JF1818: Don’t Save For Retirement #SkillSetSunday with Daniel Ameduri

Daniel is returning today after he has already given his Best Ever Advice. Today, Joe and Daniel will be focusing the conversation to a topic that Daniel recently wrote a book about. We’ll hear how Daniel recommends people save their money, and even work towards retirement, just not the conventional way. Daniel looked at the wealthy class and the middle class to differentiate what they are doing with their money and discovered some insightful observations. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“Preserve capital and buy things that produce income” – Daniel Ameduri


Daniel Ameduri Real Estate Background:


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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and 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 that fluffy stuff.

With us today, Daniel Ameduri. How are you doing, Daniel?

Daniel Ameduri: I’m doing great, thanks for having me back on the show.

Joe Fairless: Yeah, my pleasure. You mentioned it already, back on the show, so Best Ever listeners, if you wanna check out Daniel’s best ever advice, you can go to episode 1106, titled “How to find owner-financing deals.”

Daniel is the co-founder of Future Money Trends. He also recently wrote the book “Don’t save for retirement.” That’s gonna be our focus for our conversation today. He has over 40 transactions, owns 15 rental units, 7 homes, 2 duplexes and a fourplex. Based in San Diego, California.

Best Ever listeners, first off, I hope you’re having a best ever weekend. Because today is Sunday, we have a special segment called Skillset Sunday. The skillset we’re gonna be talking about is around the focus of the book that Daniel has, “Don’t save for retirement.” Daniel, if we don’t save for retirement, what the hell are we supposed to do?

Daniel Ameduri: Exactly. Well, first of all, “Don’t save for retirement” – really what I mean by that is don’t save for conventional retirement… Because all these different things are great for the retirement industry. They’re making a fortune – the brokers, the mutual funds, the ETFs, the 401Ks… They are making money hand over fist. It’s just not working out for the clients and the baby boomers.

And what does work is something that’s been proven for thousands of years, and that’s preserving your capital and buying things that produce income. It’s as simple as that. Instead of saving for retirement and deferring and using all these different things, like a 401K, where you don’t even know where it’s gonna be in 30 years, or what the tax rate for the withdraws are gonna be, how about focusing on passive income?

What I did was I looked at what are the wealthy doing? What are the middle class doing? There’s a huge divide. The middle class, of course, they’re trying to get rich, and most of  them overnight. The wealthy – they’re preserving; they’re focused on income. But it is the one proven way that works, what they’re doing.

The whole retirement idea – really, the 401K is legislation passed in the ’70s, but it’s been around since the 1980’s. Same thing with IRAs. I think there’s just a better way to go about living your life and having your life becoming financially free.

Joe Fairless: I pride myself on thinking through the opposing opinion on basically anything, and just thinking “Okay, if we think this, then what would the other group say that’s the opposite? What would their points be?” Just because I think it’s good to have that ability to be able to do that, so that the initial perspective that I have – I can make that stronger, or perhaps I retreat from that and I open up my mind to this other stuff.

This I’m gonna have a hard time doing, because I agree with you, and I don’t really do stock market investing. I agree with everything you said, so what I’m gonna have to do is I’m gonna have to ask you – because I’m sure you’ve come across people who are heavily in the stock market, and they have other retirement accounts… And you’ve mentioned this to them, and then they have some counter-points. So help me ask some good questions about it – what are their counter-points to the things you’ve just mentioned?

Daniel Ameduri: Well, it’s interesting you bring it up like that, because yesterday I was emailed by a New York Times reporter who was looking at the book and wanted to ask me some questions. And he says “How many people are making $100,000 a year from passive income, that started as the middle class? How many people have subscribed to your letter and have done this with passive income and have quit their jobs?” He’s asking me questions he knows there’s no data point; there’s no data on that.

So I actually flipped it on him. I said “How about we do this? Let’s go over the data for what you’re advocating.” I said “Vanguard, the biggest mutual fund company on the planet – they are saying according to their data the median 401K-er (65 and older) has $58,000 in their account.”

Then you look at social security, which doesn’t even equate to the cost of survival increases annually anymore. Then you look at savings accounts, which is part of that three-legged stool retirement plan, and they’re offering 0% interest. So I kind of flipped it back to them and said “Look, I don’t have a lot of data points for how many people have come from nothing and gone to passive income, or have done a partial retirement, but I do have a ton of data to show you that the other way that you guys are advocating for is an absolute failure.”

Joe Fairless: What was his response?

Daniel Ameduri: I haven’t gotten a response; that was literally yesterday. So I’ll let you know if he does.

Joe Fairless: Was it via email?

Daniel Ameduri: It was via email.

Joe Fairless: Oh, okay.

Daniel Ameduri: We’ll see what he says. But look, I’m not advocating for people to quit their jobs with passive income tomorrow, or even replace completely the idea of retirement. What I’m saying is passive income has been much more beneficial to people who’ve adopted it. I have used passive income to pay my bills. I have used passive income to go on vacations, and I simply don’t worry about retirement at all, because I love what I do – which we do talk about what you’re going to do in life as far as work, and how healthy it is… But we also talk about in the book that you do have that option, and that is where that real financial security and peace and freedom comes from, wherein “Hey, maybe your dream was to be an engineer, or maybe you’re a prosecutor who puts away certain criminals that you really are passionate about doing that job.” Do that job. But what I’m saying is when you buy passive income and reshift your mind from capital appreciation to income, it opens up all kinds of opportunities and a peace of mind and a feeling of wealth that is worth pursuing.

Joe Fairless: Okay, I’ll do my best to pretend I’m the reporter and continue his line of questions. So you mentioned passive, but investing in real estate really is not passive, because there’s some form of activity we’ve got to do. I have three single-family homes outside of the apartment communities that we have, and those three single-family homes – once a year I’ve got to pay the insurance bill, and once a month I maybe get an email from a property manager about something that happened… And that’s on the management side. But going into purchasing those, there was work involved to educate myself, find the right city, and find the right team… Versus I go on Vanguard and I could pick whatever options they have and just passively – and that truly is a  passive investment – and just let it ride on the stock market.

Daniel Ameduri: Yeah. The stock market to me is not a good diversifier for most people. They’re probably not sophisticated enough to even know what stock to buy. Warren Buffett even hasn’t beaten the S&P 500 in the last ten years. So I’m not big into stock picking; I do dabble into venture capitalism, but I’d say for people who are comparing the two – sure, you do have to do a little legwork, or a lot of legwork if you wanna make a lot of money in real estate, and it is a great way to have passive income, but there really isn’t too many passive incomes where you have nothing to do, at least if you wanna maximize it, like in physical properties.

Now, there are private REITs — there are public REITs too, but there are private REITs, or even the crowdfunding stuff… You’ve heard of PeerStreet and Fundrise – there are a lot of ways to make money, and it can be 100% passive to you, but just know you’re never gonna get that same return as if you had gone out and purchased the apartment, or purchased the single-family home. Those are gonna be your best returns.

Now, if you wanna just give the money to a private equity group that owns fractional shares of J.W. Marriotts, or maybe they build skyscrapers, you’re gonna get your 7% to 11% return, but the best returns and the best tax benefits are always gonna be owning physical real estate. But yeah, sure, they got me that it’s not 100% passive on owning physical real estate, but I think we’ve got them check-mated that the alternative is you don’t even know half the time what you’re buying, and you have no idea what that 401K is gonna be at.

At least when I have a property – not only do I have the tax benefits, but I have the income, the potential appreciation, though it’s not important… But you look at a 401K, for example, and people have no idea what the withdraw rate is. Think about how risky that is. You’re borrowing money from the IRS essentially by taking that deduction and not paying the tax, and you have no idea what your tax rate will be… Even though what you do know for certain is taxes are lower than they’ve been since 1931. And you’re gonna speculate that with 22 trillion dollars in debt and ballooning entitlement – an entire movement out there to tax people more, that taxes are gonna be lower. No, taxes are gonna be higher, so why wouldn’t you focus on passive income, rather than deferring things in a 401K?

Joe Fairless: How do you have the book outlined? Or how does it flow?

Daniel Ameduri: It starts off with my wife and I’s journey. It literally starts actually in a bankruptcy attorney’s office. I have the first chapter and the intro, for your readers, if they wanna go to FutureMoneyTrends.com/save – they can read it free. There’s an Amazon link there, of course, if they wanna continue reading… And it essentially starts with what did my wife and I do; how did we just start pointing — a lot of people say “What’s the first step? What do I do if I wanna become financially free?”

Then it goes into really what is wealth, and what is wealth ultimately going to mean for you? And then we go over the actual investments that I’m involved in, and different things that I have discovered. What I’ve done is — I’m not worth 50 million dollars, but I’ve been to a lot of these family wealth offices where everybody else in the room is worth 50 million, or 100 million, or even a billion. I’ve spoken and interviewed many billionaires over the last few years here, and I’ve always just been looking for what are they doing, and I’ll tell you – and your listeners will love this, because they’re listening to a real estate show – in the end, all roads lead back to real estate when it comes to the super-wealthy.

Joe Fairless: Well, can you drill down into some specific things from a cashflow standpoint that have worked best for you, and then some things that did not work well for you?

Daniel Ameduri: Well, when it comes to cashflow, I’ve tried to diversify it as much as possible. One of the things that works very well for me is I have been participating in private equity, either by multi-units, say 30-50 units, and then doing value-adds… Or even getting into where we purchase farmland and lease out the equipment. Now, the farmer obviously will make more money because they can actually profit from the crops, but they also carry the most risk. So it’s a fair trade. They get more risk, and they get more profit, but we get more safety. And again, my focus is preserving, so I love farmland. Then the income – we’re getting rents from the farmland and we’re leasing  out the equipment to the farmers.

On the income disaster side – I would say one of my worst experiences is trying to vet and do individual mortgage notes or loans on my own. I’m just not a credit analyst. So when it comes to that, if you wanna have some debt income, I would highly recommend, defer to people or organizations that have been very successful.

One thing I’ve done is I always try to find organizations that have been around for a long time, ideally (it’s almost a must) that they’ve been around before the 2008 crisis. If I’m gonna partner my money with a group that’s buying mortgages specifically, I wanna partner with a group that has been through the 2008 crisis, frankly… Because that was one of the worst crises and I don’t see us going into something like that again for a long time, because when those types of things happen, investors tend to be more on the conservative side for some time.

Probably my worst experience is me trying to actively involve myself in things I’m not an expert in, I don’t know about. I would start simple when it comes to cashflow – single-family homes, move into apartments, and then definitely, if you’re getting into bigger things, move into partnerships or places like your website where people can get educated and trained… Because this stuff is all repeatable; you can mimic what other people are doing. What other people are doing, you can do. That’s one of the things I always tell our subscribers, and even my kids – “Look, what one man can do, another can.” So it’s all possible, but I highly recommend people partnering with people who know what they’re doing, prior to just jumping out there and throwing money at something.

Joe Fairless: Out of 1,800 or so interviews, the term “farmland” has come up maybe 5 times, so let’s talk about that… How did you get into investing in farmland?

Daniel Ameduri: You know, it always has been something I wanted to do, and I just could not find the right partners. I would look at foreign farmland, where you buy a parcel, and the internal rate of return was like 20%, and all these things, and I was like “But I don’t know about that…” I’d go to Panama and look at these farms, I’m like “If grandma dies on the farm, it’s over. She’s running the entire operation.” In fact, I know a group who got into coffee farmland, and the guy who was the main farmer died, and all the investors lost their money because just one guy was not part of the operation anymore.

So I’d been wanting to get in it for the last decade, and finally a group out of Southern California – if anybody knows Sprott Asset Management. They’re a very good group; they have commodity, resource-related investment companies, and they had brought the opportunity up to me. It’s a private fund, private equity, and that was the pitch – they were gonna buy farmland all throughout the Midwestern United States, they were gonna buy the equipment, they were gonna lease the equipment to the farmers, and it’s done really well. It’s appreciated probably about 7% or 8% annually, but the income is about a 10% yield on my money… So it’s a great way to expose myself to farmland without owning a physical farm, which I know nothing about.

Joe Fairless: And on that note, investing in something that you don’t know much about, what gives you the comfort level to invest in something that you don’t know a whole lot about?

Daniel Ameduri: Well, I’ll give you an example in some of these mining stocks I’ve had a lot of success in… What I’ve done is I’ve just been religious about making sure whoever I’m investing with is on their second go-around. So I identified a handful of people – about 12 of them – and I wanted to find the guys who had already created a 5-million-dollar or a 10-million-dollar company to a billion-dollar company. And I took those guys and I looked at what they were doing, and the asset and the project met what I wanted.

I think if you’re going to involve yourself in a thing you’re not that familiar with, you wanna make sure you’re with somebody who’s on their second go-around. Not the CPA who’s decided he wants to be a gold-mining expert, or somebody who last year was managing a Subway, and this year they wanna buy a 25-unit apartment building with you. So try to find people on their second go-around.

Now, I will tell you this from first-hand experience, and I’m sure a lot of listeners can relate to this – typically, when I venture too far away from things that I know, I usually don’t make that much money. Whatever you’re doing right now that’s making you the most money… As entrepreneurs and investors, we love to go out and find new things. But for the most part – and this is my own personal experience – you’re far better off just doubling down on what you’re doing right now, whatever is making you money. If you wanna monetize your job and make your employer your first client and expand that industry, or if you’re an investor who’s killing it in apartments, or killing it in single-family homes, just keep killing it in single-family homes, or keep killing it in apartments, and just stay focused.

They asked Bill Gates and Warren Buffett if they could say one word that’s been the most important thing in their lives, and both of them said “focus”. I really believe that, because I made a lot of money in stocks and real estate, and I remember one time I wanted to venture out into the payday loan business, because I saw these returns, and… Let me just tell you, it was not a pretty thing. That business is so gone you can’t even find it on the internet.

So you’re better off sticking with what you do know, but if you don’t, make sure you’re partnering with somebody who’s on their second go-around.

Joe Fairless: Anything else you think we should talk about as it relates to your experience and the topic at hand, that we haven’t discussed already?

Daniel Ameduri: As far as income, no. But I would say one thing that helped me become financially independent was cutting spending in an aggressive way. If you google right now “how to save money” or “I need to save money”, it’ll say switch your credit card, switch your checking account, don’t drink coffee at Starbucks… When my wife and I wanted to become financially free, and our definition was passive income paying for your basic needs in life (not extravagances), and just making sure that that was taken care of, we moved. That cut our expenses 50%. We got rid of our pets, because they had a $150/month bill. We stopped eating meat.

Joe Fairless: You got rid of your pets because of the money?

Daniel Ameduri: We did crazy things. She wanted to quit her job, I hated my job…

Joe Fairless: What did you do with your pets?

Daniel Ameduri: We gave them to a very nice family who actually kept a lot of these different type of dogs [unintelligible [00:18:50].15] This goes back to 2009-2010…

Joe Fairless: Oh, okay. Tough time.

Daniel Ameduri: Much different life, right?

Joe Fairless: Right, right.

