential property. So one to four plexes, you can use the VA loan on it. So it’s a great tool to house hack.

Ashley:
That was a great explanation. I think there is one circumstance where you can avoid paying closing costs, and I think that’s if you have a certain eligibility of disability.

Tim:
Yep. So if you have-

Ashley:
Yeah, I don’t Remember what the limit is though.

Tim:
So that’s a crazy program. Obviously, I’m still in, so I don’t have that disability. But yeah, if you have the disability on you, you also… The more you use your VA loan, so the first time you use it, you don’t have to pay this crazy fee, but that fee is waived every time once you have your disability. So it gets even better for you.

Ashley:
We also did an episode recently number 329 where we did a really deep dive into doing VA loans if anyone wants to learn more about that.

Tony:
Just one quick comment too, Tim, you mentioned that you got paid to close on that duplex. Can you just explain what that means for people because you glossed over that, but I mean, it’s a cool concept.

Tim:
So in Kentucky there’s a certain maximum percentage of sellers concessions. So I think I got about nine to $10,000 of sellers concessions and my closing costs were almost about that range. So since I moved all that money to my closing costs, I actually was in the net positive. So when you show up to the closing table, it’s crazy that they cut a check to you. I was really surprised, but it was enough sellers concessions to pay off everything, which is great.

Tony:
So tell us what happens from there, man. So you get to get this duplex. Move us to how you funded the rest of these ones after the VA loan is gone.

Tim:
I didn’t have any more money, so I was kind of like, “Man, I still want to buy stuff. I still got a crazy addiction to trying to buy houses.” So I started trying to wholesale and that really didn’t go well. I tried working for somebody and that’s how I started with the partnership stuff. I wanted to work for somebody and gain some knowledge and mentorship by serving as a cold caller. I realized that I really didn’t want to do that. So I started seeing creative finance options, the seller finance. The subject-to deals and all that stuff. And then I started getting really into that and that’s what kind of landed me on my next deal in Louisville was a single family.
It was a subject to deal and that’s when I took over the person’s mortgage payments. She was actually a full-time nurse and didn’t want to manage her property anymore, and it was zoned for Airbnb. So when we talked to her, she wanted to listen on the market, but it had no equity in the deal. So if she sold a house, she would actually have to lose money to do so. What we tried to do was… I actually pitched arbitrage. I didn’t know how to do that. She didn’t want to do that. She wanted to sell it outright.

Ashley:
Explain what arbitrage is real quick.

Tim:
So it’s when someone leases a property from somebody and furnishes it and lists on Airbnb and the person who furnished it manages the property and you don’t own the property at all. So the seller or the person who owns the house still owns it, they’re just leasing it out to you and you’re doing all the legwork on it. So that’s how you can generate that short-term rental revenue without actually owning the property. And I hope that was a good enough explanation.

Ashley:
Yeah, that was great.

Tim:
But yes, she didn’t want to do that. She wanted to sell it outright. So I literally talked to her on the phone for two, three hours about subject-to and if it was legal or not. We actually convinced her to do it and then I ended up buying it subject-to, and then I actually turned that into a midterm as well.

Tony:
All right. So let’s break down what subject-to is for folks that aren’t familiar with that phrase as well, Tim.

Tim:
Okay. Purchasing a home subject-to is when you take over an existing mortgage. So her mortgage was 3.96% interest rate, and I think at the time when I was shopping around, interest rates were around 6%. So I got a really good mortgage rate. So the PITI was super low. And I guess the way I explained this is if you’re buying a bag of groceries at a grocery store and you have the bag of groceries and you swipe your credit card, who owns the groceries? You do. You’re holding the bag of groceries. If you give it to your aunt down the road and you give her the bag of groceries, who owns the bag of groceries? Your aunt.
How do you prove who owns the groceries? It’s the receipt to the grocery bag. So we treat the receipt of the groceries as the deeded to the property. So they give us the receipt or the deeded to the property, and then we just take over their credit card payments or their mortgage payments and you’re now the owner of the house.

Ashley:
That’s a really cool explanation. Yeah, go to analogy.

Tim:
Thanks.

Tony:
Yeah. That’s like better [inaudible 00:22:10]

Tim:
I mean, we heard that story from Pace, so it’s burned in my brain. But I think that’s a great story to explain sub-to. So I paid her $2,000 on top, so we took over the property, we took over the mortgage and we gave her $2,000 on top and the incentive was she was going to lose $7,000 in the deal. So instead of losing seven, she gained 2000. Now she doesn’t have to worry about the mortgage and we took over the property.

Ashley:
So let me ask you this. This is something I’ve always wondered, especially when Pace talks about sub-to and I see a lot of agents who specifically go towards vacation rentals, short-term rentals saying buy houses at sub-to. Are a lot of these people selling? So if they have that really great interest rate, they probably bought it within the last three years and it seems like some of them are selling because it’s not profitable for them. Why would somebody else want to come in… So they’ll have the same expenses from them and take over those payments and then renting it out.
What is the thing that I’m missing in this gap? Is it poor management? Is they’re not taking advantage of pricing? What am I missing in that scenario is if someone’s not making money on this house, they want to sell it, why would I come in, take over their payments in?

Tim:
I think people try to get into the short-term rental business and especially if they’re out of market. So if they’re out of state, I think it’s to our advantage as creative finance investors because they think it’s going to be super profitable until they realize they got to deal with the constant turnover managing the cleaners. And then also if they’re out of state, they probably have a property manager and they’re paying a lot of money to manage these short-term rentals.
For us or for me in this market, if I take over someone’s mortgage and I keep all the PITI the same, I’m probably going to save a lot of money on managing the property myself in the market. And also, you save that 15, 20% and I think that’s huge. And then also since I’m boots on ground, I can go see the property and make sure that the cleaners are doing their job and doing all that other small stuff that actually gets people dinged up on their reviews or it just eats into their cashflow. But I think from my experience, I think it’s because of that, they have all the expenses.

Ashley:
You have that advantage that self-managing or saving that management fee, and then also you’re able to have a better product because you’re the boots on the ground overseeing it and you have that quality control I guess.

Tim:
Yeah. And I don’t do any short-term. That short-term rental, that probably would’ve done well as a short term. I just turned into a midterm because I have the midterm in the other unit right here. So I have some experience with that. I think I like the slower turnover because I do at least three month contracts with my midterm nurses versus, “Oh, there’s a weekends there and I can manage it myself with that.” But if it’s a short-term rental, I probably would’ve to hire somebody because I’d have to keep going and turning over the property and stuff.

Ashley:
Yeah. I’ve always wondered about that because it seems like it’s becoming very common that people are doing sub-to to vacation rentals. Tony, what are your thoughts on that? Have you guys bought anything sub-to?

Tony:
Yeah. We haven’t purchased anything sub-to, but in terms of why would I buy a property, I think a lot of what Tim said is true. It’s like, I guess first taking a step back, there’s probably a couple of different motivations as to why someone would want to sell their short-term rental. It could be because they have a property manager in place and that property manager just isn’t performing well and they don’t have the time desirability to manage it themselves. They’re like, “Hey, I could make more by selling this than continuing to pay this property manager 25 or 30%.”
The other motivations that they have been managing it themselves, but maybe they’re burned out. Maybe they underestimated how much work goes into managing a short-term rental. They haven’t really set up the tools and systems and automations and software to do it the right way. So they’re like, I just don’t want to do this anymore. And in both of those situations, like Tim said, I think there’s an opportunity for you to come in as a new host and improve the performance of the property.
Let’s say that first motivation where maybe they had a property manager that was charging them 25%. If I come in and I’m it myself, I’m immediately adding 25% to the bottom line, even if everything else stays the same. And that could be a big difference in profitability. I might have to pay my VAs a few bucks an hour, but it’s significantly cheaper than 25%. Or maybe they weren’t doing things like using dynamic pricing tools. Maybe they have really old listing photos.
Maybe they hadn’t changed the linen since the ’80s. Who knows what it is? But you come in, do a little bit of a refresh, and I do think there’s an opportunity there for folks.

Ashley:
Okay. So, Tim, sub-to, what’s your next financing you did? We’ve got the VA loan, sub-to, liquidating a 401(k).

Tim:
Yeah. So now we go into the partnerships in Oklahoma and Atlanta. So I actually met these partners through a mentorship that I joined down the road and I met those partners through there. For the partnership stuff, it’s a really scary game too because you’re not only marrying the deal, you’re also marrying that partner.
So the ones in Oklahoma, I actually met somebody out there that does GC work himself, so he does all the renovations and manages those type of projects. And those two deals were actually sub-to deals as well. I funded the deals by raising capital. So I brought the money to the table and to the deals, and then he managed the project and found the tenant buyers. So how we got rid of those deals as long-term rentals were we actually lease optioned those two houses out to end buyers. And that’s how we fund the deals.

Ashley:
Can you explain what that process is doing a lease option?

Tim:
So explain the lease option process?

Ashley:
Yeah.

Tim:
So a lease option process, I guess the easiest way for me to explain it is that you rent it out to somebody with the option to purchase the home later. So I guess the slang term is rent to own or something like that, but it’s a two -part deal where you lease the property to somebody and they rent it and then they have the option to buy it from now to however long you set the terms.
So for those two properties, we set a five-year term. So it’s a fixed purchase price for that amount of time for that buyer to qualify for a loan and then purchase it outright with a lender.

Tony:
And Tim, you’ve got so many tools in your tool belt here, man. So I guess what’s been your process for like… I guess let me frame the question this way. There’s a lot of people who read on certain topics or YouTube university, podcasts, whatever it is. But like you said, it took you 18 months to kind of feel confident to do that first deal and you went from that deal to the duplex, which was somewhat similar, but then you really took off into the creative finance space.
Was it that you were surrounding yourself with the right kind of people? Because you mentioned going to the meetups. You mentioned that the mentorship program, you mentioned all these other things you’ve been meeting people. Was it your network that gave you that confidence to try out these different strategies or was it something else?

