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Real Estate Investing School Podcast
171. 376 Units By Age 24 with Donato Callahan
00:51:58
Welcome to the Real Estate Investing School podcast. In today's episode, Joe interviews Donato Callahan, an impressive young investor. Following his graduation from Boise State, Donato's interest in real estate was sparked during the COVID-19...
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- [00:00]
A
I was not born to real estate. My folks were to John Deere for 25 years. Born and raised in Iowa, went to school. I had no exposure to this until college. So I'm going to preface it with that thing that if you want to dedicate yourself to this, you can do it.
- [00:17]
B
Welcome to the Real Estate Investing School podcast. I'm your host, Joe Jensen. Today's guest is Donato Callahan. Donato secured the prestigious Department of Defense since Smart scholarship following his high school valedictorian success. He later graduated magna cum laude and from Boise State and dedicated time to wildlife conservation in South Africa and wildlife ecology studies in Montana. So he's done quite a bit there. Amongst the COVID 19 lockdown, Donato discovered real estate investing leading to the establishment of his first wholesaling company and, and the acquisition of an astounding 176 residential and commercial multifamily units by the young age of 23, which is crazy. He's on track to achieve nearly 400 units and 40 million in real estate in 2024. He speaks at numerous universities and empowers investors through his company, Bright Investor, a cutting edge real estate market research tool getting results for investors to grow, scale and profit. Welcome to the show. Donato. That's quite the, the bio. How old are you now?
- [01:26]
A
24.
- [01:27]
B
Now 24 years old. That's, that's. You've been doing some stuff, man. You've done a lot the past four years.
- [01:35]
A
We have, and I can update that by a little bit. I have since then closed another 200 units. So I'm at about 376 right now with offers going out hopefully for another 200 next week.
- [01:49]
B
Okay. So I want to dive into your story. I want to dive in a bunch of stuff, but since we're on the topic, I know where people's brains going, like, how is that pot? Like break? Like, are these partnership, are these funds? Are these, you know, syndications? Are they just yours? Like, how is that possible to get that many units? And I know obviously there's a lot more in depth to each one, but, but maybe just give us the, the bird's eye view and then we can kind of dive into the. More of the details, how we got there.
- [02:18]
A
Yeah. So the easiest answer is it's black magic. If that doesn't work, I call Mark Zuckerberg and he wires me a couple million and we just call the end of the day right there. So that's if people, I, I hope everyone in the audience can follow that strategy.
- [02:32]
B
I need to brush up on my black magic. And maybe you can send me Mark's number after we're done. That'd be great.
- [02:37]
A
No problem. Zuck loves that. He loves his phone number going out. But in reality, it is partnerships and through a model called syndication, where a bunch of investors come together and they pool their money to buy big buildings that they couldn't buy individually. So that is how I do it. And I take all my time and I find these deals create relationships with real estate brokers. I analyze them, I write the offers, and I work with my team who are specialized in raising capital and managing the assets to take these properties down.
- [03:10]
B
So you're a general partner in the syndication then?
- [03:13]
A
Correct.
- [03:14]
B
How many general partners do you typically have? And you do like just broad funds for across all the board or do separate syndications for each project you tackle?
- [03:23]
A
Currently it's a separate syndication for each project that I tackle. And generally speaking, there'll be anywhere from five to seven GPs on a deal, on a deal by deal basis. So that includes folks like myself who are doing all the front end work, other folks who are doing the capital raising, folks who are doing the asset management on the ground component, and maybe a sponsor who's bringing a lot of liquidity and net worth and track record so that your lender who looks for that kind of thing to more or less guarantee their investment is satiated.
- [03:55]
B
Cool. So how did you get into this? And obviously 23, 24, that's kind of a young age to be a GP. I mean, it's the young age to be an LP, even be a limited partner on these things. But especially to be a general partner and have like a team and, and be working with like really taking down these kind of bigger projects. How did, how did you get introduced to that? You know that that's not a house hack. You know, where most people start?
- [04:23]
A
Yeah. Well, to be fair, I did start with a house hack. That is where the journey began. Okay. After, after running my wholesaling company for a year as a senior in college and pouring all this time energy into it at the same time, I was finishing up school and I was working for a property management company, just like alert, get into houses for free and learn how to talk. Talk became pretty apparent to me that I wanted to buy something once and have it pay me forever. So holding assets became the strategy that I wanted to use. And then a little birdie put a thought in my head saying, well, if owning one unit is great, that owning 10 units is even better. If 10 units is great. Why not 100? And so I started looking into it, and it became something where I realized the larger you go, the less of your own capital and time you need to put into it. Because the pie gets so large, there's enough to bring in people with other specialties that can make the deal go a lot easier without you having to do everything yourself. So you get a smaller slice of the pie, but the pie is way bigger.
- [05:26]
B
Yeah.
