Joel Kraut on Losing $4.2M in 2008 and Rebuilding From Scratch

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

0:01 Hello and welcome back to the Owner Meeting podcast. I'm Christian, your channel host today, joined by Joel. This
0:07 is going to be a fun episode. We talk a lot about passive investing. We've had all sorts of business owners on here with different products and angles. This
0:13 is one of my favorite things to talk about the active side of real estate. Uh Joel is an owner. He's been through
0:19 multiple market cycles. He's done a ton of single family. He's done building. He's done flipping. His lending company
0:26 is Burr.com. Premium IP, by the way, well done. Uh,
0:31 awesome name for an awesome company. We're going to talk about all of this and how to actively run and scale your
0:37 businesses, how Joel's built his, and the takeaways we can have from it. So, Joel, welcome to the channel.
0:42 Thanks a lot for having us on, Christian, today. Want to be here. Oh, yeah. Oh, yeah. Well, let's let's
0:47 just dive right into the We talked a little bit before. Let's dive right into the the big thing. So, you had some pain
0:54 in 2008, so you've done all sorts of stuff. We're going to get into your entire background here. Uh you had
1:00 mentioned you had a lot of 2008 pain and you recovered faster and stronger than you thought was possible. What was your
1:06 starting position going into the whole 2008 crisis? Where were you positioned
1:12 as a company before the whole market got pulled out from everyone? So for me, we weren't really a company.
1:18 We were like a one-man band. Love it. was myself, two or three other partners that really
1:24 just fell to the wayside as things got tough. They really ran in a hit.
1:29 You know, I like to always joke, you know, you don't get this haircut without having a lot of, [laughter]
1:34 but you can imagine we owned 144 properties. We were the person that's on
1:40 Instagram now talking about 0% credit cards and how you buy things with no money.
1:45 You know, the rules are very different. It was very easy to buy properties with no money.
1:52 For those in the audience that are older, they know the bank Wakovia. Wakovia was a big lender. Got taken over
1:58 one night or really incorporated into their portfolio. I don't know if takeover is the right word by Wells
2:04 Fargo in a save situation. Wovia used to give us up to 123% of the purchase price at
2:11 closing. Wow. Getting paid to buy real estate, right? Like I I Exactly. One year I did
2:17 11 transactions and I think I got either $256 or $259 out at closing as the
2:24 buyer. Wow. You know, I think back and I look at the troubles that I got into and I can only imagine what people who were playing big
2:31 did. It must have been just catastrophic, right? We've had on some guys that we know from
2:36 around the road and they've talked about some of their hurts and wounds and you know, for me that wound was about $4.2
2:42 million. The hurts. Not a good day. Not a good day. So, we had a thousand tenants, about 500 called
2:49 me up and said, "Hey, you know, you're a nice enough guy, but we just can't pay the rent." Took me about six weeks to
2:55 get up off the couch. At the time, I was married. And my wife came to me one day around 10:30 in the morning after the
3:00 girls had gone to school. She said, "Look, you just got to get out of the house because they're they don't know what's going on. You're never home now,
3:08 and now you're watching some ridiculous show on TV, eating cereal in your shorts, and it's 10 o'clock in the morning, and they're going to school.
3:14 They're panicking, right?" which I could understand. Everything had changed. So, it took me a few months to get my feet
3:21 back under me and I didn't really know what to do. So, I just went back kind of did what I knew how to do and I went
3:28 from 100 best friends down to three. You know, the other 97 I couldn't pay for
3:34 dinner anymore, so I wasn't their best friend anymore. And you learn these things in life honestly going through
3:40 harder times, not necessarily the great times, but people show their true colors. And look, you learn,
3:48 and I believe one of the most important things in due diligence is the due diligence on vetting the people you're
3:53 going to go into partnerships with, right? It's not just the sticks and bricks. We can survive most of the sticks and
3:59 bricks. That's generally a math equation. Yep. Maybe not a good one, but it is one. and
4:05 it's solvable. But with humans, as you know, and other guests have been on here and talked about, sometimes you get in
4:12 this protracted circle to nothing. But that nothing is exceptionally expensive and has huge ramifications.
4:19 Well, we talk a lot about limiting variables. So, I mean, the things that white people out tend to be more than anything else in real estate. It's uh
4:26 variable rate debt. That that one obviously has been the most recent uh where you have a lot of people sign up
4:32 for the wrong debt product. your expenses change. It's hard to math if you don't have constants. But more
4:38 importantly, people are variables. The more people you have in the business and you bring partners in, and I have I have
4:43 lots of them myself, uh you are inviting chaos into the universe and is going to
4:48 be difficult in your business because people will be people. And I think you nailed it. Uh you have a hundred
4:53 friends, you might end up with three when times get hard. That's uh I had a a mentor early in my business.