Tim:
A hundred percent. So I know a lot of people talk about Robert Kiyosaki’s book, Rich Dad, Poor Dad. And it gets them started in investing and it’s an amazing book, but the book that I really love that I live by all the time is Who Not How by Dan Sullivan. That book really changed my mindset with business owning and entrepreneurship because it really talks about instead of you spending hours, months and years learning a strategy like lease option to finding the person in your community or in your mentorship program that has been doing those type of deals. And to find those people to help you, the who’s in your world to help you catapult your career or catapult your journey and the way that you get those people to help you is try to figure out what value you provide.
Because I know there’s a lot of people that say, “Hey, go network with people, go network.” It’s absolutely true, but I feel like a lot of people just ask people for help and they don’t really know how to ask for help. So for me, I like talking to people. I like building relationships and I think that’s where I figured out like, “Hey, that’s how I’m going to bring value to the team. Let me go talk to investors and bring some money to deals because I don’t have the money myself and I’m not generating the leads myself.”
So to find someone that has a lot of leads but doesn’t have the funding to get those deals done, that’s when I kind of figured, “Hey, this is where I’m going to sandwich myself in between these deals.”

Ashley:
So do you think a big part of this, if somebody is just starting out, is finding that money partner, finding how to finance a deal first by making those connections? Or is it finding the deal first, then going out and searching for those connections?

Tim:
I think if you find a really good deal, and you guys may have different experiences, but if you find a really good deal and the numbers make sense and it’s going to make money for you or a partner, I think the money will come once you find the deal. Because even me as a normal guy looking at properties and stuff, if the deal makes absolutely sense and I can fund it somehow or bring the money, we’re both going to win.
So I think a lot of people are afraid. I was too. I was like, “I don’t have the money to do all this stuff.” But once I started realizing once you bring a good deal to the table, the money is going to come from somewhere if you reach out to enough people.

Tony:
Yeah. Tim, I’m so glad you said that because I couldn’t agree with you more. I think finding a good deal makes everything else exponentially easier. And I heard this story over the weekend. It was this marketing guy, but he was talking about how sales is easier when you’re better at marketing and he gave the example of two different cars that you were trying to sell for $400,000 and he said, say imagine the first car is like an old beat up VW bus with blown out tires and the air conditioner doesn’t work and hasn’t been touched since 1970 and you’re trying to sell that for $40,000.
And then the second car is Rolls-Royce which retails for $300,000 and you’re trying to sell that for 40,000. You could be the world’s worst salesperson and still sell the Rolls-Royce for $40,000 because it’s an amazing deal. And you would have to be a hell of a salesman to get someone to buy the VW bus for you.
A lot of that comes down to raising capital as well. It’s like if I’ve got a really, really good deal, it doesn’t matter how big my network is because someone is going to find that deal. I could go into a random Facebook group and say, “I’ve got a really good deal and you’re going to have people breaking down your door.” So for a lot of our rookies that are listening, I think if the capital is a constraint for you, then try and focus your energies on how do I find a really good deal and then let everything else flow from there.

Tim:
Absolutely.

Tony:
All right. We’ve been talking a little bit of funding. Did we get through all the deals yet? I think you’ve got a couple more left in there. We haven’t touched on them all. Let’s quick rapid fire the last few deals and how you funded those.

Tim:
Okay. So the fix and flip in Atlanta, I actually… It’s kind of crazy. The Atlanta flip, I used a credit card, so I used a business credit card that had a promotion on it. It was like 0% interest. So I funded that deal on Atlanta. We sell it and we listed this month.

Tony:
Wait. Hold on for a second. Did you use that to purchase the property or to fund the rehab?

Tim:
To fund the rehab.

Ashley:
Okay. I was going to say how [inaudible 00:34:29] with a credit card.

Tony:
I’ve never seen anyone buy a property with a credit card.

Ashley:
I’ve seen people do a cash advance and pull out the cash off the credit card.

Tim:
So I used the credit card. I paid the 2% whatever to transfer the money into the checking account, and then I wired it to the Atlanta title company and then he’s renovating the property and then we’re going to list it actually in a couple weeks.

Tony:
Wow. Was that a business credit card or a personal card?

Tim:
Business one.

Tony:
Gotcha. Which one was that?

Tim:
It was a Wells Fargo card. So it had 0% interest for I think nine months. So it’s coming due soon. We’ve got to sell this house.

Ashley:
Well, I used a Wells Fargo one too for a funder rehab. We actually did it for all the materials.

Tim:
Oh, nice.

Ashley:
So we didn’t do a cash advance or anything, but we did it for all the materials. And they had a promotion too that if for the, I don’t know, first nine months, if you made your minimum payment every month that they would extend it to 12 months. I think-

Tim:
That’s nice.

Ashley:
… we paid it off already, but it did extend in case we have another project that comes up we need it for.

Tim:
Yeah. I mean they’re a really good tool. They’re so underrated.

Ashley:
Definitely. I mean, you could fund a pretty good rehab doing your materials and then you just have to worry about coming up with the cash to pay your contractor unless your contractor takes credit card. I just actually did a dumpster removal where they cleaned out a property and took the dumpster and everything like that and they emailed me the bill and they’re like, “All right. Pay by credit card.” I’m like, “Yep, racking up those credit card points.”

Tim:
Excellent. Awesome. And then the next deal, the one that I’m renovating now is a hard money loan. It’s just a normal fix and flip. We did a cash offer and then used the private moneylender to cover the rest of the costs and holding costs. We just started reno this week. And then the house that we close on in a couple weeks, it’s a seller finance deal, so we’re going to do light reno. Little down payment and we’re going to use a private moneylender on that deal as well.

Ashley:
Okay, awesome. So a wide variety of different ways to finance properties. I do want to go back to. Okay, so you’ve been able to purchase all these properties with this different funding, but now I’m curious about the rehab portion of it. Did you have any kind of construction experience at all?

Tim:
No, absolutely not. I looked for general contractors on the Facebook pages and networking events and that led to my first deals struggles because of my lack of experience and lack of network and having those systems in place. So are we going to talk about that more in depth? That kind of led into my first deal with the contractors and the lack of experience. I think the contractor knew that that was my first project and I lacked experience. I picked the cheapest one because I figured let me use the cheapest contractor to make the most spread on the deal, and it ended up costing me a lot more money because we had to hire a new contractor later on to fix a lot of the stuff that he originally did.
Also, since he knew that I was really inexperienced, we didn’t do a contract and it was the last third of the project and he actually asked me to pay him in advance because he had to pay his workers. I said, “Yeah, you’ve done a really great job for me the last month or two. Yeah, absolutely, I’m going to pay you.”
So I gave him the last third and then he literally stopped showing up to work. I know a lot of people have issues with their first GC and all that stuff, and it’s definitely true. He disappeared on me, so I had to paint the house myself and put all the light fixtures up myself to get this listed. And the project took really long because I had to do it myself towards the end. I remember I was supposed to BRRRR this house and I ended up listing it on the MLS to just get rid of it because I was just bleeding, holding costs and all this stuff.
As soon as that house was listed, there was a drug bust right across the street. So it was a lot of madness. I wanted to just stop real estate investing after that and it ended up selling. So we made a little bit of money off it. So I think that’s why I felt okay, but it was probably the most expensive learning experience that I’ve had. And I think that’s what’s helped me with the further projects because now I actually GC my own projects here in Louisville where I hire my own contractors, floors, windows and all that.
I think my military background helped me with that because I like managing stuff like that. So it’s a lot of fun to me. And I feel like I can sleep better at night.

Tony:
Tim, I guess the logical next question is you must’ve picked up that drug bust house on a pretty good deal. Right?

Tim:
I try to buy it. I try to buy it. I couldn’t get ahold the seller, but I tried.

Tony:
I wonder why.

Tim:
I really tried. It was all boarded up and stuff too, so I was like, “Oh, let me try to find the seller.” But no, I couldn’t get ahold of them.

Ashley:
I was at a real estate meetup once and this wholesaler came up to me and-

Tony:
A drug bust happened?

Ashley:
No. The wholesaler came up to me and I think he was a newer wholesaler. I didn’t know him. And he’s like, “Oh, people told me I should talk to you that you invest in this area.” It was one of the rural towns that’s actually close to where I went to high school and he is like, “Here, I have this house here. Here’s the address and stuff.” He was like, “Okay. I’ll look at it. I’ll email you.” And so I pull it up, I’m like, “Why does that house look familiar?”
I searched the address, just Googled the address and it was a meth lab, the people that owned it. And I remember my mom calling me and telling me that there was this meth lab, this drug bust going on in this house or whatever and this was probably like five, eight years ago maybe. So I said to the wholesaler, I said, “Well, has there been any remediation done?” And he’s like, “What are you talking about?” I’m like, “This house is a meth lab and it’s a [inaudible 00:40:32] the cops busted up.”
He had no idea or whatever. And it was just, you literally Google the address and information like that came up. So just you’re trying to wholesale houses or you’re buying houses. Just take the time to put the address of the property in and google it and see if there’s any news articles on that property. But actually I see that finally somebody ended up buying it and they’re slowly doing stuff to it.
Okay. Well, any last words of advice for somebody that’s doing a rehab or project managing? So you said your military background has definitely helped you with that. What are some of the things that you have implemented that make you a strong project manager?

