JF1776: The Entrepreneurial Mindset #SkillSetSunday with Prady Tewarie
Prady is back on the show today to help us with some entrepreneurial tips. His advice today is focused all around the mindset that is important for any entrepreneur to have in order to succeed as entrepreneurs, which of course includes real estate investors. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“Must approach things in a non confrontational way” – Prady Tewarie
Prady Tewarie Real Estate Background:
- Started as a buy and hold investor in college and became a real estate developer focusing on condo conversions
- Has over $100M in real estate assets
- Based in Boston, MA
- Say hi to him at www.thetewariegroup.com
- Best Ever Book: Built To Sell
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Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we will be talking with Prady Tewarie. Prady, first of all, how are you doing today?
Prady Tewarie: Hey man, I’m doing fantastic. Thanks for having me on the show again. I had a lot of fun last time. I hope I was able to provide a lot of value, and so glad to be able to do it again.
Theo Hicks: Absolutely. So if you haven’t done so already, make sure you listen to Prady’s first episode. Search “Joe Fairless Prady Tewarie” and you will find that interview.
I actually was the one that interviewed Prady, and we’ve had a great conversation about his real estate investing. But today, since it is Skillset Sunday, so we’re going to talk about a specific skill that us as real estate investors can use to improve and expand our business… And the skillset that we’re going to talk about today is going to be around mindset. So the topic is going to be the ideal mindset that you’re going to need to have in order to thrive as an entrepreneur in general in today’s competitive market.
Before we get started, a little bit about Prady – he started as a buy-and-hold investor in college, and eventually transitioned into becoming a real estate developer who focuses on condo conversions. He has over 100 million dollars in real estate assets currently, and is based in Boston, Massachusetts. You can say hi to him at thetewariegroup.com, and that link will be in the show notes of this episode.
Tewarie, before we dive into the topic of today, can you give us a little more about your background and what you’re focused on now?
Prady Tewarie: Absolutely. I think you did a fantastic job with the bio. My interest — and when people ask me “Prady, what do you do?” I do something things. I’ve owned an investment group where I invested in startups, I have a real estate development firm… What I do, in one sentence – I find under-appreciating assets and I turn them into appreciating assets, whether it’s real estate, condo conversions, or scaling a small business. The last time we talked a little bit – [unintelligible [00:04:19].03] or has potential, but hasn’t really found their momentum, and I like to go in there and see “Hey, what can we do to make this profitable?” And that’s my biggest passion and what I love to do. I feel that when I do that, it just makes it come alive, and I really enjoy that, so… Turning under-appreciating assets into performing assets is what I’d say in one sentence.
Theo Hicks: Alright, thanks for sharing that background. As I mentioned, we’re gonna talk about mindset today, and I think a good place to start — because I remember during our first conversation, when I asked you how you find your deals, you actually mentioned that you do door-knocking… And I know – at least for me personally, and maybe other people share this as well, but I think a lot of people (myself included) may be a little fearful of doing that. And obviously, since you do do that, that’s kind of proof of your powerful mindset… So maybe we can begin by — kind of walk us through what allows you to have that very outgoing personality, that’s willing to go out there and actually knock on people’s doors, and face all that rejection… And more specifically, what advice would you give to someone who (maybe like me) is completely turned off by the idea and doesn’t wanna do it, for those anxiety and fear reasons?
Prady Tewarie: Yeah, 100%. It’s a fantastic question, so thanks for asking that. I think the biggest thing about in-person communication or door-knocking, and the mindset that I always go into it – it’s not confrontational. I think if we frame it “Hey, I’m on one side. I’m the businessperson trying to buy a house, and the other person is on the other side”, we’re working against each other, and I think that mindset causes anxiety, because you think it’s confrontational. I’ve experienced that, too. You live in a place and someone’s trying to buy something from you, and I feel like I’m trying to sell it for a price that I want, and they want another price, and we’re going back and forth in just this negotiation and this power thing… And I can see for some people that has merit, but I never approach it that way.
