Justin Colby, founder of the Science of Flipping, tells Brett Tanner how a contractor he already trusted skipped straight past competing bids on an 18-unit Alabama apartment. The bid conveniently matched the exact number Justin needed to make the deal work, and he's now about $1.8 million into an unfinished property, working to raise roughly $3 million to make his private lenders whole.
Brett TannerHost, founder of Be WealthyJCJustin ColbyFounder of the Science of Flipping and host of the Entrepreneur DNA podcastJustin let a contractor who had already done his past flips bid an 18-unit Alabama apartment renovation. The number came back matching almost exactly the $350,000 cap Justin had told him he needed. He's now into the deal for $1.8 million and still not finished.
Jump to 41:36Justin's rule now is three contractor bids on every property, single-family or apartment, no matter how well he already knows the contractor. Skipping that step with a contractor he trusted from past flips is what let the Alabama deal spiral.
Jump to 53:02Justin's first lesson is boots on the ground: if his team can't touch it, they don't buy it. Brett adds that if you won't fly out before buying your first out-of-state properties, even a $100,000 house, don't buy them. When he sold his Alabama houses, he showed up unannounced and found no contractors on a site he'd been told they were working every day.
Jump to 50:58Brett and Justin agree a flip needs a near guaranteed $40,000 to $50,000 profit, and a rental needs to clear at least $400 to $500 a month net after debt service, or the math doesn't support the risk.
Jump to 54:05Justin says the number that matters on a single-family rental is the expense ratio: taxes, insurance, HOA, property management, and vacancy, divided by rent. Before COVID that could run around 35%, but rising insurance and repair costs have pushed the realistic minimum to about 45%, before any debt payment.
Jump to 56:09A contractor laid flooring over a BRRRR rental with no subfloor underneath. A tenant lived there for a year, walking on what Justin compares to a trampoline, and never once complained, until the crew found it during the turn.
Jump to 47:52Justin had set himself a 36 month goal to build $100 million in assets. He says the rush to hit that number is what made him skip basics like getting three bids and building the right internal team before scaling up.
Jump to 1:10:45Trust but verify, inspect what you expect. If you just stick to those, you will save yourself a lot of heartburn.Justin Colby · at 38:29
Justin walks through three separate crashes in his career and the root cause behind each.
| When | What happened | What caused it |
|---|---|---|
| 2008 | Lost his house to foreclosure and had his Lexus repossessed after running up a $550,000 condo and $100,000 car on new-home sales commissions | No real skill set, just the momentum of a housing bubble |
| 2014 | A 79-unit townhome development in Mesa, Arizona fell apart | A contractor partner skimmed about $20,000 a month in undisclosed fees and overpaid a friend he'd hired as superintendent |
| 2024 | An 18-unit Alabama apartment deal he's into for $1.8 million and still unfinished | Skipped getting three competing bids and trusted the same contractor who had handled his past flips |
Tap any chapter and the video starts right there.
“You don't succeed your way to success. You fail your way to success.”
Brett Tanner at 22:50Run the numbers Justin wishes he'd run first, three verified bids and a guaranteed minimum profit, before trusting a contractor with your deal.
Justin Colby trusted the same contractor who had handled his past house flips to renovate an 18-unit Alabama apartment, and skipped getting competing bids. The bid came back matching almost exactly the number Justin needed to make the deal work. He says he's now into the project for $1.8 million, still unfinished, and plans to raise about $3 million to make his private lenders whole.
Justin says the rule is three bids, every time, on every property, whether it's a single-family house or an apartment building. He skipped that step with a contractor he already trusted, which he says was one of the basic mistakes that let the Alabama deal spiral.
Justin says to add up taxes, insurance, HOA, property management, and vacancy, then divide by the rent. Before COVID a ratio around 35% could still cash flow well, but he says rising insurance and repair costs have pushed the realistic minimum to about 45%, before counting any debt payment.
No, Justin says. He describes buying a Phoenix fourplex for $140,000 renting for $1,600 a month, which was inside the 1% rule, and still losing money in its first six months from a $2,400 water bill and a car crashing into one unit's living room.
Justin says rich is transactional: you sell something and make money. Wealthy is when your money makes money without you having to work for it, which is what he's trying to build toward after his contractor losses.
0:00We don't succeed our way to success. Failure is learning. We actually fail our way to success. You'll learn a hell of a lot more from failure than you ever will for success. Trust but verify. Inspect what you expect. If you just stick to those, you will save yourself a lot of heartburn. Welcome back to the Be Wealthy podcast with Brett Tanner, the show where we deep dive into the strategies, mindsets, and real-world tactics that unlock true financial freedom and abundance in your life. Today, I get to interview my friend Justin Colby. He has created the Science of Flipping and the Entrepreneur DNA podcast. And you can check him out everywhere social media is found. Today, we're going to do something a little different and we're going to break down failure. My mentor Gary Keller, Gary Keller actually says that failure, we need to reframe how we think about failure. And it's actually not failure. We don't succeed our way to success. Failure is learning. We actually fail our way to success. Justin is having some challenges in the real estate
1:01market today and navigating them, but we break down five key areas you need to think about in your business today that can help all of us learn from his failures on his journey to massive, massive success. Without further ado, let's jump into my conversation on failure with my good buddy Justin Colby. Justin, welcome to the podcast. Thank you, bro. I am excited to be here and pour into your crowd. Thanks, man. Well, thanks for being here. Where did you and I do you and I first meet? My the Dallas story is the the I think our first actual meeting where we got trapped in Dallas in the snowstorm and
Well, that was where we had this just, you know, bromance and wanted to go get an apartment together, but before that I think it was Maybe it was one of Ken's thing. It might have been because I think we knew each other before that. I think it was one of Ken's Maybe one of Ken's early events, but that's close to that's still going back. Yeah. Dallas I mean It's a long time. I mean, we're creeping on the you know, a
2:03decade and a half for sure. We're right in there and it's been a fun journey. It's always been laughs, tell you that. And the the story is we got stuck in Dallas for Imagine you wake up in the morning and there's a snow skiff. It's like I'm going to call it an inch and a half of snow in Dallas. Now, I grew up in Colorado where if we got 3 ft of snow and there was no drifts, you're going to school, right? Like no question, you're going to school the next day. Dallas gets an inch of that, city shuts down. It was the first time I've ever gone on Uber to where there's no cars. It's just red. You know, you go to Google Maps, it's just red death throughout the city. Yeah. A buddy of mine and I try to go to the airport. There's no cars, so a car pulls in dropping some people off and I was like, "How much to go to the airport?" Mind you, 2 days before it was a $25 Uber ride to the airport. He goes, "100 bucks a seat." I'm like spark and he's a cash only. I was like, "Wait a minute." And then so not only are we going to pay you 100 a seat and we're going to cram as many humans as you can get in here with or without seat belts to go on icy roads. And we start heading to the airport and there are
3:07people who are just parking their car on the side of the road and just walking up the arm saying, "Screw it. It's not shout. I'm out." And I look at my buddy, who you know, Steve and I go, "Steve, this is going to be us. We're going to have our suits. We're going to have our luggage wheeling up here. Then we're going to get to the airport. They're going to cancel our flights. Yeah. And then all the hotels around there are going to sell out and you and I are going to be sleeping on cots tonight." I was like, "Steve, do you want to sleep on a cot?" And he goes, "Well, no, I don't want to sleep on a cot." I go, "Okay, the answer is this. We turn this bus around. We go right back where we started. We get that hotel room. And we make this epic and we live like gods. That's the choice we have." Cots at airport and he goes like He had a buddy that owned a private cigar lounge bar. I don't know how he knew this guy. And the guy just gave us a key. It's the first time in my life someone's giving me a key to a bar, cigar lounge, private area. And then we called you guys. You guys were also stuck there. Yeah.