Daniel Ameduri: So that was us crushing all expenses… And what that allowed us to do – it freed us up to buy even more passive income. And of course, that snowballed and compounded. My wife was able to quit her job, and then I quit my job, and today we live a very good life. Even though I was financially independent, I still drove a 2003 Nissan Altima in 2012.

Now, I’m not telling people that’s how it’s gonna be permanently. That’s not how it is now. My wife and now – we just got done traveling for 60 days, in Africa and Japan and Israel, and we took an Atlantic cruise with Disney from Miami to Barcelona. So I’m not telling people you’re sucking up and living a poor, minimalist life; I’m saying we need to cut deep. Because most of us aren’t living sustainable lives, because we have adopted what we’ve been conditioned to do… Just like the retirement savings, having a 5 to 8-year auto loan, having an auto loan that’s equal to your annual income… That’s just stupid stuff that we do because we think it’s normal.

The book really goes into how do you deep, deep cut spending. Because you’re doing it not permanently; you’re just doing it because what you wanna do is you need to free up as much money as you can to buy income. You need to put those dollar bills out there and put them to work.

I have the mindset — when I go check my mailbox or log in to my checking account, I’m looking for ACH deposits, I’m looking for checks in the mail. And that’s a very rewarding and healthy lifestyle I think everybody can benefit from.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

Daniel Ameduri: I would love for you guys to just go to FutureMoneyTrends.com/save. You’ll get to read a part of the book for free. It also subscribes you to my weekly wealth digest. I share stories of what my wife and I have done, and what we’re actively doing right now.

Joe Fairless: Well, thank you so much for sharing your approach to making sure we’re ready for retirement, having cashflow, and having income-producing assets. Then how you go about doing that, what has worked and what hasn’t worked.

Daniel, I really appreciate the conversation. I’m interested to hear how the New York Times reporter reacts to your email… I’m thinking you’re just not gonna get a reply, because they’re probably looking for one perspective only. But if they are good reporters, then they’ll actually get really curious about what you’re saying.

Daniel Ameduri: My publisher was the one who had the email, so I’m sure he’ll get back to them, just because he’s probably regularly in contact with the publisher… But when I emailed them, I said “He’s either going to hate this, or he might actually become curious and wanna dig further.”

Joe Fairless: Yup. Well, I agree, and… Hey, I really appreciate it. I hope you have a best ever weekend, and we’ll talk to you again soon.

Daniel Ameduri: Thank you very much, Joe.

JF1736: $10k Per Month Passive Income, Requires Just 1 Hour Per Week To Manage with Anton Ivanov

Wouldn’t $10k per month of passive income be nice? Anton currently has that with his portfolio, and he only has to spend one hour each week to manage. He also has another career, so his real estate investments are not his main focus, which makes the passive nature of his investments ideal for him. Joe digs into Anton’s portfolio and story, extracting the lessons for us to learn from. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:

“Get your foot in the door, you’ll learn more from your first deal than any kind of reading or research” – Anton Ivanov


Anton Ivanov Real Estate Background:

  • US Navy veteran, real estate investor and entrepreneur
  • Owns 35 units across 4 states, generating $10k in monthly passive income, requiring only 1 hour a week to manage
  • Based in San Diego, CA
  • Say hi to him at https://dealcheck.io/
  • Best Ever Book: 4 Hour Work Week by Tim Ferriss


If you’re a passive investor wanting to learn more about questions to ask sponsors in order to qualify the opportunities, sponsors, and the markets opportunities are in, visit BestEverPassiveInvestor.com.

We created this site just for passive investors to have a free resource providing the questions to ask and things to think through. BestEverPassiveInvestor.com


Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and 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 that fluffy stuff. With us today, Anton Ivanov. How are you doing, Anton?

Anton Ivanov: I’m doing great, Joe. How are you?

Joe Fairless: I am doing really well, and nice to have you on the show. A little bit about Anton – he is a U.S. Navy vet. Thank you for what you did for our country. He is a real estate investor and an entrepreneur. He owns 35 units across four states, generating $10,000 monthly passive income. Here’s the kicker – it requires only one hour a week to manage… And he is based in San Diego, California. With that being said, Anton, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Anton Ivanov: Absolutely, Joe. Thanks, first, for inviting me on the show. I got started with real estate kind of in a set of unfortunate circumstances. I was in the U.S. Navy a few years ago, and both of my parents passed away actually while I was stationed in Japan, overseas. They owned a condo here in San Diego, and I ended up inheriting it after their deaths. Prior to that I never had honestly any intention of getting into real estate, at least in the immediate future. I didn’t know much about it, so here I am, I’m living in Japan obviously, deployed with the U.S. Navy, I’ve got this condo… I wasn’t really sure what to do with it at the beginning. I thought about selling it. I glad I didn’t; I talked to a few folks smarter than me, and they were like “Well, you know what – it’s a good asset. Why don’t you try renting it out? Get a property manager and see where it goes. Don’t make any rash decisions.” Which I did.

I happened to find a local property manager here in San Diego, I rented the property out… It didn’t cashflow very well. San Diego prices are very expensive, rents not so much… But it trickled in, a little bit at a time. But over the years it kind of gave me my first look at what passive real estate investing can do for you in terms of cashflow. That was the kicker for the whole driver of after I got out of the Navy and kind of settled in a more normal life, so to speak… It really opened my eyes about what real estate can do for you in terms of passive income specifically, and replacing your full-time job, and obviously helping you retire early. I like to think of that as kind of the start of what followed.

After I got out of the Navy, I moved back to San Diego. Me and my wife, we purchased a duplex that we house-hacked actually, with a low down payment VA loan. That was our first ever property that we bought ourselves, without inheriting it. And from then on we just kept growing. We started investing out of state, we bought four turnkey properties in Atlanta, Georgia, and then Birmingham, Alabama, and from that we went a more traditional route and built a local team in Kansas City, started buying value-add multifamily properties, doing our own rehab, doing our own management, and right now we’re at 35 total units, over 10k monthly cashflow, and the most important aspect for me is our portfolio is more or less 100% self-sustaining and passive, whereas if I wanted to take a six-month vacation, and just basically not worry about it, I have the confidence that it’s going to keep running. It doesn’t need me there every day. And in fact, I work full-time. I’m not a full-time investor. I have a career, I have a business startup, so that’s my full-time focus, and real estate provides me with that passive income, and eventually retirement.

Joe Fairless: When you say it’s self-sustaining and passive, will you elaborate on how you’re defining that? And perhaps elaborate by giving some examples of “If this were to happen, I’m still okay on a six-month vacation, and I don’t need to be present and spend time focusing on that, because I have it solved for.”

Anton Ivanov: Absolutely. To me obviously, passive means that I don’t have to spend my own personal time managing my portfolio. It’s not my full-time job, and it’s not something that even requires my presence. Most of my properties are out of state, and the first key in having this system set up is obviously finding good property managers. Somebody has to manage the properties for you, so if you’re not gonna be doing it, you need a team, and specifically a really good property management company to do that for you. So my first step, and always advice to all investors who want to invest out of state, or just have a passive portfolio locally, is you need to find an absolutely stellar property management company or team to help you.

I’ve found that the best property managers I’ve always worked with have been through referrals from other investors. There’s a lot of companies that manage properties out there, a lot of them are okay, subpar; instead of googling or finding one randomly, first meet investors that invest in that market, that have a track record with using some company for the same types of projects that you want to use them for. So if it’s single-family, find investors who invest in single-family; multifamily – find investors who invest in multifamily, ask them who their property manager is and if they’re happy with them, and get your first few referrals and contacts that way.

And then obviously, interview the property management firm yourself, see if they’ll work for you in terms of the properties you want to buy, whether you want to do a rehab or not, what kind of maintenance fees do they have, what kind of management fees do they have, and so forth. That’s the key, Joe. Obviously, I’m  sure you and your listeners know, first find a good property manager.

The second for me has always been to kind of — I call it training or grooming your property managers. A lot of investors I meet – they find a company to manage their properties, and they expect “Okay, I’m done at this point. I turned it over to them”, and everything’s gonna go smoothly from then on. That may or may not be the case, but the best thing you can do is basically go through as many scenarios before they happen, with your property manager.

We’re talking about your unit becoming vacant, what type of turn rehab are you doing, what is your budget, what are the specific items that you want done on the property. They’re getting ready to lease it – what is the leasing criteria? Do you want pets, do you want no pets? Section 8, no  section 8? Identify and agree on a list of criteria with them. Evictions. What is your late payment policy? What is your eviction policy?

Go through the entire process with the property manager and make sure you guys are on the same page. By being proactive, especially when you’re working with a new company, and establishing a set of checklists, guidelines, basically processes that you agree on, you’re setting yourself up for success later. So when you say “I go on vacation for six months”, because I walked my property managers through pretty much every possible scenario that could happen, and I’m comfortable with the process that they’re going to follow – we reviewed it, we agreed on it – I’m not really worried that something unexpected is going to come up. Because if it does, I’ve already talked to my property manager about how to handle it, what steps to take, how much this is going to cost, and so forth.

So you’re basically delegating your work to them, and giving them the power to make decisions and actually manage the process, but at the same time you’re maintaining control over the overall structure of the process, the fees, and so forth… So when you come back six months later from your vacation and they call you up and say “Hey, we had an eviction. This is exactly how I handled it, like we agreed. Here’s the costs. Everything was done basically how you wanted to” – that for me is truly having a passive portfolio that you’re not constantly stressing over all the time.

Joe Fairless: You live in San Diego… Where are your properties?

Anton Ivanov: I have three properties here locally. I don’t manage them myself either. I have one in Atlanta, three in Birmingham, and 28 units in Kansas City.

Joe Fairless: Let’s talk about the 28 units in KC… Are they all single-family?

Anton Ivanov: No, they’re actually all 2-4 multifamily.

Joe Fairless: Okay. How did you end up in Kansas City?

Anton Ivanov: I kind of started investing out of state, reasons being that Southern California was not a good rental market, in my opinion. I like a combination of both cashflow and appreciation for a good long-term growth. San Diego sees some pretty good appreciation if you buy at the right time. The cashflow here is terrible. So I started looking out of state, and I basically did  an analysis of various markets.

I focused first on bigger cities; I didn’t wanna invest anywhere that was too small. I focused on markets that had very strong economic, population and job growth, because I believe that those qualities are what drive both price and rent growth over time. As a real estate investor in rental properties, that is what I wanna see. I don’t wanna see prices stagnate or decline, I don’t wanna see rents stagnate or decline. I want both to appreciate, and what I’ve found based on my research and reading is if a market has economic growth, population growth and job growth, then that will cause overall prices on rents to go up.

And furthermore, I wanted a market that had a fairly low entry point. We’re talking about maybe between 60k and 80k purchase price per unit. Obviously, compared to San Diego, we’re looking at hundreds of thousands per unit, and Kansas City basically fit all those criteria – it had good economic, population growth, it was a thriving city, diverse economy… At the same time, it didn’t really get hit by the real estate cycle recovery like some of the other markets, so you could still find deals for fairly cheap there.

Joe Fairless: So once you identified Kansas City, how did you start purchasing property there?

Anton Ivanov: The first thing I actually did is network and build my team. That’s the key, like I mentioned before; starting with a property manager, but also finding contractors, rehab teams, brokers, agents, and so forth, to basically assemble a group of people to help you with acquisition, rehab and management of your properties, because I’m not there myself doing it. And the first thing I did was actually connect with local investors, like I mentioned. I think that’s the key.

So instead of finding a broker and an agent, I actually went on sites like Bigger Pockets, a  few local people I knew here in San Diego that had friends who invested in Kansas City, and basically met 5-10 other investors who were successful in that market, learned from them, learned what types of properties they were buying, learned what areas they preferred, and also used them to grow my own network of real estate professionals.

So I did all of that, and it probably took about 6-8 months frankly, just networking, researching, doing this part-time, because again, I work full-time, so I just had to find time to  do it. I flew out to Kansas City myself, met all these people that I was talking to over the phone or e-mail, actually drove around the city probably for two straight days, got a first-hand experience of what these different areas are and look like, to make sure I’m not just blindly buying a property in some area that I think is good.

So I went through the 6-8 month preliminary work that was absolutely essential, because it laid the foundation for being successful in that market later. And only when I had the team, when I was comfortable, only then did I start looking for properties to buy.

Joe Fairless: What’s something that has not gone right?

Anton Ivanov: Specifically in Kansas City, I would say a few times I over-estimated the performance of certain properties, and that’s obviously the key to being a successful real estate investor – you’re about to buy a property, you’re going to run the cashflow projections and make some assumptions of what you think the rent is, what you think the vacancy is, what you think the maintenance will be. Because I was new to the city, didn’t really live there before and only had indirect knowledge, a few times I did over-estimate how much the property could rent for, what the vacancy rate would be, what the maintenance would be. That resulted in less cashflow than I predicted.

Now, thankfully, what helps when you invest in a city that’s thriving and growing is that it does give you some room for error. Because if you think rents are higher than what they actually are, but they do appreciate over time anyway, then maybe the first few years your cashflow will be diminished, but then it’ll catch up  to your estimate. That’s really what saved me in terms of my estimates. But learning from that, obviously; when it’s a new city, new market, you will make some mistakes. The best you can do is use different sources of information, double-check your numbers with other investors, brokers, agents, run it by them, see what they think. Don’t just go on Rentometer or something like that, find one estimate for the rent and think that that’s what it’s gonna be.

Joe Fairless: I noticed in those examples you said brokers, agents and other investors… Did you intentionally omit other property managers, or was that just “…and property managers”?

Anton Ivanov: No, property managers are great people to run by rental estimates. Again, I wouldn’t base the projections on any one estimate, so definitely ask a few brokers, agents, a few property managers what they think a given property may rent for, and take all that collectively, find a middle ground and use that in your projections.

Joe Fairless: Let’s say you were to find a four-unit property that you typically buy in Kansas City today. What would you estimate for vacancy and maintenance? Feel free to pick whatever area you usually buy in, because I know that plays into it, too.

Anton Ivanov: Right. So now that I have some track record in Kansas City, estimating all these numbers, especially in the same areas, is much easier, because I can look at my previous performance and estimate vacancy based on that. For example, for new fourplexes I buy in the same areas, my vacancy estimate is at least 10%. Historically, it’s been around 8% so far over the few years that I’ve been in that market, in the areas. I just add a few little percentages, round out to 10%, to be a little more conservative… Especially because it’s multifamily and these are B-class areas.

So it’s helpful when you have past performance. Definitely use that if you already own properties in the market. Definitely look at how they’re performing. But at the same time, do keep in mind that if it’s a slightly different area, a slightly different property, the vacancy or rent or maintenance may be slightly different… So don’t just blindly throw estimates out there.

Joe Fairless: And as far as the maintenance, how would you estimate that?

Anton Ivanov: The maintenance – typically, when I first get into a market, like Kansas City, when I’m brand new, I usually use a percentage of the rent as an estimate. For multifamily, I do something like 12%-15%. Again, probably a little high, but if I’m new, I’d rather overestimate. Once I have a little bit of track record, like I do now, I can assign a more specific dollar figure, usually in a certain amount per month, per unit in maintenance costs, basically based on the average of how my portfolio is performing in a given area.

