Janessa Leone started her business with $10,000. The brand now pulls in more than eight figures, she says (aka, more than $10 million). It’s still self-funded, and it’s more mission-driven than ever before.

The California native first discovered the beauty of handcrafted hats on a visit to Paris. She wanted to bring that quality craftsmanship to a category that had been ignored. In 2013, she launched primarily with hats, and a few leather accessories. But in the last 10 years, she’s been building a brand squarely focused on regeneration. “It’s not easy. This is not the typical way to do business. But I can’t imagine doing it any other way,” she says.

Leone, who grew up in southern California, spent years battling chronic health issues. The healthcare system, she says, was good at two things: sustaining health and emergency health, but not restoring health. “The body is a well-designed machine that can heal itself if given the right nutrients.”

So to help herself heal, she turned to food and nature. By eating more nutrient-dense foods, she discovered regenerative agriculture. “The way food is grown does impact the nutrients in it. The richer the soils, the more nutritious that piece of fruit or that vegetable is going to be.”

Thus, building a regenerative-minded brand came through an unusual route. “I’d been an animal lover. I was keen on nutrient-dense foods. And I was interested in slow fashion. All the roads pointed me to regenerative agriculture. It’s a slower way of doing things, for sure. But just like I could heal my body, the land could be healed as well, and give back more in dividends.”

With the guidance and support of Rachel Cantu, who was VP of Supply Chain at Patagonia for 5 years, Leone set out to build a supply chain from scratch for all the materials used in products. And she added one more key item to her lineup: wool sweaters made from regenerative wool that’s grown, sourced, and turned into yarn entirely in the US.

They connected with Jeanne Carver of Shaniko Wool Company in Oregon. Carver had been working with ranchers like herself to create a ranch group, practicing regenerative agriculture. To qualify to be a part of the ranch group, a farm had to show they were already incorporating regenerative practices (no to low tillage, rotational grazing, managing pastures, and more). Plus, they’d have to be part of the Responsible Wool Standard.

For these ranchers, it would be beneficial to sell this wool to brands such as Janessa Leoné rather than on the commodities market, but there are not enough companies sourcing directly yet.

In fact, Leone says, “When I would first ask my leather suppliers where the hides were coming from, few, if any, could trace it back to the animal. So many brands do not know where the materials are coming from because the intermediaries in the supply chain itself don’t know.”

For her, though, it was imperative to have a fully traceable supply chain, given that she wants to source more than 80% of materials from regenerative farms in the near future.

There are concerns about greenwashing with regenerative agriculture, Leone admits. “That’s why we’re focused on traceability and data. Our suppliers are tracking the carbon content in soils, taking samples yearly, and monitoring the activity. Granted, they’re already starting from a stronger place than a conventional farm. But they’re proving it with data.”

Carver, for instance, has reported this data at Textile Exchange gatherings, where Leone is also sharing feedback and helping the organization build out its regenerative standard. The last update was that the ranches had sequestered carbon the equivalent of 43,600 cars in one year. (The U.S. EPA has found that a typical 22 MPG gas-based car emits about 5 tons of carbon dioxide per year, she adds. Plus, this data has been verified by a third-party).

Yet today, Leone iterates that Carver and the ranchers need more support. Thus, she’s encouraging other like-minded brands to collaborate with her and her suppliers. For example, she works with denim brand Citizens of Humanity to source regenerative cotton, and vice versa, they’ve discovered wool supply chains thanks to her.

“Lots of companies have to come together to make this happen. It’s not going to be just one company that can do it all.”

Ashley:
This is Real Estate Rookie episode 344. 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’re bringing you the inspiration, motivation, and stories you need here to kickstart your investing journey. Today we’ve got an amazing guest for the Real Estate Rookie audience. We’ve got the one and only Jim Kwik. And if you guys don’t know Jim, if you Google his name, you’ll see him rubbing shoulders with some of the biggest names in Hollywood and business. Elon Musk, Oprah Winfrey, so much more. And Jim, which you guys are going to hear in today’s episode, is an expert in your brain and he’s going to teach you how to turn your brain into a more optimized tool to help you find success. And I get that it’s not directly related to real estate investing, but so much of what you’re going to hear will help rebuild that belief system that you need to take that step to become a real estate investor. And just overall, it’s going to be a really amazing conversation.

Ashley:
One of the big takeaways that Jim will talk about that I had for this episode is he’s going to talk about your problem of time management. And what he says blew my mind. You don’t have a time management problem, you have a priority management problem. And as he goes through why and explains exactly his thought process on this, I want you to start thinking about your own calendars, your own schedules, and what you do actually prioritize and make time for too. And throughout this episode, Jim will tell us little questions we should be asking ourselves as we go through. Then if you listen all the way to the end, he actually gives you a bunch of resources that you can use for free to get access to learning more about improving your brain power.
Jim, welcome to the show. Thank you so much for joining us on the Real Estate Rookie podcast. We thought we would start off this episode with questions from our audience. So we let everyone know that we were going to be having you onto the show and we had several people submit questions that they wanted us to ask you. So our first question is from Amy Heney. How can you overcome procrastination? Jim, what would be your advice?

Jim:
Three things that move the needle to overcome procrastination. It’s for limitless motivation, and you could use this for motivating yourself to do the things you need to do that you’re putting off. And you could also do this for people on the other side to motivate them to buy, to motivate them to list, to motivate them to invest also. So it works on both sides. The formula that we came up with in Limitless Expanded, our brand new book, it says P times E times S3. P times E times S3. So let’s unpack that. The first thing you need to do to have more motivation and overcome procrastination, the P stands for purpose. I realize that you could have goals in your head, but if you’re not acting with your hands, you have to tap into the second H, which is your heart, which are the emotions.
And that’s really where purpose comes from. Purpose really is an emotional state. It’s feelings of excitement. Because I feel like if you don’t have reasons, you won’t get the results. So let’s say you want to remember someone’s name. A lot of people will forget people’s name. Being a memory expert, putting on that memory coaching hat on that motivates someone to remember names. Tap into the reasons. Ask yourself why. And that’s how you get your purpose. Why do I want to remember this person’s name? Maybe it’s to show the person respect maybe. Which is so important by the way, to remember names and faces in business. Because how are you going to show somebody you care for their future, their finances, their family, if you don’t care enough just to remember their name? So maybe it’s to show the person respect. Maybe it’s to close a deal, maybe it’s to get a referral. Maybe it’s to practice these techniques that they learned in this podcast. But remember reasons, rewards, and if you don’t feel it, you won’t do it.
And it’s not intellectual reasons. Everyone knows intellectually they should work out, they should meditate, they should prioritize their sleep, but a lot of times we’re not feeling the rewards that would come from it. So remember, just like how people don’t buy logically, they buy emotionally. Because we’re not logical, we’re biological. You think about dopamine, oxytocin, serotonin, endorphins. We are this chemical feeling soup. So I would say the first thing to have is to really feel your purpose for doing something. The benefits that will come from doing that thing. Because sometimes in business you have to feed your business till it feeds you back. You have to feed it. Maybe you’re working a nine to five and you’re doing this, but you feed your business consistently until it feeds you back. But feel the results in advance and that’s purpose.
Next, you have to go to E, which is P times E times S3, the E is energy. A lot of people procrastinate because they’re just exhausted. We have a 10 month old and he’s teething and we’re not getting any sleep at night. He’s just like … We’re waking up five, six times a night. So it affects your motivation to do the things that you need to do. So you need to optimize your energy. That’s why in Limitless Expanded, we talk about the best brain foods for energy, mental energy. We talk about how to manage your stress. It’s very tactical things, science-based, because stress takes a lot of energy. We talk about how to optimize your sleep and supplements that give you energy. So that’s just really nailing down the energy because an exhausted mind doesn’t do anything. And then finally, you could have limitless purpose. You could feel it and you have energy to act on it, and you could still not perform. You could still procrastinate because often the third reason people procrastinate besides lack of purpose or feeling purpose and lack of energy is maybe they have a goal that’s just too big.
They want to build their portfolio, make a certain amount of income and get 100,000 followers or whatever. And S3 are small, simple steps. Realize that a confused mind doesn’t do anything. Just like a confused buyer doesn’t anything. So how do you make it super, super simple? By breaking it down. So maybe let’s say exercise is really good for your brain performance. You create brain derived neurotropic factors, BDNF. But if you’re not exercising, maybe a small simple step is putting on your running shoes. Maybe people see me social media with Oprah or Elon or something like that and people always ask how we connected. We bonded over books. You read to succeed. Leaders are readers. Warren Buffet reads 500 pages a day. Because knowledge today is not only power, knowledge is profit, but if you’re not reading 30 minutes a day, maybe it’s because you ate a big processed meal and you lack energy or you don’t feel the rewards that come for purpose. Or maybe it’s just too big of a habit change for somebody and maybe a small simple step. Opening up a book is a small, simple step. Reading one line in a book is a small, simple step.
How you find your small simple step, this is the magic question. We could turn this into a little masterclass where everyone could write this down. What is the tiniest action that I could take right now that will give me progress towards this goal and where I can’t fail? What is the tiniest action I could do right now, operative word is now, where it gives me progress towards this goal, it’s going to be closer to this goal, where I can’t fail. It takes very little energy and effort to be able to do it.
We have our own podcast, 400 plus episodes, 20 minutes each. Recent episode was with a biological dentist talking about how your oral hygiene, your oral health can lead to better brain health. And if you’re not flossing or your kids aren’t flossing, maybe get them to floss one tooth. Because nobody’s going to stop at one tooth, but the idea here is inch by inch, it’s a cinch, yard by yard is just way too hard. So those are the three areas that I would suggest putting your energy and focus. And then once you’re doing that, it just becomes second nature and you start to develop momentum. So yeah, break it down little by little, a little becomes a lot because consistency compounds just like money.

Tony:
Jim, so many good little nuggets in there. I’ve got so many notes I was scribbling as you were talking. First, I just want to talk about … You talked about the fitness thing and just waking up and putting on your running shoes. I’ve competed in a few amateur bodybuilding competitions, and one of the worst parts was getting up every morning to do 60 minutes of cardio. And I never focused on the 60 minutes of cardio. My thing was just get up and brush my teeth. And if I could make it to the sink to brush my teeth, there was a 99% chance I’d make it downstairs to get on the treadmill and do the cardio. So I love that idea of finding that small step that leads towards that bigger action.
I want to circle back though to the purpose piece. Because I feel like purpose, it’s a heavy word, and a lot of people float through life without really identifying a true purpose. And you touched on it a little bit, but say that I’m someone who’s just feeling a little lost or a little stuck just in general. What steps should someone in that position take to get some clarity on what their purpose is in life?

Jim:
Okay. Life purpose, I was thinking about a little bit differently. For this I was thinking about purpose for working out and purpose for reading or purpose for micro things. But certainly you could tie things to your life purpose. And we have a whole chapter in the book about finding your purpose. People use words interchangeably, and I find it kind of fascinating. People will say passion and purpose and they’ll feel like it’s the same thing, but for me, it’s very distinctive. Passion for me … And I relate it to purpose, how it’s related to purpose. Passion for me is something that lights you up. So Ashley, Tony, you might have something or lots of things that lights you up. And for me, learning is something that lights me up. It didn’t always. I had struggles in this area. I had a traumatic brain injury. I was labeled broken. Took me years longer to learn how to read after my accident when I was five years old. I was in special education, all of that.
But learning, eventually it became my purpose, my passion. So passion is what lights you up. For me, purpose is how you use your passion to light somebody else up. So maybe somebody is really passionate about real estate and their purpose … So learning is what lights me up. Teaching people how to learn is my purpose. To light other people up as my example. Brain optimization is a passion of mine. It just lights me up. And teaching people how to optimize their brain lights them up. So that’s my purpose. So I would say that giving yourself enough stimulus to see where your passions flow, and then how can you use your passions to light other people up. Maybe your passion is music and your purpose is performing for other people to light them up with your music.
And some people’s passion could be real estate or some aspect of real estate. And maybe going out there and performing that is more of your purpose. And so for me, it’s not necessarily easy, but I think it’s pretty simple. You know what I mean? Working out every day is not necessarily easy, but it’s pretty simple and straightforward. And so for me, another way of finding your purpose is to ask purpose-driven questions and tying it into your values. Meaning a great question everybody could ask themselves right now is what’s most important to me in life? What’s most important to me in a relationship? What’s most important to me in a career? And it’s different for every single person. It’s individual for every single person. And so I would say if your purpose for life is growth, contribution, having fun and adventure, it’s different than somebody who has their values in life is security and safety.
So other people could really value adventure and other people could value safety and those two people are going to invest differently. They’re going to do different things with their money, with their time. And imagine these two people are married. That’s going to be very different. And even in a relationship, finding the values you have in a relationship. Some people value, trust, loyalty, kindness, but everyone values something a little bit different and so there’s a hierarchy of the things that we value. So for me, my life values are love, growth, contribution, a sense of adventure and joy. And so I make my decisions based on that. And I feel like part of success is having the curiosity to know yourself. It’s why people go to therapy or they meditate or they do introspection and reflection and journal. But then part of it is once you have the curiosity to know yourself, having the courage to be that person is another game entirely.
Because a lot of people are scared of other people’s opinions, other people’s expectations. And so yeah, I would say purpose is something that is how you could use your passions to light other people up. And so just keep it there. And if you’re not really sure, what are the things that light you up and what are the things that also you can’t stand? You could also find purpose through things that really just aggravate the heck out of you, and then maybe it reveals itself in that context also as well.

Tony:
Yeah, Jim, so many good things there. I love the phrase curiosity to know yourself. I’ve never heard it phrased that way, but I think for so many people, they probably never really take the time to get to know themselves on that deep of a level. And we’re all just, I guess have these surface level relationships with ourselves. So I love that phrase curiosity to know yourself. But tying it back to just like our rookies that are listening, I think a common misconception that a lot of new real estate investors struggle with as they step into this space is they’re looking for real estate to be the end all be all for them, when really the real estate investing is just a vehicle for you to live out your passion, your purpose, and whatever that is.
So I think folks don’t need to put as much pressure on themselves to find all the fulfillment inside of real estate investing, but just get that business to a point where it allows you to do the things you’re passionate about. And Jim, that actually ties really nicely into our next question here from Tiffany O. And Tiffany’s question is, for people who have talents and passions in multiple areas, and she lists out real estate investing, content creation, music, et cetera, and wants to unleash all of those in life, how do you know which one to put your full and whole focus on first? Do you focus on one or two at a time until you’ve reached a satisfaction point and then move on to the next? Or do you attack them simultaneously?

Jim:
Yeah. Everybody has a different brain type. And one of the things I’m really excited about this new book is there’s a chapter on there on cognitive types. And I realize after coaching for over 30 years that everybody learns a little differently. Everyone leads differently, everyone thinks a little bit differently. And we found four buckets. We call them brain animals. And we created a quiz in the book. People could also access it online at mybrainanimal.com. It takes four minutes to go through. You don’t buy anything. Just like there’s personalized medicine based on your genetics and personalized nutrition based on your microbiome. Well, this is kind of like your personalized learning. And once you understand, going back to knowing yourself, there’s this … I don’t know if you two saw Matrix, but when Neo walks in and meets the oracle for the first time in her kitchen, there’s a sign right above the door and it translates know thyself, which is such an important part to get out of the Matrix and just into your power.
And so this will allow you to know a little bit more about yourself. And we have these animals that we could talk about in this conversation and it informs how you approach things and it informs whether you multitask or you just focus on one single thing at a time. And so there’s different … I mean certainly we give people advice, but I also know ultimately the best coach is self-coaching. And when you know yourself … Because not every even diet is for everybody. Some people are allergic to certain foods or they just can’t digest it or it just doesn’t agree with them. And same thing with that is other people like to learn differently and buy differently, think differently, and also perform differently. Some people like to focus on just one single thing. That’s their way. Other people like to do multiple things in parallel and be more of a jack of all trades and be passionate about all those things.
And again, who am I to decide what would be absolutely best for an individual? But I would see if you’re making progress, that would be the test. Limitless, which is the name of the book, it’s not about being perfect, it’s about advancing and progressing beyond what you believe is possible. So progress I feel like is the name of the game. If I was to ask everybody, if your life was exactly the same as it is five years from now, would you be happy? And for most people they wouldn’t because growth makes people happy. Making progress makes you happy.
And so if you’re able to manage lots of different passions and purposes in your life, then by all means, if that’s your brain type, run with it. And I know so many people that get attracted to the next shiny thing and they love ideas and they love new opportunities and they stick with it for a couple of weeks and then their motivation falters and plateaus and then they move on to something else also as well. So I would say not everything’s for everybody, not everybody’s for everything. Everyone’s a little bit different. But as you do it, judge it by results. And that’s ultimately the investing game. You’re always getting feedback. You make mistakes, which we all do, but there’s no such thing as failure. There’s only failure to learn something and those mistakes become stepping stones to get us to the next level.

Ashley:
I think a couple of things you just said there really relate to a new real estate investor, a rookie. As far as the shiny object, every episode they’re hearing of new and different ways to actually invest in real estate, and it is hard to stay focused on that. But one thing I want to ask about is, you talked about identifying yourself, figuring out who you are, and then also working on your weaknesses. How do you identify what your weaknesses are? There’s the common ones such as I know I should go to the gym every day. I don’t. But what about weaknesses in your business or weaknesses that may not be as apparent to you? What are steps you can take to actually identify them?

Jim:
I feel like all success is about skill development. A big part of it. Meaning that if you want to create a new result in your life, you need to do a new behavior. And in order to have new behavior, you need training to be able to do that. That’s why people listen to your podcast, they go through courses, they read lots of books. And there are all kinds of assessments online. Strength finder assessments and tools that could help you. Going back to the power of knowing yourself because I think self-awareness is definitely a superpower. And there’s this different approach. Again, some people lean in all in their strengths. Other people, they focus on their weaknesses, they try to level up their weaknesses. For me, once I see the areas where I’m not progressing or I don’t have a natural adaptation to pick up this skill, I have to make a decision.
And I feel like we could do anything, but we can’t do everything. And that’s where I either delete, I delay, or I delegate. If I’m not going to do something, I have to either delete it off my to-do list, I have to delay it and schedule it for another time, or I have to delegate it to somebody else. Maybe a vendor or maybe somebody else on my team or some people eventually they could hire an assistant to be able to support them. But in terms of weakness, in order to create a result, if you don’t have the skill development to be able to do that result, then I feel like that’s a weakness. You want to create a result which is sales or more income or whatever it is. And if you feel like you’re not a good salesperson because you’re not getting the result … If you’re acting on it. Some people don’t have the sales because they’re not motivated going back to the conversation we had about motivation.
But if they’re actually doing something like a method and they’re not getting the result, then they have to upgrade that method through training, discipline, deep work. And if it’s not coming really easy with them, then they have to make a decision, which means should I put more energy and effort into this weakness? Or is there a way that I could get support and build my team where somebody … It’s getting the right people. Building a team is getting the right people on the bus, getting the wrong people off the bus, making sure the people on the bus are sitting in the right seats, meaning they have the right roles and responsibilities. And I think that’s where this brain assessment comes in, because once you know how people think … One of the animals is an elephant who’s highly empathetic when you take this quiz. And we found that our whole customer support team, they’re all elephants. And we didn’t plan it that way. It’s just people go with their strengths and they find roles that allow them to use their powers. And I find this self-awareness is very important, but also the awareness of the people around you. Even the brain type of your potential prospect or a client or an investor. They would operate differently based on the way that they think and learn and perform. So these four brain types I find are super, super helpful and critical.

