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Real Estate Investing School Podcast
185. Balancing Growth and Mental Load in Real Estate with Brian H. Ferguson
00:52:39
Welcome to the Real Estate Investing School Podcast! In this episode of the Real Estate Investing School podcast, host Joe Jensen sits down with Brian Ferguson, an accomplished real estate investor and managing partner at Fergmar Enterprises and...
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- [00:00]
Brian Ferguson
The money should not be the only thing that holds you back in this world. We're far too advanced nowadays. The money's there. You just got to go find it and surround yourself with the people that can help you do it. So.
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Podcast Host Intro
What'S up, guys? Before we launch into today's episode, I wanted to take this time and announce that Real estate investing School 2.0 is on the horizon. We've spent so much time the last six months to a year diving into how we can make Real Estate Investing School bigger, better, more valuable than ever, and it's going to absolutely blow your mind. It's been a ton of time, a ton of money, a ton of energy, and we're excited to announce it to you all for following along for listening to the podcast. We are also going to reward you, so more on that. In the meantime, with Back to School on the horizon, Real estate investing school 2.0 is what you have to look out for. We will see you soon and enjoy the episode.
- [01:01]
Joe Jensen
Welcome to the Real Estate Investing School podcast. I'm your host, Joe Jensen. Our guest today is Brian Ferguson. Brian is an accomplished real estate investor and managing partner at Fergmar Enterprises and Altoonas Capital. He's based out of Victoria, Texas. He started in 2008 with single family properties. He has expanded his portfolio to over 1,000 multifamily doors and several commercial properties. Brian's been involved in over 400 million in real estate transactions and manages 150 million in assets. In 2022, under Altoonas Capital, he began raising capital facilitating significant investments in prime retail shopping centers and multi family units. Fergmar Enterprises, which includes the divisions such as South Texas Reynolds and Kimberlite Homes, continues to innovate and and grow under his leadership. Brian's also a recipient of the top 20 under 40 awards and has been recognized for significant contributions to the industry. Whoo. Brian, that is quite the bio. That is. But I did. I normally I shorten them up and like make it a little sweet, but I was like, I can't cut any of that. That's pretty impressive.
- [02:14]
Brian Ferguson
I appreciate that, man. Thank you.
- [02:15]
Joe Jensen
Yeah, man. So that's cool. So you. So you started back in 2008, maybe kind of walk us through how you got started in that. That's such a. Interesting time. It's an infamous time in the real estate world and I mean, obviously not the worst time to start into it, but hindsight makes that a lot more clear than I'm sure it was at the time.
- [02:40]
Brian Ferguson
Yeah, I mean, it's yeah, and in hindsight, it, you know, at the time, if I would have known, if I would have known now what I know then I don't know if I would have started at that time. But in recent times, that has made us much stronger to go to navigate through the current, you know, you know, call it mini recession. What's facing us? It depends on who you're asking. But, you know, we actually, technically it was 06, the 08 when the entities were actually established. But we started house flipping in 06. But it was a very interesting time. We just, I was tired of the, you know, working 80 hours a week. I was in the, I was in the finance world, in the automotive industry. And, you know, you're just, you're working six, seven days a week, you don't have time off. And I wanted to try something else. And so we jumped into real estate. Then it just, it evolved over the years quite a bit.
- [03:29]
Joe Jensen
Yeah, so you guys started flipping in 2006 a little bit. So you, you might have been left with that. That seems like horrible timing with the market to go down in value like that. Did you guys get burned a little bit?
- [03:43]
Brian Ferguson
You know, we. What we did. It's interesting. Our approach then was instead of taking like a hickey on these, if we'd flip something that we couldn't sell, we would just hold them for, you know, we'd hold them for single family rentals. And so we ended up with hundreds of these single family rentals. And then, you know, come around starting, I guess, I guess it was 16, 17 when that market really started to tick up. We just started selling them off. And then it allowed us to sell those off and then we would 1031 that money into duplexes, fourplexes. And then we did that for a few years and then now we've been able to, you know, just, just keep pushing up into the next level. Now we're in the multifamily, in the commercial. So it wasn't the smartest time to start and we got stuck holding a bunch of stuff. We were fortunate that, you know, I had a good job and, you know, I'd taken care of my credit. So I was able, you know, I was, I was a decent, you know, applicant at the bank for these, you know, back then you're talking 20, $50,000 houses. They weren't huge loans, but, you know, I'd taken care of myself from working that I was able to source those loans. And so we were able to hold them and it worked out in the long Run. But looking back on it, we were pretty naive at the time.
- [04:49]
Joe Jensen
Yeah. No, that's crazy. That's crazy. So you, you really took this to a whole nother level. I mean, reading over your bio there, it's like you guys are doing. Playing a lot higher level than a lot of people that, you know, are dabbling in real estate and say, doing some single family duplexes, fourplexes, even. What's been your favorite part? Like, if you could look at all the different, you know, genres, if you will, of real estate that you've been through, is there one that you're like, man, I really loved this one because of this. And you're like, maybe this one's like more lucrative. But like, this was like my favorite.
- [05:29]
Brian Ferguson
You know, I always joke about the fix and flip world. That's where we started. And I used to love it. And I'm, you know, or this is something that's going to go live. I'm not saying I don't love it anymore, but it definitely became a job and it still is. We still have the division. We, you know, we're on track to do 100, 200 houses this year. So it still exists. And I love that team. I work with them every day. But that's like my W2. I still enjoy it. Right. I enjoy the multifamily piece of it. We're really good at that. But I'd have to say the one that, you know, the capital side, Yes. I love talking to people. I don't. I'm not necessarily this huge salesperson, though. But the commercial world, I still to this day, will take a commercial lead. There's just something about. And if it's a national tenant and we're putting them in a space, you know, we get attorneys involved, we get through it. But when it's the localized, I'm trying to expand, I want to open a new business because, I mean, at the end of the day, that's what makes the world go around. If they can open a successful business, sure, we fill a space, they get a business start, they employ people, they put their kids through school, their kids become better educated. Like the whole circle of life just generates out of that. And you know that. I love that piece of it. Just, I love putting the deal together and hearing, okay, what are you trying to do? What are you trying to accomplish? Maybe we can get creative on, you know, some free rent, some lease up some improvements. Like, how do we help you be successful? When I used to take all the commercial property management calls and I Would my. What I would tell them on the phone was like, we're business partners in this, you know, and I've had people ask me, I'm not, I don't own anything in the center. I'm like the second year one of seven or 10 or 15 tenants in this center. You own a piece of it. We need you to survive. So I'm your partner here in the business. What can I do for you? So absolutely love that aspect of it overall. I would say just the leadership aspect, the team. It doesn't matter which division of the company they're with. I love the team building aspect and the collaboration as well. But if you had to pick a genre of real estate, it'd be that retail commercial piece.