For me it’s “Hey, we’re on the same team”, and I think that approach has allowed me to feel less anxious about approaching people for deals, because I go in there and it’s like “Hey, I wanted to see if you know anyone in the area, or if you’d be interested in selling, I’d be more than happy to help you out with that process.”
The way I approach it is they have a problem that I can solve. So I’m not selling them anything. I think a lot of salespeople – they’re generally a little bit anxious because they’re like “Man, I’m trying to sell something, and because I’m selling something, we’re on the opposite side. They need to buy what I have, and I need to trick them into buying it.” But if you don’t go in that mindset, if I’m like “Man, I can genuinely help you. You have something, and I can help you in that process, so we’re on the same team.” I’ve always approached it like that, even when I’m buying other companies, small business; I’ll go in and say “Hey, what are your bottom line problems? Okay, I can help you with those things.”
In real estate it’s actually very common – when you talk to a lot of owners who are not listing their property on the MLS, some people are hoarders (that’s very common) so they need someone to help them out… A lot of them don’t wanna go through the whole legal due diligence process, so what I do is I help them find a lawyer, or I’ll take over all the legal fees. They don’t like working with brokers, so I’ll play for all the broker fees. Stuff like that.
When you put it that way, it’s like “Hey man, I’m here to help you.” That way, I don’t feel any anxiety, because it’s not like I want something from them that’s actually gonna hurt them. It’s none of this Wolf of Wall Street mentality, “Hey, I’m trying to get someone to buy shares that are useless, and then I win.” When you do that – for me, I’ll feel a little anxious, knocking on someone’s door, trying to get them to give me a product or sell them a product where I know I’m getting a windfall and they’re not.
So I always approach owners in a way where I know they’re gonna benefit tremendously from this, and I’m also gonna benefit, so since we’re on an even playing field and we’re on the same team – that’s my number one thing I always tell about any type of relationship, I’m like “We’re on the same team.” That way I take the anxiety out tremendously, and I think that mindset alone is really powerful.
Theo Hicks: Thank you for sharing that. I haven’t heard it from that particular perspective. Most of the time people say “You’ve gotta just expose yourself to it, and eventually you’ll get over it.” But I like your advice there. Essentially, keep the same mindset and just expose yourself to it until you get over it, but think about the actual situation differently. As you said, it’s not a battle, it’s not a competition; you’re actually trying to help them. I appreciate you sharing that.
Prady Tewarie: Yeah, that’s huge. If you think about it from an analogy standpoint, if I approach you on the street like “Hey man, I want five bucks. I want it right now”, and then I try to swindle you… It’s a competitive approach. If you’re trying to sell cars, or something, it’s very combative. I was always very big on negotiation strategy, and I think a lot of the negotiation strategy we have, especially in the U.S, from the ’80s and ’90s, is very combative. We have tricks and things you should say, and themes… And maybe they’ve worked, and I’m sure they have, because there might be some anecdotal evidence for it, but I was like “What if you don’t do that?” What if I approach you and I’m like “What do you need help with?” You’re looking for some kind of help, and then I help you. Then you’re like “Oh yeah, here you go, man. Here’s something in return.” That way I’m not asking for a favor, I’m not tricking you, I’m not misleading you, and I don’t feel awkward asking you to give me something in return, because it’s just there.
So I think approaching it from kind of like friends, but really deep down knowing that — I do condo conversion development now in East Boston, what I talked about last time, and it’s kind of a hot topic, and a lot of developers are not able to fix your permits; my team is able to do that fairly well, fairly easy, fairly quickly, just because the people there like me… And the reason they like me – I don’t have any tactics or skills; it’s because I’m invested in their future. So I will make sure that they have a place to go, they’re happy, their family is there, it’s secure… I make sure that the P&S is as long as they need in order to get to a new home, and sometimes they’re like “Hey, I’ve been able to secure a mortgage for my new home. Can I use some of the P&S money to put that forward?” I was like “Yeah, why not. We can figure something out so it’s beneficial”, and then of course the neighborhood isn’t gonna look at me from a poor standpoint, because I’m on their team. I’m helping them with what they need, and they help me back.