Joe Fairless: And what’s that a percent of?

Anton Ivanov: If I use a percent to estimate maintenance, it’s typically of the gross rent. And then if I use a dollar figure, it would just be, let’s say, $100/unit/month for the entire building.

Joe Fairless: You’ve got 24 in KC? Did I hear you correct?

Anton Ivanov: 28 total.

Joe Fairless: Sorry, 28 total in Kansas City. You’re also in Birmingham, Alabama and in Atlanta. Did you come across Atlanta and Birmingham the same way that you did Kansas City?

Anton Ivanov: Fairly similar. The Birmingham and Alabama properties – I bought them turnkey. This is where basically a company rehabs the property, finds a tenant, sells it to you off-market for a sub-price. Those were my first forays into out-of-state  investing when I wasn’t comfortable building my own team. I still did some research on the markets and made sure I’m investing in the areas that I believed will appreciate over time, but obviously I was also investing in the areas where turnkey properties were being sold.

Joe Fairless: Based on your experience as a real estate investor, what’s your best real estate investing advice ever?

Anton Ivanov: What I always like to tell new investors, those getting started, is don’t be afraid to start small. It’s tempting to say “Hey, I wanna buy a 50-unit apartment complex”, or even a fourplex, but when you buy a bigger property like that you basically compound your potential to make mistakes… And as new investors, you probably will make mistakes, and you’ll learn from them, but the bigger the properties you start with, the more costly your mistakes will be.

I always say, don’t be afraid to start small, whether that’s just one local single-family property. Maybe you house-hack a duplex… Just get your foot in the door. You’ll learn more through the first deal that you buy than any reading and research you do online. That will set you up nicely for growing your portfolio going forward.

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

Anton Ivanov: Let’s do it, Joe.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:18:17].22] to [00:19:11].03]

Joe Fairless: Okay, best ever book you’ve recently read?

Anton Ivanov: 4-Hour Workweek by Tim Ferriss.

Joe Fairless: Best ever deal you’ve done that we haven’t talked about already?

Anton Ivanov: Probably I’ll have to mention the duplex I house-hacked at the beginning, just because this was the very first property I bought. I learned a ton. I still own it, and it’s still performing greatly.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Anton Ivanov: I’ve kind of mentioned this before, but over-estimating certain numbers in your cashflow projections, like potential rents, vacancy, maintenance… For example in Kansas City, when I was first getting started, I probably used estimates that were a little over-optimistic, and the learning from that was to be more conservative, to talk to more people about your estimates, and then in the future use past performance as an indicator for more properties that you buy.

Joe Fairless: Best ever way you like to give back?

Anton Ivanov: Sure, Joe. I’m the founder of DealCheck.io. It’s a property analysis platform that you can use to analyze rental properties, flips, multifamily and commercial buildings. It’s available as a mobile app. Just search for DealCheck on the iOS or Google Play store, or use DealCheck.io online. It’s free to try out. If you’d like to upgrade to a more full-featured plan, type in “bestever25” promo code at checkout to get a 25% discount, just for Best Ever listeners. Again, DealCheck.io, “bestever25” promo code to get your discount if you’d like to upgrade.

Joe Fairless: And how can the Best Ever listeners learn more about what you’ve got going on? Follow what you’ve just said, I imagine?

Anton Ivanov: Absolutely, DealCheck.io. We’re on Twitter and Facebook, and if you’d like to e-mail me personally, it’s Anton@DealCheck.io. I’d love to answer any questions or hear from you.

Joe Fairless: Anton, thank you so much for being on the show, talking about your investment approach that you take to open up a new market and invest in it if it’s not the market that you live in, and how you approach building the team, as well as some underwriting assumptions that you do, and your overall investment philosophy. Thank you so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Anton Ivanov: Thanks, Joe. You do as well. Thanks for inviting me.

JF1231: Leveraging Technology To Automate The Money-Raising Process with Craig Cecilio

With nearly $1 billion in real estate assets financed, Craig has been quite successful with raising money. One thing that sets him apart from other groups doing the same thing is he leverages technology. His offerings are still 506c but he uses a crowdfunding platform rather than doing one-off syndications for each deal. Using the crowd funding platform allows him to cut out the some of the middle-men and automate much of the process. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:


Craig Cecilio Real Estate Background:

CEO & Founder of DiversyFund

– The founder and CEO of California Coastal Funding Group, Inc.

– Participated in development of over 1,000 single family residences as joint venture equity partner, lender or sponsor

– Has financed nearly $1 billion of real estate assets, having raised over $100M in debt or equity in last three years

– Has developed and managed over $25 million of residential property (renovations and ground-up).

– Based in San Diego, California

– Say hi to him at: www.Diversyfund.com

– Best Ever Book: Law of Success


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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluff.

With us today, Craig Cecilio. How are you doing, Craig?

Craig Cecilio: Good, Joe. How are you doing today?

Joe Fairless: I’m doing well, and nice to have you on the show. A little bit about Craig – he is the CEO and founder of DiversyFund. He has participated in development of over 1,000 single-family residences as joint venture equity partner, as well as a lender or sponsor. He’s financed nearly one billion (with a B) dollars of real estate assets, having raised over 100 million in debt or equity in the last three years. You’ve been very busy!

Based in sunny San Diego, California… With that being said, Craig, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Craig Cecilio: Thanks for the introduction, I appreciate it. Yeah, it sounds like I’ve been busy, or it sounds like I’m just kind of getting old, not sure which one it is exactly… [laughter] But yeah, I founded a crowdfunding platform in 2014, combining my love of technology and real estate.

I started in real estate in 1998. I started doing real estate syndication in 1999. It was a different market back then, of course. When I saw the opportunity to get involved in taking an older business, such as real estate syndication, and combining technology with it and getting online, I got really excited; I’m all in, and it’s been quite a journey in the last few years of getting the platform up and running.

The last 12 months we’ve been focusing on making it a vertically-integrated platform, and that’s a platform where we are the developer or co-developer on all our projects. We chose that route – one it was for better transparency, better control, better reporting, and we just felt like that was the way to go to minimize the risk for the investor when they were trying out the platform, to give them a better user experience. We thought that would be a win/win for both parties.

Joe Fairless: Certainly a differentiating feature, because I haven’t come across too many – I can’t think of any, perhaps you can – platforms  that are a co-developer on all the projects, versus being a meeting place for the investor and the sponsor to meet, and then they just facilitate the introduction. Why did you choose that approach.

Craig Cecilio: Part of that was my experience of doing a lot of transactions, and by being a third-party sponsor or lending the money to somebody else, there is gonna be a number of deals that may go South; it’s just your plan against the odds there. And we thought that “Hey, if we did this, how do we minimize that from happening? How do we make that actually go away?” Our goal is not to have anything go South on our platform.

We kind of really thought about that hard, and we started doing a lot of research, and I started looking at “Okay, we’re talking about giving investors an alternative investment vehicle, maybe give most investors their first-time investment in real estate.” Also, giving them higher returns than they would find in a stock market, in traditional savings and bonds accounts.

We kind of put that all together and just said “It’s very risky if you’re gonna give your money to a third-party, but if we can create an institutional quality product and give a double-digit return to somebody, how would we do that?” and this is what we came up with. We said the best way to do this, to protect all parties, was to create a vertically-integrated platform.

Joe Fairless: I get from your side definitely why to do it, from a profitability standpoint, because (I’m guessing) you’re making more money as a co-developer than someone who would facilitate the process and take an asset management fee or some sort of fee… So I get that. The challenge that I’d like to ask about is – I don’t know if it is or it isn’t a challenge – having another sponsor come on board and say “Yeah, you know what, Craig? I’m in. And I’m okay with you all co-developing with me to get access to the investors on the platform.” Have you come across that challenge?

Craig Cecilio: Yes and no. I would say it’s not really a challenge. Alan (my partner) and I have been in the real estate industry for about 20 years, so we have a pipeline of up to a billion dollars right now coming at us, but we have also kind of looked at how do we take this to the next level and how do we allow that opportunity to third-parties, and we’re open to that.

We have certain stages and phases to our development, so right now we’re gonna go through our pipeline, and then reassess the market. We do this every year, reassess where the market is, and then decide, “Hey, do we stick with our pipeline? Is that pipeline correct where the market is headed, or do we go out and change direction and open this up to other people?” So it’s very dynamic, very process-driven, but we are opening up to taking other people’s projects aboard as well.

Joe Fairless: Okay, for what percent would you say are just your projects, versus you’re partnering with another developer or sponsor?

Craig Cecilio: Right now it’s 100% us, and our pipeline I would say is pretty good; that’s gonna be 100% us. But I see as soon as we hit around $400m-$500m mark, which we believe will be year 2019, then we’ll start taking in other people.

Joe Fairless: Okay. Why create a crowdfunding platform to do all this, versus just doing one-off syndications, or even creating a fund?

Craig Cecilio: That’s a good question. First, we created the platform to allow anyone, anywhere in the U.S. to invest in our projects. Right now we’re doing [unintelligible [00:08:24].29] Reg D offerings, which means anyone, anywhere who goes in who’s accredited can invest in these in real time through the website. We’re also in the process with the SEC to get the Reg A+ offering accepted, which means the non-accredited investor will be able to participate as well. We’re opening this up to people who haven’t had the opportunity to participate in real estate investing… So a lower barrier to entry.

Our barrier to entry is only $5,000 today. It’s gonna be as low as $500 we’re anticipating in February 2018. So as a customer or investor, you can learn a little bit about the real estate process by investing in our platform, as well as participate in development projects, in projects that are kind of way outside the realm of where you’d ever get contacted to participate in.

Most of our transactions and projects have minimum amounts of five million dollars of equity in them. So these are kind of very large projects that the general public does not have access to.

Joe Fairless: As far as you mentioning any accredited investor in the US can invest, that sounds like it’s 506(c), where you can publicly advertise, but you have to have a third-party verification process to make sure that they’re accredited. So why not just do 506(c) offering, versus creating a platform?

Craig Cecilio: It is a 506(c) platform. You create the platform so you create the technology, so you could have more people fulfill a project, fulfill an offering. It’s leveraging technology. It’s having people do the whole process, from soup to nuts, on the website itself.

Joe Fairless: Okay, so basically it’s automating the process.

Craig Cecilio: Exactly.

Joe Fairless: So you can put an ad in The New York Times, “Invest in this deal”, because it’s 506(c), and instead of having an administrative assistant or someone else on your team [unintelligible [00:10:33].15] that e-mail or phone call and talk about the opportunity, they just go to the website, they see the opportunity, and then they can invest directly and it cuts out the people time involved.

Craig Cecilio: Yeah, it does. And it cuts out a lot of middle-men on the way as well. A lot of these offerings get fulfilled by funds of funds, broker-dealers, brokers… It takes fees representing people to put their money into projects like this. We have a lot of funds of funds coming to us. So that person could directly go in and get that full return.

Joe Fairless: How much does it cost to build a platform?

Craig Cecilio: It cost a lot to build a platform. I think more importantly than cost is perseverance, it’s being able to keep your company going and at the same time investing dollars into the platform itself. It’s well north of seven figures, but there’s a lot of moving parts to it. You have to invest in the technology, you have to invest into the people… Then investments in real estate itself. We have our own money in some of the real estate projects. You have to invest a lot into marketing, and PR… It’s quite a bit of money that you have to put into it.

Joe Fairless: Knowing what you know now, before you got started, would you still do it?

Craig Cecilio: I knew you were gonna ask that question.

Joe Fairless: [laughs] Well, once you said North of seven figures, obviously I have to ask that question.

Craig Cecilio: I’m a pretty driven guy; I just felt like I was kind of born to do this, because I’ve been syndicating for so long, and I kind of had an idea of how do I use technology, so how do I syndicate this project and get it done more quickly, and I needed technology to do that. I had an idea way back in the early 2000’s about trying this out. So I would say, yeah, the cost would never get in the way of me. I would figure it out.

If you do something for a long period of time, you have an idea – “Okay, this can accelerate the process more.” But I think the biggest motivator for me above everything was how exclusive it was. I learned from a lot of wealthy people about this investment and saw how they made a lot of money over the years, and it wasn’t open to everyone. How did I find out about it? I had just a side conversation with someone who taught me about this, and all of a sudden I’m like, “Wow, a whole different world exists out there.”

Today it’s a little different than it was 20 years ago. To make something that’s exclusive, make it inclusive – that was the major motivator. The second motivator that I have which is just as big is “How do I do this and do something different?” We always focus on just real estate developments, returns… How do we do this and fund projects that can make an impact on society? How we could do a project to bring a different type of architecture to an area? How do we fund a project that might change some of the general landscape of blighted areas?

If you look at some of the investment that we have on our site right now, we’re kind of going down that path, choosing more socially-impactable projects. That’s kind of where we wanna focus with this. It’s not only “Give someone a return”, but “Let someone participate in doing something that’s different”, and I think that’s what the crowd allows that to happen, whereas if you went through traditional means to get that, people are more just focused on the returns and numbers, not the creativity component.

Joe Fairless: Yes, I can see that. And you read my mind, that’s actually where I was going next, on the types of projects that you’re doing. Can you give us a specific example of one?

Craig Cecilio: Sure. There’s a housing shortage in San Diego, so they had a high density bonus if you created more affordable housing units in certain parts of town. So we were able to buy a blighted property that’s in a very centralized part of San Diego, and we’re gonna build about 57 apartments and about 5,000 square feet of commercial space. So it takes this area where there’s not a lot of housing, it takes an area where it’s kind of older houses, an older area of town, and we’re gonna bring new architecture there, have some affordable units… We’re trying to make it very friendly for electric cars. It’s in a predominant LGBT community… Just kind of really bringing creativity to the area and everything.

Joe Fairless: And what are the main metrics that you look at whenever you’re assessing an opportunity like that?

Craig Cecilio: I don’t wanna over-simplify that one… Just, I’ve been around that particular market and I have the relationships, I’ve known some people for 20 years and it kind of just fell on my laps, this one, with the passage of these ordinances. So what we’re looking at is more of a value-add, how can we add value to the properties in specific areas.

In every area throughout the US there’s probably codes and opportunities out there if you really dive deep into the zoning and the entitlements in those specific communities. They’re everywhere, you just have to do the research on them. And really your value-add is where you’re going in, you’re changing the zoning or some zoning that passed, where you could take a traditional area that was one way and make it another way. So going in, when you’re buying the property, you’re kind of buying at the right price to make a profit on it, or to give it a good return.

Joe Fairless: What are some of the successful value-add strategies you’ve implemented?

Craig Cecilio: That would be one of them. Another one is bringing a new architectural design to a community. I think that would be the second one, and that’s probably a very big one. A couple other ones… We did a student housing project, modernized a property that was entitled a certain way, where for instance a property had a single-family residence on it and the zoning said you could build up to 16 units of apartments. That was a student housing project that we did, we added some value there.

What we’re trying to do now is doing the added value as well as bringing an architect or a new designer at the same time, so we’re kind of doing both – that would be the best choice if we could do that, just depending on the numbers of the transaction.

Joe Fairless: How do you pencil the numbers for bringing in an architect, to see that you have a return on investment?