Ashley:
As a new real estate investor, a big piece of getting started is risk management and just stress overall. So do you have some advice for somebody who’s maybe working a W-2 job, they haven’t taken a lot of risk for themselves financially, and now they’re about to invest their life’s savings? What is your advice for stress management when taking these kinds of risks?

Jim:
Risk mitigation is so important because when we’re stressed, we just don’t make good decisions. Chronic stress will shrink the human brain. When you’re stressed, you’re in a state of sympathetic fight or flight. When we’re under anxiety, we feel like we’re being threatened because stress is that kind of response to fear. And what I would say is … See, I have this idea that life is difficult for one of two reasons. Either because we’re leaving our comfort zone, life is difficult. We’re playing and practicing at the edge of our limits, life gets tough. Or life is difficult not only when we’re leaving our comfort zone, sometimes life is very difficult that we stay in our comfort zone. Because if nothing changes, nothing changes. And the comfort zone is a nice place to visit. The challenge is nothing grows in the comfort zone. And so if people have a decent amount of risk tolerance, in order to get a new result, you have to do a new thing. In order to do a new thing, then it could be threatening because it’s unknown.
And generally people are afraid and fearful of the unknown and uncertainty. And anybody who’s achieved anything had to do something that took a little risk. Because if you’re safe, you’re not going to do the things that allow you to expand. And if you want your business to grow, your bank account to grow, then you need to grow. But it takes energy, it takes attention, it takes an immense amount of effort, and you have to choose your hard. Being broke is hard and going out there and doing something brand new, in this case, real estate investing, is hard, if we’re honest. We choose what’s hard. Being sick and tired is hard and going to the gym and planning your meals and prioritizing, that could be hard. But we choose our hard. And so I admire people who make the choice and ultimately it’s their choice. Because I do believe in agency in terms of people’s personal responsibility. My whole thing is just I ask that people just don’t complain about it if they’re not doing anything about it. That’s specifically my own view.

Tony:
Jim, I got to get you to talk to my 15, almost 16 year old son about what you just said because he and I have had some similar conversations about you can’t be mad for the work that you didn’t do. And he’s having a little bit of a hard time grasping that. But I want to circle back. I love what you said about to get new results, you have to get new behaviors, which oftentimes requires coaching. I think there’s one additional element to that. I’m curious what your thoughts are, and for you too Ash, but I feel like the fourth piece would be community. Because so much of our beliefs I think are tied to the people that we surround ourselves with and if our community that we’re currently a part of thinks that financial freedom is risky, if our current community believes that investing in real estate is risky, if our current community believes that building that business is risky, inherently we start to adopt those mindsets. So I guess Jim, what are your thoughts on the role that community plays in that behavior transformation as well?

Jim:
Yeah. We talk about 10 tenets to optimize your brain. The best foods and sleep and stress management. Very tactical, very science-based. And the book is full of those things. One of them happens to be a positive peer group. Community. Who we spend time with is who we become. We’ve heard the phrase in the self-development performance industry for a long time that you’re the average of the five people you spend the most time with. And if you spend time with nine broke people, you’re likely to be number 10. And the science behind it is interesting because you have something called mirror neurons, and these are things where they imitate. It allows you to imitate people, mostly unconsciously. And I always tell people, watch, W-A-T-C-H, and I use a lot of acronyms because they’re short forms ways, mnemonic ways of remembering something quick. So just remember watch. The things that we’re mirroring and imitating from the people in our community.
The W stands for words. We tend to use the same language as the people around us. The same slang as the people around us. And those words have a big impact on our beliefs and our thoughts. The A in watch are our actions. We tend to behave the same way as the people around us. If all our friends are investing, then we’re more likely to invest. If our friends are smoking, we’re more likely to smoke or drinking, we’re more likely to drink. If they go to the gym, we’re more likely to go to the gym. We model the behaviors of the people around us, our community. The T in watch are our thoughts. And this is very important because we tend to have the same limiting beliefs as the people around us because we pick them up in conversations and just through osmosis. At events, people see me do … I don’t know. We’ll pass around a microphone to the audience and maybe 100 people introduce themselves and I’ll memorize all their names or they’ll challenge me in some way like that.
And I always tell people, “I don’t do this to impress you, I do this to express to you what’s possible. Because the truth is all of you could do this and a whole lot more. We just weren’t taught.” There are no classes and class called memory. Just like there’s no classes on how to focus and all the things that we teach in this book. That being said, people at events will often come to me and say, “Jim, I know you’re a memory expert. I’m so glad you’re here. I’m just not smart enough. I can’t do this. I can’t invest. I can’t make money like everybody.” I always say, “Stop.” If you fight for your limitations, you get to keep them. If you fight for your limits, they’re yours. Your brain is this incredible supercomputer, and your self-talk is the program that will run. So if you tell yourself, I’m not good at remembering people’s names, you won’t remember the name of the next person you meet because you program your supercomputer not to.
Now, remembering names is so important in business. Again, because how are you going to show somebody you’re going to care for them if you don’t care enough just to remember their name? Number one business etiquette, networking skill there is. But going back to imitation, we tend to have the same … Also besides thoughts, the C in watch is character. We tend to have the same level of integrity of the people around us. If they don’t have a lot of integrity, we have the same morals as the people we spend time with. And the last thing are habits. The H in watch is the habits. First we create our habits, then our habits create us. But we tend to have the same habits as the people around us also as well.
So yeah, I think a positive peer group is essential. I think on the alternate side, sometimes our family and friends, we can love them, but they don’t have to be our peer group. You know what I mean? A peer group is somebody who has influence on how you think and how you act and how you feel about yourself. And family, they could be well-intentioned, but sometimes they could be sincere but sincerely wrong. And they could be well-intentioned, meaning maybe they don’t want you to get involved in this project or this investment because they don’t want you to get hurt or they don’t want you to get your hopes up. Maybe they see you growing because you’re always listening to podcasts or reading books and going to conferences. And unconsciously they don’t want to lose you because you’re growing and making progress and they have a fear that you’re going to abandon them or something like that.
But I’m saying you could love your family and friends, but you could choose your peer group. You could create a book club, you could create an accountability group. You could create people that hold you to a higher standard for yourself. Because we know that’s going to greatly affect not just our methods that we’re going to use, but also our mindset and our motivation. If we’re around people that are driven all the time, it’s just like you got to be driven because by contrast, you’re going to feel like you don’t fit in. And human beings, when we talk about community, everybody wants to belong. So I think it’s so important to find your tribe.

Tony:
I love that tied in so well, Jim. I mean, I’m happy to hear that the community was already a big part of the framework that you have because I’ve seen it play such an important role in my life, I know in Ashley’s life, and for so many people that are getting started, that community piece, that peer group is so incredibly important. And just really quickly, I love the concept of filtering out advice from people who aren’t necessarily qualified to give you that advice. I love my mom to death, but I wouldn’t take real estate investing advice from my mom because she hasn’t done it. I love my dad. My dad’s never made a podcast. So if he gave me feedback on, “I don’t know if you should say that in the podcast,” it doesn’t apply as well. Now, if Ashley gave me feedback on a real estate deal, I’m going to take that, right?

Jim:
I would say just like when we talked about complaining, that you can’t be upset by the results you didn’t get from the work you didn’t do, when we’re talking about criticism … Because so many people shrink and being limited is the opposite of being limitless. And so many people shrink down because of other people’s expectations. And I would just remind people that if you’re fueled by the expectations of others, you’re just going to run out of gas. And you shouldn’t take advice from somebody … Or no, sorry. I wouldn’t take criticism from somebody you wouldn’t take advice from. So we can make it really, really simple.

Tony:
That is golden, man. Let me make sure I got that. You said I wouldn’t accept criticism from someone I wouldn’t accept advice from. Yeah.

Jim:
Yeah. I think that’s a nice filter.

Tony:
Yeah. That’s great.

Jim:
And you always get feedback. We could always get feedback from people because I think feedback is the breakfast of champions. So it’s nothing wrong with getting feedback from people and learning from others, but certainly it helps to learn. The fastest way to fast track your success is learn certainly from people who’ve done it. And in my case, I’ve invested millions of dollars into learning how to learn, how to optimize my brain, 30 plus years of my life doing it. And if I put it into a book and somebody could read that in a book in a few days, you could download decades into days, and you don’t have to spend the millions of dollars, the decades to be able to do that. It’s a wonderful way to shortcut that. Same thing with real estate, same thing with anything.

Tony:
That’s why I love reading books. I mean, you get to consolidate decades of experience from someone else and put that into an actionable format. I love a good book. But Jim, something you mentioned as we were talking about the peer group piece was the limiting beliefs. And especially for someone that’s at the beginning of their journey, a lot of times those limiting beliefs can lead to analysis paralysis where they’re stuck in an action because they don’t believe they can actually achieve these things. So you’ve touched on it a little bit, but what are some proven ways you’ve seen to break through some of those self-limiting beliefs?

Jim:
Mindset is the foundation for everything. Mindset is the set of assumptions and attitudes you have about something. So you could even know all the great methods, but if your mindset is … I don’t know. In order to make money after hurt people or take advantage of them or money is the root of all evil, all behavior is belief driven. So you won’t even use the methods to its potential because you have a deep-seated belief saying something to the contrary. And so it’s very important to get those things in line. And it’s nice to discover … We walk people through a process, it’s kind of extensive in the book about how to discover the lies in your life. And LIE is an acronym. Limited idea entertained. What are the limited ideas we’re entertaining that just are not true? And so going back to the power of knowing yourself, self-awareness, being a superpower, it’s nice to do a mental audit because it’s really hard to change something if you’re not aware of it.
It’s really hard to be able to change your finances if you’re not looking at your finances, if you’re not pulling up your bank statements, if you’re afraid of running a credit report or whatever. Or if you’re not going and getting on the scale or whatever the metric is for health. And so what I would say is do an audit of your current thoughts. And then there’s so many different tools and techniques that we talk about in the book. EMDR, EFT, tapping. Some of you are familiar with tapping on meridians to be able to change limiting beliefs. We talk about the power of self-hypnosis, and we’re hypnotizing ourselves all the time. I think the nature of the work is all about transcending. I mean, if you look at a word like transcend, ending the trance. And the trance is not only through marketing and media that’s saying we’re broken or we need to be fixed or those kind of things and fear that comes through the media and everything, but also it’s the self-hypnosis.
I think one of the ways to change is to be really conscious. They say the two most powerful words in the English language are the two shortest words I am. Because whatever you put after it determines your life, your identity and your destiny if you will. And so a nice I am statement. Because some people say I’m a procrastinator and that is their identity. And then they wonder why they can’t get things done. And it’s the difference between saying I am a smoker and changing the behavior. It’s really hard if people identify with being a smoker as opposed to that’s something that they do. And what you do does not necessarily define who you are also as well. But absolutely prioritize mindset, know the lies you’re telling yourself and then see if there’s a way … In the book, we do have a transformation process where we just reframe their limiting beliefs. And it’s usually a 180, the opposite of what is holding them back.
And so some of the lies that we talk about as examples in learning are things like mistakes are failures, and that’s just simply not true. People think failure is the opposite of success when failure is clearly a part of success. And sometimes when we’re talking about risky, sometimes it’s too … You know what’s risky is playing it safe nowadays. And that could be a challenge also. But these are all a mindset issue. It’s your assumptions and your attitudes about something. And especially whether it’s money or it’s real estate, but also your attitudes, assumptions about the most important thing, which is you. What you believe is possible, what you believe you’re capable of, what you believe … We can get really raw, what you believe you deserve. And some people deep down don’t believe they could be happy or deserve that loving relationship or deserve to be healthy. And then it doesn’t matter what the methods are, they’re either going to not do the methods or they’re going to do it in such a way that they’re still limited around their mindset and the belief patterns.
So a lot of the stuff that we believe is complete BS. They’re just belief systems. And for me, when I was nine years old, I was slowing down in class and I was being teased, bullied because I was just not getting the lesson that day. And teacher came to my defense and she pointed to me and said, “Leave that kid alone.” Good intentions, like family. “Leave that kid alone. That’s the boy with a broken brain.” And I was like, wow, I didn’t realize I had the broken brain. Because when you’re born, you’re a blank slate. So all these beliefs got imprinted on us. So how did it play out? Every time I did badly in school, which was like every week, or I wasn’t picked for sports, which was like every week, I would say, “Oh, because I have the broken brain.” And that became my belief. And for the longest time, for a decade and a half, it limited me because all behavior is belief driven. If you believe you can or believe you can’t, either way, you’re right. The Henry Ford quote. So definitely do an audit of your beliefs, see if you could do a 180 of it and also just see what’s working because some beliefs serve us, but we don’t have to believe everything we think.

Ashley:
Jim, how does this tie into manifestation? I recently started listening to a podcast that talks about … Some of this sounds very familiar as to whatever you want, you have to manifest it and you have to put it out into the universe that this is who you are, this is what you want, and this is how your life is going to go. Does what you write in the book correlate with any kind of manifestation or how does it differ?

Jim:
If we’re defining manifestation as taking something that’s invisible that you can’t see and making it something you can see, like you’re creating something, I’m not a big fan of law of attraction because I also believe in the law of action. And the law of attraction and manifestation, it’s kind of like you could sit in a chair and just imagine it’s going to happen and that hasn’t been my personal experience.

Ashley:
That actually reminds me of a quote that I heard once is if you’re going to build a house, you’re not going to hire a builder who’s going to dream about building your house. You’re going to hire one that’s going to plan how to build your house. So does that decipher what your difference is compared to manifestation?

Jim:
I watch a lot of mixed martial arts. I grew up watching a lot of anime, and I would think about that stuff all the time with emotion, like the law of attraction talks about. So I visualize it and I imagine it, but that doesn’t mean I necessarily have the skillset. If I’m not going into gym and getting proper coaching in jujitsu or Muay Thai or something else, I’m probably not going to get the results. Not even probably. I just won’t. No matter how much I obsessed about it with energy and imagination. So I feel like built into the word attraction is the word action, and I think that nothing happens without it. Can our beliefs affect the universe? Sure. And I feel like we have to do our part also.

Tony:
Yeah, I’ve always felt like the law of attraction is just when you focus so heavily on something, you just start to identify more opportunities that you might’ve overlooked before. But yeah, you-

Jim:
That you have to act on.

Tony:
Exactly right.

Ashley:
Like a car.

Tony:
Exactly right, yeah. Like the recency effect type thing. But yeah, I can’t imagine someone sitting at their dining room table manifesting their way to losing weight when they’re still shoving cake and pizza down their face every day. It doesn’t work that way.
Jim, I want to talk a little bit about the financial piece because for a lot of our audience, they’re W-2 employees, they’re working day jobs, but a lot of folks I think aren’t necessarily maybe operating in their areas of strength when it comes to what they’re doing to earn money. What’s your advice for folks to get more in alignment so that as they are earning money through their W-2 jobs, it’s more aligned with what they’re actually good at?

Jim:
Yeah. I’ll go back into this idea that we do what we have to do. My family, when they immigrated to the states, my dad was 13, lost both his parents. They couldn’t afford to feed him. Came here to live with his aunt. We lived in the back of a laundromat that my mom worked at. They had many jobs. That aunt who I knew as my grandmother growing up passed of Alzheimer’s while she was caregiving for me. So everybody has a different story and everybody has a different story. So it’s not a comparison thing. But I also believe it’s not about resources, it’s about our internal resourcefulness. We didn’t have any money, education, didn’t know anybody, no network or Rolodex, but I just feel like that adversity could be an advantage and the challenges lead to change. I don’t know one strong person that had an easy life.
So if you have a hard life and you’re working and you have a family, we just have to … It’s not even about time management, but time is the one thing we all have the same of. Not everybody has the same things I talked about. Income, education, connections. But we all have 24 hours in a day. But I don’t think it’s about time management. I think it’s about priority management. And for priority management is different because priority management is saying that the most important thing is to keep the most important thing the most important thing. The most important thing is to keep the most important thing the most important thing. And so we do what we can. And again, we feed our business after hours until it feeds us back. And if your values are freedom, that’s one of the things that you hold dear, that’s your treasure, then you could have structure in your job and also do something.
And I also feel like entrepreneurship, having been an entrepreneur my whole life and never having a W-2 before, people think it’s easy, but I also think it’s a different kind of effort. When you’re not being told exactly what to do and you’re not reporting to a boss, your raise becomes effective when you become effective. Because it’s all on us. And it’s a different mindset in terms of personal responsibility because you don’t have that safety net. And I’m not saying quit your job and just go full-time into anything. You could have a family and you could have bills, and you have to do it intelligently. But I’m just saying that you have to get out of your own way. Meaning some people are doing the opposite of priority management and they’re doing things that aren’t getting them the results, but they fool themselves because they’re busy and they complain to their family that they’re tired.
And for me, it always comes down to purpose. My purpose was very clear growing up because I value my family, my friends, and I’m asking myself, who’s counting on me to show up today? Who’s counting on me to do the hard things today? Who’s counting on me to be at my A game today? And that fuels my desire and my mission to do the things that I do. People are surprised to hear that public speaking was my worst fear. I mean, worst fear. Because if you grew up with brain damage and you can’t read, you never know the answers, you never want to be called on in class. So my superpower was shrinking down and being invisible, sitting behind the tall kid. I went all through school without giving a book report because I was terrified of doing that. Now, life has a sense of humor because what do I do?
All I do every day is the two things that were the hardest things for me, which is public speak on this thing called learning. But I think adversity could be an advantage. But going towards your question, I would say to the person who’s working their nine to five, their W-2, you have to make a choice. There’s a quote in Limitless again that says, life is the letter C between B and D. B is birth, D is death. Life is C, choice. That these difficult times that you’re going through, it could distract you, these difficult times can diminish you or these difficult times, they could develop you. We decide with the choices that we make every single day. And so I would say one of the most powerful productivity tools, performance tools you have is your calendar. And yet most people don’t use it. They put in like, oh, this is my parent teacher meetings. This is my doctor’s appointment. This is my nine to five.
But they’re not scheduling that side hustle. They’re not scheduling their workouts. They’re not scheduling their meditation, whatever it is, their sleep time, the things that are important. And you can know what someone’s priorities are by looking at their calendar. Because what we put our time to, it’s not what we say, it’s what we show. And even in business, it’s not what you promise, it’s what you prove. And when you act consistently, then the results do the speaking for you. And so I think it’s better well done than it is well said. But for me, I’ll be thinking about your reasons. Once you unlimit your mindset about believing it’s possible that you deserve it, your motivation, the purpose part is really just who’s relying on you. And then the other thing is, we have one life. Why aren’t we running towards our dreams like we’re on fire? That kind of urgency. And granted you do difficult things, but if it was easy, everybody would have everything, right? If it was easy, everyone would have it. But when you could get yourself to do the things that other people won’t do, then you can live a life that other people can’t live. But you have to pay the price.

