Ian Noble on Buying Cash Flow and Vetting Passive Deals

Original automatic captions. Names, numbers, and punctuation may contain transcription errors.

0:00 Welcome back to the Owner Med podcast. I'm Christian Ozgood, your channel host today, joined with Ian Noble. Ian,
0:06 welcome to the pod. Thanks for having me, Christian. I am excited about this. We're going to talk about real estate. We're going to talk about business. He's done multiple
0:12 areas of business and real estate, so this will be really fun and honestly one of my favorite types of guests to have
0:19 on the podcast. Uh virtual investor, lots of experience, and I'm excited to
0:24 learn from all the things that you have learned bringing the owner meeting to you. Uh, which by the way is the point
0:30 of the podcast. We meet with the owners who have done the thing that you want to do so you can learn from them. Uh, do
0:35 all the right things and make less mistakes doing them. So, Ian, welcome on pod. Yeah, thank you. Great introduction,
0:41 too. Uh, you're right about that. I've I've gone through the trenches on this stuff. I uh call myself an entrepreneur
0:48 who loves real estate and somehow they end up blending together all the time. So, happy to talk about what that looks
0:54 like and and share have a good conversation. Well, it's one of the fun things about real estate, right? Real estate is a business like any other business and
1:00 ultimately all of your business principles will overlap directly into real estate. Uh the only people I see
1:06 consistently lose money in real estate are people who don't treat it like a business. So I I'm excited for this
1:13 episode. For people who don't know your backstory, give us the quick overview of where you started and where your
1:18 business is at today. Based in Austin, Texas. I got involved with a family business. It was a dry cleaning company.
1:24 Uh so in my early 20s, started working that. bought that out from my dad and went seven figures into debt. So, took
1:31 life very seriously at a young age and had to [laughter] learn how to run a business. U along the way, lot lots of
1:37 lessons that I'm happy to share, but um was able to grow that business and and
1:43 turn it around pretty significantly, but along the way, I was investing into real estate. So, I talked earlier about being
1:48 an entrepreneur, but real estate finds its way in. Despite me having that long run of a dry clean owner and operator, I
1:54 was a real estate guy. everything, every penny went back into buying rentals. Um, I'm a buy and hold guy and that's how
2:01 I've operated for the last 15 years. That that was the MO for several years. Run that business, work your tail off,
2:07 make your money and what I'm what I'm good at. And at that point, I was the money was coming from the business and
2:12 start building some stuff on the back end so that someday you can step away and and hopefully kick back and take it
2:18 easy. What sort of real estate deals were you doing in the beginning when you were transitioning from like, hey, I'm a
2:23 dry cleaner to I'm buying real estate. What did buying real estate and buy and hold look for you in the beginning?
2:28 It started single family homes. So, I I rentals in my local market. I think that's a good place where a lot of
2:33 people can start. Um, it's funny looking back today. I I love single family homes and rental investing in in that aspect,
2:40 although I don't focus on it anymore. Uh, but it did get me involved in the game. Then I kind of went into um triple
2:47 net retail space. I'd buy small little shopping centers and uh have hopefully long-term tenants there. Um and then the
2:54 evolution occurred after selling the business. I went more into a passive route to where I was trying to figure
3:00 out a good space for me to play. Uh this was a really difficult transition though because when you're a business owner and
3:06 you run a business on a profit and loss statement and thin margins, which is what I did in the dry cleaning industry,
3:12 migrating into passive investing was very difficult because you know you're you're in the space. A lot of it comes
3:17 down to trust and the people that are running these deals. And so that was a very difficult step for me as an entrepreneur to number one have that
3:24 trust into people to get involved in that space. But since doing so, it really opened my eyes up to
3:30 partnerships, the ability to scale, grow, and I'm pretty passionate about that style of investing now. Uh, but I
3:36 come at it from an angle of both sides to where I'm still an active investor in real estate. I'm still a landlord that
3:42 self-manages properties, but I get to see the other side as well where other people do it. So, it's fun having a
3:47 combination and and a background of both. What does the portfolio look like today just overall? Because you've done a good
3:53 mix of things. And before we hopped on, you'd mentioned also, you know, there's RV, there's uh triple net, there's
3:58 single family. What does the portfolio look like today? I'm spread out through because I mentioned buy and hold earlier. I've
4:04 only sold one property in my life. So, this is funny. We talk about real estate all the time. Everyone's tossing out strategies and I'm like, look, I don't
4:10 sell anything. So, um but along the way, so I single family homes again those
4:15 commercial when I say commercial properties, I'm talking retail triple net spaces. I own some land uh involved
4:22 in in a number of um and this is passively uh mobile home parks, self-s storage facilities and I do a lot of
4:29 private lending. So private lending I'm now there's a focus on that. I think a lot of people in the space have gravitated towards it as cash flow