4:59 and his name is Gary and he this policy that's really helped me in business which is he's like hey every time I
5:05 partner I just assume that all the work's going to get dumped on me and all the responsibility is mine and I am just
5:11 so pleasantly surprised when anyone does anything to help and uh I've gone into
5:16 partnership like that where it's like we'll we'll do the OAS we'll do the partnerships but you know what
5:22 [clears throat] more than half the time there's one person who ends up taking on most of the work and that's obviously
5:28 Joel you're one of those people who uh you can get up off the couch and do the hard thing, which is a hard hard thing
5:34 to do. You know, I think your friend, your mentor really prepped you, right? We
5:40 don't want that to happen, but you have to be prepared for it, right? So, it doesn't ruin your mindset at that moment
5:46 because you know it's going to happen at the worst moment, right? So, if you're not really ready mentally for it, it's very tough to catch up
5:53 and that can be very expensive. You can't make good clear decisions. You end up shredding tons of dollars. You go
6:00 home every day. You can barely sleep. It's a miserable ride. You know, I went through that. I understand what it feels
6:06 like. I was a trader on Wall Street for about 22 years. We only traded proprietarily. So, we
6:11 didn't have any customers. Oh, nice. We traded options on stocks, indexes, commodities.
6:16 The risk that we took on a daily basis, you know, in perspective
6:22 just dwarfed anything in the real estate world. So in the real estate world, I was able to come to it and be able to
6:30 pretty calmly, you know, stay a little
6:35 less high when we were doing really well and not be as emotionally distraught when we were annihilated.
6:40 Yep. And that's helped a lot. I mean, being able to stay calm and see what's really
6:46 happening instead of just getting caught up in the noise of it all is a huge benefit. Yeah.
6:52 To me, that's one of the hardest things for people to learn. I'm sure you've talked to tons of new investors. We do
6:57 every day at Burr. And they're so excited about the opportunity to be in a
7:02 deal. They spent so little time actually evaluating the deal or [snorts]
7:08 due right. Their due diligence was like, you know, my friend Christian told me it was a good deal, so I didn't.
7:14 Yeah. Or or they or they fall in love with the first deal that's close to working and they they try to force it to
7:20 work. It's like, don't don't fall in love with the building. It's a building, right? It's sticks and bricks. I I tell people all the time when they're
7:26 ask me, "Well, what do you do about this? What do you do about that? What do you do about this? How do you make so many offers?" Look,
7:32 close your eyes for a minute. Every building has a roof. They all have doors. They have windows. They have
7:39 flooring. Hopefully, they have kitchens or you're going to put one in. Right? So, they're the same. So, why would you
7:45 spend your time running all over America to go look at all these houses just so you can make an offer? Why don't you
7:51 make 20 offers a week? see if one or two gets serious. You have a small due
7:56 diligence period. And if an offer gets accepted, then you go and examine upfront and close and personal and see
8:03 if you can move forward or not. But the other way around is a huge waste of resource time. And people are always
8:08 like, "You think like I don't know. I have friends who have made up upwards of 70,000 offers in their career. Yes, they
8:14 own a lot of properties, but think about you couldn't even physically have done it, right? You're based in a beautiful
8:20 city and it would have been fun to fly in and out of all the time, but who can live their life that way.
8:25 But understanding what you really want and beginning to build your box. Look, we do something, you do something, other
8:31 people do something. It doesn't always have to be the same. Doesn't mean any of them are better or worse than the other,
8:37 but understanding how to become great at that lane is really the key to your success,
8:43 right? Putting together the right teams, understanding your buy box, sticking to it, man. Getting out of your lane can
8:49 kill you as you know. Yeah. And it's hard. Like you just said, like
8:54 people want to jump. Like they just watched some webinar and they think, "Oh, that's really cool." Like we've had people come to us and ask us about trust
9:01 and like one question. Okay. Do you have any assets? No, not yet. What the hell
9:07 do we need a trust for? Like what are we spending $3,500 or $5,000 to have this
9:12 paperwork drawn up if you don't even own any assets? Oh, that that frustrates me. So this
9:17 actually a great this is a great topic. So I see a lot of educators in our space
9:23 and they like to pitch one of two things. Either the the secret of real estate and so they'll marry some random
9:30 subniche of strategy and brand it as the next way to buy real estate which I think is the dumbest of all things. Or
9:38 they'll teach something that's too complicated that's too far ahead for people to sound like they're smarter than they are. and there like if you're
9:45 starting. So this this is a this is a great conversation point. What does someone really need to know to get
9:50 started? Because it's it's definitely not the perfect partnership structures if they need a trust. I I don't even
9:56 think you need to understand too much about accounting if you're not making any money. Like there's a certain there's a there's a cart before the
10:02 horse. You have to buy real estate to have any of these problems. I totally agree with you.
10:09 If I was starting, what things do I need to know? You need to know this. You need to know the triangle. Somebody should take out a
10:16 whiteboard and draw a triangle. One, you got to show people you're willing to work hard consistently.
10:22 Two, begin to learn how to source deals. That could be as simple as telling every single person you meet what you do.