Ashley:
So Jim, before we wrap up here, what is the promise or what sort of transformation will occur of this book? What do you want someone to get out of this book after they have read it?

Jim:
The bottom line for my work is your brain is your number one wealth building asset. It just is. We live in an age where no one watching this … It’s not like hundreds of years ago. If we’re agricultural age, industrial age, we’re paid for our brute strength. Today, it’s our brain strength. It’s not your muscle power today. It’s your mind power. And the faster you can learn, the faster you could earn. Because knowledge today is not only power, knowledge is profit. And so the idea behind this book is your brain is the wealth creating machine. It has created everything else around us that we see, every technology, but this is the ultimate technology. But people upgrade their phones, their cars, their apps more than they upgrade this technology, which is everything. Your brain. And so what I would say is Limitless, the promise of the book is we’re providing you with an owner’s manual for your brain.
But it’s not like an anatomy book. It’s a very practical way to be able to change your mindset, your motivation and the methods you do to learn. The ultimate skill to master in the 21st century is your ability to learn rapidly and translate that learning into action. That’s the ultimate competitive advantage bar none. Because when you could learn how to learn, when you could focus, you could concentrate, you could read three times faster, you could understand everything that you read, you can remember everything that you need to remember and you can implement and think and solve problems, what can you apply that to? Everything. Real estate, money, marketing, martial arts, music, mandarin, everything in your life, medicine. Whatever you’re studying. Everything gets easier in your life. So the book focuses on two things. It focuses on how to optimize your hardware, the brain optimization, and also how to optimize the software, which are the processes on how to focus, how to read better, how to improve your memory, how to remember client information, product information, give speeches without notes.
I mean all the things. Because I believe two of the most costly words in business and in life are I forgot. Just think about how we lose effectiveness when we say, I forgot that conversation. I forgot what I was going to say. I forgot that presentation. I forgot to go to that meeting. I forgot that person’s name. And on the other side, memory makes money. When you can easily remember names and faces and client information, product information, give sales presentations, remember listings, remember things you have to do, you just show up with confidence in your life and capabilities. And so the promise of the book is to really make you more limitless in the area that really matters, to invest in the most important wealth building device that you have, which is your brain. So we talk about how to focus, how to get better sleep, how to change your habits, how to get rid of old lingering habits, how to change your limiting beliefs that hold you back in terms of self-doubt and self-sabotage.
And then all the accelerating learning methods that are there. And the new book, the expanded version that’s just coming out is all about how to build momentum. So we talk about these brain types. And people could take the quiz at mybrainanimal.com. It just takes four minutes, nothing to buy again. It’s kind of like, which Game of Thrones character are you? And I’ll give you a prescriptive on how to apply this towards your business. Your brain type. How to negotiate, how to communicate with people that have different brain types than you. We talk about learning agility at work. We talk about nootropics that will enhance your mood, your mental energy, help you with your focus and your memory. We talk about how to use AI in your business and in your day to day to perform better, to learn faster.
So it’s just like the culmination of 30 years of research and teaching and coaching myself into the one place. And this is the one book that will help you learn every other book afterwards. Because you’ll read all the other book’s faster, remember all the other books faster, focus better. And people could find it at limitlessbook.com. And when they do it at this time, we gift them hundreds of dollars of speed reading and memory training as my gift just to celebrate the launch of the book. And we donate all the profits to charity for the book to build schools for children, Alzheimer’s research in memory of my grandmother, and so much more.

Ashley:
How awesome, Jim. Thank you so much. We really appreciated having you on the show today and sharing your book and all of that information with us. Some of the things that I loved were that this is very relatable, not just for rookie real estate investors, but also for experienced real estate investors and anyone in business in general too that may be listening to the podcast. So Jim, where would you like people to find out more information about you and the book?

Jim:
We have a podcast too. You could just search my name in your podcast app. You just have to spell it right. It’s Jim Kwik. K-W-I-K. It’s my real name. I didn’t change it to do this.

Tony:
I was literally thinking that earlier, Jim, if that was …

Jim:
It’s my father’s name, my grandfather’s name. And YouTube, we have over 1.3 million subscribers there. We put out dailies there. Limitless Books is probably the best way if you want to be able to support that book. This book will be the most important book. That’s my promise to everybody because it’ll help you with all other books. So many people buy books and they sit on your shelf and become shelf help, not self-help because nobody’s reading that book. And then take the quiz, mybrainanimal.com, and post the Animal. I would challenge everyone to post their animal online and tag us in it so we see it. And I’ll repost a couple and gift out a couple of books randomly to the community just as a thank you for having me on your show. But yeah, social media’s just Jim Kwik everywhere. K-W-I-K.

Ashley:
Well, Jim, thank you so much. We really appreciate it. I’m Ashley, @WealthFromRentals, and he’s Tony, @TonyJRobinson on Instagram, and we will be back with another guest. We’ll see you guys then.
(singing)

Hao Hong, chief economist at Grow Investment Group, discusses China’s economic outlook and Chinese banks’ “very large exposure” to the property sector.

As cities around the world evolve into complex ecosystems, the demand for intelligent urban solutions is escalating. Early-stage startups are uniquely positioned to drive innovation in key areas crucial to the development of smart cities.

Let’s delve into six smart city areas that present good opportunities for innovative startup projects:

1. IoT-Enabled Urban Infrastructure

At the heart of smart cities lies the intricate web of interconnected devices known as the Internet of Things (IoT). This technology is the linchpin for creating intelligent urban infrastructure, encompassing everything from energy systems to public services. Relevant data from IoT-enabled systems allows cities to make informed decisions, optimizing resource usage and improving overall efficiency.

The opportunity for early-stage startups here lies in contributing to the fabric of smart cities by developing niche IoT applications. These could range from monitoring air quality in real-time to optimizing water distribution networks. The scalability and adaptability of IoT make it a fertile ground for innovative projects that can address specific urban challenges.

2. Smart Mobility Platforms

Urban mobility is undergoing a seismic shift, with the rise of smart mobility platforms that offer alternatives to traditional transportation. These platforms encompass everything from ride-sharing services to electric and autonomous vehicles. The global smart mobility market is projected to reach staggering values, indicating a vast potential for startups.

This is a niche in which we have extensive experience thanks to our deep involvement in Scoozer – an electric scooter solution focusing on shopping centers that we’ve been involved in building from the ground up.

The early success stories in this niche have already demonstrated the appetite for innovative solutions. A great example of success in the niche is Lime – a startup offering electric scooters and bikes for short-distance travel. Their app-based system allows users to locate and unlock electric scooters, contributing to sustainable urban transportation.

Startups entering the smart mobility arena have an opportunity to reshape the way people navigate cities. Whether it’s through introducing efficient last-mile solutions or integrating various modes of transportation into a seamless platform, the potential for disruptive innovation is immense.

3. Urban Agriculture Technologies

As urbanization intensifies, the importance of sustainable food production within cities grows. Urban agriculture technologies encompass a spectrum of innovations, from vertical farming to hydroponics. Relevant data suggests that the global vertical farming market is expected to experience substantial growth, indicative of the demand for localized, sustainable food sources.

AeroFarms is a pioneer in vertical farming, utilizing aeroponic technology to grow crops indoors without soil. Their approach maximizes space and resources, offering a model for sustainable urban agriculture by helping minimize the distance of the products from their place of consumption and minimizing the need for transportation. Trella Technologies, another startup in which we have hands-on experience, is another great example of a technology startup succeeding in the vertical farming niche.

The niche of urban agriculture presents a unique opportunity for early-stage startups to contribute to both food security and the aesthetic transformation of cities. Projects could include developing efficient vertical farming systems or creating technology to optimize community gardens.

4. Intelligent Waste Management

Waste management is a perennial challenge for cities, but smart solutions are emerging to optimize this process. Early-stage startups can play a vital role in developing intelligent waste management systems that leverage sensors and data analytics. The potential impact is significant, considering the mounting global concern about waste and pollution.

Rubicon is a startup that has created a cloud-based waste management platform, using data analytics to optimize waste collection routes and reduce overall waste generation.

5. Civic Engagement Platforms

Creating an inclusive and engaged urban community is a cornerstone of smart cities. Civic engagement platforms bridge the gap between residents and local government, fostering a sense of participation. The increasing demand for transparent and accessible governance highlights the significance of this niche.

A great example of a successful startup in the niche is SeeClickFix – a platform that enables residents to report non-emergency issues in their neighborhoods directly to the local government. This real-time communication fosters civic engagement and enhances community responsiveness.

Early-stage startups can seize the opportunity to enhance urban governance by developing platforms that facilitate open communication, gather public opinions, and streamline the delivery of essential services.

6. Digital Twins for Urban Planning

Last but not least, digital twin technology, creating a virtual replica of a city, is transforming urban planning. The ability to simulate and optimize various scenarios before implementation provides a powerful tool for city planners. This technology is gaining momentum as cities strive for more efficient and sustainable development.

Singapore is at the forefront of using digital twins for urban planning. Their Virtual Singapore project creates a dynamic 3D model of the entire city, allowing planners to visualize and simulate different urban scenarios.

David:
This is the BiggerPockets Podcast show, 850.
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast, the biggest, the best, the baddest real estate podcast on the planet. Today we are joined by two of my friends in the multifamily space, Andrew Cushman and Matt Faircloth. We’re going to be talking about red flags that every investor should watch out for. This is particularly important in today’s market. Andrew, Matt, welcome to the show.

Matt:
David, thank you so much for having us today.

Andrew:
Yep. Good to be here as always.

David:
And before we get into today’s show, I’ve got a quick tip for all of you loyal listeners. Sponsors are everywhere and they are looking to get your money. If you’re finding a sponsor that’s advertising on social media or even dating profiles, that might be a red flag that you want to look out for. Today’s show, we’re going to go over seven other red flags to be aware of. Let’s get into it.
Why are we doing this show right now? Well, we’re seeing operators in the news getting arrested on charges of investment fraud, and my gut tells me that as the market gets tougher, it’s going to be like the tide going out and you’re going to see who’s been swimming naked the entire time. Today’s show will be about something that has even happened with our previous guests.
Now we vet our guests to the best of our abilities, but we have had former guests on this podcast that have gotten into hot water, and that is why this type of show is so important. This whole incident is a reminder that no industry is immune to criminal behavior and BiggerPockets will continue to stress to our audience that they do their own due diligence when investing. Now maybe you’re thinking this would never happen to me, but it’s more common than you think. And as my co-host, Rob Abasolo has said, though he’s not on today’s show, “An investment fund is structured exactly like a Ponzi scheme and it turns into one if it’s mismanaged.” On that topic, Andrew, I believe you have a story that supports that.

Andrew:
Well, so back in 2005, we all like to think we’re smart and we can dig into things and we know what we’re doing, but the reality is we all make mistakes, right? Look at Chernobyl or the Hindenburg or almost any Nicolas Cage movie. Somehow that stuff still happens. So this was essentially a syndication. It was a little bit different spin. It was a group that was developing real estate out in North Carolina and they did have a couple of assets, but what they were doing is they were coming saying, “Hey, we’re selling shares, free Ipo. We’re going to build all this stuff and then we’re going to go public and you’re going to make seven to 10 times on your investment.” So, one mistake I made, I didn’t do my own due diligence. My boss at my employer at the time went and did some, and I’m like, “Well, he knows what he is doing, so I’ll invest also.”
I did a shallow look at what the sponsor was doing. Said, “Okay, it seems like they have an asset here.” Didn’t really dig into, well, where’s the money going? How’s it being used? And then there were some red flags or things that didn’t quite seem right that I overlooked because of FOMO, right? Fear Of Missing Out. And essentially greed, right? Like, dude, I can 10X my money by just investing it with these guys. And so, for example, one of those things that I found and I should have just said, “Nope, I’m out”, is a little bit of research. I found that they already had shares trading on the pink sheets, and I asked them, I was like, “Wait a second. How are you going public if you already have shares out?” And they gave me some bogus explanation. I should have said at that point, “I’m out.”
But I said, “Well, you know what? Actually this just sounds good. It’s too much of a great opportunity.” And so I invested, ended up losing 90% of our investment. I invested and then they were paying dividends and there were some more red flags. And the day before I was going to call and request my money back, the SEC swooped in, froze everything. Three years of special servicer later? We ended up, like I said, I think we got like 10% back or something like that. So it can happen to anybody. There are pretty sophisticated guys out there who can pull the wool over almost anybody’s eyes. Look at Bernie Madoff. He did it for how many decades? So don’t feel bad if it happened to you. It either has happened to all of us or probably will, but we’re going to talk about a number of things that we can do to try to prevent or minimize that.

David:
Thank you, Andrew. Today we are going to cover the biggest red flags to look out for to keep you and your investments safe, after this quick break.
All right, welcome back. We’re here with Andrew Cushman and Matt Faircloth. Andrew is my partner in multifamily investing and Matt is the author of Raising Private Capital, a book with BiggerPockets. Let’s give a quick shout out there, Matt, where do they go to get that book on the BiggerPockets platform?

Matt:
What’s up brother? Good to be here. They can go to biggerpockets.com/rpc to get a copy of that book and if they buy it from BiggerPockets, they get a bunch of bolt-on bonuses, including another small ebook that I wrote on buying apartment buildings and a 90-minute interview with my SEC attorney. So people should watch that. Just get the book just for that interview because that interview would help people avoid a lot of the mistakes we’re going to talk about today.

David:
All right, speaking of those mistakes, let’s get right into it here. All right, when they’re vetting a sponsor on a deal, Matt, briefly describe what a sponsor is and then let’s talk about what they should do. When it comes to looking internally.

Matt:
The sponsor is the syndicator in raising private capital. I talk about the deal provider. That’s the person bringing the opportunity. They’re likely putting in plenty of sweat, contacts, resources, their market knowledge, all the doingness and all the, a lot of time as well. All that stuff put together into a big package. They’re bringing the deal, the opportunity and the intuition, the know-how, the drive, all of that. So that’s the deal provider. That is the sponsor, the syndicator, they have all kinds of different names. General partner, sponsor, syndicator, opportunity provider, all these things all fall into the same guise and they’re providing the opportunity to the people that are going to invest in the deal as limited partners or cash providers.

Andrew:
And going back to some of the things that I mentioned in my story about when I lost money, keep in mind it’s not just the sponsor. The first thing to do is to look at yourself internally because whether it’s a prince from Nigeria or a sponsor with ill intent, they’re praying off human emotions. So what are some of the things I mentioned? Fear of missing out, right? A bad sponsor is looking for somebody who has a fear of missing out, not getting the great returns, everyone else is doing this. Number two, are you investing because you’re following a celebrity? You don’t really know who they are, you haven’t met them, you don’t know anyone else who’s worked with them, but hey, they got a TV show or whatever, or really flashy social media. Are you investing solely because of that? It’s not automatic red flag that they have those things, but internally that’s not good if that is the sole reason that you are investing.
Another one, too, is just are you being greedy? A lot of times we’ll talk to investors and they’re looking at four different investments like, well, this one says it returns 8% and this one says 12%, so I’m automatically just going to invest with a guy who’s promising 12%. That’s greed because just because an investment says 12% doesn’t mean you’re actually going to get it. So take the time to dive in and make sure that you aren’t just being attracted via essentially what is greed. And we are all subject to this to whatever is promising the highest return. Because generally the highest it is, the more risk that might be buried in there and you need to take time to dive into that. Matt, do you have something you want to add?

Matt:
What I want to say is the way that a sponsor plays into all those things altogether is they’re going to provide you with an opportunity, just as Andrew talked about earlier, that is really, really high above the norm rates of return. Seven X in Andrew’s case, right? But you got to get in right now because we’re almost sold out, right? So it’s going to be really, really high rates of return to create the FOMO, really, really high rates of return to create that greed. And also you got to wire the money right now and I’ve been subject to these kinds of things myself and it’s always been above the norm rates of return and I need the money immediately. So you don’t have really have time to vet it, think about it, any of those things. So that’s when you see those things, investors, listeners, just put the brakes on, run the other way. Time will start to allow these things to unfold. And if it’s too good to be true, it probably is.

Andrew:
And another thing that I would add before we dive into some of the actual red flags is keep in mind there’s multiple ways a sponsor can fail. It’s not all fraud. Unfortunately there are some fraudulent actors out there and we’re going to try to help everyone listening and ourselves to avoid those. But there’s fraud. Also there’s incompetence, whether that’s lack of experience, lack of knowledge, the wrong partners. There is incompetence.
And then unfortunately there is also just bad luck. And I know some operators who are of decades in the business, truly put their investors’ interests before anybody else’s and they’ve had a situation where a fire destroyed half the property, their insurance tripled, there was a shooting and all of a sudden the property’s in trouble. So be careful not to broad brush everybody with the same color. Just keep in mind there’s multiple ways to fail and part of what you’re trying to do with these red flags is to hopefully root out all of these and give yourself the best chance of successfully investing as an LP.

David:
All right, so we had five red flags we are going to cover in today’s show, but in just the last few days, events have unfurled that have led to two more being included. So we’re going to be going over seven red flags in today’s show. We’re going to get through these as quick as we can with as much value as we could possibly bring. All right, so, number one, the first red flag, the sponsor has a different partner for every deal.

