SPEAKER_00 0:00

They say the most important thing in real estate investing is time in the market, not timing the market. And I thought that would be a great way for us to open this very special episode, episode one, and we can share about our origin story, but more importantly than that, share about our real estate investing philosophy over the past now 15 years. It's getting to be a pretty big number and give some insights into our decision making, how we've navigated the ups and downs over the past 15 years and where we think we're going in the future. Every investor needs to consider this. Every investor needs to think about whether you're just getting started. Maybe you are contemplating real estate investing and you haven't made your first investment, or you're scaling, or maybe you've had a pause for a while because of market dynamics and you're thinking about getting back into the game, whatever it is, understanding the seasons in real estate investing and really having a solid decision-making algorithm to get through those different seasons. So we're going to take a little bit of a trip down memory lane, starting with our origin story and then walking through not just the milestones in our real estate investing journey, but specifically diving into the decision-making process that we were having at that time as we navigated the real estate market from 2011 on.

SPEAKER_01 1:28

Yeah. So I met my wife Elaine on September 11th, 2010. We were married November 1st. October 1st. October 1st. There we go. 2011. We had a whirlwind romance. And as we were getting ready for the wedding, Elaine wanted a beautiful ring and she wanted to pay for it with cash, which I thought was a very reasonable goal. It's not virtuous to go into debt for a big ring or big wedding or something like that. And I did not have a lot of cash. I was a young, fresh out of college, cash poor man. And I had some toys. I had a fast car and a fast motorcycle and a beat up old truck. I thought, man, I could, I could sell, you know, sell my toys to buy a ring, but I don't know. Somehow that just didn't feel right to me. I didn't have the the vocabulary for it at the time, but that felt like scarcity thinking. Like it should be possible for me to give my bride to be the wedding ring of her dreams and for me to not give up something that brought me joy as well. And over and over again, we see people who who really get trapped in scarcity thinking. They they think, man, if I get what I want, I'm gonna have to like give up something I want, or if I want to help someone else get what they want. And that's that's almost never the case. And so I said, How can you know how can I have both? And I loved working on cars. And I was chatting with uh some some of my friends. I said, I need to make about$4,000 to get this ring. It was a very large sum of money to me at the time. Uh, what can I do to make$4,000? And we're looking on Craigslist, which is you know how you found a car to buy or sell back then. And we found this oil field service truck, a decommissioned oilfield service truck. It was it was half of a truck. There was no bed on the back. And I can see it in my mind right now. And and then we found we found another Craigslist listing that had like the bed for such a truck for$500 for you know pennies on the dollar or whatever. And you know, my friends and I cooked up this scheme. If if we could buy these two things and combine them, this truck would be worth like, you know,$10,000 combined if it was a whole truck. And uh the problem was uh the this truck that was for sale, it was like$4,000 to buy, you know, so maybe it'd be less than$5,000 in, sell it for$10,000. We'd I'd have the money to make the ring, but I didn't have the$4,000 to buy to begin with. So I had to find my first investor. And I went to Elaine and I said, Hey, how much money do you have? And uh and she said, I don't know, I think I've got maybe three, four thousand dollars. And I and I said, Would you please give me all of your money? I I can't tell you why, but I promise you're gonna you're gonna be glad that you did. And you know, we'd only been together for like six months at the time, and you know, we knew where this was going, but still that was a big leap of faith that Elaine took on me, our first investor, and uh went out and bought the oil field service truck. And I still remember the look on her face when you know she gave me like her entire life savings and came home to this muddy, just weird half of a truck sitting in our driveway, and and she was like, You said I'd be happy about this. Tell me why I'm happy about this. And I said, Don't worry, you'll see. Went to call a person selling that the bed. Uh couldn't get a hold of him. That was a that was a panicked several days. Finally got a hold of him, got the got the bed, got the truck put together and sold that truck for for$10,500. We we cleared uh over$5,000 on that particular deal. That was like a month's salary for me at the time. That was a sum of money. I had a hard time wrapping my mind around because I was living in abundance. I was leveraging my intelligence resources, my social resources, my social network. I mean, I didn't even find this truck for sale. I just I just reached out to the people in my life who cared about me, who were smart people, who were resourceful people, and said, I need to make$4,000 today. What can I do to make$4,000 today? That's a very high quality question that not enough people ask. How can I make$100 a day,$1,000 today,$10,000 today? Until you, until you ask that question, it will never, it will never happen. Went and had the profit to buy the ring. And Elaine was like, okay, do I get my money back now? And I'm like, well, this worked one time. Maybe we could do this again. Can we let it ride? Do you want to roll over your investment? Let it accrue and compound. And went out and with the with the money we didn't spend on the ring, we bought three more cars to fix up and sell. And uh those were not quite as successful. We made money on them, but took a lot longer and a lot, a lot more effort. And over the next several years, while Elaine was in med school, uh, we flipped like 125 cars or something like that. And that's ultimately how we built our bankroll to do our first our first real estate deal. And I think sometimes people look at us today and say, Oh, it must be nice to have half a billion in assets under management and be able to go buy a you know$40,$50 million apartment building or something, and it it seems unrelatable or uh or inaccessible. Anyone listening to this right now can just go ask their friends, how can I make a thousand dollars today? That's truly all where this all started. You know, I was doing kind of tech startup stuff. Elaine was was in med school, and we were both, I don't know, in in like kind of the traditional economy or however you want to think about that. And we had just never, I guess we had just never stopped to ask how can we make$4,000 today? And when we asked that question, we got we got a quality answer and the rest is history.