You guys spent 2 and 1/2 hours in an Uber to get to us. And now we just hang out all day. We go to the end of the whole city shut down
4:09except where we are and one steakhouse. Yeah. And then we wake up the next morning and it's Groundhog Day. And all the flights are canceled and we do it again. By the third day, I was like, "We got to get I can't do another day. My body can't take it." That's Yeah, but that was the story you could tell and some of the footage that I know there's a story about, which we won't get in here. Well We can get in there. The girl walks into a bar and she looks like she was transformed into a hawk. Behind her was attached to her. And I got to get some I had to ask some questions. I just said, "Man, I love your outfit. I think it's incredible and where did you get the huge life-size bird outfit that fit on your thing? I just want to And you were filming me while I was glad my wing cuz it was such an amazing I didn't know if she could fly, but I wanted to find out. It was it was she was warm. I mean, she went for the warm route. I couldn't couldn't judge her there. And We found out a little bit more about that woman that day. She She just We just learned more about the warmth and having fun. Well, and what a great look it was. So, all right, Justin, I want to go back to
5:14I like to take every guest through their journey. I want to go back to your 10 years old. You're sitting around the dinner table with your family and the topic of money comes up. Mhm. And is money at that moment, not did you have any, but was money with the thought of it, was it like there's abundance, there's enough out there for everyone, we'll figure it out, or was money scarce? If we find it, we got to hide it and tuck it away and can't let anyone ever know that we have any or even know that we don't have any. What was money like that in the Colby household? All right, if you've been listening to the show for any period of time, you know I run a a high-end mastermind for entrepreneurs that are looking to create a different outcome and create more freedom in their life as it relates to their wealth and their money. And that's what I want to offer you a risk-free opportunity to come check it out. We have two seats available at our upcoming mastermind. You can book a call with my team over at bewealthy.com. Navigate to the mastermind section and book a call. We would love to have you at the event and check it out and see what it's all about. Yeah, more of that. Like I don't have a story where I was impoverished, right? But my money my family never came from money. Uh so, I
6:18can remember about that 10 years old. I would, you know, during tax season, it was a thing, right? Between property taxes and the their own taxes and like they would sit around and like it was a very tight scenario. And so, I don't have a story of like I didn't eat and lived in a car as a kid. I didn't have all that, but there was never like I was not a fluently like whatever. Like there was no vacations. Like our big vacation is we would go to Wisconsin. That was our
And you grew up where? And you grew up where? Where was In California. In the in the Bay Area. And that was uh basically because my stepfather had a cabin on a lake in Wisconsin. And by the way, only the best memories of my childhood. And so, it kind of goes into this point of like you know, a lot of people say, "What's the why?" But the reality is money's not it, right? That is something of of the vehicle, but we would go to this lake and it was like a cabin like a bedroom, a bathroom, that's it. No TVs, no nothing. And you just spend the whole day on the lake fishing for walleye, fishing for
7:19northern pike, water skiing, tubing. That is all you do all day long and you eat bratwurst. The best memories by far of my childhood and it cost my family little to nothing. Like besides just the flights, there was no hotels and there was no TV, there was no internet, right? So, I'm I'm older, you know, I don't have hair. Yours is gray, but I don't have any. You know, so there was no internet, there was no nothing. And only the best moments. But yeah, it comes from this understanding of they did what they could to put food on the table and I like I always had clothes, right? But I never had the big, wonderful experiences that I know you get to give your children or even I get to give my children. They don't even care about that stuff. They're just like, "I'll hang out with you anywhere, Dad." Right? And I'm sure your kids are the exact same. And so, my mentality always was there was something more though. I did know that. I was aware of it. And that kind of led me into this entrepreneur journey that I could actually go create more if I just understood how. The you know, one of the jokes that I I tell my wife is, you know, the best things in life are free. It's just the second best things are astronomically expensive. You always got
8:22a good one, bro. That's exactly right. Yeah. Go to the beach. It's free. Right? Now, going to the beach in Bora Bora thing here very, very expensive. No, I love it. That's what when I talk I think the greatest thing in wealth when we ask, you know, we always talk to people about, you know, wealth and and I say that wealth is so much more than money. You know, until you have enough money, right? To meet your basic needs and of course money is the driver. But after that wealth is so much more than money. And and for me, the best wealth is an epic experience with people I love. By the way, an epic People say epic doesn't need have to be expensive. Epic could be camping, which is largely free. You can have an epic You went to Wisconsin and had epic experiences with people you love, your family. Having bratwurst that you probably would have spent more money at home, to be honest. You probably wouldn't eat bratwurst every day at home. Right.
You know, like you're catching fish and eating I mean, like sometimes you actually might go on an epic experience and spend less money. But everyone's going to create traditions and rituals. Are they positive or negative with the people you love? And that's just, you know, that's the the question of of
9:24life. And so you go you've got So, was money did they talk to you about it all like an educate like, "Justin, here's some things to think about. You know, leverage is bad." Did they go through like, "You should have a Roth account." Or was there any or was it just kind of, "Hey, we're going to raise you as a good human and then No. Yeah.
They're making it happen. Everyone has a story, Brett, and you know mine, but you know, I didn't have the most beautiful childhood, right? I had an alcoholic mother, alcoholic father, alcoholic stepfather, right? And so, everyone has a story. This is not a woe is me, but like there there wasn't a lot of attention given to me, right? So, like I would show up from school and my mother would literally be passed out on the kitchen floor. Right? Like I didn't have to do She didn't make me do homework. Well, cuz she couldn't get off the floor, right? And so, I make light of it now as I've gone through plenty of therapy, by the way, but like I kind of had to do all this alone from I would say around 10 to 12, it started getting real where I essentially kind of held myself accountable for like I didn't have a curfew. People talk about curfews when you're like I didn't have a curfew, they
10:26didn't care. Like they were passed out by 8:00 p.m. Like I could literally do what I wanted to do anytime. So, I had to hold myself accountable. So, no, there was a whole not a lot of educating on money and and wealth and cuz we didn't have any also. So, I also don't think they had any knowledge of it, right? So, they couldn't educate me. I don't think we had any savings or any of it. And so, it was a learn as you go and that's why I've always leaned into mentors and masterminds and you and I are are part of these masterminds and lead groups and I lean into that because this is my formal education. I went to UCLA. I learned nothing. Nothing about finances, formal finances, right? Like it was just formal education to me is even like we got to rewire this whole system, right? So, yeah, I just had to do it my way. Wow. So, you I mean I mean, you had to grow early and the reason I love people sharing their story is just because I I think that Justin, people out there see people at the top of the mountain and they I think that everyone believes that their story is
11:27different than theirs, right? Meaning Justin grew up in this just you know, greatest environment ever and his parents were just literally teaching him life skills his whole life that were valuable and then kaboom, he went to college and just emphasized those strengths and then crushed it. And when I interview folks, what you learn is it's actually not the case at all. They you typically had some severe struggle. Not saying that they were like, you know, starving to death at home, but like they had some issue in their family. Every Everyone's got an issue in their family, right? Then they had to overcome maybe more significant challenges like yours. You definitely had more challenges than most. But I think being like I I think going back and working through that there's a there's several ways we can learn. We could learn through reading books and and and that approach. And then I think you can learn through human experience. People have lived before us and are living alongside us that we can actually learn positively and negatively. And I think oftentimes you learn way more about what not to do by watching others, especially today in today's society, than you do by actually the successful people.
12:28Yeah. I I you know, it's funny and and we'll get there, but I'm learning more today through other people, right? And leaning into those relationships and by the way, just asking for help, right? Like I don't know this answer, Brett. Do Do you have any experience in this and what do you think I should do versus like I'm going to figure this out, Brett. I watch. I got it. You and I briefly talked about pride and ego and recently I've had to let go of my like literally fully let go of my pride and ego and that was a very difficult thing to do to be able to build what I built and be able to pat myself on the chest and then to go through what I'm going through now, it is literally one thing that led me to that. Well, I'll take a step back. A big part of that was because I had the pride and ego and I now releasing it, learning through others is in my opinion, everyone must lean into that, right? Whether it's Brett, myself or anyone else, lean into the experiences of others because if they've already gone through it, it allows you not to have to go through it. I mean, you scars matter, right? You and I already
13:30get into this here in a minute, but you know, I coach a lot of folks as you do and you know, a lot of them all say, "Well, when did you get into real estate?" They're like, "Oh, I got in in 2010." I'm like, "Cool. You are not equipped at all to deal with this market." Now, this scar right here that will never heal, that's called 2008, right? This little guy. And so, I know what it was like, right? And in that time went from unranked to one of the top real estate agents in the country in a matter of 3 years, right out of you know, out of millions of people. So, scars matter, right? That experience you can learn so much. I It's one of the reasons I've always hung out with folks that were older than me dramatically. Like in terms of thoughtfully spending time, I like today, I probably the people I spend the most time with are probably Don't get me wrong. I've got friends and relationships around my age, but when I seek wisdom, I want people that are 60 years plus, really even 70.
Yeah. Because, you know, I want to know, man, when you were 44, 45, you could go back, what were the mistakes you made that
14:31you'd want to fix? What are the things you would double down on? You could learn an infinite amount because I don't want to get to 75 and have regrets or have things I missed out on. And so, I'm just glad you anchored that point. I want to take a weird turn for a moment. You mentioned you said I've gone through a bunch of therapy. Yeah.