- [07:22]
Joe Jensen
That's cool. Yeah. That's interesting that you, you went a long time without raising capital. Like 16 years of just kind of. How were you operating before you started raising capital and what made you pivot it?
- [07:39]
Brian Ferguson
So we started, had good jobs in the finance industry. My business partner was a sales manager in the auto industry. So we were making good money. We worked too much to spend it. We had a bunch saved up and we flipped the first few before we both left kind of our W2s. And then we didn't take paychecks for three years. We just bootstrapped it off to savings. And then I spent years, I would buy and flip my personal houses. I'd buy a high end house in the country club, do some work to it, sell that, and we'd live off of those proceeds. But. And then it went from that to. Because, you know, I don't come from money. You know, I. I built my dad a house, not the other way around. My dad didn't invest in the company, so it's pure bootstrapped on our side. But we did that and like I said, we kept the single family. We just leveled our way up and we just, I mean, we pushed and worked through it for years and years. But then just, you know, when we bought that first 134 unit complex and I saw the efficiencies of owning something that large and knowing we had hundreds of units over here that weren't efficient and we still have some of those, we're working through them, but I knew I wanted more of them. And you know, the shopping center had come up for sale and I just thought, I constantly get approached by people that say, man, y', all, I see y' all are over the place. You're buying all this stuff. Because I see our signs everywhere. Meanwhile, I'M over here going, how do I get bigger? How do I buy that next level? And I just, I saw the opportunity, went to a conference, learned that syndicate. Actually, the first syndication conference I went to, I thought we were going multifamily conference to be more efficient in operations on multifamily. And I booked the wrong conference, obviously, but I'd already been thinking of that model. And I came back home. There was a. Just a Class A prime, one of the best locations in town. It had just popped on the market. I had just done a refinance on our apartment complex. And the guy at Marcus and Milchep said, man, a guy, him off office has an asset in Victoria, which Victoria is not huge. So most of them call me on it. And I, I just, I started making some meetings, I called the attorneys, I put it together. But the reason for it was I saw where we had come in 16 years and obviously, economy of scale, we're going to go further than that at year 32. But even adding that economy of scale, I. I didn't. Where I saw year 32 and where it was headed wasn't at the same place. So I knew I had to pivot something. And it just, it really opened my eyes because we spent years of, you know, I want to buy everything, I want to do everything. We took partners and nothing. And now just seeing that, looking how far we can go together. Real estate's a team sport. Once you mature enough in the sport to realize it's a team sport. And so that was the reason for taking capital. I'd rather have X percentage of a $20 million deal than 100% of a $500,000 deal.
- [10:17]
Joe Jensen
Yeah. You know, they talk about that analogy of, you know, having a smaller piece of a bigger pie.
- [10:24]
Brian Ferguson
Yeah.
- [10:25]
Joe Jensen
And has that been the case for you? Because sometimes I feel like people will go and they'll tackle bigger projects. They raise all this money they do like, and they're, you know, they're buying way bigger, you know, assets and all this stuff. But at the end of the day, I don't know if they personally actually made any more money or any better off and had any more freedom or any of the benefits. Has what's been the case for you, Are you actually seeing way more freedom or way more money or however your goals are aligning with doing the big syndications, raising all the money, or are you just doing more, bigger stuff? But it's kind of the same.
- [11:01]
Brian Ferguson
And that's a good question. And when I first got into it, man, I tell you talk about feeling deflated when you'd go to these conferences and some guy's like, ah, you know, I got 4,000 doors or 8,000 doors. Well, then you realize they have a quarter of a percent from a $25,000 investment in a thousand door complex. Because. And I remember talking to a lender and I sent them our portfolio. You. So when I say 150 million assets under management, 100 million of that is, is not syndicated. No, it's me and one other guy, you know, that's our deal. We bootstrap that. And I remember sending him our, our balance sheet and he was like, let me, let me give you a five minute lesson because I told him, he was like, man, some of these guys, I was like, I know I'm not as big as some of them. And he educated me on that. But to answer the question, our approach is a little different. We virtually give everything back to investors. We don't, we don't take any piece of it. It's a long term play for us. I don't need the cash flow right now. I don't. You know, I manage this center, you know, it does phenomenal. We pay it all out on quarterly distributions. It really takes care of the investors that are constantly coming back. They're looking for the next deal with us. But we do that because I have, you know, we're flipping 100, 200 houses. We have a development, a ground up residential construction division and those are doing really well for us. So. Well, they're doing as well as they can considering some of the economy and the shift with interest rates. But now we are shifting our approach a little bit now to where we said, okay, the first few years we've done all these deals, there's no cash flow. We do want to pivot out of single family flipping and we want long term holdings to be our number one income stream. So to do that, we're now structuring deals that are, they're not a three and five year hold and sell. We're really working on deals that are 10 and 15 year heavy cash flow deals. That way we can share in some of the cash flow. But has it made a massive difference in our income line to date? No, because we're giving all that back. Will we reap tons of benefits in that first five year exit in there? Absolutely. But again, that's what I wanted it for. We were very seasoned. I've definitely seen a lot of guys that, you know, they go in and, you know, I've had people pitch a Code gp. And then you look at it and you look at the amount of doors and the 2% at the bottom and you know, you got to get started somewhere. We were fortunate in the fact that we have such a long history of operational and management experience and that's bode really well for us on the side of it. So again, our model is a little different. So I wouldn't. It's the right approach for us. It's been able to give us a larger reach, but I wouldn't say it's changed our financial status really at all just because we're giving it all back right now.