- [05:27]
A
Made sense to me. So what happened was I tried and failed to take down a 96 unit building by myself with two of the people, but basically by myself. I found it, analyzed it, put an offer in, got the offer accepted, graduated college road, tripped from my university for three days, basically straight to St. Louis to where it was located and hired contractors to meet me there. Found out the properties in way worse shape than I thought. Ended up losing a couple grand after we pulled out of the deal. But I learned, and after that point in time, about two months later, I closed my first multifamily house hack in St. Louis, realizing that if I was going to go move somewhere to start my new job after college, the number one thing everyone would tell me was, man, If I was 20 years younger, I would have done that before I got married, before I had kids, I would have house hacked. And all of a sudden, you start hearing that from 5, 10, 15, 20 people. You know, they say that success leaves clues. Well, failure leaves landmines. And it's a great. It's really nice to be able to walk through and have the map where other people have stepped and blown up. Yeah, I've got all these people saying, I wish I had done this. Then you just go do that. And so that was my first deal that I bought and held myself. That's actually the property I'm in right now. And after that point in time, I closed it. Actually, the day I turned 22, I rolled out of bed, had a chocolate chip muffin, and went to the bank and closed it. The day I turned 22. It was a month after that that an old landlord of mine in college said, hey, I'm going to start this multi family mentorship program. I know that you have some experience doing multifamily. And I'm like, yes, I do. I fell on my face. But I do have some experience. She said, why don't you do it with me? Okay? And from there, we put together a team, found partners, and used that to close our first 172 unit building. After about nine months in the industry, that's so Rad.
- [07:27]
B
That's cool. So let's. Maybe it's too nitty gritty, but, like, when you do this, is there, like, a cash flow or are you just getting, like, an exit price or, you know, just getting paid for management? Like, what kind of money you talked about? Hey, you're getting a. A smaller piece of the pie, but the pie's bigger. What does it look like as a gp, you know, with four or five other GPS tackling a hundred. You know, these numbers are so big for people. Like, oh, 170 unit. Like, that's like, okay, that'll never happen in my lifetime. I'm checking out that that's how a lot of people hear these things. But let's break it down and make it a little more realistic for people. Like, what does that look like on a financial side for. For. For a gp?
- [08:10]
A
Absolutely. And I'll preface this with the fact that for everyone listening as well, I was just like you, if you're just getting started. I was not born to real estate. My folks worked at John Deere, an agricultural company, for 25 years. I went to school, walked home. Born and raised in Iowa, I had no exposure to this until college. And it's just through some time and consistency that I got to this point. So I'm gonna preface it with that thing that if you wanna dedicate yourself to this, you can do it.
- [08:39]
B
Yeah, I love it. I'm glad you did. Cause that's the thing. Like, I feel like it seems so out of reach. It's like, it's not. Let's just make it real for people. And I appreciate that.
- [08:48]
A
Absolutely. I mean, I was the guy during COVID and I was in Boise State, and no one was outside. And I'd go for midnight walks, I'd put on my head, my headsets, and I'd just play some music or listen to Biggerpocket's podcasts or just other podcasts, and just like, man, I can't believe these people are doing this is. And that was less than four years ago. And now I'm here. Like, it's. It goes by in a blink, but it's so possible. Probably the most important thing I could possibly give anyone in the audience before we get into the numbers is ask, why not? Yeah, why not you? Right? I mean, some saying like, well, why should I do that? Why? How can I make that happen? Why would I ever try that? Why not? Why not try. Why not try to make it happen? Why not ask questions that make you feel like you don't Know what you're talking about. Why not give it a go? And like, that little mindset shift of 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. When you ask why your default situation is, you're not doing anything and someone has to convince you why you should. So just starting with why not says, you know what? By default, I'm going to do it. And it just gets you way further.
- [10:01]
B
So I love that. I think there's such a sentiment. And I remember, you know, and I, I didn't start writing real estate. I did sales for like a decade before I got in real estate. But even I remember seeing successful salesmen making like, good money and I was like, that's cool for them, but like, I can never do that, you know, say that's cool for them, but like, I don't know. And there's this sentiment like, oh, that's amazing for, for dawn. But like, I could never, you know, and we do that so many times in life that, and it's like, for somebody else, but not me. But like you said, the. It's not what people think it is. And I, I think that's the biggest thing is not only is success not what people think it is, but the road to success is not what people think it is. Sometimes the hards are harder than they. They thought. But the easiest, the, the approachability is also more doable than people think as well.
- [10:54]
A
Exactly. I mean, like, just like you're chopping a tree, right? If I look at a big tree and have an axe, all I have to do is walk outside and swing it one time. If I do that for a couple hundred days in a row, I will fell the tree.
- [11:06]
B
Yeah.
- [11:06]
A
Other folks might be bringing an automatic turbo chop 10,000, and they're chopping a lot during the day. But 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. Just swing the axe. Swing the axe.
- [11:22]
B
So what does it look like for you then? Yeah.
