163: How to Fail – Friday Fundamentals

We spend much of our lives chasing success, however we define it. We go to great lengths to be successful, or at least appear successful. At our cores, we want food, shelter, and security for ourselves and our family. From there, success is a rabbit hole with no end. From nice cars to big houses, good jobs, and comfortable or even luxurious lifestyles, we’re constantly looking for an easier life. To many, success is living an easy life with no worries about food, money, shelter, safety, etc. But, success doesn’t come without failures. Success is found in failure. Success is found in hardship. Success is found in trials and tribulations.

We go to great lengths to avoid failure, at all costs. But, if success is what you’re searching for, then perhaps you should consider failure and learn how to fail. If you can fail correctly, then success is inevitable.

Failure is seen as something that is avoidable and should be avoided. From a young age, we are taught that failure is bad. From education to recreation, failure is not an applauded accomplishment. We think of success as much of avoiding failure as we do accomplishments. But failure can be a signal of something good, so long as you are learning from your failures. Failures are only such if you quit and do not learn from the lessons within.Failure shouldn’t be avoided, but embraced.

“Fail early and fail often, but always fail forward”. – John Maxwell

Let’s break this down and look at each of these individually.

Fail early. In other words, get started now; don’t wait.  Be willing to make mistakes early on. Don’t let the fear of failure delay you from getting started. By making mistakes and failing, you are learning. If you wait to get started until you feel like you are 100% ready and won’t make any mistakes, then you will likely never get started in the first place.

Fail often. Push yourself to your limits, then past them. If you are aren’t failing, then you aren’t trying hard enough. If the lessons are in failures, then how many failures should you aim for – 1, 10, 100, 10,000? Failing often is an indicator you are pushing yourself and constantly growing.

Fail forward. Learn from your failures. If you come out the other side from a failure in a better place, with more knowledge, experience, and lessons learned then you are failing forward. Don’t let your failures set you back. Don’t let them knock you down. Rather, look at failures as lessons, and learn from them. Use them going forward. Learn from them, implement those lessons learned and continue on your path towards success. 

People make more mistakes trying to avoid failures than they would if they embraced them and learned from them. If you avoid failure so much as to never attempt anything, then that in itself is a failure. Don’t avoid failure. Rather, embrace it.

Try not to make the same mistakes twice. If you find yourself repeatedly making the same mistake, then dig to the root of it and solve it there. 

Don’t let a single failure get you down. Remember, it’s only a failure if you give up and do not learn from it.

“I have not failed. I’ve just found 10,000 ways that won’t work” – Thomas Edison

Map your path to success. Plan for some failures. Understand how to handle those failures, and account for them along the way. Soon enough, you’ll have failed so many times that you have no other option than success. 

162: Passive Income with Jacob Ayers

There are so many ways you can invest in real estate from wholesaling, to fix and flip, buy and hold rentals, raw land, note investing, private lending, syndication, raising private capital, house hacking, etc., the list goes on and on.

With each of these different approaches, the same term gets used a lot, even misused. That term is passive income. The truth is, no investment is truly passive. Some investments are more passive than others, but none are truly passive. At the very least you have to vet deals, build systems and process, and manage those systems and processes. When first starting out investing in real estate, you’ll likely self manage your property, which requires you to find, screen, and place tenants, manage maintenance requests, pay the bills, keep accounting records, manage insurance policies, handle leases, etc. This is by no means a passive approach. But it is an approach many people find themselves doing with illusions it is passive. Sure, at times it can be relatively smooth sailing. But at other times it can feel as if the wheels are falling off the wagon. I know, because this is where I got my start investing in real estate. There have been a lot of peaks and valleys.

So what is one to do it they want a truly passive investment? Well, as far as I know there is no such thing. Here’s why I say that. Let’s say you have a large sum of money you want to invest of $1,000,000. First you consider traditional asset classes, like stocks, bonds, and mutual funds. You’re probably going to enlist the help of a money manager. Well now you need to research that manager and firm. Already your investment is not so passive. Then you need to meet or talk with that manager periodically to review your portfolio, make adjustments, etc. You’ll likely find yourself watching the news, keeping up with the market, and searching for that next big opportunity. You’ll concern yourself with which companies are expected to beat earnings, which are going to increase or cut dividends, etc. Next thing you know you can’t go a day without worrying about the market. And the worst part is, that’s all you can do is worry. You cannot control the details of any vehicle you invest in.