So I don’t really feel anxious at all anymore because I approach it from that standpoint. It’s not because I’m an ultra-confident guy, and all that stuff. I mean, of course, that’s part of it, but that’s not the advice I would give. I would say change your mindset around it, and think that you’re helping someone when you’re doing sales. When I sell a product from a supplement company, it’s because I believe it; I know that I’m gonna help someone with the product I’m gonna give, so it’s easier for me to get them to buy the product, because I think I’m helping them, and I know I’m helping them… As opposed to “Hey, buy my product. Here’s a flash sale. Here’s this, here’s that”, just to convince them to buy.
That creates word of mouth and a buzz for you as well, especially in real estate, where the market is fairly small, and people kind of know you in the neighborhood, and there’s lawyers and attorneys who will know you, and all that stuff. It doesn’t take long for that to really catch up.
Theo Hicks: Okay, so we talked about one particular mindset, just based on a personal question of mine, but I’m sure other people relate to that as well… Essentially, that was “It’s not confrontational, it’s you helping other people”, and that’s the mindset you need to approach when you’re going into negotiations or when you’re looking for deals.
What’s another top mindset/trait/characteristic that we need in today’s market to be successful?
Prady Tewarie: I think a lot of it — and this was really down to real estate… You’re gonna have to knock a lot of doors, and you’re gonna have to sometimes face rejection. This kind of goes back to the first thing I said, but it’s okay sometimes to be a little bit outcome-independent. We don’t have to tie ourselves — if something doesn’t happen, I know in the back of my mind that I’m gonna be okay. If the deal doesn’t happen, or if the negotiation falls through, I’m gonna be okay and I’m gonna find something else that’s gonna be equally good, or better. Down the line, I will.
I think that mindset changes the way I approach negotiations, because if the deal is not good, I’m okay to walk away from it. I’ve seen a lot of younger developers [unintelligible [00:11:47].02] and they get very tied to the project… And it’s hard not to. Here for instance you go through the permit process, that takes a year, you’ve gotta get this permit, and that permit, you’ve gotta talk to this politician… It’s a very long process, so it’s very easy to get married to it; I don’t blame anyone for it. But sometimes the deal isn’t good, and it’s okay to walk from it. And the reason why we’re afraid to walk from it is because we think “Hey, a door has closed. And because a door has closed, I’m not gonna be able to open any doors anywhere. I’m stuck in this hallway. All these doors are closed, I won’t find anything again anymore”, and that makes people really desperate and needy, and desperation and need is probably the worst emotion you can have in your life, because that makes you take incorrect decisions.
I think being outcome-independent is another thing… And that’s gonna help with the first question you asked, too; I don’t mind knocking on doors and sometimes people saying no, because it’s okay. At some level it’s a numbers game, and I know I’m gonna be fine whatever happens; even if I heard a no, what I am right now hasn’t changed, because I didn’t have property before, I didn’t have the deal before, and if they say no, I still don’t have the deal. So I’m actually never worse off.
If I was worse off after hearing no, then I’d be like “Okay, that’s risky.” But it’s not risky at all, because I’m not losing anything. So asking and going for things in life — most of the time, asking a question like “Hey, would you sell your house?” is a zero risk, and almost all reward type of play, so I really commend people to do that. By being outcome-independent, you can really foster that growth, and you can really believe and you know that it’s gonna be okay and you don’t have to be tied to a deal.
We hear this a lot, especially a lot of flipper — and I say young developers because they kind of get lured, and they see all the money that a lot of developers are making, and they get very tied in the project, and they forget that sometimes it’s not a good deal anymore, so it’s okay to walk… And that’s another mindset process that comes from being outcome-independent.
Theo Hicks: Yeah, that term “outcome-independent” reminds me of a concept that me and Joe have talked about a lot on the podcast, which is 50/50 goals. Essentially – because I know Best Ever listeners have heard it before – you set a goal, and 50% of the success is based on “Did you achieve that specific goal you set out to do?” and then 50% is based on “Did you identify some lesson by going through that process that you’ll be able to use to better yourself in the future?”