10:30 Three, either have money, have access to it, or find it with a good deal. Those
10:37 are the three things you need. So, I didn't talk about you having a ton of cash. I didn't ask you what your credit
10:42 score was. I didn't ask you what college you went to. I didn't even ask you if English was your first language. People
10:49 have too much noise in their heads. Sometimes they spend a whole week in
10:55 YouTube land, which I like, but you know, come on. It can really, really take you and get you all over the place
11:00 and get you away from the hard fact. People want to make money with their
11:06 money. So stop worrying about if you can find money. Start worrying about if you
11:11 can find a deal that money would be attracted to because money is very
11:17 finicky. It's going to spend its time quickly evaluating
11:24 high risk, high re high return, lower risk, medium returns, right? It's
11:29 going to make all those evaluations, optimize, and then go to the deal it wants to. So you need to understand that, right? the language of love of the
11:36 money, right? Because America is really only the number one thing in anything anymore, right? We're like what, 17, 18,
11:42 19th in English. It's the math around the world. I don't know if those numbers are correct, but it's something like that, which is sad,
11:48 but true. Yeah. But we are number one in greed. And our dead presidents, the money, want to make
11:55 money every single day. No matter what webinar you're on, what seminar,
12:00 whatever podcast you're listening to, they're talking about building legacy, long-term wealth. The only way to do it,
12:06 I don't care who you are, is to get your money to work for you, right? You have to have that as a big component of
12:13 whatever you're doing. I've worked a lot of years, longer than most, and you cannot earn your way from a regular
12:19 salary except for what, 1% of the public that gets to that kind of salary level.
12:24 The rest Yeah. Yeah. There's a there's a study done on this fairly recently and I I apologize. I should have the quote at
12:30 top of mind but it's just not coming to me. Uh but there was a study. I promise there's a study and the dollar
12:36 [laughter] amount that it takes to legitimately have a chance of saving to financial like significant financial
12:42 freedom. You have to make about $480,000 a year. That's that's not a high proportion of
12:49 the population. That's a very high salary. But think about it. You and I have met a lot of people around the world around
12:54 the country. They earn 100 grand, 90 grand, 120.
13:00 Somehow they have figured out how to live below their means. They have some savings. Yes, they might
13:05 not be Warren Buffett, but they're working their way there over time, right? They understand the value of
13:12 maybe only having Chinese food one time a week instead of every night. And until you really embrace those types
13:18 of things, you're never going to get anywhere. It's just true. Like we talked to people at Bur Loans, they show us
13:24 liquidity statements and then you look at their their personal credit reports
13:29 and you see they have $80,000 of credit card debt, which they always blame on I just pulled
13:35 down materials at Home Depot, but generally the Home Depot card is not the one that's maxed out. Anyway, you know,
13:41 they got $18,000 in savings accounts that are earning, I don't know, let's be generous, three and a half%. They're
13:47 paying 29 to their buddies at Chase, Visa, Mastercard. Like, it just doesn't
13:53 make sense. But somehow they're justifying in their own heads and they're losing the battle. Then you have
13:58 this, I hate to use the term, but normal regular person who has this what they
14:05 would consider to be a modest job, drives a modest car, lives a modest lifestyle, but damn it, always seems to
14:11 be able to have some money when they need it, right? I mean, there's no real secret. The rich people lay out the
14:17 program. There's plenty of room at the top. They're not competing with me or someone else. Right.
14:23 Well, and I found that the people who can't manage their own personal finances, they don't have a chance of managing their business finances. Like,
14:29 if if you're bad with your if you're bad with your own money, you're going to be terrible with other people's money.
14:34 It's just the truth. I know it people don't like to hear that because they want a magic pill, but it's really true.
14:39 You got it spot on there. Yeah. And I just I've seen it I've seen it too many times. It's actually one
14:44 thing we'll So, so I I run a coaching program and it has like I turn down a lot of people. I I don't want you to
14:50 spend your last dollar learning because you can learn for free. I want someone who's like, "Hey, I if you want to
14:57 succeed in real estate, I I want to see that you can manage your own budget, that you've actually managed to save some money." Like, I want to work with
15:02 people who have a personal level financial literacy so that you can expand it to your business. But if
15:08 you're sitting here and you're listening to a podcast and you're like, "I have $2,000 in my bank account and $50,000 of
15:14 credit card debt. My credit score is recovering." That's what I always hear. It's getting better.
15:21 We're working on it. If you're sitting in that status, the last thing you should do is join anyone's mentorship program, any course,
15:28 start a new business. Fix those things. Get your personal budget under control. Eat out less, buy less unnecessary
15:35 things. Go out and earn more. But fix your personal finances because the lessons you learn there, it's going to
15:41 make you a thousand times better business operator if you understand how your personal finances work.