- [11:24]
A
So numbers. Let's talk numbers. So the first deal that I did was a $15.6 million acquisition. 172 units. And the way that syndication works is that the deal is split up in a couple different ways. First off, 70% of the deal is owned by limited partners or passive investors. So these are people that maybe have higher net worths or are accredited investors, which means they make over $200,000 per year or have a net worth of a million dollars. And these are the people that are maybe doctors or tech workers or anyone else with a high income. And when they put money into the deal as an investment to get a return, they collectively will own 70% of the deal. 30% of the deal is owned by the general partnership team or the gps. And the general partners are the hands. They're the ones that are actually managing the asset, making sure the construction goes okay, making sure the numbers are being hit. They're the operations of the whole situation. So in that 30% of the deal, it gets split up a couple ways. Generally speaking, there's one person that is the sponsor, that is someone who is, you know, typically has a track record. The banks know they have a relationship and they're generally going to get about 10, 50% of that 30% for lending their credibility and their track record. And they're usually someone that puts up money for your upfront costs and closing the deal, including legal fees, organizational fees, inspection costs, all those types of things which can be well over six figures. Then generally speaking, anywhere from 30% of the GP. So 30% of the 30% is reserved for capital partners. So folks who are going to come in, raise capital for the deal and perform operations such as asset management, working with contractors and vendors. So if you're someone that is very skilled at raising capital, there's a portion of the GP that's allocated for you. Lastly, there's basically the other component of the acquisition team, operating team or other folks who are going to be doing some of the work, which is usually amounts to about 20%, 20 to 30% depending on the deal you're doing. So for me, on that first 15.6 million dollar deal, my team got 20% of the GP. Okay. I was one of six members on that team. And the way it worked out was mathematically it was as if there was five members. So I got 4% overall of that, so I got 4% of the, which was of that 20% of the 30% of the GP. So it's got 1, 2, 3 down, okay. To earn that amount of the deal. So overall if you break it down, I owned a little over one to one and a half percent of the total deal. As my first time investor, okay. I put in no money into the deal.
- [14:26]
B
Yep.
- [14:27]
A
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. I got to visit the property, paid for by the property itself. And that 1% of the deal overall, equal to me getting a check for like 35 grand when we close the deal.
- [14:48]
B
Yeah, like just a closing before even just a closing improvements or sales or anything like that. Not even, not just the management fees. That's like the acquisition.
- [14:58]
A
That's called the acquisition fee. So for all the work that we do, getting the deal ready to be able to close, investors will charge anywhere from 2 to 5% as an acquisition fee. And that acquisition fee gets distributed to people who are doing the work. So we got. There's an acquisition fee and my 4% of 20 of 30% equal the 35 grand to me. What do I mean? Clubs. That ignores the tax benefits that I got, which virtually made that entire $35,000 tax free. And it ignores the money that I'll make when we sell the property, which could easily be two or three times the amount I made on the front end. So for a first deal, get paid to learn. With no capital injected, it was low five figure check with probably another 40 to 60 thousand dollars coming in the back end when we sell.
- [15:52]
B
And do you make money along the way in between? Is there any like cash flow or draws? But you know, because it's usually what, a 3, 5, 10 year hold? Something like that.
- [16:01]
A
Exactly.
- [16:02]
B
And you're making money along the way as well.
- [16:04]
A
Yeah. So it depends on your role in the organization. So if you're getting paid like an asset management fee. So for example, asset managers will typically charge 1 to 2% per year. And that person on the team is directly responsible for managing contractors or working with property management. And they're usually the person that lives nearby or even lives on the asset during the first, honestly six months to a year.
- [16:27]
B
And they're 1 to 2% of. Of what?
- [16:31]
A
Of the property's annual income, essentially.
- [16:34]
B
Okay, so like the cash flow, the profit, like gross or like NET Gross.
- [16:40]
A
Okay, 2%.
- [16:42]
B
Cool.
- [16:43]
A
I. It depends, it depends on your situation. It's. I don't want to give on inaccurate information. Sure.
- [16:52]
B
And these can all be structured. I mean anybody listening, like you can structure a syndication however you want. This is how you guys have done. And it's pretty typical. These like this structure is like pretty normal. But you can meet one tool. They'll tweak this, they'll change that, they'll adjust this like you can, you know, as long as it follows FCC guidelines or whatever. Like you, you can, they. There's not only one way to structure these.
- [17:14]
A
Correct.
- [17:14]
B
But this is just what you're sharing, which I really appreciate because I Love getting into these details.
- [17:18]
A
And like an asset management fee, like you could expect. Say, 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. You know, just being in cash flow coming to you as an individual who's managing that component. So it depends. And the better the properties perform, the more cash flow you get. And usually speaking, cash flow really starts for the general partnership team in years three, four, and five, because upfront most the cash flow is going towards your passive investors while the renovations are being done and the properties being stabilized.
- [17:50]
B
Cool. I love it.
- [17:52]
A
So you.
- [17:52]
B
So you're getting a little bit of cash flow, plus you got paid, you know, $30,000 or whatever just for helping tackle this thing. And what was your specific role then in all this? You know, you had, you and your team, they were helping with the acquisition. It sounds like. What was your team's role and what was your role?
- [18:11]
A
Yeah, so we were the acquisition. So what we did is we created relationships with the brokers, we found the deals, we underwrote the deals, met with the brokers to fish out all the information about what the deal situation was regarding, why were they selling, you know, what the condition of the property, all these things. We did the market research, we did the rent cops. Then we put together a. Basically a property package and then brought it to sponsors who we had. We knew and had a relationship with them, what kind of deals they were looking for, and were able to then say, hey, we know this deal meets your criteria. Why don't we do this deal together? And at that point, we would help them write the offer. They really did help us write the offer. At which point we would then go forward and start the capital raising and due diligence process, meaning that we would then go and meet with contractors, hire contractors, we would put together capital raising presentations, we would do the PowerPoints, we meet with legal. We would support all those components moving towards the actual closing of the deal itself.
