Real Estate Nerds

On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith interviews Jon Iannotti. The two investors discuss strategy at length, offering listeners some of the insider secrets of consistently and successfully making money in real estate. Jon also shares a personal story of how he weathered the market crash and has since developed systems that secure good deals. Tune in now to hear the full conversation.

Listen To Episode 30 of The Real Estate Nerds Podcast Now

Lessons Learned From Jon Iannotti’s Market Crash Survival

Scott welcomes Jon to The Real Estate Nerds Podcast and invites him to set the scene for their conversation.

[1:00] Jon has over 3,000 deals under his belt, mostly with his wife. Of those deals, he has never used his own money or credit. He has experience with notes, wholesaling, fix-and-flip, and more methods. He made his first investment in 1978, and ultimately went into real estate full time in 2001.

[3:15] Jon currently lives in Southwest Florida and actively invests there as well. His area was one of the hardest-hit during the recession: “We had to adapt almost overnight...We went into our deals with 13 exit strategies, and within ten days every exit strategy was gone.”

[4:10] Jon now regards this difficult period as a life lesson: “We either win or we learn. We don’t lose.” He also comments about some of the difficult realities he learned about short sales.

[5:00] As the market recovered, Jon developed a system with his wife called Agreeable Contract Terms (ACT). He credits the ACT system with helping him secure 14 deals in a week as the market became more favorable to sellers. He offers advice based on his experience with the crash: “Don’t count on appreciation.” [5:25] He describes his short-sale recovery method, and the dream team he assembled to make his strategy work.

[7:00] The two investors discuss market trends and whether the next recession is around the bend. Scott shares some tips about guaranteeing cashflow and “recession-proofing” as an investor. Jon agrees a market correction is impending, but believes there may be opportunities for investors to take over low-interest mortgages.

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Making Money Out of Thin Air: The REACT System and Funding Real Estate Deals

The two investors shift focus to Jon’s recovery following the crash, the development of his REACT system. They also dive into some of the details of exactly how Jon gets his deals done, and of course, where his money comes from.

[8:45] Jon describes the birth of the Reverse Engineered Agreeable Contract Terms, or REACT system. He also shares some of his approaches to handling cash buyers vs. those with loans, as well as some of the finer points of handling sellers. In general, he positions himself as the principle in the deal and allows another buyer to fund the deal.

[11:00] “We like to make money out of thin air,” Jon tells Scott. He explains his method for doing so with a concrete example of the REACT system in action. Essentially, Jon does the legwork of brokering deals and negotiating between two parties and ultimately profiting from both.

[14:00] Scott points out that Jon’s ability to source information is a major value of his business. Jon is always on the lookout for deals to get involved in more directly, but if the numbers don’t meet his criteria, he simply collects his fees and moves forward.

[15:00] Jon turns his attention to a particular deal involving a $200,000 house. The seller wanted $400,000 for it and would not budge, despite the house not being that valuable. Jon discovered a way to make this motivation work, exploiting the fact that the seller was not concerned with interest. Jon located a buyer who wouldn’t pay the full $400,000, but agreed to pay market rent and put $7,000 down. Since the seller owned the home free and clear, he eventually agreed to take $1,900/month and the savings of the tenant paying utilities and insurance. Essentially, Jon got this particular seller as close to his original desire as the market allowed.

[19:00] Scott asks about the risks of Jon’s work, particularly regarding time. Jon describes some of the costs and areas where he can outsource to most effectively leverage time. He spends most of his time on the funding end currently, rather than hunting for motivated sellers simply because that’s what makes sense in today’s market. Naturally, his strategy does adapt over time.

[22:00] Scott asks how Jon manages his private funding network, REACT Deal Flow. This is Jon’s system for managing contacts and marketing. He has over 4,500 investors in this network and has automated many of the features that market to these funders. Jon boils down his strategy simply: “Always go for the funding first, then go for the property.”

The Takeaway: Approach Funding First and The Deal Will Follow

The two investors wrap up their conversation with a recap of Jon’s methods and major advice for investors. Jon also offers listeners some free resources for developing their own systems.

[25:00] Scott solicits Jon’s advice for those getting started in investing. Scott also asks what distinguishes Jon’s role from that of an agent. The critical difference is that Jon does not make commission off of deals, but serves as a principle and secures agreements rather than simply providing listings.

[27:00] Scott points out that this conversation has inspired him to re-think the common approach of deal-hunting before securing funding. Jon points out that this counterintuitive approach was inspired by Warren Buffett’s tendency not to follow the crowd.

[29:30] As the show concludes, Jon offers listeners of The Real Estate Nerds Podcast a free copy of one of his three Amazon #1 best-selling books.

On today’s Bad Beats episode of The Real Estate Nerds Podcast, Daniel Barli joins our host and real estate attorney Scott Smith. Just like Scott, Daniel is also a real estate attorney and investor. Though Daniel now boasts a diverse and lucrative portfolio of over 80 properties, he’s here to tell us about one of his early failures. His story is a lesson to investors who try to take on too much. In Daniel’s case, he is an extremely educated attorney and skilled investor, but learned the hard way that he isn’t the best property manager. Tune in to hear what happened and how you can avoid repeating his mistakes.

Listen To Episode 29 of The Real Estate Nerds Podcast Now

Daniel Barli’s Commercial Loss: A Cautionary Tale In Doing it All

Scott welcomes fellow real estate Daniel Barli onto the show. After briefly chatting about Daniel’s background, the pair dive right into the details of Daniel’s worst deal.

[1:00] Daniel is a practicing real estate attorney, just like our host Scott Smith. He entered the real estate game in 2013 with the goal of generating steady, passive income. He now boasts a portfolio of over 80 investments, but is here today to tell us about one of his worst.

[2:30] Daniel’s worst deals started with one of his earliest purchases--a commercial unit in New Jersey with four tenants. He decided to manage the property himself, which he now regards as a mistake.

[3:30] In hindsight, Daniel believes his property management failure was rooted in becoming too friendly with his tenants. He cites one particular tenant, a fellow attorney, who consistently fell behind on the rent. Daniel attempted to work with her, but she progressively fell further and further behind. He tolerated this behavior because he empathized with her personal situation.

[4:30] When the tenant fell four months behind, Daniel served her with a notice that she must pay half of her back-rent or face eviction. She failed to do so, putting Daniel in a bind: “New Jersey is very tenant friendly. It’s not easy to get a tenant out, even for nonpayment of rent.” [5:04] The tenant, being an attorney, knew and exploited this despite having accrued over $14,000 in unpaid rent.

[6:04] Daniel showed up to retrieve the check and was met with a disappointment: “Of the $14,000 she owed me, she gave me a check for $100.”

[6:44] This incident became a lesson for Daniel, who no longer manages his own properties: “I thought I could save money managing property myself, but it ended up costing me quite a bit of money.” He was forced to evict the tenant--a process that took an additional 2 months because of New Jersey law. By the time she left, the tenant owed Daniel $19,000.

[7:15] Removing this tenant presented two problems. First, there was no good way to collect the tenant’s debt. Daniel would have had to take her to court, which would have been time-consuming, stressful, and likely fruitless. He also had to contend with having a vacancy in his building. Commercial property is more difficult to fill, in Daniel’s experience, than say multi-family or even single-family. He owns all of the above but has found commercial vacancies the most challenging to address.

Deal Post-Mortem: Lessons Learned From Daniel’s Property Management Loss

The two attorney-investors shift their focus from what happened with Daniel’s deal to why it cost him. Together, they conduct a brief post-mortem of Daniel’s property management failure.

[8:30] Daniel owned the building in a company name, but had become very familiar and friendly with the tenant who ended up costing him. He learned first and foremost he allowed this tenant to get away with too much because of their personal relationship: “Now when I use property management companies, it creates a buffer. People don’t need to know who Dan is.” He has resolved that “I won’t make the mistake of doing it all myself ever again.” [10:00]

[10:30] The two investors observe that there was a personal, as well as a financial cost, to this mistake. Daniel faced property tax consequences, negative cash-flow, and a high degree of personal stress as well.

