JF2555: Half a Million by 25 with Dave Allred

When Dave Allred started knocking door to door for a home security company, he thought he made it big. A short year later, he was making six figures and working to make his active investments passive. Dave tells us how his pursuit of freedom has driven each one of his investments, how getting clear on his long-term goals helped him attain and maintain financial freedom, and how to reduce limiting belief systems to go after big goals.

 

Dave Allred Real Estate Background:

  • Managing Partner for the Axia Partners real estate fund & Executive Coach for high-growth sales companies
  • 17 years of real estate investing experience
  • Over a dozen personal syndications, invested in a dozen other syndications
  • Portfolio consists of over 1,000 rental doors, 5 restaurants, 6 self-storage properties, 10 private equity, 21 fourplexes, 20 hard money loans for flips, Utah Topgolf location, and invested in about 20 other syndications
  • Based in Provo, UT
  • Say hi to him at: axiapartners.com
  • Best Ever Book: Extreme Ownership: How U.S. Navy SEALs Lead and Win

 

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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the Best Real Estate Investing Advice Ever Show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any of the fluffy stuff. With us today, Dave Allred.

How are you doing, Dave?

Dave Allred: I’m doing great, Joe. Thanks for having me, man. Appreciate it.

Joe Fairless: Well, it’s my pleasure and looking forward to our conversation. Dave has 17 years of real estate investing experience. And he’s been busy. It’s a mouthful, but I’m still going to read this one bullet point in his bio—his portfolio consists of over 1,000 rental doors, five restaurants, six self-storage properties, 10 private equity investments, 21 fourplexes, 20 hard money loans for flips, a Utah Topgolf location, we’ll throw that in the mix… And he’s invested in over 20 syndications.

Wow, I’m going to take a breath. That’s a lot. You’ve been a busy man over 17 years in real estate. And he’s based in Provo, Utah. He’s a managing partner for Axia Partners Real Estate Fund.  And with that being said, Dave, do you want to give the Best Ever listeners a little bit more about your background and your current focus? And we’ll go from there.

Dave Allred: You bet. So I grew up in a very low-income, blue-collar home. We never really talked about investing in real estate, didn’t know anything about money in general… But I always knew I wanted something really high level of quality of life and in my experiences in my own personal life. And I remember, as a teenager, I was doing whatever it took to get to that next level, and to be able to create that for my future family.

So when I was 21, I had an opportunity presented to go out and knock doors, and actually go door to door selling home security systems for a company called Vivint. A+nd it wasn’t something that I really wanted to do, I knew it was going to be hard. I jumped into it, I went out for the summertime. And honestly, it was the hardest thing I’ve ever done in my life, it was really a struggle, had a lot of failure. But halfway through the summer, I almost quit. Luckily, I stuck with that opportunity, and finishing very strong that summertime and made $31,000 that year, which for me, at that time my life, was life-changing. It was incredible.

So I came back next year as a sales manager and then the next year as a regional manager, and then became vice president of sales for that company for eight years. That company ended up going public for a multi-billion dollar exit. I moved over to sister company selling residential solar, door to door, and I did that for a few years. That company also went public for multi—

Joe Fairless: Were you back knocking on doors, or were you in a management role?

Dave Allred: I knocked doors the first few years, but I ended up in a leadership position where I was managing 121 sales teams across the country and a few thousand sales representatives within 42 different states across the country. I still went out and would lead by example sometimes on the doors with the guys, but for the most part, it’s more of a leadership and sales training position at that point.

So I did that for 17 years in totality, I learned a lot of great life lessons from it… But the entire time I was always trying to take that active income and put it into passive income investments. So it was just a side hustle for me originally getting into that real estate game. But in hindsight, I’m so grateful for having that exposure. And it all started when I talked to my CPA. You know, I made my first six-figure income my first year as a sales manager and asked my CPA, and I said, “Hey—“

Joe Fairless: How old were you?

Dave Allred: I was 22 at that point.

Joe Fairless: Wow. A year after you’d started knocking on doors—

Dave Allred: Yes.

Joe Fairless: —you’re making six figures.

Dave Allred: Yes.

Joe Fairless:  How much? Right at 100, or 200 or?