- [19:13]
B
That's awesome. That's cool. And like I said, so you. And you have real ownership on this. You know, like I say, you make money up front, you're making money along the way, you're making money on the end, you know, and you're providing so much value for everybody associated with it to the different roles, and you can always just keep expanding that, which is super cool. Have you structured it differently on these new acquisitions, or is it similar to the first one?
- [19:38]
A
It's pretty similar to the first one. Regarding the fees, I think we're actually doing, we're charging a lower fee than we did in the previously and we are able to have a little bit smaller GP team. Collectively, we have fewer people in the kitchen on these next ones. We just been able to build a better operation and different team members, different organizations, things like that. Yeah, but I. We talk about value add there. You know, the whole point of multifamily and investing in a syndication like this is not just to make a return. There's great returns there, there's great benefits. But the really cool thing you're doing is improving tenant lives. For example, the recent property we just closed, you know, every tenant was paying for WI Fi. Everyone's paying for WI Fi and they are paying say 70 bucks a month. We, as a part of our value add, were able to go to a local provider and say, hey, will you provide Internet to our entire property for 60 bucks a month? And I said, yes, we can do that. Okay, great. And they say, you know what? For giving us, for giving us the opportunity to come provide Internet to your guys's building, we're going to pay you $30 or you're going to pay us $30 a month for the Internet. You'll be able to charge it at 60 bucks a month to the tenants. So the tenants get $10 a month discount and what they're already paying for, we start generating $30 per revenue, per unit in revenue. And because we add revenue to the building while providing the tenants a discount, we actually added $1.6 million to the property's value. Like that's called a win win win, not like a fake win win, a real win win for everyone there to make money and to have a better experience. And so that's what we're all about is saying, how can I do things like how do I make this. I'm just an apartment. How do I make this a place that grandma is going to want to have her grandkids walk to after school and, and is proud to let them run around, go to the pool, enjoy the greenery and feel safe. How do I create a home experience that someone's going to be really proud to bring their friends to, you know, invite their families to and be here for a long period of time through doing unit renovations, exterior upgrades and doing the little things that matter. So, yeah, I mean, being able to create those win win situations where people want to invite their friends over, people can invite their family over and be proud, proud of where they're living and have a safe feeling while we're also making money and creating value is what the whole thing's about. And it's ultimately how we be successful in the industry.
- [22:17]
B
I love it, man. And that's what's so uniquely powerful about commercial real estate like that. Like say when you can adjust the cap rate and the value just by changing the operating expenses. Like you like see, just create value. Create you know, the value of the property out of thin air. You're making people's lives better like which means you get better tenants, you know. And there's just so many things you can do to adjust it. Like the example you just described is perfect. And it's just like you can't do that with single family, you know, it's just that's not how the, the, the asset is valued and you just can't do that with, you know, like the example you use is perfect. That'd be impossible with, with a single family unit. You know, even if you owned a hundred single families, you still couldn't do that same thing because it's, it's not scalable in the same manner, you know.
- [23:03]
A
Exactly. And so what I'm a big fan of is basically what I call, I do some, I do some light mentorship with this for fol interested in doing like syndication, but they want more cash flow. Component is I do this basically syndicate something with the team, get your fees from it, operate it well and then roll that into like a multi family property that's residential and then do that back and forth. Build up your large portfolio with team, build up your personal portfolio at the same time negative feedback loop where you're building up your recurring monthly cash flow while also building up your overall net worth as multif family investor. And you're able to create things where you can force the value here, boost cash flow there and just do that in a way that makes it a huge win win for your portfolio as a whole. I mean I love that system. I think it's. You can't, you shouldn't really ignore the benefits of the residential space or the commercial space because there are benefits to both.
- [23:59]
B
Yeah, there are. And it sounds like you own some, some residential stuff as well. You said your first property was like a, was a duplex or a four plex house hack.
- [24:08]
A
Yeah, so it's a four plex house hack. So I have these four units as well. And it's, I mean worked out great. Bought it in 2021 and when I got here they're two bedroom, 1200 square foot apartments and they were rented for about 500 bucks a month. And just recently, I was able to rent out one for 1345.
- [24:32]
B
Wow.
- [24:33]
A
Yeah.
- [24:34]
B
No way. So it sounds like it was under rented when you bought it, and rents have gone up a lot, so the combination of the two of those, you get quite the jump there.
- [24:44]
A
Yeah, I mean, the previous owner owned it for, let's say, 20 or 30 years, and there was under renting it. Plus the units need to be updated. So to be clear, I spent three years unit hopping from unit to unit to unit, living in one, fixing it up while I lived in there, and then moving to the next one and fixing it up, then moving to the next one, and then did that over time. So it wasn't an immediate jump, but it took the time and just lived for free the whole time. Saved up money on the cash flow in my job, poured it into the renovation, and then now cash flows really well, and I get to live for free. And in today's, you know, environment, that's a huge benefit to being able to deploy capital elsewhere.
- [25:24]
B
Yeah, I know. It's so rad. And it goes so like, they're saying, hey, before you're married and have kids, like, go house acting like. And that's a great example of why, like, you can just hop from unit to unit, like, what do you care? You know what I mean? You just move a couple things. You're not moving cribs and all the, you know, like, all. You know. It's easier when it's just a single person. And so now's the time to do it. That's awesome.