[11:30] Scott asks whether there were any indications that property management would be a challenge. Daniel replies that there were not. The previous owner had managed the property himself for almost two decades, during which he managed to secure multiple long-term tenants. These tenants did not stay through Daniel’s tenure as owner-manager.

[13:30] When asked what he does to prevent future situations like this bad beat, Daniel replies: “I try to do more homework and due diligence upfront, speaking with people who are more experienced than I and have gone through things that I haven’t.” In the years since 2013, Daniel has grown a substantial network of experts to call upon in times of uncertainty.

[14:33] Daniel offers some tips for growing a network: “Going to local meetings to meet investors in your area is one way. There are tools online for meeting real estate investors, and then you just build relationships...Most of these people are not only able to help, but they want to help. They don’t want you to make the same mistakes they did.”

[15:40] Scott and Daniel discuss some specific strategies for developing a high-value investing network. They address the age-old problem of weeding out the less helpful connections and finding those that will prove most helpful and useful.

[17:00] Scott points out that he often determines a connection’s true value when he has face-to-face time with them. Daniel agrees strongly: “When you have time to get deeper into conversation with someone, you find out they know much more than you thought. Conversations can open doors that you never even dreamed of.” [17:54] Daniel cites a recent lunch that turned into a very valuable opportunity.

[19:30] Scott probes Daniel’s intentions when meeting other investors, and Daniel replies that he starts from a place of connecting and sharing information. If a deal develops out of that, fantastic. But he does not necessarily go in in with that expectation.

[21:00] Scott agrees with Daniel that some of the best relationships are unexpected: “When I’m connecting with an individual about more than just business, it forms those long-term relationships that are really impactful.”

The Takeaway: You Don’t Know Everything, But Your Network Might

Daniel and Scott conclude the show by sharing the major lessons learned from Daniel’s story. Each investor gives his opinion on the major takeaway for listeners.

[21:30] Scott sees Daniel’s story as one of the value of a strong network for preventing bad deals. In his view, if Daniel had some stronger relationships with higher-qualitty individuals, he may have been able to avoid this loss.

[22:18] For Daniel, the lesson of his story is simple: “Make sure you keep your education going. Don’t think you know it all. Don’t think you’re better than the stories you hear.” He recommends looking to your network for help so you’re not “kissing the same toads.”

[22:50] Daniel also believes a mentor is valuable: “If I could give one piece of advice it’s this: Find someone who’s been there and done that and doing it who can guide you.”

Would you give away your money to charity if you were $2.5 million in debt? Investor Paul Moore did exactly that during the lowest point of what looked like the worst deal of his lifetime. And against all odds at the height of the 2008 recession, it worked. On today’s episode of The Real Estate Nerds Podcast, Paul Moore joins our host and real estate attorney Scott Smith to share all of the ups and downs of a deal involving a New Jersey waterfront lot. Paul’s story is one that shows how blind investors truly are in the moment, as well as how the darkest moments in investing can lead to profound growth. Tune in to Episode 28 of The Real Estate Nerds Podcast now to hear a truly incredible comeback story and learn about how an abundance mindset can allow you to prosper in even the darkest financial times.

Listen To Episode 28 of The Real Estate Nerds Podcast Now

Paul Moore’s House Flipping and Raw Land Rollercoaster Ride

Scott welcomes Paul onto the show. The two investors

[2:00] Paul Moore has a Petroleum Engineering Degree, but ultimately worked for Ford after receiving his MBA. After starting a company with a partner that experienced rapid success in the 1990s, he sold his company in 1997 for $1.7 million. He knew he would be using this money to give back to society. His first endeavor was a nonprofit to serve international students studying in the U.S. He experienced such sudden growth that he was able to go into semi-retirement in his early 30s.

[03:12]Paul’s first flip was successful, earning him $24,000. He assumed he could rinse and repeat, but actually lost on the next two. His fix-and-flip method wasn’t necessarily the best approach in retrospect: “It’s not really a good idea to build a house if you don’t know how to tighten a doorknob. But that didn’t stop us from building seven.” [4:09] He built a real estate website and began buying expensive waterfront lots in Virginia, but accrued a massive amount of debt from these assets. In just a decade, he went from having $2 million in the bank to nearly $2.5 million in debt.

[6:00] Scott asks how Paul handled the personal stress of this profound debt. Paul explains that his lack of experience and faith that things would work out may have blinded him to how bad his situation was. His area and raw land assets felt the pain of the economic downturn as early as 2005. Paul points out a single 5-acre lot that he had planned to divide into multiple lots and homes was the source of $900,000 worth of his debt.

[7:45] Paul’s partner was struggling to keep up with the interest payments and later had to back out of their arrangement. As he was meditating one morning, he wondered to himself what George Mueller would do in this situation. George Mueller was a German philanthropist who owned orphanages and believed mindset alone could raise the money to fund the labors of love that Paul ultimately wanted to pursue. This idea of raising capital through magnetism resonated with Paul, who saw Mueller as a role model. Paul reasoned that the famously generous Mueller would do something counterintuitive: give away his money, even in debt.

[10:25] Paul’s friends looked at him askance when he announced his plan: “I’m going to give my way out of debt...I’m going to start giving generously to causes I care about and see what happens.” Paul can’t recall how he even came up with money to give, but believes he may have done so with borrowed money. Beginning in 2008, he began following his plan to donate weekly through 2008.

[13:00] A developer gave Paul an idea that could help him recover. He approached the local Zoning Commission having identified a loophole in the law that would allow him to subdivide the piece of land. He hit additional obstacles with the bank, but stuck to the plan of giving generously while developing this real estate.

[14:40] Against all odds, the 5-acre lot that held the most of his debt became Paul’s way out of debt: “We were completely debt-free 10 months later. We did it principally by selling these 1-acre lots...We sold them for $1.5 million in the middle of the biggest downturn since the Great Depression.” Paul sold four of the five lots in just two months at the peak of the 2008 crisis: “My worst real estate deal became my best one.” [15:45]

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

Diving Into the Details: Analyzing Paul’s Deal and the Minor Miracles That Saved It

The two investors dive into both Paul’s mentality and the nitty gritty details of how he turned his 5-acre lot around.

[17:00] Scott applauds Paul’s continued networking with others and probes Paul about his thinking behind living with an abundance mentality despite crushing debt. Paul agrees that this was one of the main things that helped him, particularly since he didn’t read desperate. Scott presses Paul for details.

[19:50] Paul explains that local law allowed only two occupants per bedroom, but that bedrooms in this area aren’t defined by the actual number of bedrooms, but by the septic system. High end rentals for this area correlated with a higher number of bedrooms. Paul made it his goal to rent out 8-bedroom homes. Subdividing the lot immediately wasn’t possible, as local laws didn’t allow divisions on private roads. Yet this division was critical to his plan. Paul had been banking on the city’s intentions to turn the road by his lot into a public road.

[22:20] Paul explains a legal tactic he exploited during this time--the family exemption. The law was intended to help farmers who wished to cut off a piece of land for a family member. While he wasn’t a farmer, Paul noticed the law didn’t require him to be one. The law did require that any tracts split off had to be held for 3-5 years.

[24:00] Paul instead sold the entire 5 acres to a single buyer for $1.3 million. The buyer relied on Paul to continue executing the plan, as he divided 4 acres from 1, which he donated to his wife. The law allowed him to sell the “master” 4-acre track, while holding the 1-acre. Another buyer came in and bought the 4 acres, and repeated this process. Each buyer lined up and divided the land, one after the other.

[26:00] Paul describes the difficulties of convincing a bank to loan the first buyer over $1 million for land appraised at $800,000. He tells the story of approaching the bank that he owed initially, who naturally declined but agreed to a small loan for repayment of outstanding debt. Instead, Paul took those funds to a community bank and told them his whole story and plan. Not only did the bank help Paul, but they also made loans to the four buyers he had lined up.