4:36 diminished. That's been a good alternative lately. Uh I do that both actively and passively meaning through
4:42 my business and through individual investments. I like that channel because it brings usually higher rates. Um, but
4:48 again, I'm a I'm a low-risk guy. So, uh, I'm looking for I'll call it I use this
4:54 baseball analogy of looking to hit a single. I want to hit singles all day long and get on base. I'm not interested
5:00 in projects that have a lot of risk that will bring me a high return. Much more
5:05 focused on the the the low-end stable side of of real estate. Whatever asset class that may be, that's where I focus
5:12 my time and energy on now. Yeah. Oh, and that's where I've built most of my career as well. It's the low
5:17 risk, moderately high returns. It is the perfect riskreward profile. I want as little risk as possible. I don't need a
5:22 grand slam on every single deal. My economic theory is if you always buy cash flow, your income will always go up. And so, I've kept all my deals that
5:30 simple. It's like, hey, do we have day one cash flow? Do we have the upside we need? Let's find the deal. Let's line up
5:35 the debt. And if needed, let's find the remaining capital and line up the equity and close deals that increase your
5:41 income. And, you know, do that 10, 20, 30 story. Yeah, that's that's the best approach. There's it's interesting you
5:47 you see all these deals come across your table and and being in real estate. Um so much of what I look at now is these
5:53 these large projections and you've seen this as well. Uh a a lot of the the day-to-day comes at tearing apart
5:59 underwriting and proformas and looking at like hey let's let's normalize this a little bit because last couple years
6:05 have been a bumpy road. You want to make sure more than anything that you're making safe sound investments. So I like your strategy cash flow from day one. no
6:13 speculation. Uh and if you can just focus on cash flowing being enough for you, you're right. The good stuff will come. It will, you know, hopefully
6:20 appreciate. You'll have opportunity down the road, but uh you need to be focusing on that cash flow. It's the most
6:25 important piece. Yes, it is. Uh there's a lot of strategies out there that have various risk profiles, but I have found I've
6:31 done two deals that were cash flow negative because they had massive upside. Both of them did make money.
6:36 Both of them took more than twice as long as I thought that they would to make money. Both of them absolutely were
6:42 a pain in the butt to hold until the project was done. The easiest way to lose real estate is to pay to hold the
6:48 real estate while you're waiting to hit the upside. If you can avoid that completely, I just set that as a rule only by cash flow. Your income only goes
6:54 up. It's very easy to operate if all you do is buy income though. That that's you bring up an interesting point because I
7:00 hear a lot of people when I talk about returns for stuff I do, I'll say, "Yeah, I'm shooting for 8%." And they'll laugh and say, "I get I got 25 on my last
7:08 development deal." And the argument always is exactly what you said. It takes longer than what you anticipate.
7:14 There is no cash flow along the way. And a lot of that's based on speculation. Things can change overnight. But if you
7:20 know that you're going into a deal that will bring you money in the first week,
7:25 then it's a little bit it's it's more comforting and and not having to be in a position to say, "What's going to happen
7:30 with that market? Are we oversaturated? Is there a war that's going to happen?" You know, whatever comes up in life.
7:37 take away all those components because you're right, you just sit on it and hold it hoping you're going to get a
7:42 high return. Uh, and it usually doesn't pan out that way. Yeah. Oh, and that's where, especially if you're using outside capital, that's
7:49 where you have to make those awkward calls to investors like, "Hey guys, things are still going pretty well, but we're not going to hit projections. We
7:55 have to like This is where investors get frustrated. Lawsuits happen." Like, it's more than just negative cash flow. that
8:01 most of your pain in real estate will also be from relying on projections or
8:06 the markets to hit the projected return. Even if your returns may be higher, I
8:12 very much doubt that your returns are going to be more stable than it for if if you are a developer or a like, hey,
8:19 we're we're doing these massive upside high-risisk high reward projects. What you sacrifice is consistency with lack
8:25 of consistency a lot more risk. So just doing stable deals consistently that a
8:31 great way to do it. And and you said my favorite thing. You've only sold one building. I'm I'm curious which building
8:37 was the one that you sold? It was my first single family rental. I had a tenant that was in there for 12
8:43 years and she paid off that house. So it was she actually moved in the day after I
8:48 closed. She paid off the home. It appreciated. This was in Austin, Texas. So we had there there was a good surge
8:53 from uh from COVID and it normalized a little bit but um still turned out okay on that one and that that got me
9:00 involved in the space. This was dating back to 2012 2014 era when I was listening to Bigger Pockets and just
9:06 trying to figure out how can I cash flow 200 bucks a month. I wouldn't have sold that had she stayed. Uh but I got a text
9:12 one day saying thank you but uh moving on. Next month is my last month. It just happened to to to be the right time to
9:19 sell that one off. But that's it, man. It's uh I don't have a lot of exper I got a lot of experience buying but not selling which I'm perfectly happy with.
