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The Mello Millionaire with Tommy Mello
Fail Forward: Ari Rastegar on Lessons That Built an Empire in Austin
00:25:55
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- [00:00]
Ari Rastagar
The only thing that I've got really good at at this point in my life is failing. And I promised myself, you know, at Johnny Rockets one day that if I ever got to the other side, I would tell the truth. And the truth of the matter is this experiment, experience, which is this life that we're in now. The other side of the coin is failure.
- [00:19]
Tommy
Contrarian, resilient, trailblazing. Our guest today is known as the Oracle of Austin for his bold approach to real estate and wealth creation.
- [00:28]
Ari Rastagar
All success is about inertia, is about action.
- [00:32]
Tommy
Ari Rastigar is the founder and CEO of Rastagar Capital, a private investment firm with a portfolio built around recession resilient assets, including multifamily office and industrial properties.
- [00:43]
Ari Rastagar
To me, failure is learning how to win.
- [00:45]
Tommy
His career path has been anything but ordinary. He went from flipping burgers to becoming a lawyer to launching his first real estate investment firm while still in law School in 2006. Today, he's built a reputation for spotting opportunities and scaling them into long term success.
- [01:00]
Ari Rastagar
You know, real estate at the end of the day is about people.
- [01:02]
Tommy
While some investors chase trends, he focuses on assets built to weather downturns and thrive when the market gets tough.
- [01:08]
Ari Rastagar
This is sustainable growth based upon solid fundamental economics.
- [01:14]
Tommy
Ari believes that the greatest returns come from thinking differently and playing the long game. Get ready. This conversation will change how you think about risk, resilience and rewriting your own path to wealth.
- [01:29]
Podcast Host
Okay, guys, welcome back to the Mellow Millionaire. Today I'm in Austin traveling actually for work and going on a hunting trip. And Ari was nice enough Rastagar to be on the podcast. So Ari is the visionary founder of Rastagar Property Company, a real estate investment firm redefining how people live, work and thrive. Dubbed the Oracle of Austin, he built a billion dollar portfolio spending from multifamily office and mixed spaces with a focus on innovation and sustainability. So you are born and raised here. You started out with a $3,000 loan 10 years ago and you built just a massive real estate portfolio. Tell us a little bit about the story.
- [02:05]
Ari Rastagar
I'm an attorney by trade, you know, but it took me a while to, to get to that. I didn't want to even go to college between you and I. And my dad said, you know, being an Iranian immigrant and having the dictatorial, typical Iranian father said, after you become a lawyer, you can be an exotic dancer for all I care. Didn't do too well in middle school or high school at a terrible speech impediment and kind of uncomfortable in my Own skin and had to go to a couple community colleges before Texas A and M was kind of dumb enough to let me in. But I graduated number one in my class and delivered pizzas all through college and was trying to get it together. And then, and then while I was in law school I was building single family homes like in between, you know, in between classes, little houses that I used my scholarship money to buy a little lot for 3, 500 bucks and met a local builder and you know, he built it and helped me get a loan and I was on the construction sites in the morning and in class in the afternoons and it was something.
- [03:06]
Podcast Host
And now where are you at today? What are you looking forward to doing?
- [03:11]
Ari Rastagar
Well, real estate is about people and that's really what I love. You know, as a corporate litigator before and just seeing people on the worst day of their lives every day wasn't, you know, wasn't something that, that interested me too much. But building community is really what, is really what I love. But we're, we designed this beautiful, futuristic, multifamily single family home, little Texas town square, new elementary school that actually just opened in Aug. And just how there's this 60 acre of green space that really holds that community together is the thing is that we really, really love and you know, we, we've built a lot of different stuff from industrial facilities to apartment complexes. We've owned apartment, office, self storage. I'm pretty sure we've invested in 38 cities, 13 states and just about every asset class. And I guess if you build, if you build everything that we own today, meaning on the hundreds of acres of land and if you build all of it, it's worth a little over 10 billion.
- [04:19]
Podcast Host
Wow.
- [04:19]
Ari Rastagar
And I own 100% of the company. I never took corporate capital at the corporate level. There's like this unspoken rule that nobody will give you a billion dollars in equity to start. And so we just passed our 10 year in business mark in February. And so over the next six to nine months we're going to start having some dialogues to, to go do something fun.
- [04:41]
Podcast Host
So what kind of internal rate of return do you try to shoot for?