[29:00] Paul describes how he pulled off his minor lending miracle. Scott points out he should have been dealing with loan sharks at this point, and asks for the details on how Paul sold the community bank on the arrangement. Paul actually had no pre-existing relationship with this bank or banker. He simply had a good plan and amazing luck. Scott even admits if he was the banker’s attorney, he’d have advised against making Paul the loan.

[31:30] Paul elaborates on the method to his giving madness: “Some of the greatest business owners in the world are really generous...I believe that there’s a universal law of sewing and reaping that is almost always true.” Scott admires this commitment to generosity and the degree to which it served Paul.

[33:30] Scott points out that Paul’s mindset almost certainly got him through without reeking of desperation: “The reality we want doesn’t exist yet. But if we can act as if it does, amazing things can happen.” Scott points out that Paul is one of the only people who has actually walked the walk on this idea.

[35:00] Paul concludes his story by pointing out how savvy these buyers were. These were intelligent business men assuming a great deal of risk: “Lots still aren’t selling well now. I feel very grateful and thankful to be able to tell this story.

The Takeaway: Do Something Great and People Will Follow You

Scott and Paul conclude this episode of The Real Estate Nerds Podcast with their takes on the greatest lessons of Paul’s story. For Scott, Paul’s experience speaks to the power of ambition. Paul has learned many lessons from his experience, but above all encourages listeners to pursue a unique, good idea and believe in it.

[37:00] Scott observes that Paul began with a massive goal. Scott believes “If you shoot really high for the stars, even if you slip up, you can land on the moon.”

[38:00] Paul offers his own takeaways, pointing out that in December he had half of the property and interest. His partner walked in early January, four weeks before Paul solved the entire problem and made all of the profit. Paul even offered his partner the chance to stay in. Now, Paul raises capital for real estate deals and learned the mindset that avoids desperation: “I think before 2008, I would have been this desperate, clamoring “Will you invest please, sir?” And because of this, I’m really not.”

[40:00] Paul offers a final metaphor about investing. Ultimately, he believes almost anyone: “Have a great product, service, or investment, and people will come to you asking to be part of what you’re doing.”

On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith chats with MC Laubscher about wealth creation, real estate strategy, and the ever important investing mindset. MC believes that the most successful investors understand that they are their own most crucial assets. He advises new and seasoned investors alike to invest in themselves and relationships. Tune in to hear all of the wisdom MC dropped on this episode of the Real Estate Nerds Podcast.

Listen To Episode 27 of The Real Estate Nerds Podcast Now

MC Laubscher on Fear And Being Your Own Most Important Asset

MC Laubscher joins Scott to share about his early life and career, real estate debut, and his major insights into investing psychology.

[1:00] MC is originally from South Africa, but has been calling the U.S. home since 2001. He is the host of the incredibly popular CashFlow Ninja Podcast, which explains a variety of methods for creating income with a variety of assets, including cryptocurrency. He’s also the Chief Investor and Wealth Strategist at Producer’s Wealth, a wealth creation firm.

[2:45] MC describes a typical scenario for new investors: wondering where to start. He and Scott discuss the many anxieties that plague new or transitioning investors.

[3:47] MC brings attention to the fact that good investing, and even good liv

ing, isn’t all about numbers: “Your emotional IQ is a very big lesson that takes time to develop, especially when it comes to money.” MC believes the “reptilian brain” drives human behavior in many areas, with investing being no exception.

[4:45] Both Scott and MC can agree that a person’s headspace is critical to success in real estate, and life in general: “Once you switch from the scarcity mindset to the abundance mindset you start to see different opportunities in your own life. And you start to see them everywhere.”

[5:30] The two investors discuss the role of fear in the human mindset. Fear as a reaction to real threats has suited mankind for most of evolutionary history. But the psychological tendency to react with panic at setbacks is misdirected. In Scott’s opinion, “The guys who are really killing it are the ones who get comfortable with fear.” [6:26]

[7:00] “Fear drives most of our behaviors,” according to MC. But he chooses to focus on preparation to anticipate all possible outcomes. MC cautions new investors against hesitating for lack of information: “You’re not going to know everything before you start, or you’ll never start. You’ll just study your entire life.” He encourages realistic preparation when evaluating deals and possible outcomes, so investors can manage risk rather than be frightened away from the game.

[9:30] MC points out that there’s never a linear path, but no matter where you are, you can always invest in yourself: “Develop yourself as an asset first. Everything else is just vehicles.” Acknowledging that you are your most essential asset.

MC Laubscher’s Ideal Investing Strategy: Tools Any Investor Can Use

[10:30] The two investors shift to discussing uncertainty. They agree that regardless of what happens, you can always work on your internal building blocks. Without a solid sense of self, investors are subject to getting caught up in the whirlwind of markets.

[12:30] MC points out that financial wealth is secondary wealth in other aspects of life: “The wealthiest individuals and families value creativity, philosophy, principles, values, core beliefs, and investing in themselves and relationships above investing in things.”

[14:00] The two investors shift focus to the age-old question of how to get started in real estate. His advice also applies to refining an existing investing method for greater success. MC advises having a clear vision and examining strategy thoroughly. MC gives us his ideas for developing the perfect strategy, which involves positioning yourself as the first and most important asset. Then, you should understand what you do best. Everyone has their skill set and area of expertise, and MC advises investors stay in that sphere.

[15:21] MC hits his next critical point about sound investing strategy: “Your strategy has to be aligned with the vision and goals you want, and it has to be focused.” Next, he points out that efficiency is key--and indeed one of the major draws of real estate from a tax standpoint.

[17:10] MC’s next piece of strategy involves protection: “You have to make money, you have to protect it, and you have to multiply it.” He points out that many investors know how to make money, but not how to protect it. Risk management goes hand in hand with protection, as well. It’s critical for investors to understand risk in all of its forms--economic, political, market, and institutional. Maximizing every dollar is essential.

[18:30] To properly implement a strategy, MC believes investors need an “A-Team” of professionals. These can include attorneys, advisors, CPAs, asset protection specialists, and more.

[19:30] Scott circles back to how to maximize every dollar. MC points to tax minimization as one simple method. He gives an example of how to have a single dollar doing many different things in a syndication context. He also shares some tips on cash-flow banking, a way to take advantage of insurance contracts, in the family office context. Tune in to hear his method for cash-flow banking that offers asset protection, tax-free growth and withdrawals, and high levels of efficiency.

[23:00] MC gives a real-world example of cash-flow banking, complete with all its moving parts. His point is clear: “Have one dollar do many different things.” In a real estate context, this is possible through cash-flow, appreciation, tax strategy, and many more methods.

[26:00] Scott draws a parallel to MC’s techniques and his world, asset protection. He notes that the right strategy will depend on the investor and their circumstances. MC highlights a simple truth: “You don’t have to be a Rockefeller to implement some of the strategies that the Rockefellers used.” [26:49] He gives examples of how strategies can be tailored to any point in an investing career, but points out that you can start small--even as a child.

[28:30] Scott asks MC about scaling up. MC points out that he works in wealth creation, not management. For his clients, he helps with not only creating the cash-flow banking systems, but also developing the strategy and bringing in the proper experts. He describes his approach as holistic, rather than focused on income alone.

[30:30] MC points out the benefits of flexibility: “Stay efficient, stay on track, but make adjustments along the way.” Given how markets cycle, strategies will inevitably change, even if the approach stays the same.

[32:00] Scott asks MC for advice on getting started with MC’s holistic approach. MC responds with the top three books from his reading list. He loves Rich Dad, Poor Dad for worldview and wealth creation. He also likes The 10x Rule for motivation and Becoming Your Own Banker by Nelson Nash for banking information. He believes the principles in these books can help any investor.

Kathy Fettke’s early career was nothing but clear skies. So when a storm came, in the form of the recession, she didn’t have the experience to be prepared. On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith interviews Kathy Fettke about her all-time worst deal. Learn how Kathy lost big twice, what she had to do to recover, and how she now uses her famous Real Wealth Network--and their combined experience--to avoid future bad deals. Thanks for joining us!

Listen To Episode 26 of The Real Estate Nerds Podcast Now

Kathy Fettke on Her First Bad Deal & Not Listening to Her Own Advice

Scott welcomes investor and coach Kathy Fettke to the show. The two investors chat about Kathy’s early real estate career and the prelude to her deal.

