Real Estate Nerds

Welcome back to the Real Estate Nerds Podcast. On today’s Bad Beats episode, investor, author, and retirement planning expert Damion Lupo joins our host and attorney Scott Smith. Together they discuss the details of one of Damion’s worst deals, while also sharing some of their expertise about evaluating markets, investing strategy, and investing psychology tips anyone can use. Tune in to Episode 40 of The Real Estate Nerds Podcast to hear their full conversation.

Listen To Episode 40 of The Real Estate Nerds Podcast Now

Damion Lupo on Losing Big, Blind Spots, and Preparing for an Impending Recession

Damion and Scott discuss Damion's early real estate career and the lessons he has learned about his own blind spots. Damion also shares some of his observations about recessions, including a prediction on when we may be looking at our next one and what to do about it.

[1:00] Damion grew up in Alaska, where he later took physically demanding jobs in the oil industry. He left at 17 to escape the ennui and isolation of life in Alaska. He was able to use some of these funds to get started in the real estate industry.

[2:45] Damion describes his early real estate dealings. He believes he was naive, which in some cases worked to his advantage. He purchase 150 houses, but they became a massive problem: “Within 8 years, I took a $20 million portfolio of a cliff,”

[3:00] The two investors discuss the value of learning the lessons from failures. Those who do not take the learning opportunity do not tend to perform well over time. Damion admits that he failed to listen often.

[6:15] Damion also speaks to the danger of not acknowledging your own limits: “Your blind spot is everything you’re not seeing. Maybe you need to move three inches to the left and everything is wide open. It could just be that simple.”

[7:00] Scott points out that a solid economy and market bull run influences the way investors think about real estate. Damion speculates that after a long bull run, a recession within the next year and a half is extremely powerful. He suggest investors evaluate their portfolios and plan ahead for the recession.

[8:30] The two investors discuss how different assets perform in a downturn. According to Damion, “You have to know what’s going on in a recession and plan for it.” Scott agrees, pointing to investors he knows that are doing well know and thoroughly prepared for a recession.

[9:45] “It’s the prepper mentality,” Damion adds. However, some people spend more time and money on preparation than maintaining their businesses. He reflects on the fear of the unknown, which motivates many of these paradoxical opportunities. Scott points out that figuring in probability of any given risk is important for an accurate picture.

[12:00] Damion agrees that investors can evaluate risk ahead of time. He points to his own investment “rules” as an example. For instance, he will not have more than 5% of his own liquidity in a given deal. He heeds to these rules religiously. His approach is conservative compared to what he's seeing from other investors: “I don’t see a lot of practicality. I see a lot of people who are stoned out of their mind by the wealth the bubble has been creating.” [13:20]

[14:00] Scott shares a couple of anecdotes about investors in the current climate.

[15:12] Damion shares advice for new investors. “If you want to make money, there is one thing you should invest in: your education.” He lists a few terms all investors should be familiar with. Scott points out that “It is always more expensive to learn by experience...You don’t have to if you aren’t lazy.” He speaks from his own experience, pointing out he once lost several thousand dollars because of failure to do due diligence.

Scott circles back to the value of having personal rules, pointing out that some investors have criteria for behavior patterns outside of relationships. Damion agrees that having rules prevents delusion.

[Tweet "“If you want to make money, there is one thing you should invest in: your education.” - Damion Lupo, Real Estate Nerds Podcast Episode 40"]

How to Fully Engage with Your Life (And Why You Want To)

Damion shares about some of the deep internal work he has done to recover from failure, maintain success, and nurture himself to contribute to and connect with the broader community more. He discusses how he defined his purposes, as well as some of the influential books and practices that have informed his own development.

[18:30] Damion points that passive income can develop passive desires in other areas of life, and how problematic this phenomenon is. He and Scott discuss the distinction between passive investors and those who are actively engaged.

[20:00] Scott recalls his interview with Scott Sutherland about best and highest use of a property, pointing out the parallels with Damion’s story. Damian points out that the same principle of active engagement applies to retirement planning: “If you’re not engaged, you’re toast.” [21:58] Scott points out that applying one’s mind intensely almost guarantees returns.

[23:00] Scott asks about the difference in Damion’s life before and after 2008. He shares some stories about his drive for “more” as a younger man, as well as watching his father pass away living with regret.

[26:00] The two investors discuss the internal building blocks that are essential to genuine fulfillment. Scott, who shuddered initially at the mention of spirituality, has also performed a lot of internal work.

[28:00] Damion highlights the Blank Slate Principle. These strategies helped him refocus his priorities onto things that actually fulfilled him in life.

The Takeaway: Work on Yourself to Become a Better Investor

Damion and Scott conclude with some take-aways of Damion’s story for listeners. While each had their own take, they agreed on the most important principles.

[30:00] Scott feels that Damion’s story speaks to the value of strong investing psychology and profound self-insight. In his opinion, wealth and happiness do not necessarily correlate--if you want both, you have to work for it, but the work will be on yourself. This view is confirmed my numerous studies in human behavior, social sciences, and psychology.

[32:19] Damion offers a take-away for listeners “If you want to feel successful, fail faster and more frequently.” He points to the survival of extreme events, the value of gratitude, and the power of a healthy attitude toward failure.

[33:23[ Damion lends some advice to struggling or anxious investors: “What’s the lesson in your pain right now? If you don’t learn it, you’re stuck.”

Today’s Bad Beats episode of The Real Estate Nerds Podcast was cut live at FinCon 2018. So on top of the usual show notes, be sure to check out the Royal Legal Solutions YouTube Channel for some video extras from this and other bonus material from the conference.

Our host and attorney Scott Smith got the chance to sit down with Monick Halm, an apartment syndication investor who some of you may already know as The Real Estate Investor Goddess. Monick agreed to tell us about one of her worst deals and how she recovered from it. Tune in to Episode 39 of The Real Estate Nerds Podcast now to hear the full conversation.

Listen To Episode 39 of The Real Estate Nerds Podcast Now

Monick Halm’s Apartment Syndication Bad Beat

Monick joins Scott to tell us a bit about her investing career and an apartment syndication deal that didn’t go as planned.

[1:55] Monick joins Scott to share about one of her first two apartment syndication deals. She bought two 77-unit buildings within a week of another, with high hopes for both. She planned to manage them together. The market, Albuquerque, NM, was new to her and her partner. But the numbers jived, and things looked bright enough in the beginning.

[3:30] Monick quickly learned that many of her apartments had tenants who simply weren’t paying rent. “One thing we didn’t do well is look at the dates and see how long tenants had been there,” Monick explains. “We didn’t pay enough attention to delinquency.”

[4:45] The property was managed by one of the state’s largest property management companies. Occupancy plummeted and the property management company was not pulling their own weight.