- [04:44]
Ari Rastagar
We're, we're, we're singles and doubles guys. You know, we're, we're not shooting for the moon. And the downside risk protection is way better.
- [04:52]
Podcast Host
Yeah.
- [04:53]
Ari Rastagar
Is what we look for. And so if I can make, you know, between a 16 to an 18 IRR and effectively what that means to your point is the average return that you make on a yearly basis. Okay. And if you look at our audited track record, we, um, we've been able to do that in some very difficult markets. I mean, Covid a bunch of stuff that people can complain about, but therein lies the opportunity, so to speak. But we're not looking to make huge returns, because making huge returns means you took huge amount of risk, a hundred percent.
- [05:31]
Podcast Host
So in the beginning, you didn't have access to none of this stuff, and you made a lot of cold calls. What's one cold call that changed everything for you?
- [05:39]
Ari Rastagar
I made. So I was sitting in an office. Great question. So I had invested in an office building in downtown Dallas through another operator. And that's really, as I said, we started in the business. I knew a bunch of great real estate guys from my time in New York City, and I was fortunate enough for them to give me allocations and the stuff, whether the apartments, they were doing, storage they were doing, office, they were doing. So we took a sliver of this building that used to be KPMGS headquarters, a big accounting firm. I basically made a list of all the financial advisors that were in the Dallas area. And I was, you know, calling, you know, 50, 60, 70 a day. And we, you know, kind of branched out and, you know, it was a lot of. Lot of long, long, long phone calls that lasted, you know, three to five seconds. And then something very interesting happened. After about six weeks of making hundreds.
- [06:33]
Podcast Host
Of dials a day, the rest is history. So how did you get in the right rooms when no one knew your name? I mean, is that just grit?
- [06:42]
Ari Rastagar
Yes. Yeah. And I would go in New York City to this Italian restaurant called Il Molino. I got to know the bartender. His name was Elvis. And I'd go sit up there. And being a big tipper goes a long way. And whenever wealthy people would show up, they'd call me, and I'd go up and I'd sit at the table. And it would be these. These situations that were curated that seemed to be serendipitous and seemed to be happenstance, but they were cultivated. And so they were cultivated. You got to meet them, talk with them. And getting to know all the people at these places, you become a regular. And when those people start to like you, and then other people there start to like you, something happens when you create an aura in a situation where several people like you. Strangers very quickly alchemize it to friends. And if you can create a situation where you're around people that genuinely love you and they're going to go tell all the thing all you have to do is nod and smile.
- [07:37]
Podcast Host
So how do when friends influence people, let the people talk more, smile more, be there for them. How do you feel like you're able to really develop a relationship? Because that's a lot of people say, I got a lot of friends. And it's very hard once you get over like 20.
- [07:50]
Ari Rastagar
I don't have that many friends at all. My best friend is in the other room. We've been friends in seventh grade and he's the chief of staff of our firm. But there's a big difference between friends, acquaintance. There's buckets of how those work. Asking genuine questions about people that I could potentially have a commonality with is how you create and build a friendship or build a relationship. And it starts by asking a meaningful question. And when they give you a meaningful answer, dovetailing that with sharing something personal. And that compounds over the course of 30 minutes, 45 minutes, an hour, you do that four, five, six, seven times, you start having commonality. And once you have commonality, you have empathy. And when you have empathy, you have everything.
- [08:33]
Podcast Host
I love it. You know, there's two guys that come to mind. John Rulen wrote Giftology, passed away. Steve Sims just passed away, wrote a book called Blue Fishing. And both these guys were really good at building relationships. And it's just these little touch points that I'm trying to get better at with the people. If you intentional with your relationships, it opened so many doors.
- [08:55]
Ari Rastagar
Building really authentic relationships is a text message a couple times a week of hey, bro, what's going on? You know, what's the latest or something versus some grandiose gesture, you know, once a quarter or some, you know, some, you know, sterile, impotent email to all of the people.
- [09:13]
Podcast Host
Well, you know, the real deal is I catch up with buddies sometimes. I unfortunately go a year without talking to them. And when we get together, I tell my friends, look, I'm busy, you're busy. I had one of my best friends in my backyard recently. This was like in the last year and we grew up together and I showed him my schedule and he's like, dude, that. He's like, are you kidding me? And I'm like, this is the way I like things. Because some of the things are like, do a hundred push ups, call your mom, read this book. There's so many different elements than just money.