SPEAKER_00 6:29

Every real estate investing journey, you know, really has to begin before the actual first real estate investment because you have to find a way to generate the liquidity. And so if you're listening to this podcast, you're probably you know a much higher income earner than Nick and I were back when we first started, but you've got to find a way to reduce expenses, increase income, and to do so not from a place of scarcity or lack, but to do so from a place of abundance. We made a lot of sacrifices in those early years while while I was in medical school, pregnant. I had a couple of miscarriages along the way. Nick was working his full-time career, and then we were also flipping these cars on nights and weekends. But it was so joyful because we knew that we were building the future. And I remember even, you know, fairly early in my medical school journey, having a deep sense of yes, I was going into, you know, what would likely be a very high-paying profession, but that the moment I stopped practicing medicine was the moment that money would stop coming in. And yet what we were building in our investment side would continue to produce for us, whether we were sleeping or vacationing or outside of the hospital or whatever we were doing. And so it all came from that place of abundance. And that's that's really, you know, not even step one, that's step zero, which is looking at your financial lifestyle. Maybe we'll do some episodes on that later and thinking about ways to reduce what's called your burn rate, which is how much you're spending in any given month or year. I think for most families, looking at it on an annual basis makes a lot more sense than monthly because of things like vacations and health insurance premiums and maybe college tuitions and other things that aren't as structured as a monthly payment. And then also ways to increase income and then using that difference to start those first investments. So, our first investment, we'll kind of go quickly over that one. Our first investment was the home that I lived in before we got married. Um, Nick and I both had the good fortune that we owned personal homes before we got married. If there's anyone in your life that's a young person that you can help get into property ownership, make that happen. There are so many first-time home buy homebuyer programs, down payment assistance. You can do a 3% down payment in most areas for owner-occupied properties. And we had leveraged all of those different resources in the post-2008 collapse. This was before we met each other. So we both owned personal homes, kept my home as a rental and lived in Nick's home and decided that we really liked that. I mean, that too was scary. Sharing these things in the beginning, you know, because again, I echo what Nick said of it's easy to, you know, sort of look at the firm that we have today and say, well, that's so different than, you know, maybe what I have going on. Maybe I'm starting my own single family home portfolio, or I want to be a passive investor and do a couple of passive investments per year. Like, what does this big active half a billion dollar firm have to do with me? But we want you to hear the decision-making algorithm and how you can glean lessons from that and apply that to your own life. So it was really scary in the beginning when we converted my personal home to a rental property. Although at that point we had some shared understanding that we wanted to do real estate investing as a way to change our financial future. We were not on the same page with timing. And I find that that's true for many couples, many people who, you know, share financial decision making in some way, is either they're completely out of alignment or maybe they're in partial alignment. It's pretty rare to find couples that are in complete alignment. And yet we knew we had to find a way forward. And so we we actually listed that home for sale right after we got married because I said, I know we want to do real estate investing, but not right now. I'm about to start medical school. We just got married. I'm hoping for a baby. Like now's not the right time. And I'm just so grateful that we were in the post-2008 collapse. This was in 2011. And we could not sell that home. We we kept lowering the price, lowering the price. We weren't getting showings. I had some liquid reserves where I'm like, okay, you know, I have about$30,000. So if we sell it and I need to bring some cash to close in order to not have a short sale on my credit, like we can make that happen. And then it got to where, you know, we would have needed to bring, I think it was something like$30,000 or$40,000 to close. And Nick said to me, Would you agree that it's unlikely that a tenant could cause$30,000 or$40,000 worth of damage? And I said, you know, I think you might be right. So we listed that home for rent. And the lesson there for anyone listening is again, it goes back to a very similar lesson in that first lesson. It's all around abundance, is that was a very fearful time for us. It was steeped in a level of excitement. There was such life transition. We had just gotten married. I had just gotten accepted to medical school. We were planning for a baby. There was so much excitement. And yet at the same time, there was a lot of fear of, oh my gosh, you know, I'm 25 years old. Am I going to have a short sale on my credit? Am I going to have a foreclosure on my credit? Did I make the worst mistake of my life by buying a home in the post-2008 crash? And it turns out that in retrospect, that, you know, serendipitously was probably one of the best decisions of my life because it led to the creation of this entire portfolio. So we we listed that home for rent. We self-managed it because we couldn't even afford property managers back then. And turns out we really liked that. I was able to see that the mortgage was getting paid down each month. It was cash flowing a little bit. We had some tax advantages that were coming as a result of it. And that's when we decided, hey, let's go out and get our first purposeful rental. And that story was a lot different. So we just had to get it listed. And then the story of our first one, you know, what I consider to be like our active first one, is very different as it is for most people. The first one is almost always the hardest. That's when you've got to go through the learning curve. You need to go through the identity shift. You need to go through the fears. You don't know the words, you don't know the process. You're maybe asking a lot of questions of other people. And so we'll tell you that story so that you can glean those lessons there. Whether you're doing your actual first investment or you're scaling and you're doing your first of a new type of investment, we're still in that land today. Um, we just closed a few months ago on our first$40 million deal. Before that, our largest deal was like$24,$25 million. So there's always new firsts, and you just keep practicing the skill set that you learn over and over.