[5:40] Monick speaks to an additional stress of underperforming in a syndication context: “It’s bad when your property’s not performing like you want and your own money’s on the line. But when it’s someone else’s, it’s so much worse.”

[6:30] Did you know that Albuquerque, NM is the car-jacking capital of the country? We didn’t. And neither did Monick. But she found out when two of her tenants had vehicles stolen from the complex’s lot. Even then, she had to bid with five separate companies before one agreed to build a fence nine long months later.

[8:30] Monick did eventually experience a share of good luck: “Cap rates went down and a seller approached us about buying the property at a good sale price.”

[Tweet ""It's bad when your property's not performing like you want and your own money's on the line. But when it's someone else's, it's so much worse." - Monick Halm, Real Estate Nerds Podcast #39"]

Lessons Learned: Your Team Can Help You Recover From a Bad Beat

Monick and Scott wrap up the episode with the major lessons listeners Monick learned herself, as well as some take-aways listeners can learn from Monick’s story.

[9:15] Scott points out that Monick must have learned many lessons from this property. She confirms: “We learned a lot about the importance of your team. Your team on the ground is everything.” She also now knows the importance of understanding your market, particularly if you’re an out-of-state investor.

[10:30] “We leaned a lot on our network for advice” to both manage and get out of the situation, Monick explains. She has a wide professional network of experienced investors who are also syndicators. During this time, they provided an excellent sounding board and offered some problem-solving ideas that helped her spring back.

[12:30] Scott points out that you can do almost everything right, have a team of trusted advisors with the experience to handle the problem helped Monick recover from this deal. He adds that one of the beautiful things about real estate is that time can correct many costs.

[14:00] Monick shares about her space specifically for female investors, Real Estate Investor Goddesses. She has an upcoming 7-Day Challenge for anyone who joins to community. The challenge is an assessment to help determine whether you are ready to invest. If you are a woman interested in real estate, visit www.realestateinvestorgoddesses.com for the latest on that.

[Tweet "“We learned a lot about the importance of your team. Your team on the ground is everything.” - Monick Halm, Real Estate Nerds Podcast Episode #39"]

Connect With Monick Halm

Connect with Monick via The Real Estate Investor Goddesses Facebook Page or on Twitter as @monickpaulhalm.

Listener Resources

Thank you for joining us on today's episode of the Real Estate Nerds Podcast. For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook.

Don't forget to subscribe to stay up to date and have the most current episodes of the Real Estate Nerds Podcast directly in your listening library. Every subscription helps us create new, custom content for you. What did you think of today's episode? What would you like to hear more about in the future? Leave your thoughts and questions in the comments section below, or leave us a review in the iTunes store. We love hearing your feedback, so fire away. Join us again next time for another fascinating conversation. Thanks for listening and joining us on our journey to become better investors!

On today’s episode of The Real Estate Nerds Podcast, Lucas Hall joins our host and real estate asset protection attorney Scott Smith. Today’s episode was cut live at FinCon 2018, so be sure to check out the Royal Legal Solutions YouTube Channel for some video extras from this and other bonus material from the conference. Although there was plenty to do at FinCon, Lucas was kind enough to sit down and share the short version of one of his best deals. He also told us about Landlordogy and the tools that have helped him succeed as a single-family investor.

Tune in to Episode 38 of The Real Estate Nerds Podcast now to hear the full conversation.

Listen To Episode 38 of The Real Estate Nerds Podcast Now

Lucas Hall on Househacking and The Art of Landlording

Scott Smith welcomes Lucas Hall onto The Real Estate Nerds Podcast. Together, the pair of investors discuss Lucas’s unusual motivation for making his first investment, and how a deal that didn’t appear all that great ended up being a win in the long run.

[1:45] Lucas is mainly a buy-and-hold investor focusing on single-family homes. We’ve heard lots of reasons for investors getting into real estate, but Lucas’s stands out: he had a crush on a girl who had closed on a house at 23. So naturally, he did the only logical thing--bought a house in her neighborhood.

[3:00] While Lucas was able to add some roommates to the property and hack the house for profitability, it didn’t come close to meeting the 1% rule. Lucas explains the 1% rule for the uninitiated: “If you buy a house for $200,000, you should be able to command $2,000 in rent monthly to at least cover your costs and make a little bit of money.” His property was near Capitol Hill in D.C., and Lucas essentially lived in the house rent-free and later used the equity to buy a condo.

[4:30] While Lucas may not have gotten his 1% monthly, he did get the other thing he wanted: the girl. They have now been married for a decade.

[6:00] On its own this house isn’t incredibly profitable. So Lucas has taken an unusual approach to making this property work for him--hacking the property into a group house. Rather than renting to a single family, he rents to a group of six adults who each have their own rooms and common areas. Together, they pay approximately $5,000/month--almost double what Lucas would gain from a typical family.

[7:00] Lucas’s wife actually helped him devise this house-hacking method. He purchased the house in 2005, a time when there weren’t as many online materials freely available for new landlords. Lucas learned by reading and doing, and later began blogging about his experiences.

[8:58] Lucas continues to run Landlordology, a website full of resources on the art of being a landlord. He also works for Cozy, a company that creates software tools for Landlords. He describes his ideal audience as anyone with roughly 20 units or less. Lucas has essentially developed the materials he wished he had when starting out for the benefit of others.

[10:40] Lucas compares learning to be a landlord to learning to fish. He describes Landlordology as a collection of best practices and the tools to be successful.

[11:55] Scott asks Lucas about his current personal investing endeavors. Lucas recently purchased his first vacation/short-term rental property in Colorado. He shares some of the differences between managing this type of property compared to his typical investments. “In order to be really successful, you have to manage a joint schedule on multiple platforms,” Lucas explains.

The Takeaway: Your Approach Can Be What Makes The Deal Work

Lucas and Scott conclude this episode of The Real Estate Nerds Podcast by highlighting their major takeaways from Lucas’s story.

[13:00] Scott points out that to some, Lucas got into real estate for the ‘wrong’ reasons, but he still achieved his own goals. Even with a less-than-ideal deal, Lucas was able to engineer solutions to make it work and help many other investors in the process.

[14:40] Lucas concurs: “I’ve had that ‘bad’ property for thirteen years and been renting it to groups...Even if it was a bad deal upfront, if I sold it today, I’d make a decent return on it.” The two investors agree it is impossible to know when you enter a deal

[15:00] Lucas adds that factors beyond your control are often impossible to prepare for, but that real estate allows you to “wait out” bad scenarios.