And I think people I won't say the people. If you would have got Brett at 25 who is just win at all costs, push put your head down, run through, you you get in the finish line. If you got to drag the whole team there, you do whatever it takes. My brain would have said, I think therapy is for people that are soft at 25, right? It's just wire your mind, run. And it wasn't I stepped into therapy until years later, you know, for some things in my childhood, but it was I was going in to to get some neurofeedback, which is Yeah. I don't know. They shock your brain try to reduce stress for you know, like I don't know. It's It is weird modalities we get into as you get older. But they made me go to therapy and he's like, "Do you want to dive into some issues?" And I was like, "No, I'm here to chatterbox and I want to go get that thing." And he's like,
15:32"Well, we got to spend our time." And so, we started talking I was like and what I realized and and I'm doing this for the audience, the is I had just taken a lot of the items and just packed them down, right? Like I think we all do just not going to I even, you know, through like some some weird different trainings have been able like you could take parts of your childhood and just wall them off. Yeah. And almost reprogram it like they didn't exist, right? There's exercises you can go through. So, I'd done a lot of that and I can't tell you how valuable it was to actually process it and work through it and have a meaningful conversation. And I think I told you, you know, before we started today like my message here is just I'm being a truth teller in a fake world that I don't think men especially are confident enough to talk about, "Hey, man, it's okay to go talk with someone and work through things so you can have a higher form of peace, whatever that means to you." So, what what age did you start that exploration? Late teenage years because my grandmother knew like she
16:35watched me. So, she essentially became my mom, right? Through through my childhood. And she was a teacher and then a principal and then like like a school district board or whatever, right? And so, she asked if I'd be willing and I was reluctant for sure, but I like I understood like what I was going through wasn't totally normal. So, I started there where it really started to creep in in a good way like the early 20s and I continued to go and I went to psychotherapy, which is where they basically to some extent put you into like a meditative state. Like they don't put you to sleep and make you do weird stuff per se. You're pretty aware. That was really helpful. So, going into my early 20s really is where it got heavy for me. So, you know, did a lot of work there regarding my childhood, but the thing that unfortunately because I didn't progress into my 40 now I'm 44 and I just not like I've been doing it continuously for the last 20 years, which I should have, but looking back now, the thing that I realized today as a function of it was I still have today as an adult and as a business owner, all
17:39these things, I still had the like everyone be proud of me, right? Like I still want the admiration, I still want the acclaim, I still want the hey, look what you did to get out of the shitty, you know, scenario you were at as a kid and look what you built. I applaud you. That stayed with me, unfortunately. And that is in large part why today like talking about the challenges I'm currently going through through the real estate market, it was little It was more to do with I could do it, right? I was at a place where I could get these things done, but also wait till they see me. Look how proud Brett is going to be when I go do X. He's going to hit me up, dude. Unbelievable great work, brother. And I wanted it and I still want it, right? So, now I'm still going back into this place of trying to unwind the need for others' approval because it doesn't actually matter. None of it matters, right? And so, it's it's a constant I tell you, it's a constant thing that I think to some extent people should be going through because I found it happened showed up in my 44th year on this planet. It's the same thing that was in high school or not high school,
18:41but yeah, high school was the approval side. I want your approval. I want your applaud. I want your hug and admiration. That's what I'm seeking, which forces you or blinds you, at least in my case it did, it blinds me to some of the the business acumen that everyone on the planet who's been in business knows some pretty basic principles because you're more focused on let me get the admiration for achieving this thing. Who cares about the business principle I'm avoiding right now? I'm going to go achieve it. Does that make sense? And so, Oh. it you know, it's been a constant in my life and I'm finally now officially been humbled, right? To the place of like could care less. Love you, Brett. Care less if you pat me on the back, brother. Like let's go to a cool vacation cuz money's right. That's what's important, right? So, I think there's we talked about this a little bit on this podcast, Justin. I think there's three levels to what you just said and and we've talked about before, but I want to I want to anchor the point for the audience, which is everyone needs to go through these three things. The first thing is you're proving it to yourself that you can do it.
19:42So, you grew up, you're like, "I'm going to do it. I can make it happen." And so, you invest in your your vehicle, which is you, right? Knowledge, training, getting better. Second level, once you proved it to yourself, you immediately want to prove it to everybody else. And now you're playing for the applause. Right, I want to do it not because I can do it. I want to do it so that they know. And you're going to do things that are they're purely ego-driven. I tell the story that the greatest moment of my career was becoming the you know, the first time the number three agent in my firm, number nine in the company. Those are the biggest moments. That was The the worst moment was 60 seconds later. Walked I walked across the stage, all the applause. That was done and I looked around and thought, that's it. The effort and pain and what that actually took to be there. So then I was like, well, those are none of the things, right, that I want. And then the third level, which is where everyone eventually you want to get to is you're helping other people believe that they can do it. And it took me a while to get there. You know, probably mid-30s is when I kind of really formed
20:44that idea. And the last part is realizing that there's two scorecards, right? There's an external scorecard, the world's. You could play for that one. People's applause, people what they think about you, all those things, which you have no control over, by the way. Right. Or you could just believe play for what you and the people that live inside of your home, right? I always say like the people that live with you, your kids, your spouse, what they believe and what they want. And And what I found is that you know, if you look at the greatest president of our time, 50% of the public is going to hate him and 50% is going to love him. Yeah. And by the way, I think the best presidents don't care in either group because they know that the people that love me, I'm not as good as they think I am. And the people that hate me, I'm not as bad as they think I am. And all that really matters is what you believe about yourself. And once you can get there, where you quit playing for applause. And you're just playing for impact. And whether they think you're great or bad or indifferent is irrelevant. I think once you can get there, life really opens up. Yeah. And you're not playing for some weird how many likes do I get on this post or whatever. And so I just did a different game. And so I love that
21:48that I love that. I want to go to I want to get to this where you're at today. But walk us through the journey in real estate. What's your first entry? You know, you're in college. When do you first get the real estate bug and get excited about going down the real estate road? My buddy was a So we're at UCLA. He we're graduating. He says, "Hey, my my dad's a builder. Would you want to start a brokerage with me?" Now, like I just said, UCLA to me was effectively like I didn't There's nothing meaningful about UCLA to me. So I was like, "That sounds fun. Let's go do that." Cuz the one thing I know that most people do is like you can build wealth and get really rich in real estate. So I'm like, "Great. Know nothing about it. We're in." Took some years to get there, but we started a brokerage that still today this day is is one of the largest boutique brokerages in California called W Real Estate. They still have 50% ownership. They sold off the other 50%. And so that was fun right until the crash when 2008 happened cuz yours truly got to crash with the crash. Again, that was my first dealing with like financial oh Right? That was it. So I was 26, I think
22:50that was. Found myself on a couch. Uh the repo man took my car. The bank took back my house. What that means is it went to foreclosure for all those that When the bank takes it back, that's just saying foreclosure. So leading up to that, what went wrong? What were the you know, what are the lessons or you know, that we could learn from like you know, give us a a little bit of the high there and then take us through the lessons. And the reason I want you to go here, Justin, so important. You know, my mentor who you know, this is Gary Keller. And one day I was just you know, I'm at dinner with him and I was like, I want to go around and everyone give their one piece of advice, you know, that you think's most valuable to someone. And I get to him and he goes, "Well, I'm not going to give one. I'm going to give two." And I was like, "Well, you have to give one. That was the whole He's like, "I don't have to Brad, I don't have to answer your question." I was like, "You're right. I mean, fair." And he go you know, number one was he goes, "You don't succeed your way to success. You fail your way to success." And everyone needs understand that. That reframe failure. Failure is not you're done, you're toast, it's over. Failure is just a way it didn't work. So what? I mean, it's all how you think about it. And if you can learn the lesson inside of it, you'll learn a hell of a lot more from failure than you ever will for success. And the second thing he said was no one
23:53succeeds alone. You need people more than they need you. And no one succeeds alone. And so I think about that all the time. And so I want to go back to your your luck So as we go through, you know, these bumps and bruises, it's not a oh, I failed and I'm out of the game. Okay, I've learned now some key ways this does not work. So give us What caused the issue? What was When you're flying high, what caused the plane to crash in '08? I didn't build the skill set in '08. So I was a realtor and I was doing new home sales. So if anyone was doing new home sales, you could print money by breathing. By fogging a mirror, you print money. That was it. Hi, you have glasses and want to buy a home and this is a home. That's it. And then you would get 15 offers a day and you show you you fold them out like cards. You know, which one's the highest number at Yeah, we'll take this one. How about that? And that was my life. And it did very well cuz I just made a commission on doing that. But I had zero skill set, right? None. I came into being a realtor just like that. That was like my first day on the job and my last day on the job. And so that the the key there, the biggest
24:54takeaway I realized there is I can't do it alone. I need a mentor. I need a coach. I need a community. I need to follow people. I can't just think I'm smart enough, good enough, or work hard enough. That doesn't solve the issue, right? There needs to be an inherent skill set that I can rely on, which are the practices, the principles, and the processes that I talk about now that like that is imperative. Your practices, the principles, and processes, you need to lean on them when things get hard. If you don't have them, you're you're going to be toast, right? So that was the big big learning curve there is I had no skill set, no process, no practices that I could go out and find business and do everything that a realtor might do in those days. So that's what I learned taking away from that, right? Is that important understanding of I needed a higher coach. You know, I was broke, mind you, and I borrowed $25,000 to hire my first coach, right? Broke. Like no income, no money. Borrowed it. And it panned out. But that that's what I had to realize I couldn't do it alone anymore. So you go through 2008, you've got you mentioned your car got repo So you were Were you just flying too high? Was that the issue that my car was too
25:58expensive, my house too expensive, my I had it back then in 2007. I had a two-bedroom 1,300 square foot condo that I bought for $550,000. I had a $100,000 Lexus. And I figure every month I would go through about 40 grand a month. What primarily I'm guessing going out and partying was was maybe part of it? Well, fun, but also like furnishing I I took very nice furniture from those stores. Not took it, paid for it, right? And would kind of top align everything cuz money was flowing. And And you know, when you're 26 or five or whatever, like it's not going to stop. This is This is the life, right? This will continue. And you don't know any better, frankly. This is back to your first question about parenting. Like I didn't I had no business acumen, no experience. I don't come from entrepreneurship at all. I don't know what it means to work harder or work smarter. I don't know anything. So this is just like kind of God stepping in for the first time, by the way. I see him often. And he said, "Hey, baller, let's let's rewind this practice that you have here, which is like just frivolous and nonsense."