15:46 It's incredible, right? Somebody is they feel like they're late in life. They're 28 and they're not already rich because
15:52 they watch Instagram and they're somebody 22 that's flipping houses made a lot of money. You don't even know if
15:58 it's real or not, right? You watch TV, you have no idea. But the point is exactly what you're saying. Look, if
16:04 you're going to spend money on mentorship at that point, spend it on somebody who's a financial coach who's serious and will stay on you to be
16:11 accountable every two weeks like a dog and show you that love, that
16:16 unconditional love by torturing you every two weeks to make sure we've gone over the budget. We know where the money
16:21 was spent. We know what we're saving. We know what we knocked out on the credit card. We didn't wait 30 days to send in
16:27 the extra $100. We sent it in now. And we start to learn that process. And in learning that process over six months,
16:34 one year, 18 months, it starts to become a habit. Now you got something to work with and you can get back to Christian
16:40 and now learn how to start to buy multif family for your legacy, your five-year,
16:45 you know, passive cash flow and you have a big future and oh yeah, you're 33.
16:50 The other thing to do if you're looking for like the right coaches and communities, skip anyone whose advertising is the Rolexes, the
16:57 Lamborghinis, and the Superhouses. Not because they haven't made it. There there are some people who legitimately have actually bought some cool stuff and
17:04 live a crazy lifestyle. The problem is they are marketing to poor people, which means yes,
17:09 if you're falling for that, it's a program that's targeted towards people who are poor.
17:14 Wealthy people aren't interested in what you drive. They're they're really not interested in what you drive. That is a
17:20 the materialism. Most of us are not interested in that because we're too busy making money. We
17:27 we have jobs and businesses. We went through that phase, right? I mean, we all wanted a cool something at
17:34 some point. That's the truth. But we had it. It didn't make us any happier.
17:40 And then I went back to kind of like the normal stuff. [laughter] Point. People make fun of me sometimes
17:46 with the car that I drive, but like it doesn't have any bill. And nobody when I
17:53 pull up that I want to negotiate the price on and try to get it down $3,000 looks out the window and they go, "Oh,
17:59 you got that Porsche Panamera outside for like $180,000 or whatever the number is.
18:04 Why do you really need my $3,000 off again? Explain that to me." Right? Like you have to match up correctly and live
18:11 the lifestyle that makes you comfortable. I get that. But it also has to align and marry to
18:17 your interests, your values if you really want to be successful. Yeah. No, I I absolutely absolutely
18:24 agree. So coming out of going back to the beginning, so coming out of 2008, you had a
18:32 spectacular recovery and your business has grown a ton. What what does business look like for you specifically today?
18:39 What what sort of velocity are you doing? What are the projects that you're focused on? Where are you at today? And
18:44 how did you get there from 2008 to now? I really got there from three best
18:49 friends, right? They just would not accept my woe is me. They basically just kept their foot on my neck and they were
18:56 great accountability coaches and to this day still are to be honest. They are still my three best friends. Oh, that's awesome.
19:01 I've known them all for a really long time. Two of them for almost 40 years and one for probably only about 20. But
19:08 we've all been together for a long time and they put up with my nonsense by feeding it back to me and making it
19:13 sound like nonsense. So, you know, today our business is is twofold in particular. We lend around the country
19:21 as burl loans. We're lending to investors only. a lot of one to four family fix and flip new
19:27 construction has been exceptionally popular the last two years I'd say in particular and a lot of DSCR loans on our side
19:37 personally I've been flipping houses you know tonight I'm going to run a RIA
19:43 group and there'll be a few people in the group that'll probably be 22 years old so you know having some of these stories
19:50 from the early 2000s are cute but no one really cares right they got to be relevant today. So, yeah,
19:55 I can give somebody here. Here's the HUD. Here's the entity name. You can look it up in this state or that state.
20:00 You can see it's us. I mean, obviously, don't go torture the contractors on site, but you can see we're really doing it today. My guy goes
20:07 to Home Depot at 10 o'clock when he should have been there at 6:30, and I get annoyed just like you, right? We go through that sometimes as well.
20:14 Absolutely. We are also starting to accumulate a re a real estate rental portfolio again.
20:20 We are mostly focused on small mediumsiz multif family I would say three four
20:27 units small on the bigger side so far 12 unit buildings and that's been the crux
20:33 of what we're really looking at we have successfully been able to partner with a bunch of our own clients you know I see
20:39 Christian I meet Christian we lend to him a couple times seems like a good guy voicemail box is always open not that
20:46 anyone listens to voicemail anymore but you feel like you can communicate with He returns calls. He speaks clearly when
20:52 you answer ask a question. And usually I'll just say, "Hey, Christian, looks like you're only doing two or three a
20:58 year. Can you keep finding properties and would you be interested in doing more?