We talk a lot on The Real Estate Nerds Podcast about best deals and worst deals, but the reality is often more complex. Today’s guest, Trevor Robinson, has seen many ups, downs, and everything in between. He left college to strike out as an entrepreneuer, and through calculated risks, clever strategy, and a willingness to learn from mentors and self-directed study, has established an impressive portfolio before even reaching age 35. Tune in now to hear Trevor tell our host and real estate attorney Scott Smith about his investing career, some of his most notable deals, and the finer points of the investing strategy that has given him true financial independence.

Listen To Episode 37 of The Real Estate Nerds Podcast Now

Trevor Robinson’s Unconventional Path To Entrepreneurship

Trevor sits down with Scott to discuss his background and some of the highs and lows of his investing career.

[1:00] Trevor Robinson is a 32-year-old Missouri-based investor who took an unusual road to real estate. He had a realization during business school that drove him to drop out and pursue investing. His first endeavor, a tattoo shop, failed, but Trevor persisted with an electronics repair shop. He took those profits and went all in on real estate: “I knew real estate wasn’t a get-rich-quick scheme but it was a get rich scheme.” [2:33]

[2:45] Scott explores the fact that Trevor rejected traditional ideas of working life. Trevor discusses how he assessed the risk of leaving school--and offers a critique of student loans.

[5:00] The two investors discuss the necessity of failure. Scott admires the entrepreneurial spirit: “When I see people who failed while shooting for the stars but landed on the moon, I think that’s pretty damn good.” [5:50]

[Tweet: All I could see was the upside. I was literally manipulating myself into buying it because I didn’t want to lose the deal.”]

On Failure and Required Real Estate Reading

Scott asks Trevor for some of the details about deals of his that haven’t gone as planned, as well as his analysis of what he could have done better. Both investors agree that we can all experience profound growth from unsuccessful deals, given a healthy attitude towards failure and willingness to assess our mistakes honestly. Trevor also shares some of the books that have informed his investing strategy.

[6:45] Scott asks about the bad deals Trevor has experienced. Trevor discusses some of the “steals” he found over the years before diving into one of his earliest failures. He believes his first bad deal was a remodel in a low income area that needed $50,000 worth of repairs.

[8:05] Trevor points out some of the challenges of investing in low income areas, highlighting tenant issues that he struggled with. He finds that low income items like trailer parks do not appreciate as well as other asset classes.

[9:17] Trevor reflects on how he got himself into the early lackluster deal. The seasoned investor attributes his failures to youth and eagerness: “All I could see was the upside. I was literally manipulating myself into buying it because I didn’t want to lose the deal.”

[10:00] Scott and Trevor discuss the personality type that is necessary for managing low-income property. Trevor learned that he is not personally inclined to manage these types of properties, and now leverages his time and effort in other areas.

[12:00] Ultimately, Trevor grosses $1900 per month on this particular deal. He decided to hold the property, but found “Everything that could go wrong with it went wrong with it.” He goes on to advise new investors to learn from his mistakes and stay from these types of properties. He also shares some of the positive insights he gained from this early stage of his career, specifically, how to get the lending faucet “turned on.”

[13:40] Trevor elaborates on his strategy for getting financing: “I went after duplexes in C+ working class areas, mixed in with some single-families, and I’d primarily target under-rented ones...fix them up and raise the rents to have a tremendously high cash flow.” He goes on to explain his method for using equity to make additional investments. Trevor’s approach has worked well for him. He has diversified his portfolio to include commercial and multi-family properties, and is generally successful with lenders. He shares the attitude that has helped him in this area: “Your bank is pretty much your partner on the deal.”

[16:00] Trevor explains that reading about other investor’s losses has saved him millions. He also reveals his personal strategy: “I learned from doing it and talking to other investors.” He also credits some of his success to paying attention to real estate failures. Scott agrees that this is the spirit of The Real Estate Nerds Podcast: learning from others’ mistakes.

[17:00] Scott presses Trevor for more details about his investing education. Trevor is a voracious reader and has some recommendations for new investors. In his own experience, he has found that: “You don’t want to read “Get Rich Quick” books. You want to read those humble books about someone who lost it all.” On the subject of his favorite investing books, Trevor believes Manny Khoshbin’s Contrarian Playbook is one of the best things a new investor can read. He points out that the book is written in very plain English, making the ideas extremely accessible.

[19:35] Confessions of a Real Estate Entrepreneur has also been a highly influential book for Trevor. He believes books are as important as online tools, such as Reddit. He and Scott agree that anyone can improve themselves by simply investing in their own education. Developing a habit of reading

[Tweet="“You don’t want to read “Get Rich Quick” books. You want to read those humble books about someone who lost it all.” "]

How Trevor Robinson Gets His Best Deals

Scott and Trevor focus on some of Trevor’s more clear-cut wins. Trevor also shares about some of his most essential team members, tools, and tactics for how he finds the deals he wants.

.

[21:00] Trevor dives into the details of his best deal. He shares a story about a simple flip in his college town. He had observed the college growing, and bought property that “boxed them in.” This is part of Trevor’s greater strategy: “Where you can see growth coming, buy around it.”

[22:40] An apartment complex ended up being one of Trevor’s better investments, though it took two years.

[23:59] “A lot of my deals won’t be profitable for years,” Trevor explains. He also shares how investors can leverage loans. He believes his portfolio diversifies over time.

[26:00] Scott asks Trevor how he approaches new deals. His appraiser has become a useful ally. Trevor’s “dream team” is composed of his banker, appraiser, and insurance agent. These professionals offer useful information about his investments.

[28:59] Scott and Trevor break down the costs and other elements to learn about new markets. He also shares his thoughts on which deals are worth pursuing and ways to lower expenses.

The Takeaway: Take Risks If You Want Freedom

Scott and Trevor wrap up this episode with the major lessons investors can learn from Trevor’s investing experience and career. Both have takeaways and practical advice that any investor can use.

[32:00] For Scott, he believes Trevor’s hybrid approach to the way he thinks about investing and use of both traditional and modern resources have served him immensely. Both investors have high praise Reddit as an educational resource and means of connecting real estate investors.

[33:45] Trevor has simple advice for investors at any stage in their career: “Don’t be afraid to take risks.” If you have a side hustle, get on the grind.

[35:00] Both investors feel real estate is a pursuit of freedom. Trevor finds deep fulfilment in helping others, and advises that investors “Take care of the people under you, and listen to the ones above you.”

On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith sits down with self-storage investor Hunter Thompson. Hunter is here to tell us about a uniquely good deal in one of the unusual asset classes he specializes in--self-storage. In addition to telling us about the deal, Hunter shares some of his overall strategies for success in his niche and real estate investing more generally. Tune in to Episode 36 of The Real Estate Nerds Podcast now to hear the full story.

Listen To Episode 36 of The Real Estate Nerds Podcast Now

Hunter Thompson on Recession-Proofing and Risk Management

Hunter joins Scott Smith to chat a little bit about his background, recession-proofing, and the unusual real estate niches that have allowed him to experience success and financial freedom.