Tim:
So I like to set deadlines now. I think organizing the project in thirds or quarters and having that contract laid out, I think that’s really important is to not do those handshake deals with your contractors and to have that contract that’s organizing, “Hey, I’ll pay you in thirds or I’ll pay you in halves after you finish this set list of items.” It’s actually really nice too because if you’re using a hard moneylender, a lot of those hard moneylenders will pay you for your renovations after they go see it. They inspect it or you take pictures of it.
So actually it helps us too out when you break down those payments in those organized manners because once they finish that project, then you can call the hard moneylender. They’ll inspect those items and then they’ll cut you the check and you can pay your contractors. And with that contract, it really keeps your workers in check as well. And also, I like to add a little bonus too. So if I have a 45-day project, I’m like, “Hey, if you finish it in 40 days or 38 days,” whatever it is, I like to give them a little money on top so they have a little bit of incentive. But also not too fast. So they rushed the deal and the project kind of gets messed up.

Tony:
Well. Tim, it seems like you’ve learned a lot since that first deal and sometimes things going south can be the best teacher and you tend to learn a lot when things go wrong, sometimes even more than when things just go perfectly great. So I’m glad to hear that you’re able to take some of those lessons. The next question I have for you though is about how you’re actually structuring these different partnerships and obviously Ash and I wrote the book on partnerships for BiggerPockets. Head over to biggerpockets.com/partnerships. But Tim would love to hear just your experience on how you’ve structured these different partnerships across the different deals.

Tim:
I actually had a partnership with somebody that didn’t work out, so it is not always sunshine or rainbows. But a lot of it is you find what you’re missing in your tool bag. So for me was the lead generation and finding someone in those areas out of the market or out of your local real estate market to help you. So for me, obviously, I’m not boots on ground. I don’t know how to generate those leads in those random cities like Oklahoma or Atlanta. I met some of these guys through the mentorship. And you always have to do your homework on your partners because once you work together, you’re stuck together until a good or bad outcome happens.
A lot of it is to see, instead of just analyzing the deal, you got to analyze your partner. So you got to see what their credibility is, how many deals they’ve done. So I usually try to find them on social media first to see if they’re actually posting content on Instagram, Facebook, or YouTube and to see what type of projects they’ve had. Also since I’ve met those guys in a mentorship, I actually asked a couple of guys and girls in my mentorship if they worked with them.A lot of other students had some really positive reviews about these guys, and so I felt like I can trust them.

Tony:
Got it. I love that you’re doing a little bit of homework on people beforehand. I think you mentioned this earlier, but sometimes getting… I mean, not sometimes, every time in a lot of ways getting into a real estate partnership is like a marriage. So you really want to make sure that you’re “getting into bed with”. But Tim, love your story so far, brother. I want to leverage all the experience you’ve gained this past year and let you answer a question from someone in the rookie audience.
So we’re going to head over to our rookie request line. So for all of our rookies that are listening, if you’d like to potentially get your question answered on the show, head over to biggerpockets.com/reply and we just might use your question for the show. So today’s question comes from someone by the name of Ja Mac and Ja’s question is, “In your opinion, what are the top three things that increase rental value? I’m gathering ideas for a home that we bought and planned to rent out.” So Tim, in your opinion, how would you answer this question for Ja?

Tim:
To increase rental? Are they talking about the rental income, how much you can charge?

Tony:
I guess let’s look at both, right? Both rental value and the after repair value.

Tim:
For the after repair value, you can always… If you have some extra space, maybe add another bedroom or a lot of the projects that I do is we have huge closets in the master bedroom and it doesn’t have a bathroom. So we usually add a bathroom in there because it adds a ton of value. Renovating a kitchen. I think one of the projects I did actually in my midterm, the kitchen looked like it was a picture from the 1950s. Has it been renovated? It had the weird turn knob ovens.
So we modernized that, ripped out all the cabinets and gave it a facelift, stainless steel appliances on and all that. But anything that you can add some value to your property will definitely boost your ARV. And obviously if you make things nicer, you can definitely raise the rents of those properties. If you are trying to make it even more profitable, if it’s in a really nice neighborhood or a good market for a midterm or short term, you can always add value like that by changing the amount of income you’re getting. So there’s the couple of tips that I can think of right now to boost the value and also to boost your rental income.

Tony:
Yeah. I love that answer, Tim. I think a big part for me is looking at your comps as well. So what other properties have sold in that area and what information can you get from those properties that have sold? We recently had Serena Norris on episode 330 and she came in and just gave a masterful breakdown of managing rehabs. So part of that conversation was how heavily she relies on comps to come up with her scope of work. So Ja, if you’re thinking about rehabbing a property, I’d say look at some of those other properties in your area, understand what they’re offering to folks and see what you can do to match.
All right. Let’s go to our next segment here, which is the Rookie Exam. Tim, these are going to be the three most important questions you’ll ever be asked in your life and you’re doing it in front of the rookie audience. Are you ready for the exam?

Tim:
I’m ready.

Tony:
All right, man. So question number one. What is one actionable thing that a rookie should do after listening to your episode?

Tim:
If you’re trying to get started in real estate, and I think you should find a real estate investor focused agent, it’s no cost out of your pocket to use a real estate agent. I think if you find an investor friendly agent that’s focused on investments and own their own projects, they can help you comp, like what Tony was talking about earlier, comp properties, find out what the values are and tell you what a deal is or what not a deal is. Also, when you buy a house on the MLS with an agent, you’re not paying the commission. So it’s free of charge for you and I think it’s a good way to get started and also build your network as well.

Ashley:
Yeah. I think that’s great advice. And BiggerPockets has the agent finder tool too. If you go to biggerpockets.com/agentfinder, you can see the selection of investor friendly agents to really help you out. Okay. Next question is, what is one tool software app or system in your business that you use?

Tim:
So I actually use your guys’ program for my property management. I use RentRedi. Because since I’m a pro member, I get it for free and I’ve been using it for the last year and it’s super easy. This is not an ad, but it’s super awesome. I mean it made my life a lot easier because I was super worried about being a property manager and it’s super nice to get your requests for repairs on there. Also, it literally goes directly to your bank account. A lot of your tenants will really like it too. They don’t have to cut a check to you, they can just wire the money to you. So that’s my number one software that I use.

Ashley:
And they don’t have to call you to put in the maintenance request. They can just put it in through the app.

Tim:
Put it in, super easy. But for real estate stuff, I use REIPro. My REIPro, so I use that as my system to pull up addresses, to pull up information about the properties. Now, that costs a little bit of money, but if you are trying to wholesale or trying to find some good deals off the market, that’s a system that I use.

Tony:
That’s interesting. I’ve never actually heard of REIPro before. Have you heard of that one, Ash?

Tim:
So it’s kind of PropStream.

Tony:
Interesting. There’s so many other options that are popping up. And Velo is one that has a relationship with BiggerPockets. Privy is one that I just recently found that actually seems pretty, pretty cool. Lots of options out there. But last question for you here, Tim. Where do you plan on being five years from now. If you keep the same pace, you’re going to be at like a thousand doors in five years, but what’s your personal goal where to see yourself being in five years?

Tim:
For me personally, in the next couple of years since I’ve been shifting towards the fix and flips and shorter stuff, I’m really trying to supplement my W2 income so I can comfortably leave work and start focusing on the business full-time. I started off with the long-term rentals, trying to generate a hundred, $200 a cashflow a month. But that would take me a long time to eventually feel comfortable to leave my W2. So I think in five years from now is to focus on real estate full time and start building long-term wealth with long-term rentals and still using the flip income to survive.
But I think in the long run is I would like to start getting into multi-families larger than the normal residential stuff. I think it’s a great opportunity out there. There’s a lot of cool things to get into and it’s something new, something that I’m not familiar with. So I really like learning, so I think that’s what I want to get into down the road.

Tony:
Awesome, brother. We’re excited to see you make that a reality, Tim.

Tim:
I hope so.

Tony:
So before we wrap things up, I want to give a shout-out to you. This week’s rookie rockstar, this week’s rockstar is Marielle Lily Walter. And Marielle says, “It’s almost unbelievable how much life can change in just one year when you decide to get out of analysis, paralysis, fear and doubt, and go for something greater. One year ago I decided to plunge headfirst into real estate and go hard towards my goals of financial freedom. At that time, I had done just a few real estate deals. Now, I’m about to celebrate my one-year anniversary of taking the real estate plunge and decided to look back over the year.”
So she says in just one year, she’s done 12 real estate deals, including seven flips, two apartment building investments, three rental properties, and four new deals under contract. And she finishes off by saying, “Your dreams are on the other side of your fear.” So Marielle, congratulations giving you a run for your money, Tim, with 12 deals in one year. But super excited to see that success happening too, man.

Ashley:
Tony, when I first read that before you said it out loud, I thought it said, “Your dreams are on the other side of your feet.” And it was because there was like a little smear on my computer screen. I was like, “Huh, I never heard that one before. You got to move your feet to take action to reach your dreams.”

Tony:
Move your feet to make it happen.

Ashley:
Well, Tim, thank you so much for joining us on the show today. Can you let everyone know where they can reach out to you and find out more information about you?

Tony:
Yeah, thanks for having me on the show. It’s been so much fun. You can find me on Instagram. It’s @itstimyu. So we keep it super simple with my name and you can find me on there. And thanks so much guys.

Ashley:
Thank you so much for listening to this week’s Rookie Podcast. I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson. And we will be back on Saturday with a rookie reply.

Speaker 4:
(singing)

The financial sector is undergoing a significant transformation, with technology at the forefront of change. Fintech startups are capitalizing on unique opportunities to revolutionize traditional financial models and introduce innovative solutions.

Let’s dive into five specific areas within the finance industry that offer promising opportunities for new innovative startup projects.

1. Personal Finance Management Apps

Financial management is not just important for businesses. Individuals are increasingly looking for more control and transparency over their finances. Personal finance management apps are addressing this demand by providing users with tools that make money management easier.

Mint, for example, is a popular platform that offers budgeting, expense tracking, and financial goal setting. Users can link their bank accounts and credit cards to get a complete view of their financial health. The success of these apps lies in their ability to simplify complex financial data and offer insights that empower users to make informed decisions.