- [13:35]
Joe Jensen
So you haven't had any of the large exits on any of those big projects that you syndicated yet?
- [13:41]
Brian Ferguson
We got in towards the interest hike.
- [13:44]
Joe Jensen
Okay, there you go. So the game plan really, it's virtually kind of just like old school flipping. You buy it, you make it worth more and then you sell it for more. And that, that's the, you know, the, the play with these, you know, anything that's commercially valued, you know, you, you raise the value of that. Not necessarily through putting new countertops in, but you know, there's other ways with noi and stuff like that. But, but you, you plan on exiting in five years or whatnot when the market's right and then that's when you'll just make. Your profit is off the sale and you're not worried about making all the way. Is that what you're saying?
- [14:18]
Brian Ferguson
Yeah. Well, let me elaborate on a little bit more. So my goal is, and I'm very upfront with all of our investors, I know they want to exit in five years, but by giving them all the cash flow from year zero to five, I have a bigger piece of the pie at the end. What it'll allow me to do is have it appraised and I will now have enough equity built up myself to buy, to refi it with. Obviously gonna have higher value, higher noi, better rates. Because most of the stuff we've taken on is higher rates, mid eights, you know.
- [14:43]
Joe Jensen
Yeah.
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Brian Ferguson
So I will be able to reef buy them out with a new debt at their multiple and then maintain ownership. Because we're not looking to sell. I mean, we're looking to hold long term. I want to build a large portfolio, but if I'm taking my share along the way, so it's virtually just a piggy bank just sitting there for me, it's a bigger piece and I'll be able to use that towards a buyout to get the investors bought out. At the proper returns and then at.
- [15:06]
Joe Jensen
That point they've made awesome returns the whole way. They get all of their multiple return that they were promised at the end. You now retain the asset and now all that money that you've been paying out to them is all going to you guys now and you, you get to make all the profit and have the full ownership.
- [15:23]
Brian Ferguson
Yep, exactly. I mean I'll get nothing for say five years and then I may even have to bring money to the table on year five. There's a good chance of it. But now the next 15 or 20 years. So I'm working on, I'm definitely working on the long plan here. You know, it's, it's, it's a 10 to 30 year plan. It's, it's more, I call it my generational wealth plan. What we're doing now and have been doing for 16 to 8 years has provide. We have a nice house, we travel a lot, my kids are in private school, we have a good life. There's nothing wrong with it at all. I don't know that what we've done is going to create long term generational wealth. And that's always been. I don't come from money. I know a lot of friends that have, a lot of my investors have and I want to create that for my children. I want them to have a generational portion and this is the play for that. That's the big items.
- [16:05]
Joe Jensen
I want to dig into that a little bit and I apologize, Brian. I feel like I'm asking a lot of more like, I don't know, personal, like lifestyle questions, real estate. But so I hear people talk about the generational wealth a lot. What is your take on why does that inspire you to make the sacrifices and do the work to create wealth for other generations where it's like you won't be there and shouldn't they just go make their own way in the world and figure that shit out? Like is that really going to make their lives better to inherit, you know, daddy or grandpa's millions or hundreds of millions? Like is that really worth sacrificing today to be able to give them something that they really might just mess them up anyway? Or what's your take on the generation wealth? Because I see different views on it. I want to hear your thoughts.
- [16:53]
Brian Ferguson
So I think it all depends on what your, what your, whether it's worth. I think is, because I've definitely seen the ones where it was just all certain age. They brought them in the business gave them the business gave them Everything. And they're not being good fiduciaries of what was given to them. You know, so a couple pieces. It would be tough because I have a friend that has the same approach. He's like, I'm not. I want to live my life with my wife. You know, I want to make sure my kids have something. But I'm not just going to, you know, I'm not going to not suffer, but I'm not going to do without, say, a trip, you know, to Europe, because I'm saving it for them. And I'm not saying that either. I'm saying I did the years, put in the grind, work to where we were set to a point, to where my family can have that now and does have that. Where this is part two of this 2.0 now, could we continue just to go down the same path? And we're going to spend it and do this. But my generational is them to be. I want them to be able to do similar things of what I've done, but just on a whole nother level, you know, they're not starting with fix and flip and duplexes and fourplexes and getting to 100 units. They're starting at 200 units and getting into institutional class, maybe a family office to where they're backing people like me that are looking to start out and have some experience. They're looking at deals like that. I just. I want them to get it to that next level. And I'm not saying I'm not going to get there, but I have an interesting situation, too. I mean, I'm. I'm 38, you know, you know, my wife, my daughter. I have two sons from my previous marriage. So I'm a Victoria person. I'm going to be. I love our market, but I'm not going to move off to New York or anywhere and kind of put my roots and just level into those massive deals. But. And I'm again, I'm not saying I'm old, but, you know, they. I want them. They can get out of college and move straight to that. You know, I was having a conversation one time and they said, oh, what do you think the kids are going to do when they move back home? I'm like, well, first of all, if they move back home, that's the first issue I see. Like, I don't necessarily want them coming back home. I want to give them bigger opportunities. I don't want to give them trust funds so they can drive Lamborghinis in college. That's not what I'm saying I want to give them to where they can level up to that, that next level.
- [18:53]
Joe Jensen
I love that and I love that concept where it's like I'm giving them basically just helping them start at level 10. But they still got to show up and they still got to play the game, and I'm going to teach them how to play the game, but they can just do it on a bigger left scale than, than I had, than I did. But they said again, they still got to show up and you're just giving them the vehicle to drive, but you. So they still have to learn how.
- [19:18]
Brian Ferguson
To drive and I'm mine structured that way. As long as I'm alive, it'll be structured that way. I have it structured that way when I'm not here. Nothing's given to them, you know, like they, they will work and they will earn it. If they choose not to do that, well, then there'll be some really happy charities out there. I don't know. I guess we'll leave it to that. But like you said, I started 01 and I ended up, you know, maybe I end on 10. I want them to start on 7 to 10 and end at 50 and then their kids can, you know, because it, it just, that will snowball effect the more opportunity you have at that point. And you know, I didn't, I didn't get the opportunity to go off and go to a nice college. I didn't have that luxury. I mean, I started in the auto industry selling cars. I was 17. You know, my dad signed a consent. There was no, there was no other options. Right. I want them to have the options, go get the education, whether they use the degree or not. You know, most, a lot of people don't nowadays, but make those connection, those frat brothers, you know, just, you know, get out there on the golf course and talk to people and, and then be able to bring something to the table because of what we provided for them. So it's a very long answer to it, but that's my outtake on it.