- [25:44]
A
Absolutely. If you're 18 to 25 in your. In your single or unmarried, go move to the city with the best prices that you possibly can find for real estate that meets your strategy and. And go grind it out for a couple of years. Yeah, I'm a huge fan of the strategy, because why not? Right? There it is again. Why not move to the city, grind out a couple of buildings, and then you're done? Like, it just makes too much sense.
- [26:10]
B
When it's like you're just light years ahead of where you would have been. Alternatively, I mean, I'm sure you look at some friends back home who never left, and it's like where you're at now compared to where you would have been if you had just kind of followed that same path. It's like, it's. It's incomprehensible.
- [26:26]
A
It truly is. You know, you don't realize, really. I would say, especially for folks who are in their 20s or early 30s, it's an exponential growth between the difference in your life and your peers around you. You know, you start your, you know, late teens, early 20s, relatively in the same place. By the end of the decade, you can be completely different places. You know, you would never have known you came from the same town or same background, etcetera, Simply because of, honestly, something my folks told me when I was growing up. The person you are at 18 is because is based off who your parents were. Person you are at 30 is based off who you are, the choices that you made.
- [27:03]
B
I like that.
- [27:04]
A
I like that.
- [27:05]
B
That's deep, man. So you, are you working as well full time or just in this indication?
- [27:11]
A
I was working full time. So I should make this super, super clear to folks. It sucked. It was horrible. So I graduated college in fall in spring 2021, and I started my job working as a geospatial analyst for the Department of Defense and the intelligence community in the fall 2021. So, you know, all the fun FBI, CIA, fun stuff that you hear about, you know, I'd love to tell you, but I hate to kill you, that kind of thing. I was doing that for two years. So I would go to work between, you know, get there at 6, 7, 30 in the morning, work until 3 or 4 then. And because it's a, you know, intelligence community operation, you know, you can't bring your phone in there, you know, it's a security risk. So I don't have my phone on me. So I come out of work 3 or 4 o', clock, 20 missed calls, 30 mixed test messages, drive home and I'd work for another six 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. And it wasn't until September 2023 that I was able to retire from the Department of Defense and go into my real estate business and software company full time. But it took two years of pretty much sacrificing everything else to make that happen, which I was lucky to be able to do as a young person who made those choices. But that's what it took and that's the choice that I made.
- [28:46]
B
Yeah, that, that's awesome, man. And that's the thing. It's like, it's approachable, but it's not easy, you know, I mean, it's doable. Like you said, anybody could do what you've done, but who's willing to actually to make the sacrifices? And this is something I know I keep running into this concept more and more lately in life from, like, man, it's really not about, like, is this possible? It's just like, what are you willing to sacrifice? Yes, you know, like, that. That's like. Like at the beginning of life. I remember when I was young especially, you know, honestly, when I was your age, I never made a penny. I didn't know anything about money. I'd never really been around anybody successful and. And, you know, I was 24 when I started my first sales job. Before that, I never made, like, more than $17,000 in a whole year. You know, I didn't know what money was. And. And it just seemed like, so I didn't know what I could do. Everything was like, could I do that? Could I do that? I never even ran a 5K. I'm like, could I do that? Like, and then it was like, could I do a marathon? Could I make a hundred thousand? Could I have a million dollars net worth? Could I? Like, it was always like, is this possible? Was always the question. And now I'm looking back on life, I'm like, no, it's just, what am I willing to sacrifice? Anything's possible. Anything is possible. Anybody can virtually do anything for the most part, you know, but what are you willing to. To do to get there? Is the. Is the real question. That's the question. Not if it's possible.
- [30:10]
A
Yes. And I've got a hot take for you, so you can let me know if you're cool to. Jeff, I got a hot take here.
- [30:14]
B
Let's take it, dude. Let's go.
- [30:16]
A
People make money and they think it's theirs, and it's. It's their future selves. Money. It's not. If you're making money, it's not yours. It's the. Think about, like this. When I make a dollar right now, it's not money for me to go spend on, you know, frivolous items. The things I want, I really want a nice classic car, you know, 68. And I want those things, right? I want them. But Future Donato, he wants to never have to get up and set his alarm clock for any reason besides early morning brunch that he really wants to go do. He wants to be able to go take that trip. He wants to be able to go spend time with family, loved ones at a hobby. He wants to be able to go do these things for as long as he wants, whenever he wants. So every dollar that I'm spending right now is really spending a dollar. Future denials money on things that he cares about a whole lot more than a nice new set of clothes or nice new car. So right now, when I look at this cash that I accumulate, that's not my money to spend. That is money that needs to be put to work for Future Donato. And there have been several times in my life where I've stopped and I've looked, like, over my left shoulder, jokingly been like, thanks, Past Donato. I appreciate that. You know, it's not mine, and it's not your money. It's your future's money. And I know some folks are going to disagree and say that, you know, you got to enjoy life as you go along. And I. I agree. You should enjoy life. But there's a huge difference in enjoying the journey, enjoying your life, and taking unnecessary financial risks or taking few two risks while you're young to go and set your future self up. Huge chasm of difference there, because, as you put it perfectly, nothing's impossible. You just have to stop thinking that maybe your life is supposed to be a certain way or look a certain way or be at a certain point and be willing to say, you know what? I'm not going to elevate my standard of living so that I can provide my future self exactly. Whatever type of living they want to have and not push that off by decades or potentially ever by not making smart choices now.