27:01And so I had to learn, right? And And I was gracious to actually have a friend letting me sleep on a couch and kind of regroup. And yeah, I just I was just spending it in ways that were like going out to dinner every night, buying a you know, $15,000 couch back in 2006. Like nowadays that's kind of normal. If you go to Restoration Hardware, everything's $15,000. But like unneeded for a single 25-year-old, right? You could have given me a two-foot a futon and it would have been just as good. You know what's crazy is I do see I believe today I believe the difference, you know, it was big it was big then, but today the social pressure around FOMO and you see people online and I have someone who will remain nameless on me and they go nameless on the show. They go, "Uh Brad, I just bought a couch recently." I said, "Oh, yeah? What'd you spend out of curiosity?" $20,000. And I said, "Do you know the most expensive couch I purchased including right now? I bet we haven't spent over 2,500 bucks." Cuz I look at it and I go, "Well, they're all going to go bad. I mean, what's the it The couches go bad. Like kids are going to walk in there when they're little, you know, and
28:02they're going to Great ju I mean, yeah, we could try to stink, but it They're going to poke something right through the leather. It's just It's going to happen. And I don't want things to where I feel so weird that we can't use them. Yeah. So right, we bought that couch and I was like and she was like, "When are we going to replace this couch?" I was like, "When they get old enough to not spill crap all over it." And she said, "Well, I just I don't know. Throw a rug. Throw a rug on that section. It's fine." Throw a little blanket Throw a little blanket on that thing. It's going to be perfect. But I think that's I think I love that you're saying that because I think I think people miss out on fiscal discipline. And you know, if you went on Facebook today and said everyone should spend less, be conservative, here's the car I mean, you that that post will get zero likes. And yet it's what everyone actually needs because I bet that couch didn't bring you tons of enjoyment.
None. Like zero. Maybe a day's worth at least worth. A futon would have served me just as well. I mean, I had it was like one of those that you could arrange and you can build it out like I built it out. So it was like a U So I had this useless useless. I sat on the same part of it. I
29:05could have sat in a chair for God's sakes. Like I You know what I mean? Like I didn't use it. Yeah. I All right. So what's the process from here to go You kind of hit rock bottom on a couch. What's the process now to rebuild this time? Leaning back into what you and I both know to be the right answer is leaning into people that have more experience than you do, that have a process, that have, you know, principle and and practice that you can follow. And so you can just implement what they told you to do because they have done it before with success. That's what my next, you know, seven years were of just doing well is I just kept doing the same thing that they told me to do. I didn't really deviate. I just did it, right? And there's some certain things you and I are in the Phoenix market and have been forever and you know when the hedge funds come in like things change it. But the other the other component that you and I both know and we would probably scream from the mountaintops anyone who was breathing starting in 2010 in the real estate space they had the wind at their back and if they weren't making money they weren't alive. Like they weren't they then they just
30:06weren't doing anything. And the frustrating part for you and me today 2025 comes around and we have a different financial scenario and we have a difference in you know economic scenario for the last call it 3 years and you can even push it back before COVID all of a sudden you go wait a minute I don't have anything to lean on anymore cuz it's not just on a steady uprise of awesomeness for a decade plus. And that was with so frustrating when you see all these coaches that have 2 years of business they've did six deals now they're coaching others like brother you just did everything normal and did nothing special and now you're coaching. And so it's that you know what I did was follow the blueprint and then the hedge funds came in turned my world a little upside down cuz we were buying so heavy at the the courthouse steps. And so I had to pivot a little bit right and lean into my own marketing in in finding my own deals. And then the the next big hit to me failure if you want to use Gary Keller is I went after a development play of 10 years 79 townhouses in Mesa. Okay what year are we in now? What year
31:09are we 2014. Okay 14 you decide to go I'm going to build 79 townhouses. And you know who I'm going to call nobody Brett I got this your boy I make money I print it I breathe it it's easy. Let's go. I'm going to have a success in flipping homes I flipped a home building one can't really be anything more complicated and then if you build one I I could build 79 in one shot no big deal. You know listen
So what happens there what happens at development?
You're going to hear this theme twice. The guy who got me into the development was a contractor who could no longer raise money he lost all during the crash and so he was still going through BK he found a young guy who knew how to raise capital and said here's this brilliant opportunity I have it under contract if we can get it financed I'll run the whole project I just don't have any way to get it financed. I ran through the numbers went back and forth on it blah blah blah everything seemed to to pencil
32:13and went for it. And we went you know got Gould involved for the capital there in Phoenix and in he believed in two like I before I did anything I went to him actually cuz he was one of my first like Phoenix like I know this market I lend cuz I know this market. He's like these numbers actually pencil right like if we do this well well shocker the contractor was a piece of And basically started immediately I raised all this private capital along with Gould's capital he was pulling 20 grand a month in G&A fees that he never discussed about our partnership he was overpaying the the not the project manager but the I'm blanking on the name superintendent he was overpaying him cuz he was a buddy right so this guy's making I think 35 grand a month well I'm sure he's getting kickbacks you know what I mean they're sharing some of that love. All because I didn't have someone actually who was a builder before who actually built the 70 townhome like to be able to mentor me and walk me through this. Because the Gabby agreements are perfect your I'm guessing the contracts that we use here are are far from perfect. Far
33:17from perfect and just over like just practical oversights right just like you know again a little naive thinking he was actually going to do right by the partnership because he was a partner so he had the upside alongside of me. So why would he tear the whole thing down financially? Well cuz he was selfish and in need and he had his own issues so he saw a naive successful young man he was like let me kind of prey on him cuz he doesn't know the scar he doesn't have those scars so I'm going to go and I had to learn very quick you know this again is like I just didn't have someone to lean on and it almost financial financially crippled me. So what ended up happening with the development? What was the the I gave it back I brought a private money lender in for one or two million two million. His name's Tony great gentleman out of California and he said go away young guy kid I got it. And he took over the whole project. And he got you out of it and said Yeah get out of here I got it and made millions and
34:19millions and millions of dollars cuz you know what he also had? Financial stamina to fix it to come out the other side where I didn't I couldn't withstand the storm. And he was like all right I'm going to go fix it and by the way this guy is sold insurance for a living he did not do real estate. And he just understood the business economics and whatever and he was like okay well if I just turn this around I have two million dollars in it if I can make this happen I actually I don't know for sure but I think he made seven figures cuz I was going to stand to make roughly eight million. And so I think he just had the stamina to get through it paid off Gould and powered through it and they're there today in Mesa and I I would guess he made somewhere between one to three million dollars off of it in profit just because he was able to get through the project and and that's another thing I I always kind of if I just could have kept pushing I would have been on the upside of the whole thing. I didn't have the financial stamina to keep pushing. I think it's a big point of people go into deals and what I see today is not enough people
35:21looking at the downside right like I understand the math of the upside that's really easy to calculate that's the first part that's what gets us excited. Then you got to flip it over and say okay if everything that I you know if I have a lot of challenges how much capital will I actually need and really putting and making sure you have it all set up before you start and access to it like your capital stack really matters because you and I you know when I were talking before the show I we have people out there that we know that today are making terrible financial decisions because they got into a deal they're over their skis they're over leveraged and if they just had insert the number an extra 100 grand put sitting here that would give them the peace of mind to make a better decision and instead they're going to threaten everything they have. And I think about Warren Buffett's quote you know I mean he's got so many but one is never trade what you have in need which is safety and security he doesn't say it that way. Never trade what you have in need for what you don't have and you don't need which is more money. We all need more money but like not at the expense of safety and security. That's right. And so you think about those you know two
36:24things and it'll it'll save you from a lot of issues if you're just am I trading safety and security for what I don't need? So you get through that what's next? Take us through the journey so you get you know I have a great little learning next story. Yeah pretty good comeback story and so what did I say this is 2014 right and so for the better part of you know up until 2024 was a pretty steady just going and and my business was very transactional for all those years it was always fix and flip or wholesale and when COVID hit I I kind of got to a place when I got married and I think you even told me you know something along the lines of like things change when you get married and you have to provide and you know so I started buying rentals and which was very cool to start to build my wealth right cuz I was like dude I've been making a lot of money for well over a decade but now it's time to like think for the future and the wife and everything else is happening right? And so I do that and things essentially go pretty well all the way through 2024 and in and we can talk about that right in in this scenario I'm currently in but I was buying 10 rentals a year nothing like I wasn't setting the world on fire
37:26but these rentals are low dollar point rentals not necessarily section 8 per se but just lower dollar point so it's hard to you know go bankrupt on buying you know a hundred thousand dollar home every day or not every day but every month cuz economics just make sense and then 2024 came or 2023 came had more success that I wanted to get into bigger apartments and buy more single family assets and that's where again my hands get slapped about what I think is God basically checking me whether you believe in God or not I think I made it too much about me my let me get the admiration the claps and the hugs and how great are you buddy and you're amazing and look at me and I was too I was too far ahead of that curve where he kind of stepped in and said hey brother we're going to we're going to check you again here seems like we got to do this every 7 years or so so hopefully this is by far my last time I have to see him in this scenario. Hey if you're getting value from the show do me a favor take less than 10 seconds and hit subscribe
38:29whether you're on YouTube Apple podcast Spotify hit subscribe leave us a review it helps us immensely our goal is to help more people and you are one of the keys to doing that so please do us a favor and leave us a review and also subscribe. Well so let's go to so specific so you're buying rentals you're buying single family rentals you're I know you're buying in Oklahoma right? Oklahoma yeah Alabama Florida yeah those those are the four states I've been buying. What was the fourth? You got Oklahoma Alabama Florida Arizona too or no? Oklahoma Alabama Florida I guess those would be the three. Okay big three and now you going to check these out do you know these markets so you just you got somebody there or you're saying So there was a gentleman I was in introduced to by three separate people in two separate masterminds that gave me trust to trust him. So there's some like I'm going to tell you guys now this is the moment you want to write some down. There's two basic principles you will forever never want to forget. Trust but verify inspect what you expect.
