← The David Greene Show
The David Greene Show
BRRRR Is ‘Dead’— Here’s Why This Investor Is Still Printing Wealth I Episode 114
00:54:45
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- [00:00]
A
Welcome to Real Talk Real Estate, the show where we cover how to build wealth in real estate with no fluff, no BS and no sales pitches. I'm David Green and I've been doing this for over 10 years. I've seen the ups, the downs, and everything in between. This is the show where we pull back the curtain and show it to you too. So if you want to build wealth through real estate or you just love learning about it, you found your home. What's going on? Real Talk Real estate. Welcome to the David Green Show. Got a banger for you today. I'm joined with brrrr investor, real estate supporter, kind of overall real estate nerd. Maybe we could say Tony Javier. I mean, he's not really a nerd. We're all nerds if we like real estate. But he's having some success in today's market with the BRRRR method, which if you may have read the obituary of apparently is not true. It's not dead. You can't make it work. You just gotta be like everything else in buy and hold real estate really tight on what's going on. And Tony was cool enough to come on today and share what's going on, what's what he's doing and how we can all kind of learn from it. So thanks for being here, Tony.
- [01:00]
B
Absolutely. Looking forward to this.
- [01:02]
A
Okay, so tell me a little bit about, like the market that you're working these in. Are you all across the country? Are you focused on one place?
- [01:10]
B
Yeah, I was born and raised in Wichita, Kansas. So that's my market and that's where my team is. I currently live in Boise, Idaho. I moved away from Kansas back in 2015. Fortunately, I was able to get my operation where it didn't need me anymore. So moved to California for 10 years and just recently moved to Boise. So I'm just focusing on Wichita, Kansas, where I know the market and I've got my team.
- [01:33]
A
Awesome. So you're all in on Wichita, but you're not living there. So you're using long Distance Principles and Burr first two books I wrote. So this is the perfect person to talk about. Have you noticed anything changing with the brrrrs you're doing when you're not in the market yourself?
- [01:51]
B
No, I mean when I moved away 10 years ago. Oh, no, no more than 10 years ago. Yeah, exactly 10 years ago, about 2015. I was a little scared to move and when I made the move, I kept going back every two to three months to check on things. And eventually I realized that I actually Manage things better from further away. I can be a little bit nitpicky on things. I could kind of, I don't want to say micromanage, but I just like things done a certain way. And so I was able to have a really good team set up. I had really good systems set up to where they just, they were able to run things without me. And it allowed me to look at things from a higher level. And like even to today it's, you know, if I can, I can look at spreadsheets, I can look at, you know, the KPIs we have and I can have, I have, I'd like know exactly how we're doing and as opposed to getting into the nitty gritty until like visiting properties and you know, doing punch list items and stuff like that. I can, I can look at, okay, how are our numbers doing? Are there any other marketing methods that we can put in place? Are there any other, are there marketing methods that we can make better? And like even implementing new CRMs, we just, we're switching over our CRM. That's something that, you know, if I was in the weeds, I probably may not have seen that we needed a upgraded system. And so it's just, it's just to me it's a lot easier to manage from further away now. That's if you have a good team. You know, if I were to try that in 2010, there's no, no way I would have been able to do that just because my team wasn't solid. I was just net just back then kind of making better decisions on hiring. But once I got my core team in place, it allowed me to kind of start thinking about, you know, where I wanted to live because I knew I wasn't going to be in Wichita, Kansas forever.
- [03:53]
A
So how is your team currently made up? Like, what are the different jobs and what are they doing?
- [03:58]
B
Yeah, so my sister I hired 15 years ago, 2010. I kind of hit rock bottom and fired my whole staff. And you know, I think we had four or five employees at the time. Time and then hired her and she basically took the job of like two to three people. And then she started as a assistant and property manager. Then eventually she started doing transaction coordination. Then eventually she moved into project management and then we hired property managers and assistants under her. And she's kind of a unicorn. She does acquisitions and project management right now. But she does have a support in acquisitions. So we do have an acquisitions person that is in place as well that she kind of just oversees and he Basically helps her to do the job of acquisitions while she can oversee it. And then she does project management as well. And our head maintenance guy, who's been with me for 13 years now, helps her with project management. And then we just hired her another project management assistant. So we have an acquisitions team, we have the project management team, we have property management. We have over 100 rental properties that we own and manage there in Wichita. We have a transaction coordinator just recently hired an operations manager. And she's really there to look at the numbers, implement any new, like the CRM we're implementing. I kind of gave her that project. We are hiring more guys on staff. We found that we like to subcontract everything we do except for minor plumbing and minor electrical, because our guys can go in there, do it quicker and do it cheaper and punch list items. So as you know, if you do a flip, there's just usually things that you forget about or don't see until the end. And then to ask a contractor to give a bid and then come back, it, you know, could take two weeks for that to happen. And so our guys just go in in one day and knock out a whole punch list of stuff and we can get the house on the market quicker. So we have about three guys on staff, three or four. And our goal is to double that here in the next six to 12 months. And our operations manager is there to, to take on that project and, and push that forward. Probably missing one oh, lead manager, which we are moving to AI on that, I believe. And I'd like to get your opinion on that, on how you feel like AI can take the role of lead managers. And I think that's it.