So next you consider investing your $1,000,000 in real estate. As we discussed, there are numerous ways to do so. You could buy quite a few single family homes. You would need to research, interview, and vet a qualified property manager. Then you would have to manage that property manager, review monthly income & expense statements, and navigate through all those other things we talked about. This approach isn’t so passive, you come to find out. You decide that instead you’re going to loan money for real estate projects. You have to vet the borrower, understand and vet the project, have the contract drawn up by an experienced attorney, and then hope the project is successful and you are repaid your money with interest. This is a bit more passive, but not entirely. With this less involved approach, you lose out on a lot of those benefits of real estate, like the power of leverage, depreciation, principal pay down, etc.

The moral of this story is investing money requires at least some level of due diligence and active involvement. Nothing is truly passive. If you are going to invest your money over time, then you should pick the best investment vehicle and strategy that fits your goals. If you want to be very hands-on, then perhaps building a business is the best approach. You’re investing both your time and money by doing so, and hopefully one day you can automate that business and step away from it. If you want to be as hands-off as possible, then partnering with someone else or a group of people is probably the best option. But remember our private money lending scenario, where you are less involved, but also less rewarded.

So what is one to do? It all comes down to what your goals are combined with your personality. What I mean by that is, you have to ask yourself what it is you want, then find a way to achieve that knowing your personality and what approach best fits you.

Many of the guests on the show have shared their journeys with us. They have all shared with us what drew them to real estate investing and how they got started investing. There have been lots of guests who have started as passive investors, partnering with more experienced real estate investors on their first deals. One benefit of this is they are able to learn from that experienced partner on a real project. They are able to “tag along” and see, sometimes, the life of the project from finding and vetting properties, to financing, managing and exiting the project. There are many ways to partner with real estate investing. That’s the beauty of real estate investing, is there are very few rules on how and what you can do. So long as you and your partners are following the SEC laws and reporting your income to the IRS, then your imagination is the only limit to what you can do.

Some experienced real estate investors whom I’ve learned about partnerships and so much more from include Joe Fairless, Matt Faircloth, Ben Leybovich, and Vinney Chopra. They are experienced and professional real estate investors, and all emphasize the power of partnerships.

One of the most common ways to form a real estate partnership is called a syndication. We’ve talked quite a bit on the show about syndications, but just to quickly define the term again, syndication is simply a fancy word for pooling resources – money, knowledge, time, & experience – together to invest in properties much bigger than one would be able to individually. Most of the time, syndications involve larger projects such as apartments, commercial or retail buildings, storage units, office buildings, etc.

Participating in a syndication as a passive investor is a great way to be involved in a deal that you otherwise wouldn’t be. While there are many different ways that people structure syndications, most of the time you, as the passive investor, will own a small percentage of the asset, whether that’s an office building, apartment complex, etc. You will be able to review the financials of the deal, be in the loop with the renovations, and potentially receive a return on your money invested.

There are very few hard and fast rules when it comes to syndications, aside from those previously mentioned IRS and SEC laws, of course. Profit splits, entity structures, asset classes, roles and responsibilities, distributions, decision making, and business plans all vary. No one syndication is the same as the other.

If you are interested in participating in a syndication here are a few things you should consider:

What asset class (i.e. – apartments, self-storage, office, retail, industrial, etc.) do you want to invest in? Determining this high level criteria will help you begin to narrow down your approach.
Consider your risk tolerance. Would you rather invest in stable, low risk properties that provide lower returns, or value-add properties that need to be stabilized, but offer potentially higher returns?
What are your financial goals? Consider and weigh near term cash flow and long term appreciation. Different projects will produce different Cash-on-Cash returns and Internal Rate of Returns (IRR).
Once you have set your own investment criteria, you can begin to explore investment options. Note that some investment opportunities are only available to accredited investors, as defined by the SEC. At the time of this recording, an accredited investor is one who has:

A net worth (excluding one’s primary residence) of $1,000,000, and
An annual income of $200,000, or $300,000 joint income with one’s spouse, with reasonable expectation of reaching the same income level in the current year
It’s important to consult with an attorney when dealing with any U.S. Securities and Exchange Commission regulations.