Craig Cecilio: I think that comes down to more relationship than anything else… Building the right partnerships with the right people. It has to work out for them as well. They might get some good press, they might become potential partners in their next project. It basically just comes down to building relationships with the right people, creating a project that creates a little buzz, that people wanna participate in, and sharing in the benefits of that.

Joe Fairless: But you have to pay them before you receive any profit on your end, right? Because they’re doing work. Or are you saying because you’ve created buzz and you’ve positioned it a certain way, they’re not being paid cash out of pocket before you receive money?

Craig Cecilio: Oh, we make sure that we pay people. So we are paying them, but we could pay them more at a cost basis than we have to do for an added benefit if it was a complete stranger doing architectural design for us.

Joe Fairless: Okay. When you look at a project, how do you determine if it makes sense to bring in an architect and pay them, versus not bringing an architect and just maybe modernize a student housing property and not use an architect?

Craig Cecilio: Well, for us it’s a fairly simple question and answer, but to answer the question, I think for us, we’re gonna choose the project that it pencils for us… So we have the right relationships to get those projects. But for most people they don’t pencil. That’s one of the reasons where I survived real estate for the last 20 years comes in handy, and having those relationships in place to get those deals. You have your network of people finding you the deals, you have the next partners that are willing to give you the cost that makes sense… It’s just building relationships, and I think a lot of that is at the end of the day [unintelligible [00:18:57].12] looking at some of these things we might be talking about, if you’re getting started in real estate, it’s kind of developing win/win relationships with people, where everyone is benefitting together, and growing that. And to put yourself in a position where we are today, because of that.

It’s a long process, it’s a fun process, and it is a reality. But just to say “Hey, I’m just gonna go do that today”, where it took us 20 years to build out – that might not happen. I’m not saying it’s gonna take 20 years, it could take a lot less time than that, but it’s just building the relationships and the partnerships and just having an eye for it. We found our niche; properties 5 to 25 million dollar range is more of our niche of product right now, and we’re able to do that project size where it doesn’t really affect our bottom line.

Joe Fairless: For someone who’s looking to engage an architect for the first time on a project, say they don’t have the pre-existing relationships that you’ve built, what should they expect from a cost standpoint for how architects charge their fee on projects?

Craig Cecilio: It’s gonna be tough for them. You’re gonna have to save some costs in a certain way. If you’re gonna pay market for something, you’re gonna have to look to buy the property at the right cost. Is there a way you can get your construction done a little cheaper? Are you the contractor on that? Are you the real estate agent [unintelligible [00:20:19].14] are you gonna make it up somewhere? You have to kind of measure it out… It’s like, “If I’m not paying market in one area, I have to have a discount in a different area.”

That’s kind of like being a developer, juggling all those different hats and all those different analytics, and just kind of putting it all on a spreadsheet and say “Hey, if I’m gonna pay market for somebody, how do I pay less for something else to even this up for it to make sense on the spreadsheet?”

Joe Fairless: And roughly what is market, would you say?

Craig Cecilio: It just depends on [unintelligible [00:20:49].18] I don’t have an exact number for you. Each market would be different.

Joe Fairless: Got it. Based on your experience, what is your best real estate investing advice ever?

Craig Cecilio: That is a great question. It’s a hard, hard choice, and you don’t wanna go there, but put me in the position where I am today on a deal, it’s having the ability to say no. It’s just to turn down a deal. I remember the market crashed, I’m looking at a hundred deals. I might be doing one.

You’ve just gotta kind of use reason when you’re underwriting something. Don’t do a deal just because you have to do a deal. I think that would be my biggest advice, to say no. And I don’t think people say no enough. And it doesn’t make sense for some people, but I look at all those deals I passed on in the downtrend, which if I, I could have gotten in trouble on, and it was because I said no a lot. My best advice is persevere.

Joe Fairless: On the saying no front, what filters do you use? And I know there’s many and this could be a three-day conversation, so feel free to take this whatever direction you want… But what filters do you use that help you quickly identify that it is a gonna be a no?

Craig Cecilio: I would say if we’re talking about a deal that we’re gonna be the developer on, we’re the owner on, I would just say location, if I’m not familiar with that location. I wanna have a really good understanding of the location of the property. It’s like, “Well, it’s a little bit outside the neck of the woods I traditionally sold.” That’s what I would start with – are you familiar with that location? That’s where I would start.

There’s a lot of places where you can do deals, and if you’re not familiar with that, I think that’s where you start.

Joe Fairless: Why would you start there?

Craig Cecilio: A variety of reasons. If you’re in a new market and you don’t know about how to get permits, the city, the county, who’s making the decisions in those areas, you don’t have the relationships or no people have relationships in those areas…

On the resale side, if you’re reselling an asset, are you in an area that’s gonna sustain a correction? Are you in an area where you usually understand street-by-street what happens? Every city has certain cities within the city, or sectors within the city; not knowing those intricacies of those neighborhoods, you might be doing the wrong product in the wrong neighborhood. Even though on paper it’s the same city, you might just not know that specific neighborhood in that.

So there are a lot of things to look out for, but if you’re a real expert in that city itself and you’re familiar with that, you would know those things.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Craig Cecilio: Sure.

Joe Fairless: Let’s do it. First, a quick word from our Best Ever partners.

Break: [00:23:26].28] to [00:24:16].07]

Joe Fairless: Best ever book you’ve read?

Craig Cecilio: I would say it’s The Law Of Success by Napoleon Hill.

Joe Fairless: Best ever deal you’ve done that we haven’t talked about?

Craig Cecilio: I did a small 90k deal, turned it around for 375k nine years ago. It was a quick turnaround.

Joe Fairless: Turnaround in what period of time?

Craig Cecilio: 120 days.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Craig Cecilio: Didn’t ask for enough money, enough fees…

Joe Fairless: Best ever way you like to give back?

Craig Cecilio: I’ve sat on a board of a non-profit for four years. Fantastic experience. We actually won an Academy Award on one of the students that we had. It was a phenomenal experience, and I’m still proud to be a part of that.

Joe Fairless: And how can the Best Ever listeners get in touch with you and learn more about your company?

Craig Cecilio: Easy, go to our website, DiversyFund.com. A bunch of ways to check us out, a bunch of ways to communicate with us – through e-mail, through Intercom, through phone call.

Joe Fairless: Well, thank you for being on the show, Craig, and thanks for talking to us about your venture, DiversyFund, and also why you created the platform, the vertical integration component, as well as a specific example of a project that you’ve done, the housing shortage challenge that San Diego has, and your solution with the affordable housing build, with the 57 apartments, the 5,000 square feet commercial space, as well as just from a macro level, what you look for from a value-add standpoint, and then one of the filters that you use to disqualify a deal, and that is if you’re not comfortable with the location.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Craig Cecilio: Great. Thanks, Joe. I appreciate it.

Marvin Washington and Joe Fairless

JF1196: From The NFL To The Cannabis Space – Hard Work And Self Reflection The Keys To Success with Marvin Washington

Marvin had an 11 year NFL career, 7.8 years longer than the average NFL career (3.2 years). Now a successful businessman in the cannabis space, Marvin says that his work ethic and self reflection is what separates himself from the average NFL career and entrepreneur. We’ll not only hear tips on how cannabis can and does help people everyday, but how we can separate ourselves from other entrepreneurs and investors. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:


Marvin Washington Background:

-Super Bowl Champion in 1998 with the Denver Broncos with an 11 year NFL career

-Former NFL Defensive end with the New York Jets, San Francisco 49ers, and Denver Broncos

-Crusader for the healing power of cannabis and getting the league to consider the benefits

-Leading the movement of former athletes embrace it as solution for brain injuries and painkiller addiction

-Involved in a hemp-derived CBD product company, Isodiol, where he leads the promotion of their IsoSport line.

-IsoSports line is a hemp-based nutrition line supports both mind and body wellness in training and competition, used by high profile athletes in NBA, NFL, etc.  

-Say hi to him at https://isodiol.com/  

-Based in San Diego, California


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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.

With us today, Marvin Washington. How are you doing, Marvin?

Marvin Washington: I’m doing well, thanks for having me on.

Joe Fairless: Yeah, my pleasure. Nice to have you on the show. Best Ever listeners, I know all you football fans know who Marvin Washington is. If you’re not a football fan, let me give you a brief background on Marvin. He is a Super Bowl champion. He actually won the Super Bowl in 1998 with the Denver Broncos. He had a long and successful NFL career, and is now involved in five different companies as an entrepreneur and a businessman. One of them is Isodiol, which I will let him talk more about… With that being said, Marvin, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Marvin Washington: Yeah. My football was my football career; I retired in 2000. After that I went to the financial industry, we started out with some big houses like Merrill Lynch, MetLife, then I went over to boutique firms, and about five years ago I got introduced to the cannabis space. I call it a space because it’s not an industry yet, because we’re not federally regulated by any of industries as far as [unintelligible [00:03:21].27] what have you.

So I got introduced to it, I did a deep dive into it, because I didn’t know the difference between THC and TLC, because I don’t consume cannabis, and I still don’t… But learning about the medicinal benefits and learning the full spectrum of what the plant can do, I went into it with both feet, and I’m happy that I’m here.

Joe Fairless: Can you tell us what the company does and what’s your role?

Marvin Washington: The company is Isodiol International, and they’re a supplier of Isolate, of CBD, and they have all types of products that they have, from water to pain cream to beauty products, to tinctures, to vapes… The full spectrum that you can have. I got introduced to Isodiol about two years ago; we talked and we did a joint venture, and came up with something that was in my wheelhouse – IsoSPort, which is a sports nutritional line that is geared towards athletes, and we have some products in there line recovery water, cream and what have you… And everybody that uses the product, they’re really happy with it.

Then about six months ago Isodiol – there’s a [unintelligible [00:04:33].09] up in Canada, and everybody put their companies in there. I’m still part of Isodiol IsoSport, but I’m part of Isodiol international, and there’s Laguna Blends, which was a skincare product company; we’ve got  Pot-o-Coffee, who makes infused coffees and teas, we have Isodiol, and we have — Jesus, there’s one more company that [unintelligible [00:04:57].28] but Isodiol was going to be a [unintelligible [00:05:02].09] not only in North America, but also in South America and Europe and Australia also.

Joe Fairless: You said a couple things… One, just for my education – what’s CBD stand for?

Marvin Washington: I’m sorry, CBD is Cannabidiol. There’s two main compounds in the cannabis plant – one is THC, which everybody knows gets you high and gets you stoned, and CBD is non-psychotropic, so it doesn’t get you high, doesn’t get you stoned, and it helps out the kids that have like the epileptic strokes and seizures, it helps out cancer patients, it helps out soldiers that PTSD, athletes that have CTE or the closed-head issue, diabetes, blood pressure – you name it. And we’re not making medical claims, these are facts; that’s what it helps with.

So that’s the main part that I’m on – the CBD side, because as I said before, I don’t consume cannabis to get high, but I definitely use CBD.

Joe Fairless: Got it. So the products that you were mentioning, like the water for athletes, things like that – an athlete in the NFL or NBA could consume that and their pee would be fine?

Marvin Washington: Yes, because in the sports league they’re testing for the THC, and the NFL and the major sports leagues over here haven’t gotten that far, because CBD is still a grey area. But water, the World Anti-Doping Association that governs all Olympic athletes all over the world, they just came out with a big announcement last month that they’re taking CBD off the banned list and athletes can use it now, and they’re gonna start using it… Because we have CBD cannabinoids in our own body. There’s something called the endocannabinoid system, and that’s the one that regulates our body and gives us homeostasis, so to speak. But this thing, I want it to be researched and developed, and we’ll see what it can really do. But I know that athletes should be taking CBD, and if there’s ever a sport that should be experimenting with cannabis, whether it’s THC or CBD, it’s football.

Joe Fairless: Yeah. And maybe rugby too, right?

Marvin Washington: Well, any contact sport.

Joe Fairless: Right, I know.

Marvin Washington: And the second-highest incidence of concussions are high school soccer players.

Joe Fairless: I would have not got that correct on a trivia question.

Marvin Washington: [laughs] Yeah, a lot of people do not know that. So anybody in a contact sport, especially when they’re putting their head in play – we want them to use CBD because the government has that patent, and the patent is patent 6630507, that says “CBD is an antioxidant and neuroprotective for the brain in relationship to concussions.” So the government knows about it, and we’re just looking for this whole cannabis prohibition then to be lifted, and we can really study this natural plant that we’ve been medicating with for thousands of years.

Joe Fairless: Let’s talk about you as an entrepreneur. Let’s take a step back from this particular company and talk a little bit more macro-level… You as an entrepreneur. So I’ve interview other NFL players or former players, and one thing that they’ve said – and not just NFL, but NBA and WNBA – is that when you’re in the professional sport, that’s your life, and really, you almost have to attach your identity to it, because it’s all-consuming. So when you leave, one of the challenges is reinventing yourself and that identity that you attached to yourself. And I’m asking you this question not because I have a lot of listeners who are former NFL players that need some help, but I have a lot of listeners who do have full-time jobs in an industry, whether it’s finance or advertising or whatever, and they’re looking to reinvent themselves into real estate, and being a full-time real estate investor… So how did you reinvent yourself and your identity from one industry to another?

Marvin Washington: Wow… I think that I might have been a little different; the average NFL career is only 3.2 years, and I played 11 years. In the middle of that career, I started thinking about what am I going to do next. The NFL had set up this internship program and I did an internship with Wall Street Journal, I did an internship with Reebok… Which gave me an introduction to the corporate world. So towards the end of my career I started thinking about what I wanted to do, and one of the best things that happened to me was when I was leaving the 49ers, I met with Bill Walsh, who’s an iconic legendary coach, and he told me “Marvin, whatever you do, get to doing it. Don’t sit around, get to doing it.”

So after a season I took about three months off, and the market corrected itself and I was kind of upset about that… I said “Maybe I can do this myself”, and I reached out to my advisor and he got me on with MetLife; starting with insurance, then I got my securities license… And the whole thing is that the lessons that I took from football, I just took them to the corporate world. So if anybody is in a different field and they wanna transition, still take whatever you’re doing and the things that you’re doing that makes you successful there, take some of those fundamentals to your next venture, your next career move in life, and go at it 100%. You can’t be half way in or half way out. Go at it 100%.

There’s gonna be some ups and downs, just like there is in professional sports, but you persevere and you keep going, and eventually that new venture becomes who you are.

I’m known more for what I’ve done over the last 15 years, versus what I did in my previous like as a professional football player.

Joe Fairless: And what are those sports lessons that you learned that you are now applying as an entrepreneur?

Marvin Washington: The biggest one is you’ve got to give 100%. You HAVE to give 100%, because a) you have to really work hard and apply yourself, because in the financial industry that I was in, if you think you’re gonna work 9 to 5 and have success, you’re misleading yourself. But I worked as much in the financial industry as I did in my football career. It was 12-hour days in my football career, and it was the same in the financial industry, and I knew not to ever give up. I knew that there were some down periods, but you have to just kind of keep your head down and keep going, and the biggest thing that I can say is even when you’re not having success, do things that are gonna make you successful.