- [20:17]
Joe Jensen
No, that's great. I, and I appreciate that. I know that's not necessarily real estate focused, but, but it's always interesting to see because there is a sacrifice involved with what you're doing because you could just hang up the hat and, you know, ride off into the wind and.
- [20:31]
Brian Ferguson
Yeah.
- [20:32]
Joe Jensen
You know what I mean?
- [20:33]
Brian Ferguson
For sure.
- [20:34]
Joe Jensen
But there's something in you that, that's pushing you to, to keep going and that's got to be worth it, you know?
- [20:40]
Brian Ferguson
Absolutely.
- [20:41]
Joe Jensen
But that's exciting, man. So, I mean, so you, what would you say to somebody who's like dabbled in real estate? They've, you know, bought a couple homes, single family, maybe some duplexes. It's kind of like where you were. But they've never really been able to scale to the, to the big stuff. Or maybe you never reached out into commercial. But they've like, they're curious about it. What are the goods, the bads and like the, the heads up to thinking like that.
- [21:07]
Brian Ferguson
You know. A couple advices I would give. I mean, you know, there's the old advice, you know, I always regret the deals I've sold. I agree with that. And I don't agree with that. There's deals that I don't regret I sold. They just didn't fit in our, in our vision anymore. But I would say, you know, pick your. We definitely went all over the place, different asset classes and things over time. I would definitely. My advice, pick where you want to be in focus. If it's, you know, I know guys that are killing it and you know, just single family, single family rentals, vinyl in the masses, developing subdivisions. Hey, that's great. If you want to do self storage, you know, we bought a self storage last year. It's doing well for us. Am I going to expand into mass self storage? No, I wanted to dabble in it and we've realized now we've, we fine tuned our niche like we're, we're 100 plus, you know, ish or more multifamily retail neighborhood shopping centers. That's what we want to buy. I'm not saying that'll never change, but that is our focus. If something gets brought to me, we had a great building brought to us the other day. It was going to be an amazing single tenant commercial, you know, had like a warehouse showroom up front. Great. It was a good deal. Did we buy it? Yes, we bought it. Am I adding it to the portfolio for long term? No, we're putting some work into it. We're going to flip it, take some cash out of it and put that into something that does fit in. So I would say that's the thing. And then, you know, you just have to determine your strategy early on. Are you going to manage it? Are you, you know, do you have the time to manage it yourself? Are you experienced to manage it? Because we made plenty of mistakes along the way and while now we have a very established property management company that wasn't the case for years and we made a lot of mistakes. But just find your asset class you want to be in and figure out what your game plan is. You know, is it your full time, is it your part time? And I think all those are okay. Just don't try to be this massive. I'm going to be ten places at once. Because we've made that mistake and it's cost us. Because you lose focus here. You're doing great here, but how much did you lose over here? To your point earlier when you asked the question, is it even better by focusing on the syndication versus just focusing on what you were doing? In this case, it's been worth it. But there's definitely been times where I've owned Laundromats. I owned a bowling alley one time. I owned a show, a home showroom store that we just shut down last year. And actually that was our. One of our babies. We opened this amazing showroom. And there was nothing wrong with the showroom. It just. When we really dug in deep and we started running on eos, it just made us say, what is our true goals? And once we align those, we just realized this business wasn't part of it. These people, certain people that, you know in the company, when we looked at our core values, once we dove into all that, we just said we want to be laser focused on what we do.
- [23:43]
Joe Jensen
I love that. How would you suggest people figure out kind of what their niche should be? You know, because I look at. And maybe there's more ways, you know, one, I think you could study all the different things and just kind of run with whatever you think's best and just stay the course. You could dabble like you did with a bunch of different stuff. And then as you dabble, you gain clarity on what you prefer and then you go, stay the course. Is there a right way? Is there a wrong way or better way? Or is, you know, an alternative way? How does someone decide what their niche should be when they're like, well, I don't. I don't know, I haven't done it.
- [24:20]
Brian Ferguson
I think it's a piece of all of it. You definitely, you need to read. You need to do some research. Foolish. If you're not doing that, determine what the goal is. Because some people may say, look, my goal is maximum cash flow for minimal investment or what have you. You know, like the people do the Airbnbs or the Verbos, right? Like the vacation home stuff, you know, they're able to go put a special touch. A lot of their time and effort goes into it and then get massive. If it's in the right market, get massive returns on that single family investment. But the next guy may come along. And so, yeah, I just want to make sure, you know, I have a good retirement plan. Well, then I probably wouldn't Airbnb that house. I'd find a long term tenant that's going to give me minimal headaches. And, you know, so that is the big thing, like, what is my goal in doing all this? Because someone coming in like, I want to make as much money as possible, then it doesn't matter. Like you said, what was my favorite genre of real estate? It's commercial retail. Well, if that's not the most profitable, and my goal is to be as profitable as possible, well, I'm just gonna have to do something I don't like, which, I mean, I'm sure that you walk by someone 100 people a day that have a job they don't like, but it pays them well. So. But I would say a little bit of research and maybe a little bit of dabbling, you know, unless you're just laser focused or family's done it or you know, someone that's done it, I think you do have to try a few. But I would definitely say start small. I know I've met people that will get on a stage and say, my first deal was this big, I've never been smaller and hey, great, it worked for them. But if you don't have the experience, you know, and you think, I want to get into rental properties, yeah, I'd probably go buy a, maybe a duplex or a four, like try it out, you know. You know, I talked to a guy a while back, he bought a four plex and they, you know, with the new FHA va, you know, you can buy a fourplex, live in one of them. And that's what he did. So it paid for his mortgage, he lived in it and. But he sold his house to do it. And that's what was interesting to me. I said, why'd you sell your house to do it? He said, because I wanted, wanted to intimately know what it's like to maintenance. I'm going to fix every faucet, I'm going to fix every ac. And my first thought was, man, that's going to be a long road if you're fixing all the ACs. He goes, no, absolutely don't plan on fixing them all. But when I have 500 units and a guy tells me, or my property management tells me why I had to replace an AC that couldn't be fixed, I Want to be able to call, you know, BS on it. So I'm not saying everyone's going to take that approach and move their. He moved his family into a two bedroom. But how big of sacrifice do we want to make? What are our end goals? But definitely research it. And like I said, I think dabbling's okay a little bit. Just don't dabble too long and know when to get out if you have to and make sure you can afford to give out and have dry powder.