- [09:46]
Ari Rastagar
Yeah. Money is on its face, is not interesting. Money is a tool. Money is a, is a catalyst. Money and on its own is absolutely worthless. I've made, I've made Money. I've lost money. But the point is, money itself is not a thing. It's an illusion that it's a thing. It's a tool. And it matters who's holding it and how that's actually facilitated. I've had billions and billions of dollars go through my hands throughout my career. And I'm just getting started between you and. Between you and I. But it's also, like you said, like, everything in nature is busy. Everything. The birds, the bees, the plants, the trees. Everything is busy. So not being busy with some sort of action, you are neglecting your part in the whole.
- [10:30]
Podcast Host
I always see readers are leaders. When I was starting my business, when I was 22, I met this CPA that only worked with 10 clients, very wealthy clients. And he's like, dude, I like you. He's like, I'm going to give you tips along the way. He's like, I might even work with you. He's like, but you got to do me a favor. He's like, what's the last book you read? I was like, kill a Mockingbird, I think, in 11th grade. And he's like, well, listen, this is called the E. Myth Revisited. Go read this. And then he gave me the Richest man in Babylon. And then I went back two days later, and he gave me the Ultimate Sales Machine by Chet Holmes. And those were the first three books that got me obsessed with reading. And I was like, I didn't know books like this existed.
- [11:04]
Ari Rastagar
So I'll tell you a story. My daughter, when she was in kindergarten, my oldest daughter, they were. Had that point in the class when they say, so, you know, what does your mommy do? What does your dad do? And they'd go up and, you know, I know the teacher obviously very well, and she goes up there and very proud, said, my daddy is a reader. So it became this thing. I am a voracious reader, and there's no limit to the amounts that I read. But I'll tell you something. As a lifelong personal development, you know, guy like you, because I'm a nobody from nowhere, like, whatever I am, I built this guy out of nothing. And there wasn't much to work with between you and I. But what I can tell you is as an English literature major, okay, reading the greatest books in the world was my profession effectively. And I have found there to be more substance and more expansion in reading the best novels in the world than reading any of the personal development books. For example, give me.
- [12:08]
Podcast Host
Give me your top three.
- [12:10]
Ari Rastagar
Oh, another. Well, I'll tell you, if there Anybody is listening to this that has not read 100 Years of Solitude by Gabriel Garcia Marquez, or if you're in America and haven't read Moby Dick, Dostoevsky, Crime and Punishment, the idiot, Chekov, Dickens, you're, you're doing yourself an injustice. And the reason I say that is reading the, the, the greatest novels in the world. Expand your possibilities. What do I mean by that? If you study, if you read Dickens, you read Bleak House as an example, you're not just reading a book, you're studying a time in history when it was written. You're seeing a social commentary. You're reading a vernacular from a particular city, country, state. So you're getting a history lesson, you're getting a human psychology lesson, you're learning about relationships. And by digesting that deep in your subconscious, you're expanding your ability to dream.
- [13:02]
Podcast Host
I want to ask you three questions that are repeats. I got a million questions here. So we're, we're going to go over time a little bit. What's one piece of game changing advice you wish you knew in your twenties.
- [13:11]
Ari Rastagar
I'd be telling myself that in this particular time space, time is much more limited than, than I treated it at the time. At that age, I, I thought that I had all the time in the world and I thought time was moving slow. I went to, I went to classes, I came back and I found myself sitting around a lot. Even though I was working in those, I was studying, I was um, and going back and looking at the things that could have been done with a little bit more intention would have compounded into something even more profound. You look at Warren Buffett, that has the, all the accolades and then just the name itself creates something. He wasn't a billionaire to 65 years old, he's made 99.9% of his wealth. After 70, the greatest thing he ever did is live to 95.
- [14:01]
Podcast Host
Well, it's true, people underestimate what they could do in 10 years, but they overestimate what they could do in a year.
- [14:06]
Ari Rastagar
I think so much of the very hard work that I, that I have done in my life, and I'm no stranger to sleeping in my office for days at a time. You know, when my kids were young, I would go home at some point and be out at the office and not see them awake for days at a time. You know, working those frenetic hours is very much in my DNA. But looking back, seeing how bad of a strategy that was, in hindsight, if I would have started a little bit earlier, the Smaller little bits of effort. My own work, so to speak, could have turned into. And could have turned into strategic delegation much earlier.
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Podcast Host
If you were to start over tomorrow with 10 million bucks, what would you do with it?