- [06:41]
A
These handymen that you've got that are handling all the minor stuff, are they like full time salaries, full time employees, or are these people? Yeah. So they're just working for you alone?
- [06:51]
B
Yeah, they're full time for me. One or two of them are just basic laborers. They can do just basic stuff, clean up, you know, go get materials and give our guys a hand. And then I've got the other two to three are skilled guys. They're higher paid. They can do plumbing, they can do electrical. I don't have them do like paint or sheetrock or anything like that. I just feel like, you know, those are more specialty kind of things. But yeah, we like having those guys on staff because it just make, you know, we can save a lot of money in different areas and we can just get things done a lot faster that are kind of smaller items.
- [07:26]
A
Oh, yeah. If your contractor has to run to Home Depot to buy the different kind of screws that they didn't have, you're taking a highly skilled person off the job, making them sit in traffic. When you could just get a person that can run and buy the stuff and have it taken to the job site, clean up the stuff that gets left behind, prep the next day's thing for them to get there. And you can. I mean, you kind of have to. Skilled labor likes to just do the thing they're skilled at. That's what I've learned. They do not. Most contractors cannot organize money in cash flows. They. They never have enough money to pay their guys. They're not good bookkeepers. They don't even bid jobs. Great. Sometimes you get a bid for a job, it's four grand, and then someone else bids you 26 grand. You're like, how on earth is this happening? They're good at swinging hammers and doing the stuff they do. And so the more you can take off their plate, the better work you're going to get and the faster it's going to be. Unfortunately, you have to get to a certain level before really afford to take them on. In the meantime, you're gonna just have to pay more because they don't work for you. And I think this is where a lot of investors are stuck is they're looking at, I want to be a real estate investor, and I want to do one deal every six months. And they don't have some of the inherent advantages you have being able to do this at scale. And so they wonder, well, how could I ever. How do people do this? How do they do five at one time? I can barely get the one done. But there's some efficiencies that you create as a business owner that other people don't. Do you have any advice for just the person who's kind of struggling to give them some hope that if you keep doing this, there is a path to get where the numbers make more sense.
- [08:58]
B
Yeah. So I kind of learned this in the beginning. You just have to have good systems and processes. Right. So when, you know, everyone does it differently. But when we, like some people, when they. When they go into a job, they will actually give pricing to the contractor and say, hey, here's my pricing. Can you meet it? Which, you know, can work for us. We know what our estimates are, and we will go with. To the subcontractors. So we. We are the general contractor. There are some people and there's some markets where you can hire a general contractor and it just makes more sense for us. We want to be the general contractor for a few reasons. One is we can control the cost better. So as opposed to a general contractor has his subs, we have our own subs. So we're going to say probably 10, 15, 20% off the top, just right there. And then we feel like we have a little bit more control of the job. So if, let's say a painter messes up, you know, we can go and we can find a painter to get in there very quickly. Whereas if we hire a general contractor, their painter messes up, then we're relying on them to kind of clean up that mess, which they are not going to be as efficient, they're not as good business owners, and it just, it's not going to be nearly as efficient. So I would say, well, first of all, some people just take on too big of rehabs for their first rehab, right? And I think that's probably one of the biggest things, you know, is making sure, you know, you can manage a rehab, you know, efficiently. And that's not getting too, too, you know, getting too big of a rehab, you know, right out of the gate. And then don't just go with every contract, you know, any contractor that's going to bid the job and say they can do it, right? I mean, be a little bit picky on your contractors. Get, you know, see if they have reviews. A lot of them maybe don't, but get references, you know, go to other, other real estate investors that are doing flips. Get their, you know, maybe they are willing to refer their contractors over to you if they're not too busy and just have a good plan in place. You know, you got to have your contracts in place, you got to have your timelines in place. You have to manage expectations. I think that's probably the biggest thing. If you throw someone in there and just say, hey, here's the job, here's the budget, you know, what happens if it goes over budget? What happens if there are unexpecteds. How do you put all that in writing? You know, it used to be that, you know, people would give me verbal change orders and then at the end they would be like, oh, well, I, you know, told you it was gonna be an extra $2,000. I'm like, no, you told me an extra thousand dollars. And if you don't have that in writing, then, you know, they're gonna get upset and then they're gonna try and sue you and it just, it blows up the whole thing. Good systems, good processes, everything in writing. And just be choosy about your contractors, because a contractor can make or break a deal. I mean, I can't tell you how many deals that I funded myself for other investors where I would say probably 75% of them ended up firing the contractor and had to. Had to find someone new. And unfortunately, no matter how well you vet somebody, I mean, I vetted contractors really well going into, like, new markets, and their references look great. They'd been in business for 30 years, they seem professional. And then when they get into the job, like, stuff happens, and you just kind of have to be prepared for it. Make sure you don't pay them too much money up front. That's another deal. You know, some contractors want 75% up front, 50% up front. And typically the way that I do that is I might give them like, closer to 10% up front before they show up, and then I might give them a little bit more as they show up and start doing work. But if you start getting. Giving contractors 30%, 50% up front, the chances of them showing up is going to. Is not showing up is going to go up dramatically.