Example business idea: a financial well-being app that goes beyond simple budgeting and focuses on personal goal-setting and priority optimization to help you make financial decisions suited to your specific situation, preferences, and ambitions.

2. Peer-to-Peer Lending

Peer-to-peer (P2P) lending platforms have transformed the way individuals and small businesses access loans. These platforms connect borrowers with individual investors, eliminating the need for traditional banks and transferring the cost savings to the lenders and borrowers.

LendingClub and Prosper are good examples of P2P lending success stories. They provide an alternative lending source, often with competitive interest rates. Startups in this niche can leverage technology to streamline the loan approval process, assess borrower risk, and enhance the overall lending experience.

Example business idea: a loan marketplace focused on educational loans. Students seeking financing for tuition, books, and living expenses can connect with investors interested in supporting education. The platform could offer flexible terms and competitive rates, helping students avoid the burden of high-interest traditional student loans.

3. Robo-Advisors

Robo-advisors use algorithms and automation to offer low-cost, diversified investment services. Wealthfront and Betterment are leading players in this space, allowing users to invest in diversified portfolios tailored to their financial goals and risk tolerance.

Robo-advisors have gained popularity for their simplicity and cost-effectiveness. Startups can continue to innovate in this area by enhancing the sophistication of investment algorithms and expanding the range of services offered. With the advancement in artificial intelligence, this niche is bound to experience rapid growth.

4. Insurtech

The insurance industry has experienced a digital transformation through insurtech startups that disrupted traditional insurance models by leveraging technology to simplify the insurance process.

Lemonade, for instance, uses artificial intelligence and behavioral economics to offer fast and transparent home and renters insurance.

The success of insurtech lies in its ability to enhance the customer experience and streamline claims processing, ultimately reducing costs. Startups in this niche can explore new insurance products, customer-centric services, and innovative risk assessment models to disrupt the industry further.

Example business idea: Develop an insurtech startup that offers travelers on-demand insurance coverage. Users can purchase insurance for the duration of their trip, and the app can use geolocation data to adjust coverage based on the user’s location. This model caters to the needs of modern, spontaneous travelers.

5. Regtech

Regulatory technology, or regtech, is revolutionizing how financial institutions navigate compliance and regulatory challenges.

Startups in this niche, such as ComplyAdvantage, employ advanced technologies like artificial intelligence to help businesses detect financial crimes and ensure compliance with regulations.

These platforms offer a cost-effective and efficient way to address compliance concerns, which is crucial in an industry highly regulated by governments worldwide. Regtech startups can expand by diversifying the range of compliance issues they address and by tailoring solutions to specific markets and sectors.

David:
This is the BiggerPockets Podcast show, 838.

Brian:
It’s an interesting thing whenever you look at recessions and depressions and everything, the amount of lawsuits almost doubles. So when times go bad, people start running out of money and start panicking. And what do they do? They start suing. Who do they sue? The haves. My landlord, I hate you. My doctor, you got that nice BMW. I want that BMW. So as things get harder, you have an increase in divorces and you have an increase in lawsuits. And then you couple that, which I broke down also because I tried to set the scene in my book. How did we get here? And it realistically is over the last 40 years, we created a society of victims.

David:
What’s going on everyone? It’s David Greene, your host of the BiggerPockets Real Estate Podcast, the biggest, the best, the baddest real estate podcast on the planet. Every week, bringing you the stories, how tos and the answers that you need to make smart decisions in this current market. Today is all about protection and I’ll be joined by the honorable Rob Abasolo.

Rob:
I hold myself in contempt.

David:
Today’s show is all about protecting yourself from potential lawsuits as well as dispelling so many of the myths that you may have built your foundation of knowledge on that are not true. And we get into that today with returning guest Brian Bradley. Brian was previously featured on the BiggerPockets Rookie episode 106 and 107, as well as our show, the BiggerPockets Real Estate Podcast, episode 595. He is an asset protection attorney and he brings the heat today. Rob, what were some of the things that you think people need to look out for to protect their wealth?

Rob:
Listen, we’re going to get into some pretty technical stuff, but we really make it digestible for everybody at home. And so whether you’ve been investing for 20 years, 15 years, or you’re just getting started, we are going to lay out the blueprint for how to protect your assets. And we get into that towards the end of the episode. So you’re definitely going to want to stick around.

David:
That’s right. No matter where you are in your journey, $0 or $100 million portfolio, you want to protect what you’ve built and we are here to help you. You’ve heard it said, measure twice, cut once. It is always better to prepare for things ahead of time than to wait until your middle of the storm and try to figure it out. Today’s quick dip is simple. In today’s episode, we talked about a recent change to landlord and tenant protections within the legal system. If you’re not sure about landlord and tenant laws, the BiggerPockets blog has a great post on this. Check out the link in the show notes and go read the blog. It’s got charts for specific issues like security deposits, lease violations and more. Rob, anything you want to say before we bring in Brian?

Rob:
Yes, a goose. 1% of people will understand that joke, but y’all are the real ones.

David:
And if you’re part of the 99% that don’t, make sure you’re following us on YouTube so you can see what Rob just did. All right, let’s get to Brian. Brian Bradley, welcome to the BiggerPockets podcast. How are you today?

Brian:
I’m doing great. Thanks for having me back on and this is going to be a lot of fun and we have a lot of important changes in the law to go over as well as myth busting a lot of misconceptions and questions that I get. All of this, I go into a lot of detail over my new book that’s coming out Over Exposed where I break all this crazy world down and this mess in that we’re living in and then investing in. But I think we’re going to have a lot of fun in today’s topic.

David:
Well, awesome man. Well, we want to bring you up to the stand if you will, and I hope you both will to tell us about these things.

Brian:
No, absolutely. Looking forward to kicking it off.

David:
And for those of you who have been enjoying the lack of jujitsu references, because I haven’t been going for a long time, I’m sorry to say that streak is likely going to end today because Brian was a IBJJ, is that what you’re competing in?

Brian:
Yeah, I compete through IBJJF and I’ll probably do ADCC afterwards in December.

David:
Well, it’s great to have you here again, to give our listeners a heads-up on where we’re headed with your insight today, we’re going to be talking about why your risk as a real estate investor has changed and what you need to know because of that, how to not accidentally commit fraud. It is way more common than you think and exactly what to do to protect your assets the right way at every level of wealth. So one of the reasons that we’re talking here today is that there’s recently been a court case with pretty big implications for people who own rental properties. Can you tell us about the Mallory v. Norfolk case?

Brian:
Yeah, yeah, absolutely. So it goes to when we’re talking about asset protections and layers. First layer of asset protection, think of cold weather, you’re going to wear a nice thin T-shirt or a nice thin shirt underneath all of your other layers. This is your base layer, your LLCs, it sits on your skin. Asset protection 101. And so there’s a lot of confusion when it comes to asset protection like where do we even set these things up? And you’re like, do we go to Delaware, Wyoming, Texas, Nevada? And this is where we really need to break down these modern myths and through the case law, because we’re talking about charging order protection and corporate veil piercing, just big legal fancy words.
And so what we have is, for example, a lot of California residents running off to other states like Wyoming to create Wyoming LLCs to hold the real estate in, the risky assets and their investments in, but then when you have to register those LLCs in the state that you’re a resident of and then pay the franchise tax. You can’t just go and take another state’s more beneficial laws and bring them to you to another state. And this is demonstrated now in a recent 2023 Supreme Court case named Mallory v. Norfolk, where the Supreme Court upheld a Pennsylvania statute that forces companies to face litigation within the borders that it’s registered to do business in.
And I’m going to repeat that because it’s very important and when lawyers and professors repeat things or cops repeat things, it’s generally going to be on the test. So I would say focus and pay attention. It forces companies to face litigation within the borders that it’s registered to do business in. This case now opens the door for other states to adopt similar registration requirements. So state courts are permitted to exercise jurisdiction over registered foreign corporations that are, let’s say, being used to hold your real estate in just as if they’re domestic corporations of that state.
So your Wyoming LLC that is now registered in California or registered in Pennsylvania or whatever the heck the state is that you’re a resident of is subject to the laws under California or Pennsylvania or that state that is registered in. And remember, you’re legally required to record your out-of-state LLCs known as foreign entities and pay the franchise tax. Again, you don’t just get to take Wyoming or Delaware tort and damage and personal injury laws with you to other states. You can’t just go and purchase other states’ more beneficial laws. And this case now has kind of put the nail in the coffin on that.

David:
So what you’re saying here is if I live in a state that has unfavorable laws, I can’t just open an LLC in a state with favorable laws, hold my properties in that LLC and then benefit from those favorable laws.

Brian:
Correct. Your general rule of law thought is we’re going to use the state that the asset is in. So if you own a rental property and it’s in California, it’s going to be a California LLC. If it’s in Tennessee, it’s going to be a Tennessee LLC. And there’s another really big distinction that’s really important when it comes to just LLCs that people are just literally not understanding. And what it is is a distinction between tort law and personal injury laws and then business law and contract law.
And when you’re setting up businesses and creating contracts, we can and should use choice of law clauses and venue provisions. You see them in every contract you ever sign. Okay, if we have a dispute we’re going to be litigating in this state, but when we’re setting up a business and we’re selling widgets or a product in a different state, we can then use Delaware or Wyoming or Nevada, those good charging order protection states.
What we’re going into there is internal disputes of affairs of the business, and I’m going to say that again, hint, hint, to govern internal disputes and affairs of the business internally. But again, when it comes to real estate and LLCs acting as holding companies for the rental properties, that’s not a business. When a person gets injured on your property and you’re getting sued or your LLC is getting sued for damages due to wrongful doings and negligence, so another legal fancy words, that’s not a business dispute, that’s a tort liability. We’re talking about wrongful acts and infringements on rights. So cases like tort liabilities do not relate to internal affairs or corporate government matters. And so they are seen as outside the entity. So you really don’t have corporate bill protection at all.