[1:00] Kathy now makes a habit of partnering with people who have survived down markets. She began investing in 1997 by buying her first house and turning it into a fourplex. “It quadrupled in value in a 10-year span...What did I know about real estate? I only knew that if you bought something, it makes money.” [2:27]

[2:48] Kathy stresses the importance of knowing the downsides of markets, reinforcing her thoughts on partners: “Would you get into an airplane with a pilot who had only flown blue skies? No. You want to know that they can survive the storm.”

[3:10] Scott asks how Kathy developed her substantial network. She began developing her network when her husband received troubling health news. The two burned through their savings amidst uncertainty. During this time, Kathy set about learning how to create real, lasting wealth. She started by simply interviewing investors, one after another. The Real Wealth Show was born.

[4:30] Today, Kathy has an audience of over 40,000 members looking to her for advice on cash-flow and investing strategies, as well as networking opportunities. Scott points out that her success and growth are underscored by her tenacity in the face of challenges.

[6:00] Scott and Kathy fast forward to 2007 to discuss the beginnings of Kathy’s deal. Kathy credits The Real Wealth Show with helping her identify over-leveraged markets where homes were under-valued. She had a connection that helped her learn about the opportunities available in a down market.

[7:20] Kathy speaks a bit about her decision making process: “First of all, you have to trust your gut.” Common sense told her that the lending crisis was inevitable. She followed the instructions of the trusted mentor who helped her learn about preparing for the fall-out: “I wanted to own real estate where people could pay loans, where housing was affordable. That was Texas.” [7:35] She bought 14 properties, all of which performed well

[8:13] Kathy points out that she was teaching other investors as she went along, and knows exactly what her first mistake was: “I stopped listening to my own advice.” She realizes in retrospect she thought she was smarter than the smartest people she had advising her. She explains her rationale to Scott about why she deviated from the path that she encouraged others to follow. She figured diversification was good, and that she didn’t want to overinvest in Dallas.

[9:00] Kathy elaborates on her flawed logic: “I thought I could use the same reasoning and go find areas that had job growth and population growth. But somehow I didn’t pay attention to those two metrics that I was teaching.”

[9:30] Kathy briefly discusses the media’s role in her decision making. She has a journalism background, and bought into some media hype about Boise, Idaho. She knew from experience, but disregarded one of the main lessons she had already learned, which was to “Follow the jobs.” Where people need jobs, they will also need housing. In the case of Boise, the job market wasn’t growing--and neither was the population.

[10:50] Kathy shares a second rule that she broke: “Always invest in a metro area that has at least a million people, because if half are renters, you have a larger pool.” She believes she ignored her own advice based on Zillow metrics, and getting excited and big-headed.

[11:30] The two investors talk about how easy it is to be taken in by buzz and popular thought. Scott briefly paraphrases Oscar Wilde’s notion that “Everything that is popular is wrong.” If enough people say something, even smart investors can begin to accept it as truth without truly investigating. Scott and Kathy chat more about the emotional context of this deal, and how ego can cloud judgment.

[13:12] Kathy thinks her problematic thinking was even more basic: “It was more lack of experience mixed with too much eagerness.” If anything, she believes she got a little greedy.

[14:00] In the case of Boise, Californians were moving to the city and driving some prices up. But Kathy was moving on pure speculation rather than observable metrics: “The properties didn’t make sense the day I bought them, and they didn’t cash-flow.” [14:36] She couldn’t manage her way out of the problem, either, and ultimately sold the property at a loss.

[Tweet="I’m damn glad that I kept pushing forward."]

Kathy’s Worst Deal

That first deal Kathy mentioned wasn’t even the worst deal she’s here to tell us about. Her all-time worst deal took place several states over in Tennessee. She and Scott conduct a little post-mortem of her Bad Beat together.

[15:00] Kathy shares about her next, even more painful deal. She continued hunting markets around the country and found an area in Tennessee, but it was low on inventory. She made a deal with a builder, who agreed to give her network 10% of what he built in exchange for her purchasing some of the properties.

[16:30] What got her into trouble with the first deal she talked about came back to bite her a second time: “Again, I didn’t follow my rules about following the jobs. This was vacation property.”

[17:00] During the building process, the market crashed. Kathy shares with Scott about how her failure to read the fine print on one loan led to a major problem. She was forced to refinance, and while investor loans were previously unlimited before the crash, banks were placing hard limits on the numbers of loans investors could have. Unfortunately, in Tennessee, you can actually go to jail for failing to pay debts--and the loan in question was in her husband’s name. What had started out as a labor of love ironically ended in a painful predicament.

[19:00] Just as timing had a role in getting Kathy into this problem, it also played a role in getting her out. Given how many people were having loan issues, new legislation passed that took jail for nonpayment off the table. She doesn’t know how she would have solved the problem without this legislative intervention. Simply selling isn’t an option in a market downturn.

[20:00] Scott asks if Kathy had a more experienced investor on board for these deals. They discuss the delicate balance of not deviating from models that work, while also leaving room to grow. She shares about learning from her experience, and believes she over-corrected in hindsight: “I missed an opportunity because of my fear of ever making mistakes again.” She was afraid to take properties that weren’t cash-flowing, but would have been lucrative if she had taken them.

[23:00] The two investors discuss the issues involved in market downturns. Scott points out one famous investor who dropped out of the market for four years when faced with a downturn. Kathy responds with the importance of taking the temperature of the market.

[26:00] Kathy shares an anecdote about a misguided investor who believed C-class properties will always be in demand: “In reality, the way it works, is everything kind of goes on sale...What happens in a downturn is the people in the nicest properties have to downsize into a B property, and people who have been living in C properties can now afford the B. The safest place to be is in the middle.”

[27:27] When asked if there are ways to learn without experience, Kathy tells Scott: “It’s a rare person who can make the right decisions without experience.” She does believe that you can account for inexperience, and circles back to her airplane analogy: “If you don’t have the experience to navigate a storm, you need a copilot.” [28:18] This is particularly true when you’re investing other people’s money as well as your own. She now has experienced team members on her network to help with areas where she isn’t as experienced.

[29:10] Scott asks what younger investors with less experience bring to the real estate networking table. Kathy, who is often the younger party in her own deals, believes younger people bring understanding of the culture to their deals. She herself had to explain what a webinar is to another investor. Experiences like this have shown her that “Younger people can bring the technology and marketing that older people are clueless about.” [30:25] Young investors also have high amounts of energy, drive, and willingness to learn and work hard.

[31:00] Kathy knows her own place in her network, as well: “I fill up a room, bring my experienced experts, and together, we make it happen.”

The Takeaways: Challenge What You Think You Know & Get Experienced Partners to Help You

As always, we like to wrap up the show with the greatest takeaways from Kathy’s story. Kathy and Scott each share their opinion on the strongest lessons listeners can learn from Kathy’s Bad Beat experience.

[32:00] For Kathy, the major lesson is to contain excitement. She dove directly into the deep end of investing and found herself lacking in experience. Her advice to new investors is simply “Jump in, but jump in with a partner who’s been there before or do an enormous amount of studying.” [33:50]

[34:00] Kathy underscores her point about doing your homework: “Real estate isn’t that hard or that complicated, but a lot of people mistakenly believe they don’t need the education.” Scott agrees that this is vital, as is analyzing the details of any particular deal.

[35:00] Scott points out that Kathy’s story is a cautionary tale about the influence of mass media messaging, and the importance of challenging beliefs we take for granted. Identifying the truth amidst buzz is a skill that requires practice, as is challenging one’s own belief systems.

On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith welcomes Jacob Ayers. Jacob is only 28, but has already made his first successful real estate investment. If you’re new to the game, or waiting until everything is perfect to get started, or just uncertain where to begin, Jacob has tips for you. He believes there’s a step that anyone can take in the direction of becoming a real estate investor. His own story is a great example of not letting anything, whether it be lack of experience or capital, get in the way of pursuing real estate dreams. Tune in to hear Scott and Jacob’s full conversation.