Similar to what you are saying, when you’re going into a negotiation, obviously you want them to say yes, but if they say no, one thing you mentioned is it’s really low-risk and very high-reward. But also, if they say no, you can go back like “Alright, is there something I could have done differently to make them say yes?” If the answer is no, then it is what it is. If the answer is yes, then you identify what that reason is and move forward and get that next deal, so in a sense, that no was actually successful, because it helps you get that next deal.
Prady Tewarie: A hundred percent, man. That’s math. When it comes to time as well – I think we all have a finite amount of time, and I think failing is good; we’ve heard that a lot, “It’s good to fail, you learn from it.” But failing is good as long as you learn from it, and I always say “If you’re gonna fail, try to fail as quickly as you can.” A lot of times in our life we know that something is not gonna be good for us, but we try to extend it. What I would always do is do everything possible right in the beginning to actually force failure, to see if I fail… Because that way I get it out of my way and I can learn quickly.
So that’s another thing about learning from failure – if it took you a year to learn from a mistake, if you could have learned that in one month, then that’s wrong; you should have learned it in one month. I’ll give a quick story on that point – a lot of times for instance I’m running a company, and we start selling products, and one of the biggest things that can happen when you sell a product is that your suppliers cannot handle the demand. People know this, and this happens a lot on Kickstarter; people start a Kickstarter project, they raise a lot of money all of a sudden, and then they can’t meet demand and the whole thing collapses. So if you know that going in, what do I do? The first thing I do is when I make my first order, I go to my supplier and I say “Hey, instead of doing 100 of these units, give me 20,000. How quickly can you do it?” And I say that’s what I want, although I’m not gonna pay for all that, because I wanna see their reaction. And a lot of times the supplier is gonna say “Well, we can’t do that. We don’t have the capacity.”
So I could have just known that by talking and asking them right from the bat, than waiting for seven months by the time we have to make a 20k unit order, and then we ask the supplier and they’re like “Sorry, we can’t do it.” I could have known that before. This goes with real estate, working with the right contractors… A lot of times we’ll ask them about their schedule and I’ll say “Hey, I have a property. Can you do this right now?” I create situations that will actually most likely be the ones where you can fail. Instead of waiting… “Well, this can go wrong if we scale. That can go wrong…” – well, do it now. You can just simulate the situation and force failure and get the answers as soon as possible. That’s one big thing that I do all the time if I know that there’s room where things can go wrong, which there always are. I try to simulate that situation and I try to see how the people or the things which could lead to failure – how they react right now, instead of waiting for 6, 7 months when the stakes are really high.
Theo Hicks: I appreciate you sharing that example. That was gonna be my next question. So you gave two examples – one was the supplier situation, where right now you need 500 orders to get started, but your projections are saying you’ll need 20,000 in the future; then you’re gonna go upfront and ask for those 20,000 and see how they handle it.
You also gave the example of the contractor, and let’s say right now you need a project done in a month, but down the line at some point something might go wrong, or you might have a project that needs to move quicker, and so you ask them “Hey, I need a project done in a week”, or whatever. When you actually do fail in either one of those situations – or a different example – what’s the next step? Do you just go to another supplier/contractor and ask them the same thing, until someone says yes? What if no one can actually fulfill that? What’s the approach from there?
Prady Tewarie: The first thing is I find someone that can fulfill it. And if no one can fulfill it, then I have a big problem. That means that the company can never succeed. If there’s no one in the world or in a market that I could ask that could ever fulfill it, that means that I just don’t do it. Especially in real estate, a lot of deals sound really good on paper… But they’re only good if you can get certain points or interest rates with the bank; but then you ask all the banks and no one can give you that interest rate, and then it’s not profitable anymore. So you just don’t do the deal.
I think that’s the big thing. All the issues that you will face – and we can all list them out, because if you listen to your podcast, for instance, there are so many examples of things that have gone wrong, that people actually tell you. So you don’t need to be very experienced to know all the things that can go wrong. You can listen to your podcast, and there’s so many examples that people have provided… Real-life examples, like me giving this example. So you can test it out.