39:31If you just stick to those you will save yourself a lot of heartburn okay cuz those are the two that like fundamentally I just started to look over. So I trusted him because of people that referred him. Now, the trust went good for some time. We did more than our share of flips and they were profitable and it was good and things were great. But, the challenge was then I started to really lean into the trust and gave him a lot more leash. And that's where I
And is he doing Are you doing everything there? So, you're buying rentals, you're doing fix and flip. What else are you doing in these markets? Yeah, wholesaling, rentals, and fix and flip. So, I'm just doing, you know, if it doesn't fit for my rental, then I'll see if it can work for a fix and flip, otherwise I'll just wholesale it to some local. Okay, got it. And when do you go What point in the journey do we start going bigger deals? Like the apartment Yeah.
In the beginning of 2024, I had a wholesaler who sent me an apartment that just economically you go, "Dude, this pencils." But, back to your point of of the financials, this pencils. Here's the challenge with that. It only penciled if this said contractor could get me around
40:34the number it needed to pencil out. So, I said, "Hey, I'm going to send my general manager and I want you to go We're going to fly both you guys out there. You guys are going to spend the day walking it, understanding the economics. I want a line out and bid of every you know, everything." And this is not a big apartment, right? This is 18 doors. So, this isn't like And I was like, "This is But, the construction for those of listening and what you know, haven't done it, the construction bid could be anywhere from a hundred grand to 1.5 million, though. I mean, that sales wider. This is where it gets tricky.
you Well, that's what I say like cuz we're like, "Oh, it's 18 in a four-building, no big deal." Maybe, right? That's a maybe. And so, he goes in so I I kind of said, "Hey, listen, I think I want to buy this deal, but I don't want to buy it unless I can be in this roundabout number of where we need to be." And unfortunately for me, I told him what the number was. Cuz guess where the bid came back at? The number I
Oh, right. Yeah, of course. Yeah, I need this to be I can't buy it if it's over 350,000. Kaboom, got one 350. That's it. Sent to you by the wholesaler that's selling you the deal? And what about the wholesaler? The contractor. Where did the contractor come from? Did you find
41:36him or was he sent by the person that sent you the deal?
No, it was it was same contractor I've been working on on these flips. Oh, so it's the same guy. Got it. Yeah. So, he had my leash of trust cuz things were going pretty well. I'm like, "Well, if we could do this, let's see if you got your, you know, so He So, he's excited because it's $350,000 for the work. 750. Seven So, we are buying
it for 250, going into it for 750 with a just under a 2 million valuation for the rent roll and everything else, right? I'm now into it for a million eight and we're not done. So, you go How long does this take? So, how long does the construction? We start early 24. Yeah, we're not done. So, you started what when in when in 24? This one started in 24, but by the end of 24 I caught on to his little scheme. So, I stopped it.
But, I'm just trying to get time. So, start to finish like we're at You started when in 24? When was the rough When did you buy it? January, I think. We closed on it in January. Okay, so now we're almost at the end of 25. So, this you probably what How long did you think
42:39this was going to take versus then step us through to where you're at?
is a year turn to get it remodeled and tenanted. And And I was like, "We don't have to be 100% but getting the tenanting started within that year." I thought that was a fair range because the structure was essentially there, right? So, he just had to rebuild the inside of it all. It was vacant. So, that was That was the nice part. I didn't have to remove tenants. But, it was also the downside, right?
No. And so, third quarter, fourth quarter of 2024 I realized this isn't we are way far off of anything reasonable. But, he also had all these single family homes that I bought give or take in the same time. And I was clipping off like five properties a month, single families, to flip or to keep as a rental. And this goes back to just because I should doesn't mean or just cuz I can doesn't mean I should, right? Just because I can go do this financially doesn't mean I should. And so, this some other basic principles, hopefully this is where I can actually help the audience here, right? There's There's a very long story that I'm going to condense down. There's two friends, me and Brett have two pieces of land. We're going to build them together. We're going to build up
43:41100-story apartments together. Same Everything is identical. I start building, 60 days later I have, you know, 20 stories. Another 60 days later I have 60 stories. Brett doesn't have a single story. And everyone's like, "What the is Brett doing? Just drinking all day?" Well, Brett is underground digging down first, literally underground. He's building a foundation deep enough to withhold the storm that is coming. Because everybody there's always a storm. Always. And what I was doing is I was the building up before I had the foundation. So, I had my almost C-suite level executives that I could rely on. Hey, general manager, you got this. Property manager, you got this. Transaction coordinator, head of construction. All these people were my top align. I didn't help them build down. So, when I was running and I know how to run fast and I can go create, they had nowhere to put it all. And so, it was my fault. So, all of this damage that I created is all on me because of a handful of reasons. I don't blame the contractor. I mean, I blame him in a sense of like he did me really dirty. He did this
44:42a lot across his portfolio, but I was doing some things that basic principles would have taught me better, right? I just wasn't adhering to them because again, it the pride and ego of like, "Look at what I'm doing and how fast I'm doing it, dude. I am going to smoke everyone. Watch." And I was building a really massive portfolio, like massive fast, but not paying attention. So, I wasn't building down. Brett built down. The storm comes. My 60 floors falls to the ground. Brett starts building. He sells out his building before I can even finish building it. And Brett's sold and done. And now, while everyone's like, "What's wrong with Brett?" now he's the guy that did it, but he did it the right way. So, I didn't do that for my team and they flooded and they couldn't continue going and that fell apart and then I found out what this contractor was doing because I didn't trust I didn't verify or I did trust and didn't verify. I didn't inspect what I expected and these basic principles got me because the trickle-down effect of one rather big mistake, which wasn't getting three bids on this Sorry, guys. I
45:46don't know if you guys cut it out here, but like the basic principle that we all know, get three contractors to bid the project. Like it doesn't get more basic, Brett. No, isn't the most basic fundamental thing we all know? I didn't do that. I just trusted him. He's doing all these projects for me. We're making money. Why would he screw the the I'm the pony. He's going to eat off me. Why would he screw me? Well, I don't know to this day cuz obviously he has never talked to me. He's in a lot of lawsuits. He didn't just do this to me. He did it to a lot of people. I could point the finger. I'm not going to. I'm going to look in the mirror. How can I get better from this? One is go and be a part of a podcast like this that's going to talk about transparency and authenticity and not about how great things are, but really how to miss the potholes that I missed, which are simple practices, everybody. I'm telling you right now, right? Simple things that you can do to avoid this. And so, anyways, I'm kind of good enough, but like that's that's what happened and and it's it's just things that like you get
46:48God that comes in and said, "Buddy, made it about you. It's not about you, right?" And And he checks you and unfortunately now I'm going to have to deal with this and I'm going to deal with it and it's going to be a long uphill battle. But, thankfully I have you, Brett, and Kent, and Gray, and just people that been there, done that. Like, "Hey, we got you. Whatever we can do for you." But, So, anyways, long diatribe. Sorry about that, dude. No, that I I I think it's so helpful, man, cuz people aren't willing to Like you said, lately everybody even if they're are getting hurt, well, they say, "I'm crushing it. I'm killing I'm getting." So, I think it's so valuable for people to be authentic, come on and share, you know, where they're at. So, I want to break some of these Well, catch us up to the end of the story. So, you're dealing with it now. Well, I got right now and what's the What's the solution as you see it? Yeah. Well, so I have I'm liquidating everything and and I'm going to try to keep two of my apartments cuz they have some legs on them that I'm able to protect some of my private investors on. But, the bigger challenge right now is just like I have private investors on all of this. And so, I need to figure out how to in my I have what that little
47:52thing that is hard to come by these days called integrity. And I don't want them to have to lose money. And I won't let them lose money is a better way of saying it. So, I'm trying to solve to make sure I can protect that. And so, I'm liquidating everything, what any of it all of it. I will tear it all down to rebuild it. I'm okay with that because I I can work. I know how to work and I know how to do this. And so, my bigger solve is to speed that up, frankly, and I don't know if I have an answer yet and we can talk offline and and go through those type of things, but you know, I want to be able to bring in about 3 million to go make it right, right? And that just puts everything in that even. So, yeah, it's real time. Like I found out last week. I'll give you a great example. This guy, and I've never used his name online, so I won't yet, remodels one of my BRRs. We refinance, get a tenant. It's great. Had it for a year. Tenant just leaves last week. Never once does she complain. Our team goes in to go like just clean it up and get it re-tenanted. We're actually going to sell it. There's no subfloor. He put LVP on nothing.