Andrew:
So you’ll notice this is really popular the last few years, is you would see these sponsors and it would be like, they’d be like the Oprah Winfrey of syndication. You get to be a GP and then you get to be a GP and you’re a GP. Everyone look under your seats. They’re an equity. And the reason that this is and can be a problem is a lot of times what that represented was just someone grabbing any partner they could to get a deal done. And as all of you know, partnerships have a high risk of blowing up and not working. So then the question becomes when it hits the fan, and we get into the market environment that we’re in now, where the Fed has raised rates over 500 basis points, insurance is doubling or tripling, vacancies going up a little bit, etc. When things get difficult, who’s in charge?
Which partner is it? If a sponsor has six different partners for six different deals, who’s going to contribute the half a million to save this deal? Who’s going to step in in place of the property management company that’s maybe not doing so well? If one partner declares bankruptcy and is just like, “That’s it, we’re out,” and I’ve actually seen this happen in the last six months, then what? Right? Because now you’ve got half of a partnership. So that is definitely a red flag.
Now again, it’s not something where you’re automatically out because on the flip side of this, there’s what you call fund of fund investors where it’s very experienced professionals who will raise money and then from maybe let’s say 50 LPs and then go invest with another sponsor. In that situation, if you’re someone who’s raising that kind of fund, what you’re doing is you are relying on their expertise that they have done all this due diligence and that they have picked the right sponsor and that they’ve done all of this vetting. So don’t confuse the two. It’s okay to invest with someone who’s raising for another sponsor, but you just realize that you are relying on their due diligence and in fact that if you’re a busy doctor, you don’t have time to do all of this, you are going to invest with that fund, then you’re relying on them to do that. And picking the right fund to fund capital raiser can be a great and safe way to invest. Just make sure you dive into it. Matt, anything you want to add?

Matt:
When things are going well, these folks look brilliant. We see people that met at a conference one week and the next week they’re doing deals together, right? And that’s okay sometimes, but also I believe in building businesses together. So maybe it’s okay for people that just met to do a deal, but you should see a plan beyond that. If you’re going to consider investing in something where it’s a couple of operators first time doing business together, it flags. If they’ve all got different email address domains, right? Or if they all have different websites and everything like that. Or if you see them on, I’ve seen sponsors promoting multiple deals at once with different teams and things like that. So that’s really, to Andrew’s point, all well and good, if things are going well. When things start to not go so well, that’s when you’re really going to see the tide go out and see who’s naked, right?
I think that you want to see companies that are building brands, building businesses, building something that’s going to be doing deals over and over again. That should make you comfortable. It’s okay for people to bop around a little bit first and then they should really kind of drop anchor and find a home.

David:
And the logo on this red flag to highlight here is that most people get into trouble when they’re picking a spartner because they are trying to delegate the due diligence. “Oh, you did a deal with him? Oh, I know this person. Oh, Logan Paul is selling that NFT? Okay, I’m going to buy that one because I know Logan Paul.” No you don’t. In fact, the reason Logan Paul makes the podcast is probably just because people like you will buy stuff without due diligence and he can convert the Kardashians have made an empire doing this. Is Kylie Jenner’s makeup better than anyone else’s makeup? No. But Kylie Jenner’s makeup is well-known because it’s her name on it.

Andrew:
I like it.

David:
That’s good. So remember that due diligence is not an area that you want to delegate or give up on it. It is sometimes laziness. I myself have had deals where I tried it out with somebody. Didn’t go well. That’s not a person I want to partner with anymore. But guess what? That person went out there and did a bunch of deals with other people saying he was my partner. And unfortunately other people got into bad deals because he said I did a deal with David Greene. That was a consequence I was not expecting when I did that first deal with him. And now I have to be super careful. Maybe I just don’t partner with anyone anymore. I don’t want my audience to get exposed to, “Oh, you did a deal with David? Well then I can trust you.” And it actually wasn’t the case. I was just trying it out to see if they were a good operator. All right.

Matt:
David, one more thing to throw on the back of it, is a thing that a lot of the cool kids were doing in an up economy was raising capital for lots of opportunities. And since I’m the author of Raising Profit Capital, I should comment on that briefly, right? That was something that happens. A lot of people just all raise half a million for this person’s deal and then I’ll raise a million for that person’s deal over there. That’s all fine in an up economy. But what the problem with that is, as we’ve said before, that if the deal starts going south, the capital raiser that you liked and trusted has no control over the real on goings in the deal. And so when you’re getting in with a fund of funds that maybe is putting a lot more juice, a lot more opportunities into operators, maybe that’s okay. But if you’re investing with a capital raiser that’s contributing a small portion to the capital stack for a real estate deal, I would be wary because the capital raiser you’re working with, your relationship as the investor really doesn’t have any sway.
And I’m already starting to see deals like this fall apart, Andrew. I’ve had capital raisers call me up to say, “Hey, I raised a million for this deal where there was a $15 million equity piece and they’re now talking about giving back the keys to the bank and this capital raiser doesn’t really have any control for these people that put millions of dollars of their hard-earned money into the deal, there’s really nothing they could do because they’re in minority control of the opportunity.” So I would be very leery of sub subcapital raisers in this changing market

David:
And that’s a question that should be asked. Is this your deal or are you raising money for somebody else’s deal? ‘Cos if you think about the fact that money can change hands three or four different degrees here, I raise money to give it to this person who then gives it to this person who then gives it to this person and then puts it in the deal. You’ve got a lot of distance from personal responsibility and nobody is going to be vetting it exactly. It’s like a copy of a copy of a copy. It can easily come out really, really fuzzy.
All right, red flag number two, the sponsor or the seller suggests anything suspicious like inflating the proof of funds, not disclosing material facts, et cetera. Andrew?

Andrew:
Well this one really is kind of a gut intuition thing, right? If somebody is telling you to do something or that they’re doing something that seems unethical or suspicious or maybe something you wouldn’t do, like don’t tell the bank, don’t tell the other investors, we’re going to swap these signature pages at the last second. Those are some things that you want to look out for. And this one, it’s hard to give a list of the 27 tips to avoid. This really boils down to using your gut, right? You hear that a lot. Trust your gut, trust your instinct. If it’s something you wouldn’t do or you wouldn’t want your mom to know you were doing, that might be your good litmus test right there.

Matt:
Great point there. I mean the problem is that an LP might not see a lot of the things that are happening behind the scenes, but you got to go with your gut and sometimes if things look a little bit suspicious then they could very well be, right? I would say that if you’re looking to be an LP in someone’s deal, you have the right to ask for things like the contract of sale on the property. You have the right to ask for a lot of the documents that went back and forth between the buyer and the seller on the deal. And if the sponsor is not willing to give you full transparency and give you copies of the agreement of sale, the appraisal, the this or that, they should have actually those documents very easily. And if they won’t give you those things, then maybe there’s a little bit of smoke and you should look for the fire.

David:
All right, red flag number three, no successful track record in the business. This one has been extra common the last couple years with the market being incredibly easy to succeed in. Andrew, what do people need to look out for here?

Andrew:
Think of it this way. If you are on a flight, right, and it’s like, “This is your captain speaking, thank you for flying Syndication Airlines. It’s been noted there’s some turbulence between here and our destination today, but the good news is your captain and copilot covered this in flight school and speaking of flight school, we just graduated yesterday, so we really appreciate you joining us on our first flight. Tray tables and seat backs up. Let’s get rolling.” You hear that you’re going to want to get off that flight and it’s the similar thing if you’re investing in any syndication or sponsorship. If there is no track record whatsoever, it doesn’t, again, doesn’t mean they’re fraudulent, doesn’t mean they’re incompetent. It just, they don’t have the experience, right? And then with that said, none of us would get started if people didn’t trust the inexperienced.
There’s a point where every single investor out there did their first deal. However, how that can be mitigated and what you want to look for is, is that inexperienced person partnering with somebody who is experienced? And it could be a literal partnership, it could be a mentorship, it could be maybe someone who’s really experienced is putting money into the deal. Is the new person putting money into the deal? And then also track record and experience does not always have to be direct. It’s kind of a catch 22, right? It’s like, well, when people who are applying for a job, it’s like, well, you have to have experience to get this job, but you can’t get experience because you don’t get the job. So track record can be somebody who maybe excelled in another occupation for 10 years and has just a stellar reputation for being honest and hardworking.
Or maybe they ran an incredible flipping business for 10 years and made it into a seven figure business and now they’re going to start going into self storage, right? So again, if I was investing with that person, I would be like, “Okay, I like this person’s work ethic and their business skills. If it’s their first deal in another asset class, I might want to see a mentor or some kind of more experienced partner.” But I would still consider investing with them even though they’re technically not experienced. So what you’re looking for is either the direct experience or making sure that the person is partnering with somebody who truly has experience. A lot of the deals that are going bad right now are the ones where somebody went to a bootcamp and in the last couple of years ran out, just went straight into buying 200 units, had no experience managing it, operating it or anything like that and doesn’t have anybody to fall back on, now that things are getting difficult and then those deals are having trouble. So that is why you’re looking for experience.

Matt:
Just to, on top of that, Andrew, I agree. The only thing I would say in addition is that it’s one thing to cite that I’ve got this mentor or cite that I’ve got this experienced person sitting over top of me and we were actually, a brief story. We were selling an apartment building a couple of years ago in North Carolina and we had a bidder that pointed to a mentor that said, “Well, I’m working with this person as my mentor,” and it gave me a lot of comfort, but then I realized after a little bit further investigation, that mentor wasn’t at risk on the deal. All they were, were just sitting over top of the student. The student really just took the mentor’s class and was allowed to point to the mentor as their advisor, but the mentor wasn’t going on the debt as a sponsor. The mentor really wasn’t engaged and a at-risk sponsor, meaning the reputation wasn’t there to lose if the deal fell apart.
So if you’re going to be investing with someone that points to someone above them that taught them everything they know and is going to be bringing a lot of their expertise to the deal, just make sure that that person with the experience is also at risk, so to speak in the deal.

Andrew:
I should stop and clarify that. We’re not throwing all boot camps under the bus. So the education that BiggerPockets does and that Matt’s involved in is the right kind of good education. What we’re talking about is some of the big flashy ones that you’ll see all over social media, on billboards, where it’s more about the excitement of just getting out and doing a deal and not necessarily, well, it’s like the dog who finally catches the car and then doesn’t know what to do with it. That’s what’s happened with a lot of these multifamily deals in the last few years is you have somebody that is doing, I mean their heart is in the right place, right? They tried to get the education, they took action, they raised money, but they don’t have the expertise or the partners to fall back on now that things are getting difficult.

Matt:
So to clarify, Andrew, when you take the BiggerPockets Multifamily Bootcamp, you’re not allowed to say that Matt Faircloth and the Derosa Group are your business partners for every deal that you do. But we do teach quite a bit, but we’re not everybody’s business partner for the BiggerPockets Bootcamp. We have to draw the line somewhere.

Andrew:
Exactly. And candidly, it’s not on the Bootcamp. The responsibility for this is on the individual, right? Again, it’s like, you can’t sue Harvard if you get out and you can’t get a job, right? That’s on you. It’s not necessarily the Bootcamp. Again, it’s just the person who just got an education and ran out and just bought 200 units without building the team and the resources and the bench that’s required to do this successfully.

Matt:
I agree.

David:
And that’s a good point there. And there’s analogy here where maybe you look at partnering with someone is like betting on a fighter. Well, you can lose your money if the fighter throws the fight. That’s someone operating outside of integrity, doing something illegal, but that’s not the only way you lose. You might just bet on a terrible fighter and they just go out there and get beat. Either way, you lose your money. So don’t assume it’s only getting ripped off by illegal activities or unscrupulous behavior. It can also just be a bad operator. Now on the topic of bad operating, that leads us to our next red flag, which is lack of focus. Is this investment their core area of expertise or just one of 27 different things they do and they’re a part-time operator, not a smooth operator. Andrew, what do people need to look out for here?

Andrew:
Again, this is another one where it’s not an automatic no, it’s just something to dig into. There are a lot of sponsors and syndicators out there that, for example, have done 10,000 units of storage or 10,000 mobile home communities and they’ve gone an inch wide and a mile deep on that asset class. And odds are when things get tough, they’re going to know how to handle it. They’re going to know how to steer the asset through tough times. What seemed to get prolific in the last few years is we had a lot of groups that their thing they were best at was raising money. And then the problem became, man, I got all this money raised, what do I do with it? Okay, well I’m going to go over here and I’m going to invest in this and I’m going to put this in here and you know what? I got this stuff in Venezuela that I heard has just great returns.
And so all of a sudden you’ve got a sponsor who has got, like you said, 27 different asset classes. And so again, the reason that’s a red flag is because you need to ask yourself, well, are they an expert in any one of them? Now there is the situation where they have partnered with an expert in one of those, and then what you need to do is you need to find out who that partner is and then go do due diligence and vet that partner. And if that partner is an expert in that asset class, then you might want to go for it. That might be fine. But what you want to be careful of is, if it was just Andrew and I’m in self storage and I’m in mobile homes, I’m in apartments, I’m in a crypto farm, all this different stuff, I’m probably not really good at any of those. So that’s what you’re looking for.

Matt:
To add on to that, Andrew, is that if I’m involved in a lot of different things, I don’t have the time availability that I might need to turn the asset around. There are times, and you and I have both been here in our careers that we need to go and put ourselves on an airplane and go get boots on the ground at the asset to go and address a specific issue, whatever that may be. If you’re working with an operator that everybody in the operations team has a day job. Or as you said, they’re involved in a crypto farm and a self storage facility and a resort and they’re too busy with those are the things that they can’t put the time into the multifamily asset. The multifamily assets could just languish a bit from the attention.
We looked at buying a multifamily asset in the southeast recently that was owned by a consortium of doctors. None of them were full-time active. They all were trying to own this thing passively thinking they could just buy the apartment building and wish the property manager the best and tell the property manager where to send the checks when they’re ready, right? So all well and good, but sometimes there is the need for daytime availability and if they operator you’re working with doesn’t have that, that they can’t just go parachute them into the property and get in the face of a contractor or go and look at the property manager dead in the eye and find out what’s going on, you might not be in the best boat.

David:
In Pillars of Wealth I talk about one of the mindsets to avoid if you want to become wealthy, which is what is the easiest, shortest, fastest way to make a bunch of money. It’s people looking for the downhill road. And in this space when they hear about Matt, Andrew, some other multifamily operator raising money and making a bunch of money with it, there’s a lot of people that go, “Ooh, that looks easy, I want to do that.” So they start saying, “How can I raise money and then give it to someone else to go invest?” Or, “How can I raise money and throw it in a deal? How hard can it be?” And so the person investing, they don’t know the difference between a person who’s done this for 10 years, 15 years, really the captain that’s seen the stormy seas or the person that’s only sailed in the harbor, which would be like the last eight to 10 years of rents increasing and cap rates decreasing, and almost every single thing that could go right in multifamily has gone right, and everyone’s doing well.
So you start to hear this confirmation bias of, well, they’re doing it and they’re doing it and everyone’s doing well, so what’s the risk? And maybe you even put some money into a deal and it goes well. So you’re like, “Well, I’ll put more money in the next one. I’ll put more money in the next one,” not knowing why it’s working out. So just those are elements of human nature you want to be aware of so that maybe you sniff out if something doesn’t seem right, versus what you’re saying here, Andrew, is you’re looking for the operator that has done this for a period of time and they’re doing this full-time. They have seen the things that go wrong and they know when A happens we have to do B. They’ve got some clever solutions in mind versus someone who doesn’t have the experience that won’t.
All right, the next red flag is a sponsor that is new to that market or MSA. Why is this something that people should look out for?

Matt:
So David, in the multifamily bootcamp, one of the main core strengths that we talk about you need to have on your team is market knowledge. We call it the market hunter. And the reason for that is that there’s such unfair advantage you can create for yourself as an operator if you get to know a market like no one else. You get to know the brokers, the good property managers, the bad property managers, the property managers that everybody knows. If you’re from out of town, that’s the property manager you use. But if you really know the market, you use the other property management company. You get to know who the acceptable vendors are in the market, who the good roofer is, who the not so great roofer is. All those things. Those happen through market infiltration. If you are new to a market, you’re not going to have all those great contacts.
And so it’s okay to invest with an operator if it’s their first time in the market, but you do want a little bit more due diligence and ask them, who did you select as your property management company and why? What else do they manage in the market? Because the PM company when we did our first deal in Winston-Salem, for example, Winston-Salem, North Carolina? That PM company was the one that introduced us to the roofer that we ought to talk to. And the roofer then said, “No, no, don’t call that other roofer because they’ve really messed up a few of our other properties, right?” So you want to know who they’re relying on to help them infiltrate the market. And a lot of times it’s a PM company or maybe a fellow other real estate investor that’s on the operations team on the company, but whatever it is, make sure that they’ve got some good boots on the ground that’s helping them infiltrate very quickly.

David:
I love that and here’s why. In my own experience, when I’m new to a market, I don’t know it that well or new to an asset class or new to anything, I don’t like rushing into it. I have this analogy that when I was in the police academy that we were learning how to drive the cars on a course and basically they set up all these cones and you have to drive it in under a certain period of time and it was very difficult. They don’t give you that much time and if you hit even one cone, they say that’s hitting a pedestrian. So you fail immediately if you just touch a cone, at all. So people made two different mistakes. They would either drive it too fast and run over the cones or they would drive it too slow and not make the time.
And I think at the first run, like 70% of our class failed. It was really hard. The only way you could do this was you had to study the course and anticipate when I’m in turn A I know what turn B is going to be. So you’re actually thinking at least one step ahead. Ideally you want to think two or three steps ahead. So when you’re in a sharp turn, you’re not just staring at what you’re doing, you’re like, “All right, I’m about to come out of this. I need to get on the accelerator for half a second, build up some speed because I’m not going to break for a minute and there’s a straightaway coming and I need to be bringing speed into the straightaway, right?” So what I would do is drive very slow until I learned what to expect and then when I was anticipating the next step, I would go a little bit faster and I would just run that back and forth until I could do the whole thing quickly.
Moral of the story here is when you’re new to a market or new to a strategy or new to anything, you don’t want to smash on the accelerator. That is what raising money is, it’s hitting nos. You go way faster when you raise other people’s money than yourself.
So when you’re putting together a team or an area, when you get a great contractor, a great property manager, and I know it’s the same for you guys, you start thinking, oh boy, I could do more. Now that I finally have this person, I could scale, I could have two projects at one time, I could take down a deal I normally wouldn’t have been able to before because there’s some more margin here. That only happens when you find the property manager that you trust, the contractor that you trust, a marketing system, all of these pieces give you the confidence to go quicker. So I think that’s great advice. If you’re talking to the sponsor, you want to ask, what do you think about turn three? And if they’re like, “I don’t know, I just wait until I get to turn three before I do turn three.” That’s a red flag. You definitely don’t want to go down that path. What do you guys think about that analogy?