With all of that said, syndications are essentially just partnerships. Each one is different from the other. When we discussed all the different ways you can invest in real estate from flipping, to private money lending and buy and hold rentals, we briefly mentioned the  levels of involvement vs. the levels of returns. For example, you don’t receive the benefit of a tenant paying down your principle balance for you on a fix and flip project, like you do with buy and hold rentals. With private money lending, you don’t get to capture depreciation. Each method of investing has pros and cons. Buying and holding real estate for the long term offers the most benefits. You are paid in the following ways:

Principal pay down by the tenant
Appreciation of the property
Cash flow
Tax advantages (depreciation is a big one)
Hedging against inflation by securing long-term fixed rate debt
Personally, I prefer to invest in buy and hold rental properties since they pay you in all 5 of these ways. Further more, I prefer to invest in residential real estate for a few reasons. For one, I understand it. I can look at a property and at least closely assess its value or rental price. I don’t have a crystal ball to tell me what the world will look like in the future, but there aren’t any scenarios I can imagine that would eliminate the need for people to have somewhere to live. These two reasons alone are why I focus on residential real estate, specifically multifamily, rather than office, retail, etc.

From single family homes to large apartment complexes, you can find partners to invest with. Typically the larger the deal, the more complex the partnerships are. But fundamentally, all partnerships are similar. Each person contributes something, whether that is capital, time, experience, or anything else, in return for equity, cash flow, or any other benefit. You can partner with someone on a single family home, or a group of people on a larger apartment deal. You can take a more active role, managing the deal, or a more passive role by providing capital and not having to manage the day-to-day operations.

Your investment approach should be built around your goals and desired outcomes. From hands-on active roles to more passive hands-off roles, real estate offers many different options. Investing is real estate is quite the journey, and one I personally enjoy. But no investment is better than the one you make in yourself and your future. You are already investing in yourself by listening to this podcast. Continue to make that investment today and in the future. It will pay dividends far beyond anything you can measure.

If you have any questions about partnerships or are curious about the types of properties and markets I invest in, feel free to reach out to me directly. Investing and partnerships are a relationship business, and I would rather first understand you and your goals. I’m happy to share my opinions on any investments you are considering, answer any questions I can, and just talk real estate investing.  You can contact me at www.JacobAyers.com/contact. Simply provide your name and email, to drop me a note. I do not share your email with anyone, nor even add you to any type of list. You won’t receive any type of email unless it personally addressed to you from me.

In the coming weeks we’ll be speaking with several guests who are successful real estate investors, capital raisers, and syndicators. They’ll show us how exactly they find and vet deals, structure partnerships, and other details of their unique businesses. In the meantime, if you have any specific questions around these topics, feel free to reach out to me and I would be happy to answer any questions and pass them along to our guests to discuss on the upcoming shows.

161: Reflections with Jacob Ayers

With Thanksgiving approaching this week, it’s a great time to reflect and think about what you are thankful for. Gratitude and being thankful are important qualities in one’s life. I say qualities, but for me I try to make them more of a habit by writing down one simple thing or person I’m thankful for everyday. Doing this, puts everything in perspective in the present. In that moment of gratitude, you’re not looking towards the future. You’re not focusing on your goals. You are simply looking around you and noticing all the great things in your life. This practice will help ground you and show you that you have so much to be thankful for right now, from material things to people and relationships.

Speaking of people and relationships, another thing that’s been on my mind recently is how much you can learn from others. Every single person you meet in this life knows something you don’t. Keep that in mind as you meet new people, catch up with old friends, or the next time you see that friend, spouse, family member, or coworker. Everyone knows something you don’t. You can learn something new just by talking with people. That’s really the entire premise of this podcast. From ultra-successful and experienced real estate investors like Brian Burke, Vinney Chopra, Keith Wienhold, Joe Fairless, Ivan Barrat, Andrew Campbell, Reed Goossens,and Rod Kleif (just to name a few), to up and coming young-guns like Christian Montalvo, Lane Kawaoka, Brent Kawakami, and David Pere, each and every one of these people have something they can share and teach almost anyone. It’s been a pleasure and great experience getting to bring these people on the podcast, and share their journeys, experiences, and stories with you. I’m sure you’ve taken away a lot of awesome stuff from each one of these people, as I know I have. But beyond these awesome go-getters, there is something to be learned from everyone. If you simply tried to take away one little nugget of information from every person you speak to,then imagine the wealth of knowledge you’ll accumulate over the long term.