21:04 We can put up the money." And sometimes the Christians of the world say, "Hey, you know, I'm good. I'm very comfortable
21:09 just doing my two, three a year." And others will say, "Well, what do you mean?" So for us, it's been very
21:15 powerful to be able to build local teams in different markets with our own clientele. So we have some track record
21:21 with them already. We see that they can go from start to finish, which I really like. You know, we talked about that off
21:26 camera. Different ages in different markets. That's true. But most of them have
21:31 experience one way or the other. To me, that's really important. I want to be able to feel good about how someone's
21:38 going to react when things are going wrong. Most people can do well pretty well, but I'm more interested in people
21:45 who can stay the course when things aren't going well. Because I can't fly
21:50 800 miles away quickly. I can do it that day, but that's not the same as meeting
21:55 an inspector, a zoning person, somebody else who wants to find me in the next hour, right? I
22:02 need boots on the ground. Plus, to run jobs from far, you have to have it. I know the Bigger Pockets
22:08 library, not to pick on Bigger Pockets. They have a lot of books on, you know, investing a thousand miles away and how
22:13 sweet it is. We're seeing inside of our own lending portfolio operation, a lot
22:20 of investors who went to tertiary cash flow markets the last two, three years,
22:26 bought into the section 8 program, how great, simple, and easy it would be to collect those rents. And now they're
22:32 trading back out of those properties for break even, small losses because it wasn't as simple to actually just do
22:39 that from a thousand miles away. They don't like it as much as they thought they would and they don't like the market as much as they thought they
22:46 would. And now they're trading out. So, we're starting to see that rotation, which to you, to me, to others that
22:52 don't have that legacy on their back and and are bogged down by it or have
22:58 suffered losses from it. You can now clearly use the MLS if you're buying
23:03 three and four and two and three and four families pretty well as a tool again and not compete against 30 people.
23:10 Maybe on the rally best properties you compete against two, three, four people. That's very different in people losing
23:15 their mind, just bidding through the roof, which you know, honestly, for a couple years there, 2020, 2021, maybe
23:23 almost all of 22 just drove me nuts and kept me on the sidelines. You know, I I didn't buy any properties. I bought one
23:29 from an estate sale, but it was off market. No one knew type of thing. I just I find it so important to be able
23:37 to work with people who can stay clear-minded. The worst beats of my career have been through people, not through the real
23:44 estate themselves. Yes, I have lost money on real estate deals. That's true. But I've lost a lot more money. My hair,
23:51 heartache, aggravation, working with the wrong people where we ended up in big problems, couldn't seem to get out even
23:57 if I was willing to pay my way immediately. You know, you just had to keep working at it. Work. You could waste years on this and really ruin any
24:05 momentum, change your train of thought, ruin your mindset, all the things you really need, you know, to make a
24:11 positive impact and create what you're trying to for yourself. You know, picking the right people to work with is
24:17 crucial. It's almost impossible to do everything by yourself. Some people do it. If you want to own three properties,
24:23 four, you probably can do that. But if you're going to start to get through eight, 10 and more, you're going to need
24:29 all hands on deck and finding good property managers, finding good partners, accountability partners,
24:35 physical partners who can help you with work, manage books, move money around successfully, properly, ethically,
24:42 transparently, morally, all those good morally, right? All those good elies or
24:48 whatever you call it. But, you know, just getting that right to your point.
24:53 They're really sloppy. They don't usually get really sharp. Well, and as you scale your business,
24:58 and you can scale to any size that's appropriate for what you want to do. So, it's important to go in to have a specific goal for what you actually want to build. But as you start to scale your
25:06 first few deals, they're probably going to be your hardest deals. And as you start to build that track record and you start to build that resiliency, you
25:12 start to actually overcome things groups will start to want to invest with you just like just like you do in in
25:18 established operators. It's like, hey, once you get some momentum and some track record, all of a sudden it
25:23 becomes, hey, do you want to keep doing three deals or what would it look like if you did 20 deals a year? What would it look like if you did 30 deals a year?
25:30 I just got out of a meeting with one of my lenders who were like, hey, we've they've done a few $5 million loans.
25:35 We're doing a $10 million loan right now with Fanny and the reps are like, "Okay, well, we like the way that you guys
25:41 operate and we love how aggressively you guys are buying. Like, we love your pacing. We love your operations. We like how you guys handle adversity." It's the
25:48 exact same conversation. They're like, "Have you guys given consideration to
25:53 what it looks like to be a company that can borrow $und00 million?" I'm like,
25:59 "No, I haven't given that much thought." And they're like, "Well, this is what some of our clients have scaled to." And
26:04 so they kind of laid out like, hey, this is this is what we like to see to go from where you're at today to, you know,
26:11 you borrow tens of millions. The next step would be, can you take out these other deals that other people can't take
26:16 out? It doesn't actually take that long to build a track record, though. If
26:21 you're building your business, you're dedicated to that, that is something that you can start laying the groundwork for today and five years in the future,
26:28 you can find out you're somewhere you never imagined you could be. Yeah. I think a lot of people have a hard time with the starting point,
26:34 right? Here, I have no experience all the time. So, I asked them, you know, what do you
26:39 do in life? What's your career path? Have you ever gotten a promotion? Have
26:44 you ever been responsible for a budget? Have you ever had to move people around logistically? You know, single moms,
26:51 divorced single moms or single moms sometimes are great at making the
26:56 transition to fix and flip. They have spent years budgeting, right? years transporting everybody, moving
27:03 them around, being logistics, manager, scheduling,
27:08 and they're typically inherently risk adverse, which is great, right? And understanding how to do
27:13 things not necessarily cheaply in the way the word is often used, but efficiently and economically, right?