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Ari Rastagar
Start over with 10 million bucks tomorrow. I would spend at least a year traveling the world. And during that one year, I would spend a year planning the next 10 years. And I would do that in a capacity in different cultures, different climate limits, eating different foods, experiencing different body movements. And I would go and use that time to really, really plan, feel emotionally, spiritually, physically things that I had not felt before, to awaken parts within me that had not been awakened. And then from that place, be comfortable walking into the unknown and letting the plan on the 366 day dictate what I was going to do.
- [15:34]
Podcast Host
It's very interesting. I love that. I think a lot of people, you get caught in this trap of comparison and just a lot of people. And if you get on social media, which I do, it's probably a mistake, but I got to post all the time. This is kind of nature of the beast, but I just can't believe how many people just have nothing better to do than insult other people and get into debates with people they've never met.
- [15:58]
Ari Rastagar
Only. Only miserable people do that.
- [16:00]
Podcast Host
100%.
- [16:01]
Ari Rastagar
Only miserable people do that. And at this point in my life, finding a place of actual love for those situations really changed the way that I look at my life. And for most of my life, I would consider myself a pretty angry person.
- [16:16]
Podcast Host
Yeah.
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Ari Rastagar
Yes. Mad at myself, mad at the world, feeling entitled. Something was owed to me. My family in Iran were very powerful, to say the absolute least, and came over and started over. We weren't Muslim. They killed our whole family. And so there was a. And this is the story of a lot of Iranian Americans that are here in Texas, California.
- [16:40]
Podcast Host
You kind of knew that Austin was going to be explode. You also knew in 2006 that storage was going to be a good industry. You kind of are able to see things before they happen. What do you think? What are the signs?
- [16:56]
Ari Rastagar
Austin is a town on steroids. It's not a city. Grew up living in Dallas, going to law school in San Antonio. We don't say the H word. These are metropolis, okay? They're built with infrastructure, highways, they're expansive. Austin has real geographical barriers. You know, it was a little sleepy hippie town. It was a music, you know, music, hippie town. Nobody really anticipated Austin. I know in hindsight there have been some very flattering things that people have said about our thesis, I wish I could tell you I was as clairvoyant then as it has appeared to be. But the truth of the matter is people have certain core values that make them spend money. Water is one of them, nature is one of them and live music. So meaning there's these tribal things with this 2 million year old reptilian brain that sits up here and the behavioral aspect of humans, as unique and interesting as we all like to believe that we are, we're not. We're amazingly similar and amazingly repetitive and amazingly predictable. If you look at the, the cycles that go through real estate, you look at the debt cycles that happen through global economies, you can almost time them to the day of how they will repeat themselves. Keeping things as simple as possible, but no simpler has been our guiding, our guiding principle along, along the way.
- [18:38]
Podcast Host
But what are your thoughts with AI is probably, I mean, I don't know if you know Peter Diamantes and what's going on or just this idea, but I, I do believe Bill Gates, I mean he said in 10 years you're going to decide if you even want to work. Next year Elon Musk is coming out with his robots that'll do cooking, walk the dogs, simple things around the house. And you talk a lot about technology. You're a big fan. You told Forbes you embrace technology because you're a hybrid. Where do you think we're going?
- [19:07]
Ari Rastagar
The way that I've been taught about artificial intelligence as an example is the same way you would look at electricity, meaning it's not a separate thing Right now it's being one dimensionalized as a thing. Artificial intelligence is over here, but in fact it's going to become the underpinning and an activation catalyst point for all the other things as an underpinning not unlike electricity. Electricity turns on these lights, turns on these things. So we don't think of electricity as much as its own thing because it is now become ubiquitous through everything that we do. That's the place where AI is coming. So in this fourth industrial revolution, it's the equivalent electricity, just so you know, was like the Facebook of its day. It was a fight between, you know, between Cornelius Vanderbilt, between JP Morgan, between Nikola Tesla and Edison. John Westinghouse, who is actually the one that had AC current with Tesla before JP Morgan shorted the stock and bought all the. The trade bar is fine. It's again not its own thing as much as it is a catalyzing piece that everything else is going to sit on, sit on top of to enhance Its productivity. And as that productivity hybrid changes things, things revolve just like there's no yellow pages anymore. There'll be something else that'll, that'll come, that'll come beyond that. So I believe this is the most interesting and exciting time to ever be alive for so, so many reasons. But technology I think at its best is an extension of humanity.