Listen To Episode 24 of The Real Estate Nerds Podcast Now

Jacob Ayers’ Life and Business Philosophy: Striking a Balance Between Security and Freedom

Jacob Ayers joins Scott to discuss his background, as well as how he balances his day job with his investing career to reap the rewards of both.

[1:00] Jacob is only 28, but began investing at age 25. He shares about the expectations placed upon him by society and his family, which he ultimately found unfulfilling. He graduated from college, joined Corporate America, and knew he wanted something more. He developed an interest in personal finance and investing around age 23, and gave himself an education.

[4:00] After educating himself with the many free resources available online and getting some money together from his day job, it was clear to Jacob what he had to do next: “I bought my first rental property, and here we are today.” Scott points out that it’s possible there are personality types that want the safety and security of a “normal” job, while others are driven to strike out as entrepreneurs and do something different. The two investors speculate whether this is a matter of personality, fundamental values, or something else.

[5:30] Jacob believes “you’ve got to be a little bit crazy to go down this path.” He considers real estate investing his side hustle and works full-time as an engineer. In this way, he’s struck a balance between security and freedom. Scott acknowledges the wisdom in this: “There’s a middle ground, and you have to consider your worst case scenario. For you, that’s ‘I still go to work on Monday, build up more capital, and try again.’” [6:38]

[7:20] Scott points out that Jacob has built up a community around his philosophy towards work and real estate balance, especially as a young person. Many people approach Jacob with their fears around real estate investing, and that drove him to start his podcast to share his knowledge and experience.

[8:15] Jacob digs deeper into what drives him and his investing: “I think people have a duty to themselves to chase their passions, and real estate investing is a vehicle that allows you to do that.” Even if investing itself isn’t your passion, it can give you the opportunity to pursue the things that you do what truly moves and inspires you. Scott agrees: “Money can’t get you anything. It can only motivate you to pursue another passion.” [8:54]

[bctt tweet="I think people have a duty to themselves to chase their passions, and real estate investing is a vehicle that allows you to do that." username="Royal_Legal_Law"]

Jacob Ayers’ Best Deal: A $25,000 House With a $140 Mortage

Jacob shares the details of his first real estate investment, an almost unbelievably cheap property in his hometown. Yet it has maintained steady cashflow, and perhaps more importantly, taught him many investing lessons.

[9:30] Jacob’s best deal began when he was around 23 or 24, having just spent a year researching opportunities, listening to podcasts, going to meetups, and otherwise getting his free real estate education. He bought a rent-ready property in his hometown in Oklahoma for $25,000.

[10:20] Jacob bought the house with traditional financing for $5,000 down and rented it out immediately. He knew the worst-case scenario was a loss he could afford, as his mortgage is only $140--comparable to Scott’s cell phone bill.

[11:15] Jacob went into his first deal with the commitment to treat it as a learning experience: “I treated the whole thing as kind of an experiment...When I got that first rent check, it was my proof of concept moment.” He resolved to rinse, repeat, and expand.

[12:00] Scott asks Jacob whether he’s ever had a bad deal. He tells a cautionary tale about his first tenants, whom he didn’t screen at all. They bailed from the house after six months and trashed the place. But Jacob says this taught him to screen tenants, rather than taking the first qualified people to offer. He has learned to treat these mistakes as lessons in becoming a better landlord.

[13:45] Jacob discusses how he’s a details guy who wants to know all of the numbers and have his spreadsheets perfectly laid out, but ultimately he has to take the plunge sometimes. He acknowledges a truth about investing: “You don’t know what you don’t know” [14:30] But all the reading in the world couldn’t prepare him for the lessons that just doing deals and managing property has taught him.

[15:55] Scott notes Jacob’s natural entrepreneurialism: “You probably learned more in a year of dealing with that property than you could have in a year of listening to podcasts and reading books.” Jacob agrees: “You can only learn so much by paper, and the rest is just by doing.” [16:00] He acknowledges that cheap properties like his aren’t everywhere, and encourages investors to investigate affordable properties

[17:00] Jacob talks about how he talks investors through examining markets. This is something he does often with friends who live in expensive, hot markets like Austin and Houston, TX.

[18:00] Scott drops his own bit of advice, explaining why he’s a big believer Jacob agrees: “Partnering as early on as possible is a really good idea. At least having a coach or a mentor to informally look over your shoulder and be a sounding board, voice of reason, and somebody who’s done what you’re doing.” The two investors share their methods for getting expertise. Scott likes to throw small amounts of money at consultants for their expertise. He puts his money where his mouth is, and encourages investors to use and abuse his own law firm, Royal Legal Solutions, in this way.

The Takeaway: Take Action Today to Succeed Tomorrow

The two investors wrap up their discussion by sharing their takeaways. Both Scott and Jacob agree that if you want to succeed in investing, you have to just get out there and try.

[20:00] Jacob’s advice to new investors is to just get in the game: “To get started, you have to take that first step. It can be big, or little. It can be picking up a book or going to a MeetUp. It can be anything, just take the first step.” He encourages investors to get out there, take action, make mistakes, and keep going.

[21:00] Scott agrees, and points out that Jacob’s spirit of not letting fear win the day has contributed to his success. Not allowing “no” to be an option and finding a way to get in the game is essential. Scott offers words of encouragement to those hesitating to get started: “If you keep trying, you never lose. Otherwise, it’s just learning. You only lose when you quit.” [22:00]

On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith welcomes Jacob Ayers. Jacob is only 28, but has already made his first successful real estate investment. If you’re new to the game, or waiting until everything is perfect to get started, or just uncertain where to begin, Jacob has tips for you. He believes there’s a step that anyone can take in the direction of becoming a real estate investor. His own story is a great example of not letting anything, whether it be lack of experience or capital, get in the way of pursuing real estate dreams. Tune in to hear Scott and Jacob’s full conversation.

Listen To Episode 24 of The Real Estate Nerds Podcast Now

Jacob Ayers’ Life and Business Philosophy: Striking a Balance Between Security and Freedom

Jacob Ayers joins Scott to discuss his background, as well as how he balances his day job with his investing career to reap the rewards of both.

[1:00] Jacob is only 28, but began investing at age 25. He shares about the expectations placed upon him by society and his family, which he ultimately found unfulfilling. He graduated from college, joined Corporate America, and knew he wanted something more. He developed an interest in personal finance and investing around age 23, and gave himself an education.

[4:00] After educating himself with the many free resources available online and getting some money together from his day job, it was clear to Jacob what he had to do next: “I bought my first rental property, and here we are today.” Scott points out that it’s possible there are personality types that want the safety and security of a “normal” job, while others are driven to strike out as entrepreneurs and do something different. The two investors speculate whether this is a matter of personality, fundamental values, or something else.

[5:30] Jacob believes “you’ve got to be a little bit crazy to go down this path.” He considers real estate investing his side hustle and works full-time as an engineer. In this way, he’s struck a balance between security and freedom. Scott acknowledges the wisdom in this: “There’s a middle ground, and you have to consider your worst case scenario. For you, that’s ‘I still go to work on Monday, build up more capital, and try again.’” [6:38]

[7:20] Scott points out that Jacob has built up a community around his philosophy towards work and real estate balance, especially as a young person. Many people approach Jacob with their fears around real estate investing, and that drove him to start his podcast to share his knowledge and experience.

[8:15] Jacob digs deeper into what drives him and his investing: “I think people have a duty to themselves to chase their passions, and real estate investing is a vehicle that allows you to do that.” Even if investing itself isn’t your passion, it can give you the opportunity to pursue the things that you do what truly moves and inspires you. Scott agrees: “Money can’t get you anything. It can only motivate you to pursue another passion.” [8:54]

[bctt tweet="I think people have a duty to themselves to chase their passions, and real estate investing is a vehicle that allows you to do that." username="Royal_Legal_Law"]

Jacob Ayers’ Best Deal: A $25,000 House With a $140 Mortage

Jacob shares the details of his first real estate investment, an almost unbelievably cheap property in his hometown. Yet it has maintained steady cashflow, and perhaps more importantly, taught him many investing lessons.