David:
So what you’re saying here relates to the belief that a lot of investors have that they figured out a loophole, they figured out a secret, there’s a way that they can get around being sued or losing things, and you’re saying it’s not as cut and dry as that sounds.

Brian:
Correct. And what it is really saying for some reason there’s become this weird thought that I have an LLC, I’m good, that’s all I need. It’s this dragon slayer and they forget first word, first letter, limited, they tell you this straight up in the name. And then we have now transitioned from ignoring the decades of case law about LLC and veil piercing and veils are very easy to be pierced and all you got to do is think about the thin, flimsy piece of fabric that goes over a bride’s face on a wedding day. It’s the same weakness. It is very weak.
There’s a seminal case on this, it’s called Associated Vendors Incorporated versus Auckland Meat Company came out in 1962. Here, the Court of appeals gave 20 reasons for justifying piercing your bill. I’m not going to go over all of them, it’s too tedious, but I’m just going to do the five heavy hitters. Co-mingling of funds of other assets, using funds for something other than corporate uses, failure to maintain adequate corporate records or the confusing of the records, use of corporation as a mere shell, under capitalization. That’s just five of them and I’m pretty sure you and your listeners have probably were like, “I probably check a couple of those boxes off already.” And that’s just five and that’s going to pierce your veil.

David:
Piercing of avail for example, is if you have a LLC for your rental properties and then you’re using the credit card for that LLC to buy personal-

Brian:
Groceries.

David:
Purchases or groceries, okay, that would be a case to pierce the veil because you are commingling personal funds with business funds.

Brian:
Correct. Like, “Hey babe, I forgot our credit card, but I got the business card. I’m going to go get some groceries.” Oh boom, now you’re co-mingling and mixing assets. Transfer the money out from your business account, put it into your personal account, declare it on your taxes at the end of the day, and then go use the money to go buy your car if it’s not a business for the business or go pay for the groceries, go on your nice vacation. But as you start mixing accounts on co-mingling assets or under capitalizing your corporation, which is very vague, there’s not even a clear distinction on what under capitalization is, especially if you’re starting up. So it’s an easy way to pierce the avail though. And so people need to realize this is why LLCs are the bottom of the rung of protection and why as you grow and you scale and you keep getting more and accumulating more, you add more layers, you add the management companies, you add the trust.

David:
And we’re going to talk about those. This is scary stuff because I think a lot of people, exactly like you said Brian, are under this impression that they got from some Instagram graphic that they read or some free webinar that they attended that said, “Hey, look at this little org chart with circles.” They’re always circles and it says, here’s you and here’s your LLC. Now if you get sued for the property, it stays within this self-contained LLC and it can’t come out and you’re protected. And what you’re basically describing is when the judge actually has that case and they look at the, you were negligent on your rental property, something terrible happened, somebody was hurt very bad, and they’re suing.
If you’re thinking, well, there’s only $50,000 of equity in the property, that’s all they can get. That’s not necessarily true. The judge is going to be looking at the intent, was this really a business or was this your house that you just registered as an LLC? Judges look at intent all the time and you’re giving examples of things judges hang their hat on and say, “No, no, no, that wasn’t its own business.”

Brian:
That’s very correct. And that’s the scary thing is especially when it comes to LLCs is you hear a lot of promoters, I’ll call them salesman promoters because a lot of them aren’t even attorneys. They’re saying, “Oh, we’ll get really creative with the operating agreement and we’ll put this on the operating agreement.” What you don’t realize is you submit that operating agreement to the judge for a judicial determination, and so you’re sitting there, “Please judge, please judge, agree with my operating agreement.” Well, that operating agreement is probably not valid and it doesn’t hold up to the statutes. And so that operating agreement gets pierced, which means in the bail gets pierced, which means now you’re held personally liable goodbye properties in the LLC and goodbye other personal assets as well like your brokerage accounts and other assets. So it’s very-

Rob:
Brian, can you just quickly define just the basic concept of piercing the corporate veil? I think we can probably get it from context clues, but just to give some very simple one line, what is it?

Brian:
Holding you personally liable. So the veil is separating out the managing member of the LLC and saying you can only get a judgment against what’s inside that LLC. The rest of the members’ assets are completely protected. Now some states are different with charging water protection. Some are stronger, some are weaker, but if the veil gets pierced no matter what, that means we’re no longer providing that one layer of separation between you and the rest of your assets. Now everything is fair game to be used to collect on for a judgment.

Rob:
Okay, got it. Yeah, yeah. And David, I feel for you on those Instagram TikTok where those reels or whatever where it’s, “Hey, do you want to not pay taxes ever again or ever get sued? Set up an LLC in Wyoming.” And I’m like, I’m pretty sure all that doesn’t work that way, but not a lawyer, and that’s why we brought you on.

Brian:
Yeah, and we’ll get into that with that’s a great one for when we start talking about fraud and scams because there’s a lot that we can dive into on that.

Rob:
Yeah, okay. We’ll get into that here in a second, but before we do, I do want to ask, with the new law change and everything, what does this actually mean for investors and what are some of the impacts that you think we’ll see as a result of this court case?

Brian:
So one, I think that now you’re going to see other case instituting similar statutes that Pennsylvania did is fair game now. And so what you’re going to see is that essentially if you went down this route and are just randomly using Wyoming to hold real estate in or as a management company and you have no connection to that state, you just bought a false sense of security, which sucks. You thought you did something beneficial, then you get sued and when you need it to work you’re like, “Oh my god, it didn’t work. What do I do.” That’s horrible. And that’s a really expensive learning lesson.
I spent money on this system, I thought it was going to work. I lose the case, spent all this money on the system paying this damage award and now I have to redo my entire asset protection plan so it’s going to cost more money. So this is really when you start going down this route of purchasing and setting up a plan to protect your assets, you really just have to look at what’s the case law, ask good questions, use these cases that we talk about and ask the promoter or the attorney, what about this case? What about that? If they don’t have an answer for you, which I had literally had a client or a potential client call yesterday who was, thank God I went through your website and was going over all these case calls so I asked this person all these questions, they said they’ll get back to me. I’ve never heard back from them and they ignore all my emails, which means their system doesn’t work.
So go through a checklist is how effective is the system, what’s the cost? Is it easy to maintain IRS compliance on? Do I maintain control of my assets or not? That’s kind of the checklist that you want to go into, especially like effectiveness and what we’re going to realize is jurisdiction shopping like this is just not going to be effective.

Rob:
Okay, all right. And I know you’ve mentioned one of the things you’ve encountered kind of a lot in your legal work with real estate investors is that people have accidentally committed fraud. Can you walk us through a story of how someone could accidentally commit fraud in the inner workings of LLCs and legalities here?

Brian:
Yeah, so there’s three realms of fraud. One is divorce, which we’ll come into because that’s not accidentally stumbling into that, that’s just you trying to hide assets. So we’ll break that one down after, but there’s two good tax scams that relate to accidentally stumbling into a scam and fraud, it’s essentially tax trust, myth busting. It’s insane how many times I get this call thinking that asset protection means not paying taxes and moving and hiding assets so that you lower your taxes and not pay it at all. The question generally is asked, I want to set up an asset protection plan, I’m tired of paying taxes. This is just legal and is tax fraud and that’s when people potentially go to jail.
But tax mitigation is legal, so just realize you can mitigate your taxes, pay less in taxes, that’s done with your CPA and wealth managers and using the tax code like a treasure map, setting up different investment types of stuff that you guys talk about and different types of investment accounts, that’s legal, that’s using the tax code how it’s supposed to be used. Now asset protection is about limiting liability of risk from lawsuits and creditors, people coming after your money and your assets through legal means, not hiding and moving assets.
So let’s start with the easy one that you can stumble into when you’re calling people in my world of the high end offshore trust, what we need to understand is that offshore asset protection planning will not reduce your taxes. If someone is telling you this, it’s a scam, and this is why we don’t use the Caymans, we don’t use Belize, we don’t use the Bahamas. They’re all red flagged and used as tax havens. The scam works by a promoter or sometimes an attorney or a CPA, generally just a salesman who’s not even a legally licensed attorney trying to sell you the idea that if you don’t have your money in the US then you don’t have to pay or owe any taxes on it until you bring the money back to the US. So just don’t bring the money back.
This is just false. The fact is that the IRS taxes you on worldwide income, plain and simple. You have annual FACTA disclosures, offshore wire transfer disclosures, 1035s, 1035 As, it doesn’t matter where you earn your money. If you’re a US citizen, you’re a US taxpayer and you owe the taxes, you have to disclose it, especially when it comes to offshore stuff. The problem with this scam is that when the IRS takes a look at your plan, it not only will not protect you, but it may leave you with this massive tax bill.
The bottom line is that asset protection planning and tax planning do not go together. It’s rule number one is oil and water. Anyone promising to help you legally evade paying taxes using any offshore entity is certainly lying to you. And if you’re involved in a scam like this, whether you were duped into it, it was not intentional, you just listened to some promoter talking to, you’re like, “God, this sounds amazing. I hate paying taxes. Great, I believe you.” Or you did it intentionally, it doesn’t matter. It all comes down to you. You’re the one that’s signing on your taxes under penalty and perjury. You’re the one going down for this.

David:
Right, so let me see if I can paint an analogy here since we’re on the protection theme. Let’s look at this stuff like body armor. There’s body armor that is really good at protecting you from ballistics heavy rounds and then there’s body armor that’s easier to move around in and it’s more comfortable. They are rarely ever or never going to both provide maximum benefits on both of those. It’s either easy to move around or it’s going to be protecting you more, but they’re not the same thing. When it comes to asset protection strategies that can protect you, that does not mean they will also be great at saving you in taxes though the entities that you create to claim your income are similar. It’s like they’re both forms of body armor.