- [12:54]
A
It's the human element. In fact, you mentioned AI. I think, unfortunately, this is why AI is becoming so popular. Human beings have become more increasingly difficult to work with as our standard of living has increased in the world, our expectations have gone up, and we've sort of, in my perspective, we've lost touch of how we fit into a bigger picture. We tend to think that we are the whole picture. So on my real estate team, my transaction coordinators thought they were the glue that held the whole thing together, that they were so important. And the showing assistants that opened the doors that barely know anything about real estate at all would come back and say, I want to hire split because I'm the one running around all the time doing the work. And the agents that were the ones negotiating with people would always say, I deserve a bigger piece of this, not them, because I'm the one the client's yelling at. But how do you tell the agent it's because you're not that good yet. You've been doing this for nine months. You still don't know anything. You need so much support. Like, they get their feelings hurt, and then they withdraw. So it becomes very difficult for just humans that maybe 100 years ago were like, I want to make sure I eat today. I don't want to starve. They came with a good attitude. They were loyal to each other. You feel pressure as A business owner to keep these guys working. You put them on a salary so they have guaranteed income. If that puts pressure on you to make deals happen, then maybe you, you don't want to make happen because you're playing your part. But I don't know that the people in the support roles always feel the same way. I think that there's a lot of like in the political atmosphere, there's a lot of victim talk where people start to think that they deserve more than they do, frankly. And you can get more in life if you get better, right? The contractor who learns new skills and can do new things and can do it faster, can take on more jobs and be more productive and make more money. But it is a challenge, like you said, when you're looking for a person to trust with your job and you're going to give them 40, 50, 60, $70,000 at the of the day and you're going to be left holding the bag for whatever they put together. If that hot water heater goes out or that roof wasn't put together, well, it's on you, it's your money. They've already got paid and they're off on their own. And it is very difficult to make this work with people. I found that the people that tend to do that you can trust the most have just done it for a long time. And it's a character thing, like they're a person whose integrity matters to them, their reputation matters. They will work a 16 hour day to do it right because it bothers them if they cut a corner, they can't sleep that night. And these are never, these people are never going to have passive income. They're going to be working hard in order to be reliable. And I don't know about you, but I think one of the biggest and most harmful parts of propaganda that spread through real estate investing was this idea of passive income that you will just get money coming to you because of something you did in the past. You got in really good shape at one point and now you're ripped for the rest of your life and you don't have to exercise anymore. And it's been sold and people bought into it and then they become very disenfranchised when they step into the business and they realize like everything else, if I stop paying attention to this, it will fall apart and it will cost me money. And it's like that for the workers, it's like that for your staff. It's like that for you as the leader. You're constantly having to Pay attention to all these people. How are they feeling? What are they thinking? Are they getting resentment that's building up? Is there friction between people, whatnot? Do you just have any advice for those that are discouraged because they stepped into this, not expecting the level of attention you have to pay to all the pieces that are involved in this?
- [16:52]
B
I think I stuck around for 24 years and been able to multiple businesses because I think I'm just.
- [20:13]
A
I mean, you mentioned prices going up. I think in addition to that, expenses have gone up. When I got started, insurance was almost like you didn't really need to pay attention to it. It was so small, it just barely mattered. My goodness, insurance now, especially on expensive houses, through the roof in some areas, taxes go up in a lot of areas, I think taxes are going to continue to go up. As America gets deeper into debt, the federal government has less money to give around. We're kind of seeing that in the news today. So states have less money to give around. Well, guess what? They got to go to the people that make the money and those are going to be the asset owners and they're going to increase taxes on you. And there may be rent caps that are being put in where you can only increase rents by so much, but they can keep increasing expenses on you. And it's not meant to discourage people because it's still better to do it than not to do it. But you do need to temper your expectations. You kind of need to look around in the environment you're in and have realistic expectations that maybe if your expectation is to pay a Property off in 12 to 15 years, you can have that passive income that at one point we expected on year one, the second we bought it doesn't mean don't do it. But maybe it does mean expect to work a little bit harder because guys like you are still making it happen. When we're being told constantly you can't burn today. I can't tell you how many times I've been told Burr doesn't work and like, well, what long and hold strategy is working? I'd love to hear that because it's the same pressures that are affecting all of it. I think most people's biggest struggle right now is probably an acquisition because again, I'm speculating, but it looks to me like so many people have left their W2 jobs because they don't like them and they want to be in real estate that we have been flooded with wholesalers, we've been flooded with bird dogs, we've been flooded with people that Are like, I want to do this type of a thing. But they're not getting good training in how to do it with. They're just, it's like a volume thing. Just unleash this huge locust flock out there on whatever sellers are there, and eventually one of them gets something. What advice do you have for what kind of efforts you're actually making? To consistently be putting properties under contract that not only will cash flow, but if we, we have to think about the fact you're also paying salaries to people. So your deals have to be that much better than the average person's if you've got the overhead of your staff.