Here are just a few takeaways and reflections of just a few of the many great guests we’ve had on the podcast.

Smile, be happy, and treat others well. This is the mantra of Vinney “Mr. Smiles” Chopra. Vinney has a true rags to riches story, coming to the U.S. from India as a young man with only $7 in his pocket. He started out selling bibles door to door. Vinney became an engineer, then transitioned into multifamily syndication where he has experienced enormous success, completing over 26 successful syndications over the recent years. Vinney credits much of his success to the people he surrounds himself with. If you’ve heard either of Vinney’s episodes on the podcast, you know that he is a very pleasant and positive person.

The scarcity mentality is abundant, and the abundance mentality is scarce. Keith Weinhold, host of  Get Rich Education, practices and preaches the abundance mentality. Keith values his return on time invested, just as much as his return on money. He shows you how you too can achieve financial freedom through real estate investing while building a lifestyle by design.

Build it and they will come. This has been Joe Fairless’ strategy for building his $400,0000,000 real estate empire in his 30’s. Joe has built a brand, which he famously calls The Best Ever, consisting of the longest running daily real estate podcast, a blog, videos, books, events, and masterminds. Joe is a proponent for finding a mentor and learning from them. He has taught and mentored hundreds of real estate investors to do what he does – buy apartments. Joe condenses his experiences into three principals, which he calls his 3 Immutable Laws of Real Estate:

Buy for cash flow, not appreciation
Secure long term debt
Have adequate cash reserves
Building a crash-proof portfolio. After acquiring more than 1,000 single family homes, Rod Khleif saw his net worth swell by $17M in one year, only to lose everything in the 2008 financial crash. Rod switched gears, and went on to build a multifamily portfolio, better realizing the economies of scale and seeing how this asset class performed when his single family portfolio weathered away in the crash. While still growing his own portfolio, Rod teaches others how to invest for the long haul like he does by buying large apartment deals.

Scaling with partnerships. After building a portfolio of over 70 units consisting of small multifamily properties, Andrew Campbell partnered up with Reed Goosens to form Wildhorn Capital. They have learned from some of the best people in the business, and coupled with their own individual experiences, have gone on buy over 1100 units across Texas in the past few years. Andrew credits much of his success to finding the right partner who’s skills compliment his. These two guys have experienced exponential growth and the sky is the limit for them. You can find Andrew and Reed at conferences across the country, speaking, listening and constantly learning.

Get things done. Christian Montalvo is a doer. She started investing in her mid-20’s with the traditional house hack. Her and her husband, Cameron, bought their very first home – a duplex, living in one side and renting out the other. Learning pretty much everything along the way, Christian and Cameron have grown their portfolio of small multi-family properties, supplementing their income, living for free, and building wealth along the way. Grit and determination are two qualities they have carried with them in their real estate journey.

Network and set big goals. David Pere hasn’t let geography stop him from networking, building relationships, and investing thousands of miles away. Stationed in Hawaii with the Marines, David has built a network of friends who share similar interests to him – achieving wealth and financial freedom through real estate investing. David also hasn’t let living in one of the most expensive markets in the country stop him from investing. He has purchased over 60 units in his home market of Missouri and shares his journey with others, inspiring his fellow military personnel and working class people alike, that they too can invest in real estate.

Each and every one of these people have taught me something, as I’m sure they have you as well. This is just a small sample size of the people in this world that you can learn from. If you take this approach, and make a conscious effort to listen to people and understand their points and perspectives, I think the world would be a much better place.

With the holiday seasons already here, it reminds me of spending time with family, travelling, and the inevitable new years resolutions. While I love spending time with family and travelling, I have come to dislike new years resolutions. They just don’t make any sense to me. Why wait until an arbitrary calendar date to make a resolution in your life? Rather, take some of your down time over the holiday season to finish your yearly goals out strongly. Don’t coast, but rather gear up and continue improving. Get a jump start on those next year goals now.

If you’re having trouble or would like someone to bounce some ideas off, feel free to reach out to me for a completely free strategy session. I would be happy to be a sounding board and offer my advice where I can. The same goes if you have any questions or would like to talk real estate investing.