SPEAKER_01 12:54

Yeah. So talking about our first kind of purposeful rental, when I was younger, I have always been drawn to people who are kind of further on the path than I am and kind of sought out mentors. And I don't know why. This is something I've always been pulled to do, drawn to do. So I did a side hustle doing IT consulting for accountants and doctors and attorneys. I had a lot of attorneys. And I was like, you know, if I could just figure out a way to bring value to these people, I bet I'd learn a lot. I didn't really have a vocabulary to describe it. I just knew somewhere in my heart of hearts that if I if I found a way to get into a relationship with these people, I would one day have what they have. I I don't know. I just I just had that that feeling in my bone somewhere. And that's, I mean, that's the most important thing that anyone can do is find a coach, find a mentor, find a peer group, and you will one day have what they have. That's just that's how humans work. And all these people that I did this IT consulting for, they owned real estate. I, you know, I'd go pick their brain while I was fixing their computer and stuff. And I'm like, yeah, what do you do with all this money? And it seems like you make a lot of money as an attorney or as a doctor or as an accountant or something like that. What do you do with it? And and the people that had wealth, there are plenty of people who didn't have wealth, they had a high income, but they did not have wealth, they didn't have net worth, they didn't have passive income. The people that that had that passive income in spades, they were all in real estate. And uh some of them were you know passively invested in you know syndications, you know, many of them had purchased uh a bunch of single family homes. And I asked them, well, how'd you buy all the single family homes? You're you know, you're like a busy attorney. And it turned out they're all using the same real estate agent. And his name was uh Don Venable. He's this amazing, you know, charming old man. He's probably hopefully still a charming old man here in in Oklahoma City where we live at the time. And uh and I and so, of course, I went to Don and said, Don, do you need a computer guy? I'd love to help you with your computer. And it seems like a lot of your clients have a lot to show for their relationship with you, and I'd love to learn anything you can you can share with me. And so he showed me how he bought VA and FHA foreclosures, REOs. Uh, that was a you know a booming business. And I would say he was ahead of the curve because people would say, Well, if I could go back and buy properties in the early 2010s or whatever, I would be a genius or something like that. But if you went back in time, you seemed crazy to be buying homes at that time.

SPEAKER_00 15:08

It was so scary. I mean, the number of people that literally to our faces, I mean, from a place of love, would say, like, you guys are insane. Like, what are you doing? Nick has this career in tech. Elaine's on a path to be a doctor. Why aren't you guys just happy enough? Why don't, you know, what why do you need more? You're gonna lose it all. This is crazy. You've probably heard things like that in your lifetime too, from someone who's well-meaning. And, you know, what we always chose to do was to not give that feedback from other people any negative energy to just believe that, you know, someone had our best interest in mind, or maybe they didn't have the same education or connection or resources that we did. But we never gave any of that like energy. We didn't, we didn't allow it to like soak into us. We would just, you know, politely, you know, thank people, or maybe we'd even make a joke of it of like, oh, you know, we we hope you'll have us over for ramen noodles, you know, when we've lost it all or whatever, to just diffuse the conversation and move on. But yes, oftentimes in real estate investing, you are making decisions that the common consciousness thinks are crazy. And you have to find a way to fortify your mind, to surround yourself with good advisors and ultimately to be a person that that takes action and makes decisions. And you have to have that decision-making algorithm. And that's what we're hoping to translate here in these first couple of episodes, is that you leave hearing our decision-making algorithm over 15 years and you pick the parts that you want to apply to your own decision-making algorithm so that whenever you hear that noise, which inevitably you will, you know what to do with it. Because it's easy to look back and say, oh yeah, it must have been nice when you bought that, you know, VA foreclosure. We paid$35,000 cash for it. You can't really buy a home in the United States for$35,000 these days. That's not what we were hearing at the time. At the time, we were hearing you guys are crazy, you're stupid, you know, even hints of like you must be greedy, you know, all sorts of things.

SPEAKER_01 17:02

Because remember, everybody, like the the front page headline of CNN at the time was Main Street underwater, four sale signs in every house on the block, and the banks weren't even bothering to foreclose because they were so far underwater there's no point. That first house we bought had been vacant for like six years. It had been vacant since 08. And history doesn't repeat itself, but it sure does rhyme. And sometime on another podcast we'll talk about seasons. But I remember talking to Don and him looking at me and and saying, Nick, you'd be crazy not to buy everything you could get your hands on right now. And just like that, the very simple wisdom r resonated with me. And I remember, you know, working with uh my clients who had gotten short-term and variable rate debt through that cycle and the pain that they had trying to dig themselves out of that hole. And right now is a really difficult time in the multifamily industry. There's uh you know, foreclosures and lots of groups announcing capital loss and fire sale pricing. And uh fortunately, we're in a much better spot than most because we got long-term fixed rate debt because I got to experience that pain from those mentors and those peer groups the last cycle. And last year was the the best acquisitions year in the history of the company because you know, just breathing this air, just hearing this common consciousness, it's like we've been here before and we bought every single family home we could get our hands on, and we're so glad we did. It was you know the best financial decision we ever made. So got into a relationship with Don, didn't really know what we were doing. We we owned two houses, you know, like uh I'll call them nor normal houses, you know, typical owner-occupant homes, but we'd never bought an investment property before. And Don got us uh, you know, kind of into some properties, and none of them seemed like pretty good deals. They were okay deals, but not good deals. And it was so interesting to see how he thought. We would just walk in and be like, eh, it's not a not a deal.