- [22:26]
B
Yeah, we, we are very omnipresent in our marketing, which means that we are everywhere. You know, newer investor, that's tough because you need to find one marketing channel you can afford. You need to be able to, you know, implement that, do some deals, make some money to where you can now put extra money into a second marketing channel. So, you know, back in the day when I first started, I, I think phone book was my first, you know, marketing channel. And I was actually able to crush it with, with, you know, based on the returns anyway, you know, I'd spend a thousand bucks and I'd make thousand bucks a month. So I'd spend 12,000 a year and I'd make, you know, 50 to 100 grand a year. You know, from that. And as time has gone on, it's become very, very competitive. And eventually we did direct mail. Direct mail. You used to be able to mail out and get a 3% response rate and you could send out a direct mail piece and know you'd get, you know, two, three, four deals under contract. Now your response rate, I haven't looked at it lately, but I think if you even get like a 1% response rate these days, that's pretty good. So that is very competitive. Back in 2012, I accidentally stumbled across TV commercials, and that's by far our number one lead source and has been the most consistent over the years. You know, there's a lot of different benefits of tv. The branding, the direct roi, the credibility. You're doing things that not many other people are doing, which is really how you get deals these days. You have to do things that other people aren't doing or do them in a different way than they're doing. So TV commercials is our number one lead source. I'd say, what was it, three or four years ago? We started radio. Radio is another mass media that works really well with TV. So that is, I think our top three. So I think TV's number one postcards and radio are two and three. And then we sprinkle in Facebook, Google, PPC. I own commercial property in Kansas and I've got a big digital billboard on a major highway, which is not a great return overall. But it's good for branding and I think it helps our TV and our radio efforts and probably our postcards. But these days, in order to be highly successful, I feel like you have to have at least two to three marketing channels, if not more, because, like even tv, TV is very consistent, but there might be a couple months that TV just for some reason doesn't perform as well. And so we need other marketing channels to pick it up. And it's, you know, from a wholesaler standpoint, I think we bought, we bought a few properties from wholesalers this year, and in the previous 24 years, we'd bought one in like the 24 years. And so, you know, you can. Some people depend on wholesalers, but I don't think that that's a great way to, you know, something to depend on. Some people, ppl pay per lead, they depend on even Google ppc. A lot of people are coming to us and asking us to manage their TV commercials or implement tv because Google, I mean, gosh, in a, in a flip like that or even like Facebook, when they made their changes, you know, something changes in the algorithm and all of a sudden, you know, even with ppl pay per lead, I think some people still do make pay per lead work. But now there's so many pay per lead providers that I think those leads are getting sold to so many people. And once you start calling them, they've already talked to maybe one or two people. And it's just. That's become super competitive as well. And the costs have gone up. I mean, you're talking about costs going up. I used to be able to buy PPLDS for 50 bucks. Now I'm lucky to find them for 250. And the quality has gone down on.
- [26:31]
A
Top of that because they may be being sold to three or four other people.
- [26:34]
B
Yep, exactly. And sellers are more knowledgeable these days. I mean, I think it was even six, seven years ago we were the only one called on a lot of appointments, especially 10 years ago for sure. But now it's like we go to an appointment and it's like, oh yeah, we have three other people, four other people showing up later today.
- [26:55]
A
Oh yeah, just like a real estate agent going on a listing appointment. The off market kind of has Its own market. It's not really. There's no off market anymore. There's a market for off market, if that makes sense.
- [27:06]
B
Yeah, yeah, that's true. That's definitely true. And so, you know, with that you used to have, your sales team used to be just have to be mediocre. You know, if you did good marketing, they could go to the property. They were the only one there. But now it's like, man, you've gotta, you gotta market better, you gotta manage your sales team better. You gotta make sure that they're getting out to that lead and getting it under contract. I mean, there's so many things we're putting in place now. Like I said, a new CRM that's going to have better KPIs on. How fast are people answer the phone and how fast that they call them back if they don't answer the phone. We actually started having them wear bracelets that record the in person appointments. So now we can put that into AI and I can listen to them too if I want to. If I'm like, hey, sales are down, what's going on? I listened to a call the other day or a sales appointment the other day and I was like, oh my gosh, like our acquisitions guy needs some more work. And then I did some training with him and the next appointment I listened to it and I'm like, you did not implement the top two things that I told you to implement. So now hopefully the next time I listen to a call, he'll put that in place. But man, you have to be really put together these days just because things are so much more competitive and you just have to, you have to know your numbers and you have to be on in almost every single part of your business.