9:26 I I like being in that position. It's a good position to be in. And if you keep buying, right, then that's that's how you make money. I've never in
9:34 my career heard anyone say, "I regret holding a building." Seen a lot of people say, "Oh my gosh, if I didn't
9:40 sell this, you can always look back and be like, wow, I just held this would have been amazing." And I've heard that regret story uh a hundred times. I had
9:49 one one investor, one of my first mentors in uh this was back in when I lived in Washington, which I'm recording
9:54 from for my parent-in-laws right now, but in central Washington State, he owned this like 50 unit building and
10:02 he had no partners. And he's like, "Hey, I can cash out and make a couple hundred grand. Had he held that building, it
10:09 appreciated like $3 million from the time that he owned it to to
10:14 now. And all he had it was cash flowing. He could have got paid to just sit and make $3 million, which by the way in
10:21 Grand County, Washington is an especially large amount of money. That's a very low cost of living area, Washington state. We would have hit the
10:28 jackpot. Sold it, took the quick win. Almost everyone regrets that. You hold your properties forever or almost all of them forever. I love the strategy. I've
10:35 also sold very, very, very few properties and the only times I did is when I was adjusting or when I moved to
10:41 Texas. I reduced my Washington State portfolio just a little bit. if it was small, it was hard for me to self-manage
10:46 and do well. So, I lost a lot of my little duplexes here and there. But, yeah, same exact strategy. So, I really love
10:53 this in the in the business side. So, you started you started in business and you're treating your real estate as a
10:59 business. What is the difference to you between treating real estate as a hobby and treating your investment as a
11:05 business? Real estate's a people business. I'll start there. I think that a lot of people will from the outside looking in
11:11 can say, "Oh, that place is going to rent for X and uh and then your payments are Y." Uh that's a good start, but so
11:19 much of running it like a business would be how are you going to position yourself um to where you have a safe,
11:25 stable asset uh that's going to give you cash flow. That's the reason I think that most people get into it. You
11:31 mentioned earlier about people selling. A lot of people, this comes up in, you know, my personal business as well. You
11:36 get to a crossroad where you understand, okay, this property is bringing me in this much in cash flow a year. And I can
11:42 see people's, you know, want or need to sell at some point if there's, you know, there's an upswing or let's say they
11:48 just had a rent increase that makes that property more valuable depending on what kind of property is, if it's, you know, valued on cap rate or all these
11:54 variables that go out there to where yes, people see that shiny number and go for it. whereas if they could just hold
12:01 on, uh they might be in a better position years down the road. I'd say running a business is looking at it to
12:06 where you're keeping close tabs on your properties, um you're you're visiting these properties, making sure they have
12:12 good quality tenants, and at the end of the day, I'm probably I'll call on my on my active portfolio, I I'm a pretty soft
12:20 landlord. I've dealt with some other people that are real strict on their tenants and uh you know, they're cutthroat, shrewd business operators. I
12:27 think there's a place for that, but at the end of the day, the success of, you know, my business uh relies on those
12:34 renters being happy, being able to afford what they're paying for. Uh because at the end of the day, you need
12:40 to keep your tenants happy. They're paying off your property. They're paying down the equity, and they're allowing this lifestyle that everybody wishes
12:46 they can have when they get into real estate. It's just being in the business for a while, you start to see how people approach it. And there's a difference
12:53 between being walked on but then also being courteous and and generous at times with with tenants. Uh because if
13:00 they don't succeed, neither will you. A perfect example, some of my commercial property, these are some some smaller
13:05 ones in Austin, they're triple net leases. So tenant pays for everything. But it doesn't mean So I've heard people
13:10 I've talked about expenses going up and they're like, "What's the big deal? The tenants paying it." I'm like, "Yes, exactly. They run a business and their
13:17 business operates on whatever margin that they can pull in." So, me going and blindly getting a new insurance policy
13:24 where I'm not as cautious on how much that premium's costing, it's going to hurt the tenant because I need them to
13:30 be successful and want them to be, right? I'm I have a small business background ownership. I'm very pro small
13:36 business. So, when they're renting spaces, it's important that they can make it and that there'll be some
13:42 longevity there. So, that's just one example of a misconception from people outside the industry that are like, if
13:48 it's really handsoff and the tenants really paying everything, what's so hard about it? Well, I'm actively working to
13:55 make sure that my costs are as low as possible for that tenant because I want long-term success. I want them signing
14:01 at renewals and sticking around for the long haul. So, um, ju just one example of what we run into in the day-to-day
14:07 that maybe somebody on the outside wouldn't see. It's important to take care of your people and they'll take care of you in turn.