27:22 When Home Depot has a sale, buy the product, right? Store it in your garage or store it in a friend's garage if you
27:28 rent your apartment, right? You can find those situations. We bought some appliances in Milwaukee yesterday.
27:34 Not ready for appliances for four weeks, five weeks, but great pre-H holiday sale. We decided to do it and we're
27:41 storing them in our contractor's house in the basement, right? Not perfect. I'm
27:47 sure his wife's not thrilled, but we did save about 40 almost 40 cents on the dollar. So, you know, we'll get them a
27:53 free Yeah. He'll he'll take his wife to dinner and she'll next time we're in town, she won't be mad at us. But you
28:00 have to think that way because to your point, it's not about the first $100,000 deal.
28:06 It's a business. And the sooner you get on board with that and start to document
28:11 your path all the time, you're going to be able to present that book of experience that people are looking for
28:16 much faster than you think. Oh yeah. Yeah. You're going to incorporate other things from your life. It's not just
28:22 real estate, you know, being able to manage money or being in a position in a
28:28 full-time role where you are managing money is a trait, a characteristic people are looking for in everything
28:33 that we do, right? So people just haven't been taught to think
28:38 this way because to your earlier point, you go to a class, you pay $9,000 for this
28:44 unbelievable, you know, super sales system or
28:49 great coaching program and it's so esoteric and it's like so
28:54 trumped up. They're not even getting the basic simple things that they can move forward on the actionable items that
29:00 they could do right away and are going to use every month for the rest of their career. Like I'm a single guy and people
29:07 are telling me about different markets and I'll ask them, "Well, how many McDonald's are around? How many Burkings? How many Wendy's?" They're
29:13 like, "What are you talking about? You you know, you're like a little chunky. You must love fast food." I'm like, "Well, you're an idiot. Think about how
29:18 many billions they spend in demographic studies. And if I go into a town and there's one
29:23 McDonald's, there's not enough density there to support what I'm trying to build. But if there's 10, you know,
29:30 Wendy's, Burger Kings, and McDonald's in some medium-sized town, there's enough density there to build what I want to
29:35 build. There's a hospital, there's some schools, right? There's a little bit of infrastructure. There's tons of fast food. Well, there's tons of rentals, and
29:42 that's what I'm looking for. And it costs zero to figure that out. Go to the police station. Fly into a
29:48 town. Go to the police station. Where do you guys not invest? People are shocked to see how many civil servants are
29:54 investors long-term looking to augment their future pensions and they're putting away a couple properties now.
30:00 You don't think they know within their own towns what parts of the city they should and shouldn't be in.
30:06 Right. The fire department can tell me where the arson are. Well, yeah. And there's a huge advantage
30:12 of being local or having someone on your team local. I I own in Washington state and in Texas and in Texas where I live
30:18 now, very very easy. I'm from Washington State. I know a lot of the markets, but my ability to immediately react to
30:24 something. There's a lag. So, sometimes I don't know something that I really wish I knew a week ago.
30:29 You just don't have all the pieces. So, building the team, if you're going to invest remotely, is everything. And if
30:35 you're going to buy small, you're never going to have efficiencies to do that, right? But, you know, you want to keep
30:41 it simple, right? Because you can apply the same principles on the $10 million
30:46 Fanny loan that you're going to do on the $500,000 you know, 10 units somewhere or eight
30:52 units somewhere. And and that's your point. Over time, and that time is much shorter than people think, you're going
30:59 to grow into that. So, setting your systems up early to enable you to scale with the same systems, adding to it,
31:06 learning, meeting good people like yourself that also could give you some tidbits. I mean, that's crucial, right?
31:12 Can't be a one-off. One-off is chaos, and you can't be successful living in
31:17 chaos. It's just not possible. I'm living proof of it. I went through it. You know, it's mayhem. Every day you're
31:24 gonna spend way too much time on the wrong things. And that is not a success blueprint.
31:31 When you built your business, every I ask this question every time, but the dumbest anyone ever is at the beginning
31:36 of their career. And so, goal of this podcast is to educate people on as many things they can do right and the right mindset and the right tactical skills.
31:43 One of the best things we can do is help save people money and not make mistakes that we've made. Mine was a uh cost me a
31:50 million4 on a $ four half million dollar resort that I purchased in the wrong partnership and it didn't tie into my
31:57 business. I made a multiple uh multiple mistake of I bought the wrong type of asset with the wrong team. Cost me a
32:03 million for to get rid of the partners and fix the problem. I had a seven figure stupid tax. Uh what
32:10 has been the most costly lesson that you've learned that others can avoid? I would say grossly
32:17 overleveraging. I know it's cool to watch into [laughter]
32:22 figure out everything is 0%. You can use everyone else's money. Never do anything with your own. I get it.