- [28:34]
A
That is, that's the reality right now, is to do what you're doing to continue doing this. You're not just a person that attended a Bigger Pockets webinar, grabbed a calculator that did all the work for you, right? Paid $350 a month for a pro membership and thought, now I can flip houses or do burrs. That was kind of what was sold to people for a long time. And to be fair, there were enough deals out there with enough meat on the bone, you could stumble into it, stumble your way to the finish line and still end up with a deal that cash flowed. Not being very good, what you've said so far, to do this full time, you have to have a massive budget. You've got to be able to advertise omnipresently everywhere. You have to be a leader in business hiring, managing, overseeing, and experts in construction, experts in marketing, experts in management, property management, experts in hiring. These are not skills that people think of when they get on a real estate investing podcast and they say, where do I find my next deal? There's not that much personal development that's brought into this type of a thing. And it may be one of the reasons my channel doesn't get a hundred thousand views, because I tell people how they can become a millionaire tomorrow. But those of us that are in the business realize you every day you have to wake up and be like, I'm not good enough, I gotta be better. I'm not good enough. The market keeps changing, it keeps getting more competitive. Expenses keep going up, contractors keep losing focus, all of these issues keep occurring. I always have to be better. And if you're not in love with the process of becoming great, you are not going to like real estate, you're not going to like wealth management, you're not going to like competition, because that's what this is. You're competing with everyone else. Like you said, there might be four appointments listed. You're competing with all the other investors that want your contractors to work for them. So you got to put them on a salary. And if you don't do enough deals that month, you literally lose money. And there's no one to cry to. You can't go complain about this to anyone else. It does take that level of commitment and I think it's commendable. You're well spoken, you're articulate, you understand these types of things. You probably are pretty, pretty calm headed in a bunch of storm. The benefit isn't just the money. The benefit is like the character that gets developed as you're going through a hard process. And I just want to encourage people to fall in love with that element of that. That part will never change. The struggle of business will make you a better person, it'll make you a better partner, it'll make you a better parent, it'll make you a better friend. A lot of things will benefit if you don't quit. If you stick with it. Do you have an overall matrix that you could share for a deal crosses your desk, you've obviously got somebody else who's overseeing these deals right now. There you said an ops manager that's kind of doing the pricing, working on the numbers, trying to figure out this will work. Is it really complicated to where you couldn't share it on a podcast or is there a framework that maybe 80% of deals, if you just know this part, you can figure out if it's worth buying or not.
- [31:27]
B
Yeah, I created a deal analyzer a long time ago. That's actually one of the things that I implemented that helped me to leave my main market of Wichita. And so when my team puts a property under contract, they send me a few things and literally within three minutes I can know whether it's a deal. So I've got the comps, I've got the pictures of the property, I have the deal analyzer, and just an overall description of like where we found it, what the situation is, the specs of the property. And again, within three minutes I can take a look at that and tell whether it's a deal. I think the most important part of that is the deal analyzer. So I put together a. It's basically just a Google sheet. My team punches in the price that we can sell it for. Once we're done fixing it up, they punch in what we're going to buy it for. They put the rent, how much rent the property will rent for if we keep it as a rental property. And it spits out all the numbers, how much do we make on it? What is our profit percentage on that deal? What is the cash flow on that deal if we keep it? What are the tax benefits if we keep it? Because right now we're keeping a lot of properties with the BRRRR method and we're able to do that and buy more properties because of the tax benefits. So let me see if I can give you some, some round numbers off the top of my head. So let's say you buy a property for $50,000, you put $50,000 into it and it's worth, you know, 140,000. If I were to sell that property with, with all the holding costs, with the real estate commissions, all that kind of stuff, let's say we net $20,000 on that. Well, maybe I don't want to sell that property, right? Maybe I want to keep the equity in it. And what I've actually realized is that when I keep the property, I actually can make almost as much money on that property. So if I sell it and make $20,000 and let's say tax rates 40%, then in my pocket is $12,000. So let's take the $50,000 purchase price, right. And you can actually cost segregate that property, which I found that I think we can usually take about 30% of that and write it off in the first year. So that's 30% times 50,000, that's 15,000 in write offs right there. And then on top of that, when we renovate for 50,000, we can take about 80% of that and write that off in the first year because they are, they have a useful life under 20 years. So then there's another $40,000 in write offs. So $52,000 in write offs. And if your tax rate is 40%, then that is about what is that $20,000. That about $20,000 back to you as kind of cash tax savings.
- [34:27]
A
Sure.
- [34:28]
B
So you can sell it, make $12,000, you have no asset. Or over here you can get $20,000 worth of cash tax savings, potentially cash flow, the property. Unfortunately, in today's market, like, I'm okay with no cash flow. I wouldn't recommend that to a newer investor. I would not recommend that if you're putting 20% down. But because we have, let's see, it's worth 140, we'll have about $30,000 equity in that property. So what I'll do is I'll keep that for anywhere from three to five years, let it appreciate, pay the mortgage down, and then sell that 1031, exchange it, and then put it into other properties. So I can probably usually buy, you know, two more properties with that and not have to pay taxes. So it's kind of, at this point, I'm playing the tax game. If you're looking to get cash flow out of BRRs right now, it's, you know, like we talked about, it's, it's really tough. But if you can take the BRRRR model and use it to save taxes, that's the biggest thing that, you know, we're doing right now is just kind of get our tax liability down because we have other businesses that make money that we need to offset in income.