14:13 I I found a balance in this in my portfolio. So I I I went the route of
14:18 starting my own property management company. I I sold mine successfully in Washington state and we started one in
14:24 Texas. So I do third party in Washington and I it's not really self-management but it's a full management company in
14:30 Texas. A policy that I have there is uh always kind never nice. If you are if
14:35 you are kind, you do the right thing by tenants. work with tenants. When people need help, you work with them because
14:41 I've seen a lot of owners that are just terrible to their tenants. It's not about beating your tenants down. You
14:48 want to have people who want to renew, who love where they live, and who they feel like their voice is heard. At the
14:53 same time, if you build a large portfolio, as soon as you start being nice, people start taking advantage of
14:59 you. And you can you very quickly as a landlord, you can identify, are we being kind or are we being nice? When you
15:05 start being nice, that's where you get one tenant doesn't pay. You keep working with them. You keep working with them.
15:10 You keep working with them. All of a sudden, their neighbors stop paying. Now you have cascading issues where people aren't taking you seriously. And I've
15:17 seen people's entire properties have massive financial problems because the owner was nice. Kindness fantastic. When
15:25 it becomes, hey, we're just being nice to everyone. There's a limit there. And so, I do think there's a fantastic
15:31 balance. I think you hit the nail on the head. It's so important. Like renewals
15:36 are one of your most important thing. Vacancy and lease up are two of your biggest expenses. To the extent you can
15:42 limit that, your business is going to do way better. Yeah, you said that perfectly. I haven't heard that expression before about
15:48 kindness but not nice. Um because you're right, that's that whole expression, you give them an inch and uh you know how
15:54 people will can can take advantage of the situation. So definitely a fine balance to try to achieve. Uh I have
16:00 found that on the the units that are managed by property managers, they're probably better at saying no. You know,
16:06 a lot of you again, you got to it's a delicate situation and despite it being real estate, it is a people business and
16:13 you got to keep everyone happy and do good by by others. So, um yeah, definitely a challenge for anyone in the
16:18 industry. It absolutely is. And you've already mentioned this before, but I really wanted to draw the line between this. So, you still actively invest. You help
16:26 people passively invest. And you mentioned that you've gotten heavier and heavier into passive investment. Just for context, what is the definitional
16:33 difference between active investing and passive investing? Yeah, for everyone listening, active investing is going to be you're buying
16:39 these properties, maybe you or a partner or two, and you guys are running it. Uh you have your hand in a lot of the
16:44 day-to-day operation of it to where on the passive side, you are actively placing your money in exchange for being
16:52 100% passive and hands-off. So, there's appeal uh to to both sides, frankly.
16:58 But, um if you lean towards passive investing, you're often gaining access to deals that you couldn't tackle
17:04 yourself. It's you're a smaller piece of the pie for bigger projects. And but you
17:10 still get the benefits of ownership through tax benefits, profit splits, things that that are important, but you
17:16 don't have to deal with with the day-to-day headaches. Uh, and it's interesting because you think that by sometimes passing the torch to somebody
17:23 else that you're going to earn less, but I do have properties if I stack this
17:28 against my active portfolio versus my business on the passive side. I have properties that are out there to where
17:34 yeah, I'm the only owner and I I make less money being the only owner and running that deal myself than some of
17:41 the others that I'm a small minority in that I'm passive. It just depends on, you know, the the asset itself and uh
17:48 and what you're investing into. And we talked about before, I like mobile home parks and private lending. That is where my passive business is focused to help
17:56 people get involved with that. Um not because those are the best two that are out there. It's just they they generally
18:02 align with my risk profile. I think that there's opportunity everywhere, but that's kind of the the uh that's the
18:07 market that I chose to focus on. Yes. Oh, well, and bam, mobile home parks and RV parks that both of those
18:13 are such awesome uh income generators, and I'm seeing a ton of opportunity in
18:19 those right now. So, it makes a lot of sense to me. That's an area that you're finding a lot of success in. With the
18:25 passive investing, if someone's looking at like, hey, do I get active or do I get passive? H how do you make the
18:30 decision of where to focus first? I'd look at I'd ask them the question of, you know, what do you do for income
18:36 right now? So, I think it's important if you have a dentist and they run a successful dentist office. Uh, real
18:42 estate's a full-time job and so to be successful at that, I don't believe you can be great at both. So, that is a good
18:48 example of when I'd probably push someone to be passive. Um, when you have a really flexible job or maybe it
18:53 doesn't require a lot of your hours, then maybe you should approach it. Uh, but it comes down to what people want to
18:58 what sort of life that they're looking for. Uh, because as you begin to scale, I ran into this personally. I was my my
19:06 process when I had my small business. This is the dry cleaning uh life before me the last 14 years before I do what I
19:13 do now. Yeah. It was buy one property a year if I can do one and just add to it and then you
19:18 know I try to get two in there and then you start to add these properties up and you you run into an issue where you
19:25 don't have any more time or you start to neglect something. So, I didn't want to neglect things any further. And uh this
19:33 season of my life, I had young children. I have three young children under five. So, for me,
19:39 I don't want to be out there, you know, knocking on a door, collecting rent, and doing any of that stuff that comes with
19:45 some of the not to say that that that that's how these properties are run, but I don't I want to be in a position to
19:50 where I've got some more time freedom because these years go fast. So the question for if you want to be active or
19:56 if you want to be passive, can you handle not having direct control? Because when you're a passive investor, you don't uh and are you willing to
20:04 place your money in advance uh in hopes for being fully passive. So it just
20:09 depends on everyone's circumstances. I also think that there's a lot more
20:14 opportunity on the passive side because there's deals everywhere, right? And
20:20 there are operators and people raising money everywhere. investors, specifically the passive ones
20:25 or the the the limited partners, the LPs, they can be really selective on who they go with. It's the best position in
20:32 the world to be. I had a discussion with someone at a real estate conference recently and I told them, "I'm a fund
20:37 manager. You know, I raise passively and our group goes in and invest into these deals." And they said, "Oh, that's cool,
20:43 but don't you want to go the next level up and be the operator and own these assets and get a bigger piece of the
20:49 pie?" And my answer was, "No." I think that being a passive investor is the ultimate position if you're aligning
20:56 with the right partnerships and if you can leverage those teams that are doing a good job at running these property. That's half the battle, right? Finding
21:02 the right people to run these deals. People don't get into real estate to be an operator. They can say that they're
21:08 good at it, but it's not a true passion. It's not the the destination that we're looking for when we choose real estate.