48:54It was basically walking around on trampoline, this woman. For a year. Never complained once. We had no idea. So, now my team's like, "Hey, we got to replace the subfloor." I'm like, "What do you mean replace? Like it We just remodeled the thing." Like, "No, no, no, there's there's none. There's no subfloor." So, it's just stuff like that, like real time. Every day, every week I'm dealing with real time. Like, "Good, another rental I can sell. I can get, you know, the plan's working." Oh, no, there's still I'm like, "So, right this moment my immediate plan is to liquidate and to turn back on at a pretty high velocity my transactional business. Wholesale only. Buy nothing. No fix and flips. Just wholesale. Five grand, ten I don't care. Give it to me. Let me transact at a high level. I know how to do that. I don't need a big team. I don't need a big operation. I don't need overhead. I don't need cost. Right? And in so that's really the plan is a moment in time is to make it right to my lenders cuz that little thing integrity is important. But then also to just go transact and you create money. I love
49:57it. So let's break down some lessons that I think our our listeners could learn from. And I'm going to I'll I'll you know as you're saying I'm so if you could go back, imagine you got a time machine and you could go back to this most recent round, right? Like so when did it really start? 21, 2? Yeah, yeah, yes. Give or take.
All the rentals, okay. Yeah. So if you could go back to that moment, what would you do different in just in any order but you know lay the lessons out as is how organized as you can.
people be boots on the ground. Not hired, not call a company. If they can't touch it, we don't buy it. So let's say each of these I want to talk about each one as we go. So you're thinking through the next one to talk through. So internal team's big. I'm curious when you how long did it take you to go visit this property on site the 18-unit apartment building, you know, once you knew there were problems. How long before you got there? Or is it in your market? Is it it's not in your market, correct? Yeah, it's in Alabama. So I don't
Yeah. So my general manager the second we realized like oh my god, he flew out there.
50:58Got it. But it but not the beginning. He hadn't I mean he was there in the beginning but not ongoing. What this little guy would do is he would do like he would do like selfie videos. Right? Oh, look at the update. This Look at their new kitchen. It's not even our property, dude. Oh, that wasn't even our property. It was someone else's kitchen. It oh I I'm as a as a hard money lender out there, I've seen every scam that possibly this my favorite. So internal team on site all the time. Here's the other thing I would say if you're buying your first asset out of state, your first five and you're not willing to fly there before you buy. I don't care if it's a $100,000 house. It's not don't buy it. Your internal team and I would even say you. Yeah. Like you should like when I I go on these little journeys with my team but I go. I recently I was selling off everything in Alabama, okay? Because I was rolling them up to triple net commercial. It did everything. It was the greatest investment of my life. I flew out. I didn't tell the property managers everybody I was coming. I just said hey we had access to all of the keys cuz they're vacant. I just flew out. By the way, I got stuck in Atlanta to drive to Alabama. Not not that
51:59matters. But I drove everyone. And then I called when I was out there. I was like hey I'm at 123 Main Street. How's it going? Or sorry, before I got there, how's it going at 123 Main? Oh man, it's good. We got this. You got contractors there every day. They're there now. I go, they're not here now cuz I'm here now, right? And we'll have that conversation. So I think it you got to be closer to the action is my internal team your if you wherever your money goes, you got to go. If you're not willing to go with it, then don't send your money. Amen. All right, what's the next lesson? Again, this the typical things that I had to wake up and realize I wasn't even doing like three contractors bid every property. I don't care if it's a single family home or apart I doesn't matter. Like you just need three. Find them. They're out there. Two will be off, one will be on or or vice versa. One will usually be way far off. The other two will be similar. That's what you got to figure out. But that practice is there's no more doing it base round. Oh, I've done this 20 years. I know. I have a head of construction on my internal team. Right? Like now, by the way. Now I do.
53:02Cuz that way like there is no getting around any of this. But yeah, the basic principle three
So well, let's go there to it but I I every on our our rental portfolio, every expense over $1,000 we get three bids. Even like they're like hey you got to do insert thing. The AC needs a repair and it's going to be, you know, 2100 bucks. Sick. Let's get three bids, take the lowest bid, offer them 25% less, see what they say and then go with that, right? Like that's an internal process that's just built, right? So bidding matters. I I love that. What's the next one? There's no way I'm buying an asset like without an almost guaranteed 50 grand. You mean a 50 grand profit like up for a flip? Yeah. Oh. Or and this doesn't exist these days so I'm just not going to do many. Or basically a straight up cash out refi for a burr. There's just so much you know, Brett I've there's so much more power in just creating the cash and you know this where you're at in like I just want to go cash heavy and the rest. And so I'm happy to buy more rentals. I you know, and and you may be a little bit more in the season but
54:05single family real estate could burn for all I care. Like I just I'm like god damn it. Like I could have just sold that for 20 grand, made 20 grand, not had any of the headache. None of it. Zero headache. And like to me and and you're there cuz you and I talk but like less, you know, no brains no brain damage and I just go no headache. Give me the money, right? Now again tax reasons, there's things you I'll always be in real estate. I'm not saying I won't but I'm going to be changing how I look at it in a very very big way, right? So that's part of it is like the other rule I'm going to have is if I am going to flip it in a place like Alabama which is hard to come across $50,000 net profit, net then I'm not going to flip it. I am going to wholesale it and I am going to get out of it. So I'm calling your third lesson is know your math, right? There's a minimum amount of capital you have to receive to do a flip for the brain damage headache and work. And I think your number's right. And we could argue it's 40 or 50 but I'll see people trying to flip a
55:06home to make 20 and I go here's the problem with that. You're going to be wrong sometimes. And when you're wrong on the 20,000 construction's a little bit more and you're wrong on price and now you lose 20. Now losing 20 on one deal is not the end of the world. But if all of your deals are lined up to make 20 and then you lose on all of them, it could be colossal deal. And on rentals, here's the math that people don't understand on single family rentals. I call it your expense ratio and no one actually talks about it. It's the only thing that matters. Right. Taxes, insurance, HOA, property management, vacancy. Right? Those amounts added up divided by the rent gives you a percentage. The old rule of thumb prior to COVID is if that those numbers were 35%, you could make great money. Unfortunately, since COVID, taxes have gone up insane amounts. Insurance is just a a complete mess. It's a disaster every day. Probably double to triple. Repairs have doubled to to to tripled. Yeah. Now your minimum expense ratio will be 45. This is before debt. Will be 45%. And so buying a single family rental at today's value with any debt in almost
56:09any market I said almost, right? There's going to be the deals. Does it does it make sense? The old 1% rule, you know, you hear people running around as long as you get 1%, you can't lose. And I'm like first of all, that's absolutely not accurate. I mean that's not even close to a thing. Because I'm going to tell you I'll tell you a quick sideline story why and you need to know the math of what profit you want to make on a rental. So I'll give you an example. My partner Joe and I who you know very well, we found a deal. Fourplex, Phoenix, Arizona. $140,000. It's rented for $1,600 a month. We're we're inside the 1% rule. I mean, right? Like buy we're better than the 1% rule. Cuz the 1% rule 140,000 be 1400. So we're getting more than that. We own this property for the first six We bought it for cash. In the first six months, do you know how much money we made as the rents rolled in? Fully rented. Negative. So first month, we get a water bill for like $2,400. So I'm like this is impossible. We go out there. One of the tenants is like oh yeah, my shower broke a month ago. He didn't call it in. Just thanks, brother. Second month, guy drives his Taurus, I'm sure he's hammered or whatever over the
57:14curb into the living room. Like I'm not saying like bumped to the door. I don't want to mislead you. So much so we could have sealed the Taurus back inside of the proper. Oh. That That happens. Yeah, awesome. So every month I mean it's like a zombie apocalypse, you know, on the afternoon down there. And what I realized is that yeah, the 1% rule while a good little kind of fable has nothing to do with how the asset will perform, right? We've got to look at real ratios. And so the lower end the property, the higher the repairs will be. Now I don't know why that is in the world and I'm not making comments about people. I'm just saying I've owned at one point I had over 120 single family rentals and what I learned is the ones that rented for the lowest amount when I went to turn them, two problems occur. One, you only have a little bit of rent. So when you have a AC goes out for 12 grand if your monthly rent's 895 it takes a lot more 895s to get to 12 grand than it does 2600s to get to 12 grand.