Dave Allred: Yes, you know, [unintelligible [00:04:00].12] kind of a private guy, but I’ll throw it out here. $31,000, my first year as a sales rep, and my first year as a sales manager, I made $156,000. And then as a regional manager, I made $256,000. And then as a VP, I made $516,000, and then it just kind of went from there [unintelligible [00:04:18].09] a tax problem. And again, we’d never talked about money and finances or anything within my family about how to be a responsible steward over your capital… So, you know, I talked to my CPA and said, “Hey, so what are your wealthy clients doing?” And he said, everyone of his clients are either investing; they either invest in real estate or they own businesses, or both. And that made a lot of sense to me.

And so I committed to learning the real estate game and really trying to master the game of money, and it’s just been an ongoing process. And honestly, it’s always been about being coachable and really trying to soak it in and learn. And honestly, I actually really enjoy the process now, because investing is almost like a chessboard and you have your little chess pieces, and it’s all about strategy and how to best leverage and how to best strategize to win the game.

Joe Fairless: Now your speak my language, I love chess.

Dave Allred: I did not know that, Joe.

Joe Fairless: Oh yes, I just got done with five sessions with a Cuban Grandmaster. I forget his last name, his first name is Fidel. But he’s taught me five one-hour sessions. Yes, I’m a big fan. I’m still terrible, but I’m a big fan of it.

Dave Allred: That’s awesome, man. I did not know that. Just going back to that topic, though… What’s really fired me up about and really drawn me to real estate – because I retired from that leadership career at Vivint Solar, about four, almost five years ago now. And a lot of people thought I was crazy to leave that opportunity, but ultimately, what I’ve realized about myself is I’m very driven by the pursuit of freedom; I just want to have a lot of freedom in my life. That’s freedom to be able to do what I want to be doing, with people I want to be doing it with, when I want to be doing it. And it’s not just for me, but for the people I care about and love – my family, my friends. So I realized, in my opinion, I feel like real estate is the best way to create true financial freedom, and not just short-term wealth, but real generational wealth.

So really just committed to that, kind of doubled down on it… And when I was 30 years old and I’m out doing this job – it’s a very difficult job, obviously, I’d say it’s probably one of the hardest ways to make $1 out knocking doors, cold contacting and selling. And I’ve always talked about financial freedom, but I got really serious about it, I sat down for four hours, I said, “Okay, if I’m serious about financial freedom, what does that mean exactly? And how much do I need to have?” So I just reverse-engineered, “What’s my family’s cost of living?” and then I reverse engineered that to, “Okay, how many rental properties do I need in order to hit that number?” And at that time in my life, I needed to have 40 rental properties to be able to have true financial freedom. So I said, “Okay, in the next 10 years,—” I’m 30 right now, “I’m going to get 40 rental properties.” And got laser-focused on that, reverse engineered it, I was able get that goal when I was 36.

And then kind of one of my things in life is to always push for the next level and to always beat yesterday, or to always do bigger deals than I’ve done previously. I thought that’s where you get real personal growth and development, you get new circles of friends, you really just grow a lot as you continue to expand and make that forward progress. And so I set a scary audacious goal and it was to have ownership in 1,000 rental properties by age 40. So kind of the same thing, I sat down reversed engineered the whole process and I was able to hit that goal last year when I turned 40.

And the next goal for me was, “Okay, well, so I’ve done the syndications, I’ve done 12 or so multifamily syndications, so the next step is to launch a real estate fund.” So that’s the latest thing we’re working on, is the Axia Partners Real Estate Fund, and it’s been an awesome experience and I really enjoyed it so far.

Break: [07:45] to [09:46]

Joe Fairless: Lots of questions, let’s start in no particular order of importance… Well, we’ll start chronologically, as those questions came up and I was writing them down with what you’re talking about. So one, door-to-door sales, you had a lot of success doing that, and then managing teams. What would the rookie door-to-door people do that could be easily corrected to make them be much better than rookies?

Dave Allred: Great question. I would say it really all comes down to confidence and mindset. And the same thing applies in real estate investing when guys first get started. I think that the biggest limitation is actually our limiting belief systems. It’s the stories we tell ourselves. And it’s the potential that we honestly see ourselves, our personal potential. I know when I first got started out making 30k, honestly, Joe, that was the very peak, the top of what, in my mind, I thought I was worth in the market. Now, okay, I did that. So then I’m like “Okay, you know what? Maybe 100 grand, that’s my potential.” That’s the same thing for sales rep, expecting how much success we’re going to have in the summertime – it’s really dependent.

I think our biggest limitation it’s our self-belief. So the rookies would come out and just dominate their first year; they’re usually not the most articulate or the most polished sales guys, it was the people that were willing to grind and pay the price and continue to improve. But they had the confidence in themselves, and the personal belief that they could do the job and they would win no matter what; I think that’s really what separates the guys that did quit from the guys that actually had a successful summer and would come back and continue that journey.