It’s just like, if I went out in my backyard right now and planted a seed, the next day I’m back out there I still have to plant that spot, and then a tree is gonna grow and eventually I’ve got a plant I need to be consistent with every day, and eventually it’s gonna bear fruit. So that’s what you have to do in your career, because I’ve seen too many people give up, and it’s like “Did you really give it an honest shot?” You have to go, you have to keep going day after day.

Joe Fairless: When you are giving it 100% and you’re not getting the results, what do you do?

Marvin Washington: Well, make a half-time adjustment and see what you can do to be successful and be around successful people. One of the things I learned at MetLife and Merrill Lynch – if your client’s making $40,000/year, you’re gonna make $40,000 a year. I had some good mentors; always be open to learn, go into work or go into your new career  like you don’t know anything, but soak it all in there, still have the basic fundamentals, and that will give you a shot at success; I can’t say it’s gonna give you success, but I know it would give you a shot at success. But there’s no way that you’re gonna be successful without the things I learned in sports, which is hard work and consistency.

Joe Fairless: Can you tell us a story of a half-time adjustment, either during half-time or actually in business where you had to make that adjustment, and what the results were?

Marvin Washington: Well, in business, when I first started out in the financial industry – I like to dress up and look like a financial planner and advisor, but I was doing 9 to 5, and it was reflected in my paycheck. So the whole thing with me in sports – I didn’t give myself a backdoor, so my half-time adjustment was to come in early and to leave late, and to work weekends, and always be working. That’s something that I did in football – if something wasn’t working in the first half, we’d go in and make a half-time adjustment and go from there. It has to be on the fly. But you have to be able to adapt, because things would always come up unexpectedly, and as long as you’ve put in the work and you’re focused, you can overcome them.

If something is not working and you like what you’re doing, try something else or go with somebody else that has done it and that is successful, and follow the path… Because no matter what field you’re getting into, you’re not reinventing the wheel; maybe with cannabis, but you’re not really inventing the wheel, because eventually this is gonna become an industry also, so the same skillsets and the same fundamentals that are necessarily in the corporate world are gonna be necessary in the cannabis space.

The thing that I put away and I tell people is to work hard and be consistent… Whether it’s in the financial industry, the financial gods will bless you; the cannabis gods will bless you. You’ve gotta go at it. If you’re giving it a half effort, you’re gonna give that back.

Joe Fairless: As far as working hard and that consistent piece, what do you do consistently?

Marvin Washington: I have my schedule, I’m set to my habits. I get up early, and I always plan my day the day before. Then on the weekends I review what I did the previous week, and see what’s ahead and what I can do better… Because especially in this cannabis space, things change day to day, week to week, month to month, and it’s tricky in this space because rules are different with different cities and municipalities. Cannabis may be legal in Colorado, but Denver’s rules and regulations are different than Colorado Springs, and Colorado Springs are different than Boulder. You always have to be steady on your toes and malleable, but the whole thing is getting back to the fundamentals. Be consistent, have your goals, don’t go with the fads and the trends. You know what you’re trying to accomplish, so go after that every day. That’s what I do.

One of the things I learned in football is I write down a list and I study. If I’m looking at a new company or meet with new people, I’ve already done my research on them, because that’s what I did in sports, and that’s going up against [unintelligible [00:15:59].28] I have to study them. That’s the way I learned, and that’s just the way I brought some of that to the corporate world that I’m in now.

Joe Fairless: Digging in a little bit – or maybe a lot of bit – on the planning the night before and reviewing the previous week… When you plan the night before for the next day, will you tell us exactly what you do in terms of keyboard, notepad, bullet points… What does that look like?

Marvin Washington: The same thing, all of it. On my laptop, and I have an old school planner, and I visualize, because when I was in spots, the Saturday before the game or the week before the game I would visualize myself making [unintelligible [00:16:40].23] in certain situations… So this is the same thing. I visualize myself being successful. I prepared for this interview, I prepare for all my meetings that I go to, and I visualize certain talking points, and I just stay on the talking points and try to get the narrative that I wanna get across. That’s the way I prepare… And it may not be for everybody, but if you’re not prepared, I don’t think you’re giving yourself a chance to be successful… Definitely not against me, because I’m gonna know everything I need to know about your company and about you, and I’m going to use that to control the narrative.

I’ve been lucky enough to work with good people and have good companies, and Isodiol is an excellent company, excellent people… Smart businessmen, so we’re a team and we go out and we get things done

Joe Fairless: As far as now reviewing the previous week, what’s your process for that?

Marvin Washington: It’s on a Sunday. A habit that I picked up when I was with Merrill Lynch is reviewing the week and seeing what I could have done better, because one of the things is that you don’t wanna have regrets in business or in life, and seeing what you could have possibly done better. And if I didn’t close an account, I would do a review and see what could I have done different. It’s the same thing in this industry, with the different companies that I’m with. I’m always reflecting and seeing what I could have done better, because the buck stops with me.

Joe Fairless: Is it challenging to have that self-assessment on a regular basis, to identify things that you could have done better?

Marvin Washington: No, this is the way that I’ve always been taught – you always have to do a deep self-assessment, because sometimes when there’s an issue, it’s not other people; you’re the common denominator in that [unintelligible [00:18:40].13] from girlfriend to girlfriend, wife to wife, job to job, what’s the common denominator in there? So I think people should do that all the time. If you’re really honest with yourself, you can see where you can be at fault. If you do a self-assessment all the time, you shouldn’t be at fault for 100% of the time, but there are some things that you can always improve on, because everybody can always learn and everybody can always improve, no matter what age they’re at, and no matter what industry they’re in.

Once you feel like you can master something and you’ve got it, you probably don’t, and you probably need to adjust or get out of that space entirely, if you think like you know it all.

Joe Fairless: When you identify an area of improvement for yourself, what do you do at that point?

Marvin Washington: I take action on it; I try to improve it and do something better. Sometimes it can come down to something like “I didn’t listen enough.” You’re in a meeting and you wanna get your point across, but having a conversation is a two-way deal, so it’s listening and it’s talking. I like to talk, I can talk a lot, but sometimes I have to listen; sometimes I have to see things from a different point of view, instead of just my point of view. The way that I see things – and I think I’m kind of lucky like this – I see things vertically or horizontally, and then I can see them from above. That’s when I’m doing my reflection, and even thinking ahead. I’m trying to look at it in all ways and get the whole picture, to make sure that I’m getting it… Making sure that the issue is not coming from our side, or coming from me. But I think everybody should do that; I think you should do that in your relationships, I think you should do that in business, I think you should do that in your religion… Do that self-assessment.

Joe Fairless: Yeah, I love that. I completely and whole-heartedly agree with you on that. Based on your experience as an entrepreneur, what is your best advice ever to other entrepreneurs out there? My audience, people listening, the Best Ever listeners, they’re real estate investors, but we’re all entrepreneurs… As a real estate investor, we’re an entrepreneur, so what is your best advice ever?

Marvin Washington: You’re running your own business, and so you have to be true and honest and put in the hard work. You may not have success, but you’re not giving yourself a chance if you don’t put in the hard work, have some fundamentals, have some fundamental things and focus that you’re gonna do every day. Like I said, watering that plant every day, you have to do that. If you’re in real estate, if you have to make contact with 100 people a day, [unintelligible [00:21:12].26] make contact with 100 people a day in order to make 10 sales a month…

The other thing about entrepreneurs – salesmen. Because whether you call me a financial advisor, or investment advisor, or a real estate person or whatever, you’re a salesman because you have to give the check. Don’t be afraid to say no; you have to get your no, but don’t be afraid to get your no… But you have to get it. Don’t be afraid to approach anybody, be consistent in what you do, have a fundamental focus, and go in there and you’re giving yourself a chance to be successful.

Joe Fairless: I love that. We’re gonna do a Lightning Round. Your answers don’t have to be quick, and in fact one of the questions I ask you, I don’t think you’ll be able to have a quick answer (maybe). Are you ready for the Best Ever Lightning Round? First, a quick word from our Best Ever partners.

Break: [00:22:07].13] to [00:22:58].20]

Joe Fairless: Okay, Marvin, here’s the question I was thinking of… You mentioned “Put in the hard work as entrepreneurs.” You may not have success, but at least put in the hard work and be consistent, so you can set yourself up to be as successful as possible. So what’s a venture as an entrepreneur that you’ve done that completely flopped?

Marvin Washington: When I left football, I tried to be concert promoter, and I tried to throw money behind it without throwing work and experience, and relying on other people. I’ve learned since then that if I’m going to cook the meal, I should be able to buy the groceries, too. Saying that, I need to be involved at each level and be in there to make sure that I’m bringing everything I can to make it a success. That one right there, I failed at.

Joe Fairless: Best ever way you like to give back?

Marvin Washington: Oh, all the time. I’m known for it, whether I’m giving to the homeless every day that I see them – and I always give money. I volunteer my time; as a matter of fact, for Thanksgiving and Christmas — I can’t think of the last Thanksgiving that I haven’t given back and helped out at a homeless shelter. That’s my way of helping out humanity, because I think we were put on this earth to help each other, and the way I do that is through my charity of giving to the less fortunate. It says in the book “It’s better to give to receive”, and I take that as “I’m in a position to give, so I do give.”

Joe Fairless: How can the Best Ever listeners either get in touch with you or learn more about your company/companies and get involved with your companies?

Marvin Washington: I’m an open book. Most people find me on social media, or they can go to the Isodiol website… But I’m social media platforms and people can reach out to me; I don’t have a closed page. You can reach out to me, and I’ll answer to your question any way I can. I’m always trying to help people and I always tell people I’ll help you out any way I can, because I think to whom much is given, much is required. I keep saying that like I’m a Christian, and I’m not; I’m more like [unintelligible [00:25:08].01] but there are some fundamentals in each religion that I think you can go by.

Like I said, if anybody reached out to me, I’ll help them out any way I can, especially if they’re trying to ge into the cannabis space.

Joe Fairless: Marvin, thank you for being on the show. This has been a powerful interview for entrepreneurs, and as entrepreneurs and real estate investors, because most of us have been in other industries and we’ve needed to pivot and get into real estate in some form or fashion, and how you were able to do it… I mean, you mentioned you got a couple internships – The Wall Street Journal, Reebok, but fill in the blank, just get an internship, get that experience wherever it is, and start. As Bill Walsh told you, “Whatever you do, get to doing it”, and just be immersed in it, and identify and take away the fundamentals that you see others having success in the industry – whatever they’re doing, take those fundamentals and apply it.

Then also the sports lessons that you learned as an entrepreneur that you’ve applied to business – give 100% and work hard… It’s not a 9-to-5. Just like you had success in your previous life, it’s 12-hour days, it’s putting in the work, giving it 100% and being consistent with it. And I love the visualization aspect of this, I love how you talked about that, as well as how you do a recap for the week and identify areas for improvement.

Thanks for being on the show. I’m grateful that we had a conversation. I hope you have a best ever day, Marvin, and we’ll talk to you soon.

Marvin Washington: Thank you, take care.

Best Real Estate Investing Advice Ever Show Podcast

JF1134: Below Market Rents Make More Money In The Long Run with Chris Heller

Chris is an agent and investor, and uses all his available resources and knowledge to succeed in the San Diego market. From REO’s to MLS listed houses, he’ll look at anything that makes money. He has a unique strategy for pricing his rental units, and it seems to work really well. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Chris Heller Real Estate Background:
-Owner of The Heller Real Estate Group Inc.
-Former CEO Keller Williams Realty International, Keller Williams Regional OP, Multiple Market Center OP.
-Sold over 3600 homes in his real estate career His team sells over 150 homes every year Based in San Diego, California
-Say hi to him at http://www.hellerthehomeseller.com/
-Best Ever Book: The Psychology of Winning

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluff. With us today, Chris Heller. How are you doing, Chris?

Chris Heller: I’m doing great! I’m happy to be here.

Joe Fairless: Nice to have you on the show! A little bit about Chris – he is the owner of the Heller Real Estate Group. He sold over 3,600 homes in his real estate career; former CEO of Keller Williams Realty International, and a Keller Williams Regional OP, and Multiple Market Center OP. What does OP stand for?

Chris Heller: Operating Partner. It means that I own the majority of a market center, which is what we call an office or a region of the company.

Joe Fairless: Okay, got it. Based in sunny San Diego, California. With that being said, Chris, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Chris Heller: Sure. I got my license when I was 20 years old, in 1983; I was a sophomore in college. Real estate has been my one and only career. I still have a team in San Diego, the home seller team that’s been selling homes for all these years. We’ll sell 160-170 homes again this year.
The last several years I’ve spent my time working with Keller Williams at our headquarters, helping run the company. I’m no longer doing that; now I’m focused on building my businesses, but also looking at new opportunities and new ways of impacting the real estate industry.

Joe Fairless: So what’s the primary way you make money right now?

Chris Heller: The primary way I make money is off my real estate businesses, my brokerages, my team, and my real estate investments.

Joe Fairless: Let’s talk about those investments – what type of properties do you invest in.

Chris Heller: My philosophy has always been about the same, and that is they’re opportunity purchases. I’m just always looking for the opportunity to acquire properties at a good deal, that make sense, that are quality properties and make great rentals. They’re anything from single-family homes to condos to duplexes… It’s not so much the type of property as it is the opportunity and the type of deal.

Joe Fairless: That’s interesting. What would be the type of opportunity? If you could maybe give a specific example, that would help clear up the ambiguity of opportunity purchases.

Chris Heller: Sure. When we’re talking to as many consumers as we talk to every year, there’s always opportunities that come up. There’s people that say “Hey, look, I just want this for my home” or “As long as you can get me this, I’ll sell the home.” Or “Will you just buy my home? I need it quick, I don’t wanna put it on the market (for whatever reason). As long as I can get this, it accomplishes my goals and I’m happy.”

Many of those are good opportunities, and as long as the client understands that they’re foregoing additional potential profits by not marketing the property and exposing it to the whole market, and they’re good with that and willing to sign off on that, then it becomes a win/win situation.

Joe Fairless: Will you give us an example of a property you’ve bought in that scenario?

Chris Heller: Sure. I actually have a couple that I’m looking at right now – two different ones – in North County and San Diego. In both cases, the seller has said “Hey, can you just buy the property for this?” So we worked out the price — sometimes it’s what they want, because what they want is fair; sometimes what they want won’t work, because I have to factor in what I might need to do to the property to remarket it or to turn it into a rental… So I disclose that to him, and if they’re good with that, then I move forward and buy the property.

There was one I bought at the end of last year, which was a property near the beach, and [unintelligible [00:04:43].21] 1.1 million dollar property, and that was a really fair price. I knew I’d need to put in some money to fix it up, which I did… So she got what she wanted, I got the property, I fixed it up, I rented the property very quickly for $6,000/month, and it’s a great quality property for a long-term hold.

I have other opportunities — depending on the market… In a down market they come many times in the form of foreclosures or short sales in down markets; we took advantage of that and bought several shortsales in the last down market… There were some foreclosures, and those are properties that we were able to buy.