I gave the example of a contractor – huge issue. A lot of contractors are not responsive. They don’t show up at the project site. Well, you don’t have to wait until you start a project, when you’re securing your project, and then all of a sudden you’re taking bank financing where you have to pay every month and the contractor doesn’t show up… Then you’re kind of screwed.
So the best way to do it is — it’s very easy to check someone’s availability; you just call the contractor every day, have them do different tasks, have them do different things, tell them to go to different sites, tell them to help you out with inspections before you close, and then you can see how responsive he/she is. And of course, that’s not always gonna be a fool-proof method, but more likely than not — I think most of the failures that I had in the beginning, one thing that I did wrong was I waited a long time until I failed, and it was usually in the middle or right when the project was supposed to really start off and really go into higher gear; it’s that shift that you make from being good to great, where most people fail. And that’s because of this – they didn’t vet properly. Proper vetting is very important.
Now the change that happened is I still fail a lot, and people are like “Prady, you didn’t do this project, you didn’t project; you said you were gonna do this”, because all my failures are at the beginning. They’re not in the middle anymore. That allows me to have a huge portfolio right now, that I’m able to speak to you on this podcast. If this kept happening with all my failures, like most people, in that little growth phase, right from good to great – then they can’t handle it. But for me, I don’t even start, and when I start, it’s definitely gonna be great, because I’ve already crossed most of the hurdles that are gonna stop me from going from good to great, if that makes sense.
Theo Hicks: That totally makes sense, and I really like that – the interest rate anecdote that you gave. If you’re looking for a deal and you need a certain interest rate, and you’re not gonna get it, then you just don’t do that particular deal, or you need to figure out another way to do that particular deal. That really resonated with me.
As it relates to the mindset that we need in order to thrive as a real estate investor, as a general entrepreneur in today’s competitive and fast-evolving market, that we haven’t talked about already?
Prady Tewarie: Yeah, one thing that’s huge that I’ve implemented in my life – and I’ve seen some other CEOs talk about it – very valuable, is that you don’t have to be fantastic at everything. We talked about this a little bit the last time. I actually have come up with a rule, which is the 75% or 70% rule, which basically means if someone can do a task that I’m doing in my day-to-day 65%, 70%, it’s okay, I’ll outsource it. You as a CEO or as a developer, you wanna be able to free up your time to do big-level strategy things.
We think “Oh, I need to do all the small things, all the time.” You’re so deep working in your business, when you should work on your business. And that’s a big mistake I see a lot of people make, especially developers. They kind of stay in the same game. They do their buy and holds, they do a fix and fix and flip, and they stay in fix and flips all their life… Which is fantastic, it’s awesome, if you can build a career. But I know a big question a lot of people have is “Man, how can I scale? How can I get to the next level?” When I was younger, I was doing really small rentals, really cheap and cost-efficient. Now I’m doing real estate development in Boston, and it’s because I recognized that I had to free my time at every point. Everything that I can outsource right now, I do. And there’s really cost-effective ways to really do that; through virtual systems… There are so many ways to do that, you just have to be open to that.
Also, if you’re not good at something, it’s not the end of the world. That’s really where you should leverage other people. People say “Who should I hire?”, and usually people hire people just like them, because they like those people, because they’re the same. But then you guys are both doing the same thing.
If for instance you know that you’d get more leads by knocking on more doors, and you’re super uncomfortable with it, like it’s not your thing – that’s not the end of the world. You can train a team, find a group of guys, find a group of college students or someone that’s excited that wants to maybe learn from you, because you have all this wealth of knowledge… I do this right now, because I can’t knock on so many doors anymore, so I built a list from the tertiary that I wanna target, and I have a couple of guys that come to me, they found me on some website, and I’m mentoring them. One of the things they do is they knock on doors, because I can’t knock on 500 doors every week, so they do it for me.
So it’s okay to not know everything. Don’t let it stop you. If you’re the CEO and an entrepreneur, always work on your business, not in your business… Because that is the number one way you’re never gonna be able to really scale, if you’re doing the minute things. You should always be doing the bigger things.