Joe Fairless: Is that coachable for the rookies who don’t initially have that personal belief in themselves?

Dave Allred: That’s a great question. I think that as long as there’s some humility—actually, one of my core values in my life is to have humble confidence, where you’re humble enough to still be coachable and to learn and to always be continuing to pursue personal development. But you also have the confidence in taking action, and not having analysis paralysis, and being able to be a strong negotiator, and to be able to really chase what you want, what’s important to you in your life.

So I would say it is very teachable, especially with a good leader that can come in and help inspire people. I’ve always said that trust is the highest form of human motivation. So some of the best leaders are the people that can come in—I mean, as a quick example, mid-summer, my first year, I was on the brink of quitting for like the 12th time, you know…

And the regional manager came in sat down at lunch, and he’s like, “Hey, Dave, just so you know, man, you’re not doing great here, but I can see potential in you, and you’ve been a leader in previous jobs you’ve done. So I just want to throw it out there, if you can do 100 accounts this year, you can qualify to be a sales manager the next year, and you can go recruit and build your own team and build your own career.” And it had never even crossed my mind to become a sales manager, but this switch flipped for me that. “You know what? This is actually could be a real career, I can actually impact and help add value for more people if I can win the next two months.”

And so I was able to turn it all around, and I ended up with 121 total sales, and it was a big win for me. But that was actually the moment that switch flipped and I saw the opportunity to become a leader and to be able to lead other people and create value for them.

Joe Fairless: I love that humble confidence approach, I really dig that. The next thing that comes to mind is with the earnings that you mentioned, at 22, it was 150k or so, I think you said, and [unintelligible [00:13:13].14] the next years. So by my calculations, around the age 25, you were making a little bit more than half a million dollars. Is that right?

Dave Allred: Yes.

Joe Fairless: Yes. So what’s that like with your peer group? And what’s that like from a drive standpoint? Because I would imagine a lot of 25 year olds who are making half a million dollars, their peers are not, and there also might be a sense of complacency there.

Dave Allred: Yes, another great question. So on the peer group question, what I would say is I realized a lot of my friends as their income went up, their discretionary spending went up; and I didn’t want to be in that position. So literally, as people year over year, income goes up, their discretionary spending, their toys they’re buying, their vacations, everything would just go in parallel with that. And I realized that you never can get ahead. In fact, you’re actually in a worse position if you take cost of living up proportionately. And so I’ve always been very focused on not buying depreciating assets or depreciating toys. So, never had a boat, never had an RV, never had a lot of those things; it’s always been about making money work for me, again, taking that active income into passive income. And I think that’s really what’s helped me to be able to get where we have, is because of that early understanding on that you’ve got to make your money work for you while you’re sleeping. And that’s how you create true freedom.

So I’ve always been very disciplined in my approach there, and that’s probably because I grew up without a lot. I’m actually grateful we grew up in that way, because it makes it so much more rewarding and the contrast is so awesome. I’m actually really grateful that we grew up without a lot of experiences and a lot of quality life and travel and vacations and whatnot. We would always go on vacations to Yellowstone or national parks and [unintelligible [00:14:55].25] my parents love national parks but in hindsight—

Joe Fairless: It’s free.

Dave Allred: It didn’t cost anything to go to those parks, right? With the peer group, I’d say, I don’t really measure success based on your income at all. So I think for me, it’s been very much focused on deploying that into investments. And you have to have almost 200 different investments and across the spectrum, and pretty much every different category.

Then the second question was in terms of making that much money when you’re young, how do you not lose your drive? And what I would say to that – because it’s actually a great point, and I see it all the time, guys that are making more money than they expected, and they get very complacent and stagnant and they stop pushing forward. What I’ve found to be the most valuable thing is to really get clear on what your long-term outcomes are in your life.

I’ve been very, very intentional with sitting down and drawing out my entire — I call it lifestyle design, but it’s getting clear on when I’m 80, 90, 100 years old, about to kick the bucket and look back in my life, I want to have no regrets. And I want to feel like I lived a life of significance, where I left a real impact and I left a really strong legacy for those around me, for my children. So I’ve gotten very, very, very clear on exactly what I want in terms of personal health, my finances, my business, my family, culture, and traditions, spirituality, experiences, relationships, memories. Those 10 categories to me are what are really the most important in life. And you want to be at least good or competent in all 10 of those.