21:13 We want the benefits that we hear, you know, oh wow, that that guy doesn't go to work that much. How does he do it?
21:19 Well, he has a lot of real estate. That's what people want. For the passive investor, it's their pick of the litter. And I think it's a really good
21:25 opportunity for them. But you got to be smart because getting into this business, that's the first thing I learned. There's a lot of riffraff out
21:31 there and a lot of speculation and hype and internet scarier.
21:36 Yeah. Especially in the online era. This is what I hear the most consistently.
21:41 um because I'll have people invest in some of my deals and it's the person that they saw online who they're super
21:47 excited to invest with who ends up being a terrible operator and a wonderful marketer. And that is just rampant in
21:54 the space and there's a ton of it. And we saw a lot of this come crashing down in the back end of the syndication
22:01 heyday where everyone in their sister was a syndicator because rates were 3%. And then rates doubled and then rates
22:07 pretty much tripled. And a lot of those lost all their money. And I've had a lot of friends and a lot
22:13 of people who've invested with me who they're still recovering from multi00,000 losses on deals where they
22:18 invested in because the person they saw online wasn't really an operator.
22:24 Yeah. They were a marketer. How do you actually find the right team to trust?
22:29 Because that's the risk with passive, right? That's what everyone is worried about. It's not even making money. It's how do I feel confident I'm investing my
22:36 money with someone who's not going to lose money? So, how do people find this? What principles have you found that
22:42 consistently have worked for you? I think the biggest value from somebody that's that's raising money is number
22:48 one to figure out what motivates that person. So, I have people in this industry ask me uh even investors, what
22:55 is your endgame? Why do you do this? Um there's there's two reasons. The first one is I I feel there's an obligation
23:01 to, you know, to be a good steward of people's money. You hear that? That's cliche, but it's true. The way that you
23:08 get there is by a you may have a a mistake that you've learned. I personally have a learning mistake where
23:13 I've lost money. Um it sucks. These are expensive lessons. And then you kind of vow to I don't ever want to be in that
23:19 position again. But what I'm looking for first is because I'm a full-time
23:25 investor and I'm an investor in every one of my deals. I'm looking for does it suit me? Do I like it? So that's step
23:31 one. Uh is this a lowrisk uh investment that fits my risk profile? Once I go
23:37 beyond that, then I'm looking really at the people and I spent a lot of time here because this is the hardest part. You're right about there are people that
23:44 are very good marketers that aren't good operators. And that's the challenge that you know everybody's trying to dissect
23:50 because yes, that's how people lost money. There were bad actors in the space. Part of what I do is I generally
23:55 will invest money into a group first as an individual. So if I'm getting to know you and you've got a deal coming up,
24:01 I'll say, "Hey, that sounds good. You probably have a minimum, let's say that's $50,000 into a deal.
24:07 If it's a good investment for me, I'll put money in it first." This is a very slow process, by the way, in how I vet.
24:12 I got to put money into your deal. Then I'm waiting and I'm seeing if are you communicating with me? Are you making
24:17 the returns that you said you would? What does reporting look like? All of the things that are my expectations moving forward if it goes to my network.