[9:30] Jacob’s best deal began when he was around 23 or 24, having just spent a year researching opportunities, listening to podcasts, going to meetups, and otherwise getting his free real estate education. He bought a rent-ready property in his hometown in Oklahoma for $25,000.

[10:20] Jacob bought the house with traditional financing for $5,000 down and rented it out immediately. He knew the worst-case scenario was a loss he could afford, as his mortgage is only $140--comparable to Scott’s cell phone bill.

[11:15] Jacob went into his first deal with the commitment to treat it as a learning experience: “I treated the whole thing as kind of an experiment...When I got that first rent check, it was my proof of concept moment.” He resolved to rinse, repeat, and expand.

[12:00] Scott asks Jacob whether he’s ever had a bad deal. He tells a cautionary tale about his first tenants, whom he didn’t screen at all. They bailed from the house after six months and trashed the place. But Jacob says this taught him to screen tenants, rather than taking the first qualified people to offer. He has learned to treat these mistakes as lessons in becoming a better landlord.

[13:45] Jacob discusses how he’s a details guy who wants to know all of the numbers and have his spreadsheets perfectly laid out, but ultimately he has to take the plunge sometimes. He acknowledges a truth about investing: “You don’t know what you don’t know” [14:30] But all the reading in the world couldn’t prepare him for the lessons that just doing deals and managing property has taught him.

[15:55] Scott notes Jacob’s natural entrepreneurialism: “You probably learned more in a year of dealing with that property than you could have in a year of listening to podcasts and reading books.” Jacob agrees: “You can only learn so much by paper, and the rest is just by doing.” [16:00] He acknowledges that cheap properties like his aren’t everywhere, and encourages investors to investigate affordable properties

[17:00] Jacob talks about how he talks investors through examining markets. This is something he does often with friends who live in expensive, hot markets like Austin and Houston, TX.

[18:00] Scott drops his own bit of advice, explaining why he’s a big believer Jacob agrees: “Partnering as early on as possible is a really good idea. At least having a coach or a mentor to informally look over your shoulder and be a sounding board, voice of reason, and somebody who’s done what you’re doing.” The two investors share their methods for getting expertise. Scott likes to throw small amounts of money at consultants for their expertise. He puts his money where his mouth is, and encourages investors to use and abuse his own law firm, Royal Legal Solutions, in this way.

The Takeaway: Take Action Today to Succeed Tomorrow

The two investors wrap up their discussion by sharing their takeaways. Both Scott and Jacob agree that if you want to succeed in investing, you have to just get out there and try.

[20:00] Jacob’s advice to new investors is to just get in the game: “To get started, you have to take that first step. It can be big, or little. It can be picking up a book or going to a MeetUp. It can be anything, just take the first step.” He encourages investors to get out there, take action, make mistakes, and keep going.

[21:00] Scott agrees, and points out that Jacob’s spirit of not letting fear win the day has contributed to his success. Not allowing “no” to be an option and finding a way to get in the game is essential. Scott offers words of encouragement to those hesitating to get started: “If you keep trying, you never lose. Otherwise, it’s just learning. You only lose when you quit.” [22:00]

What is a real estate investor supposed to do when their first apartment complex purchase turns out to be rife with drug dealers, prostitutes, and other problematic tenants? Today’s guest had to figure that out for himself, and did so quickly. On today’s episode of The Real Estate Nerds Podcast, Bill Manassero joins our host and real estate attorney Scott Smith to tell us about both a best and worst deal, one of our only hybrid Bad Beats/Best Deals episodes. Tune in to hear how Bill kept his first apartment complex purchase from becoming a total bad beat through creative problem solving, strong networking, and clever solutions like connections with the local community and even leveraging Airbnb. This is one you’ll have to just listen to to really believe.

Listen To Episode 23 of The Real Estate Nerds Podcast Now

Bill Manassero’s Apartment Complex Rollercoaster Deal: Bright Beginnings

Bill joins Scott and shares a bit about his background and the circumstances that led up to his Best Deal.

[1:00] Bill started his real estate career later in life. He began considering this option while he was ending the end of a 12-year stint as a missionary in Port-au-Prince, Haiti. He was at a turning point, but not quite ready to retire. He began eyeballing and studying emerging markets, then initially purchased a set of duplexes and single family homes in these markets.

[2:10] Bill quickly learned a lesson: “I paid about the same for the duplexes as I did for single family homes, but everything was sort of better.” Vacancies were never 100%, taxes were cheaper, and he was able to collect double the rent. This made it clear multi-units were best for him. So he began checking out apartment complexes in the three markets he was already in: Memphis, Atlanta, and Indianapolis. Because this ambition was huge, he continued educating himself about this new-to-him asset class.

[3:30] Bill experienced some initial “analysis paralysis” when working the figures for his potential new investments: “The numbers definitely are different for multi-units.” But he pressed on, eventually finding a 22-unit property in Indianapolis in an emerging part of the city, sandwiched between trending and developing parts of town. By the time he got the courage to make an offer, someone else had bought the property. Bill learned the value of moving quickly in a hot market.

[5:00] Bill decided to take one last shot, and let the broker know he was still interested if anything happened to cause the deal to fall through. 3 months later, Bill learned the deal did fall through. The deal falling through actually put Bill in a better position to ask for lower than asking price, and now the seller was more motivated to get the property off his hands. Bill completed his due diligence, and when the inspector came through Bill was able to save even more. He ended up buying the property at 25% below asking price, and way below the market value.

[7:00] While this was Bill’s first apartment complex deal, he shares with Scott how his experience with the financing end of real estate helped him negotiate the funding dilemma around the property.

[8:30] When Scott asks how Bill handled the jump from single- and multi-family to complexes psychologically. Bill was anxious but soon learned that “It wasn’t all that different on doing a transaction on a single family or a duplex.” Bill now believes dragging his feet actually hurt him.

[9:45] Bill points out the first big thing he did right with this deal: “A lot of us when we’re after a property and it goes under contract, we immediately go away. But going back to the broker and saying “I’m still interested, don’t forget me” got me that winning call.”

[10:00] Bill was thrilled with the beginnings of the deal, but not everything about this property was a win. He was unprepared for the surprises that came up with this property. He was looking for ways to boost the rent and cut expenses, and discovered that he was paying for heating and would have had to pay high costs to replace its boilers. He ended up having to replace all the gas-powered appliances with electric, and transfer the costs to the tenants (who paid their own electric bills). He describes the rehab measures and other improvements he took to increase rent values 16-20% increase per unit over time.

[bctt tweet="“I paid about the same for the duplexes as I did for single family homes, but everything was sort of better.”." username="Royal_Legal_Law"]

The Challenges of a C-Class Complex & Bill’s Creative Solutions

The two investors discuss Bill’s many challenges around the property in more depth. Whether it was the police activity, property management complication, or tenants selling drugs, something seemed to always pop up with this property. But Bill didn’t give up. He tells Scott about the broad range of clever strategies he used to address these many issues successfully.

[13:30] Another early challenge Bill faced was handling property management: “A 22-unit doesn’t really warrant an on-site property manager. I had a property manager in place, but they weren’t able to be there all the time.” So, there wasn’t always someone there to handle issues as they came up.

[14:00] Bill tells a hilarious anecdote about the police running a sting operation out of his apartment, which he now knows was an enormous red flags. But he did make some great contacts with the police department, and even offered to let them use the place again--if only to have their cars in his parking lot!

[15:00] Bill also describes the challenges with his occupants: “We had some real tough tenants. Some guys we thought were dealing, others we thought were pimps.” Scott asks why Bill bothered trying to bring up such a rough area. Bill decided to invest time and money into this because of the value and demographics of the surrounding areas, which were blue collar workers and millennial students/young professionals.