- [26:45]
Joe Jensen
I like that. I think that's such a good advice is like really like what's your goal? And people sometimes don't realize that. And it's funny because you talked about when you guys, you know, oh, we're going to let go of this property refocus because you looked at what your core values were, what your focus was, what you were trying to actually accomplish. And I always say there's lots of good deals out there that are good deals for other people. You know, that's an awesome deal, but it's not the deal for me because it doesn't align with my current goal. And sometimes the current goals are different than, you know, phase one goals, different than phase two goal, you know, Absolutely. This where for me is like phase one was just get out of the rat race. I just need enough cash flow to not have to work so I could spend my time and energy building what I wanted to build, you know, so phase one was just the cash flow at all costs. And then it's like phase two. Now I can focus on like, say like you're, you're not making any money off these syndications but you don't need to. And it's like that, that's a good now, now your phase changes because of phase one. Now you can focus on phase two. And if you're thinking about phase three when you're on phase one, you know that can be an issue. And if you don't know what your goal is at all, then then that's a huge problem as well. And, and sometimes I don't think people think about it enough. What would you say your guys goal is, Brian? What like if you were to put it in a nutshell, like what is the goal? How do you decide what to keep and what to focus on, what to avoid?
- [28:09]
Brian Ferguson
So our, we became pretty laser focused on this in the past few years and changed our company model. Really honed in on core values and company purpose. But so we have our, you know, we have our 1, 3, 5 and 10. Some will tell you 1, 5 and 10, some say 1 3, 5, 13 breed 10. But anyway we have all four. The goal between, you know, for our three going into our five is the transition out of everything. Single family and be an all long term holding. We're doing it in a strategic way to where our company that is filled with superintendents, acquisition specialists, disposition specialists, they all stay on the team plus more of them, they'll just be acquiring, disposing and managing larger assets. That's it's all it is. So we're, we, we used to have a residential commercial in all these divisions. We branded them all together under the Fergmar brand. So like we read off earlier like Kimberlite and all these. Actually we, that one doesn't even exist. Everything's gone deferred more now we name change them but it's cross training them, letting them all work in different, different departments. That way they're ready for the thing. Yeah, it's not. We're just going to lay a bunch of people off. We're, we're, we're, we're raising or training you and growing you into the next level. And then by the time we hit 10 year, we want to 100% be out of that side of it. So we want to be close to it at 5 and be there by 10 different steps along the way. Like this year was, everything we have is in Victoria county, which is a lot for you know, 65,000, 120,000 MSA area. But our goal is to expand out well by the end of the year, have closed on and we're currently underwriting assets in similar markets. So that was our first expansion one this year and then we'll have our 25 set. But that's how we plan to expand it long term. We want to be owning, holding, managing multifamily and retail shopping centers.
- [29:53]
Joe Jensen
They need a 10 years, that's all. We should change it to Ferg Mawr county, not Victoria County. You own it, we're close. I think you get the call. So I'm going to give you a little pushback here. I know it's semantics though, so don't get mad but I would say that's all strategy though. There's a reason why that's your strategy and again it's semantics. There's a reason why that's your strategy, everything you just listed, which is awesome and I love the clarity, which is like, man, that's a life lesson right there for everybody. But what's the goal? Why is that your strategy? Like I There's a reason you're doing.
- [30:28]
Brian Ferguson
Sure. But yeah, so it actually lines up so my children are 12, 9 and 5. So this is where it ties into my personally. So in five years I will be approaching going my son going into his senior year, moving off to college and at that point I want to be out of the single family fix. And flip is definitely a big time restraint on me. Like I said, it's my W2 so being being almost transitioned out of that or close to it by the time he goes off because I don't want to have a single time where I can't go watch a game or whatever. He does, he plays. Both my boys play select ball. My daughter does competition dance, just started that. So I don't know if they'll still be doing that there. But I don't want any reason why I can't miss it. I miss nothing now locally and I'm not going to change that. Whenever they move 100 or a thousand miles away, you know, I always say I want a condo in every city where they're at so I can go stay there even though I'm not wanted. And then my 9 year old will be right behind him. That gets into our 7, 8 year and then my 5 year old, we're 13 years away so that'll be a little past our 10 year plan of being fully, you know, into that. Just multifamily shopping centers. I can manage that from anywhere. I can do site visits, I can fly in and do site visits to whatever areas we're in which I travel. I do my site visits now. I would do the same thing, just maybe flying versus driving. But I want to be at that point where I can be anywhere the kids are. And then, you know, once we get past that 10 yard, my daughter graduates. You know, I want to be able to spend those years still managing, sitting at board meetings and doing it. But I want to spend the time with my kids, my grandkids and traveling the country. My goal is to travel the country with my wife once my kids start their own family. So all those years line up with that.
- [32:05]
Joe Jensen
So it sounds like the real goal to me is about the freedom and the flexibility which right now you're giving up a little bit of that because of the demand, but you want to release some of that demand so you have more freedom and that's where all that strategy came from.
- [32:19]
Brian Ferguson
Yeah, absolutely. Trading time for money. Want to not trade as much time for money? Eventually, yeah.
- [32:25]
Joe Jensen
I like picking your brand. I appreciate you letting me ask you the hard questions. I'm going to give you another one. Why. Why transition out of the flipping? You've got it systemized. You have teams, you have contracts. You've done all the hard work to have what everybody wanting to build a flipping company is working towards. Why not delegate as opposed to dismantle when I just. You don't want to. It's all heavy work. So give someone a job, pay them, you know, amazing salary, but keep the machine running.