[1:00] Hunter Thompson is an investor and the principal at Cash Flow Connections. He specializes primarily in mobile home parks and self-storage, but assists with many asset classes. He began investing in financial assets just before the recession, seeing opportunity when other investors panicked. The failure of the stock market piqued Hunter’s interest in real estate. He came to the realization that stocks were not a good vehicle for the type of investing he wanted to do just as the Europeacked. n financial crisis began.

[3:35] “Investors have every reason to be concerned about recessions,” Hunter tells Scott when asked about how he recession-proofs his own portfolio. “There are real estate assets that perform well during market corrections. The data is very compelling for mobile homes,” Hunter explains. He reflects on the 2008 correction and believes another correction is approaching. Yet Hunter is optimistic about real estate’s ability to weather future market corrections. He believes mobile home and self-storage have particular strengths in these types of wider market issues: “Mobile home parks are a great example of the worse the economy does, the better for the product.” [4:50]

[5:50] Hunter elaborates on what makes mobile homes and self-storage excellent even in volatile markets and recession: “The most important part of any real estate investment is the debt. It’s the majority of the capital stack.” Hunter quickly explains the relationship between debt and capital, and how to avoid problems regarding debt attached to real estate. He points to metrics beyond simply loan-to-value ratios for investors to pay particular attention to, including loan terms.

[8:08] Scott points out that Hunter’s approach is balanced in terms of risk. Hunter points out the value of asset classes, such as self-storage, that have an increased demand from those who are downsizing in a bear economy. He uses Baby Boomers approaching retirement age as an example. Scott asks where listeners can hear more of Hunter’s insights, and he replies that The Cash Flow Podcast is the best way for investors to follow him and his ideas.

[11:35]Hunter points out the value of lists in managing time and productivity, challenging listeners to devote thirty days to creating and completing to-do lists to see how their priorities are affected. He touches on the many ways to add value to self-storage units, particularly in comparison to single-family homes.

[Tweet="“My worst real estate deal became my best one.”"]

Hunter’s Self-Storage Win and The Strategy Behind It

The two investors switch gears, laying the groundwork for Hunter’s best deal story.

.

[12:40] Hunter sets the scene for his all-time best deal, beginning with the “10,000 feet view” Scott requests. Hunter was involved in hard money lending in Tennessee. During this time, he observed the risk-adjusting benefits of self-storage and mobile home assets and wondered where he could add value.

[14:50] Hunter noted that out-managing and out-competing single-family units was difficult, but that: “With self-storage, there are a tremendous number of ways to add value.”

[15:50] Scott observes that Hunter exploited “information gaps” in a case where knowledge converted directly to dollars. Hunter points to the property he is here to discuss today as an example of exactly this concept. The property was a massive 120,000 square foot self-storage unit in Fayetteville North Carolina. He points out that military personnel made excellent tenants, particularly since their deployments tended to be longer than the rental periods for Hunter’s units.

[17:30] Hunter points out how a relationship with a trucking company, such as UHaul, can add thousands of dollars of monthly equity to a storage facility.

[19:15] The lack of mandatory tenant insurance also became an opportunity for Hunter. By filling that “gap” himself, he directly fed his bottom line immensely.

[21:00] The two investors discuss that the major value of Hunter’s company is through his wide network and many solid relationships.

[23:30] Scott points out that Hunter’s depth of knowledge, ability to exploit knowledge gaps, and network are things that are very valuable but difficult to build. Scott believes these are critical things to look for in an operator.

[25:00] Hunter believes two things have created a “unique opportunity to mess-up:” the real estate market doing well over the last decade and the JOBS Act. He points out that this can create confusion between whether good results come from your own processes or the market correction. Scott highlights that this is an issue of “because of or in spite of.”

The Takeaway: Better Thinking Leads to Better Investing

Hunter and Scott wrap up the show with the most important take-away our listeners can learn from Hunter’s story. They both agree that Hunter’s success hinged on his ability to think deeply about the problems and information gaps inherent to his investment and implement the strategies to solve them.

[27:00] Scott points out that Hunter’s ability to think deeply through his problems. The two investors agree that thinking makes the difference between success and failure in the long run.

[29:00] Hunter concludes his story by sharing that he sold the property he bought for $6.4 million for $9.1 a mere three years laters. While this deal had many good things going for it, Hunter explains: “The true key to why this was a great deal is the lack of capital expenditure risk.” Simply implementing better strategies led to success in Hunter’s case.

Welcome back to The Real Estate Nerds Podcast! On today’s episode our host and attorney Scott Smith welcomes investor Jordan Goodman to discuss a topic we haven’t covered as much as we would like to--funding real estate investments. Scott and Jordan have a truly inspiring conversation that may have you thinking differently about financing and sourcing funds for real estate investments. Stay tuned through the end to hear some of Jordan’s favorite free mortgage tools.

Listen to Episode 34 of The Real Estate Nerds Podcast Now

Jordan Goodman on Crowdfunding and More

Scott Smith invites Jordan Goodman onto the show. The two investors chat about Jordan’s crowdfund and crowdfunding more generally, as well as risk mitigation in these contexts.

[1:00]Jordan comes from a financial journalism background and runs the popular website MoneyAnswers.com. He has become the author of 13 books, many about real estate

[2:37] Jordan discusses crowdfunding, which has only been possible by Act of Congress in 2012. The spirit of the law was to give investors access to funding they otherwise may not have, while also benefiting developers.

[3:47] Jordan mentions the fund he is involved with and its 8% yield. It is called the Secured Real Estate Income Strategies Fund (SREIS). Visit the fund’s website for more information, including an inside look of those managing this fund. Jordan is on the board aswell.

[5:00] Jordan touches on the two strategies that make this fund work: “The first is forced appreciation, meaning they’re doing something to the building to increase the value of it.” Next, they use collaborative lending to partner with the developer and keep a profit share. Both the investor and the fund receive profit returns from sales.

[7:00] Scott asks Jordan how the fund handles the risks inherent to the real estate market:N “Obviously real estate has risks. So we want to mitigate those risks.” Jordan explains the ways that risk can be mitigated--by having lenders have “skin in the game,” through diversification. Diversification can be geographical or across asset classes. He also mentions the thorough underwriting they engage in.

[10:10] Jordan’s fund offers options. Investors may choose to receive monthly payouts or reinvest profits to continue to draw on the high returns.

[11:00] Scott points out that the rise of crowdfunding has attracted some bad operators on to the scene. He asks Jordan what investors should look for in a fun. “Track record is key,” Jordan explains. Jordan also believes leverage and the fund’s strategy (degree of speculation) are essential metrics to look at. He gives some concrete examples, pointing out that his fund doesn’t rely on an area’s appreciation, but rather on adding value. He gives an example of one investor whose cashflow doubled on the same property.