- [20:40]
Podcast Host
I'm going to go through a rapid fire questions here. What's the first real estate book every entrepreneur should read or book in general?
- [20:49]
Ari Rastagar
If you're, if you're listening to this podcast and you're starting your entrepreneurial journey in real estate is something that you find to be interesting. I love the first Rich Dad, Poor Dad. I read it the first time when a 13 year old boy reading that book the first time just putting it in a perspective that I could digest, I could visualize, I could see the difference between making money work for you versus working for money. And then when my father gave me think and grow rich at about 14 or 15 years old, that foundational piece drew the thing, drew it all together. But I think anybody that is on this journey and has an appetite back to that word of hunger, whatever that means spending time reading the best novels in the world. Pick one, go back to Huckleberry Finn does it in any book that you. That is a book I believe will expand your capacity.
- [21:58]
Podcast Host
What's the most expensive lesson you've learned?
- [22:01]
Ari Rastagar
That I learned was the astronomical price of procrastination.
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Podcast Host
Last question before we close out the sun belts or coastal cities. Where's the smarter bet right now?
- [22:16]
Ari Rastagar
So the sun belt as a region has population migration trends on its side. For now. People will migrate to beaches as they have for a variety. There's energetic reasons. Even having your bare feet in sand has a grounding mechanic that you know actually heals your body. And there's a certain part of us being salt water and the, the way that the waves in the ocean move is by following the moon because it's the largest, closest thing to it. So waves follow the circle. The moon that's on the ocean exists. You are a saltwater being the whole universe. And this is what I tell people. Stop acting so small. The whole universe is inside of you quite literally. So because of that there is a gravitational pull quite literally to the coast. Why say the framework matters? Most real estate investment funds are on seven year cycles. And with two one year extensions seven to nine years in the seven to nine year the only place to be is in the sun belt period. Hard stop. But if we had this question on the. On the larger debt cycle. People are going to be right on the coast and they're just going to be there. The social issues, California, New York, Mamdani, is irrelevant because the gravitational, physiological, spiritual pull that we have to oceans will make coastal cities valuable across the world to the end of time.
- [23:32]
Podcast Host
I love it. What's your book called?
- [23:35]
Ari Rastagar
The Gift of Failure. The first line of the book is, I hope you fail. I hope you fail a lot. That's all I've known how to do. The only thing that I've got really good at at this point in my life is failing. And I promised myself, you know, at Johnny Rockets one day that if I ever got to the other side, I would tell the truth. And the truth of the matter is that this, this life, this experiment experience, which is this life that we're in now. The other side of the coin is failure.
- [24:04]
Podcast Host
I always say when I get on stage, I'm probably the biggest failure in this room. I just fall forward a lot and I embrace it. I'm gonna have you close us out on anything you want to talk about.
- [24:14]
Ari Rastagar
To finish us up right now at this moment. There's so many things that are going on in the world that are forcing people either to wait because of uncertainty, whether economic uncertainty, global uncertainty. There's so many reasons right now. If you read the, you know, read the. The headlines which are only designed to draw attention. That's all headlines and all the.
- [24:37]
Podcast Host
The.
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Ari Rastagar
The media, I should say, is designed to do TikTok. They're buying attention. Now there's an algorithm for how much your attention costs, quite literally. I would take a moment to close your eyes and sit in silence. To close your eyes for a second and sit in that divine silence and listen.
- [24:58]
Podcast Host
All right, you're the man. This has been a pleasure. I need to go sit down and close my eyes more.
- [25:05]
Tommy
Thanks so much for listening to this episode. Like always, we're going to close it out with the Tommy Truth, which is a little slice of wisdom from me to you that can help guide you in whatever you're striving towards right now.
- [25:16]
Podcast Host
One of the biggest mistakes I see with young entrepreneurs is they're trying to grow a business into a lifestyle business. What happens is a lot of the people say, I want these things now. I want to buy a nice house, so I got a larger mortgage. I want this nice car, so I got a bigger lease or rent payment. And that's a mistake. You should be thinking about the outcome of the company. That's where true generational wealth comes from. That's where your mindset should be. Not how much money can I extract from this business today as W2 income? So just remember, build a business that's.
- [25:43]
Tommy
Worth a lot of money.
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Podcast Host
Don't think about getting rich every year based on the draws you're taking from the business.
- [25:48]
Tommy
And that's it, guys, we'll talk to you next week.