32:29 There have been some people who really successful at it. Only been successful at it during periods when the markets have gone up a
32:35 lot. If you're in a sideways market, doesn't even have to be down. But as things take
32:40 more time, that 0% time frame starts to shrink. If you get nervous, you forget
32:47 to roll it to another 12 months, it could eat you alive at 29%. So for me, being grossly overleveraged when the
32:53 market slow down, I couldn't cash flow. And not being able to cash flow was
32:58 super destructive. So we want to balance leverage. I think that's crucial. I'm
33:04 not saying don't use it. We have to use it in our business. It's important, but it's important to understand it as well.
33:10 And what's a what's a healthy LTV to maintain your portfolio at? And I do understand sometimes you buy a deal that
33:16 has a lot of upside. So sometimes at acquisition it can get a little bit out of whack. But as a stabilized portfolio,
33:23 where should one hold LTVs? I mean, I personally believe if you can
33:28 get to 65%, you're in pretty good shape. I agree that that's the same number that I maintain through my portfolio. 60 to
33:34 65%. been through a super cycle. I've been through a couple other situational markets, I guess you'd call them.
33:42 The super cycle took you below 65% but not for a long period of time. So, if
33:47 you were under control with your own personal finances and your business's finances, you could survive out the cash
33:54 flow and not puke out the properties. So, I like that. Now, if you're at 80,
33:59 you're going to puke, right? I mean, you just can't take the pressure. two, three tenants here, two, three tenants there.
34:05 You just can't stomach it anymore. You're not built for it. Set your business up that way. So, my
34:10 own clients honestly have taught me that. You know, watching them, working with them,
34:16 seeing their appetites, how they structure their deals has really helped me a lot to be honest.
34:22 That's the truth. Yeah. And you know, you learn from some really good people who are willing to share.
34:28 Again, they don't feel like they're worth competition. I'm like their buddy. I'm their lender. But I'm learning from them, asking them questions. And even
34:35 now, after 29 years, I'm still asking questions to lots of people who are infinitely younger than me and have to
34:41 worry about things like that. My whole world reopened 100 days ago, learning how to use chat GPT. Oh my god,
34:48 unbelievable. But you have to always be learning. You cannot think and stop that you think you
34:54 got it because man, they will change the damn rules on you quick and you don't got it, you're going to get it. So for
35:00 me, I would say overleveraging in a very short period of time to build a suspect
35:06 portfolio that felt good on the way in, didn't taste good under operations, and
35:11 was overleveraged. That was my biggest mistake. Oh, I love that. I love that. Yeah, it
35:17 is crazy how AI is changing the game. That's amazing. When I learned that you can custom prompt chat GPT,
35:25 I had what I did is I asked ChatGpt, "Hey, can you help me build a custom GPT?" It's like, "Yes, I can. I'll ask
35:32 you all the questions." It just literally went through. It's amazing. 8,000 lines of prompt later, I'm like,
35:38 it does exactly what I want, the way I want to do it. It built it for me. It's the most amazing. It is amazing time to
35:44 be in the real estate. Quick story. So yeah, a local old business friend who used to
35:50 work at the exchanges with us reached out and was really humble and said, "Look, I need some help. I need a job."
35:56 Okay, come on down. We'll we'll help you get reset up and hopefully it could be a
36:02 home for you for a couple years. Right. Comes in first day on the computer,
36:08 little slow. By the end of the first week, he's basically one finger at a time on a computer. Now,
36:16 unfortunately, he's basically done nothing over the last five, seven, ten years to enhance his own skill sets.
36:24 And in today's world, even then, you couldn't afford to do that. But in today's world, that's a suicide mission.
36:31 Yeah. Right. You have to be I don't want to use the word aggressively because people
36:37 take it in the wrong way, but you always have to be moving yourself forward. You have to take that responsibility. I
36:42 mean, sometimes I go to the diner at four o'clock in the afternoon to have lunch, right? You finally get a break. You're exhausted. Blah blah. The person
36:50 serving me is 75, 77 years old. They're hunched over. You can see the body
36:57 doesn't work as well as it was. Look, when I'm that age, I want to go do those types of jobs for two, three hours here
37:03 and there for socialization. Not because I need to split the tip cup. Mhm.
37:08 And none of them ever went to sleep dreaming to do that. There's no way.
37:17 I'm sure your friends, you hang out, you talk, you're bullshitting about whatever, talking about these cool dreams once in a while, right? You're
37:23 you're in Monte Carlo winning in the casino or you're in Australia, you know, diving with the White Sharks. You're
37:30 doing cool stuff. You're not dreaming of being in a diner serving some guy like me at 4:00 in the afternoon. and you can
37:37 barely stand up and you're hoping I leave you three extra dollars on the tip. I mean, this is not the dream. But
37:43 America is faced with this reality. And if people aren't going to take every step
37:50 they can to help themselves, I really don't know what what's going to happen. I'm afraid for them, honestly. I mean, I
37:57 spent a lot of time, you spent a lot of time talking to people, and this is one of the things that I really want to resonate with people when we walk away.