- [32:54]
Brian Ferguson
You know. One, the answer has been that has been. And there's probably a company out there and I'd love to talk to them that has gotten to the same size and is completely hands off. I've yet to see. It's just, it's not a playbook you can go by. You know, every time you open a wall, it's something different. You can have a really experienced team, but there's so many audibles. It's always taken involvement. It's, you know, plus your, the, the acquisitions piece of it. You know, unless you had someone that was signing off on it completely able to make all the decisions with the money, you know, to where I want. I'm not signing closing docs. There's just a lot of moving pieces. You'll have those same moving p if you're buying, you know, $50 million complexes. But it's a lot less often throughout the year. I mean, in one week, I think last week we did 15 transactions, 15 sets of closing docks. We had to source funds for so many deals which most of them we fund ourselves. So it's just a lot of moving parts. And you know, now if this thing, you know, as we. The more we. We're trying to transition out of it got to where it was these directors and the company could 100% run. And I didn't touch anything. Sure, that may transition my thought process on it, but you know, that, that hasn't happened to date. You know, I transitioned out of it for a few years when I started focusing on some of the other divisions and it did okay. It just processes different things. Didn't grow the way we would have wanted them to. Neither did the line, you know, the revenue line. And then the second we come back in, we're gearing up, we're taking off again with a, with a great team. Don't get me wrong, I'm not taking anything away from the team, but it would truly have to get to a point where I was completely hands off for that to be the case. And in my 18 year experience, that hasn't There, there's divisions that I can be very hands off and I talk to them once a week. And then there's the ones where you're every day, every morning, you're, hey, you know, you're, you're, you're in some type of decision making. And that's one of those, that's one of the divisions.
- [34:42]
Joe Jensen
Yeah, it sounds like to me you're saying it's like, you know, yeah, you read a textbook and it says, yo, delegate it and roll it in. It's not that simple though, to find someone that can tr. Do all the work that isn't just bringing it back to you. It's not that simple. And bringing it down to like a real low level compared to where you're at is just, just property managers. I think the same thing. It's like I have issue with hiring a property manager and I take as many calls from my property manager as I did my tenant. I'm like, what's the point in paying you when you're still just bringing it all to me? I like, it's just like, I'll just take care of the tenant myself. And it's like, yeah, you can hire someone to do your role, but if they can't actually do it all without you and they have to bring everything to you, that's what's the point. Right.
- [35:28]
Brian Ferguson
Well, and I will say one clarifying point on that. There's definitely an option to where I'm not like just dissolving it. There's an option to where that great group of people say, we want to continue being in this space and we don't necessarily want to go be in multifamily and commercial. We want to stay in this space. There's definitely an opportunity where it becomes theirs. So very open to that piece as well. Like it becomes their company. Maybe, maybe I hold some type of share in it and I sit on a board and I talk with it. But it's their day to day, it's their baby. So that's for sure an option. We wouldn't just shut it down. I just don't want to be in the day to day of it in five years.
- [36:06]
Joe Jensen
Right. You could retain some equity and ownership, but then let them. The people that have put all the work. Absolutely.
- [36:12]
Brian Ferguson
I tell them all the time, my kids are never going to come in here the day after they graduate college and say they're the boss. That will never happen under my watch. They will. The kids decide they want to come work in this company, they are going to start Cutting yards in the summer, property management and maintenance over another summer and work their way up. So the company, if it goes to anyone, you know, I want wealth I can give my kids to help them get a great start. Like you said, that level 10. But these businesses that these, that our team now is putting their, you know, blood, sweat and tears into, if it goes anywhere it goes, it'll go to them.
- [36:43]
Joe Jensen
Yeah. Do you like winning, Brian? Are you competitive?
- [36:49]
Brian Ferguson
I didn't play sports at all growing up, but I don't like to lose at anything either. You know the reason I don't go to the casinos a lot, so. Yeah, but yeah, I mean, it's tough, you know, because I guess I would say yes because I've always taken the approach. I love the money aspect of it. Right. Like if you close a great deal that you've been working on for a year or five years, like seeing a big check deposit, that's amazing to me. That's, that's kind of part of how we keep score though, right? Like, you want to be the best at what you're doing, and in our world, you should be making really good money if you're the best at it, so. But I don't watch sports. I don't know, maybe that's because it would probably give me a heart attack. My dad's a huge sports fanatic and I think he's going to have a heart attack every time the Cowboys lose, which is frequent.
- [37:38]
Joe Jensen
So that's too much then.
- [37:42]
Brian Ferguson
Yeah. And he has a bad heart and he's 71. Yeah. It's not a good combination. We know.
- [37:46]
Joe Jensen
But yeah, if we, if we could just get the Cowboys to, to win more, I think the healthcare costs in Texas would cut in half.
- [37:53]
Brian Ferguson
You know, that's probably a fair point.
- [37:57]
Joe Jensen
Okay, I'm going to give you one last hard one and then we'll go to some easier questions. So why, why, why not just step back now, man? Like, you've got young kids. You don't want to miss that life. You're working a lot. Maybe you're not working a lot, but it sounds like you got a lot on your plate. A lot of response, responsibility. Why not? Like, how much money do you need to be able to step back and just enjoy it?
- [38:19]
Brian Ferguson
I feel like stepping back, we could 100% do it. May take, you know, maybe take, you know, it would probably take shutting down a division or maybe selling off a good size asset or two. And then, I mean, I could probably, you know, why 100%, we could sell off Assets, there's so much equity in there and I could passively invest that and within a few years time probably have the same bottom line we have now. Just, it wouldn't grow as fast but to me, you know, so I have an interesting schedule. You know, I start at 5am I go to the gym, you know, my office. When I, when we built this new, built out our new office, I put a shower in for this exact purpose. We were, I was planning for this. I get here, I shower, I'm in my desk at 7:30 for my first meeting. But you know, I'm out of here by, if I need to be out here at 4, I'm out of here at 4, 4:35. I used to have to take a ton of work home and there's, there are times I, you know, I take it home. Maybe I need to do a few things on the weekend or the evening, but it doesn't consume me, you know, getting, changing that 5am schedule, you know, the kids are in school anyway, I make myself available in the summer. But the way I see it is the heavy lifting isn't necessarily computer work at night. The heavy lifting for me is more of a mental heavy lift. It's that it's all the moving pieces processing through your brain and trying to be the one that puts that together. But as long as I can bear that mental burden while still growing financially and it not become a burden when I walk through the door of my family, I think that's the equal mix. The second I can't be the dad or husband I need to be because the financial struggles at work are too much, then it's time to step back. So as long as I can balance that, I think if I stopped any sooner than that point to me I feel like it could even be considered selfish. It's less I'm doing for my families and for that generational wealth portion as long as we're still growing.