24:24 Then if all of those boxes are checked, it becomes background check flying out to the site. And this is before raising
24:30 money for a particular deal. It's a lengthy process. I had someone the other day say, "Your business is going to grow very, very slowly. You're going to die a
24:36 painful death because it's so slow." I'm like, "Well, look, I'm a real estate investor first. My cash flow comes from my own properties and other projects
24:43 that I have. So, I get to be very selective on how we are investing into it. And if it's one deal a year that
24:49 comes up as a result, so be it. Because my concern is I don't want to lose my own money. I don't want to lose definitely don't want to lose anybody
24:55 else's money. So, we're looking at uh capital preservation first. People is the next thing I'd bring up. Can I sit
25:02 down next to this guy or gal and enjoy a conversation with them for a couple of hours? Will we be good partners long
25:09 term? because even if we're passive, that's still a partnership. They they owe you uh the the respect of
25:14 communicating along the way and and vice versa. And so, um so much of it comes down to the people. I I sound like a
25:21 broken record saying this over and over again, but uh it is the hardest part of the job is making sure that you're
25:27 aligning yourself. And then when you find those good groups, then yeah, in the future maybe you can raise for them
25:32 and you can bring people in with you along for the ride. Yeah, I think that's a great way to do it is you slow play
25:37 and that's the biggest thing for me that I've seen in successful groups. The communication's fantastic. The
25:43 reporting's fantastic. The groups that I've enjoyed participating with the most and we work so hard in my companies to
25:49 do the same thing. Clear, concise newsletter where like just just the basics. I know on a monthly basis what's
25:55 going on with property. I have clear views of the financials. We're hitting our targets. And the biggest thing for
26:02 me, they share early and upfront when things don't go to plan. I I don't need
26:07 everything to work. Every single time we invest, there's risk. But if they're really fast on communicating, hey, we
26:12 ran into a problem. These are our proposed solutions and we're open to feedback. That's really as an investor,
26:19 that's really all I need. I'm happy as long as I know that my money is safe and the people who are managing it are doing
26:24 the best they can with where it's placed. And if I don't feel that, I'm not going to invest with them again. That's a
26:30 fantastic principle though. Invest the minimum. Work with them over time. Have them prove that it's a good partnership
26:36 and then continue to grow that relationship in things that you already know works. I think something that people try to do too much is over
26:42 diversify and invest with everyone. And that seems like a good way to lose a good chunk of money because some of them
26:48 will work and some of them won't. I like that slow, steady, measured vetting process. I think that's fantastic. How
26:53 are you on the active side? How are you actually finding deals? You mentioned that you do uh mobile home parks has
26:58 been a huge thing for you. How are you finding these deals and how are you creating opportunities for others to invest in? On the active side, again, my business
27:05 is set up to where the passive and active. I'm not running the day-to-day of these mobile home parks. So, that
27:12 becomes more of a passive role for me. I may have certain roles in it, but I'm not the key player. Uh and and that's by
27:18 intent. So, I I do love that asset class. That remains though the focus of
27:23 the passive bucket. Uh on the active side, it's a variety of what I know at
27:30 private lending, the retail spaces that I'm buying. And look, the interesting thing now with with today's interest
27:36 rates, overall, they're fair, right? I'm I'm not complaining about where interest rates are. Everyone looks back a couple years.
27:41 Not at all, they're great. Very moderate. Yeah. And and so I think it's a good time to to get involved with those. Uh
27:48 but that all comes down to what the expectation of the investor is. I looked at something this morning and talked to
27:53 a broker. uh there were three tenants long-term good stable names and and uh
27:58 in the local community. The problem is when you do the math on these deals, some of them return like 4% your cash
28:05 return. This is on retail triple net spaces. I diversify personally outside
28:11 the business to figure out where where's the best blend for what I like because yes, you can focus 100% on one thing and
28:16 a lot of people are incredibly successful that way. I do think real estate allows you to be a little bit
28:22 more open. That's how I I dissect it from from two ways on the business side, bringing in passive investors. I only do
28:28 two things, private lending and mobile home parks. I do believe that there are other ways that that fuel people's
28:34 active income that they should be making sure they concentrate on. Um the number one thing though for anyone getting
28:39 involved is um don't quit your day job too soon. I see this mistake. People
28:44 think that they can get a rental house or two at getting into the game and uh and quit their job. It's not the case.
28:49 They're not going to make that much money. You can look in the rearview mirror in 10 years and you're going to be in a really nice position if you just
28:55 hung in there. But uh if you're getting into safe investments pretty often, more
29:01 than not, they are, you know, lower returns. They are not, you know, if somebody is comparing what a stock
29:08 market return has been the last year relative to real estate. Two completely different things. You can't compare a
29:14 15% here to a 15% there because they each have their perks. Uh, I just like things that are tangible that I can
29:21 control. And that's why I focus more of my energy on real estate. People should spread it out though, just safe stuff.
29:27 And people get sold on the idea of of buying one rental at a time and eventually you're going to retire there. And that
29:32 was the big learning thing for me is I I bought a couple duplexes and I got my total cash flow between two duplexes was
29:38 $2,000 a month. So like per unit, decent cash flow if you're doing the bigger pockets method.
29:43 Yeah. I'm cash flowing 500 per door. Net cash flow. My mortgage on my house at the
29:49 time was $2,000 a month. So, cool. My real estate pays for my real estate. I own my house and my duplexes pay for it.