Matt:
I love your analogies. That’s what I think.

Andrew:
I love that. I don’t think I can top that. The only thing I would add is, just be careful of the sponsor who is picking markets like they’re swiping on Tinder and just stopping on, “Oh, this one looks good on the surface, right?” Because odds are, they don’t have the depth and the resources. The two most successful types of sponsors that I’ve come across over the years and when it comes to market selection are either the huge national guys who’ve got maybe 10/20/30,000 units and they have the resources to go into a new market with power and understand it and bring in their own management and just really take it on big time all at once or, and these are the guys that most of us and the listeners are going to know, is the sponsors that live in and invest in one market and have been doing it for a long time.
I know sponsors in San Antonio and Atlanta and Houston. They literally know every block and street and which one you should invest in and which one you shouldn’t. And if I’m giving out money, I’m going to go with someone like that.

Matt:
The only comment I have here is I love David and Andrew’s analogies and I listen to this show so that I can laugh at the phenomenal analogies they come up with and making real estate relate everything to driving courses, to Tinder, to basketball, to everything else that I hear about. So, that’s my thoughts on the matter.

David:
Keep an eye out for BiggerPockets episode 851, which is how to improve your Tinder game while making money through real estate.
All right, the next red flag, other than trying to use Tinder to find love, that’s a red flag in and of itself, but the next red flag for real estate is going to be the sponsor only pushes one return metric. I love this one because this is a clear sign of deception when people are trying to pull your attention away from areas and into others. And before I turn it over to you, Andrew, I have another example for this.
My mom told me when she was a kid, she was in this group called 4-H where they raise animals and she had a pig and she would take the pig to a competition where it would be gauged on how good of a pig it was. I have no idea how this works, it’s a weird thing. But my mom said her pig had a lazy eye and a droopy face on one side of its face and she knew the minute that they see this really jacked up pig, I’m out. So what she did was every time the judge was starting to walk to that side of the pig, she would just point something else out or she would say, “Oh, I forgot to tell you about this.” Or she would start talking about herself. And actually she used it the entire timer and the judge never made it to that side of the pig and she ended up winning with a less than ideal animal. And that is something people do to deceive. So can you explain how this would look within a multifamily deal?

Andrew:
That’s a trend that we’ve seen in the last few years is, if anyone who’s been getting solicitations from sponsors, the last five years you’ve typically seen equity multiple, and I’ll explain what all these are, or internal rate of return IRR and then all of a sudden the last six to 12 months, all everyone’s talking about is AAR and oh, okay, sure. All right, sounds good. AAR, I like that, it says I’m going to make an average annual return of 18%. So I’m going to define these each really quickly and run through what you need to look for and then why the key thing to take away here, if you miss all the details, but the key thing to take away is when evaluating a sponsor in their investment, do not rely on any one of these metrics.
You need to know all four to determine if that investment is Number One, good for you. And Two, knowing all four will help you ferret out the different risks and levers that are being pulled to generate the returns. Because any one of these four is easily manipulated on a spreadsheet. And if all you look at is the one that’s being projected to look good, you might miss what’s showing up on the other factors that will reveal what’s going on.
So, internal rate of return, IRR, that is basically a way of looking at your compounded return over time. And then basically it says, “Hey, money today is worth more than money tomorrow.” The second one, AAR, that is average annual return. And that’s exactly what it sounds like. Just take your return, divide it by the time and that’s your average. So here’s the difference. Let’s say you have two investments. They’re both five years. You put $100,000 in and it’s a great investment. Five years later you get $200,000 out. For one of them, you get $10,000 in cash for every year and at the end you get $50,000 back.
The second one you get zero for five years and then you get $100,000 back. Which one’s the better investment? It’s the one that gave you $10,000 a year upfront and then $50,000 at the end. Well, if you evaluate those two investments with these two metrics, the IRR, internal rate of return is going to be higher for the one that gave you $10,000 a year because you got your money back sooner. And if the IRR on the second one where you had to wait five years to get anything, it’s going to be much lower. So what’s happened recently is that as cashflow has gotten more and more difficult to generate with new assets, everyone has switched to AAR to, I wouldn’t say hide the fact, but maybe not fully disclose the fact that almost the entire return is on the backend and that until you get there, not much is going to be happening.
So that is why you want to look at both IRR and AAR. The other two are cash on cash. I think most listeners are probably pretty familiar with that. It’s just does the investment generate 4% a year, 5%, 6%, 7%? The key thing here is to make sure that the cash on cash is actually being generated by the asset and is not just extra money that was raised up front to give it back to you and call it a distribution. That’s a whole ‘nother topic, but that’s something to look out for.
And then the fourth one is equity multiple. This is really just exactly what it sounds like. You put in your equity or your investment. How many times over is it going to be multiplied at the end of this thing? If you put in a hundred thousand and five years later you get a total of 200,000 back, your five-year equity multiple is a 2.0.
And so by looking at all four of these together, you can again determine if it fits your investment goals, but also figure out if and where the sponsor may be hiding something. And then again, it may not be intentional. They may be using, for example, really high leverage, like 80% or something in mezzanine debt or preferred equity to get a high IRR. If all you look at is the IRR, this is going to look exciting because it’s at 20%, but then you go look at these other three that I talked about and they’re not going to look so good because of that. Bottom line is look at all four of those together. Matt or David, anything you want to add or that I missed?

Matt:
I just want to say that first of all, thank you Andrew for summarizing those things because they get thrown around a lot and it’s assumed or maybe hoped that people don’t understand what those things are or maybe assume that people do. So I’m glad that you went through and defined them. The only thing I would say on top of that is as an investor, what’s your duty to do is to look at how they calculate the IRR, the cash on cash, those kinds of things. Because there’s levers that the syndicator, the operator, the sponsor can pull to make the IRR look really, really good. We’re going to sell it five years from now at today’s cap rate. Or we’re going to sell it and double our money, whatever it is a year or two from now or five years from now, whatever it is.
There are factors that they can use to not so much manipulate the numbers, but to make the numbers shine in the best light on the deal. And you want to look at what the assumptions that they made because every syndicator is being asked to look into the future. And so if they look into the future with super rosy colored glasses, well we’re probably going to sell into a booming economy and we’re probably going to sell when interest rates are going to be back down to 3%. We’re probably going to refinance and get a 4% loan. Well, given today’s standards, you might not. And so it’s important to make sure the operator made conservative assumptions when they present those metrics to investors.

David:
You can see why AAR is going to be a more popular metric because it doesn’t account for the inflation. If inflation is 5% a year and it’s a five-year deal, that’s actually a 25% pad that they’ve been able to work into what their numbers would look like versus the IRR, you’re getting your money right now and it can’t be inflated literally by inflation. So, you can see this is the tricky way that people can adjust what they’re saying to make it look better than it is.
All right, last red flag. The sponsor is not transparent about where the money’s coming from and where it is going or if there are strings attached.

Andrew:
This is another one where we could almost do an entire podcast on it, but essentially what you’re looking for as an LP here is there’s a couple of different things. Number One, sources and uses, right? So if they’re raising $8 million, how much of that is for down payment? How much of that is for fees? How much is for renovation? How much is for reserves? How much is for maybe a rate cap or all of those things? And that gets into how you vet a deal. I actually just talked to somebody unfortunately today who had a situation where, whether it was their, they didn’t understand or it seems like this maybe not have been disclosed, but an additional capital partner was brought into the deal and they were a large capital partner and that large capital partner came in with a clause that said, if certain targets aren’t met, we have the right to arbitrarily buy out the entire LP position at a value we determine.
Basically, let’s just say that investors getting zero. Because, you ever seen those contracts where it’s like, for a consideration of $1 seller does … this. That’s essentially what happened where this large capital partner said, because of this, this, and this, we have the unilateral right to buy out the limited partners for an amount we determine and the amount they determined was effectively zero. And unfortunately this is really common. These kinds of clauses and strings are common with mezzanine debt, with rescue capital, with institutional capital. So it’s not that this situation was completely out of the norm or even fraudulent, it’s just that it doesn’t seem like it was fully disclosed to the investor and/or the investor didn’t fully understand the ramifications of it.
So make sure that any investment you’re doing that you fully understand the capital stack. And when I say capital stack, think of it like literally a stack of pancakes, right? The debt, maybe a big juicy layer preferred equity, and then the LP equity on top of that. And however you want to stack that up, make sure you fully understand not the structure of it and then the rights that come with each piece of that structure. Lenders are not the only ones who can come and take over a deal.

David:
All right, thank you for that Andrew. Matt, to close us out, can you give us some common sense principles for people to keep in mind when choosing a sponsor?

Matt:
Thank you, David. So guys, here’s some common sense principles for you guys to take home and take to heart when you’re looking at deals as either a investor or even as an operator. A great sponsor can turn a bad deal into a good one, just like a bad sponsor can turn a great deal into a terrible one. Good sponsors can have deals not work out, and they are willing to tell you about them. So good sponsors, guys, are transparent, good times and bad. Look for asymmetric risk, meaning the amount of money you could make on the upside of the deal is much, much more than you could potentially lose on the downside of the deal. Use your gut, guys. Listen, a lot of times your gut’s right. There’s some Spidey senses, if I may use a superhero analogy. There are some good things in your intuition.
So use those when considering a deal. And if your gut says slow down a little bit, maybe do a little bit more diligence, do that. If you don’t understand, don’t invest in it. That’s a great analogy for anything. Don’t invest in anything that you can’t comprehend or explain to somebody else very easily. And if you guys want a lot more thoughts, as in from an LPs perspective on how to select the right operator, consider all of our good friend Brian Burke wrote a book called The Hands-Off Investor. And it is a great book about selecting operators. And at the very end of that book, there is, I believe, 72 questions that I’ve had investors ask me to answer all 72 of them. So maybe don’t do that to an operator, but pick maybe the top five you like and send them over to an operator you’re considering investing in because Brian put a lot of hard work into that book and it’s intended to help you guys select operators that are really going to be there for your best interest.

David:
All right, so several good book recommendations on today’s show. We mentioned my book, Pillars of Wealth: How to Make, Save, and Invest Your Money to Achieve Financial Freedom. Brian Burke’s book, The Hands-Off Investor. Matt Faircloth’s book, Raising Private Capital, and I’ll throw a bonus one in there for you. You can also get this at the biggerpockets.com/store website. The Richest Man in Babylon, which covers investing principles. And one of them is don’t invest in anything that you don’t understand.
A quick recap of our seven red flags. The sponsor has a different partner for every deal. The sponsor suggests anything suspicious like inflating proof of funds or not disclosing material facts. The sponsor does not have a successful track record in the business. They lack focus, meaning that this is not their core expertise, it’s just one thing that they’re doing. The sponsor is new to that market. The sponsor only pushes one return metric. The old smoke and mirrors. And the sponsor isn’t transparent about where the money is coming from and where it is going to.
Matt, Andrew, thank you so much for joining me on this show. This is very valuable to our audience, which hopefully we could help people save some money. I’ve said it before, the old flex was bragging about how many doors you got. The new flex is holding onto what you have accumulated during the good years.
All right guys, thank you very much for today’s show. This has been fantastic. Appreciate you all being here. I’m going to let you guys get out of here. If you’re listening to this and you enjoyed our show and helping save you some money, please consider giving us a five star review wherever you listen to podcasts. Those are incredibly helpful for us. And share this show with anyone you know of that is considering investing in someone else’s deal before they send their money.
And if you’d like to get in touch with any of us, you can find out more in the show notes.
Do I look like a Shar Pei when I do this, in my head?

Matt:
A little bit?

Andrew:
Actually, you kind of look like one of those Sega characters that had the lines on there.

Matt:
Yes, the bad guy. And Sonic the Hedgehog.

David:
Dr. Robotnik. That’s right.

Andrew:
You know what, quick side note, I think pigs should be man’s best friend instead of dogs because three quick – Number One, highly intelligent and trainable. Two, easy to care for and Three someday when they pass away? Bacon, right?

Mark Cuban says he’s leaving ABC’s long-running series Shark Tank. The question is, who could the network get to replace him?

Cuban has been a shark, or investor looking for new opportunities, on the series since season three. The program is currently in season 15, and the billionaire said on the All the Smoke podcast this week that he plans to leave after season 16.

ABC has not yet confirmed Cuban’s departure, which is still a while off.

Still, Cuban is by far the biggest name on the program, appearing alongside fellow sharks Daymond John, Lori Greiner, Robert Herjavec, Kevin O’Leary and Barbara Corcoran. His high-profile media presence and willingness to promote the show make him very valuable to ABC, which could have been caught off-guard by his off-the-cuff remark.

If Cuban does indeed, depart, the network will need an equally high-profile replacement to succeed him. It’s also an opportunity to add diversity to a largely homogenous panel of investors. Though the network is likely months from making any sort of decision, here are five possibilities to replace Cuban, whose net worth is $6.2 billion, according to Forbes.

1. Kylie Jenner

Why not dream big? One of the stars of The Kardashians on Hulu, Kylie Jenner is also a cosmetics mogul and model who is worth $680 million. While she’s not actually a billionaire, her clout and name could prove valuable to any of the Shark Tank inventors, and any network would love to have a Jenner on their program.

2. Aman Gupta

The breakout star of Shark Tank India, Aman Gupta co-founded boAT, a wearables company that has taken off very quickly. He’s known for his positive outlook and excitement for ideas pitched on the Indian version of the program, a trait he shares with the enthusiastic Cuban. Gupta would share a similar hype man type of role.

3. Tyler Perry

The billionaire who built an entertainment empire based on movies and TV shows has the showmanship and bluster to match the current set of sharks. Tyler Perry famously supports Black brands and would bring sharp business acumen to the table—but he’s already so busy with all his pursuits (he also acts in films and shows he doesn’t produce or write), it might be tough to get on his schedule.

4. Col. Jennifer Pritzker

The Pritzker family has been on Forbes’ list of wealthiest families for decades, and Col. Jennifer Pritzker has an interesting story. She was a Republican donor until a few years ago, when Pritzker, who is transgender, said she could not support Donald Trump (she famously explained, “why should I contribute to my own destruction?”). A savvy businesswoman devoted to philanthropy, she would bring great knowledge of nonprofits and the military, adding to the sharks’ dimensionality.

5. Camila Coelho

A Brazilian YouTube star with more than 10 million Instagram followers, Camila Coelho is a self-made millionaire whose matter-of-fact approach to beauty has earned her legions of fans worldwide. She launched both a beauty and a clothing line, and the influencer appeared in People magazine after giving birth to her first child, something she had long worried she couldn’t do because she has epilepsy. Her fun personality, gorgeous clothes and huge platform make her an excellent potential shark.

Ashley:
This is Real Estate Rookie. 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. And today, we’ve got Brian Lubin. Brian’s also a podcaster, but a real estate investor, entrepreneur who really documents his journey of being able to leave his six-figure salary with only two deals. He only had two deals. And he talks about this strategy of using both passive income and what he calls passionate income, and how you can combine those two things together to really accelerate the time that you can leave your job or, I guess, so you can leave your job faster.

Ashley:
Yeah. The foundation is really important to having that stability to be able to do that. But it’s not just all roses and happiness. He had a panic attack, and that wasn’t really because of real estate, which most of us do have panic attacks over or worry about. It was actually just the fact of leaving his job.
And he actually talks about how detrimental and serious a panic attack can feel. So he’s going to go through as to when this happened to him, what were the steps that he took in that moment to reassure himself that he was making that right decision to actually move forward with leaving his job.
At the end, you’ll want to keep listening because we go into more detail on co-living and how he was using this real estate strategy, but also even some tax strategies that he implemented during this process too, especially if you are house hacking or you’ve lived in your primary residence, he lets you know something that is a really, really good piece of advice that you may not realize as far as paying taxes on your primary residence.

Tony:
All right. So before we kick it over, I want to give a shout-out to someone by the name of Jet 91 Jackson. Jet, love to see a five-star view on Apple Podcast. And Jet says, “I’ve been listening to the original BP podcast for years, and I also love on the market, but I find myself gravitating more towards the Rookie Podcast every single day. They cover all the details and strategies a rookie would need to know, and I love hearing the challenges people have run into and how they overcome that in their journey. Not to mention Ashley and Tony complement each other very well. Keep it up, guys. You’re helping more people than you know.”
Jet, really appreciate those kind words. That truly is why Ashley and I love doing this podcast is to hear stories just like that. And you kind of hit randomly on a lot of what we’re going to be talking about in today’s episode, right? You get to hear a lot of challenges. You get to hear about how they overcame them, and it’s just cool that we get to present so many stories like that to folks just like this. So if you’re a part of the Rookie audience, if you’re enjoying this content, please take just a few minutes out of your day. Leave us an honest rating and review on whatever podcast platform it is you’re listening to.

Ashley:
Brian, welcome to the show. Thank you so much for joining us today. Please let us know a little bit about you and how you were able to get started in real estate.

Brian:
Oh, man. So I had a very traditional upbringing. I went to high school, did the four-year college thing, thought that I was going to be a suit and tie wearing guy for the rest of my life, and that was going to be the pinnacle of existence, right? I was like, “Man, I can’t wait to make it to the top of this corporate mountaintop, and I’m just going to make it to manager, VP. I’m going to drive the fancy cars, have the nice watches, have the beautiful house, be at the coolest country club.”
And so, that was my intention after I left college. I didn’t have this backstory of wanting to be an entrepreneur, wanting to be an investor, any of this stuff. Very traditional, just I wanted to make money. I wanted to just do the thing, and I wanted to get better. So when I was looking at that, I originally got my degree in marketing, and I realized, “Wait a second, this whole salary thing, if I’m really good, I’m making the same amount of money as somebody does not really good. It’s the same amount of money.”
I was like, “Wait, hold on a second. Can I go do something where if I get better, I get paid more?” So I was introduced to sales. So I joined this Fortune 500 sales organization. It was a wonderful experience, which is ironic because I actively preached about how to get out of corporate America, but it was as good as it could have been and, sometimes, the most difficult situations to leave. It’s very easy to leave when things are awful. It’s harder to leave when things are good enough. And that applies to relationships, your life, your business, anything.
So I made it to the top of that company over four and a half years. I made it up and just worked my tail off, blood, sweat and tears, 80-hour weeks really learning, being coachable, just taking feedback, going to the top reps in the company and asking them for help. And that was my first run in with mentorship, made it to the top, got everything I ever wanted, won number eight out of 5,079 for the position rep of the year, rookie of the year, and then decided it was time to leave.