58:15So while the 1% rule small little property may look amazing it actually may never make any money ever. You know, in my mastermind I we it was about three years ago when I started having this conversation in detail cuz I knew the world was changing. Maybe two years ago. And I was getting ready to sell off all of my rentals and roll them up into commercial. Which is what we we're now done with that. And people were arguing and I said I've asked the question in the room, if you buy a single family rental for cash can you make money? Can you make cash flow? And the room's like how many believe in a cash flow? The whole room's like of course, buy for cash. And I go you're not right. That's not a true statement. Not neces It's true with asterisks, right? The answer to the question is maybe. So if you're not really running the real numbers what is an average turn? Here'd be a great question for five property managers. Based on really could I see the actual turn costs Yeah. on average for this for this $900 a month rent, what is the cost to turn the property? Assuming that the tenant does a little bit of damage like they always do when they do some stuff. So long winded answer but I want to make a point just
59:18what I love you're saying. I have a hard rules around my math. I got to make fit 40 to 50 to flip it. I I think a rental after debt service, after everything, if you do not clear at least 4 to $500 a month net net net. And people say well Brett that doesn't work. Well, no, it involves you putting a bigger down payment or paying cash today to to play. And if you can't do that, that's not a problem. There's other ways to invest money to do stuff, but you shouldn't be playing in an over-levered game. The other thing I'll tell you is people don't realize that BRRR is also, right, a foreign language for cash flow killer. That's right. The refinance part gets you. Right. Well, they you get the money out of it, right? How many of your students go to you they go, "Dude, I BRRR'd this and now I'm losing 400 a month." And you're like, "Well, that that's called math." Yeah, that's called math. That's how calculators work. All right, so what's the next lesson you learned as you went through this? This is probably the bigger one that I'm dealing with real time. How to move for like wealth is all I really care about, right? I got to a place now where I'm done with the ego and like more is better and look at me. So, this is my reality check.
1:00:22But now it's more about what what vehicles can really create wealth without what we just talked about, the single family asset or the smaller like very rarely do you come across, "Oh, I'm going to get this 500 door A+ building, syndicate it and it'll be worth 100 like let's just be a little bit more." There's ways that you can work with money and create wealth that don't have to strategically be single family assets or smaller apartments. Right now, my bigger learning lesson which is more just continually looking at what am I going to be doing moving forward cuz the thing that I have proven to myself and not to you, Brett, or to anyone listening, I proved to myself I know how to make a lot of money. I do. Okay, great. Pause, then what? Now what? Right? And Brett, you're one of the best at it, right? You will be a call I'll be making as I start to unwind this and we'll what do we do here? Like I love whole life policies as an example. I love them, right? I don't have enough of them. Right? That's just one example like could I just go make myself a decamillionaire by myself? Yeah. Yes, that's Yes, yes. I can. That's the answer. So, that's the answer.
1:01:25
Lesson four is I'm going to focus on wealth instead of just cash. So, that's a good segue. What's your definition of rich versus wealth? You know, so for me it's I don't know if I know that It's a good question meaning I don't know if I could divine it right this second. Rich to me is always just transactional. I know how to make a lot of money, you're rich, right? Great. Wealth is like you're able to store the money. Your money makes you money. That to me is wealthy. Like when you sit around go, "I just, you know, my 100 grand just made 20 grand this year." And you're like, "What do you do?" And you're like, "No, I just did this thing, this vehicle that I'm able to use this scenario like made me 20%." That to me is wealthy. I didn't have to go work for the money. The money made it on its own. To me, that, you know, besides the stereotypical answer of like you're wealthy when you have your health and your family and time with your family and your I get that and I love that and yes, that is one of the answers for sure. I'm not denying it, but like wealth is where you go, "I don't know, I just made I think one day you told me we're literally flying somewhere, couldn't tell you. You're like, "Oh, I just made 11% on this 100 grand in like whatever
1:02:28you were doing." I was like, "What the fuck?" I literally asked, "What the hell did you just go do, bro?" And you told me and I was like, "That's cool." And you did nothing. You and I are literally I think we're flying to Mexico or something for a mastermind. That to me is wealthy. When you can sit back and just kind of look at your ledger and be like, "Oh, my money's making me an extra 250 grand this year." All right, fair. So, there you go. That's my like as you answer real time, that would be my answer. Transactional, I go sell something, I make money. That's rich. I'm getting rich. I make a million dollars a year selling acts, I make a million dollars. Now I'm rich. Wealth is I have these vehicles that allows my money to go to work for me and I sit around doing whatever the I want. There you go. Now you're rich. Now you're wealthy. I I think if you took your per like people's personal lives, right? I would just say what's the difference in my mind is is rich as you can afford the payment, right? I got payments on stuff, but I can afford it. That's rich. My my definition. I got a payment. Wealth is I don't know, I just send a wire, right? I mean, there's way there's way more to it, but like if you just simplistically, right? I'll see you. Brett, I mean, I just got this new car and look at me I got 0% interest. And I was like, "Give him a
1:03:30payment?" Yeah, that's that's that's not wealth, right? Wealth is you send a wire for for things like that. Anything that doesn't make money. Now, there's good debt and bad debt, we can get into that, you know, debate there, but that's a good way to think about it, right? I don't know I don't know any wealthy people. I don't know any, by the way, really wealthy that have payments on crap. Cars, boats, planes, trucks. I don't I just don't know that I just it's not true. Even down to the really wealthy, they don't even have payments on their primary residence because they look at it and they go, "Yeah, I understand all the games, there's a ride, I get all that." But they're going to go like, "Yeah, but why? It doesn't make money." Wealthy people borrow against things that make them more money. That's right.
Right? Your your primary residence is not an investment. It may work out that it's such that, but it's not an investment. Because you do things to it, right? Like and people always, you know, as as being in real estate space, "Gosh, I'm thinking about buying a primary now. Should I do it or not? Is it a good investment?" I'm like, "Well, it's never an investment, so let's just start there." Right? It's just not. It's a place where you live, it's your home, and over a very long period of time, right? It will work out in your
1:04:32favor. But in the short term, what do people do with their homes? Well, I put in new cabinets and countertops and a new flooring and I want to remodel. Well, all of that is a stupid investment because no one's going to pay you. They may not like the cabinets you put in or the way you did your pool or they may not love a maroon fireplace mantel, right? So, they're going to redo it. So, many of the things you spend money on actually don't create a return. You know, you go put a pool in the average house today, a really great pool is going to run what? 50 to 100 grand? And the next buyer may say, "I don't even want a pool." And if I do, the appraiser is going to give you 8 to 15,000 dollars worth of value for the pool or whatever it is. And so, our homes are not where you're going to create wealth. It's a vehicle, right? That if you have a 30-year mortgage, right? It's your, you know, inflation causes rents to go up and you have a fixed form of your housing payment. That's all it does. And it's a great way to do it. I love my home. I wouldn't want to be anywhere else and it's a home, but it don't people try to make their home some vehicle to flip their way to whatever, hack house hack and all that crap. And there's places for all those tools. I'm just saying the wealthy, the
1:05:35really wealthy are playing a radically just I love I loved I genuinely loved your definition that no one's ever actually asked me that question, what how do I define rich versus wealthy, but that will also now be my answer cuz that's essentially what I'm talking about. Where your money's making you so much money, you say, "Oh, I want to go buy that car. I'll just I'll just send the wire." Right? You don't care about whether you got to go sell a thing to go make the money to be irrelevant. I'm just going to go send the wire. Well, and if you if the wire is annoying or a lot Like you know, the first time I did it, you know, when I bought my current vehicle, it was the first real car like I'd I always bought my cars used, 2 years old, sub 20,000 miles and cuz that's the way you lose the most least amount of money in cars, right? Fact. 2 year old, sub 20,000, buy something reasonable, drive it till the wheels fall off and then rinse and repeat, you'll lose the least. And so, I wanted the brand new Model S Tesla. I'm a huge Tesla believer. It's the greatest car ever. I can't get my wife convinced of this, but I don't know like I don't understand why someone would it drives it so I haven't driven a car. I use full self-driving all the time. It's eight times more safer than a human. These are facts based on millions of miles of, you
1:06:37know, driven. But I I remember it took me for a minute cuz I was like, "I know that I'm sending a wire." I'm like, "I just don't know that I would rather buy an income-producing asset, right? I would rather buy another asset and another one." And I got to the point where you're just like, "I want the car and here's the wire." And I did it. But that's like now. Right? When I see young people with a I've never had a car payment. I've never told you this. My dad gave me a car when I graduated college. Yeah. Gave me his truck. And ironically, I drive the same model of truck years later. I got to give you a a story. I'll come back to it. But he's like, "I'm giving you this car when you graduate college. I don't want you to ever have a car payment. Cuz car payments are stupid." And I was like, "Okay, car wire, you know." He said, "Cuz cars go down in value and you're paying on something and by the time you get to here, you go trade it in, it's an ever-ending loop and people have car payments their entire lives, right? Figure that out." I was like, "Okay, so I just realized like when I I I was on the I got to buy it." No, I I've had a lease for tax re you know, like or my wife I love leasing it cuz she just tears cars apart and then every 3 years you just throw the key on the dealer let them let them deal with it, right? Cuz she's just a wrecking ball for cars. Love her
1:07:38dearly. You know, just you got the mom crap that's just inside the whole I get in her car and I just go I don't want like I can't I'm that guy I can't have like if there's a gun wrapper on the floor, I I was I would just And and that was beat into me by my dad. My dad's like, "If you have something nice, you got to take care of it." And you take care of it by washing it and cleaning it and making it great. Like you maintain it in all ways and that was just So, I come from the Rod Sanders school of of car maintenance. But it's just funny. I think people don't they don't adjust their lifestyle. Instead, they make decisions based on someone else. Well, well, Tom drives the Lexus. All we know by Tom driving a 100,000 dollar Lexus is he doesn't have 100 grand. That's all we know about Tom, right? That's all we know. He may be going financially completely eradicated at home. All we know about Tom is he doesn't have 100 grand or he's making payments on the 100. That's right. And the person to drive you know, my So, I I have I have, you know, a few vehicles these days and my favorite vehicle, not my cabin, I told you before, is a '99 Silverado. It just hit 110,000 miles. I call it Old Ginge.
