Real Estate Investing School Podcast
Episode 171: 376 Units By Age 24 with Donato Callahan
Date: July 1, 2024
Host: Joe Jensen
Guest: Donato Callahan
Overview
This episode features Donato Callahan, a real estate investor who has amassed a portfolio of 376 units by the age of 24. Donato shares his journey from a non-real estate background in Iowa to becoming a general partner in large multifamily syndications, and discusses the mindset, sacrifices, strategies, and structures that enabled his rapid growth. Host Joe Jensen steers the conversation to demystify large-scale investing for young or aspiring investors, focusing on actionable advice, real-world numbers, and the philosophy behind lasting wealth.
Key Discussion Points & Insights
1. Background and Introduction
- Donato grew up in Iowa with no real estate background; his parents worked at John Deere for 25 years.
- Academic highlights: Valedictorian, DoD Smart Scholarship, graduated magna cum laude from Boise State.
- Post-college experiences include wildlife conservation in South Africa and ecology studies in Montana.
- Real estate entry: Started wholesaling in college during COVID-19 lockdown; first house hack at 22.
"I was not born to real estate. My folks worked at John Deere, an agricultural company, for 25 years... I had no exposure to this until college." — Donato (00:00, 08:09)
2. Rapid Scale: From Wholesaling to 376 Units
- First multifamily attempt: Nearly succeeded in a 96-unit deal solo, lost money but gained experience.
- House hack: Bought a fourplex in St. Louis, closed on his 22nd birthday.
- Breakthrough: Invited to co-found a multifamily mentorship by a former landlord, leading to their first 172-unit syndication.
"I tried and failed to take down a 96 unit building by myself... Ended up losing a couple grand after we pulled out of the deal. But I learned." — Donato (05:26)
"The day I turned 22, I rolled out of bed, had a chocolate chip muffin, and went to the bank and closed [my first multifamily]." — Donato (06:34)
3. Syndication & Partnerships: Structuring Big Deals
[02:18–04:23, 11:24–19:37]
- Acquisitions through syndication — multiple investors pool funds per deal (not broad funds).
- Donato’s role: General partner (GP), primarily on the acquisition team (deal sourcing, underwriting, broker relationships).
- GPs per deal: 5–7, with separate groups per project.
- Breakdown of GP responsibilities: Sponsor (track record and liquidity), capital raisers, asset managers, acquisition/operational team.
"In reality, it is partnerships and through a model called syndication... I work with my team who are specialized in raising capital and managing the assets to take these properties down." — Donato (02:37)
4. Financials and Compensation in Syndication
[11:24, 14:26–17:49]
- Typical deal structure: 70% to limited partners (LPs)/passive investors, 30% to the GP team (split by responsibilities).
- Example: $15.6M, 172-unit deal. Donato’s team got 20% of the GP’s share; Donato personally received 4% of that, equivalent to ~1–1.5% of the total deal — with no capital invested.
- Compensation: $35,000 acquisition fee (tax-advantaged), plus eventual backend profits (another $40k–$60k), and future cashflow as the asset performs.
- Asset management fee: 1–2% of the property’s annual income, usually for those managing day-to-day operations.
"All I did was put in my effort. It was time, I spent time and sweat equity to be in this deal with no cash out of pocket... that 1%... equaled a check for like 35 grand when we closed the deal." — Donato (14:26)
"If you're the person doing all the asset management, you might make anywhere from $40 to $80,000 a year, maybe more than that, just being in cash flow." — Donato (17:18)
5. Mindset: 'Why Not?' and Sacrifice
[08:47, 10:01, 28:45, 30:10]
- Donato attributes much success to a mindset shift: instead of “why?” ask “why not?”
- The approachability of large deals is greater than people expect; “swing the axe one time a day.”
- Sacrifice: Worked grueling hours at the Department of Defense while scaling his portfolio, often with 16–18 hour days.
"Why not? Why not try? Why not give it a go?... By asking why not, your default situation is that you're going to do the thing." — Donato (08:47)
"If you want to get out there, just swing at the axe. Swing the ax one time a day. That's all I did. And you just get there." — Donato (11:06)
"I did that for two years. It was horrible, worked way too much. It wasn't until September 2023 I was able to retire from the Department of Defense and go into my real estate business full time." — Donato (27:11)
6. Real-World Value-Add Example
[19:37–22:16]
- Recent property: Negotiated bulk internet service, saving tenants $10/month each, generating $30/month/unit in revenue and boosting the building's valuation by $1.6 million — a model of win-win value creation.