Tony:
Brian, first, something you said that I think I want to circle back to you, it’s an important point, but you talked about how when you first got that W2 job and you were looking around like, “Man, I’m making the same as everyone else, even though I feel that I’m a better employee than these people,” and you said, “I want to go into a field that kind of compensates me based on the value that I can provide.” I think that in itself is a major lesson for a lot of rookies who are listening today because say that your goal is to accelerate your ability to save cash, to put money towards your real estate business, sometimes, the simplest solution is getting a new job, right?
And if you can leave this job where you’re tied to a 2% annual raise based on how the company performs or whatever it is, and instead move yourself into a position where based on your skills, based on your merits, based on the value that you provide, you can exponentially increase your income, that’s one of the fastest ways to kind of kickstart your real estate journey.
So I want to talk about this because there’s, I think, a certain sentiment, Brian, towards the sales profession. There’s a lot of people who feel that I can’t be a good salesman, or being a salesperson just kind of gives me the ick or I don’t know if I like the idea of doing that. So what’s your rebuttal to people that have hesitancy about sales as a career?

Brian:
So you guys have complete control over what you sell, who you sell for, and how long you do it. So what my advice is, especially to those people that are listening that are maybe in college, that are looking to make that first jump, go into an organization that’s tried, tested, and proven to where you can actually get behind the product that you’re selling because, then, selling isn’t a game of closing people. It’s the game of helping people make a decision. That’s it.
And sometimes, the decision is that it’s not the best fit, and that’s okay. And I’ll tell you right now, Tony and Ashley, the best salespeople in the world are the ones that will actively lead with that and say, “Hey, I’m here to help you make a decision. This may not be the best thing for you, but it may be the greatest thing for you,” and I only want you to do it if it is the greatest thing for you.
And so, that’s what led to everything. And I even sold myself into that position because I had zero experience, and they said, “Well, why should we do this for you?” And I said, “Well, if you hire someone with a bunch of experience, they may do things the way you don’t want them to do it.” I’m a blank slate. I’m a clean canvas. You can mold me into whatever you want me to become. And that’s what happened.
And so, I made it to the top of that company. And then, a piece of advice that I give to everyone that I think is really, really important, look at your boss’s boss. So that’s what I did because I made it to the top. I won the awards. There was nowhere else to go besides promotions, right? And so, in corporate, you start shadowing your manager. And then, you see their boss too, and you start following the position, and they’re like, “This is what the day-to-day looks like.”
And I followed them, and I was like, “Oh my God, you have less freedom than I do. Oh-oh.” I was like, “Bro, you have Zoom calls in 15-minute increments throughout your entire day, and your diet is donuts and caffeine.” I was like, “Oh-oh, I don’t want to do this.”And then, that’s when I started being like, “There’s got to be another way. There’s got to be another option. I can’t be 30, 40, 50, 60 years old living that kind of existence. I want to have my freedom to do what I want, when I want, with who I want.” So then, that’s when I was introduced to real estate. I’ll pause there.

Tony:
Yeah. And I want to go into the real estate piece, Brian. But one last thing that I want to circle back to is, I can’t remember how you phrased it, but it was really well said, but you said that it’s easy to leave when you hate your job, but it’s harder to leave when things are just okay. And it’s true, right, because when things are just okay, it’s this idea of you start to get complacent, you find yourself in your comfort zone. And it reminds me of the story.
Have you guys heard the story about the dog that’s sitting on the nail? Have you guys heard this? So there’s a story, these two neighbors. One neighbor walks over to their neighbor’s house, and the neighbor’s got a dog sitting on the front porch. And neighbor’s in his rocking chair, a dog sitting next to him, and the dog’s just howling.
And the other neighbor is like, “What’s wrong with your dog?” And the neighbor who has a dog, he’s like, “Oh, he’s sitting on a nail.” And the other neighbor says, “Well, why doesn’t the dog move?” And the neighbor says, “Because it doesn’t hurt bad enough.”
And it’s this analogy for how a lot of people live life where we’re all sitting on some sort of nails in different parts of our life, but we don’t take action because the pain isn’t great enough. So the question to you then, Brian, is what was the straw that broke the camel’s back, or at what point did that pain get big enough for you to have that moment where you woke up and said, “This is what I want to do full time”?

Brian:
Oh, it was absolutely when I got everything I ever wanted. So I call these the mountaintop moments of life, and it represents the 2% of life where you get everything. You hit that goal. You run the marathon. You accomplish that thing that you’ve been working towards, and you get up to it, and you raise your hands in victory, and you’re like, “Yes, I did it.” And you’re like, “Oh, wait, now what?” And then, back to the 98% of life, which is accomplishing the next goal. S.
So once I looked at my boss and I looked at my boss’s boss and I realized the goals that I want in life do not correlate with the trajectory that’s before me. So that ceiling kind of started coming down on me. And then, when I was able… Like you said, it was a good job. I was making great money for my 20s. And I had to create the pain from the future and bring it to the present in order for me to do that, because I was like, “I want to be a present father in the future. I want to have my freedom. I want to have control of my time.”
And if I continue down this path, I will not have those things. So therefore, this is the moment I need to draw a line in the sand and make a change in my life. And then, I feel like people that are listening to that, you guys have all had these moments already, which is why you’re listening to BiggerPockets and you’re listening to Real Estate Rookie. You’ve already had those moments, and you’re trying to find that other path, that other alternative. And it’s here.

Ashley:
I think there’s three different ways that actually could have gone. So you needed that next goal, that next achievement. You were at the mountaintop, and you needed another mountain to actually climb. But what about the people whose mindset is, “I’m comfortable, I’m complacent, I’m just going to stay here”? And then what about the people that get too comfortable where they actually start sliding down that other side as to maybe that they get comfortable. They’re like, “We love this lifestyle creep, but it starts creeping too much.”
And then, they start partying too much, and they start going on too many vacations. And their work starts to slide. How did you achieve that mindset of, “I need another mountain,” instead of staying complacent or actually falling back down that path?

Brian:
Oh, that’s a great question. So Tony Robbins has this quote that says, “If you’re not growing, you’re dying.”

Ashley:
Tony Robinson?

Tony:
Yeah.

Brian:
Oh, yeah.

Tony:
Oh, [inaudible 00:11:43]

Brian:
Yeah. No. Tony Robinson has got this great quote about this dog on a nail. Tony Robbins has this great quote about if you’re not growing, you’re dying. And that applies throughout all of life. So I’ll answer that with there’s actually this wonderful book called The Top Five Regrets of the Dying, and it was by this hospice nurse named Bronnie Ware.
And in this book, she interviewed hundreds and hundreds and hundreds of her patients on their death beds. And the vast majority of them on their death beds, when they were asked, “Your regrets of life, what do you look back on and regret,” most of them are regrets of omission of things that they didn’t do as opposed to things that they did do that they wish they hadn’t. So it was, “I wish I would’ve went and talked to that person I saw at the bar. I wish I would’ve spoke my mind. I wish I would’ve been true to myself. I wish I would’ve left that job, and done something else.”
And so, they’re all thinking about the things that could have been. And so a piece of advice that I give to people is zoom out to 80-year-old you, and it’s like, “Is 80-year-old you happy with what you’re doing looking back on your life right now?”
If not, take the advice of that person. So it’s like I talked to the 80-year-old version of myself a lot, and I’m saying, “Okay, cool.” Looking back on all of this, what does this look like? And so, that really helped reinforce it. And there’s this thing called sunk-cost fallacy, which is you spent so many years climbing this mountain that you make it 75% of the way to the top, and then you realize that the only way to make it to the top is to go all the way back down and climb another path, which all of us have been, especially in real estate investing, because it’s seasonal sometimes too.
And you’re like, “Oh man, I can’t go all the way back down. I’ve made it so far.” And that’s a lot of relationships too. You’re like, “We’ve been married 10 years. I don’t want to start all over again.” But, sometimes, it’s like you have to go back down to the base of the mountain to make it to the actual mountaintop that you’re looking to summit. A lot of the people, the top regrets of the dying were, “Man, I wish I would’ve gone back down to the base and tried to climb again a different way,” because that’s where the fun of life is. It’s in the climb. Hopefully, that answered the question.

Ashley:
Do you think there is in that story or that situation, there’s some part of some people where they may be thinking that I actually wish I could start over?

Brian:
Yeah.

Ashley:
I wish that it was wiped away and I would start over, knowing what I know now, it would be so much easier to build and to create that path, and I could get up there faster because of what I know now.

Brian:
Oh, and the coolest part is you already know what you know now today.

Ashley:
Yeah.

Brian:
So tomorrow is literally that instance for you to start all over again for fresh, because I tell people the reason that people don’t take action is because they’re terrified to start. They don’t have the confidence to take the action, but taking the action is what builds the confidence, ironically.
And so, the advice I give to people, especially people listening, that on your first property, your first three properties, your first 10, if you do leave that job to go do this thing full-time, when the cashflow supports it, what’s the worst case scenario that’s going to happen, the worst possible thing? You fail, right? Oh man, repairs, CapEx, a roof goes out, the tenant, there’s a messy eviction, like “Oh, crap. What now?” You go get another job. It’s like your worst case scenario is your present day reality.
And then, people are like, “Oh, okay, that makes sense.” And so, that alleviates the fear a lot to just get started because analysis paralysis, I know which we’ll get into here in this episode, that’s the big boogeyman that everyone’s got to beat. That’s the dragon that needs to be slayed for people to do anything because let’s face the reality of the situation. We all know how to do this stuff. BiggerPockets does exist. There’s a lot of episodes. There’s a lot of YouTube videos. There’s a lot of books. So it’s just a matter of people being like, “There’s other roadblocks that are keeping them from that now.”

Ashley:
Brian, I’m curious. When you approach someone that is stuck in that analysis paralysis, what are some questions you ask them to try to help them get out of it?

Brian:
What do you want? What do you want? So it’s like that scene in the notebook where he is banging on the window, and it’s just like, “What do you want,” because 99% of people can’t answer that at all. And because in our society you’re not trained, it’s not encouraged for you to actually ask what you want. You’re encouraged to be practical and reasonable. So like, “Hey, whoa, too much dip on your chip there. Calm down. Come back. Let’s not do this whole real estate thing,” which my entire family told me how stupid of an idea it was, which I’m sure you guys can relate to, all my friends, all my coworkers, at the time, because that was my network. That was it. They all told me it was the worst idea ever. And so through doing all of that, I asked people, what the heck do you want?
If you won the lottery tomorrow, if you had $100 million just pop into your bank account and you don’t never have to work a day in your life again, what are you doing? What does your day look like? What does your routine look like? Where are you living? Who are you with? How do you feel?
And so, the biggest thing that I’ve done throughout all of investing in all of anything is literally just wrote down what the heck I wanted. And I’ve done that for a long time now for the last three years. This is an excellent book called Vivid Vision by Cameron Herold. And it talks about writing out a three. And he’s been a guest on BiggerPockets on the main podcast too. And so, he talks about writing out in present tense three years in the future, “What does your life and business look like if you’re experiencing it today, if anything was possible?”
And when you write that out, then all of a sudden, you have a goalpost to aim for. When you have a goalpost to aim for, now, you actually have an understanding of what to say yes to and what to say no to. So the reason that most people are not starting is because they have too many options, and they’re driving in this car, and it’s dark, and it’s foggy and cloudy, and they have zero visibility. Of course, you’re going to go slow.
It would be fullest for you to mash the gas in that situation. But if it’s crystal clear, you got the Google Maps set. You got a freaking playlist, bump it on Spotify, you’re listening to BiggerPockets, you can just mash the gas. You can go clear. So clarity is the answer. And that also solves anxiety because people are just anxious because they have too many options. So if you remove all these different options and you’re only focused on one, game over.

Tony:
Yeah. One thing I want to add to that, Brian, you made a couple of really good points. But the last piece you said about just making the decision, I think that’s where a lot of people get stuck, is that they have this overwhelm because they’re like, “I need to make a decision that I can live with for the rest of my life.” That is not the case.
You make a decision today based on the information that you currently have available. And then, you start progressing down that path. And then, every opportunity that you get, you’re kind of reassessing, does this still make sense for me? And then, sometimes, you might need to pivot, and you pivot this way, and you pivot that way because the path to success is never a straight line. It’s really messy. And there’s ups, and there’s downs. And there’s 180s where you’re not even making any progress at some points.
But the point that I’m trying to make for all of our rookies that are listening, and this was advice that a mentor gave to me, was that it’s not super important in terms of what you decide. What’s more important is that you make a decision. And once you do that, then, you can start making and feeling that progress and feeling that momentum.
And then, the other thing you said was that your family wasn’t incredibly supportive. And I think that is a big challenge for a lot of our rookies listening as well, is that they’ve got their Uncle Jims who watch CNBC and think they have all the information about real estate investing, but they’ve done exactly zero deals themselves. But yet, somehow, Uncle Jim is this authority on what it takes to be a successful real estate investor. And because most of us who have never invested in real estate before, we don’t have that network of people who are also doing it. We feel influenced by Uncle Jim because, hey, he’s our uncle, he’s our family member. I love Uncle Jim. He’s given me good advice before. So he must be right about investing in real estate. But the thing that I always say is that you should only take advice from someone that’s actually done the thing that you’re wanting to do.

Brian:
Bingo.

Tony:
And if they haven’t done that, then, why take advice from them? I feel like I’m a pretty good dad, but I wouldn’t feel qualified to give my son advice on how to do an open heart surgery. I’ve never done it before, but if he wants to learn from me about real estate investing, I can teach him that. So I think that’s a super important point, Brian, I’m glad you brought it up, was that community can either support you or they can pull you back.

Brian:
And everyone’s so stuck at capital H, how. Right? Everyone listening to this podcast in some way, shape or form, it’s like, “How? How do I do this? How do I get mentors? How do I find peers, partners? How do I raise capital?” What are all these crazy things that you guys are talking about all the time?
And when you change the question, exactly what you said, Tony, it was a great point because this is an awesome segue, when you change the questions from how to where and then to who, the game changes. Life unlocks. Everything becomes easier because you don’t have to do this by yourself. And anxiety and indecision, analysis paralysis because you’re doing it by yourself and you’re trying to, and you have to start that way in the beginning. I did it by myself for the first three years, and I felt like I was on an island.
And a lot of people listen to this feel like they’re on an island. So when you know where you’re going, there’s this crazy thing in your brain called reticular activating system, RAS for short. When you go buy a new car to car dealership, you drive out on the road, you start seeing that car freaking everywhere. So it’s just your brain just being trained to see what you’re paying attention to.
So when you know where you’re going, and you’re saying, “Man, I want to travel around the world,” which is what I did. I quit that job and I traveled full-time around the world for eight months. I was like, That’s what I want to do.” So I’m like, “Who has done that? Who has built a business? Who has invested in real estate and built a framework around that, that allows them to have the remote management style and the ability to travel while they do it?”
So that allowed me to say no to other opportunities that presented themselves because every single yes needs to be justified by a hundred nos. So strategy isn’t really a game of what to say yes to. Strategy is a game of what to say no to.
And for me, I was like, “I can’t do multifamily.” It’s too hands-on right now. I can’t do Airbnb for me, at the time, two hands on because I didn’t know what I didn’t know. But I was like, man, “I could do this house hack thing. I got this down, and I could be able to go travel around the world, and you’re telling me I don’t have to pay for rent. What?” I was like, all of a sudden, this just unlocked for me. So you need to know what attributes that you’re looking for in your mentor as well. Then, that’s when you start recognizing those people.

Ashley:
Brian, when you started the second mountain, can you kind of go back and tell us as to how you actually quit your first job and made that decision and what your next step was? Was it to get into real estate, or what was the process there?

Brian:
Yeah. So a bunch of people listening to this want to quit their jobs, right? That’s basically what I’ve built my entire personality around. So I’ve got this covered, guys. So the advice that I always give around leaving your job is, man, do things in tandem with your job.
Guys, think back to what Tony said at the beginning of the episode about your income. Your income is your biggest asset when you’re first purchasing real estate because you’re bankable, you’re loanable, and you’re able to save that money and have that cash cushion. So we start with our W2 income. And then, eventually, once you have a couple of doors under your belt, then, you can start leveraging all the creative strategies. I know we all want to do sub -2 seller finance, all these wraps and all this stuff to get the first couple of doors, and that’s all fine and good.
But the easiest and best way that’s most predictable and you can spread it out across everyone, it’s just being really good at your job and being where your feet are and making sure that that’s optimized so that you can start buying the property.
So what I did was I had my doors already purchased. I just bought one a year. It was very boring, very unsexy. Anybody can do it. They’d be terrified to learn that anyone can do it. And so, I just did that. So by the time that it came, now, I was making a six-figure income, which some people may think is an advantage and a privilege. And other people that are making a six-figure income also view it a different way, which is oof, this is way more difficult to replace.
40, 50,000 is easier to replace than over 150,000 plus. So it’s like it’s a different game to play. And so, I always say there’s three different levels of passive cashflow that you need. And if you chunk it down, it makes it more attainable. So you have survive, arrive and thrive. So if somebody’s making $100,00, even $70,000 plus, that may be really intimidating for them to figure out how to build that passive cashflow.
And they’re like, “There’s no way I can get out of my job.” But I’m like, “Okay. Well, let’s chunk it down.” So survive, first step. So for survive, we’re just figuring out what are our fixed expenses, roof over our head, food on the table, bills paid. I can survive here. And then, that’s going to be way lower than what your total income is take home.
Arrive is now you’ve got some discretionary room, you can wiggle around a little bit. And then, thrive is, “Oh man, I got this whole thing replaced.” So for me, once I hit that survive and kind of moved to arrive, that was about $4,000 a freaking month for me. Wasn’t that much cashflow? I had two properties co-living that I lived in one part, rented the other rooms out, bought one a year, and I had $4,000 coming in. I was like, “I live for free. I’m debt free, because I always made sure to pay off the credit cards and everything.” I was like, “This is enough to swing for the plate and try to venture out and start up side hustles, take big bets on myself, do my own thing.”
And so January, February, March of 2022, the income was coming in. I started up my own podcast and that started producing revenue as well. It’s like a side hustle. And I was like, “I got this. This is consistent.”
March of 2022, I left that job. And as we were talking about this before the podcast, I journaled every single day, day one, post W2, day two, day 14. I was having panic attacks after I left my job. And so, that’s the irony, is nobody talks about what happens after you do the thing, after you have done, you’ve left your job, you hit quote-unquote “financial freedom,” whatever you want to call it.
There’s a whole lot of life to live afterwards. And none of us, none of us, are just wanting to sit on a freaking beach and do nothing. I did it. I lived in Greece for a month, and I traveled full-time for eight months. I literally lived on the beach. And after three weeks, you’re hung over and sun burnt.
So it’s like what is next afterwards? So a coach asked me something that really changed my life. And I always love sharing it on podcasts because it really impacts people. And my coach said… And you guys will really resonate with this. He said, “Okay. So you want to build $20,000 of passive income.” And everyone says “10,000 is kind of the default,” that you guys probably hear a month. And he goes, “Okay. So you want to build this passive income.” He goes, “Why does all of it need to be passive? Why?”
He’s like, “Can’t you make some of it passive and then just go try to figure out how to generate active income in ways that are super fun to you?” I was like, “Oh my god. Yeah. That sounds awesome.” And so, that’s what I did.
So I used the real estate to build the foundation to exit, and then ask the question, “What really fires me up that I can do, that I would do for free but I can make money from?” And that’s where I came up with passionate income.
So for some people that is building a big old real estate company, that is building an Airbnb empire, that is doing wholesaling, flipping, self-storage, whatever have you, for me, it was podcasting, and I’m still going to buy a bunch of real estate in my life, and we’ll go into my real estate journey here in a second.
But it’s just I want to get everyone to that point where they have enough passive income coming in to where they can focus on passionate income and to really drive the point home and to land the plane. Think about Steve Irwin. He’s a perfect example of this. Steve Irwin was a dude that was the crocodile hunter for people that are maybe don’t recognize the name. He was the guy that lived every single day. He was on freaking fire. Dude’s soul just radiated through the television, and every single person around the world resonated with this guy.
And so, when he died, I remember there was a quote that he had that really stuck out with me. He said, “Give me all the money. Give me the millions of dollars. I’m going to pour it all back into wildlife and conservation, and my family.” And now, his kids are old enough to be doing the same thing that he did. So I want everyone to have that passion. It may not be quitting your job and traveling around the world full time like I did. But if it’s making freaking candles in a cabin in Colorado or teaching surf classes in Hawaii, I want you to do that. A lot of information. I’ll pause there.