1:08:41And Old Ginge Old Ginge, she doesn't move a lot, you know, but when I'm up here, it's all I drive. I mean, I drive it in into town. The looks you get for driving just And it's got like paint's kind of faded off the side, the hood's discolored, the seats got rips in them. And I drive all my friends in it and they're like, "What's going on?" And I go, "This is my favorite car. I love everything about it." And it just reminds me of, you know, where I came from. Yeah. And it reminds me how little we need all these crazy things. Oh, dude. And and actually, the only reason I like the Tesla is just cuz it could drive itself. But other than that, I really couldn't care. I mean, really I'm not playing for someone else and I drive it up to my, you know, my private club up here and I get the looks that I get, I love them. I think it's so amazing. Just taste disdain just
You know, they kind of look at you like like and and I just smile I just love it like you know, right? The payment plan is nice. How's it going guys? Happy Jan, good to see you. All right, Justin any other lessons that you think you could share cuz this has been so good. If there's not any more that's fine. Well, you said I'll get
1:09:43while you're thinking that you said inspect what you expect. And the way I'm going to help define that for the listeners is get into the details of your business. What does that mean? I want you to get as close to the issue I want you to actually get to the issue. So in your case it is fly on site meet the three trades view the actual physical work and then okay, so we're tearing out this window what does this window cost? You know, I just told you if you were opening the show like I just bought a resort up near my cabin and the first day I closed I had to drive it's 3 hours away. I drove up here and when it hit record 60 seconds later. I was on site at the property. Literally, you know, we had whatever we started with 10 employees, but I'm literally there minute zero and that's what my my team asked what are you going to do? I go I'm going to get in the middle of it. What's the middle of it? The middle of it's the front desk. I'm going to sit there right and I just sit there and then okay, how does this work and then how do they check in just check them in watch it. Okay, I went through every process every
1:10:45system. You talk about being in it. I am as close as you could get to every new every new contract negotiation. My team does it but at the end it rolls to me. I want to look at I want to be the one executing the documents. I want to touch it. I want to feel it and if you don't have the time to get that close don't do it. Then don't do it. But you will you will laugh lesson right there. Slow down. Slow down. Everyone has this need for speed and and this is by the way yours truly. I had this 36 month metric in my head like I'm going getting a 100 million dollars of assets. Watch. Watch me. All right, if you've been listening to our show for a bit you've likely heard that I run a wealth building mastermind largely around some of the same concepts and content that we talk about here on the podcast. We have an upcoming mastermind. We've got two seats left for it. If you want to come shadow our mastermind, take a look at what it's like get a actual feel for what it feels like to be with a tribe of people that are on the same journey as you. We've got a completely risk-free way to do so. Just go to bewealthy.com navigate over
1:11:49to our mastermind and book a call with one of my team members to learn more about our mastermind and you can how you can come completely risk-free and check it out. And by the way, I could right? I'm effectively being able to be on that journey. But because I took my eyes off everything I didn't have the foundation going deep and the people to support that journey it crumbled. I made bad decisions not because I was intentional I didn't want the bad decision. I didn't have my team built the right way. I wasn't inspecting what I expect I didn't trust and didn't like again the basic so if I would have slowed the down and listen to myself by the way the fifth metric I talk about the laws of success my fifth metric is remove your time expectation on the result you're trying to achieve. I literally scream this from the mountaintops all the time all the time and I became my own hypocrite. Right? I wasn't eating my own medicine. I had this 36 month metric that I was well on my way to achieving but because I was moving so fast and didn't take my time to slow down because I cared more about what Brett
1:12:51and everyone else thought and not doing it for me, right? So slow down like you're not in a rush to go get whatever like do it the right way like you said get in the middle of it like understand it and then you'll be able to you know like take a step back to take two forward. That's okay. So I think what I the way I would I'd say that is there's very few people I know that have massive wealth that have made it quickly. Right? And you could say like you know, you had some tech startup thing that goes kaboom right like that outside of those very few examples which are the point zero zero zero zero zero one it it's success and wealth is a marathon. It's like a 30 year marathon. Yeah. And what people try to do is make it a three year sprint. That's right. And if you just sit there and realize I could accomplish first of all in five years you could and I look at what I was doing five years ago to now. I would have never dreamed the things I mean I had big goals and aspir we we went into them but you know, it was bigger than I ever thought. Now it was less than I thought in a year. But it was way more in five and then if
1:13:52you look at what you could do over 30 year career yeah. It's endless, right? And you could be anywhere. But the people that never get to their goals are the people that try to make a 30 year game a three year game and those people typically get lit on fire again and again. And so you know, when I tell people like by the way the difference in once you get to Ricardo Semler wrote this amazing book called the seven day weekend and we'll drop the link in the show notes. He did an amazing interview with Tim Ferriss as well. But in his book he's like actually happiness and net worth are somewhat correlated until you get to 12 million dollars in net worth. After that point there is actually zero additional happiness created. And his point I don't give you a 12 million dollars ton of money. But he go his point in in that book and I've actually found this to be incredibly true in my own life. He goes at that point you've got the things you want. You're traveling typically in the in the way that you travel. You're staying in the places you're eating the things you want. You likely if you wanted a second home you have one and he goes if you
1:14:55want a boat you have one. He goes from there the things just get bigger, right? I've got a bigger boat. I've got a bigger house. But the happiness was in getting just there. And so I think if people can realize that then then creating wealth becomes a different game and it's how many lives could you impact? How can you help others and and money can do some really really things as it relates to helping others, right? There's some amazing uses of capital, you know, beyond your own. But I think that like the more people could I love your thing slow down. It's a long game and quit racing based on FOMO of what someone else is doing because they're posting every day on social media. If you just slow it down you could have it all. You just can't have it all right now. Amen. All right, Justin as we wrap up here I ask to every guest the same three questions. Okay. Let's rip. Top three books that have most improved your life. I will do most recently buy back your time was incredible by Dan Martell. Incredible. The obstacle is the way blanking obstacle. Ryan Ryan Holiday
1:15:59amazing dude. Amazing. And then I'll throw a little bit more of a cliche because it's just it's just only always true which is now I'm blanking on it. Oh my god the classic book. I just haven't read it recently but it's just been such a great true. Wow. All right, I forgot it. Okay. If you throw me any buzzword you say like arugula and I'll say Think and Grow Rich. That's a great that's a great being on that even though I just blanked on the book because again I was making emotional decisions and and just by definition if you think them through a little bit longer you probably don't make the wrong decision. So Think and Grow Rich Napoleon Hill. I love it. All right, best purchase under 200 dollars in the last 12 months that's most that most improved your life. Blood work. Great. I mean what a good answer. You guys can't understand like I'm 44 and very very physically healthy, right? Dude but I'm leaning into it in a big big way. Blood work was under 200. The other things I'm doing are much more cuz I want to know everything inside this thing. Like everything.
1:17:01Blood work is such a good I mean you could see anything in your blood work. You could spot and not the blood work that your doctor tells you to do that's the covered by insurance that does 1/12 of the thing. The full panel of every available test that exists on earth. Like if they're if you're done doing your blood work and there's not vials everywhere yep. You're not doing what we're talking about. You need to check every marker that exists. I I got to tell you the best the all the things that I do uh they go up from there to your point but there are so many options in health. So I'm I love that yours was blood work. I think that's incredible. And by the way, there's amazing services whether you're using like the you know, the aura ring has got the blood work actually you could do it and where it ties into your actual service so that uploads they use their person. I'm just getting like but there's services will actually help you read it and understand it and give you natural ways not you know, lifetime subscriptions to pills you don't need that cause of the problems but natural ways to actually solve many of the blood work things. So I love that. Last thing Justin you get 60 seconds to talk to your 21 year old self. What do you tell him? You are
1:18:03worthy. If you if you stay in the game long enough to win the game can have anything you want. And if you just you know, understand that none of it is easy. It'll always be hard. All the decisions you're ever going to make are going to be hard. But it is more simple than you are going to probably make it. So don't make it difficult. It is simple. But the decisions can be hard. Just keep it simple. But you are worthy. That's so good. All right, if people want more Justin where should they go to find you and we'll include all this in the show notes but where should they go find Justin the easiest? TheJustinColby. That's easiest. All right. Thanks so much Justin. I appreciate you being so raw and transparent in a fake world. It's cool to hear someone share to benefit the audience. You shared massive lessons that everyone can benefit. Thanks brother. I appreciate you. We'll talk soon. Appreciate you having me brother.
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