Throughout this podcast, we talk a lot about goals. If you can’t tell, I’m quite the goal oriented person. I think setting goals and striving towards achieving them is important. I’m not sure if that’s the best approach for everyone, but it definitely fits my personality style well.

But just as important as goal setting, are the people who you chose to surround yourself with. New years resolutions, goals, vision boards, books, conferences, etc. are all important. But you may be constantly holding yourself back by surrounding yourself with people who don’t bring out the best in you.

“Your network determines your net worth”

By surrounding yourself with people who are doing what it is you want, are where you want to be, and know what you want to know, you’ll start to become that person you want to be. It’s okay to be the least experienced, least intelligent, least accomplished person in your circle of friends. In fact, that should be the goal. By surrounding yourself with these types of people, you’ll begin to think and act differently. If you don’t know anyone right now that fits that bill, then find someone and seek them out. You can meet people at events, meetups, online, etc. There are so many ways in which you can network. If you think that I might be that someone, feel free to reach out to me. I’m happy to meet new people and talk with them. Remember all those successful real estate investors and young hustlers we mentioned above? I’ve obviously talked with every single one of them, and have even developed friendships and professional connections with most of them.

So in summary, be thankful for the people you have in your life. Be thankful for all the good in your life. Seek out the good – good people, good experience, and good memories. Continue building your real estate empire, full steam ahead.

160: Challenge Yourself – Friday Fundamentals

This morning when I woke up, it was a bit cool in my home here in Houston, TX. Our winters aren’t usually very cold but we do occasionally have to turn the heat on. Well being that is was a bit colder than I preferred in my home, I simply went over to my thermostat and turned up the temperature with the click of a button. Then, on to my normal routine as I clicked the button on the coffee pot to brew a fresh hot pot of coffee, and then to my home office to get my day started.

Why am I telling you this? Because I realize, as should you, this is an easy life. It’s comfortable. Our lives are filled with these luxuries that we take for granted.

The problem many people face is they are not challenged in life. This can seem contradictory on the surface. One would think that by building a life void of challenges, struggles, and failures, is the solution, not the problem. But this isn’t the case in my perspective. People are meant to be challenged, solve difficult problems, be faced with obstacles, and experience hardships. We’re a resilient species who has evolved over many many years to where we are now. We didn’t always have central heat and air, coffee at the touch of a button, etc.

When we don’t challenge ourselves, we become complacent with our luxuries. One small minor mishap and we think it’s the end of the world. Think of something minor that has happened to you recently and then how you dealt with it. Maybe your home internet went down, or you got stuck in traffic on your way to an appointment or work, or you had a flat tire, or whatever else. That thing probably seemed like a really big problem at the time, right? Rightfully so, since it likely was your biggest challenge of the day. But in the big picture, these are all relatively benign challenges. Some wouldn’t even consider them problems. Good luck getting sympathy for your home wifi from a refugee fleeing their country walking hundreds of miles seeking asylum in a safer place.

In order to have a better perspective on your life, it’s important to challenge yourself. Do things that are difficult. Do things that you normally wouldn’t. Take on bigger challenges and grow into them. You develop resilience when you challenge yourself. You learn and grow from the challenges you take on, not to mention the feelings of success you’ll experience.

Challenging yourself is similar to setting 10X goals. Even if you don’t accomplish that challenge or goal, you’ve still made more progress than you would have had you not tried. Many of my 10X goals revolve around buying apartments. This feat alone is enough to keep me busy and hustling, trying to reach my goal of $10M of real estate by age 30.

A recent challenge I’ve personally taken on is training the age-old martial art of Brazilian Jiu Jitsu. Not only is it physically challenging, but also mentally challenging. Starting out, I have been completely incompetent and out of my element with it. It’s a relatively new endeavor of mine, and I plan on sticking with it for the long haul. I see Brazilian Jiu Jitsu as a way to challenge myself mentally and physically, and a way to ground myself with this new challenge. It’s very humbling to realize there is something out there that you are completely incapable of in the moment, yet given enough time and work you can accomplish. Focusing on this challenge encourages me to grow and develop. It also puts other things in perspective – like that traffic and flat tire we mentioned earlier. Things like this seem insignificant compared to the challenge of Brazilian Jiu Jitsu.