Brian:
And then your CPA can then do their thing and what they can do within the tax code to then mitigate the taxes. And so essentially the CPA just needs to know how is this owned? Is it owned personally? Is it owned in a corporation? Is it owned in a trust? Now we know what section of the tax code we can do our magic with.

David:
Gotcha.

Brian:
But the asset protection plan is tax neutral. You can’t call an asset protection attorney and say, “Hey, I hate paying taxes.” Put it in a trust and hide it.

David:
Or vice versa. You can’t tell a CPA who wants to save in taxes and also make sure I can never get sued, those are not the same areas of expertise.

Rob:
But it’s a common thing that people, my accountants always like, “People ask me so much about LLCs and there’s a big misconception.” And starting an LLC is not going to save you thousands of dollars in taxes like that specific deck. It’s the actual tax stuff.

Brian:
But trust are magical. There’s a lot of things that you can do with them. They’re strong, they’re flexible for asset protection like we’re talking about just not for income tax avoidance, but you got a really big one, which you can stumble into. This scam is called, this is a 643 domestic abuse tax trust scam, and the IRS are heavy on this and I’ve hired 800 more auditors to check this out, and basically you get some salesman or a promoter talking about a special new trust where you can save on taxes and particularly you don’t have to pay on the sale of a business.
You can sell your business tax-free. This is just BS. At the bottom line, this is just messing with the definition and misusing Section 643, the tax code. Section 643 relates to distributable net income as it relates to how you tax a trust. The basic rule is that the taxation of a trust for income is going to be to the settler, meaning the person that created it or the beneficiary or the trust itself or some kind of combination of the three. What these promoters are doing is they reference an actual accurate authoritative source like citing the IRS code, but then they intentionally misinterpret what the code actually means.
But the taxpayers, you can’t freely self interpret the meaning of the tax code in a way that you want it to be. This is where you get in trouble and then essentially you’re up, you know what creek without a paddle. So it was very important to understand that even though trust are magical, creating a trust does not somehow magically create an ability to defer or avoid paying income taxes. Elon Musk can go and make a trillion dollars mining some sort of mineral on an asteroid in space, and so he made a trillion dollars in space, but he’s still going to have to pay his taxes on it.

David:
So that is ways people accidentally commit fraud is they are under these erroneous beliefs. All right, now what about divorce?

Brian:
So this is the other one that I get, the big D word. Asset protection plans cannot help you in a divorce. You can’t hide assets or unilaterally change the character of an asset from community to single, period. The end. A judge will determine that through the ruling or you and your ex-spouse must agree and all assets when you go up to the table in a divorce court are all presumed community, and then you have to prove what’s not community. It is hard to imagine in any scenario that in a divorce some portion of the assets are not going to be community assets. And that some of them won’t be awarded to the ex-spouse. This is just the reality.
So you start hiding assets, it’s going to be considered fraud and the system is going to be pierced. So the way you go about protecting your assets, if you’re thinking about having a potential divorce, is you plan individually, meaning only with separate assets that were agreed upon before the marriage with a prenuptial agreement or you plan with the spouse even though you’re going to get in divorce, but to protect it from lawsuits coming in while you’re figuring out who’s going to get what or you can plan individually, but exempt the divorce proceedings [inaudible 00:23:48] the protection planning.

David:
So it’s got be [inaudible 00:23:50]-

Brian:
Correct.

David:
There’s no secret. I moved here. I guess.

Brian:
And this is the Dale versus Dale case. All right. This is a 2015 Supreme Court case that made a major blow to domestic asset protection trust. The Dales were going through a very contentious divorce. Ms. Dale claimed that she was entitled to the assets that her husband placed and hid in his own domestic asset protection trust, one that he created just for himself. Then two big things happened in this case. First, the courts considered Mr. Dale’s assets that he placed in his own domestic trust as community assets and they joined those assets as a married couple.
So the Asset Protection Trust was pierced and it didn’t work for the divorce. The second thing that happened, which is why I like to use this case because it talks about both divorce and asset protection, is you can’t rely on choice of law recitals that are in the documents to establish jurisdiction. The court ignored the choice of law clause and found that it violated Utah public policy, meaning ultimately the court will decide not your documents.

David:
Now what about the popular case in the news about the soccer player that was married to an older girl and she divorced him and tried to take his stuff and he had moved his assets into his mom’s name. Are you familiar with this?

Brian:
No, I haven’t heard about that one. So yo have to give me some-

David:
So the idea was it was in another country and he was married and he felt like his wife might be looking to marry him just for his money. So he put the majority of his assets in his mother’s name. He didn’t own them. She divorced, she went after him and he said, “I didn’t own anything.” Is there a scenario where that could work?

Brian:
Yeah, no, that won’t because what a judge will generally do is consider that fraud and that you’re just hiding the assets and changing title into somebody else’s name, undo it, call it community, and you’re back into community assets.

David:
Now in another country, they might have different laws when it comes to, but not in this country.

Brian:
Correct. Yeah. And you hear something similar to that when it’s talking about doctors who are investing in real estate and then saying, “Oh, for a lawsuit just put it all in your wife’s name and then if you get sued, the assets are on your wife’s name.” That doesn’t work because a judge will just call that fraud. You’re married as community-

David:
Yeah, it’s community property.

Rob:
Yeah.

David:
So there are, again, same theme, these shortcuts when you’re actually in court standing in front of the judge, they get revealed as not being accurate as the same as the YouTube video that you watch with somebody telling you this is all you got to do.

Rob:
Or a season three of suits. I really felt like that prepared my real estate journey with the LLC stuff. So moving on, Brian, one question I did want to ask was, LLCs are always the thing that people get caught up on, especially in the real estate world. They’re like, “Oh, can I start a business without LLC?” And then I also see a lot of stuff about S-corps. I understand that there’s some misconceptions about the S-corp side of things too. Can you shed a little bit of light as to some of the misconceptions around them that you’re seeing?

Brian:
Yeah, yeah, absolutely. So S-corp fraud, you can use S-corps can use C-corps. They’re more set up for tax mitigation strategies. The problem here when it comes to lawsuits and asset protection is when a lot of people get into these situations like this, I’m creating a business, I want to go talk to my CPA, “Hey, CPA aDave, I don’t want to pay that much taxes.” So what systems should I set up or what should I do to mitigate as much taxes as I can pay? S-corp, first thing the CPA is going to do, they’re not thinking about lawsuits, they’re not thinking about anything like that. They’re just thinking about keeping more money for you.
So you create this S-corp and then you start investing in assets like real estate, or it could be you own a truck bed business and you have 100 now truck beds, or you’re a doctor and you have all your equipment in this S-corp. This is the general problem. And then 10 years later you call me and you’re like, “Hey man, Brian, I realized this was a really bad idea. I got $100 million worth of real estate all on this one S-corp, I need to take it out.”
Or, “I have my medical practice and I can’t have all my assets in there because if the medical practice gets sued, I still got to practice medicine. What can I do?” Probably nothing because I can’t take assets out of the S-corp without you owing all the deferred taxation back to the IRS. The problem with this situation is most people don’t have that kind of money just sitting around liquid in their bank account to pay the IRS back.
So the assets are stuck, I can’t do anything with it, or S-corps have shares, they can be frozen and seized by judges, which means all your assets are now frozen. So setting up an S-corp is good for tax mitigation money coming in, but what we want are assets to be held in LLCs, lease the assets back to the S-corp and that’s how you marry the two together. But your S-corp should not be just holding large amounts of assets. Because then you get sued, there’s literally nothing that we can do over.

Rob:
Got it. Okay. Cool. Cool. Thank you. Thank you. Well, I’d love to move into how to protect your assets. I think asset protection in general is a pain point no matter what level you’re at, and really there aren’t a ton of great resources. There’s not a lot of education on this. I have students ask me all the time about asset protection and LLCs and I legitimately refer, when someone asks me a question about asset protection, I refer them back to the episode we did with you about a year ago because that one was such a great masterclass in basically the basics.
But I have found personally that it’s hard to set up a system that grows with your portfolio. I have figured this stuff out as I’ve gone versus having set up the foundation at the beginning of my journey. So what I’d like to do is actually take people through the different pillars of income and maybe talk through the plan that someone might want to consider at that time. So for people that are in that $0 to $250,000 of exposed assets, what might that look like in terms of real estate?