SPEAKER_00 18:54

And that that was so curious to us because he would make that assessment in seconds, literally at most like 20 seconds. Yeah. And, you know, as we were building our relationship with him, there would be times when we would get in the car, and you know, transparently in the privacy of our relationship, we would say, like, is he just like lazy or is he like losing it?

SPEAKER_01 19:14

He didn't even walk into the bedrooms. He just walked into it.

SPEAKER_00 19:18

Like, like, what is going on? And then we learned over time and we were able to build a vocabulary around it that what he had is called unconscious competence. It's when you've done something so many times that you can just do it with, you know, unconsciously. Like, I'm sure if you, you know, drive from your home to your work every single day, there are plenty of days that you get to work and you have no idea how you got there, right? You were clearly awake, you were clearly conscious, and you have so much competence on that route that you're able to daydream and do other things and just unconsciously get to work. And we knew that we had to build that skill set. We wanted to have the skill set of being able to walk into a property and within the first minute be able to say yay or nay, and maybe not even be able to truly describe it, but just to have that visceral, bone deep sense. We learned that from Don. We saw that from Don. And then there was the day finally that we, I don't even think we saw this one. We didn't.

SPEAKER_01 20:11

He just he just seemed to called and he said, Hey, so he was on like this short list where the asset managers for different banks and VA and FHA Hub would call him because he represented clients that were serious buyers, cash buyers, and they would say, Hey, we've got one coming, you know, let us know if you if you have a buyer who'd want it. And it was a good win-win relationship they had. So Don gave us a call and said, Hey, uh, we we've got it. You know, we've been looking for houses for how long did we look at houses with Don?

SPEAKER_00 20:38

I mean, at least four to six months.