- [40:04]
Joe Jensen
Brian, you're super sharp. I really like your answers. I love the concept and maybe this isn't what you meant, but this is kind of what I took from part of what you said. So many times people talk like, oh, the hours they're working or whatever and it's like a lot of times it's likely like you don't want to sit at home and do nothing or whatnot. But you talk about the mental load. You're like, as long as the mental load is doable so that I can show up when I am home and I can be present, I don't have to take it all home, then that, then I can do the hours. It's not a big deal. I don't mind the work, but it's the mental load that you have to, to be cognizant of that it can take over your life. And that's whether you're working 15 hour days or working 4 hour days. You know, if you constantly have this mental load where you're gone mentally from your partner, from your kids, from your friends and your hobbies, your interest, you just can't think of other stuff because it's so heavy. It's not even about the work hours. You know, that's a more, a more important metric to look at when deciding how to pivot your life and your business than just set of the hours. And I don't know, I really like.
- [41:10]
Brian Ferguson
How you articulated that you're 100% right. And the thing is like, you know, don't get wrong. You have to be there physically. Like I don't miss a soccer game. I don't. You know, my wife loves taking them to practice. So sometimes, you know, I'll be at home with the kids. But you know, like the past, they just went back to school today. So we've been, you know, we had this thing, we have practice every day with select ball, select soccer. So one of them has practice every night. But I, I make dinner, I sha. Shower. The other ones, if it's my older one there we go for an evening run, kind of get a second little cardio session in for the day. We eat and then they want to play Go Fish and this game called Garbage. We want, we want to explain how to play it, but super simple game, look it up. And we play it every night until it's about 8:45. And then I'm like, all right, time to wind down. Y' all get to stay up because it's summer. I'm going to bed. But if you couldn't, I could be there all day long. But if you're too stressed out, what is it? You know, what does that matter?
- [42:02]
Joe Jensen
I love that. I love that. I think that's something I could apply better in my life. What's the mental load? I love that. I want to ask you a couple questions we usually ask most our guests. One of them is what's one of the most expensive or interesting quote unquote mistakes that you've made in real estate investing?
- [42:25]
Brian Ferguson
And I've been asked that one a few times. That seems to be a common question on some of these shifts, you know, it's not a single. I could definitely tell you a single event or, you know, where we made a bad decision on a deal. There's, there's, there's plenty of those. But right now we operate on a, like a full accountability chart at the EOS system, and that's how our leadership team operates. And it took, you know, we just started on this about a year and a half, two years ago. So you're 16 years without that happening. Just taking that long. For me to think that I needed to be the best at everything was such a massive mistake. And it. Now that I know that, you know, surround yourself with people that are better than certain things at you and don't be fearful that they'll take over those pieces of it. Right. You don't want to be the smartest person in the room. It just took me so long to get there from our team or from, you know, the syndication model of bringing in investors and sharing and growing together. I just used to have such that I need to be the one to do it. I need to do this. And now that I've surrounded myself with great people, the growth has just been phenomenal. And I could just only think if I would have figured this out 15 years ago, where we could be today. So I don't even know how you monetize that, but. But I know it's a big number that we've lost.
- [43:46]
Joe Jensen
Yeah. So that leads my other question, really. Well, then, if you did have to start your real estate journey over knowing what you know now, not having the portfolio you have now, but knowing what you know now, but you're starting all over, what would be your first, second, maybe third.
- [44:05]
Brian Ferguson
Knowing everything I know now, there'd be a caveat. Would I have been able. Would I be able to execute it the way I did now without my experience that people know? But I definitely would have gone into the. I would have partnered faster with people. People that had, you know, either a. That had done this and had the experience. I. If I would have started, I'd have gone and found someone that was very experienced in the world I wanted to be in. I'd have brought them on, and then I would have immediately started a syndication or some type of partner route and to grab bigger assets faster, because the ones that I've missed along the just kind of make you sick. And I just didn't have the money to do it. And I didn't have the money to do it. So they just weren't deals, but they were. I just, I had something to Bring to the table. I just didn't have the money. And the money should not be the only thing that holds you back in this world. We're far too advanced nowadays. The money's there. You just got to go find it and surround yourself with the people that can help you do it. So that's where I would. I would have started. Step one partnering. I would have. I still would have done a few small deals with my own money to get some experience, but I would have much quicker, maybe on that second, third, fourth, fifth deal, brought in someone with a higher experience level, started bringing the capital in and gone off, gone after the bigger deal sooner.
- [45:20]
Joe Jensen
How would you structure a partnership like that? Let's say someone's listening. They're like, yeah, that's what I'm going to do. I've got my feet wet with the other stuff. I want to start. I want to do what you just said, Brian. You know, how would they look to structure a partnership like that?