29:54 But it took me like eight years of working to find those two duplexes. And this one rental at a time model. Well,
30:01 the goal wasn't to create $2,000 a month every eight years. It was to retire it. It took me I was right around 75 rentals
30:08 is where I'm like, I have enough income to retire myself and retire my wife. That's that's where it was for me. And I
30:14 So, I jumped to multif family, started buying bigger deals. I didn't really feel like I had a lot of excess until we
30:20 hit around 150 units. I'm like, "Hey, I'm It's about twice that where I was like, this is actually really good." But
30:26 I think a lot of people go into this with that bigger pockets mindset of, "Hey, I'm going to do this a single
30:32 family or a duplex at a time. They're not really high margin. They take a lot
30:37 of time to actually make that money unless you're doing it, again, as you said at the beginning, unless you're
30:42 treating this like a business and you're scaling. But I for most people I like to shift that perspective of you might
30:47 actually be closer to 50 units if you're trying to do this retire and have stability and and have this dream of you
30:53 know people are like oh mailbox money. It's like you're going to work your butt off for that because everyone wants to do it. It's like any business you're
31:00 competing with everyone else trying to do the same thing. If it was easy everyone would have retired with three
31:05 houses in five years, right? Like everyone would do that. It doesn't look that way in reality. I have one student
31:12 out of a thousand who did two transactions and was able to do uh both of them did a million dollar cash out
31:18 refinance. That's one out of a thousand. Now, it's awesome because he blew me out of the water. You might do it in two transactions, but
31:25 less than a 1% chance that's going to be you. You can win win the real estate lottery. Doesn't usually happen.
31:31 And most people aren't utilizing all the ways that you can make income from real estate. So, they might be focusing on
31:36 cash flow. you know that they could they could get introduced to depreciation or cost segregation studies and then that
31:42 really opens the the box of wow what was I missing here one of the best things and it's talked about so much in real
31:48 estate is the ability to have tax write offs or depreciate some of these properties that you buy every property
31:56 um but a lot of people don't know about it and so it becomes the the import it becomes an important thing to say look
32:03 if you're comparing this style of investing to the stock market and you and say, "Well, there's 18% there. I
32:08 might make 7% here." You got to look at a couple things and the ways you can make money. It's like you get depreciation in year one, which could be
32:14 a huge tax benefit for you. You get cash flow. You have equity payown. You have
32:19 appreciation. All of these things, just those four ways right there that I just listed. Um, and you got control. That's a big
32:26 one. So, why I love it is because if there's a down cycle and you've got you've got a lease, don't sell that
32:32 property. You're going to have to stomach it somehow. all these things. It gives people a lot of options. But to your point, the Bigger Pockets method,
32:39 and I don't I don't knock it whatsoever because I love what they've done a really good job at is getting people to
32:44 get their feet wet and Brandon Turner era, that's how I got into those first two duplexes that taught me what I needed to know to buy
32:50 my 38lex. That got me started. That's Bigger Pockets is a fantastic jumping on
32:56 point. Love them. It's uh Yeah, it's amazing. So, those groups are very important. And I think
33:01 that if you don't have any real estate and you're listening to this, find a way to dive in and then just figure out what's the best route for you. You might
33:08 hate being a landlord. Um, I've had awful stories and you have too. I know Christian, we haven't even discussed
33:14 this, but I know you have awful stories of being a landlord. So, yeah, I think we house 1,381
33:21 people today, like total humans who live in my buildings. Yeah, you will have problems with that
33:27 amount of people. Uh, if you weren't aware, 100% of domestic violence happens
33:33 at your doicile. So, in a house. [laughter] Yeah. If you're living there, there there's you will have all sorts of problems uh
33:41 when you house a lot of people. It it's part of the business. Absolutely. Yeah. Pro tip. If you're buying anything beyond even a single family house, but
33:47 if you're buying bigger uh deals in a market, just call the local police department, give them the address, and
33:53 ask them what they know. I love it. I I did I looked at a property. I didn't fly out there because I I found out
33:58 everything I needed to know up front. It was in Memphis and it was a mobile home [laughter] park and I called up enough
34:03 that Yeah. Yeah. What' you say Memphis? No way. Uh but people do own property in Memphis and they are successful there.
34:10 So it just has to fit your appetite. So I called the police and they're like, "Man, oh, I think they name people on a
34:16 firstname basis. They're like, "We're at that place every day. Get away." And at that point,
34:22 diligence is done. I for me I'm I'm not trying to overcome these big obstacles. I'm not a turnaround guy. I want to make
34:28 sure that something's pretty stable when I'm getting into it. Uh it's just not for me. The turnaround people that exist
34:34 out there, I commend them and they take on the risk and I and I want them to get rewarded for it, but it's a lot of work
34:41 and a lot of risk and you just have to figure out where you fall on that scale if you're willing to do that.