[13:00] The two investors touch on the dangers of loaded funds, which lack incentives for any of the key players to perform well. The more invested operators are, the better crowdfunded models tend to perform. In the case of Jordan’s fund, the profit sharing is split 80% to shareholders and 20% to management. Each gets paid “on the back end” based on the performance of the fund.

[16:50] Jordan and Scott talk the essential metrics that make Jordan’s fund that make it a good choice for those seeking secure, regular income off of passive real estate. Scott wonders if the fund is more secure in some sense, such as against recession, than real estate itself.

Jordan Goodman’s Investing Toolkit

Scott and Jordan change focus to practical tools any investors can use, giving particular attention to their mortgage payments and strategy.

[18:50] Scott asks about ways investors can get involved with some of the activities and funds Jordan has discussed. Jordan turns away from crowdfunding to point to another of the most essential tools for the average investor: “The Mortgage Optimization Strategy is a way to pay mortgages off much faster than you ever thought possible. It can be used on homesteads or investment properties.” Jordan highlights the fact that most mortgages aren’t making money, and in fact the average mortage holder is making many interest payments and few principal payments.

[19:32] “The Mortgage Optimization Strategy allows you to pay off the principle much faster--without extra income,” Jordan explains. He goes on to explain that some are able to pay of a 20- or 30-year mortgage in as little as 5-7 years. He gives an example of how this works using a Home Equity Line of Credit (HELOC). For a more in-depth description of this process, visit www.truthinequity.com. The tools are absolutely free and help calculate a mortgage based on the strategy.

[24:00] Jordan elaborates, stating: “There are three things you need to make this mortgage strategy work.

1. Equity on your house.

2. Decent credit score to qualify for the HELOC

3. Positive cashflow to push the principal down.”

He believes most of our listeners have these three things, particularly those with tenants paying down those mortgages faster for you. Jordan has written an entire book chapter on this strategy.

[25:34] When Scott asks Jordan for additional resources on mortgages, Jordan explains some benefits for professions he knows as American heroes, consisting largely of those in the military, helping professions, and medicine. There is a program known as Heroes Come First that such people can take advantage of at www.heroescomefirst.com or by calling 1-888-487-6114.

[27:58] To conclude, Jordan offers one final resource: VerifyMyMortgage.com. They will conduct a detailed analysis of how much you should be paying, and their system can find many errors. Often, investors have overpaid their mortgages and are eligible for lower payments and even refunds.

Many of us dream about the things we’d do if only we had more time. Often, that’s the motivation for entering the real estate game. Today’s guest knew he wanted to leverage real estate to do something big: quit his job and start his own business. Our host, asset protection attorney Scott Smith, also happens to know a thing or two about that.

Welcome back to The Real Estate Nerds Podcast! On today’s Bad Beats episode, Scott Smith welcomes CPA and investor Brandon Hall. Together, they go over the details of one of Brandon’s earliest and worst real estate deals. However, Brandon doesn’t view the property he attempted to manage himself as a total loss. Find out what exactly happened with both the deal and Brandon’s business ambitions by tuning into the full conversation.

Listen to Episode 35 of The Real Estate Nerds Podcast Now

Brandon Hall on Becoming The Real Estate CPA

Brandon Hall sits down with our host and fellow investor Scott Smith. The two chat about Brandon’s business, a CPA firm that caters to fellow real estate investors, and Brandon’s entry into the real estate world.

[1:00] Brandon runs a CPA firm called The Real Estate CPA, which only serves real estate investors. They offer a variety of services including tax strategy, preparation, and accounting support. His firm is fully virtual but serves clients nationwide, just like Scott’s law firm Royal Legal Solutions. The two reflect on the advantages of operating this way and how this unconventional approach benefits clients.

[4:00] Scott points out that a CPA like Brandon who can successfully operate remotely demonstrates the high quality of his service. Virtual firms create a liberating work environment that allows firms to pick the most talented personnel without the traditional limits of location.

[6:30] Brandon also invests in syndication deals. He was originally drawn to this by a client and attended the first meeting as a courtesy. Brandon realized the deal was brilliant, and the pair formed Naked Capital--a virtual capital firm.

[8:00] Scott invites Brandon to set the scene for the worst deal he is here to discuss today. Brandon already had a couple of successful deals under his belt and was working at a conventional CPA firm, but plotting his move towards the virtual firm. He knew he would be leveraging his traditional W2 job to get the best financing terms for the investment. “My goal was to buy a property in Baltimore, then live in one unit and rent out the others,” Brandon explains. [8:48] He selected Baltimore because that is where his wife was working, and he was hoping to use the returns from this investment to start The Real Estate CPA.

[10:00] Scott relates to Brandon’s story, sharing that when he approaches a major change, he always evaluates a worst-case scenario and the exit strategy to get back to his current position. Brandon agrees that his plan was to simply go back to work if his real estate plan went down in flames. Scott observes: “People don’t really hold it against you if you’re doing something big.” [11:42]

Brandon Hall’s Baltimore Triplex Bad Beat

Brandon and Scott switch gears and dive into the details of Brandon’s Baltimore deal.

[12:40] Brandon followed through with his plan. He selected a property, lived in one unit, and rented out the other two units. Right off the bat, he had a problematic tenant who consistently paid rent late: “Part of this being a bad deal is I had no idea what the tenants were like. Then, I never actually put my foot down and said ‘You need to pay me.’ I never assessed late fees or any of that.” [13:00] He reasoned he was still getting paid eventually, but in retrospect realizes his failure to establish boundaries was a major mistake.

[14:00] Brandon now realizes the importance of setting expectations in the business world. He touches on what this looks like with his current clients. He admits: “At the time, I didn’t know how to set expectations and that carried over into my business as well. As you can imagine, eventually things break down.”

[15:00] Brandon explains that he had previously, and successfully, used property management companies to handle tenant issues. On this investment, he was managing the property himself and realized he simply wasn’t cut out for it. When he and his wife moved to North Carolina to be closer to family, he hired a property management firm. Yet this presented other difficulties: “Baltimore, Maryland is just an insane city to comply with if you are a landlord...I didn’t even realize some of the stuff we had to do.” He spent several thousand dollars and five months to get his units tested, inspected, and registered with the city.

[16:32] Scott asks if this was an error in due diligence. Brandon explains that the seller did give him the information he needed, but much of it was inaccurate. He points out that his own clients come to him with too-good-to-be-true tax strategies Simple double-checking could have saved Brandon money and compliance headaches: “I just listened to the hearsay, trusted it, and paid for it later.” [17:40]

[18:00] Scott points out that situations like Brandon’s are why investors hire professionals in the first place. Scott shares a funny anecdote about a client who asked his legal opinion on not paying income taxes. Spoiler alert: “My legal opinion is that you’re going to end up in jail if you do that.”