A lot of people are really good at making money or they’re really good at their health, but they neglect everything else. And I don’t want to have that imbalance in my life. So I’ve gotten really, really clear on how I define successful life. And by doing so, I realized as I make more money — your money is just a tool, right? It’s not good or bad. It’s just a tool that helps accelerate who you are and what you really want in life.

So I realized that as I make more money, I can literally just plug and play that capital into my blueprint for my life. And by doing so, it accelerates that progress so much faster. And it’s actually super motivating, Joe, at least for me, to be able to make more money. And I want to make more money, not so my net worth is bigger, so I can brag about whatever… It’s so that I can get that freedom and accomplish my life purpose and goals in a quicker fashion.

So long answer short,- how do you avoid that complacency, by making good money, is having real clarity on what you’re going to do with that money, tying a purpose to it and making money matter, so that there’s an intentionality behind this purpose. And for me, that’s been very motivating to continue to increase those earnings.

Joe Fairless: Let’s segue and switch gears a little bit to what you’ve invested in. You have a 1,000 rental doors. Does that mean you own 1,000 rental doors yourself, or what is that exactly?

Dave Allred: No, I own about 20 something fourplexes and some other commercial multifamily assets and whatnot. It’s actually; it’s quite an over 1,000 now, but it does include some of the syndications that I’ve done as well, where I’ve been a lead sponsor on a deal when we bring in capital.

Joe Fairless: Got it. Okay, so that’s where you’re a lead sponsor. So you’re a lead sponsor on that stuff, and then five restaurants… So you’re a part-owner in five restaurants?

Dave Allred: Correct.

Joe Fairless: Okay. Where are they located?

Dave Allred: Nevada, Vegas, here in Utah, one here locally in Provo area. And then a few investments in parent companies that are up and coming emerging franchise brands.

Joe Fairless: Six self-storage properties – do you own them, or you syndicated them, or you’re LP in them?

Dave Allred: JVs, they are all JVs.

Joe Fairless: JVs. Okay. Ten private equity investments, how would you characterize those?

Dave Allred: So high growth startup, investments, seed investments… Real quick on that – I’ve pre-calculated my approach with my investments. And so, you know, whether you have $1,000 or $100 million invested, what I like to do is I put about 1% of my total investments into cash, 3% into cryptocurrencies, 1% into precious metals, 5% into bonds, 10% into equities, 15% into private equity, and then 25% into residential real estate and 33% into commercial real estate. So these are buckets that I’ve pre-determined that I want to be investing in, because it creates kind of an all-weather portfolio where you don’t have to try to time the markets because everything is cyclical. So I just try to invest in those different buckets. It’s not perfectly according those numbers, but it’s pretty close.

Break [19:20] to [22:24]

Joe Fairless: 21 fourplexes, you mentioned those; 20 hard money loans for flips. Are those currently outstanding, or have those come and gone?

Dave Allred: The way I do that is, I do about 2-3 at any given time. So I was borrowing $150,000 to $350,000 to a flippers; they’re going to go and do all the legwork to go and flip. And I get a really healthy return on that, very low-risk profile, I’m in a first position lien with a personal guarantee. I’m only paying 85% of the market value upfront to begin with. So I’ve loved that investment.

Joe Fairless: What’s the return on those?

Dave Allred: I say this and people are always surprised, but I get 18% annualized return on—

Joe Fairless: Any points at closing or anything?

Dave Allred: Depends on the market. So I did one in Detroit, and so I charge two points on that; it kind of depends on the risk profile of the investment. But usually, 18%, I’m pretty happy with that. That is a little above market in today’s terms.

Joe Fairless: Okay. A top golf location – is that still an investment or is that come and gone?

Dave Allred: That is a personal project that I’ve been working on, and here in Utah County specifically, there is not a lot of premier entertainment. So I’ve just been working on that for two years now. I’m really, really excited about that. So it’s a syndication where I brought in and several of my friends, and purchased the land and now we have the golf entertainment coming in on our land. So really excited about that—

Joe Fairless: So—

Dave Allred: —and to create that for the community.

Joe Fairless: Got it. So when does it open?

Dave Allred: We’re up to a little over a year out.

Joe Fairless: Okay. And then 20 syndications that you’ve put together, correct?

Dave Allred: Yes, I’ve done over a dozen personal syndications that I’ve invested in.

Joe Fairless: Oh, passively?

Dave Allred: Yes. Passively, probably two dozen.