34:46 This is a perfect segue to our favorite question, the one that everyone's here for. Uh the stupid tax. There's a lot of
34:53 mistakes that get made and the dumbest you're ever going to be is when you start. So the main goal of this podcast
34:58 is for people to learn from people who've done the thing that they want to do. The most valuable advice we can give them is avoid the super expensive
35:06 mistakes. For you in building any of this business, what was the most expensive mistake that you made? Before
35:13 I began raising capital, I invested into a deal as a passive investor and I fell
35:19 victim to what you discussed earlier of a very good marketer and a very bad operator. The thing that they leave out
35:27 when they send you these deals and show you their performs is it doesn't seem
35:33 that people will list fraud or Ponzi scheme when they are giving you their
35:38 perform. [laughter] Yeah. wasn't on the document, sir. Um, so
35:46 yeah, it it was myself and and a ton of other people that fell victim to this and it was a very expensive learning
35:52 lesson for me. Um, I'm very fortunate. I see the silver lining in everything and I'm so happy that it happened to me. A
35:59 when when I first started and b when I wasn't raising money from other people
36:05 uh because that was a part of this this same group. Um, so big learning lesson
36:11 for me couple to to when you first look at it if you're passive investing, uh, yes, definitely type in that operator's
36:18 name or their business. Um, you can look at property ownership filings, make sure they actually own those properties that
36:23 you're being pitched on. Uh, you can do the deep dark Google search and type in
36:28 their name and type in fraud, Ponzi, scam. If they've done it to date, it
36:34 will be on the internet. So, start there. Um, you can use programs like Lexus Nexus or background checks. Just
36:41 go with your gut and make sure that you really feel safe about doing it. Now, if you want to invest with someone and
36:47 they're like, "This is a hell of a way to start a partnership." Then don't go that way. Because if you're going to give somebody your hard-earned money,
36:53 let's, you know, pretend it's a $100,000. If someone's doing that to me and they said, "Ian, can I background
36:58 check you before we do this? Like, I trust you, but just to make sure." The answer is absolutely. Like, yes. What do
37:04 you want? Because and if they're like, "Listen, that's not a way we should really start this partnership." Walk away. There's other people that are out
37:10 there that will that will do this for you and you need to have confidence and peace of mind when you get into something that they are going to be the
37:17 right people to partner with. Yeah. And and I have I have worked with people who have made mistakes in their
37:22 background and they're transparent about it and they can like if someone can give me a very clear like, you know, granted
37:28 if they've done a Ponzi scheme. Yeah. Yeah. But I've had people who have had deals that have failed and lost
37:33 money and they didn't get rejections. And I I actually prefer when I'm investing with someone when they've done
37:40 enough business when they have had a failure and they can really break down. This is what we did wrong. This is how
37:46 we've learned from it and this is how we're transparent when these issues come up. I I love that in a deal. The the one
37:53 thing that always makes me the most hesitant and is the person who's like, "Hey, every deal I've done has always
37:58 gone fantastic. Everyone loves it. there's never any problems. I just don't believe that. Uh so you don't have to
38:03 have a perfect track record and I certainly don't claim to have a perfect track record. I had a hotel conversion that it took me an extra two years to
38:10 get through the project. Absolute pain. We didn't lose money, but
38:15 it cost us a lot more money to get from A to B than we originally thought. It just it was not the deal that we
38:21 expected it to be. I'm always transparent about that and I'll share numbers. That's that's what I want to
38:26 see from someone is I want to see honesty. I want to see transparency. I don't need to see a perfect track record. I need to see someone who I
38:33 sincerely want to invest with and then comfortable with investing. There's always going to be some risk. If people
38:38 wanted to invest with you, learn from you, work with you. What is the easiest way for people to find you online?
38:44 For everyone listening to the show, we can include it in the show notes. Um, I made a cheat passive investing cheat
38:50 sheet that I wish I would have had when I got started. Um, it just goes over the right questions to ask and kind of
38:56 identifying what happens when you get on someone's mailing list and every step along the way. So, it's helpful. Check
39:01 it out if you're curious about passive investing. Um, we talk about transparency. I think it's a great segue to get into that. Uh, but yes, we'll
39:09 we'll leave that link in the show notes. Uh, or you can find me. My website is runsteadyinvestments.com.
39:14 Perfect. And those will be below in the show notes or if you're watching on YouTube, it'll be in the description
39:20 linked below. But Ian, thank you so much for joining us. This was super fun. I love just talking to other investors and
39:26 operators. I love the way that you're running your business and you said all of my favorite points. Just go buy and
39:34 hold real estate. The fact that you don't have a lot of experience selling, I think that [music] should be the story
39:39 of every single investor means you're doing something right. You don't have to sell the deals to make them work.
39:44 Uh so guys, copy copy his model. If you want to learn more, click the link below and we'll see you guys on the next
39:50 episode. Thanks for having me. Absolutely.