[19:30] Scott asks how Brandon dug himself out of the hole. Brandon points out that the property fortunately cashflowed well, with 8-10% annual returns. Unfortunately, his profits were sunk into cutting through the city’s red tape, particularly on lead paint issues. To make matters more complicated, Brandon was also growing his CPA firm rapidly. Where other firms may grow at 10% yearly, his was growing by approximately 10% monthly. Balancing his business with the property’s issues became a managerial nightmare.

[21:55] Brandon explains that he is now offloading this property, and if he has his way, will come out of the deal just above breaking even. He explains his motives for offloading: “From a total equity standpoint, we haven’t made much on this at all. The reason I’m offloading is I don’t want to be stuck with this property in a downturn. I don’t want to be in an anti-landlord city or state.” Brandon is nonetheless grateful for the lessons he has learned the hard way from this investment.

How a Bad Deal Led Brandon to a Better Life

Although this particular deal wasn’t profitable for Brandon, it did serve a greater purpose. In Brandon’s view, this property allowed him to start the business that he runs successfully today. He and Scott discuss the difficulties of a rapidly scaling business, as well as how real estate can lead to greater fulfilment in life in general.

[23:30] Scott and Brandon discuss how rapidly developing businesses present problems of their own. Like Brandon, Scott’s business grew rapidly over the past year and was accompanied by growing pains. Brandon believes he could have been smarter about his investment, but acknowledges that it played a key role in helping him achieve a larger goal: “This property allowed me to be more comfortable pulling the trigger, quitting my job, and launching my business full-time.”[25:27]

[26:00] Scott comments that many investors get into real estate to free up time to fulfill a higher purpose, and that Brandon’s story is an example of that. The two talk about the importance of healthy relationships in building a business and preventing burn-out. Brandon, who was dating his current wife Bonnie before he established his business, jokes that listeners should “lock in a significant other before building a business.” Together, the pair have endured extreme highs and lows, a testament to the strength of their relationship.

[31:00] Scott and Brandon acknowledge that dramatic highs and lows are normal in entrepreneurship. Scott points out that many of the wisest investors he knows maintain their internal condition to run on an even keel, even amidst chaos or highly stressful times. Scott tells Brandon: “I love that real estate has helped you get to that next phase of your life. I think that’s going to resonate with a lot of people.”

Welcome back to The Real Estate Nerds Podcast! On today’s episode, investor Scott Price joins real estate attorney Scott Smith to talk about the details of the strategy that keeps him on top. The pair of investors also analyze one of Scott Price’s all-time best deals. Tune in to hear the full story.

Listen to Episode 33 of The Real Estate Nerds Podcast Now

Scott Price: The Opportunistic Investor and His Strategy

Scott Price sits down with Scott Smith to discuss his early life and real estate career. Scott Price also shares what he looks for in a deal, what due diligence looks like in the auction context, and how he keeps himself accountable to his own criteria for good deals.

[1:00] Scott Price has worked traditional W2 jobs for most of his life while investing part-time for the last 15 years. He made the transition into full-time investing last year. Scott and his wife have collected a portfolio of multi-family, single-family, and office rentals over the years. Scott explains, “We’re opportunistic. We don’t just jump in on one asset class. We jump in on anything that might be a good deal.” [2:20]

[3:24] Scott Smith asks Scott Price for a brief overview of the Best Deal he is here to discuss today. Scott Price chose to share a deal that highlights the use of leverage. He bought a 2-building apartment complex in an online auction and used creative financing (and re-financing) to turn this one property into multiple assets for his portfolio. This one property turned into three cashflowing properties.

[5:20] Scott Smith asks our guest about his background in these types of properties and what made him feel comfortable purchasing property online. He also asks what due diligence looks like under these sight-unseen scenarios. Scott Price has made such purchases three times. Scott Price shares his strategies for evaluating these types of properties, as well as a couple of anecdotes about how he has made these purchases.

[7:40] Scott tends to bid on many properties with the understanding that he may have to lose the earnest money if the property can’t feasibly be fixed or used for rental purposes. Because the property he’s discussing today was a foreclosure, he hit some additional bumps in the road. Risk is simply part of this method of purchasing.

[8:30] “I paid $295,000 but later learned it was in the $800,000-900,000 range. Even if I had just sold it for $400,000, I could have made a profit,” Scott Price explains.

[9:25] Scott shares a bit about his strategy for finding deals and risk mitigation: “I specialize in tertiary markets--small towns. A lot of investors don’t even look there.” He goes on to explain how he examines these properties, from inspections to the quality of the tenants. He tends to do a lot of his own footwork.

[11:50] Scott Smith asks if Scott Price has ever actually tracked the amount of time he spends on due diligence. Scott tends to zero in on a particular town and carry a list of criteria to narrow down his options. He also deploys his network to his advantage when checking out properties.

[14:30] Scott Price describes how he and his wife have automated their criteria and developed checklist systems that account for everything from comps to taxes. They start with high-level concerns, then work out the smaller details later in the process.

[16:15] Scott Smith asks where investors can learn these bits of knowledge that Scott Price has gained through experience. Scott Price points out: “One of the best sources to learn about these processes would be places such as Meet-ups.” He also praises podcasts, books, and MasterMind groups for being excellent resources on these subjects. He also points to the value of seminars. Tune in to hear who Scott’s favorite real estate guru is and why.

Scott Price’s Best Deal: Good Luck at an Auction

The two investors refocus on Scott Price’s Best Deal.

[18:00] Scott Smith recaps the early indicators that this was a good deal and asks about the “rehab phase” that follows auction. Scott Price shares that “I basically did my inspection after purchase, which of course is the opposite way than you want to do it. But that’s the way it works at auctions.” [19:10] He explains that this is not always the case, but it was for the type of auction he used.

[20:10] Scott Price elaborates further: “I take really good care of my properties, because I’m generally a buy-and-hold investor.” For this reason, and for the sake of the tenants, he does his best to keep his properties in excellent shape. He credits creative financing with giving him the financial buffer to hire professionals and address unexpected issues.

[21:30] When asked how he vets contractors, Scott Price replies: “I’ll talk to the brokers, property managers, and investors in that specific market. And I’ll look for the same names coming up.”

[23:00] Scott highlights that Scott Price must do a high degree of planning to execute his purchases.

The Takeaway: Dream Bigger Than Real Estate For True Success

Scott Smith and Scott Price conclude the show with the key lessons listeners can take away from Jason’s experience.