"As a part of our value add, we were able to... provide Internet to our entire property for $60 a month... tenants get $10 a month discount... we actually added $1.6 million to the property's value. That's called a win win win, not like a fake win win, a real win win for everyone." — Donato (20:11)
7. Tactical Advice for Young Investors
[24:07–26:26]
- Emphasis on house hacking while young and mobile.
- Donato improved and re-rented his own fourplex by living in and renovating units sequentially, effectively living for free while gaining sweat equity.
"I spent three years unit hopping from unit to unit to unit, living in one, fixing it up while I lived in there... and just lived for free the whole time." — Donato (24:44)
8. Philosophy on Money and Infinite Returns
[30:15–40:44]
- See earned money as 'future you’s money' — every dollar spent now is $5–$10 taken from future self.
- Real estate's power: Infinite returns through rental/assets that generate perpetual cash flow and perpetual generational wealth.
- Analogy: “Life’s a game — and real estate is the best engine-building card you can play.”
"People make money and they think it's theirs, and it's. It's their future selves. Money. It's not... every dollar that I'm spending right now is really spending a dollar of Future Donato's money." — Donato (30:15)
"How much effort would you put into making a hundred dollars? But how much effort would you put in to make a hundred dollars forever? ...that's the most exciting concept to me of why I love real estate..." — Joe (36:22)
Notable Quotes & Memorable Moments
- On Sacrifice & Growth:
"It sucked. It was horrible... I'd work for another 6 hours on my software company and my real estate business until like 8 o'clock, and go to the gym for an hour and a half, work again until like midnight or one o'clock and go to sleep. And I did that for two years. It was horrible, worked way too much." — Donato (27:11)
- On Mindset:
"Starting with why not is instrumental into how I got here. Because by asking why not, your default situation is that you're going to do the thing." — Donato (08:47)
- On Infinite Returns:
"If you own real estate that you pass on to your kids and their kids... it's paying it infinitely. You grind, but you know when you stop, you've built this asset portfolio that'll pay you infinitely. You don't have to go back one more time for one more dollar." — Joe (36:22)
- On Viewing Money as 'Game Pieces':
"When you can make that switch mentally, you get your paycheck, you put in an account, and you think, oh, that's not my money. That's money to play the game. And you can just completely emotionally detach yourself from the fact that you have 10 or 20 or $40,000 in the bank account and say, yep, that's the game's money. Let's go play the game." — Donato (41:30)
Timestamps for Key Segments
- 00:00–01:26 — Donato’s working class, Iowa upbringing and academic background
- 02:18–04:23 — Overview of syndication model and Donato’s deal structuring
- 05:26 — Lessons from failed 96-unit solo attempt and the breakthrough deal
- 08:47 — Mindset: “Why not?” and overcoming limiting beliefs
- 14:26–17:49 — In-depth breakdown of deal numbers, fees, and Donato’s real-life compensation
- 19:37–22:16 — Value add case study: boosting revenue and property valuation with tenant-friendly improvements
- 24:07–26:26 — House hacking and tactics for young, mobile investors
- 27:11–30:10 — Sacrifice required: full-time job plus real estate grind
- 30:15–33:52 — Money philosophy: spending for the future self and compounding returns
- 36:22–40:44 — Infinite returns, generational wealth, and the “engine building” game of real estate
Final Four – Rapid Fire Insights
44:17 — If you had to start over, what would you do?
- Get clarity on your goals sooner
- Network more intentionally
- Pick up more house hacks when rates were low
45:10 — Book/podcast recommendations:
- Who Not How and Traction
45:42 — Biggest (expensive) mistake:
- Year-long failed deal led to reimbursing investors — lesson: Money doesn’t automatically follow deals; trust and network must be built first
49:26 — Why real estate?
- “100% ownership with 97.5% of the value financed by government-backed, long-term debt... There’s no other asset.” — Donato (49:26)
How to Connect with Donato
- Website: donatocallahan.com — Free one-on-one calls
- Product: brightinvestor.com — Real estate market research tool for investors
Closing Message
Joe wraps with a reminder:
“It’s all a game. Go play.” — Joe Jensen (51:45)
Takeaway:
Real estate is more accessible, scalable, and transformative than most realize. The biggest obstacle is mindset — ask ‘why not me?’ and start swinging the axe, one day at a time.