- [32:17]
B
Yeah, man. Two thoughts on that. You know, just to add to that take, which I really like, and it's like, not only is every dollar that you spend now, you know, you're taking from Future Donato's dollar, you're taking, like, $5 from future. It's like, it's not $1 and one. It's. It's every dollar I spend now, I'm stealing five or ten from future me.
- [32:39]
A
Exactly.
- [32:40]
B
Oh, is that worth it? You know What I mean? $1 to him. Screw him. I'm alive, too. You know, like, but if it's $10 from him. Yeah, I don't need that bad.
- [32:51]
A
Exactly. Like, oh, I'm just gonna go spend five grand on a nice vacation. Okay, great. You just lost 50 grand five years from now. Like, okay, okay. And I get that all the time. And, like, the thing is, I know folks will listen to this and say, man, but, like, I want to do this, and I want to do that, and that's okay. But the big point I have to make is, if you're going to choose to make financial decisions that prioritize your present self or elevating your standard of living. Understand that you are also consciously choosing to not set yourself up for the future.
- [33:27]
B
100%.
- [33:29]
A
I'm not going to blame you. That's fine. You have to live your life. But don't ever for a second think it's because of someone else's decision or outside of your control to be where you want to be. You made that choice by not making that choice. And if you want to be like where you are, Joe, if you want to follow and put steps and greatly exceed where I'm at, consciously make the choice to go that direction.
- [33:53]
B
Yep. And I love that. And there'll be points where that, that is the decision that it makes more sense. Like, hey, I'm gonna sacrifice, you know, this because of, this is more important, you know, but like I said, that thousand dollar whatever you don't really need when it could be ten thousand dollars for future you when you really want it, you know? Yeah. I love that you say there's not a right or wrong, but be aware of the impact of what you're really deciding. And it goes for time as well. You know, you put in a year or two now of that grind and you're giving yourself back five or 10 years in the future.
- [34:29]
A
Yes.
- [34:30]
B
It's not a one for one exchange in time or money, which is, which is really powerful.
- [34:35]
A
Exactly. Like I talked to way too many people who, you know, you know, in their early 40s to late 50s, and you know, it's, you know, it's an unfortunate reality that I've experienced is that folks saying, you know, I have this dream job, I love my job. But over time you start building a life. You have places you want to go, you have kids, you have spouses, you have friends. It's that season where you're supposed to be able to enjoy the fruits of your labor. And many of them that I speak to say, man, I'm at this point where the thing that I rely on for my income is more and more so frustrating me and rubbing up against me, but I rely on that one thing to be able to enjoy the fruits of my labor. And so that's where you get people who feel stuck. And that's where I think I really got to make a point here when it comes to what you just said. There will come a time when you want to choose leisure and enjoying yourself. And you should. Right. This grinding component is supposed to be a season of life. Supposed to be one point of Time a couple years. You do this so that you can do other things later. You don't have to do grinding and hustling for decades and decades and decades. And you shouldn't, you know, take care of yourself. But be willing to say, I'm going to do this for this season so that future you, your future spouse, future kids, future whoever gets to enjoy you in your fullest sense, free from shackles of choices that your younger self did or didn't make.
- [36:04]
B
Yeah, man. And, and you mentioned something earlier when you were very, when I think you're first introducing yourself, you mentioned like, oh, I could go make money that just pays me indefinitely or something like that. You use some sort of phrase like that. I think about this a lot is the concept of infinite returns.
- [36:22]
A
Yes.
- [36:22]
B
And it's like, you know, I know we just said, hey, every dollar spend now is still in five or ten dollars from yourself, but it's even more than that. Like if you do it right with real estate, it's an infinite return. Like it will pay you indefinitely until you're dead and your kids are dead. Like it could just pay forever. Like you hear about generational wealth and it's like, yeah, like if you own real estate that you pass on to your kids and their kids and their kids and it's like it's paying it infinitely. And it's like, how much effort would you put into making a hundred dollars? Right. But how much effort would you put in to make a hundred dollars forever? That just keeps coming back even after you stop putting in the effort. And it's like, I love it because you're young and you've got this like excitement in you about it and like it, it sparks that back in me because it's like, that's the most exciting concept to me of why I love real estate and is the idea of infinite returns. I'm like, yeah, I can put. Because I grinded in a sales job and it was a grind and it was miserable. I didn't love it and I made money, but it was just a one time money for the grind. I was like, man, how much better is it to grind? But you know that 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. It just keeps coming. Like that's the dream. Like that's what it's about. Like if people, like, if any listeners are like, that's real estate, like that is why real estate's so sexy and so powerful. And that's different than anything else because you can get better returns in owning a business and running a business, right. That's way more money there. You can get better returns on your time, even, you know, doing sales and stuff like that. Like, but the infinite passivity of like just getting that money forever is, is unlike anything with real estate because if you stop running your business, it's going to go under. Right. But real estate can be pretty hands off. You hire a manager, take a couple calls, you're. It can be pretty hands off. Anyway, exciting stuff. I love that concept and just the heart and soul of it for me.