Everyone can find unique ways to challenge themselves. You just have to make an effort to identify and take on those challenges. Here are just a few challenges I can come up with that may be of interest to you:

Run a half or full marathon. This has always seemed like such a big feat for me, although I’ve never completed either in a sanctioned race.
Set a 10X goal, develop a yearly, monthly, and weekly plan to achieve it, and then hold yourself accountable for achieving it.
Learn a new hobby or skill you aren’t good at. This could be dancing, archery, public speaking, weight lifting or exercise, etc.
Improve your health with diet and exercise. This is one that many people desire but not many people achieve. With the new year fast approaching, you could get a jump on those new years resolutions and start improving your health now.
Volunteering. This is a challenge with unique rewards. Rewards that aren’t tangible but rather, enrich your life with gratitude and fulfillment.
Whatever is it, find a challenge that fits you. Don’t become complacent and coast through life. You’re capable of so much more, if you’ll just put in the effort. Your life will begin to expand when you take on new challenges. Your horizons will change and grow.

When you come to a fork in the road, don’t always take the easier of two paths. It often doesn’t lead to as rewarding results as the challenging path does. It can be easy to choose the less challenging path, even without thinking about it. Make a conscious effort to continue to push yourself through new challenges, grow, and learn from your experience. This will help you become a more well-rounded and successful person. So take on that new challenge you’ve been putting off. Grow, learn, and experience everything you can.

159: Scaling Your Multifamily Portfolio with Joseph Gozlan

Joseph is a multifamily investments specialist, leading group acquisitions of over $15MM in real estate and providing asset management services to a portfolio of 253 units and growing.

Joseph is a former lieutenant in the Israeli Defense Forces (IDF) and over 17 years of leadership experience in the software industry, 12 of which working for publicly traded companies such as GameStop, Retalix (NCR) and JCPenney which enhanced his business acumen, analytical skills and “big picture” perspective, all skills that he leverages to maximize efficiency in the real estate business.

In his last IT role as a Senior Software Development Manager, Joseph led five software engineering teams and was responsible for the on-time and on-budget delivery of a multiple software products that contributed directly to the company’s multi-million dollar bottom line. Joseph is now dedicated 100% to real estate.

Joseph has a B.S. in Information Systems Engineering and is also currently enrolled with Texas A&M MBA program (part time program).

Joseph began his real estate investing back in 2005, when he purchased with his wife Rita their first investment property in Israel.

In 2007 Joseph & Rita relocated to Plano, Texas and in early 2008 started their US real estate investment journey with the purchase of a duplex in Plano. Since then they grew their portfolio and strengthened their equity positions in multiple single family properties.

In early 2015 Joseph began his multifamily journey and not long after led the successful acquisition of a 22 unit multifamily property in Celina Texas. In 2017 Joseph led the successful acquisition of a 130 units in two multifamily properties in Lubbock Texas and has been serving as the asset manager for all three communities since.

Joseph’s next steps are closing on a 97 apartments community, which is under contract at the moment which will strengthen EBG’s presence in the city and will increase operations efficiency for all properties and to continue to lead the acquisitions of even more multifamily communities in the Texas secondary markets with the goal of acquiring and managing an asset base of 1500 units or more by the end of 2018.

Recently multiple family offices have been reaching out to Joseph exploring collaboration opportunities in the markets they operate in.

Key Points
Assessing secondary and tertiary real estate markets
Starting and scaling your real estate portfolio
How to find off market multifamily deals
Lightning Questions
What was your biggest hurdle getting started in real estate investing, and how did you overcome it?
Breaking into the multifamily space. Joseph was able to backdoor the process by getting pre-approved with lenders and having those lenders vouch to brokers.
Do you have a personal habit that contributes to your success?
Joseph doesn’t have an off switch
Do you have an online resource that you find valuable?
Audible for audio books
What book would you recommend to the listeners and why?
Rich Dad Poor Dad by Robert Kiyosaki
The One Thing by Gary Keller ad Jay Papassan
Profit First by Mike Michalowicz
The Real Estate College Fund by Joseph Gozlan
If you were to give advice to your 20 year old self to get started in real estate investing, what would it be?
Skip single family properties and go straight to multifamily.
Resources
Visit Audible for a free trail and free audio book download!

The Real Estate College Fund by Joseph Gozlan

www.EBGTX.com