- [35:41]
A
In my book, better than cash flow, the 10 ways you make money in real estate, I break down 10 different ways real estate makes money. Because most people look at it like you said, does it cash flow or not? Cash flow is like the only metric most people even talk about. And I use examples like what you said, because there's a chapter dedicated to tax savings. There's a chapter dedicated to forcing equity or buying equity is another chapter. You put all these things together and deals work that someone else would say, you can't make a deal work in today's market. But for example, if you kept a property that bled $200 a month, you lost that every month. That's $2,400 a year. But you saved $20,000 in taxes. And you had the future upside that as rents do end up going up over time, and you pay the mortgage down two ways. You make money in real estate. It will eventually break even and then make you money. But that $20,000 that you saved could go into another flip where you could double it, right? When you have these options, Real estate is still a really attractive asset class. It's still worth the energy and the effort. But you hit on what I've been trying to share with people. It can't be the only basket you put your eggs in. You've got other businesses. Real estate is so good when combined with business income. It's a hard way to make money. It's a great way to store money. It's a great way to protect money. It's a brutal way to try to start with nothing. And that's unfortunately what a lot of people see it as. And I think when the market was so favorable to real estate, you get away with that. So the marketing went out to the masses telling them, come here, do real estate. Anybody can do it and anybody can do it. But sometimes the work you put into making it work, you'd have been better off to just have a job and work really hard and make money at your job. I like the method of work a job, get really good at it. Start a business in that industry. Get really good at it. Learn how real estate works, make it synergistic with the business, shelter your business income with the real estate depreciation. And you can make deals work that other people can't because all they've got is the cash flow. But to your point, if you do, if you do two deals a month and you're bleeding four, $800 a year from those deals, but you saved $40,000 a year in taxes and then you added $60,000 of equity every single time you do this in a market that doesn't really lose equity, doesn't grow it exponentially either. But Kansas is relatively a bomb shelter when it comes to. Or maybe a hurricane. Not a hurricane when a tornado shelter. When it comes to prices, they don't drop crazy over there. $60,000 a month times 12 months, what.
- [38:25]
B
Is that, like 720,000?
- [38:28]
A
There you go. That's a 3/4 of a million dollars a year to your net worth that isn't being taxed. In fact, you're saving money. Now, you compare this to flipping those same houses. You're losing that $30,000 of equity that you would have made. You're losing the tax benefits of the $20,000 on the deal. Out of the 30,000 in equity, you have all the closing costs, you have all of the realtor fees. Then you have the capital gain, you're incurring taxes when you're doing it. So it becomes like exponentially better to build wealth to store to side. And the point I'm trying to hit at is that's when it's not cash flowing. That's like a mind blowing concept to people that haven't heard it that you can grow big, big chunks of wealth, $750,000 a year times five years, you're like what, three and a half million dollars or so to your just doing what you're doing versus flipping. You're probably just able to put food on the table doing the exact same amount of deals. Was there a point that this clicked with you? Did like you have a mentor that showed it to you or did you just stumble into this from doing it?
- [39:34]
B
You know I started burning properties in 2001. Like I don't know too many people that bird properties before that. And so what I would do is I would buy properties for. I actually had a friend that invested with me. We'd buy the properties for cash. We partnered on this. We'd buy a property for 40,000, put 20,000 into it, refinance it, get that money back and then we would just repeat the process. And within like two years we had 10 properties and hundreds of thousands of dollars in equity. And I was working, I was waiting tables when I first started and then I started selling real estate as I was doing these Burr properties. And then eventually I'm like, okay, I need to start flipping properties and start making money. So I think it really like what we talked about is great, but you also need income. So wholesaling is fine, flipping is fine to create that income. But if you're not keeping properties, even if it's just one or two a year to start with, or three or four or five, you're really missing the boat. Especially you know, I think we're going to flatten out a little bit. But like man, in 2021 when prices started going up, I started stacking up on properties and I started selling those here in the last, I don't know, year. And I could have made 20 or 30,000 on those properties back then. And I'm making 50 to 80,000 now just because of the appreciation. And you know, that's only in a three or four year time period. Now the Prices may not go up as much, but let's say you keep the property 10 years. You could have made 10 or $20,000 wholesaling or flipping that property. But what if now you can make $80,000 ten years down the road and you can 1031 that money into something else? I mean, there's so much wealth that can be created by just small changes in your business.
- [41:23]
A
Yeah, you're literally talking about a snowball that grows exponentially fast. I didn't even mention the future appreciation that you get. There's a chapter in the book dedicated to that. I mean, the stuff you're talking about is all high level stuff, but it's not rocket science. It's really how real estate should be done. We should be looking at it from this perspective. If you're playing the long game and you're building yourself in the process to be able to sustain this. I know one of the things that you're passionate about is helping real estate agents. I share that. I don't know if you share my opinion on it, but I think most agents get terrible training, very bad mentors. Brokerages are not doing their job. They've all sort of become body shops where they just throw perks at agents and multi level marketing systems to get them to join. Then they don't teach them anything, and then agents go out there and script more transactions than they help. It's a very frustrating industry we've sort of found where there are good agents, of course, but there's more good investors than there are good agents. And you're passionate like me, about helping educate them. So I have a podcast where I help agents get better at what they do. And you've actually got a pretty cool marketing system going along to help agents get more business. Can you share a little bit about that?