[16:20] The owner before Bill was indiscriminate with tenants: “He just kind of let anybody in. They were allowing folks in that weren’t screened very well.” Bill’s response was creative: “We had to move into a mode I call Stealth tenant marketing. We started targeting major employers in the area and going to their HR departments. We gave them flyers offering any of their employees who signed up for our apartments a month free and other incentives to get good working folks into the building.” [16:44] This move paid off for Bill, and helped turn the complex around and changing its dynamics. But he still had to check out questionable tenants, and immediately evict the sketchier tenants if they were late on the rent. That was easier to do than proving illegal activity.

[18:00] Bill shares how property management’s goals didn’t align with his own, and how he responded: “I had to really monitor property management closely. They were concerned with getting people in to have a high vacancy rate. I was concerned with getting in the right people.” While Bill had no advisors, he borrowed some of these creative moves from the mentors he’d had over the years.

[19:21] Bill describes some of his other clever solutions for improving his complex, including using closed circuit TVs. He also addressed the security concerns of this C building in a smart way: “I brought in a house mom, a tenant who pays lower rent in exchange for the job of monitoring what’s going on, keeping things in line, and reporting tenants who aren’t doing things right.” These measures increased the quality and security of the complex.

[20:29] Bill sums up the strategy he employed succinctly: “It’s all management. It’s all about having strong management, strong criteria for tenants, and not just getting bodies in there but getting the right bodies in there.”

[21:10] Bill offers some tips to any investors for handling property managers of any type: “You need to document and almost put a manual together for each property manager based on the needs of the property and the area. And if they can’t do it, you’ve got to move on.” He also emphasizes strong communication: “As an out-of-state investor, the property manager is your number one key to success or failure. If you don’t handle them right and get the right people in you’re doomed for failure.” [21:35]

[22:30] Bill believes management is so important because despite all of his research and legwork, he didn’t see the problems. Scott ribs him a little for his naivete: “Sweet innocent Bill...Didn’t even see the prostitutes!” Bill shares how he managed to add capital as well by converting three units into Airbnb units. In addition to being more profitable, Airbnb tenants would report to Bill when tenants attempted to proposition them or sell them drugs, because they weren’t afraid like the local tenants.

On this episode of Real Estate Nerds, Rod Khleif tells our host Scott Smith a painful story of building up a real estate empire, only to watch it crumble. But he is back, stronger, and wealthier than ever thanks to a multi-unit real estate investment strategy. Listen to Episode 16: Bad Beats to learn about Rod's rise, fall, and comeback, and the truths he has learned from his journey. Scott and Rod share insights into multi-family unit investing, as well as the strategic and psychological secrets to resilience that helped Rod build back up after losing everything. Success in anything is a habit that can be learned, and today's episode will show you exactly how to build the positive mindset that is essential to real estate success.

Listen to Episode 22 of The Real Estate Nerds Podcast Now

Rod Khleif's Story: The Rise and Fall of a Young Real Estate Investor

Scott welcomes Rod Khleif, a multi-family real estate investment success. But Rod wasn't always a success. Rod tells the story of his humble beginnings, rise in the industry, and his most devastating loss.

A Young Real Estate Broker on the Rise

Rod tells Scott about his experience growing up poor, wearing clothes from Goodwill and drinking powdered milk, and knowing he wanted more. He set out to make his mark and improve his life by getting started in the real estate industry.

[1:18] Rod's entry into the real estate industry at age 18 was inspired by his mother's successful investment.

[1:37] During his third year as an investor, Rod multiplied his income tenfold. How?

[1:55] Scott learns about Rod's earliest investing epiphone: mindset is everything.

"It's your mindset. Your ability to push through fear, take action, to get uncomfortable, and to get up when you get your nose bloodied that causes you to be a success. And to be a consistent success."

Real estate skills account for 10-20% of your success, according to Rod. The other 80% is all psychology.

[2;40] By 2006, Rod owned over 200,000 houses and several apartment complexes in three states. His net worth climbed by $17 million overnight, and he was earning an average of $80-100 per hour.

2008: The Fall, or, The Seminar

Rod tells about how he "imploded" in 2008, but he isn't crying about it. He came to view it as a massive learning experience. He now affectionately refers to this objective failure as a "Seminar."

[3:13] In 2008, the market crash combined with Rod's investing strategy caused him to lose $50 million.

[4:15] Rod explains why his investment strategy was ultimately unsustainable.

Rod's C- property choices combined with the costs of insurance and property taxes in Florida to create significant cash flow problems.

Maintenance costs made managing single-family properties expensive and inefficient.

[6:20] The critical lesson, for Rod, was that if you're going to buy and hold, buying multi-family properties is a much more sustainable long-term plan.

[6:48] This experience motivated Rod to start his Lifetime Cashflow Podcast, which educates other real estate investors based on his experience.

[7:52] Rod describes the parts of his business that were worth

Mindset: Investing is All in Your Head

Rod has since seen a comeback and is more successful than ever. He shared how this was only possible because he developed a healthy attitude towards failure and a mindset that fosters success. He told Scott some of his best psychological tricks for developing a winning mentality.

On Failure

[8:55]Rod tells Scott about having to reframe his position on failure. Despite owning multiple successful businesses, he has also had many go down in flames. His advice to our listeners is: "You shouldn't be afraid of failure. Most successful people fail their way to success.

[9:55] The billionaire owner of Spanx, who began with a mere $5,000, agrees. Her father used to challenge her with the question: "What have you failed at today?"

This attitude towards failure also resonates with Scott: "If you haven't failed at something on a daily basis, you're really not trying. Stuff doesn't work out most of the time if I'm trying new things. "

[10:00] Scott and Rod agree that comfort is your enemy as an investor. Both have signs in their offices to remind them that comfort kills, and life begins on the edge of your comfort zone, respectively. They agree that coping with discomfort is vital to quality of life.

Motivational and Psychological Tips for Real Estate Investors

[10:40] Rod is a Certified High Performance Coach who engineered his own comeback in part by learning directly from world-famous motivational speaker Tony Robbins.

[11:20] Mr. Robbins taught Rod the importance of psychology to success and some of the tools below, empowering Rod to bounce back from his $50 million "Seminar."

[12:30] Motivational Tool #1: Manifestation. Rod describes manifesting his desires into existence, initially with cars he hoped to own. When he owned a Corvette, he placed a picture of the Maserati he dreamed of having in the visor. He later came to own a Maserati.

-visualization of success

[13:50] Motivational Tool #2: Written Goal Setting Process. If you don't know what you want, you won't know how to get it. Rod shares his one-hour exercise for establishing, and meeting, your major goals in life. Here are the basic steps:

Write down everything you could ever possibly want in life. Don't place limits on yourself. Want a Lambo? Toilet made of solid gold? Go for it.

Also write down everything you want to learn.

Also write down who you want to help. Be specific. Everything you want to do, be, or have should be written down.

Ensure that your goals are measurable. Put a time limit on each goal. Keep in mind that people tend to overestimate what we can do one year but underestimate what is achievable in ten years

Pick one "top" goal, then pick top 3 one-year goals. Write a paragraph about why each goal is absolutely necessary with compelling, strong language. An example might be "I must acquire one more property this year to help support my amazing family."

Last step: Use images placed in a journal to reinforce your goal and bring in visualization element.

It's natural to be nervous when changing your focus as a real estate investor, but often the greatest risks can reap the greatest rewards. Our guest knows this from personal experience. On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith sits down with a man he calls “one of the smartest investors I know,” Scott Meyers. In his case, transitioning out of single-family homes and apartment complexes in the wake of the tech bubble bursting was the smartest choice he ever made. The Best Deal he is here to discuss was his first commercial purchase, and he has stuck with industrial and self-storage properties to the point he would never dream of going back. Listen to the podcast now to hear the two Scotts discuss Scott Meyers' office building win, how the deal played out, what challenges Scott faced and the ways he overcame them, and how his mindset, focus, and integrity have contributed to a successful mentoring and investing career.

Scott Smith welcomes Scott Meyers and asks about his early days in real estate.

[1:00] Scott Meyers has been in real estate for 25 years, first starting out in 1993. He began buying houses, then apartments, and eventually graduated to industrial and self-storage. The best deal he is here to talk about his an industrial deal that he affectionately calls “The Boomerang Property,” because he has already bought it and sold it once, and is now preparing to sell it again.