38:04 I'm not trying to scare you, but I want your eyes open to reality and simple
38:09 little things you can do to start to help yourself. You're not going to go out and run Cisco systems or take over
38:16 Google or Apple or any of those company. I get it. But to your earlier point, you
38:22 can figure out how to make 10% more income. Oh, easily. You can figure out how to learn one new
38:28 skill every three months. You can do these things to help yourself. And if you're not,
38:35 and it doesn't take that much time. You look back five years later and you're like, "Wow, I'm a totally different person than I was five years." I mean,
38:42 people look at I feel like people tend to look at this as like a hey, you know, I I'm just kind of like doing my thing
38:48 until I retire at 65 or whatever it is now. It's like that that does you could
38:54 be in an unbelievably different place a few years from now if you just keep stacking skills, focusing on building
39:02 your topline and managing your bottom line. If you just do those things, you're
39:08 you're going to be in a much better place 100%. We have friends, business friends
39:13 in their 50s and 60s that started their portfolios, eventually started to make
39:18 some private loans and made money, more money than they ever made in their whole career.
39:24 They didn't go out and split atoms. They weren't going to the moon and back. They were doing simple basic things. They
39:31 learned a structure. They learned some new things. They put it into work and executed and keep doing it. Nothing
39:38 crazy. You know, today I think the playing field has been dramatically
39:44 evened. For $99 a month, you can go to Harvard Business School. All the case
39:51 studies that they're studying are in your phone. But what are you doing with your phone, right? Are you scrolling and
39:57 trolling? You using it to learn a little of both? Like, you got to balance it out
40:02 because it's right there in your hand for 99 bucks a month. You're paying the bill, your parents, someone else.
40:08 Somebody's paying for it. You got one? I mean, basically every place you go in
40:13 America, people have a phone. No matter
40:20 what race, religion, neighborhood, ABC, B, C, D, FG, neighborhood, they all got
40:26 phones. So, there's no excuse anymore. You can't say, "Well, you know, they're more." No, no, they have access. You
40:34 have access to the same info they do. What are you doing with it? You want something different? Do something different. But again, you
40:39 don't have to split atoms. You can do simple basic things and keep putting those blocks in place. Then, as you just
40:46 said, learn how to make a little more income, play a little better defense with your money, begin to save,
40:52 eventually begin to invest, and change your life. It's literally that simple.
40:57 Joel, how do other people get a hold of you if they have follow-up questions from the podcast, they want to learn
41:04 more about your lending company, burr.com, any of the above, how do they best get in touch with you? Well, one of
41:11 the easiest ways is just to go to our website and drop us a note there at burrbwith4rs.com.
41:17 You can find us on Instagram at burr_loans. That's easy as well. We actually do
41:22 respond. We don't have the bots there all day. We have people who actually monitor it so that we know to respond.
41:29 No, there we go. That's a that's a breath of fresh air. Yeah. I don't like the other. It drives me nuts. So, we we don't do it that way.
41:36 Good. You know, for us, we've been around a long time. We enjoy the opportunities to come on
41:41 and be with you and meet people and talk to them. Keeping it real, keeping it
41:47 simple for them. Take away some of that overwhelming feeling. Show them what they've already accomplished in their
41:54 life can translate into this or other things that they're interested in and be more successful
42:00 no matter how they measure it because it's not always about money, right? Whenever they find something that really
42:06 makes them feel something, that's what we want to help them get behind and be excited about. So for me, that's how
42:11 I'll be spending the last 20 years of my career. That's really important. I never
42:16 really was sure, I hoped, but I wasn't sure that I have an opportunity to make
42:23 a comeback and, you know, restabilize my life, get it moving forward and be in a positive scenario. So I really feel like
42:30 I have a responsibility to others to help them in that regard. Look, it's tough. It's not easy. I get
42:35 all that, but it's a decision you make, and that's what I want to try to help people focus on.
42:41 Oh, that's awesome. Well, Joel, thank you so much for joining us today. We appreciate you a ton. Your knowledge in
42:47 the industry and just your just your time in the business, it it's great when I get a young entrepreneur on who's
42:53 like, "Hey, you know, I'm I'm right in the middle of my peak." It's so much deeper to have an owner who's like,
42:59 "Hey, I've been through the highs. I've been through the lows. I' I've seen how the game is played and how other people
43:05 react. I appreciate your insights on partnerships, on variables, on loan to value, the entire thing. So, fantastic
43:11 episode. I'm excited to get this live. Everyone, give Joel a uh follow here. Reach out if you guys have questions. If
43:18 you haven't yet, we have a free school community that you can join. Skol. Uh there's no fee. There's no reason not to
43:24 do it. If you want to join thousands of other investors around the country just talking about real estate, creative finance, it's called multif family
43:31 strategy. You guys are welcome to join that at any time. Reach out to Joel uh with questions on any of his programs or
43:37 just want to follow up from the episode. We appreciate you all and we'll see you all on the next episode. Have a great afternoon and thanks again.
43:43 Pleasure to be here today. Thank you.