SPEAKER_01 20:40

Bless his heart. Like, I mean, he's working for a tiny commission, but he was he was rooting for us. And and when you find a a coach who believes in you, a mentor, like it's just so it's so empowering. They're so willing to pour into you if you're if you're putting in the work yourself. And and so I'm like, Don, let's go look at it. He's like, no, you don't have time to look at it. You need to put an offer now. It's about to hit the market. They'll get tons of offers on this one, and you need to buy it. I'm like, okay, well, how much are we paying for this house around looking at it? He says,$35,000. Like, okay, so do we offer 32? And he's like, no, Nick, I said 35,000. I'm like, okay, if it's uh such a good deal, shouldn't we offer like 37? He's like, no, Nick, I said$35,000. Do you want me to bring the paperwork by or not? I'm like, I guess so. And we signed the paperwork, sight unseen, and bought a house that we we saw after we had signed the paperwork, after we'd gotten it. And it looked like a$35,000 house. It had four walls and a roof, but it needed everything else. Well, it needed a new roof, it needed new walls. Yeah. We bought a piece of land, got a free house with it. Yeah. That is about the value of a residential lot in that area. And we had this idea that there wasn't a word for there, wasn't burr, that that wasn't like a coined phrase at the time. But uh, most of the investors that we knew, they'd buy a house and put down a down payment, but then they'd have to like save up money for another down payment. So we had this idea if we bought it with cash and just Poured in a ton of sweat equity, you know, bought the cheapest house that needed the most work and did as much of the work ourselves as we could. Maybe we could, you know, force appreciation to it. And again, we didn't quite have that vocabulary yet, but could we make it valuable enough we could do a loan after we buy it? We didn't even know what a quote unquote cash out refinance was. Just could we put a loan in place after we bought it where we could get that money back out to do it again? And then we wouldn't have to wait years to buy it to get another down payment saved up. And Don said he'd never heard of this before, but he won he was curious to see how it worked out for us. And he thought this property was a good deal, so we bought it and uh took like nine months to close because the VA didn't have clean title. Again, the value of having a good, a good mentor, a good coach, a good person in your corner with subject matter expertise. And I had no idea what he was talking about or how the VA could legally sell a home that they didn't have title to, but he knew all about it and uh we kept going back and forth, finally got title to it, and then we were there, you know, I was managing teams of engineers by day, uh, you know, doing software engineering, and and Elaine was going to med school, and then we would uh we'd, you know, kind of clock in at this house, and we were there, you know, 5 p.m. until midnight, until two in the morning. It was freezing cold. We closed in November. There was no working heat, so we had like halogen work lights to try to heat the place up enough that the that the mortar for the tile we were laying was uh you know was would would set properly. You know, we uh we were we were struggling with pregnancy. Lane actually had a miscarriage while we were working on that house, so she was literally uh miscarrying our