[2:15] Scott Meyers explains that this deal came up for him in 2005. He was recovering from the 1999 recession following the burst of the tech bubble. He owned approximately 400 apartment complexes and 100 houses at the time, and found his tenants were leaving in dramatic numbers. So he decided to sell of these properties as quickly as possible. During this time, he was eyeballing commercial and self-storage investments to step up to the next level of his investing career.

[3:30] After selling the last complex (which was also his personal office space), Scott and his assistant began searching for a 15-20,000 square foot building with multi-tenant capacities. One goal of the investment was to use part of it as his office, so his tenants would essentially be paying for his office space. He eventually found a seller-financed property with the cost per square foot he was looking for. The only problem was that the property was 200,000 square feet--ten times what Scott actually needed.

[4:30] Because the property checked all of Scott’s other needs, he decided to check it out anyway. His reaction was pleasant surprise: “It was way bigger than anything I’d ever imagined. It was a cool old industrial building originally built in 1929.”

[4:55] Scott elaborates on his attraction to the property: “I was tired of tenants and toilets...I wanted to do something that was fun and challenging.” He also saw this as his second chance to prove himself in the real estate world. At this point in his life it was either try something new, or get a job--not an option for Scott Meyers.

[6:00] Scott shares how he was able to get a 200,000 square foot building valued at $1.5 Million for no money down. He also shares some of the early challenges he faced with the unit. The property was made up of coworking space, inexpensive office space, and industrial mix. It had previously been a business incubator, and the 80-year old owner wanted to maintain that aspect of the business. Scott did so successfully: “We became the largest business incubator in the state, and I was the Executive Director.” [7:38]

[8:00] Although Scott was buying other self-storage properties, this one was his main priority. He was able to maximize cash flow easily by adding additional office space, leasing out all units, and managed to substantially force appreciation. While he didn’t predict the recession, he sold the property just in time in 2008 at $3.9 milllion: “That was the largest payday I had ever seen.” [9:10]

[9:54] The man who bought the property at $3.9 million went bankrupt as a result of the recession. This ended up costing Scott, who warns listeners: “If you’re going to sell something with seller-financing, be prepared to lose it. You better be happy with what you get at the closing table, because there’s no assurance that you’re getting anything on top of that.” Yet Scott was able to turn the buyer’s misfortune into opportunity.

[11:10] Scott ended up buying the property back for $500,000, or $3.98 per square foot. He felt he couldn’t pass on that opportunity. This time, he made the purchase with the help of 14 investors. But it wasn’t all sunshine--Scott also had to pay the debts incurred by the buyer, who had already stiffed him for $390,000. To add insult to injury, he also had to pay the legal fees to the very attorney who put him through bankruptcy to skate on his debt to Scott.

The Mental Pieces of Scott Meyers’ Success: Integrity and Rationality

Scott Smith and Scott Meyers continue analyzing this Best Deal, but also touch on the lessons learned from the aspects that didn’t go so well. Listeners can find out how Scott’s worldview, ability to separate business from emotion, and commitment to integrity above all else served him then and now.

[13:00] Scott Smith recognizes that this must have been harsh to deal with emotionally for Scott Meyers. The two investors discuss the importance of not letting emotion overwhelm good judgment or get in the way of an otherwise good deal. Scott Meyers’ unique knowledge of the building made it a great chance to take, even during a recession. The two Scotts agree that anger wouldn’t have been useful to harp on.

[16:00] Scott has also applied his worldview of not taking business decisions too personally to his network. He tells about how the 80-year-old original seller of the property became a mentor to Scott over the years. Scott recalls how he missed a detail in closing that allowed the seller to get over on him. The seller knew exactly what he was doing, as well. But because Scott was able to realize that it was all business rather than personal, he was able to let this incident and the emotion involved go and benefit profoundly from this relationship. In fact, Scott views this gentleman as having taught him a lesson.

[18:00] Nowadays, Scott does business mostly as a General Partner or Limited Partner, but prefers the former because it allows him to call the shots in his deals. His ability to view business deals rationally has been a lesson learned, and Scott Smith agrees about its importance: “Life is too short to cry over spilled milk, and it helps if you can compartmentalize and understand that this is a game. There are rules that you play by. And it helps to understand those rules.”

20:00 The two Scotts discuss the importance of operating with integrity. Scott owns two businesses, a private equity business an education business, on top of real estate investing. He holds himself to a high level of integrity for a variety of reasons, including the fact that reputation is everything in the digital age. “Protecting integrity above everything else, including profits, is how we play the game.”

[21:15] Scott Smith agrees and operates Royal Legal Solutions in the same manner: “In the modern age, your reputation is everything. It’s widespread, transparent, and easy to find out about...You can’t afford to have crazy people blast you on social media”

[22:45] Scott Smith asks how Scott Meyers managed to maintain focus with multiple endeavors. In fact, he actually withdrew from other projects to give this deal and property his complete attention. Scott Meyers shared his own personal strengths that allow him to maintain focus: “I’m not the smartest guy, buy I outwork other folks. Operating from a place of integrity tends to draw other folks to us.” [23:12] He also shares how his ability to work well with others, including the City and wider community, helped the building remain successful.

[25:00] Scott shares more about the community aspect around his office building, and how it has contributed to his continued success. It worked: in fact, he spoke to Scott from that very building for this interview. He also shares his tips for succeeding, which rely largely on just trying to do something great: “Just like fishing or marketing, you throw things out there and see what works...When you realize you’ve done something unique, it’s really gratifying.” [26:00]

[27:00] Scott circles back to the fact that this deal went so well because it was both a real estate and business play. Scott Meyer’s highlights that the second purchase was more of a real estate effort. He used the same strategy that worked the first time, but has also built a self-storage business along the way. After exiting the property the first time in 2008, Scott launched a self-storage education business. It grew during that time into a full-blown coaching and education business for serious, top-level investors. Coaching and helping is meaningful to him, but Scott feels his highest and best use of his time is still deal-making.

[29:00] Scott shares how he leverages his time effectively with his education and real estate projects: “I get away from the things that don’t make sense, and go towards doing what I love to do, which is teaching people and investing in real estate deals with the most upside and gain.” His students often become long-term partners, as well. Scott spends little time deal-hunting, Instead, his current and former students regularly bring him in on their own good deals.

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[bctt tweet="“I’m not the smartest guy, buy I outwork other folks. Operating from a place of integrity tends to draw other folks to us." username="Royal_Legal_Law"]

The Takeaways: Focus Your Time Appropriately & Understand That This Good Market Won’t Last Forever

The two Scotts conclude this episode by sharing their personal takeaways from Scott Meyers’ story.

[31:00] Scott Smith kicks off with his greatest lesson, which is about focus. He cautions listeners against constant multi-tasking. Scott Smith learned that Scott Meyers’ willingness to make this deal his sole focus was a massive factor in its success. He feels that is something that any of us can work on for absolutely free.

[32:00] Scott Meyers’ first lesson is about speed and staying on top of priorities and moving parts. But he also feels that time and timing is vital, perhaps even more important than his first point. Understanding the scope of projects and what can happen in the worst case scenario is vital to succeeding in a major project.

[34:02] Scott also cautions against overconfidence in the current real estate market: “All you investors that are enjoying the boom going on, and those of you that came in after 2008: You’re not as good as you think you are. You’ve got a large wind in your sail right now of a booming economy. Don’t think you’re as good as you think you are if you’re not preparing for changes.” He gives additional tips for preparing for future recessions, and points out that those who don’t prepare will be the first to fall if a recession strikes. He urges listeners to plan for the worst and begin thinking about their own strategies for an inevitable market change.

[36:00] Scott Smith sees a parallel between Scott Meyers’ advice and estate planning. People don’t like to think about hard times, whether that’s death or market reversals, but these things are inevitable. Preparation for either event is vital for real estate investors. Scott Smith sums these simple truths up nicely: “Law favors the proactive. Finances favor the proactive. Being proactive is the only way to live if you want to be successful long term.”