Ashley:
You know what? But that is such a great point, and that is very true. When a lot of people do hit that financial freedom, they still end up going out and working somehow, whether it’s a passion project or it’s a job to help somebody else. Whatever that is, it is very true that most people just don’t stop everything and sit on the beach especially, there’s a lot of people too that do education. So whatever they’ve built passively, then, they are so passionate about it, and they help other people to get to that point too. But let’s talk about some of that real estate. So do you have a deal that you want to walk us through?

Brian:
Yeah. Let’s walk through two of them because I don’t have much real estate, guys. So maybe, I don’t know what I’m talking about. No. The first couple of deals, man, the first deal, I’ll tell you guys, every single person that I knew in my world at the time told me how dumb it was. And the second deal, there were less people.
And now to give you, guys, a full circle snapshot, I just exited both of these deals. I actually sold them, which we can get into that as well about why I made that decision to sell. And now, I have enough cash to be able to float three years of living expenses by doing whatever I want of that thrive level based off the equity created from these two terrible decisions that everyone told me about. So, guys, real estate pays off in the future through appreciation.
It may not be this rapid COVID appreciation that we had, but if you hold on 10, 20 years, it starts to get fun. So the first property I bought was about $300,000 in North Atlanta. I put 3% down. I did a conventional house hack. So that’s what I did, is I put that downpayment down. I lived in one room, and I went and rented the other rooms out.
So when I was looking for a property, I did what David Greene calls the luxury house hack. So I bought a five bed, four bath houses, 1970s built plus or newer with two kitchens, in-law suite, two separate entrances because in Atlanta, duplexes are either way off in kind of the rural markets, and they’re very dilapidated and need a lot of CapEx, or they’re like $4 million in the middle of the city. And a lot of people are relating to this because I talked to people 24/7, and they’re saying, “I’m sitting on $80,000 of cash that I’ve saved, and I’m trying to buy this condo or this place, the house hack, and I’m not able to buy it.
I keep getting outbid. The interest rates are going crazy. And then, I’m just like, “Okay, well, let’s zoom out, and go back to what we’re actually aiming for here.” So back then, I was able to do that and just break even in the beginning, right? And then, when I moved out, I was able to rent it out by the room instead of by sections.
So in the beginning, I rented it out in the top half as a full unit, bottom half as one person living in a bedroom. Afterwards, I transitioned to the co-living approach by rent, by the room. And then, that was able to produce about 1600 to 1800 of pure net cashflow on top of CapEx and everything afterwards. So I just rinsed and repeated that same strategy and got the same house again the next year.

Ashley:
How did you not get shiny object syndrome and stay focused on doing that same thing on repeat?

Brian:
At the time, I didn’t know anything else because I was just-

Ashley:
That’s a good answer.

Brian:
And that was such a blessing. I didn’t even know about anything else. I didn’t have mentors or people in my life that were coaching me. I was just like, I read the books, the BiggerPockets books, and I was like, “Man, I’m going to buy this house, and this sounds cool. I ain’t going to have to pay money for rent or mortgage. It’s covered. Awesome.”
And so in the beginning, that’s what I did. But for people that have a couple of properties under their belt like I had at the time, and they come to that realization where they’re saying, “Okay, I’ve done the thing. I’ve got a couple of rentals, now I need to scale,” that’s a whole different ball game to play because now, you’re going from a focus on passive income to a focus on people, which both of you know more than anyone. At that point, it’s all about people.
You’re like, “Okay. Who has scaled where I want to scale? Who in my local market can I trust for acquisition and lead flow? Who are the top wholesalers? Who are the top realtors? Who are the top agents that I can get connected with?”
And then, it becomes a who conversation because going back to what we said, when you know you’re aware and you know exactly what you need, how much you need to come in per month and you know your who’s, that’s when you become dangerous. And so at that point, I was like, “Okay, cool.” Now, we can start to scale.
And for me, it just happened to be, “Oh, this podcasting thing ended up being more lucrative than I anticipated because I created a show myself.” And I was like, “Okay. For me, that was that.” But I know hundreds of other people that have done that through multifamily self-storage, commercial, mobile home parks because what Tony said is, doesn’t matter what you pick, matters that you pick,

Ashley:
And what’s your advice to somebody that is trying to pick their strategy that they don’t get distracted with that shiny object syndrome and just, “You know what, I’m going to research short-term rentals, but also I’m going to be at the same time analyzing campgrounds. And then, I’m going to be analyzing duplexes for long-term rentals.” So what’s your advice on that?

Brian:
Well, that’s my favorite one. It’s my favorite one because I think I came up with something original. I haven’t heard it. So I think I came up with something original, guys. Oh-oh. Five-star rating review for real estate rookie.
So what we created was if you are in a mall and you’re walking around a food court, are you just going to walk around the food court and just look at the different places and not eat anything? No. You go try the free samples. So you’re going to walk around, you’re going to try the chicken, you’re going to try the beef, you’re going to try the barbecue over here. Maybe, they got some Japanese over here. You’re going to try all the free samples. And then at the end, you’re going to circle around and you say, “I really like the barbecue. I’m going to go back and sit down for that meal. I like that meal.” That’s it.
It’s literally like a food court. So people in the beginning, I think people mislabel shiny object syndrome because I don’t think that shiny object syndrome is a problem until you have something that’s working, and then, you leave that thing to do something else.
Then, it becomes an issue. But in the beginning, it’s about trying out all the different stuff. So maybe, you do a flip. You’re like, “Okay, that was cool.”All right. Maybe, you invest in a duplex. Maybe, you start up a short-term rental.
Maybe, you try the midterm rental strategy afterwards, and you’re like, “Oh, that was a little bit more fun.” Maybe, you try sell storage. And then, you just start trying different things. And then, you can look around your food court, your real estate food court and say, “Okay. Man, self-storage was really interesting to me as opposed to all the rest of this stuff. I want to use that as my path.”
And so, I use this another analogy to land the plane here. If you’re going to a car dealership, and we all are going into this entrepreneurship car dealership and you’re walking around the lot and all the different asset classes are the different cars to pick. So then, say, that you pick a car and it doesn’t matter which one, and you start just driving down this endless highway. So that’s what most people are doing.
So they are like, “Okay, a defeated analysis paralysis, a defeated shiny object syndrome. I’m going to do Airbnb. I’ve got this.” And they post on Instagram. They’re like, “Look at my new car.” And they start driving. But back to what we talked about in the beginning, if you don’t know where you’re going, you’re just going to keep driving, man. You’re just going to keep going.
And then, eventually, what happens when you just keep going and you don’t stop, the car breaks down. And then, that is where everyone’s having all this anxiety, this depression, this fatigue, their relationships are falling apart. They’re getting sick because they’ve been driving this car for 20 years. They don’t know where they’re going. So it’s like once you have that, so land the plane, like I said. Once you have your destination picked out, go around the dealership, test drive a couple of the cars. And then, you can pick out which one you like the best.

Tony:
One thing I think I’d add to that, Brian, is for all of our rookies that are still trying to decide what strategy they want to go after, I think… Well, first, let me take a step back. There’s a few decisions you need to make. You need to make a decision on your actual strategy. And then, you need to make a decision on your niche because I could say that I want to become a syndicator. But I can syndicate apartment complexes, I can syndicate mobile home parks. I can syndicate hotels, or I can say I want to become a flipper. Same thing. I could flip single family homes. I could flip small multifamily. I could flip large multifamily. I could say I want to become a wholesaler. So you have your strategy first. And then, you have the niche that you want to apply that strategy in.
And I think the best way to find that perfect intersection of strategy and niche is doing a bit of a self-assessment because just because you know someone that makes a ton of money at wholesaling, that doesn’t necessarily mean that that’s the right strategy for you because wholesaling, in a sense, is a sales position. And you have to be really good at having conversations, handling objections, managing leads, and dealing with a lot of rejection.
And if you’re not the type of person that no matter how much income potential there is, no matter even how good you might be at it, if you don’t like the idea of doing that, you’re going to struggle with that strategy. Same thing with house flipping. If you don’t like dealing with contractors and kind of not handholding, but holding people accountable in that sense, then flipping may not be the right strategy for you.
If you want to get into the Airbnb space and you don’t like the idea of being at the beck and call of your guest and providing a exceptional customer service, my property’s turned 12 to 15 times per month, that’s 12 to 15 different groups of people at every single property. If that overwhelms you, then, maybe that’s not the strategy for you.
So the point here is that you’ve got to find the strategy and the niche that aligns with your personality, with your skillset, with your desires and ultimately what your goals are because if your goal is long-term equity gain and your goal is tax benefits, then, you shouldn’t be flipping because that strategy doesn’t align with that goal. If your goal is I want big chunks of cash right now today, then don’t go buy a single family as a long-term rental because that doesn’t align with your goal. So I think it’s taking a step back, assessing yourself and then trying to figure out how do I fit within these different strategies and these different niches.

Brian:
At the car dealership when you’re at, also, those are the different cars you’re looking at. The equity, I say if you’re looking for the equity, maybe that’s a multifamily play and you’re doing a longer term time horizon, maybe, that’s like searching for the minivans for a family. Tony’s about to have this big old family that he’s growing right now with Sarah.
So it’s just like maybe you’re not looking for that fast cash, you’re not in the market for a Porsche. You’re in the market for that minivan, right. So that’s what you’re going for. And I love everything that you said. Have you guys ever heard of the DISC assessment?

Ashley:
Yeah.

Tony:
Yeah. By the way, I’m never buying a minivan.

Brian:
Never buying a minivan. All right. You guys heard it here first. So Sarah, when y’all buy a minivan, you come back to this, and you show it to him.

Tony:
Actually, I will say we’ve rented a car in Tennessee. And usually when we go out there, I’ll get a truck. But all the trucks were sold out. They’re like, “All we got left is a minivan.” And it was a Dodge Caravan, and it was actually a really, really nice car. It had screens everywhere, and everything was automated. So who knows? Maybe, I want to buy the minivan.

Ashley:
I could honestly see Sarah getting sponsored by a minivan company-

Brian:
By a minivan.

Ashley:
… and her moving reels and the dancing and the minivan doors opening up and her showcasing it 100%.

Tony:
I can’t wait. [inaudible 00:40:03]

Brian:
That’s a good idea. This is going to be awesome. But the DISC assessment for people listening, this is an awesome, awesome thing that you guys can take because in the beginning, it’s like, “You don’t know what you don’t know.”
And a lot of us are probably asking the question, “All right. What Tony just said is awesome, but what are my strengths? What are my weaknesses? Where are my blind spots?” When you’re looking for partners, which we can get into a whole tangent on this as peers, partners, mentors and coaches, but when you’re looking for partners, you’re looking for someone with a complementary skillset to you because if there are two of the same of you, one of you isn’t needed. All right.
So if you’re a people person, you’re super extroverted and bubbly and outgoing like me, believe it or not, guys, Labrador Retriever energy, Golden Retriever energy over here, it’s like I’m terrible at details.
So it’s like I’m not going to partner with somebody that’s a super extroverted people person. I need to partner with someone that’s hyper-analytical, that loves pouring into Excel sheets, and that’s called your operator.
So not go too deep into the operations weeds, a DISC profile is D-I-S-C. And if you go take this free test online, there’s a bunch of free resources, a bunch of websites, it will tell you what your personality style is. D is dominance, I is interpersonal or whatever. The moral of the story is that D and I, if you’re a high ID like I am, then that means that you’re super into people. It may be capital raising and running a team. That’s where you thrive.
If you’re an SC, then that means that you are really into systems, structure, compliance, building out the deal analysis spreadsheet. And if you’re an SC for a person like me that loves making content and loves being the voice and making the vision and all this stuff, I am hungry for SCs in my life. I’m starving for those people that love the spreadsheet. So you may be loving doing that. You love deal analysis, but you’re like, “I can’t stand making content. How am I ever going to be successful in real estate?” Go to that person making content. [inaudible 00:41:54]

Ashley:
Or like Tony, you just marry that person.

Brian:
Just marry them.

Ashley:
You like the spreadsheet. She likes the content.

Brian:
You heard it here first, guys. Go find a person that marry them. That is the secret to your financial freedom, but that also be the biggest roadblock if you marry the wrong person.

Tony:
That’s also true.

Ashley:
So before you get married, take the DISC profile.

Brian:
DISC profile, baby.

Ashley:
Okay. So Brian, I want to circle back to your properties. And before we move into our segments here, I want to hear the bad. So you left your job. you have these rental properties as your foundation, did everything go as smooth as you thought it would owning these properties because you didn’t mention the panic attacks. Was any of that because of things that happened with the properties? Explain more.

Brian:
All right. So there’s two different points to that. But first, of course, nothing went wrong. Everything was perfect. It’s real estate. What are you talking about? Everything is okay. No.
A belief that I had in the beginning was that you can out-earn problems. This is false. For people that are listening that think that real estate’s going to magically solve every single problem that you’re ever going to have, this is incorrect. You are always going to have problems. They’re just going to look different through different stages.
They call it different levels, different devils. And I remind myself with that phrase every single day. So it’s like you’re never going to avoid them. You just get better at managing them emotionally. So the first time one of my basement units flooded, it was a lot of emotions. The water heater started leaking.

Ashley:
Wait, first time?

Brian:
The first time. Oh, are you guys sitting down?

Ashley:
There’s more.

Brian:
Just wait. Just wait, there’s more. So first time my unit flooded, it was the water heater had bust, and it completely destroyed the entire basement unit, had to get everything fixed. Tenant texted me, and he’s like “Hey, I’m in water.” What? I had never dealt with anything like this before. So, okay, cool.
First time, hyper-emotional, fixing that. Cool. Second time a unit flooded, different house. This time, it was the washing machine return hose came loose, and just launched water all in my personal unit that I was living in. And it was Valentine’s Day. So we had just come back, my girlfriend at the time had just come back and we were like, “Who spilled something on the floor, on the carpet?” And then, all of a sudden, it was everywhere. And then, it started coming under the door. And so, that was fun.
So it was a washing machine hose. So I fixed it, turned the water off, come back later. Then, we leave to go get fans to fix it, come back, have the fans going. And then, the tenant upstairs, their teenage kids came back to do a load of laundry. They realized, “Oh, the washing machine’s not working.” So they plugged it back in, turned it back on again, pretty flooded everything.
So the fourth time was heavy rains, floodplain, poor drainage, one of the gutters and everything wasn’t working, it just backed up. There was a creek. And so, then, it flooded the fourth time. So guys, by the fourth flood, I was just like, “Of course, it’s going to flood. It’s an annual tradition.” And I was traveling at that point. So I just was like, “Okay, cool. Let me call Eric. Eric will take care of it,” property manager at the time.
So he took care of that. So, yeah. And then, you also asked if any of the panic attacks that happened after I left my job were real estate related. No. The answer is because by that point, I’d had the four floods. Well, the three floods, the fourth flood happened. I’d had everything under the sun go wrong, like plumbing, electrical, roof, everything at that point.
So I tell people, “You’re not a real estate investor until you have one flood or a roof.” Now, you’re a real estate investor. Welcome. It’s not even something to be upset about. Welcome to the tribe. You’re embraced now. So I left my job. And this is a really, really important point for people that are still listening to the sound of my voice right now, which means, hopefully, you’re getting some value here.
Cashflow gets you out of your job. Cashflow will get you your initial freedom. Community keeps your freedom. So cashflow gets you out of your job. Community keeps you out of your job because I did everything right. I had the cashflow. I had six months of emergency fund cash sitting in my account. I had great community, I had a thriving podcast. Everything was right on paper.
And I left that job, and I did it. And I was more excited than I was nervous. I submitted that two weeks’ notice on a Wednesday. And I left. And I remember driving to my car thinking there was going to be a mariachi band or something. Just like when you hit millionaire status, you’re like, “Okay. Where are the fireworks? Who do I call?”
It never happens. And so, I remember I didn’t feel anything then, but it was the day, two weeks after, and it’d been two weeks of me not working. And I was texting my friends. And if anybody’s planning to go travel full-time around the world after leaving your job, book the trip close.
I had it two months out. So I had this two-month buffer of second guessing every single thing and every single decision that I’ve ever made. And I’m texting friends to say like, “Hey, can we hang out?” No, they’re working.
So thank God I had my own community that I’d invested in. And that’s ironically where I met Brandon Turner and David Greene, all the BiggerPockets guys, was through that community. And I had mentors in that group that were able to be on the phone with me and talk me off the ledge metaphorically whenever I was freaking out because I was journaling one day, and I was writing out everything that I was about to do. And I was going to go do this trip, and I was going to live in Greece for a month. And I had Mykonos booked and Santorini booked, and all these places booked.
And I was like, wait, “Greece is expensive.” It’s like, “Whoa. What am I doing?” And it just washed over me. And anyone’s had a panic attack before. It’s like a heart attack. You’re like, “I am going to the hospital right now. Call the ambulance. I’m going to die. And that’s what you’re thinking at the time.
And I remember at the time I started just walking and doing my deep breaths and I called a mentor of mine and he said, “This is going to be the scariest time of your life is after you leave that job. But I’m telling you right now that you have made the right decision. You have done the right things. I’m here to support you in any way that I can. And a year from now, you’re going to be going on podcasts. You’re going to be telling people that it’s worth it and that it’s the greatest thing you’ve ever done.”
And now here we are, a year and a half later, I’m still not bankrupt. I did something okay. So it works. And now, I’m literally living every single day feeling like Steve Irwin did, where I’m just on fire and on this like I’m in my path, in my purpose, in my passion for people that are watching Deion Sanders of what he’s doing at Colorado right now as a football coach. That’s what I feel like every single day.
So Ashley, you made this point before about education and about helping other people. I remember I was in Brazil at the time, and this thought came to me, and this is something people can take away and implement in your life today. You don’t need to be in freaking Brazil. You could be at Dunkin Donuts. And this thought is going from me to we.
So at a certain point, if you do this real estate thing the right way, you will have financial freedom, and there will come a point for all of you when you’re like, “I have more income coming in than my expenses. I don’t have to work anymore. Now, what?” And that goes back into passionate income. And what I think my hypothesis is for a lot of people, it’s going to be involved with giving back to other people and helping other people.
So I was walking on the beach, and I was feeling so lost. I was feeling so aimless because when a winner stops winning, you are no longer a winner. And the irony is when you become the type of person that can’t become financially free, you become the type of person that’s emotionally unable to because now, you’re really good at systems, processes, business, and investing.
So I was like, “I got to work on something. What is my path? What am I meant to do in life?” And the thought came to me. I was like, “Me to we.” And it was something a mentor had said to me. So I was like, “How do I help a million other people do the same thing that I did? How do I help a million other people do this for free?”
And so, that’s what started me going crazy with the podcast, going crazy with content. The account started blowing up. Now, we’re knocking on a million followers now. It’s insane, just posting videos and sharing the story, sharing the journey, letting people know that they’re not alone. And now, this is the most fulfilling thing that I’ve ever done in my life. And I know that both of you can directly relate with what I’m saying because you both do it. And watching other people win after you coach them and give them something and they execute almost feels better than when you did it. It’s insane.