- [42:30]
B
Actually it's for real estate investors, so yeah. So back in 2012, when I started TV commercials, it just crushed out of the gate for me. I spent $3,000 my first month. We made 35,000 in my first month. And you know, we were just rolling from there. And about six years ago, five years ago, I was in a mastermind and this guy said, you know what, why don't you show people what you're doing? And so instead of just giving people the playbook, because, you know, we knew what scripts worked, we knew what stations and shows worked, you know, we knew the whole process. So rather than bundling it and putting it in a program and saying, hey, you go do it yourself, I went to my media agency And I said, hey, I, I think this will work in other markets. And I was like, can you buy around the country? They're like, yeah, we've been buying around the country for, for, you know, over a decade. And so, so I went to about eight and no, 10 investors that I knew, and I said, hey, I want to do this in other markets. Can I implement it for you? Eight of them said yes. So we did exactly what we did in my market. We, we knew what scripts worked over the eight, like, eight or nine years we'd have been doing it before then. We had tweaked the stations and shows. We knew what the formula was there. And so we would go negotiate with the stations, we would put the scripts together, they would go shoot the commercial, they would send the footage back to us, we would produce it. So we'd basically do 95 to 99% of the work for them. And pretty much every investor that we got on tv, boom, it was working for them just like it was working for us. And I think out of those eight, probably six are still with us today. Maybe six or seven. And now fast forward. Today we have over 100 real estate investors we're running TV commercials for. And it's one of those things kind of like we've been talking about is like, just figuring out how to do things differently. And, you know, while everybody is texting, cold calling, you know, doing ppc, ppl, you know, all those types of marketing methods, there's not that many people doing TV commercials. And so when I started in my market, there was no one doing tv. I would join Collective genius investor fuel, all these big masterminds. Nobody. I think there might have been one. There's one in each one of those masterminds doing tv. And even to today, when someone comes to us and they're like, hey, we want to look at tv, we're like, do you know anybody that's in your market that's. That's doing TV commercials? And their answer is either no, or they might say there's one or two doing it, or, or in the small chance that there's like even four doing it in a market. Like, at one point, we had five people doing TV a couple years ago, but they, I don't think they were doing it right. They saw what we were doing, tried to copy us, and within a short amount of time, pretty much all of them fell off except for one. I think we have, like, one main competitor on TV right now, and so, so many benefits. You're. You're doing Things that other people aren't doing. You get the credibility, the branding. When you're going in their living room, even if it's not me, I'm on tv. But if it's my team going on the appointment, it's still the brand that they're looking at as the credibility standpoint. And it's so much easier, it's been so much easier for us to get deals when people, like, know we're on tv, especially if they call us from our TV commercial. Usually, you know, we talk about competition. There's quite a few times, you know, or quite high a percentage of times when they call us that they, that we are actually the only one that they call because we're hitting them at the right time. They're not calling us from a stack of postcards. They're not going on Google and, and googling 10 other companies and filling out 10 different forms. Usually we're hitting them at the right time with tv, they're calling us. And we're able to get that deal, usually at a steeper discount because we're not. Not as much competition or just getting that deal in general because we're the only one, you know, out there. And so I, I think, you know, I mentioned earlier the, the thing that I would have done getting into the business first, I would have. I would have hired coaches or mentors or gotten help. But the other thing that I say when people ask what I would have done differently starting out is I would have started TV commercials as soon as I possibly could. You know, you're not having to manage lists. You're not having to manage cold callers. You're not having to manage, you know, people that are texting. In fact, there's a guy in Ohio that started with us a little over a year ago, and he was texting, he was cold calling. He had like five or six people that were texting and cold calling. He had one guy that was just. Just analyzing the deals that were coming from the texters and cold callers before they came to him. And he got on TV and he literally fired the whole team and is just doing TV commercials, which I tell him he still needs to add some other marketing channels, but TV is doing so well for him that he was able to not only replace that business, but now he doesn't work nearly as much because he, you know, doesn't have to manage those texters, doesn't have to manage the cold callers. And instead of going through 50 leads to get a deal, he only has to go through five to 10 leads to get a deal. And so that's the thing that I spend most of my time on now is helping other real estate investors transition into omnipresence marketing. And a lot of that has to do with, you know, TV commercials as the hub. And, you know, a lot of people think that it's too expensive. A lot of people think that it's for, you know, these big companies. But TV is not nearly as expensive as most people think. And you don't have to be a huge business to be on tv, even though their perception is that you are a big business when you are on tv.