- [38:27]
A
Yeah, I mean like growing up I had one advantage and that was I got introduced to board games as a young age. And there's certain types of board games and I'll explain, right, like what do you mean? Tadani, you nerd. Okay, I get it. When there's certain types of board games that are called engine builders. And the whole thought is I can play this card, this card lets me do an action and this action lets me play another card and this card lets me do an even greater, more powerful action. And you basically are creating this engine of different actions that result in more resources or points to win the game. By being introduced to that as a young age, I applied the same strategic thinking to life. Life's just an engine builder and real estate is a great card to play because if I'm young and I can say, great, let's play the real estate card now and let's play the business card now and let's play. If I buy syndication real estate that lets me do more multifamily residential real estate. And if I do that over and over again in this engine, I can build my business and if I build the syndication into the residential, into the business that keeps compounding to give me more resources to play the game of life with.
- [39:40]
B
Yeah.
- [39:40]
A
And the cool part is, you know, a lot of folks will say the end of life, you know, we all go to the same place, you know, we all pass away and the game is over. Like not really, not with assets. That's the point. Because at some point the debt that I put on my properties gets paid off and over say 30 years. So at 30 years from now, when my $200,000 fourplex is now worth $800,000, I go put new debt on it, get a tax free check, 600 grand, use that to go buy more assets, pass them down to my kids names, and now every 30 years the debt gets paid off. They Put new debt on it. And because of increase in property values, increase in rents, that asset continues to be our own personal piggy bank. And it's an engine that literally goes. The sun blows up or the property needs repairs. You know, either way, it's just like. It's just. It's just a game. And games have rules. Read them and go clean up. This makes sense 100%, man.
- [40:45]
B
No, I love that. I love that concept. It's exciting and I think it is. Sometimes it's healthy mentally to look at as more of a game. You know, if you, if everything is so serious and so, like, unattainable said, oh, that's cool for them, but not for me. If you're just playing a game, no one starts Monopoly or these card games or, you know, these different role play games, right? Because, like, oh, well, I couldn't win this game because it's a board game. You're just like, of course I could win. Anybody can win Monopoly. Like, you just like, whatever. You know, you don't take it so heavy and serious. Serious. And. And if you have people approach life like that, they probably get a lot more done because they're not so intimidated by, oh, I could never have all the properties on board. It's like, why not?
- [41:30]
A
Exactly. And that's back to my point. Earlier I talked about not spending today's money, how I don't see it as mine. That's why it matters to think of life as a game. Because I'm playing Monopoly, for example, I can have fat stacks in front of me. I can have thousands of dollars lined up in front of my little properties, but it's not my money, it's the game's money. Yeah, that money is meant to buy more by Boardwalk and, you know, Park Place. It's my money, but it only works to play the game. And so 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. Yeah, you just release yourself from all the spending pressures, and that's how you do it.
- [42:23]
B
Well, and it's funny because I think just to keep running down this analogy is like, you know, when you're playing Monopoly and you draw the cars, like, pay this thing or pay a beauty contest, or tax. And you have to like, put money into kitty that like, doesn't buy an asset. It hurts literally like 10, like, oh, I don't want to spend that. But every time you spend money on assets, you buy another property, you're excited, you spend way more buying that. And that's how it should be in real life. And that is exactly how I am. Like, if I go spend money on like, stuff, I'm like, it hurts a little, but I'll be like, oh, property. And I'll just like drop any money I have access to on real estate. And it doesn't hurt because the money's still there. And that's what's beautiful about every penny you put into real estate. It's still there and, and probably in, in, you know, spades. It's coming back with more friends with it, you know, when you see it again. And, and so I love it, man. It's all a game. Learn the rules and, and go play hard, you know?
- [43:19]
A
Exactly.
- [43:21]
B
Well, sweet, man. We could talk about this stuff forever. I do want to roll into our final four. What's a good way for people to follow you? You've got an interesting journey, you're doing some cool stuff, made people want to participate in your syndication applications or pick your brain or to get some coaching or whatever. What's the best way for people to do that?
- [43:38]
A
Yeah, so you check out my website@donatocallahan.com lets you book a time with me one on one, completely free, just to chit chat about, you know, investing in business. You can also check out the software company that I founded to help people do real estate, find emerging markets, find great deals and close on and make money anywhere in the country. It's@brightinvestor.com check out that. Those are two best ways to do get in touch with me.
- [44:04]
B
Love it, man. All right, I'm gonna bust through our final four questions here. If you had to start your real estate journey over Donato, knowing what you know now, what would be your first and second and maybe third move?
- [44:18]
A
First move would probably be to get more specific on what I really want out of real estate a little earlier. Probably could have skipped or been easier through the wholesaling process when I first started and avoided a couple mistakes. Second thing I probably would have done is spend a little more time networking, little more time networking with other folks who are in the industry to really get an understanding of what people want and lead growing my circle of people who could either introduce me to someone or teach me something Third thing I would probably do if I can go back is, man, I wouldn't mind picking up another 4 plex at 2.7 interest.
- [45:05]
B
Love it. All right. Book or podcast recommendation?
- [45:10]
A
Yeah. So I always recommend who Know how and I always recommend Traction as two great books I think really, really changed how I approached moving forward in real estate and business. Highly, highly, highly recommend those.