[23:30] Scott Smith points out that listeners can learn from Scott Price’s meticulous, data-driven, criteria-based approach to selecting and evaluating rental properties. Scott Price adds that his checklist approach also allows him greater flexibility: “It opens up the opportunities for higher returns and better deals. We’re not constrained by where we can drive to in 20 minutes.”

[26:15] Scott Price shares his own lesson with our listeners: “The most important thing is a vision of what I wanted to do in life.” He goes on to describe his family’s use of vision boards, and how real estate is a vehicle to pursuing these greater passions rather than an end in itself. “Eventually, you’ll be successful in real estate because you had a bigger vision.” [27:35] Scott Smith concurs and shares some of his own personal moments of introspection about purpose.

On today’s episode of The Real Estate Nerds Podcast, Jason Hartman joins our intrepid host and attorney Scott Smith take an inside look at what a conversation between a seasoned real estate professional and asset protection attorney actually looks like. Jason has been involved in over 1,000 transactions, and because of that alone, has been involved in lawsuits. Tune in to hear a fascinating discussion between two high level professionals, effectively giving you a peek inside their world.

Listen To Episode 32 of The Real Estate Nerds Podcast Now

Jason Hartman and Scott Smith on Asset Protection for Real Estate Investors

Jason sits down with Scott to discuss his background for context on their legal discussion. The two investors share some realities about lawsuits and asset protection in a lively question-and-answer format.

[2:00] Jason began investing in his first year of college and has over 30 years of investing under his belt. He is now considered the most expert on his niche.

[03:12] The two investors dive right into a discussion of litigation, liability, and the world of real estate lawsuits. “Liability doesn’t come from where you think it does,” Jason explains, pointing out that he hasn’t handled disgruntled tenants but has instead had to initiate litigation against representatives stealing client lists and other less expected legal clashes.Jason shares about litigation from the plaintiff side, explaining most investors don’t understand the liability and risks of being a plaintiff. He is blunt about the obligations of attorneys: “When your lawyer doesn’t do their job, you can get in trouble. It’s amazing how much liability a bad lawyer can create for you.”

[6:00] Jason brings up compartmentalization in the context of the Series LLC. Scott points out additional benefits “You can create one company that can have as many “children” as it wants. The children all have full liability protections...You have an infinitely scalable design that makes a lot of sense for real estate investors above everybody else.” He also points out the fatal flaw of holding multiple assets inside of a Traditional LLC, as well as the fact that there are no additional costs for operating the far more effective Series LLC.

[8:31]Scott shares his top picks for the best states for forming a Series LLC: Texas, Delaware, and Nevada for their strong asset protection laws. Wyoming has strong asset protection laws, but no formal Series LLC legislation or options yet. Fortunately, investors from any state can take advantage of the Series LLC.

[9:30] Scott discusses how easy it is to create a new child series, or company, in minutes for free on your Another FAQ Jason presents: Do you need separate bank accounts for each series to remain protected from merging? Scott’s answer--and insider tip on avoiding comingling easily through simple banking and bookkeeping--may surprise you. He offers a method for using a Series LLC with a single bank account.

[13:50] “I spent the first half of his career, creating wealth. Now I spend most of my time managing it,” Jason tells Scott. Jason shares some of the challenges he has experienced. He brings up banking regulations and the real-life impact of legislation such as the Patriot Act. Managing entities can be equally complicated, but he is interested in the Series LLC because it makes it easy to manage your real estate business. He asks Scott about which states are the least hassle.

[15:27]Scott confirms that he uses Texas Series LLCs in part because there are no ongoing fees, and only a single filing declaring “no taxes due” annually. There are no tax obligations beneath the first million dollars worth of income, which can be “chopped into entities to spread out anyway.” Scott’s firm, Royal Legal Solutions, also provides compliance and check-ups to asset protection plan and follows current evolving law for a flat fee. In addition to creating Series LLCs, Royal Legal Solutions gives clients the option of outsourcing maintenance. Scott has built up the Royal Legal Solutions staff to be as authoritative on these structures as he is.

[18:00] Jason asks if the Series LLC is a common starting point for his clients’ asset protection plans. Scott states that for most investors, he uses a two company structure: a Traditional LLC operating company and a Series LLC as an asset-holding company that does absolutely no operations. The liability is insulated within the Traditional LLC, which owns nothing at all. Because an effective Series LLC is an asset-holding company alone, it does no business with the public to perfectly separate legal liability from the assets themselves. He advises doing all business with the public “If anyone sues you, the either get blocked by the shell corporation or the problems of suing you personally, because you have nothing to take.” Jason asks if this means the Series LLC is a special purpose vehicle. Scott quickly recaps: “A shell corporation is an entity that handles operations but doesn’t own anything.”

[22:03] Scott mentions how these companies are technically owned by the investor’s estate plan in the form of an estate plan, that keeps your estate plan up to date as well as offering yet another layer of asset protection. Further, the investor’s assets won’t get caught up in probate court in the event of their passing. Scott clarifies the difference between a living trust, which does not protect assets, and a land trust which does protect assets when used with the Series LLC. He also points out the value of using anonymous trust structures to create anonymity for the investor. The way Scott sets up these anonymous land trusts also happens to be protected by attorney-client privilege, further preserving the client’s anonymity. The two investors touch on some other issues about trusts, including the benefit of pass-through tax treatment.

[26:45] Scott redirects the focus onto how Jason addresses his legal strategy. Jason advises investors to “Really pay attention to insurance.” He highlights the importance of good insurance, vigilance about how insurance companies operate, and maintaining anonymity. He also gives an example of unexpected liability when he brought an action against a seller who defaulted on their contract. “I love the law,” Jason states sincerely, “but these arbitrations operate outside of the law. That’s what’s really scary about it. They’re a private kangaroo court with no public record.” Jason’s own arbitrator had a massive conflict of interest which he failed to disclose. Jason lost the arbitration but a judgment was issued--against him, complete with trumped-up legal bills.

[31:00] Jason ended up taking his conflict-of-interest case against his arbitrator, who essentially represented the opposing side. He also shares about an alarming discussion he had with their collection attorney who knew the exact balance of a bank account the attorney couldn’t touch.

[33:00] Scott shares a brutal reality of the business of lawsuits. “People think lawsuits are about truth and honesty. Throw that way out the window. They’re 100% about who has what information and leverage.”

[34:00] Jason mentions his effort to help investors resolve disputes while staying out of court and arbitration--totally free of charge. It’s called FreeCourt.com, and is free for anyone to use. The system uses anyone who wants to participate in a crowd-jury, rather than a conventional jury.

On today’s episode of The Real Estate Nerds Podcast, the powerhouse investor, podcaster, and brains behind Morris Investing and the eponymous ClaytonMorris.com web site drops by. Clayton Morris shares one of his all-time worst deals with our host and attorney Scott Smith. Together, they dissect the deal and focus on the critical errors Clayton made--and what he does now to avoid future busts. Listeners will also gain some insight into Clayton’s philosophical approach and major revelations around investing and financial freedom. This is a conversation you truly don’t want to miss. Tune in now to hear the full discussion.