I’ll give you a couple of quick examples. One in Carlsbad, a townhome for $225,000 in 2011 that now is selling for $500,000. It had positive cashflow from day one. And I have some foreclosures I bought in the ’90s, some of them are paid off now… I bought them so long ago.

When I say opportunity purchases, those are the types of opportunities.

Joe Fairless: Back to that one example though, the 1.1 million dollar property which was, as you said, a fair price, and it rents for 6k… You said it was a good long-term hold – I think that’s the phrasing you used. Just from a cashflow standpoint, from a high level… I just look at the numbers, and for any property I just take the rent, divide it by the all-in price, and then you try and be somewhere between 1% and 2%. With this one it’s 0,5%, so are you able to cash-flow on that?

Chris Heller: That one’s about a breakeven. When I bought that in December, the loan I got on it was 3,25%, and that was with I think 25% down. So that one breaks even. But I can put that property on the market right now and probably sell it for 1.5. So I factor in the fact that I was also buying something at a really good price. I don’t plan to sell that, because it happens to be in a neighborhood and on a street that I really like and I have some other property in.

I have four kids that are becoming grown-ups, and someday some of these properties might be opportunities for them.

Joe Fairless: How do you manage your portfolio?

Chris Heller: I assume you mean literally manage, as in property management?

Joe Fairless: That’s correct, yes.

Chris Heller: So I have a girl on my team that handles the properties for me, and she’s been managing properties for 20 years for me and for some of my clients… So she does that. If I didn’t have her, I would hire someone to do it. It’s not worth the headache. If someone has one or two properties, that’s one thing, but when you get past that, it makes more sense to pay someone who’s really good at doing it, so you don’t have to deal with the hassle and the headache.

Joe Fairless: What’s been a challenging investment property that you’ve purchased? Can you tell us a story about that?

Chris Heller: Most of them have not been challenging for two reasons. Number one, I make sure they’re quality properties in quality areas. And with that, it’s easier to get quality tenants. The other reason that most of them have not been a challenge is that we really do a great job at not only screening the prospective tenant, but making sure that we price them in a way where we have a lot of demand for the property; it allows us to be really selective, and the people that rent them know that they’re getting a good deal.

Now, the reality of it is they may be paying $100 or $200 a month less than the market, but that’s a big deal for them, and if it allows me to get a much higher quality tenant, I’ll take that every day.

But to answer your question, if there was one — I had a fourplex in the ocean-side that was in a low-income area… These were four little studio bungalows, and three of them were great tenants, one of them turned out to be a guy on drugs that was a challenge constantly, and the eviction was a challenge, and all those things. But with all the properties I’ve owned over all these years, I’d have to think really hard about one that was a challenge. And in retrospect, it wasn’t that big of a challenge.

Joe Fairless: Yeah, that’s pretty good. I haven’t thought of it that way, how you described where you priced it so that you have a lot of demand – not necessarily with the primary objective of getting a quick tenant in there, but the primary objective of actually having a lot of people to select from, because ultimately we lose the most amount of our money (typically) on tenant turnover when we have an investment property. So I suspect, since they know they’re getting a good deal, they are likely to stay longer than what a tenant would if they were paying the market rate or above.

Chris Heller: Yeah, you hit the nail on the head. The losses are in the vacancy between tenant turnovers. I always do everything we can to minimize that. I’d rather have people immediately wanting to move in and take the properties…

As an example, I closed on a new construction in out of state, and put that property up for rent, and within three days had someone who wanted it. This was last week, actually… And they wanted it as of 1st August. Because I knew I had priced it so well, I was able to say “I don’t wanna wait until 1st August. I think I’ll have someone else take it before then”, and they said “Okay, we’ll take it 15th July.” So that’s a good way to minimize the downtime… Because if you have a property that rents for 2k or 3k/month and it sits for one month, you’re better off offering it out for $100 or $200/month less and gain it then quicker [unintelligible [00:10:29].13]

Joe Fairless: What’s been the best-performing deal that you’ve done, from an investment property standpoint?

Chris Heller: There’s different ways to measure performance. There’s just the black and white of it – the return… But another way to measure performance is on the amount of hassles or non-hassles, or turnover… I have one property that I bought in 1993 that has the same tenant in it from 1993. They’ve lived there all of those years, and they’ve done as many or more improvements to the property as I have, and treated it like their own house. In my mind, that’s a really well-performing investment.

I typically take a long-term approach. There’s the occasional ones that we’ll buy specifically for the purpose of turning or flipping, but most of them are with the idea of a long-term hold. In Southern California, if you buy them right, [unintelligible [00:11:26].17] like I mentioned that townhome that I bought in 2011 or 2012 that’s more than doubled in value, or some single-family [unintelligible [00:11:34].29] that I purchased in that same time period and that have doubled in value – by any measure, those would all be considered well-performing.

Joe Fairless: I hadn’t thought of it that way, when you defined performance in different ways, like one of them is the non-hassles. The 1993 property – is that a single-family house?

Chris Heller: Yes.

Joe Fairless: Okay. Did you inherit that tenant, or was that someone that you brought in?

Chris Heller: No, it was a property I bought as a foreclosure and I had to remodel it. It had been owned by a lady that had a lot of cats, maybe hundreds… [laughs] And we had to completely gut it and sterilize it and everything else. Then we put it on the market, we got the tenant and they’ve stayed over since.

Joe Fairless: What is your best real estate investing advice ever?

Chris Heller: The advice that I’ve gotten – that’s how wealth was created in real estate. As real estate professionals, we make a living off our commissions, but we created wealth through our investments. The advice that I’d give myself or if I’m asked for it by others is to make sure you get a great buy. There’s no shortage of great properties, but there are not always great buys. And not being emotional about it – be objective, and make sure that… We’ve all heard the old adage, “You make your money going into the deal, not coming out of the deal. You make your money on the acquisition, not on the sale.” I believe that to be accurate. So the advice is, again, to make sure it’s a good buy and that it makes sense.

The only time that I ever bought properties that weren’t at least a breakeven were when we were in a rapidly appreciating market and I knew that the market was appreciating so fast that that would more than overcome any negative cashflow I had. But as soon as I’d see that the market is starting to change, those would be the properties I would always sell. By 2005 I could see and sense that the market was gonna shift, and I looked at all the properties I owned at that stage and asked myself which ones am I not willing to carry for the next ten years? And there were four or five that I had negative cashflow or would be problematic for ten years, or didn’t have good mortgages, or whatever the case might have been… So in 2005 those properties were sold.

Joe Fairless: What would you look for now to identify a shift in the market, and do you see one?

Chris Heller: I’ve always looked at the same thing, and that is simply supply and demand. In any given market, I’m looking at how many homes are for sale, how many went pending in the previous 30 days… And when you’re looking at that over time, month after month after month, you start to see trends. You start to see demand starting to wane, or supply starting to grow, and those are the indicators of eventually prices changing and the market shifting. So that’s what I look at.

I think your second question was when do I see the market shifting…?

Joe Fairless: Yeah, do you see it shifting now?

Chris Heller: The market always shifts in a finite period of time, say a three, or four, or five year period of time. There might be a general trajectory – there might be an upward trajectory or a downward trajectory, but even during those upward trends or those downward trends, there’s times where it flattens out, or speeds up, or slows down, and that’s [unintelligible [00:14:52].04]. What most people talk about when they talk about a shifting market is the general trend of the market, the complete market trending in a different direction. So we haven’t seen that start to happen yet, but we’re closer to that happening than not. The only time you know you’re at the top of the market is when prices start going down; that’s the only true indicator.

The only true indicator of being at the bottom of the market is when you see prices going up, and you know that was the bottom. So it’s impossible to time it, but you can see when it’s starting to happen and watch the trajectory or the trend start to shift and change. I don’t think for the remainder of 2017 the market is gonna change much from where it is right now. 2018 and 2019 I think it’s going to slow down, or inventory is gonna grow and the rate of sales will start to drop off – that’s when it would happen, but there’s no guarantee that that will happen. It’s a different world we live in now, and there’s different factors that impact the market… And the demographics are changing, and we have to take into account those demographics. If they weren’t changing, we’d probably start to see the market already shifting, but there’s a big group of buyers that over the next 3-5 years will be entering the market that could prolong a strong market.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Chris Heller: Sure.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:16:11].13] to [00:17:06].23]

Joe Fairless: Chris, what’s the best ever book you’ve read?

Chris Heller: It’s funny, I just re-read it again and gave it to my daughter to read – possibly The Psychology Of Winning would be one of the best.

Joe Fairless: Best ever deal you’ve done that you haven’t mentioned?

Chris Heller: Personal deal?

Joe Fairless: Yup.

Chris Heller: I was cold-calling out of area owners, I talked to a guy in Chicago that owned a house in my marketplace; he said, “Yeah, I actually was just thinking I wanted to sell it, I just had an appraisal done. It appraised for this”, and I said “Great, I’ll buy it for that.” It turned out to be a great investment.

Joe Fairless: Simple enough. How many calls did you have to do to get to that point?

Chris Heller: I called for 29 years, so… [laughter]

Joe Fairless: Hundreds…

Chris Heller: Thousands of calls.

Joe Fairless: Thousands, yes. [laughs] What’s a mistake you’ve made on a transaction?

Chris Heller: Hundreds and thousands of them. Everything, from representing that there was a refrigerator included when there wasn’t, to — there’s so many, I probably try to block them out. I know there’s been some bigger ones, and I would definitely focus on minimizing them, but things still happen. I don’t know, fortunately there haven’t been a lot of big ones; it was a lot of little ones.

Joe Fairless: On just the refrigerator example, what’s the solution, when you say there’s a refrigerator included but there’s not?

Chris Heller: I always take responsibilities for our mistakes and own them. If I have to buy a refrigerator because that’s what the expectation was, that’s how the deal was represented, then I’m buying a refrigerator.

Joe Fairless: Best ever way you like to give back?

Chris Heller: In every transaction there’s an opportunity to give back, and that is the quality of the service and the experience that it provided the client. So that’s one way that I always give back… And the other agents that are involved, too – making sure that they have the best experience possible. But I’ve also done lots of things like making donations for every home I’ve sold, at certain times, in certain years, to different causes, whether it’s a Boys & Girls club, or different charities.

Joe Fairless: How can the Best Ever listeners either get in touch with you or learn more about your company?

Chris Heller: Our website is HellerTheHomeSeller.com, or call us toll-free at 800-800-2978. And lastly, they can e-mail me at Chris@HellerTheHomeSeller.com.

Joe Fairless: Chris, thank you for being on the show and talking about your opportunity-focused investing mindset, where the purchases you’ve made have been opportunity purchases – number one. The second thing that stood out is what we talked about earlier, where you price your rentals so that there’s a lot of demand, therefore you can be more selective and the tenant or resident knows that they’re getting a good deal, therefore it’s likely they will stay longer and save you more money in the long run. And the third thing that stood out – among many others – is when I asked you about performance… You mentioned returns, but then you also talked about different ways to analyze deals, and one of them is how much of a non-hassle they are, and you referenced the 1993 tenant who has been there since… Well, since 1993.

Thanks for being on the show, thanks for talking through these things among others. I hope you have a best ever day, and we’ll talk to you soon.

Chris Heller: Joe, thank you. The pleasure is all mine.

Best Real Estate Investing Advice Ever Show Podcast

JF1103: Using Your Money Wisely and Staying Ahead of the Curve #SituationSaturday with Sarah Davis

Sarah’s first company was when she was in high school, picking lice out of people’s heads, for $10 a head! Who would have thought? Now she sells used designer handbags online and has been making money from the start. Hear about the specific situation that she is here to share with us today. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

Sarah Davis Background:
-Owner of ‎FASHIONPHILE, the largest and oldest handbag reseller online Featured on Good Morning America, Good Day LA, and Forbes
-On track to sell over $60 million this year and have always been profitable
-Their app that helps you earn cash for your luxury bags
-Based in San Diego, California
-Say hi to her at www.fashionphile.com

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Joe Fairless: Best ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluff.

I hope you’re having a best ever weekend. Because today is Saturday, we’ve got a special segment for you called Situation Saturday where we’re gonna hear about a sticky situation that our Best Ever guest was in and how she overcame it. With us today to talk through that – Sarah Davis. How are you doing, Sarah?

Sarah Davis: Hi! I’m doing great, thanks.

Joe Fairless: Nice to have you on the show. A little bit about Sarah – she is the owner of Fashionphile, who has built a company from scratch and is now the largest and oldest handbag reseller online. They’re on track to do over 60 million dollars of sales this year, and have been profitable from the start. She’s been featured on Good Morning, America, Good Day, L.A. and Forbes among many others. She’s based in sunny San Diego, California.

The focus of our conversation today will be the sticky situation that she was in when she got started. Her and her husband were in school and they didn’t have any money coming in, they had money going out, and she has built this company. As real estate investors, we’re entrepreneurs, right? And we can learn from fellow entrepreneurs for how they overcame the challenges of starting from nothing and growing a business; that’s gonna be the focus of our conversation today.

Sarah, with that being said, before we get into your story starting from nothing, can you just give the Best Ever listeners a little bit more background on your company, so that we have some context?

Sarah Davis: Yeah, we sell pre-owned (used, basically) luxury handbags: Chanel, Gucci, Louis Vuitton, Hermes… All of the brands. Basically, the favorite luxury brands into the really high-end sector. We don’t sell Coach and [unintelligible [00:03:01].17] and Michael Kors and [unintelligible [00:03:04].10] – those are all great companies, but we don’t even sell those more accessible luxuries (that’s what they call it), but we’re talking about the really higher upper end, average selling price about $1,300-$1,400 purses, but used.

People said we’re kind of like [unintelligible [00:03:17].14] for luxury bags. You bring us your Chanel handbag you used for a couple of years and we write you a check for $1,400, or whatever that is. So that’s what we do, online.

Joe Fairless: Got it. Now let’s rewind to the very beginning… Tell us your story.

Sarah Davis: My husband and I were both in school – I was in law school, he was in medical school, so it’s not like we had a future [unintelligible [00:03:40].18] We thought a direction where we were going, and I’d never really thought of myself as a business person or an entrepreneur, although I was one of those types that had started lots of little businesses; my mom called me “industrious” when I was growing up. She just didn’t have the vocabulary, she wasn’t thinking about [unintelligible [00:04:00].21] When I was in high school I started a company taking lice out of kids’ heads for $10/head. That’s just weird. Or like — I just always had businesses that I started and I was always trying to make a buck on the side.

I’m in law school, my husband’s in med school, just writing checks and bills, and things are adding up, and student loans… We had no money coming in, so I actually had heard about eBay, and started selling some of my own stuff on eBay; really long story short, my husband was on Price Is Right, because he’s in the notary, and there was notary people. He [unintelligible [00:04:36].23] bunch of stuff that we really didn’t use, so we sold that on eBay. That’s the first stuff we sold.
Then we just started selling my own things, and what I realized right after that was that women’s clothing accessories do okay, and especially things with a name brand really keep their value… So when we really just kind of whittled it down I realized that my size for pants may be a size [unintelligible [00:04:56].13], so clothes are kind of a drag, but that handbags really keep their value. You can sell them really close to retail, depending on what the condition is, and things like that. So I whittled it down to just selling purses. Right from the get-go, I realized I was on to something good. Like I said, women just love purses, so it’s not a hard thing to sell, and especially women love a branded purse, a Chanel or a Louis Vuitton authentic bag.