first child as we were laying tile in that house at 11 o'clock at night on a frigid uh ice storm night in Oklahoma City. And I remember having a kind of defiant hope. If we were just willing to do the hard work that other people were not willing to do, we would one day be rewarded for that. And that's I mean, that's really all it takes. If you are, if you are committed, if you are defiant, if you are tenacious, if you are completely committed to you know winning financial freedom for yourself, for your family, you will get it. You will that it is, you know, those who refuse to give up by definition cannot fail. And it took us about six weeks to renovate that home. We spent about$17,000. Uh, we accounted for every meal, every gallon of gas, every renovation material, everything. So we're about$52,000 all in, paid$35,000. We we had no money. We we were like buying all the materials on credit cards. I mean, this was we were down to the felt. Every penny we had into this house, but we owned it with cash. We had no financing on it. And then uh you know, we'd gotten a contact at a commercial bank also from referral. And his name was uh Evan Cohen with uh with Alliance Bank. I don't know if that guy's still around or if that bank's still around or what, but uh again, just really powerful referral. And they also, you know, this was kind of a new thing to them of getting financing after the fact. But I remember closing on that loan, we got praised for like 100 grand or it was like 90,000 or something like that. So we had made, you know, like$40,000 in six weeks. Again, the better part of a year's salary that we made in six weeks working on that house. And we had gotten all the money out plus a little extra. We got, I think, you know, a little under$60,000 in cash out from that deal to go do another deal. I remember sitting sitting in the parking lot of the bank after walking out, and it just seemed so preposterous to me that we now owned a house. We had no cash in it, and we were holding this check for you know like$60,000 sitting in the car. Like, did this really work? Did this really happen?

SPEAKER_00 25:29

And this this beautiful family moved in. The mom's name was Rosa, um, single mom, she had a couple of kids. This house was really close to an elementary school. So they were excited to be able to walk to school. It was gonna cash flow every month. Yeah, it just in that moment when we sat in the car, we decided we will do whatever it takes to do this as many times as we possibly can in our lifetime.

SPEAKER_01 25:51

Yeah.

SPEAKER_00 25:52

So that's kind of part one of our origin story and peppered in there some decision-making algorithm, right? Living in a place of abundance, being defiantly committed to your goals, knowing that if you want financial freedom, you will find a way, you will make a way, you will figure it out, surrounding yourself with people who are ahead of you on the journey, having mentors and coaches, someone with subject domain expertise who's navigated these things, who can tell you things like, we're not gonna close till we have clean title, right? We didn't even know what clean title meant at that time. Believing in yourself when all of the noise around you, you know, maybe says otherwise. Hopefully, you've gleaned some lessons here. Hopefully you've been humored by some of these stories. Hit like and subscribe. Join us for episode two. We'll continue on the origin story and decision making algorithm.