Brian:
Yeah, so first, so what do we do shopping for an asset protection plan? This is where I think people need to before we even talk about the pillars, do it before it’s needed. Asset protection only works before it’s needed. That’s it. It’s a barrier. It’s a safe for your gold or your guns. You can’t set it up after the fact. The two big takeaways that I really want people to understand is there’s this case called SEC versus Solow. Here’s a situation where Ms. Solow’s trust was attacked by the SEC to collect her husband’s fines from engaging in fraud and a fraudulent trading scheme.
So just say bad people doing bad things, they’re the villains in the story. The court found that Mr. Solow made a fraudulent transfer after the SEC judgment was entered. So after the judgment was put up against him. So what he did was he assigned his assets over to his wife’s trust to protect them after the judgment. This is just no bueno. This is just straight up fraud. Mr. Solow was held in contempt of court. The good thing is 100% of the assets were protected because he put it in an offshore trust, but he was still held in civil contempt of court.
I liked this case because it demonstrates two things at the same time. One is just the power of an offshore trust, which we will recap as we go through the layers in a second. But it shows what really needs to be done is it goes to a timing issue. The timing of the trust has to be set up before the wrongdoing, before anything happened. So Mr. Solow was blatantly wrong. He’s the bad guy, but the strength of it 0.1, the assets were protected, but why was he held in civil contempt of court? Because of the timing issue. He did everything after the fact, after the lawsuit, after the judgment, and that’s fraudulent.
So the big takeaway, number one, when you’re shopping around for asset protection is do this stuff beforehand. You call me after the fact, there’s literally nothing I’m going to be able to do for you or anybody. Anybody that tells you that they can run away from them. They’re just trying to take your money from you. Now, when it comes to the layers. Think about winter. I always like to use a winter reference because we layer up when we go outside in wintertime. Entry level, first layer, you said you’re at 250,000 or less in net worth, maybe zero to three properties. This is when we use LLCs in insurance. It’s that thin layer that your base layer goes straight on your skin. This is where you’re starting at.
Then as you’re scaling and you’re growing, you’re adding more assets and you hit that probably four unit mark and you’re investing probably in multiple states. We got three or four LLCs set up. You have around $500,000 to $700,000 net. You want a mid-layer. You want something that’s a little bit thicker, like a Moreno wool sweater or a cardigan for you ladies that are listening, this is a management company. Some people use a Wyoming LLC, but you know why I don’t? We use a limited partnership for this layer. Then you keep growing, you kind of hit that 1 million net worth mark, or you are also a doctor, high risk professional with assets. This is where you want that last layer, that outer shell waterproof layer, that really nice winter jacket.
This keeps you nice and dry and warm when the weather’s really bad, that’s your doomsday lawsuit protection layer. That’s your asset protection hybrid trust. But by layering like this, you’re more flexible. You can adjust and make yourself more comfortable. You’re skiing, you’re getting hot. I’m going to take the mid-layer off. Oh, I’m sitting at the lodge getting some drinks with some friends. I’m just in my base layer. Oh my God, this storm came in and we weren’t expecting that. Now I’m going to throw all three layers on it. We’re going to go hit the powder. That’s the purpose, and we want the same thing that apply for asset protection trust.

Rob:
So to recap that, you’re saying when you’re starting out, it’s best to start out as soon as possible because if you don’t have these systems in place and someone sues you, there’s nothing you can do after the fact. And if you try to transfer it after the fact to an offshore shelf that you talked about, that’s fraud. So the first layer is going to be, I think you said is it $0 to $500,000? And that’s where you have a couple of LLCs.

Brian:
$0 to $250 generally is where that is. Yeah, so you’re going to start with just the base layer LLC and insurance and go get into some good insurance. Then the next layer, you’ll start growing. You’re going to expand. You’re going to need more than just the LLC because we know we just spent what, 20 minutes bashing LLCs. So now we know why we need the next layer. So we need to do something more. So that’s where those management companies come in. Some people use Wyoming LLCs as a management company. We use limited partnerships as a management company, but you need that another layer. That’s the second layer.
And then you’re going to keep growing. Hopefully you become a millionaire and you have like 10 properties or you’re high risk professional, that’s where you need that third layer, that asset protection trust, and it’s a combination of all three together that really provides you really strong ironclad protection. It’s just wherever you fall on that at the initial stage, I’m not going to advocate for somebody just starting out to say, “Hey, let’s go spend $30,000 today and create the Taj Mahal of all asset protection.” That’s stupid spending of money. I mean, honest to God. Start small. You’re just starting, LLC insurance. We scale as we go. If you’re coming in big time with me already, I’m a doctor. I got six properties, all in my personal name.” We’re going Taj Mahal, we’re going LLCs, limited partnership and bridge trusts.

Rob:
That’s interesting. That is something I did want to follow up on was when I’ve talked to a real estate attorney before, obviously LLCs are a layer of protection, but he’s always kind of maintained. And I’m curious on your POV here that really that first layer of protection is insurance. Insurance is usually what kicks in before we get to the lawsuit side, is that one of the first things you need definitely for sure?

Brian:
For sure. Insurance. Obviously, if your listeners go back to our prior episode where we talked about what’s wrong with insurance to recap that they’re good for the little things and then you have claim limits. What happens if you have an above claim limit? What happens if there’s an allegation of fraud or intentional wrongdoings in the lawsuit? Insurance doesn’t cover you for intentional wrongdoings or fraud, and virtually every case that’s filed nowadays will always have an allegation of intentional wrongdoings and fraud.
So if you have now a million dollar case with some form of intent, which could just be sending an email, yes, the plumbing was done, send, and then you have a mold issue, a multimillion dollar lawsuit now, what is the insurance company going to say? We’re not going to pay you a million dollar claim for something that has an allegation of intentional wrongdoings. If you think we’re wrong, sue us. Goodbye. That’s how they wiggle out of big lawsuits.
So do you need insurance? Yes. Get good insurance, is good for the little things. What you need to know is what are my claim limits? What are the wiggle outs? And from there, you start scaling as you go. But absolutely get insurance and get the LLC. Just realize the weakness of it, which we’ve been talking about, and the need to scale as you go.

Rob:
It’s like the first line of defense, but it’s not the silver bullet.

David:
And from the insurance company’s perspective, if we’re just being smart and taking a wide range and not just narcissistically looking at our own needs, they’re going to pay out on small claims because it doesn’t make sense for them to hire someone at a six figure salary to go look at small claims. They’re looking at, oh, we got to pay 10 million for this. Let’s find a way to get out of it. So by having them cover your small stuff, they’re not going to fight you on it as much. It’s fine for that lower $0 to $250,000, but when you get into having a higher net worth, the risk of lawsuit goes up, now that thin layer of ballistic armor that may have worked for small firearms or something isn’t going to be a good when you’re getting into light machine guns or something, right?

Brian:
Correct. And to piggyback off of that, the same analogy and principle goes to the next layer of insurance, umbrella policies because people are like, “Oh, why not just go get an umbrella?” It’s the same exact argument. Just realize all umbrella policies do is provide you more capital to fight, but generally all that money is going to be eaten up in litigation and trial expenses. So you need to realize it has the same loss, the same limitations, the same exit strategies, and then think about the cost of trial and the cost of litigation. That is generally going to be like if you’re going to go really fight, that’s going to probably be $250 to $500,000 legal battle.

David:
And then the ultimate protection for when someone gets to a net worth of a million dollars or more are these offshore accounts. But they have to be set up before you’re in trouble. Again, there is no get out of jail free Trump card that you can throw down and say, “No, no, no. The judge said that I have to pay this, but I’m just going to move all my money to the Cayman Islands and then he’ll never be able to touch it. I outsmarted the law.”

Brian:
Correct, because people are like, “Oh, well, you’re Mr. Offshore anyways. You’re doing all these Cook Island trusts. Why can’t I just put it in there and have jurisdictional non-recognition?” Because even the Cook Islands, even though they don’t recognize you as judgments and court orders, you’re doing this after the fact. So they’re going to look at it and say, if you set this up beforehand, yeah, it is completely legit. We won’t recognize it, but you did this after the fact. So they still are going to say, “No, sorry.” They can force them to bring the judgment down to the Cook Island. So we have a little bit of negotiating rule leverage there and say, “Cool, you got it.” They won’t recognize it, but you got to go take the judgment down there anyways, so that could get us back in the negotiating table. But it’s nothing like, nana, nana, nana, we threw your judgment in the trash. Take my penny on the dollar. That argument is when you set this up beforehand.

David:
I think it’s funny that as human beings, we all have that, what if I think I know the loophole because I’ve watched season three of suits or Yeah, I saw a YouTube video. If it ever comes down to it, I’ve got this super secret five-finger death punch that can get me out at any fight. And we don’t think about the fact that you have judges that are incredibly smart people with extensive law degrees at a practice for 20 years, and that is the person you’re going up against with your, I’m going to outsmart them with this strategy and that they’re going to do what you said. They’re going to look at your intent. Was your intent to get around my judgment? Because I’m not going to let you do that, versus was it in place before I issued the judgment?

Brian:
Correct. And we kind of identified what the term of fraud is, but you keep hitting the nail on it when what is the intent? So when we’re transferring assets, the judge literally is going to be, when we transferred it, what was the intent? If you had no creditor and you had no lawsuit, then there is no fraudulent transfer because you had no intent to hinder or delay a claim of a creditor. Now, if you’re coming to me after the fact and we transfer an asset, that is the exact definition of fraud. You just intended to transfer an asset to hinder or delay a legitimate creditor.

David:
Now Brian, when people are setting up these legal entities, at least in my experience, I’ve had to probably reshuffle things around four different times. That’s partially because I often have to switch CPAs and oh, I just get PTSD thinking about what it’s like. I did it a year ago and I’m still talking to them every week trying to figure out how we’re going to set it up.
But a lot of it’s because of, like you said, changing needs, equity grows, your net worth changes, the ways that you make money change. This is like a living, breathing organism. It’s not like pouring concrete and you could do it one time and you could just let it sit for 50 years. What advice do you have for people who maybe think that they’re doing something wrong because they’re frequently having to have conversations about how to structure their entities and how to take advantage of taxes?

Brian:
I think that what you need to realize is those are the conversations you should be having consistently. As you’re becoming successful and you’re making more and you have more risk and you have more assets, you honestly should be talking to your CPA and your advisors more regularly. And I love it because one of my good affiliates who’s a great CPA for investors, he’s like, “God, I wish my clients would call me more than one time a year and just dump a bunch of files on my desk and say, here, work some magic.” He’s like, “You know what magic I could have done if you were talking to me and telling me about what you’re doing beforehand throughout the year.” It’s like, “I could have really done something for you.”
And so what I think people need to realize is these are conversations that you should be, get some sort of plan with your CPA where it’s not just, “Hey, you’re going to going to file all my taxes at the end of the year.” Talk to them quarterly. Tell them what your goals are. Tell them, “I’m going on vacation next month. How do I save some taxes on this?” “I’m building this business.” Involve your CPA. Maybe you don’t need to involve your attorney on it right now because some people don’t want to pay those costs for the legal fees for that, but at least start getting involved with your advisors more often and just realize that’s the business of being successful. And the more you utilize your advisors, the more money you’re going to probably save and make.