When I started selling, there was nobody else doing what we were doing online. I think women were really clamoring for a source for authentic used luxury handbags, because the brands that we sell – they don’t discount at all. Louis Vuitton – they don’t have a sale ever. There’s no [unintelligible [00:05:42].01] there’s no outlet, there’s no wholesale. The only way to get a Louis Vuitton authentic purse for less than retail is to either work for the company, and there’s a limited number you get, or you buy used. Those are your two options.

Like I said, when we started doing this, there was nobody else doing it. You might go to your local consignment shop and you’ve got like eight purses in there; one of them is [unintelligible [00:06:06].04]. So just the idea of building a place where people can really trust that what we’re selling is authentic, and they’ve got a great selection — I consider it like the muffin shop of consignment shops. The best section and only the best pieces of your local consignment shop times like a thousand and online.

Now I think we have like 10,000 items on the site. We’ve built this kind of machine where if you want a used luxury handbag, depending on how much money you’ve got or what kind of condition you want, you can get any type of range of thing. So we kind of started from that… From the early days, I sold my own stuff first, and then I used some of the money that I had there, which was in the hundreds of dollars – we’re not talking about thousands of dollars – to actually buy things from consignment shops. I’d buy a purse for a few hundred dollars, and then I’d sell that purse. Then I’d take the money that I made out of that sale and I’d buy another purse, one at a time.

Joe Fairless: And you were selling them on eBay, or on your own website?

Sarah Davis: I was selling them on eBay. In the beginning, everything was on eBay. It was actually a great platform. It still is a decent platform. Today there’s lots of really great platforms for whatever you do, where I was able to watch tutorials and learn from other people and see what other people were doing, and research pricing and all that… I consider eBay kind of like my MBA. I never went to business school; like I said, I went to law school. But I learned a lot about selling used items [unintelligible [00:07:41].29] I just actually learned on eBay. Anyway, I did that for a couple of years and started hiring people to help me, because in the early days it was just me. I had PTSD sometimes, because I’ll have these memories of the time — I had a family, I started having kids, and I remember going to the post office with a stroller filled with boxes, and a kid strapped to my belly, trying to keep the closing time at the post office…

Now we’ve got like 90-something employees, we’ve got multiple locations, and we have a 30,000 square foot building in Carlsbad. It kind of looks like Willy Wonka for luxury bags. It’s [unintelligible [00:08:19].14] it’s so fun.

Joe Fairless: So now let’s talk about the challenges. Name the top three challenges you’ve come across.

Sarah Davis: Like I said, I started myself, and lots of it — I had no background; I didn’t have training, I didn’t know what a [unintelligible [00:08:38].20] I really didn’t wanna know… So basically, just kind of getting myself, while I was in law school – like I said, I didn’t give that up; I passed the bar, I graduated from law school and really wanted to finish that, but at the same time I had a lot to learn. The thing that’s amazing nowadays is there’s so many great resources; there are books that are not only filled with amazing information, but that are easy to read and enjoyable, that didn’t feel like punishment for me to read. Now there’s video tutorials, and there’s information online with websites, and you can take classes from universities for free online… There’s all those resources. So I never went to MBA school; I always in the back of my head was like “That sounds like a lot of fun, maybe I should do that. Maybe I should think about that.” But really, I learned so much, and really everything I needed to know, from reading, from all these resources and from what was on the internet.

I had in the very beginning kind of like — they talk about impostor syndrome, where I’m like “Okay, I own this business, and I’m acting like I’m this businessperson, but I have no idea…” And nothing has changed as far as my degree or anything like that, but I don’t feel like that anymore because of the training that I got myself. [unintelligible [00:09:57].18]

The second thing was I never really felt like money was a challenge in the beginning, because there was nobody else doing what we were doing, and like I said, I would just invest the money that I’d make back in the business, and we slowly grew it that way; there was never a profitability problem, we were always profitable, but we didn’t have some of the — when you get a bunch of VC money and there’s like money flying out and there’s not a lot of thought put into where it’s all going precisely, and maybe money is wasted in different areas that wouldn’t be if it’s your own money. When it’s your money out of your own pocket – we were so careful about every purchase that we make and every dollar we spent.

So that wasn’t an issue in the beginning, but it actually became more and more of a challenge as people noticed that what we were doing was working, and that we were growing. People could see that there’s money to be had in this niche, so now we’ve got lots and lots of competitors. All of the time someone will send me a link, or I’ll get a Google alert, something will pop up and it’s another company that was started, and “Oh my gosh, this one [unintelligible [00:11:04].09].” Some of our company has up to over 173 million dollars – one of our competitors has raised that much money… So how do you compete, when we’re bootstrapping? I felt like that’s the direction we should go.

So just really trying to use our money wisely and to continue to stay ahead of the curve. Like I said, there was nobody else doing that when we started, but you can very quickly lose your position in the market and that advantage that we had when somebody comes in who’s got a lot of money. We’ve been able to maintain our growth trajectory, and really just by paying real attention to those numbers and making sure that we have people on our teams that are really good with numbers and that we’re smart with the way we spend our money.

I read something – I think Malcolm Gladwell… I think it was actually something he wrote in the New Yorker, where he’s talking about planes, and how small planes crash, and he’s talking about the fact that when these pilots will be flying, and just flying in an area that’s really murky or foggy, and they use the plain of the earth as a way to keep balance. They wanna keep their wings balanced with the plain of the earth. And if they just start to lose that sight, they try to look ahead and they try to [unintelligible [00:12:22].10] themselves and they end up in a tailspin and they go down. And he talks about the fact that if those pilots would just look at the instrument and not look around… If you look around, you get stressed out – it’s dark, it’s foggy – so look at the instruments that you can actually fly that plane without visibility.

We stress out — just in this last week we found out that one of our competition have raised another 50 million dollars… And you can just stress yourself out and say “What is going on here? [unintelligible [00:12:50].06]” And what we realized is like “Okay… Let’s just look at the instruments. We’re doing pretty good here.” Just checking everything to make sure that we’re all — you know what I’m saying? Just to make sure that we’re on track… That we’ve got a plan, we’ve got a direction we’re going and we’ve got a speed that we wanna get there, and rather than get stressed out about the things that you might see around you or hear, you just have to watch the instruments and look at your numbers, and pay attention to those things and pay attention to metrics and goals you’ve set for yourself, and then you can say “Okay, we’re doing okay”, and not allow yourself to get really wrapped up in that. I think that’s been really important.

I think just trying to stay — again, when you’re really super budget-conscious, like we are, where money is an issue and you’re trying to really be careful with your money, just making sure that we’re using it smart in the way that we do our marketing and social media, and really trying to develop a brand.

For us, we’re like — we recognize that people who want a Louis Vuitton purse or a Chanel purse, or [unintelligible [00:13:51].11] or a Gucci purse – those people care about brands. They care a lot about the quality, and they become very brand loyal. They like the history of it, and they like the story, and again, there’s different things  that make them love that brand… So we decided early on that we want to be a brand like that – a brand that they appreciate our story, they appreciate the fact that they can trust us, they appreciate our customer service, that we have a reputation, and just that we become an actual brand… Not just a company selling bags, but they become loyal to our brand, because we are loyal to them and we just kind of do a lot of those things. Part of that means that we should be very involved in social media — and I actually do all the social media myself still.

A couple of times we thought about having somebody else do our Instagram, our Facebook, and we realized that at this point it doesn’t take me long… I’d be walking around the office and I’ll see something, I’ll snap a picture and I’ll write a little thing, and it’s real, it’s authentic, and it’s my voice, and it makes sense to the business.

I think people appreciate feeling like they’re getting a secret, behind-the-scenes view from my voice, so that’s been a helpful way that we can keep the word out and have our buyers and our suppliers — they all feel like they [unintelligible [00:15:10].11]

Those are, I think, three challenges that we’ve had and ways we’ve addressed them that have made us actually stronger in the end.

Joe Fairless: With your marketing and social media – you said earlier that you pay close attention to the numbers… What numbers do you look for from a “This was successful” standpoint?

Sarah Davis: One of the things that is really important to us is that — there’s lots of ways online that you can manipulate all those numbers, where it’s just not real. You can run contests, but there’s lots of other (even little black hat) ways that you can grow your numbers that they’re not gonna end up benefitting your business. We want followers and people engaged that actually care about what we do, that potentially are buyers or suppliers, or aspire to be that.

Our goals are a little bit different than maybe other people’s goals that are just looking for awareness building in the grand scheme of things… Because you can really ramp up numbers really quickly in using black hat methods that we just don’t agree with. So we have tried to very slowly but surely just use tools like engagement, making sure that we’re holding an online conversation, that we’re engaged with the people that are commenting and sharing, and that we’re appreciative and generous in that.

So for us, we keep close tabs on things like Google Analytics. Google allows you to monitor very closely when you’re doing online sales — we can see where all of our sales come from. We can see that “Oh, this percentage of people found us from an organic Google search” or “This percentage of people found us from paid Google ads” or “This percentage of people came to us from a Facebook post and then made a purchase.” We can track all that, and it’s actually awesome to see that.

What we sell isn’t really an impulse buy; if we were selling cute $25 T-shirts, we might put up a Facebook ad and sell 25,000 shirts, because it’s a small price and you can just impulse buy.

For us, part of it is how many things people buy from us every year or two years, and we just try to make sure that we are keeping people engaged so that the next time they’re looking for authentic bags, that we’re the ones they will come to.

It’s not that we’re gonna put up a Facebook post right now or an Instagram, and then all of a sudden we’re just gonna sell 200 purses… What we sell is something that lots of people think about a little bit more. It’s like “Oh, you want a $4,000 purse? Maybe I’m gonna save, or maybe I’m gonna get it for my birthday.” We want you to remember Fashionphile when that comes, because maybe you are ready to  buy at that moment.

Joe Fairless: Sarah, how can the Best Ever listeners get in touch with you or your company?

Sarah Davis: I respond to all of our social media posts, so on Facebook, Instagram, Twitter – Fashionphile. If you have a question in particular, you can find me at Sarah@fashionphile.com

Joe Fairless: And the Fashionphile website link will be in the show notes page, so Best Ever listeners, you can just click that and check it out.

Sarah, thank you for being on the show. Thanks for talking about your journey as a fellow entrepreneur and the three challenges that you have come across from a macro level. One is just learning what it’s all about, all the different aspects of the business – not having a formal training, but having kind of a hard knocks training. Two is that investing money back into the business and knowing that really you’re competing against some companies that are funded with more dollars than yours, so how you can be nimble and compete at that level, and your solution was to pay close attention to the numbers and be smart with how you’re spending the money. You talked a little bit about the types of metrics that you look at.

Then three is being really focused on building a brand that people care about, and that’s why you personally do the social media stuff, to make sure that your voice is being shown on the brand channels and the engagement levels there.

Thanks for being on the show. I hope you have a best ever day, Sarah, and we’ll talk to you soon.

Sarah Davis: You too, thanks so much. I appreciate it.

Terrell Fletcher and Joe Fairless

JF1102: When You Feel Like You’ve Lost it All, or Have Lost it all, You’re Not Alone – with Former NFL Running Back Terrell Fletcher

When he was done playing football, Terrell had to figure out who he was. It took him about 5 years to learn what he was all about. When Terrell lost everything around the 2008 market crash, somehow he found himself and his purpose. It is impossible to not be inspired after hearing him speak! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

Terrell Fletcher Background:
– Former American football running back in the National Football League for the San Diego Chargers.
– With the Chargers he rushed for 1,871 yards and gained 1,943 yards receiving
– He currently serves as the Chaplain for the Charger organization.
– As of March 2012, he is the Senior Pastor of the City of Hope International Church in San Diego, California.
– He shares a message of transformation and action, motivating audiences of all ages to live to their full potential and realize their dreams.
– Just released newest book, The Book of You, where he shares his transformation from nearly losing everything to discovering his purpose. https://www.amazon.com/Book-You-Discover-Transform-Future/dp/1531835112
– Based in San Diego, California
– Say hi to him at http://terrellfletcher.com/

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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff. We’ve spoken to a whole lot of people – Barbara Corcoran from Shark Tank, Robert Kiyosaki (Rich Dad, Poor Dad), Emmitt Smith (former pro football hall of famer), and we’re gonna keep with the football theme/entrepreneurial theme with Terrell Fletcher. How are you doing, Terrell?

Terrell Fletcher: I’m amazing, how are you today?

Joe Fairless: I’m amazing, I love your energy, it’s so much fun. I am very grateful to be speaking to you, and more importantly, I am glad that the Best Ever listeners are gonna share in our conversation.

A little bit about Terrell, in case you have been living under a rock and you don’t follow football… He is a former NFL running back for the San Diego Chargers, and now he has transitioned since — let’s see, in March of 2002 I believe you’ve been the Senior Pastor at the City of Hope International Church in San Diego, California. Is that right?

Terrell Fletcher: 2006, but yes, [unintelligible [00:08:38].17]

Joe Fairless: 2006, okay. And when did you stop playing for the Chargers?

Terrell Fletcher: ’03 was my last year. We had this great talent named LaDainian Tomlinson that came in around 2001-2002ish, and he put that whole running back room out of business.

Joe Fairless: I wanna talk about from ’03 to ’06 what you were doing and how you transitioned, but a little bit more about you, real quick, for the Best Ever listeners. Terrell just released his newest book, The Book Of You, where he talks about his transformation from nearly losing everything (and we’ll talk about that) to discovering his purpose. It is available on Amazon now, you can go to it… Actually, we’re gonna include a link in the show notes pages so you can simply just click that link and go straight to Amazon and get it.

Let’s talk about the 2003 to 2006 period when you had left NFL but you had not started as a Senior Pastor… What were you doing?

Terrell Fletcher: Well, a lot of soul searching, to be honest with you. What I did when I was playing – I tried my best to prepare myself for the day that I wouldn’t play. My last two years — like I said, LaDainian was so amazing, and he was really starting to turn into the guy that would eventually be the hall of famer… And I had time to explore other parts of myself that football takes away from you.

We spent so much time with football that you really don’t get a chance to find yourself. All you do is find the football player in you, but you don’t get to find yourself. I had a little extra time to do that. One of my loves was real estate, one of my loves was public speaking, and my other love was inspiring and motivating people. During that three and a half year period or so, I tried to hone those skills down.

My brother and I, while I was still playing, my business partner and I formed a small company, we started to acquire real estate back in St. Louis where I’m born and raised. We rehabbed strip centers and houses, and we kind of jumped knee-deep into real estate, and that’s what I did during those years. I was trying my best to be a mogul and to be a TV personality with football, while at the same time exploring who Terrell Fletcher was.

The funny thing about football is that football is an identity to itself; to become a football player is an identity to itself. So I really wasn’t looking for a new job, I was really looking for a new identity. “Who in the world is Terrell?” and I just put my hand in a lot of things that I could do, and those were the things that I spent my time doing, hoping one or two of them would shake out.