- [45:24]
B
I was gonna say you. You're a businessman at heart. I can tell. You know, those are the business books. And you, you, that's your businessman. I love it. All right, question number three. What is one of the most expensive or interesting mistakes that you've made in real estate investing?
- [45:43]
A
Yeah, my second multifamily deal was under contract on it for almost a year. Worked on it, worked on it, worked on it. Tried to make it happen. It didn't work. I had to pay, you know, low five figures back in to reimburse our investors for some of the upfront costs that we had to try and make the deal work. So I had to write large checks to pay people back, and they got the money back. It was great. You know, didn't really hurt because I get used as a tax bright at the end of the year, which is great. Appreciated that. But that was an expensive mistake, which taught me one thing above all else. Just because you find the deal does not mean money will come. You hear that a lot. Like, find the deal, the money will follow. It's not true. Not true at all. It's a complete lie. Never. If you find you need to have relationships and systems in place to be able to raise capital from people, because the only way you can do that is if they trust you, you trust you, they then trust you know what you're doing. And there has to be all this front work done to be able to get them to a point of, okay, yes, I feel comfortable investing with you, and then when you have a deal, they'll move forward. But if you try to say, hey, I have a deal, oh, by the way, here's how to invest, there's way too many questions, way too much pressure, way too much xyz. So the capital and the networking for that really needs to happen in advance. And if you're someone listening who says, okay, great, but how do I feel confident enough to be able to network with people, to ask for money? That's where the work comes in. Listen to podcasts like this one. Go read books, go to meetups, watch YouTube videos, educate yourself, go to webinars so that you feel comfortable taking that money from People to put it to work in an opportunity.
- [47:28]
B
Yeah, I love that. I think that's so good because you do hear that like, oh, they're, you know, the money will come. The money will come if you find a deal. And the truth is the money's there. There is money out there. There's more money out there than you can possibly comprehend. Like, it's all there. But that doesn't mean it's going to come to you unless you've done what you just explained. That's why, like, one of your first or second moves would have been to network more. Right. And it's like, yeah, building that network of trust so that when you do find the asset, the money that is there, when will come to you. Like, I love that. Thanks for pointing that out.
- [48:02]
A
Absolutely. And like, when he talks about my biggest mistake or failure, because that failure happened in like, in public, it was known like, hey, this deal didn't work out. But because I also paid back investors and I did what I was supposed to do. Failing in public and having people watch you and see how you react to messing up and failing is the best networking thing you could ever possibly do. Because now they get to go to someone and say, oh, yeah, when this thing didn't work out, this is how he responded, this is how he treated people, and this is what he prioritized. And now other people can say, great, when the going gets tough, I know what to expect from this person. And that is a huge benefit when your next capital comes around because they know they're protected.
- [48:48]
B
When you, you said it earlier, you said they gotta trust you, right? And like, you were able to prove your trust there. And that's why at that question, I always, I do air quotes mistake. You know, what's the worst mistake you've made? Because obviously you were able to leverage that into a trust building opportunity. So people were happy to invest with you down the road. And so I love that concept. All right, man, last question and then we'll let you go. What is one word or short phrase to encapsulate why you love real estate investing?
- [49:27]
A
I'm gonna think real hard about this. Real hard. A short phrase to encapsulate why I love real estate investing. It is one of the only ways that has been tried and true for a very long time to create independent wealth for yourself, that there are government programs instituted to help you do it using other people's time, other people's money, and other people's resources. There's the fact that Fannie Mae and Freddie Mac exist and the government is willing to give you fixed rate long term debt backed by the government with the FHA loan, three and a half percent down. They're willing, the government's willing to pay 97.5% of a property's value that pays me cash flow every month for 30 years. There is no other asset.
- [50:24]
B
And who gets a hundred percent ownership?
- [50:27]
A
You do. You get 100 ownership in something that somebody else pays 97 and a half percent for that you make money off of.
- [50:35]
B
Like that would be a deal if the government was retaining 50 equity. It'd be like fair. That's fine. They get 50% of the ownership, you know, but you get 100 of it and you know, so it's like, it would be good if it was even 50, but it's even a mate more amazing that it's a hundred percent, you know. Yeah, I was just interviewing somebody from Canada and we were talking about these, these loans we have here in the States and they're just like, man, they would kill to have that opportunity up there.
- [50:59]
A
We're so like, doesn't do fixed rate, right?
- [51:01]
B
They're all very Freddie Mac locked in rates for 30 years. Like, it's just not a thing. We're, we're super. And then they don't have 3% downs either, you know, or 5% downs for that matter, you know, so there's a reason that.
- [51:17]
A
There's a reason. Debt runs the world. Yeah, there's a reason. And if you can get into good debt in the right asset. Come on, come on.
- [51:26]
B
100. Well, this is sweet, man. I appreciate your time. Thanks so much for being on the show, sharing your story with us, being like real and genuine and authentic. Just kind of opening up the curtains to the numbers and how you built your portfolio and, you know, excited to see where you go. But thanks for being here.
- [51:43]
A
Absolute pleasure, man. Thanks for having me on.
- [51:46]
B
This is Joe Jensen signing off for the Real Estate Investing School podcast, reminding you that it's all a game. Go play.