- [45:34]
Brian Ferguson
So let's, you know, let's live in a. Let's let. Let's say. Okay, let's say. The way I see it, you know, let's say Joe's like, man, I've done some. A few flips. I've done some fourplexes, duplexes. But now I want to go after this 70 unit. I don't have the balance sheet to do it. I don't have the experience to do it. I don't know. And I, you know, but I got a few friends and family that'll invest, but maybe they won't invest the whole thing. I would say, you know, they call someone like myself, someone with that, you know, larger size portfolio and get them to partner. Maybe they sign off on the balance sheet. There's gonna have to be some comfort level there. Obviously, there's some disconnects if you're in the same market competing. But find someone that maybe is in a different market that you can meet. Because in this world now, I mean, again, you can meet people from Colorado all over the place, and it's not hard to do. You know, take. Take that. You know, take the money you spend going out to eat or Chick Fil A one month and buy a ticket to a conference, meet some good people, sell yourself to them, explain how hard you're willing to hustle and get them to partner with you if they have the experience. You know, I. We get the calls. We've never had one go to, you know, full cycle, but we've definitely had what people call us. And they want Us to partner just clearly, hey, you don't have to put any money in the deal. Sometimes they're not even asking you to sign as a KP on the deal. They just say, we want your operational and management experience, we want you to be a resource. We'll give you 5% of the deal, yada, yada, yada. And you know, even in that aspect, if it's free money, I'm only going to do it on something that feels right for us. I only do business with people that I like and that I want to do business with. We made that decision a long time ago. But that would be my approach to them. Like, first things first, buy yourself the education piece. Go spend $200 on a ticket in Houston. Whatever's closest to you. That's what's close to us. Meet someone. It may take a few of them, maybe take you a year, but just make, make that partnership. Someone has the experience and go after the deal you want.
- [47:19]
Joe Jensen
So if they, what you actually kind of maybe already answered this, but what criteria would the, would you be looking at if you're the partner? They go to like, hey, you know, I want to hear, here's something. What are you going to look at? Where you're like, yes or no? I like one aspect. You're like, do I like, do I want to work with the, this person is, is one variable that you're like, it's a deciding factor. But, but what about some of the, the, the nitty gritty details of like, what, what's going to be attractive to you as the deciding partner?
- [47:51]
Brian Ferguson
I'd ask him a few of the questions you just asked me, right? Like what, what's some struggles you've had? What have you done along the way to get here? Like, do I want to know, do you have any experience? And then I just want to know a history. You know, where do you work now? Like, how long have you worked there? Almost. I want to see your resume, right? The same way I'm going to interview someone to a certain extent. Oh, in the past five years, I've had 18 jobs. Not one lasted more than three months. Yeah, I'm probably out, right? Let's say you call me and go, oh, well, I'm a, I'm a server. I'm a server at Red Lobster. I've been there 12 years and you know, I'm making X dollars and I've saved some money back and I bought one rent house. Like, that person probably doesn't have a real high net worth, but they've Showed commitment. They've bought a little rent house. I've went to these classes. I just want to see what kind of commitment and grit they have because education's there. You. But you can get your own education nowadays on the Internet to a certain extent. But, oh, yeah, do they have. There's just that burning piece that separates most of us from the others. Don't get me wrong, some of these guys had a great start, had a ton of money when they did it, and they're going to make a ton of money along the way. But the ones that didn't start with that, that need that help if they don't have that, just that burning fire inside of them to do whatever it takes. And, you know, I don't know if there's, there's not a surefire way, but I think you can see a lot of that and what kind of determination someone's had. Again, to me, it's just like an interview. You know, what have you done the past five or ten years? Because we can all say, I want to go and invest in real estate, I want to make them. Or. And then you ask them the why? Like, I just want to make a bunch of money. That's great. But have you done anything to get yourself closer than that other than calling me and expect that I'm going to do it all for you?
- [49:24]
Joe Jensen
You know, it's interesting for the listeners. You know, one thing I want to point out you didn't say was, well, I need the, the return on the deal to look like this. I need the, the capital. You know, the bottom line. You didn't even talk about the deal. You know, it's like, if it makes sense, you'll run it to your, your systems. If it makes sense, you'll do yes or no on the deal. But the real question is like, I think of Shark Tank, it's like you're investing in the person, not just the product. And, and I thought that was very poignant how you. That was your answer. And it had very.
- [49:53]
Brian Ferguson
We would look at the deal at some point. We would look at the deal at some point.
- [49:57]
Joe Jensen
And that's, that's spreadsheets. That's deals. That's, you know, most time.
- [50:00]
Brian Ferguson
Those deals, if they're giving you a certain percentage most time, what you're going to return on that deal is not enough to probably be worth the time you're gonna have to pull away if you're successful, how much time you're pulling away from your main companies to do that. It's more of A mentorship, like you're doing it to get them to the next level. But you're right. Like people. I say the same thing with investors. Some investors invest in the deal, but every investor we have ever written us a check, said, I'm investing with you because I like you, because I talk to them one on one, every single one of them. But we don't have this mass social media presence where we take every investor that wants to give us money. You know, we've turned checks away, but same aspect. I think everybody does business who they want to, who they feel comfortable with.
- [50:40]
Joe Jensen
Yeah, I love that. What's a book or podcast recommendation for.
- [50:45]
Brian Ferguson
The listeners right now? If you're in a growing company? I can't tell you enough. You know, the eos, like we run on eos. I listen to that podcast every time an episode's done. I reread the book constantly. But it is just if you're scaling, if you're just starting a business, maybe you don't need it yet. But if you are scaling and you have. You're trying to figure out how to get the right people in the right seat, how to find accountability, and. Or if you're say, I have 50 people working for me or five, and I'm doing everything myself, man, that just. That changed my entire life. That's what's allowed me to be home at 5 o'. Clock. Because we have the right people doing the right things. And I spent 16 years worth of stress. So I just. Tons of great books, but that one and Patrick Lenciones is six geniuses. I just finished reading that for the second or third time and tying that into all the leadership in our team, but that's just really where my mind's at right now.
- [51:42]
Joe Jensen
I love it, man. All right, last question. One word or short phrase to encapsulate why you love real estate. Investing.
- [51:56]
Brian Ferguson
Everything can make money, but you have to do what you love.
- [52:02]
Joe Jensen
Love it, man. I love it. I appreciate your time, Brian. You let me have fun with this one. I feel like I was able to just kind of go hard on you and some questions and pick your brain, and you really deliver with the answer. I can tell there's a reason why you're where you're at and what you're doing, and it's cool to let us be able to kind of take a peek inside of it all.
- [52:21]
Brian Ferguson
I appreciate it, man. Thanks for having me on.
- [52:24]
Joe Jensen
All right, without any further ado, this is Joe Jensen signing off for the Real Estate Investing School podcast, reminding you to think about the mental burden, not just the time.