Rob:
Well, I am signing my trust tomorrow because every time I get on an airplane with my wife, she instantly goes to, “We’re going to die.” And so every time we’ve travel, she’s like, “We need to get our will in place. We need to get our trust.” I’m actually signing our paperwork tomorrow. And after listening to you, I’m like, did we do it all wrong? Who knows? Find out on the next episode of BiggerPockets, no, I’m just kidding.
So yeah, there’s a lot of, I’ve spent the past year really trying to learn the tax side of things. I certainly have not put that much effort into the legal side of things. And so I’d really like to, now I’m more inspired than ever to be, “Okay, let’s look at the system cracks here. Let’s make sure that all the credit cards are being used correctly.” I think the number one thing that people can probably do and find education on is how to protect themselves from, I guess the veil being pierced. Some small education there can really help you break a lot of bad habits that all investors probably have.

Brian:
Correct. I devoted a lot of section of that in my book. And then there’s other good books that are just written about corporate veil piercing. The problem is now there’s not a lot of, it’s hard to get access to information and sifting through what’s a bunch of BS and what’s salesmanship and what’s legit. And so that’s where I always look at who wrote it? Do they support it with case law? Do they have statutes on this or is it just a bunch of hyperbole and theories? And we need to start flushing a lot of that stuff out. And I think people need to realize some of this stuff, estate planning, protecting your assets, talking to your CPAs, yeah, it’s not sexy, but this is the important stuff when we’re making money and trying to grow and have financial freedom. That’s the stuff where the nitty and gritty needs to really happen.

Rob:
Well, we’re trying to keep the financial freedom, I guess.

Brian:
Correct.

Rob:
That’s the point of asset protection is yeah, taxes help you get there. And then the legal asset protection side-

David:
There are people out there, and this is me going into a hypothetical, okay, I don’t know this, but here’s what my gut says, with YouTube, with social media, with how fast information transfers and with the growing animosity towards wealthy people that we’re starting to see as we go into a recession, I think you’re going to see an uptick in how much people don’t like people that are financially successful. You’re going to start to see information being made that teaches people how to sue in the same way that we are teaching you now how to protect yourself.
You will start to see people saying, “Hey, I learned how to take advantage of someone by suing them in this way. This is what I did. This was the process. This is the point they settled at, and I was able to make $180,000.” As that information gets around, more and more people are going to start doing it. The protection that you need is going to need to level up as the weaponry of the other side increases. I’m not looking forward to that, obviously. I don’t think it’s good, but I think it’s a legit threat that we would be irresponsible not to be sharing that that’s very likely to happen. Have you seen Brian maybe an uptick in how often this is happening?

Brian:
Yeah, I actually was going to say, it’s an interesting thing. Whenever you look at recessions and depressions and everything, the amount of lawsuits almost doubles. So when times go bad, people start running out of money and start panicking, and what do they do? They start suing. Who do they sue? The haves, my landlord, I hate you. My doctor, you got that nice BMW. I want that BMW. So as things get harder, you have an increase in divorces and you have an increase in lawsuits. And then you couple that, which I broke down also because I have tried to set the scene in my book, how did we get here? And it realistically is over the last 40 years, we created a society of victims. And now as this victim class increases, now they want to play the lawsuit lottery, and they’re trying to get rich quick by what you’re talking about.
“Hey, I sued people like this. Now here’s the script. You can go and try to do the same thing.” And even though lawyers now can advertise and have a medium of stirring the pot, there’s no pot to stir. If people didn’t check out accountability and responsibility and weren’t so sue happy and weren’t identifying as a victim, then there wouldn’t be a pot to stir. And so it goes straight to your point of how we got into this massive mess anyways and realize things are getting worse. The world economy is getting worse. There’s no easy fix, monetary manipulation, inflated diet mentality, we got to protect our stuff and we got to be prepared for the tsunami that could potentially be coming ahead. But keeping a positive attitude about things in saying, “Where do we keep investing and growing from here?”

David:
Yeah, I look at us like we subscribe to a philosophy that more or less was captured in the book that I wrote about Pillars of Wealth, save your money, make more money, invest it wisely. And it’s all about adding value to the marketplace, improving your skills, pursuing excellence, giving your best, educating yourself. That’s how you become wealthy. There is an opposing philosophy that preaches financial freedom with the Robin Hood method. We’ll just take it from those people that are rich and give it to yourself. And there is a bit of a struggle that isn’t as noticeable right now, but I think as we head into a recession, it’s going to become much more noticeable and this information becomes more popular.

Rob:
Totally, yeah, yeah. Well, Brian, you kind of mentioned you have a book. Can you tell us where we can grab it? Is it available now? Is it available with pre-order? Where can people find you, all that good stuff?

Brian:
Yeah, so as soon this last stage of its editing, so it should be done this week, and then I hope to have it put out and published by this week or next week at the latest. It’s called Over Exposed and like I said, I break down the world of asset protection and how we got to the point of this crazy messed up legal system that we’re living in, and how do we just protect ourselves from it? And then a great way to go and find the book. You can just jump on my website. I have a whole page just for the book that people can click and go to, or I’m going to publish it through Amazon so they can just jump on Amazon and get a copy of Over Exposed.

Rob:
And what is your website? Where can people find you?

Brian:
Yeah, www.btblegal.com. And like before, I use my website just as an educational link for people, tons of case law, tons of client facts, situations, frequently asked questions, questions you should ask attorneys when you’re vetting them to create this system. And what I’ve noticed is when people actually go in and jump on my resources and start asking people questions, they can vet through a bunch of BS.

Rob:
Cool. Well, I rest my case, your honor. David Greene, where can people find more out about you if they want to learn about you on the Innerwebs?

David:
You can’t handle more about me, davidgreene24.com, or you can check me out on your favorite social media @DavidGreen24. What about you, Rob?

Rob:
You can find me on YouTube over at Robuilt and on Instagram as well. I got very diverse content. They’re both very different, so go say hi. Go leave a comment. Go leave a mean comment about my hair or a compliment about my hair because I seem to get them both every single day.

David:
Any attention is good attention when you’re an attention starved person like Rob. Well, thank you, Brian. We appreciate you coming back on again. This is David Greene. For Rob, I rest my case, your honor, Abasolo, signing off.

In the information age, media has already gone through a fundamental transformation. User-generated content, smart content recommendation algorithms, and nowadays – AI are making the traditional media landscape almost unrecognizable both on the supply and demand sides.

Most of these changes have been driven by innovative startups. The changes, however, are likely not over. Let’s delve into four specific areas within media that present promising opportunities for new innovative startup projects.

1. Streaming Services For Niche Audiences

Streaming services have become a dominant force in the media industry. However, there is a growing demand for content tailored to niche audiences. Startups that focus on providing content for specific communities or interests can thrive.

As the streaming market becomes more saturated with mainstream content, niche streaming services can fill the gaps by providing specialized, high-quality content. Consumers are increasingly seeking content that resonates with their specific interests, and startups that deliver on this demand have the potential for rapid growth.

A good example is FloSports, which caters to passionate sports fan communities by streaming events such as wrestling and track cycling.

It must be mentioned that the father of modern live-streaming – twitch.tv, is focused on a niche itself – gaming. This model could likely be replicated by on-demand streaming service startups. By narrowing down on producing and publishing content for an under-served but passionate niche community you avoid competing directly with the established players on the media market.

2. Interactive and Immersive Storytelling

Startups that venture into interactive storytelling using technologies like augmented reality (AR) and virtual reality (VR) are gaining ground. These innovations enable users to engage with content in unprecedented ways. Whether it’s interactive documentaries, historical reenactments in VR, or augmented reality apps that enhance print media, startups are reshaping the way we experience stories.

With the technological improvement in the AR and VR field, the potential for immersive storytelling is also growing. These technologies have the power to transport users to different worlds, offering unique and engaging narratives. As consumer interest in immersive experiences continues to grow, startups that tap into this trend can capture a loyal and expanding audience.

3. Crowdsourced Journalism Platforms

Thanks to user-generated content and improved content-recommendation algorithms, the era of citizen journalism is upon us. Startups that make it easier for ordinary individuals to report on events, share videos, and contribute to news coverage are gaining traction.

Crowdsourced journalism startups leverage the power of citizen reporters who are often on the scene before traditional news outlets. They enable real-time reporting and provide a diverse range of perspectives. With the rise of social media, the public is increasingly engaged in reporting events, making crowdsourced journalism an area ripe for innovation. Startups in the field can change the way news is gathered and disseminated, making it more decentralized and immediate.

In our experience, the real opportunities in this niche for new early-stage projects don’t lie in creating new journalism platforms. The reason for this is the chicken-and-egg problem for UGC platforms – you need users to generate content, but the users wouldn’t come if you don’t have good content. This problem makes the UGC platform business model a hard nut to crack for small startups. Instead, services that make it easier for people to find and report on noteworthy events while letting people publish on established platforms like Twitter, Facebook, and YouTube are likely to provide the richest soil for innovation and growth in this niche.

4. AI-Powered Video Production

Creating video content can be resource-intensive and time-consuming. Startups that harness artificial intelligence (AI) for video production are streamlining this process. These AI-powered solutions open the door to efficient, cost-effective video production, enabling businesses and content creators to engage their audience through video more easily, empowering user-generated content (one of the driving forces behind the media landscape disruption) further.

Video content is in high demand across various platforms, from social media to marketing campaigns. AI-powered video production reduces the barriers to entry, allowing even small businesses and individuals to create professional-quality videos. As the demand for video continues to surge and more and more individuals aspire to become content creators, startups that offer cheap but efficient AI-driven solutions are well-positioned to thrive.