- [48:24]
A
I can attest to that when I would go on a listing appointment or someone would say, you got to work with David. You can find a lot about me on a Google search. A lot of people had known who I was from the podcast or my books. I wasn't going in there, competing with a bunch of other real estate agents, begging you and slicing my commission to a third to try to get a deal. They were more like, oh, you're willing to do this? I'm lucky. And then that freed me up to give my very best effort towards them. I think in your position, there's a lot of, like, you're going after a deal or are they talking to other investors? You don't want to prioritize analyzing the deal, looking at it, chasing them really hard if you think they're working with someone else. Just like nobody really invests super hard in dating somebody that's dating a bunch of other people. So if you can eliminate that element and it's just you and them belly to belly at the table, what do you need? How do you want to get out of this deal? What can I do to do it? Here's the price I would need it at. It's a lot cleaner. And there's an incentive to give a better effort versus the sneaky shadiness and the retrading that goes on so often in our business where. All right, I'll tell you what you want to. Here, here's your price. And you know you're never going to pay that. You're going to come back to them, try to drop it by $20,000 later. Well, if you're the guy on TV and you've got a reputation, they're more likely to trust that if you say you're going to do something, you're going to do it.
- [49:42]
B
Yep, 100%. 100%. And they're actually texting and cold calling is the other extreme where you're reaching out to them and having to convince them. But as you kind of mentioned, they are actually trying to get you to do business with them. They're calling you saying, hey, come do business with me, as opposed to me saying, do business with me. Right.
- [50:00]
A
It's a million times better.
- [50:02]
B
Totally different conversation.
- [50:03]
A
One of the things that I would teach my agents is if the lead comes in in an easy way, like you go buy it on Zillow, it is easier to get the opportunity. It is way harder to close it. If the lead comes in a difficult way, you held open houses. This was a referral from a person that you trust. You put the time in ahead of time. It is way easier to close it on the backside. So pick your heart. It's going to be one or the other. If you're lazy and you just go, I'm going to hire an AI company to blast a bazillion text messages to everyone. And then they're going to come in and I'm going to have AI go back and forth with these people. You're probably hitting the same list that everybody else bought to. You're probably competing with a bunch of other people using the same methods. That human doesn't have a relationship with you, does not trust you, has no reason to think that you are a credible person in the first place. It's gonna be really hard to close that thing or vice versa. If you can fight to the point that you could do something different and you get your phone to ring, it's a great point. They're the one initiating it. They're probably not even thinking about reaching out to anyone else unless it stalls with you. So you get that first crack to go, lock it up before anybody else gets involved. I think that's brilliant. If people wanted to reach out to you, they wanna hire you to help get them on tv or they're interested in any other masterminds or groups that you're running, where's the best place for them to go?
- [51:22]
B
Yeah, you can go to 10xtv co. So not.com 10xtv co. You can go there and kind of see what TVs all about, the benefits of it. You know, we say we, we call it 10x TV partly because I was getting a 10 times return at one point. But we get people 10 times more exposure, 10 times faster with 10 times more credibility. And so if you want to see if your market's available, you can book a call with us. We can show you how far TV reaches in your market, how many commercials you would get. And because, you know, when. When people get on tv, they think they're going to spend all this money and not get many commercials. We figured out a formula to not have to spend nearly as much money and get a ton of commercials. So typically, for, you know, five to seven grand a month, you can get hundreds and hundreds of spots, and sometimes even in smaller markets, that'll get you a few thousand spots a month. So we can go over all that information and see if it's a good fit for you.
- [52:21]
A
What do you think about someone hearing that and they're like, I probably don't want to spend that much money, but I could pay 3500 partnering with somebody else and flipping houses together. Do you think that that ever makes sense to do that, or does that just make things messier than it needs to?
- [52:34]
B
You mean team up with someone else that's willing to pay the other 3500.
- [52:37]
A
And maybe partner on the flips with this other investor splitting?
- [52:41]
B
Yeah, we actually have a guy in Florida, and his market was sold out, and he's like, I've got this other guy in this other market. So he didn't necessarily partner and split the ad spend, but he would pay for the ad spend, and then the d. The guy in the other market would do the deals with him, and then they would split the profits.
- [52:59]
A
Oh, yeah.
- [53:00]
B
But I. I don't. I mean, I don't see why it wouldn't work. I mean, if. If you have two people that are on the same page that want to go in and split the ad spend and do the deals together. I mean, I don't see any reason why you couldn't do that.
- [53:11]
A
But you just brought up a good point, is you could even do this and make it your business to create a funnel of leads that you lock up, and then you feed all of the home flippers in your area that didn't want to spend the money on the commercial. So it'd be a whole lot less frustration having to build an entire staff like what you've got. If they're just able to handle. I get a lead, they call me, I go lock it up, and then I give it to a house flipper and we split the profit, or they pay me for it, or however you work it out. If it was me, I'd much prefer to be really good at just that one piece of it rather than having to oversee all of it. So if you control the lead, you control the outcome. It's one of the biggest things you got to learn in real estate is everybody thinks their job's the most important part, but the salesperson, the one who's locking up the deal, is the most important part of any business. So that's really where you want to put all your effort. There we go. All right. Thank you, Tony. Thanks for being here, man. I really appreciate it. We'll have to have you on again sometime. Get an update on what's going on with the Burr.
- [54:03]
B
My pleasure. I appreciate it.
- [54:04]
A
Have a good one. And thanks, everybody, for listening to this episode of Real Talk Real Estate with Tony. Javier, leave us a comment. Let us know what you thought of today's show. Make sure you subscribe to the channel and keep an eye out, because I've got another show coming out in just a couple days. Take care.