Listen To Episode 31 of The Real Estate Nerds Podcast Now

Clayton Morris on Financial Freedom and The Psychology of Reprogramming Bad Ideas

Scott welcomes Clayton on the show. The two dive into his background as context for the deal they got together to discuss. Their conversation covers Clayton’s early life and ideas about finances, the critical revelation that drove him into the real estate world, and the real world techniques that he has used to transform his own destructive, self-limiting thinking. These are techniques that any of us can, and probably should, use.

[1:00] Clayton mentions some of the unhealthy ideas that he absorbed about money and finances during childhood. Axioms like “money doesn’t grow on trees,” and the notion that a traditional career was the only means of financial security stuck with him for years. He spent a decade in broadcasting, and saw major success in that career. But ultimately, he dove into investing when he was fed up with being dependent on a paycheck and living by other people’s rules.

[03:12] Clayton elaborates more on his experience and pursuit of freedom. He describes his life before real estate: “You are your own performing asset. You get your asset out of bed every morning, drive to work, and rely on that paycheck.” He believed a W2 job was crucial for security. Now, he has successfully attained the goal of having regular cashflow on a monthly basis from real estate.

[4:00] Scott circles back to the childhood beliefs Clayton’s family and society instilled in him about money, namely that you have no safety net unless you follow a certain career path. After losing his job at Good Day Philadelphia, he bought two properties for roughly $50,000 that cashflowed at $850/month. He maintains this strategy, but at that time, he had not yet achieved a psychological shift. He discusses the major change: “It wasn’t until I started journaling and writing affirmations and realizing that I was worthy of these things...If you don’t believe you’re worthy of abundance, it won’t come.” [5:30]

[6:00] Clayton re-emphasizes that journaling was a critical discipline to retraining his mindset. He admits his old beliefs still creep up from time to time and shares some tips for combatting these moments.

Clayton Morris’s New Jersey Bust: Veering Out of His Lane

Scott and Clayton shift gears to discuss Clayton’s Bad Beat. They touch on what lead up to the deal, and the most significant mistakes Clayont made along the way.

[8:40] Scott asks Clayton for some background about the circumstances leading up to his worst deal. Clayton talks about his pattern for acquiring properties: “I try to find off-market properties that I can add value to, place a tenant and get it cashflowing. It’s what I’ve always done. It’s been a key to my success, it’s what we help my clients do, and it’s been a key to my success. It’s how we build financial freedom.” While this is his pattern, a property in New Jersey didn’t go as planned.

[9:00] An investor friend presented two New Jersey properties. He was a longtime landlord who managed the property himself, and was offering packages of ten as he planned retirement. Clayton tends to stay away from New Jersey for tax reasons. He sticks with single-family homes as a general rule and was told that he was looking at a package of 10. However, these weren’t truly single-family homes. They were duplexes, but not the type you’d imagine. In New Jersey, Clayton explains, “duplex” ownership means something different. Unlike most of the country, the units are deeded separately, almost like townhomes. This difference and his unfamiliarity is now something he regards as a mistake.

[11:30] Clayton’s next mistake was listening too closely to the landlord. This particular landlord managed properties himself, while Clayton always uses property management. There were other bumps in the road, such as maintenance issues and tenants vacating with little notice, that Clayton could have avoided by not being so trusting of his landlord. “I should have paid much closer attention to the tenants...We had to handle two evictions right out of the gate.”

[13:20] “We had to deal with all of these problems because I went out and around what I was used to,” Clayton explains. He allowed his emotions to cloud his judgment and ultimately ended up with additional inspection, legal, and tenant-caused damage costs. The remaining properties that were cash-flowing were essentially paying for the costs of the others. “This should have been a home-run of a deal, but basically I ended up making nothing.” [14:15]

[15:00] Scott asks whether Clayton began doubting his gut instincts. Clayton concedes his trust in this seller caused him to look the other way on some things that should have been clear red flags.

[16:20] Clayton shares another mistake he made: “I was distracted with other business and didn’t put much time, attention, and effort into this closing, which is my own fault.”

[17:00] Clayton warns of the dangers of “inherited” tenants. Unless he sees a full ledger, he will not simply trust that a tenant pays on time regularly. In fact, he has encountered completely falsified ledgers as well--and heard plenty of horror stories on the subject.

[20:00] Scott points out that Clayton’s story invokes a classic investor’s dillemma: “It can’t be the case that we never go out of our lane. When we veer out of our lane is when we find new opportunities, grow, and make money.” He asks Clayton for his thoughts on changing lanes effectively. Clayton believes that, “If you’re changing lanes, you need to be all in on it--looking over your shoulder and checking your blind spots.” Change must be calculated and focused, in his opinion. He feels his “lane change” failed because he was distracted by other issues and not paying full attention.

[22:00] Clayton ultimately agrees with Scott about the importance of getting out of your comfort zone: “Growth comes from discomfort, and not being distracted. You kind of have to surrender to the discomfort.”

[23:31] Scott believes one of the key takeaways from this lesson is knowing your core skills and sticking to them. He speculates that if Clayton had adopted a “copilot,” or someone familiar with the Jersey market and aspects he was unfamiliar with, this deal would have gone very differently. Clayton agrees that experts are extremely valuable, and defers to them regularly. His personal approach with highly skilled experts is humble. He encourages them to explain things like he’s a five-year-old and approaches with an attitude of being ready to learn.

[25:00] Clayton speaks briefly about the importance of his mentor: “I had a mentor who showed me the formula, where to buy, how to do it, what to look for, what type of neighborhood, and how to find the sweet spots.” This is how he developed his successful single-family strategy that remains the bread and butter of his portfolio. Scott shares how he, too, uses experts in various contexts, from investing in joint ventures as well as running Royal Legal Solutions.

The Takeaway: Set Aside Pride and Ask Questions

Scott and Clayton conclude this episode of The Real Estate Nerds Podcast by sharing the takeaways they hope listeners can use as lessons from Clayton’s story.

[27:30] Clayton’s biggest takeaway from his own story is about humility: “Don’t be too proud to ask the right questions.” He shares some additional lessons from his own mentor, who pointed out half of something is better than none of it. This is why partnering can be critical--going it alone is

[29:00] “You can learn some amazing things if you’re not too proud,” Clayton points out. Scott points out that giving another person the opportunity to share their knowledge is actually a gift to them. The opportunity to be of service is rewarding to experienced investors and other investors. Scott also points out that Clayton must know this well, as he helps many investors not only make money, but change their lives.