Ashley:
That is so true. Having somebody come up to you and tell you they listen to the podcast and their story of what they’ve achieved since they’ve been listening for a year from… I mean the guests that we bring in, they just give so much valuable information. And Tony and I just sit here and get to ask questions based off our own curiosity. But it’s still, yes, it is a great feeling.

Brian:
Yeah. And here’s the kicker, and I want you guys to do something. Here’s my homework for everyone listening. DM Tony and DM Ashley, and let them know how they’re impacting you. You could DM me too at Brian Lubin. Let them know because a lot of the time, we’re talking into the void. And it’s just like you spend an entire year. And everyone assumes that we’re flooded with, “Oh my God, you’re changing my life. You helped me with this episode.”
No, no one’s doing it because you all think that somebody else is doing it. And so, I had this one woman named Jamara, shout out, Jamara. She called me about some education that I was doing and she said, “Oh my God, you did a podcast episode a year and a half ago about Airbnb, and I’ve bought three Airbnbs since then. And I’m financially free. ” I was like, “Why am I hearing about this a year and a half later?” I was like, “Couldn’t have shot me an email? What the heck?” So there’s so much more impact than you know that’s going on in the background.

Tony:
Brian, I appreciate you being so transparent about that journey post leaving your job because for a lot of people listening to this Rookie podcast, it is the goal that they want to be able to be in a position where they can walk away from their jobs. But there’s something that I want to point out to everyone. When you do leave your job, it is scary because it’s a different lifestyle where you’re not getting direct deposit every two weeks.
Your ability to generate income is based on the value that you’re providing to not just your employer, but to the marketplace. And the thing that I always tell myself that helps me sleep better at night is that say that my businesses, all of them just came to a screeching halt today. I know without a shadow of a doubt that I can go back out into the workplace, brush up my resume, start applying to places, and in a reasonable amount of time, have another six figure paying job just like I did before.
It’s not like I’m in a position where just because I took a break from the workforce that I’m never going to be able to go back. It’s not like I’m blackballed from every single company that’s out there. Even if everything that I’ve done as an entrepreneur failed in this exact moment, I know I could still go out and get a six-figure income just by being an employee somewhere else. And that’s what always gives me the confidence to keep moving forward because I know that that option is there, and that’s something I want people to understand.

Brian:
That’s so huge. And I’ll also add to that, my buddy, Aaron Amuchastegui, he runs an awesome real estate podcast as well, and I think he’s been a guest on BiggerPockets a bunch. And so, he did a keynote at this event that we just threw, and he was saying all about his journey and how in the 2000s he was killing it, and he was making millions of dollars through. He had left his job as a home builder, and he was doing his own thing on his own.
And then, BlackRock came to him at the time and said, “Hey, we want to hire you to come on with us. We want to buy your company, basically.” And he’s like, “You can’t put me…” or they said, “We’re going to put you out of business.” He goes, “You can’t put me out of business. I’m the best.”
But it was BlackRock, and no one knew who BlackRock was at the time. So BlackRock put him out of business. And so, that directly afterwards. They bought up every single house at the foreclosure auctions. He couldn’t make a dime, and his income just disappeared. And he went through a two and a half year period of just floundering, of just turmoil with his family and everything.
And now, I met him through a mutual mastermind that we’re in as well in a community, and he’s like, “Man, if I would’ve had people around me at that time,” he goes, “I wouldn’t have floundered for two and a half years.” And Tony, I would actually challenge you on that. I don’t even think you would ever in your life ever again have to go back to that six-figure income because of how strong your community and your network is today, just from even posting free content or sharing what you’re doing, sharing your story with you and Sarah, you would never have to. It’s an option.
But because you have people in your corner, the people are always the answer. They’ve always been the answer. And the more you make, the more they’re going to be the answer. So your rental property, your house hack is not going to emotionally support you. Technology is not advanced to this level. It’s not going to call you when you’re crying when you’re down, you’re depressed. Your people will. So I just wanted to add that.

Ashley:
I don’t think Tony and I physically could actually go back to a nine to five job. [inaudible 00:55:24]

Brian:
I’m the least hireable person. If anyone Googles me, it’s like how to quit your job, how to leave your nine to five. I’m the least hireable person in America. So those ships have been burned a year ago.

Tony:
Brian, before we let you go here, brother, I do want to just drill down a little bit on the strategy that you chose because we don’t talk a lot about the co-living strategy. But I guess, first, just for folks that maybe weren’t paying attention at that point, just define what co-living is and how it’s kind of an extension of typical house hacking. And I would love to hear how you sourced your tenants and how you kind of managed multiple people living in the same space together.

Brian:
Yeah. So it was just rent by the room essentially is how we started it. So in the beginning, it kind of just became this Frankenstein’s monster. There are people that are much better at this than me. My buddy Sam, Sam Wegert, plug for him, I think he’s been on BiggerPockets as well. So he’s a great co-living expert where he actually has SOPs and everything around it.
So for me, I was just doing the house hack thing. And then, I had a tenant move out upstairs. And then, I just had people that I knew already and I was just able to give them a lower than market rent. Say, “Hey, you got a bedroom over here. We do a year lease, like a traditional lease. You’re just basically leasing a bedroom.” So we didn’t have anything fancy about it, and that’s kind of how I’ve operated my entire life, is to just figure things out.
And here’s the cool thing for people that are still listening, once again, you guys are rock stars. You guys are troopers. So I’ll say this, you are guaranteed to fail. It’s guaranteed. At some way, shape, or form. At some point in your journey, you will fail, and that’s okay. I need you to know that.
So we are like, “We’re so afraid of failure that we don’t get started.” But what if you knew that failure was part of the journey, and it was actually an acceptable part of your progression and your investing journey? People aren’t afraid of failure. They’re afraid of the appearance of failure, and they’re afraid of uncertainty. So they’re like, “How long will this failure last before I find success?” So it’s like if you knew that you were four leaky roofs away from the property and the SOPs in the systems that will change your life, you’d be like, “Give me the leaky roofs.”
If you knew you were seven dates away from finding your wife or your husband, you’d go on seven bad dates. If you knew you were four crappy businesses or 40 crappy properties away from changing your life and hitting financial freedom, you’d be excited for that 41st. So that’s how I view this and view everything that I do. I was just like, “Okay. I’m going to try this out. And then, I’m going to pivot and tweak and tweak and tweak.”
And then, eventually, it came to the point to highlight this and to really drive this home, there came a point when I was traveling. And all of a sudden, “Oops, didn’t work out anymore.” Tenant became a problem. Oh, oh, it was a mother with two kids that I had taken out. She was paying enough rent to where I could take out the individual and just give her the full top unit again.
And she didn’t have the best credit score. So when it came to my tenant screening, I let her through. Tenant screening is the most important thing. The most important thing, especially for your first property. You need that good tenant for your first property. Otherwise, you’re going to be discouraged to stay in the game.
And man, she trashed it. She stopped paying rent while I’m traveling. She just said, “No, I’m just not going to reply to you anymore.” And so, it went two or three months with her paying no rent, me filing for eviction, went through that entire process. By the time I came back, the unit was trashed, and it was $17,000 to fix it. So everything was trashed. And this was in a nice neighborhood too. So I was like, “Okay, cool.” So emotional hat was off because I’m a real estate investor now. So I say, “Okay. This is what it is. How do we fix this? And where do we go from here?”
So we talk about the importance of CapEx when you’re doing your underwriting for especially single family and anything… I would be more generous with your CapEx with a co-living situation with more people because more wear and tear, more points of failure. So what I did was I was just like, “Okay. I had CapEx in my bank account, but that was getting eaten away while I was going through the eviction process,” which is the worst thing to go through in any state.
Thankfully, it was Georgia, which was a landlord-friendly state. And so, I finished that up. I go back, I’m looking at it. And my realtor at the time, who also is an investor in the local Atlanta market, he was just like, “Oh yeah, it’s going to be 17,000 to fix.”
I do this all day in my sleep. And I looked at him, and I was like, “I hate this. This is awful. I don’t want to ever do this again in my life. This is the worst thing ever.” I said, “I am done with house hacking now.” And I was like, “I’m going to do something different moving forward.” I was like, “Actually, let’s run the numbers and see what repairs would be and getting this rented back out. What’s the turn? What am I going to have to eat?”
So we talk, I don’t want to go too high level. We can bring it down a little bit, but we talk about return on equity a lot, ROE, which is what is your equity in that property the best thing to use in that property or can you leverage that through a home equity line of credit, through a cash-out refinance and do another property?
I talk about return on ROE, return on energy, return on effort. And right now, I had a thriving business outside of this. And I was just like, “Every single minute that I’m spending focusing on this is a blip on the radar,” and this is just a distraction from what else I’m trying to do in my side business, quote-unquote “my passionate income.”
So we did the analysis on return on equity and the return on energy and effort. And I was just, “Man, this is going to eat our cashflow for a full calendar year afterwards.” Now remember, this worked for four years. And, finally, there was a pop when I did something that was against my systems and my standards. So set strong standards do not waiver from them, and I wavered from them. And that was my mistake. And so, the aftermath was, I was like, “Dude, I’ve got a low interest rate on this property.”
Every single bit of conventional wisdom is telling me not to sell this property. And I hear that you buy real estate, you hold it forever. But I was like, “This is draining me emotionally to deal with. And then, I have to get another tenant.” And now, nobody wants to take the property to manage.
So I was like, “What I’m going to do is I’m going to put it on the market. I’m going to sell it.” So I sold it. And now, I’ve got enough cash to do a bigger deal now that we’re four or five years down the road. And now, I didn’t even do a 1031, which for people listening, you can do a 1031 exchange. You sell a property. Then, you have a time window in which you have to pick a new asset to invest in. And I was just like, “Man, I want to keep my one thing, my one thing.” And that’s what I’m doing.
I say, “I just want to podcast right now.” And I can financially support it. So what I did was I sold that property and now is there going to be a tax implication on one? Yes, about 10 to 15% long-term capital gains, which we’re going to offset with business expenses. And this may be a little insider baseball for people.
You guys let me know. The other property, we’re going to do what’s called the homestead exemption. So I lived in that property for I think it was like two out of the last five years as a primary residence. So we’re able to tax defer that. Now, an important note on the homestead exemption is because me and my CPA are actively going through this right now, you have to have a portion of it sanctioned for business use and personal use. So because a house hacked, if you house hack, you’re going to have a portion of it sanctioned for business use, which will probably be 50% plus.
So when you file your homestead exemption, you can do the exemption on the part that’s your personal use. So that’s another thing that’s important for people. And I didn’t know that until recently. So that’s a lesson that I just learned. So I’ll probably have to pay five or $6,000 tax on that, which is a drop in the bucket. So now, the position I’m at today, I can freaking swing for whatever fence I want to swing for. And I can take whatever risk I want to take because I have the financial foundation and the backing to be able to really launch into the stratosphere now. So it’s about emotional wellbeing over anything. And I feel like the more experience of an investor you become, the more that this will resonate with you.

Ashley:
If you hold the property forever and you transitioned into actually selling the properties and it’s beneficial to you, and I think that’s such a lesson right there, is you don’t have to stay stuck in the same thing. You can change and pivot and still have that strong foundation. It’s just the fact of getting started.

Brian:
I will say that that isn’t to say just sell your property when things go wrong. Things will go wrong always. You’re always going to have something go left, right sideways. But if you do choose to sell the property, you need to have a strong enough business case why. So for me, it was the return on energy and effort for my other business that was already established and running, or if you are looking to do a 1031 or you are looking to have a strategy in place, don’t just say, “Oh, this property is annoying me now. I’m just going to sell it.” I would not do that. I do want to add that disclaimer.

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

Brian:
Absolutely. I’m all over social media at Brian Lubin, just my name. Action Academy podcast it’s my show which I want both of you guys on. It’s my literal life’s passion. I have not missed a day of podcasting in 479 days. I podcast every day. I do a daily show. So I’m either making a podcast or I’m a guest on a podcast. And I’ve done it all around the world, literally everywhere.
I’ve recorded in Greece, Turkey, Istanbul, Brazil, Austin, Texas right now. So it’s my life’s passion, is that podcast. And then, if you guys want a bunch of free stuff, I’ve basically consolidated every free guide resource, and training that I’ve got at quityourjob.co because that is a dope domain that I was able to buy. And it’s dot C-O, not com. It’s quityourjob.co. So that’s where you guys can find me, and I just talk into a microphone.

Ashley:
I’m Ashley at Wealth From Rentals, and he’s Tony at Tony J. Robinson. We hope you enjoyed this episode of Real Estate Rookie, and we will be back with a Rookie reply.

Mark Zandi, chief economist at Moody’s Analytics, and CNBC’s Diana Olick join ‘The Exchange’ to discuss affordability concerns in the real estate market, when inventory will settle and more.

New technologies like blockchain and AI have been in the spotlight in the past years. Yet, new technologies wouldn’t be that exciting if they couldn’t find a receptive environment – at least one industry in which they can create added value and specific niches that they can disrupt and grow.

While e-commerce is as old as the internet, it has returned to the center of the startup world since the COVID-19 pandemic during which it found unprecedented growth.

In this article, we’ll explore four e-commerce niches that present great opportunities for new innovative startup projects.

1. Personalized Shopping Experiences

The contemporary e-commerce landscape is undergoing a shift toward personalized shopping experiences, where algorithms and machine learning analyze user behavior to provide tailored recommendations. Accenture reports that 91% of consumers prefer brands offering relevant offers and suggestions. Early-stage startups have the opportunity to leverage AI to predict future needs and create a shopping journey uniquely crafted for each customer.

A great example of a successful startup in this niche is Stitch Fix, which seamlessly blends data science with a human touch, sending personalized clothing selections to users.

The innovative opportunity for early-stage startups in personalized shopping experiences is rooted in the growing consumer demand for individualization. Amidst a sea of choices, a curated and personalized approach stands out.

2. Social Commerce Platforms

The fusion of social interactions with online shopping has given rise to social commerce platforms. With the average person spending nearly 2.5 hours daily on social media, according to Statista, integrating commerce into these platforms is strategically aligned with consumer behavior. This niche revolves around seamlessly combining social elements with online shopping, allowing users to not only discover products but also make purchases without leaving their favorite social networks.

Poshmark is a standout success in the realm of social commerce. By creating a community where users buy and sell fashion items directly through the app, Poshmark has harnessed the power of social influence.

For startups entering this space, the opportunity lies in not just creating transactional platforms but fostering communities where shopping becomes a social and collaborative experience. Social media has evolved beyond communication; it’s a space where users seek recommendations, share experiences, and discover trends.

3. Direct-To-Consumer (DTC) Brands

The Direct-to-Consumer (DTC) model is reshaping traditional retail by establishing a direct link between manufacturers and consumers. With DTC e-commerce sales reaching over $150 billion in 2022 according to eMarketer, this model eliminates intermediaries, allowing startups to control the entire customer experience and gather valuable data directly from their audience.

Warby Parker, a pioneer in the DTC niche, disrupted the eyewear industry by offering stylish, affordable glasses directly to consumers.

By cutting out middlemen, startups can offer products at competitive prices while maintaining quality and gaining authenticity, transparency, and an opportunity to differentiate themselves. Moreover, the direct relationship with customers opens avenues for gathering valuable insights, allowing startups to adapt and evolve based on real-time feedback, which is a crucial advantage for early-stage startups.

4. Gamified Shopping Experiences

Gamification has proven to be a captivating strategy to enhance user engagement, and when applied to shopping experiences, it creates a unique niche for startups. By integrating gaming elements like rewards and challenges into e-commerce campaigns (e.g. merch drops, influencer campaigns, etc.), startups can in the competition for attention especially of the younger generations. As consumers seek entertainment and engagement, startups can leverage gamification to not only boost sales but also to establish a brand identity that resonates with a digitally savvy audience.

The innovative opportunity for early-stage startups in gamified shopping experiences is rooted in the ability to offer more than just products; it’s about creating an immersive journey and a one-of-a-kind experience.