Joe Fairless: Okay, got it. Alright, cool. So that’s the lay of the land. What investment have you lost the most amount of money on?

Dave Allred: Knock on wood, I’ve only lost on three investments in my investing career. And the worst one was actually in 2006. I bought the book Investing in Real Estate for Dummies, it was black and yellow books. Read the book, felt like I knew what I was doing, googled for a real estate agent, hired this lady, and we went and bought a fourplex in Salt Lake county. I was real excited about it, thought we knocked it out of the park. However, at the closing table, after we signed my signature and we closed everything, my agent leans over and shakes my hand and says, “Dave, thank you. That was my first closing ever.”

So I was like, “How did that not come up earlier?” And it’s my fault for not vetting; you know, ask questions. So it was her first closing ever. And then about seven months later, I get a letter in the mail from the city letting me know that I’ve illegally rented, because it was actually a duplex with two mother-in-law apartments. And I guess the two tenants had gotten in an arguing dispute, and they called the city and they called it in, so I had to evict two of my four streams of income on that duplex. So it was misrepresented to begin with. But anyway, and then the housing collapse happened a year or two later, lost 60k on the disposition.  And so I literally learned, Joe, everything that could possibly wrong. But luckily, I kind of learned a lot of those lessons upfront on that first deal.

Joe Fairless: So you lost 60k.

Dave Allred: I think I was negative cash flowing after I evicted those tenants for about a year as well. So probably 75 grand.

Joe Fairless: Okay. 75k. All right. Which one have you made the most money on? Which one deal?

Dave Allred: We just closed on a $20 million asset in Kansas City. We’re really—

Joe Fairless: It’s gone full cycle, though. Yeah, yeah, you had money in your bank account as a result of that deal. What one deal has made you the most money that’s gone full cycle?

Dave Allred: I got you. So the best full cycle deal for me has been the first six fourplexes that I bought here in Utah. I bought them all within the same year at $560,000; this was in 2014. And in the last year or two, I’ve exited all those for over a million dollar disposition value. But the best part, it cash-flowed very well along the way; great tax benefits with cost segregation and whatnot. But the best part is I’ve been able to 1031 exchange all those gains into larger multifamily – you know, a 20-plex, 60-plex, etc. – without putting any additional capital into the new acquisitions.

Joe Fairless: That’s outstanding.

Dave Allred: Yes.

Joe Fairless: I want to ask you the question I ask everyone else, and then we’ve got to do a quick lightning round. What’s the best real estate investing advice ever?

Dave Allred: Best advice would be — I’d go back to saying just think bigger, reduce limiting belief systems. When I was 20, I was really proud of what I was doing. When I look back when I was 30 [unintelligible [00:26:46].01] and I’m like, “Man, I was playing small.” When I was 30, I was so proud of what I was doing, managing teams across the country. But now at 40 looking back, I’m like, “Man, I was playing small.” And I hope that when I’m 50, I look back at 40 saying the same thing or when I’m 100 looking back at being 90, I can say, “Man, I was still thinking too small.”

But the second thing I’d say in terms of advice, Joe, would be to work with people you really enjoy working with. I think that’s really important. Joe, you and I have partnered, invested in co-sponsorships on a few deals. And I feel like real estate by itself isn’t that exciting. What makes it fun is the relationships we create around the real estate and the deals and the experiences we get to enjoy as a result of the work that we do here.

Joe Fairless: We’re going to do a lightning round. Are you ready for the Best Ever Lightning Round?

Dave Allred: Let’s go.

Joe Fairless: Best Ever book you’ve recently read.

Dave Allred: All time best book is As a Man Thinketh. In business specifically, I’d say Extreme Ownership, love that book. In investing specifically, I would say, The Lifestyle Investor. I just finished that this year, phenomenal book. In terms of personal development, I would say, Atomic Habits.

But really today, I’m actually more focused on podcasts. I love podcasts; they’re free, they’re relevant. Your podcast is awesome, Joe; great content, and it’s always fresh.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Dave Allred: I’m probably most active and reachable on social media. So Dave Allred on any of the platforms. I’d say Instagram is definitely where I’m most active.

Joe Fairless: Dave, thank you for being on the show, talking about your psychology, how you approach life, business, investing, and then specific examples that you gave us along the way of each of those things. So thanks for being on the show, I hope you have a best ever day and talk to you again soon.

Dave Allred: Joe, I’m looking forward to hanging out in person at the next Best Ever Conference in Denver. It’s going to be awesome. I appreciate you having me on, man.

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