My concept is if I’m not good at something, I fire myself all the time. A lot of CEOs fire their employees, they fire everyone, but they don’t fire themselves. So I always fire myself; I’m like “Hey, I’m not so good at this”, I fire myself, and I free up my time to do other things.
Theo Hicks: Just to add to that – and you kind of already hit on it – obviously, if you aren’t good at something, then outsource it… But then you also mentioned, if you don’t like to do something, you could probably also outsource that too, instead of just not doing it at all.
Prady Tewarie: Right, 100%. Yeah. You asked earlier about the global economy of the internet, and I think we should take advantage of that. Back in the day it was maybe harder to find people [unintelligible [00:22:35].11] but nowadays even for my real estate — we think real estate is a more analog business, so we can’t use people online, or freelancers, or virtual assistants… You can definitely use them. Use the global economy, use the internet to help you scale, and use the internet to help you do things that you’re not good at.
Especially now, I’ve built a whole team that is just being outsourced, where they qualify leads, and they’re all based overseas; virtual assistants that help me vet deals and go through more… Because I realized my deal flow was too big for me to look at every single thing, so I had other people look at them, and it’s very cost-effective… And they’re happy, because they’re getting a job; and you’re happy, because — are they as good at managing and looking at deals as I am? No, but I can train them.
I think it goes back to your earlier question, where it’s like — use the digital economy to your advantage when you’re trying to do this. It’s relatively inexpensive, and it will actually make you more money down the line. The people who think “Hey, I wanna reduce costs” – you’re actually increasing costs by hiring yourself, because you’re not the cheapest source of labor.
Theo Hicks: Well, Prady, I’m really glad that I got to speak with you again. Again, powerful advice, specifically to the mindset that we need to have as investors to thrive in today’s global, digitalized economy. I just wanted to quickly go over the four mindset factors that we discussed.
First as it relates to essentially getting over that fear of rejection and anxiety, whether it’s negotiating or door knocking or whatever… And the mindset shift is to not think of it as a confrontation or a battle or a confrontation where one person wins and one person loses, and instead go in with the mindset of genuinely wanting to help people, and thinking that you’re both from the same team, and trying to add as much value to each other as possible. That was number one.
Number two – if something bad happens, which is obviously eventually gonna happen to everyone, the mindset is to not just sulk and give up, but to realize that you’re gonna be okay, and you are going to eventually find something else, as well as you’re going to learn from whatever that bad thing that happened… And the term that you used was “being outcome-independent.” I also mentioned the 50/50 goals as well.
Something that I really like too when it comes to the example of door knocking and searching for deals – you’re really not putting anything at risk. If someone says no, you’re not really losing anything, whereas on the other hand there’s really nothing but upside and reward. So that’s number two.
Number three, which is probably my favorite one, which is not only learn from your failures, but try to fail as quickly as possible. You gave a few examples on that, as well as your philosophy behind that, which is essentially if you are going to fail at something and it takes you a year to do it, that’s a waste of time and a waste of money, whereas if you could have failed at that within a week or a month, then technically you can try 12 extra things before a year ends, as opposed to just trying that one thing and failing and having to start over again. So that was number three.
Number four was that you don’t need to be fantastic at everything, and you don’t have to like everything in your business. And you talked about your 70% rule, which is if someone can do a task 70% as well as you, then you’re gonna go ahead and outsource that task.
You also mentioned the reason why you’re outsourcing that task is so that you can focus on the big-level strategy. You are the CEO, so you’re gonna be working on your business, instead of in your business. That’s really the only way to expand and scale.
Then I’ve really liked what you said, that people get fired from their jobs all the time, or they are firing people from their jobs, but people never really fire themselves. Obviously, I’m not saying fire yourself from the entire business, but fire yourself from one particular role within that business, and bring on someone else to do that for you.
Again, Prady, I really appreciate you coming on today, great advice. Thank you to everyone who listened. Have a best ever day, and I will talk to you soon.
Prady Tewarie: Thank you so much, man. It was a pleasure.