Joe Fairless: As you were testing different things, identifying what that new identity was, since football had been your identity for so long, what did you start gravitating towards and what lessons did you learn along the way?

Terrell Fletcher: Interesting thing, I started gravitating towards people. Football is a funny, funny world, because that world centers around the team and you, and when you separate from the team, you have your secondary team, which are your handlers – your agent, financial advisors, your friends, your [unintelligible [00:12:20].03] and somewhere in that space, you’re the center of it. So without even realizing, even though you might give back a whole lot, you might not realize it, but when you become the center of your world, you become selfish.

I needed that time to rediscover the kid that handed out sandwiches to the poor, the kid that didn’t mind helping an old lady cut her front lawn back in Missouri. I needed to reattach with that, and that’s what I found again in those two and a half years. I realized that I could do a lot of things, but I wasn’t purposed for everything I could do. Being able to perform it doesn’t necessarily mean that’s what you should be doing.

I performed pretty good as a sports announcer, but my heart wasn’t connected to it. I performed pretty good as a sports coach, but my heart wasn’t there. It wasn’t where my purpose was. And I found myself just connecting with people… Inspiring, challenging, pushing – almost being a coach in a different way, except a coach toward being your best self, having a great life, chasing the dreams that’s inside of you, and not settling for what everybody else thinks you should be operating in.

I learned this the hard way – people will root for you at the level of their expectation for you. And if their expectation for you is lower than your capacity, then you will feel a void and feel insignificant, even though they’re applauding you. People will applaud you at average, man, so you can’t go off of what everybody else thinks; you have to find that thing in your heart and chase it, because that’s where you find real satisfaction… And that’s what I did. That’s what I had to do for about three and a half, four years, five years – chasing and digging and doing self-introspection and finding out “Who am I? What do I have to offer this world and what core tenets of life am I gonna operate in?”

As that started to shape itself out, I came up with this idea that I’m here to motivate, educate, inspire and entertain every person that I come across. I wanted to make sure that no matter what business venture I got into, I was able to motivate, educate, entertain and inspire every person that I ran across, whether it was a Ministry, or rehabilitating a community or what have you, I felt that this was a part of my job, to be able to do that.

So that’s what I had to do, and that’s what I did. It was a journey, it’s still a journey, but that’s what I had to do.

Joe Fairless: You mentioned you gravitated towards those people, and now your personal mission statement sounds like is to motivate, educate, inspire and entertain people you come across… What would someone who played with you on the Chargers say, if they were asked, “Did you see this coming?”

Terrell Fletcher: Funny thing – everybody saw it coming, except for me. Everybody but me. I talked to guys, Rodney Harrison (who would be great for your show, by the way) Fred McCrary – all of these guys, to this day, they’re like “Fletch, we saw this coming a mile away. You were the guy that kind of kept us centered, you were the guy that brought all the laughter and the energy.” Everybody saw it but me. I was following a path that I thought was what I was supposed to follow. It was the predictable path. Underdog athlete, reaches his dreams, and now he goes into the studio and he becomes this announcer, or he goes into the coaching room and he becomes a coach.

Somewhere along the journey I just wanted to not be normal. There’s nothing about normal that excites me. So somewhere along the journey I realized that my core competencies lend to more than to just what people are expecting of me. And I probably could have done it, it probably would have been the easy path, I probably would have some level of success, but one of the things I learned along the journey was that I didn’t just want success, I wanted significance. I wanted meaning, I wanted what I did to count towards somebody’s life, so it had to be more than a money grab for me, and it had to be more than a fame grab, getting my face on TV. I needed to find the underlying purpose for all of those things – “Why did I wanna build wealth? Why did I want to be a household name? Why did I want these things?” and now I have a better sense of my Why. I wanna motivate, educate, entertain and inspire every person that I meet, and as creative as I possibly can be: through real estate, through entertainment, through faith, inspiration… These are opportunities for me to do my mission and to have a sense of significance while I’m giving back to the world, and not just be a big success.

So yeah, the guys in the locker room would have said that they saw this a mile away. They still tell me, like “Nothing about you surprised us.” It surprised me, though. Everybody knew me but me.

Joe Fairless: You mentioned you describe yourself as an underdog athlete reaching his dreams… In what ways would you consider yourself an underdog?

Terrell Fletcher: Now, here’s the irony behind that – I never viewed myself as an underdog. I had no idea — I’m 5’8,5″, 5’9″ on a long hair day… [laughter] I had to eat seven times a day to stay 195 pounds. They used to fine me for being underweight.

Joe Fairless: What was underweight?

Terrell Fletcher: For me, if I got below 195, they would fine me. They wanted me at 201, 202, and there was no way in the world I could hold that.

Joe Fairless: How much would they fine you?

Terrell Fletcher: $368/day, per pound.

Joe Fairless: $368/pound?

Terrell Fletcher: At the time, that was the maximum fine that the Collective Bargaining Agreement allowed them to fine us. So some guys would be overweight and get fined that, and some guys like myself, if you were considered five or so pounds under your weight, you were considered too light. So I would frequently run in there at 190, 191… I just — listen, I was 135 pounds as a freshman in high school. I went to college, I was 170 pounds soaking wet as a freshman in college, so to be… I just, I didn’t have the body for it, and if you looked at my football pictures, you saw this little guy out there with all these big guys; it was just like “Where is he gonna fit in this game of gladiators, and bodies being thrown around?” And I’ll tell you something about the NFL – they’re not just tackling each other, they’re tackling each other with bad intentions. [laughter]

But I never really viewed myself as the underdog, but everywhere you turned around it was “What are you gonna be size-wise? How are you gonna deal with the injuries? How are you gonna keep up?” And the reality was that even though I was fast, there were guys that were more physically gifted that were just as fast as I was, that could jump higher, that could do circus things that my physical ability just didn’t allow me to do. And then playing running back was somewhat of a — that was a difficult thing as well, because when I played, all the running backs were 215 pounds or higher.

[unintelligible [00:20:39].01] who was our star at running back at the time, Nate was 244, 245, and was just as quick as me. [laughter] It was crazy – I’m looking at this guy and I’m like “How in the world are you as quick as me? Not as fast, but as quick as I am.” But the good thing for me is that they had a situation where a guy named Ronnie Harmon really revolutionized the running back position. He was a running back that could also essentially do everything a wide receiver could do. If you catch and run routes, and go in the back field and do the traditional running back work, there was a spot for you. And I was versatile enough to be able to do both of those.

Early in my career, I caught more passes than I actually was [unintelligible [00:21:28].15] because of the mismatches that I was able to create. And here’s the interesting thing – all of those things were considered, you know, “He’s too small, he’s not as physically gifted as everyone else… Where are we going to place them?” – those are looked at as all the reasons why you shouldn’t have a job in the NFL.

I had creative coaches and I felt like there was a pathway that had been paved before me, that if I can get in here and show them that I’m necessary, that I could create mismatches, that I can catch and I can beat a bigger guy who would normally cover me, or that I would make them put in a smaller guy and I could move back into the back field and we’d have a big guy and a little guy – if I could create mismatches, I could find a niche in the game for myself. And for a four-year period of my eight years, I was the highest-paid third down back in the National Football League, because we did that and we used it effectively, and I honed a skill for myself… Which interestingly enough is what I feel like I had to do in business, as well. I had to do it in people’s faith, I had to do it in Ministry and in my personal coaching business.

Finding those spaces where I fit in the market has really been the hallmark of what I’ve been able to do.

Joe Fairless: I love how you segued into what you’re doing now, and applying what you learned to what you’re doing now, so can you give us an example of how you’ve created a niche for yourself  in any one of those areas that you mentioned?

Terrell Fletcher: Absolutely. I think one of the things that I do as a public speaker, that I bring to the table is this sense of being unassumable — I’m talking a lot about football right now, but I really don’t talk that much about football when I go to corporate events or when I speak face-to-face. I like to say that “I’m not a serious guy, I’m not just a fun guy, and I’m not just a guy that’s full of degrees and information, I’m all of it!”, and the interesting dynamic is that there really aren’t a lot of guys that do what I do in that sense – we engage you with information, but engage you with humor and engage you with personality. Usually, when that happens in our industry – you know this – it’s a head-to-head conversation, and I try my best not to have head-to-head conversations with an audience. I think my niche is having a heart-to-heart conversation, and a heart-to-head conversation.

Before you’re over-consumed and over-powered by information, I wanna touch your heart. I don’t want to just give you tips and tools to be successful, I wanna give you a purpose for wanting to be successful, and the only way we do that is not to just touch people’s heads, but to touch people’s hearts. That’s a really interesting space in our industry of speaking and in our industry of motivating.

Joe Fairless: How do you do that? How do you touch people’s heart?

Terrell Fletcher: You know, here’s the irony, man… It’s my gift? It’s really not my gift. You are one of the most successful entrepreneurs of our generation, and I thank God for you as an example, I follow you… I’m gonna really be on your tail now that we made a connection, really following you in that sense now that we’ve made a connection, but here’s the reality behind what you do – you don’t just have an amazing financial portfolio, you house people. You have found ways to help people who have families, and who need families, and you have placed them in a place that they can call home, a place that’s comfortable for them to build morals and to build foundation and fabric for their family lines.

Sometimes we miss that when we’re buying a multi-unit complex, or when we’re going downtown and putting up the latest condominium… We forget that “Hey, we’re impacting lives.” You’re changing people’s dynamic. And when you grew up the way that I grew up, in communities where everyone did not have a steady place to live, that your neighbor this week might not be your neighbor next month, or that guys that you went to school with one year may have had to move out of the community to go to another school the following year – when you get to that transient type of lifestyle, then you start to see that show up in the fabric of community.

What you guys provide is you provide opportunities for stability, opportunities for communities to be stronger, and very rarely does a highly successful entrepreneur see themselves as being a part of the continuum of humanity… But brother, that’s what you do, man, and that’s why you’ve gotta keep doing it at the level that you’re doing it. You are adding to the fabric of humanity, and that’s what everyone does if you’re listening to the Best Ever; all of your podcast followers – that’s what you do.
When you do your next business deal or when you go after your next project, keep that in mind. Connect to heart with the project, and you’ll operate not just in business, but in purpose.

Joe Fairless: That’s beautiful. And just taking a step out of our conversation, kind of putting on my analytical hat, what you just did is you put yourself in my shoes and you acknowledged the good that I’m doing, which clearly — well, sometimes I don’t even realize it… And that immediately connects us. So now from an analytical standpoint, a way to connect with people’s heart, as you just did, is to take that same approach, and that is put yourself into the other person’s shoes, acknowledge the good that they’re already doing, because a lot of times (I suspect) they don’t recognize that themselves, and it brings to light the positive things they are responsible for in their life.

Terrell Fletcher: You’re absolutely right. Remember how a few minutes ago you just asked me “What would your teammates say?” and I told you that they saw what I didn’t see… It’s the same way. A lot of times we’re doing things that we’re successful at, but we don’t really see how far the ripples in the pond go. It’s guys like me that come and just remind guys and gals that “Hey, you matter, and how you conduct business matters, and how you deal with your customers and treat your customers – all of these things matter”, because we’re not really in the marketing business, real estate business, faith business… We’re really in the human being business, and there has to be more of us, who have some level of influence and power in the community, to remember that there is a human being that’s on the other side of our purchase, and we want to treat them with dignity and with respect, and not just have guys and gals as being numbers, but have them being human beings. That’s important, and that’s critical for us.

Joe Fairless: Let’s talk a little bit about your book that just came out… The Book Of You: Discover God’s Plan And Transform Your Future. I introduced it by saying it talks about your transformation from nearly losing everything to discovering your purpose. “Nearly losing everything” – tell us the story about that.

Terrell Fletcher: Well, the book itself is about transitions, and I use my story to help any story who’s going through transitions. For me it was the period between leaving football and finding a sense of purpose and meaning on the other side of football. But what I’ve learned is that life is about seasons, and who you are in this season is not necessarily who you were in the last season, and what validated you in the last season may not be the thing that validates you in this season.

What happens is I learned that there were individuals that it looked different, but it was the same process, of going through a period of transition where they were searching for identity, and by that I’m talking about the stay-at-home mom who’s children just went back to school, or the empty nester, or the new divorcee, or the person who just got downsized from his job and has to figure out what they’re gonna do next. Transitions are a part of life, and part of the challenge of my book was not just to create change in your life, but to create transformation. And change is a much more cosmetic thing, and transformation is much more of an internal thing; it’s about transforming who I am, so that I can meet the demands of what my life should look like now.

So for me, I went through this interesting period for a handful of years where I was trying to figure out who I was, trying to figure out how I could contribute to the world in a meaningful way, and real estate became one of those ways for me. Ministry was one, but real estate was another one.

My business partner and I – we got interested in real estate right around the time that real estate flies out the [unintelligible [00:31:07].24] in the United States. We were really novices, holding on to a skyrocket, right? We were trying to hold on to this thing… And we were novices, so we just acquired properties, acquired properties, acquired properties, because we did not necessarily have all of the information of how trends worked, how markets worked etc. We just had pockets full of money, and opportunity… And we took advantage of it.

Well, when the market tanked, like many investors, we didn’t know what to do. We were such novices and it happened in such a fast three-and-a-half-year span that we didn’t know the conversations we should have had with banks, we didn’t know the conversations we should have had with other investors… We just didn’t know. So we basically went on a firesale and tried to dump as much stuff as we could dump, and you go one day from your portfolio being one way, and your business portfolio showing up within two-and-a-half-years looking totally different, and potentially owing banks money; instead of making money, now you’re owing more than you ever dreamt or imagined. Well, that was our situation.

It was scary, we really weren’t sure how to solve all of these problems… One way is to just dig into your bank account and pay everybody off; another way is to go and talk to an attorney, and then you’ve gotta trade off who you wanna give your money to – the attorney or the bank…? [laughs] And you know how the market was… We chose not to panic. Our futures were secured through other ways that we made money, but we chose not to panic, and we waited it out as long as we could. We made some very foolish mistakes at the beginning of the downturn; I got rid of a bunch of things, or we gave things back to the bank, or we sold out some things… In the panic, we made a lot of poor business decisions that if we had a bit more experience, we would have held tight or we would have talked to the banks in a different way, if we would have known the banks were in the situation they were in. We don’t kick ourselves too hard for it…

Joe Fairless: Yeah, you didn’t know at the time…

Terrell Fletcher: Not many people knew that, but that was the story, man… And we looked ourselves in the face, and here we have families, here we have people that were counting on us because we did start to find a sense of purpose… We had families in these homes that were trying to rebuild their lives… So it was tough on many levels for guys like me. It wasn’t just a business transaction, “Hey guys, you’re gonna have to move, because we’re gonna give this house back to the bank”, it was “How do we put a plan together where we can help families relocate?” In some instances we even helped with first month’s rent, because they just didn’t have it. Things were happening so fast that we just didn’t know what to do.

Fortunately for us, we built a great team around us, that helped navigate us through the back-end of it. There were some things that were not redeemable, there were other parts that were redeemable that we still hold today, that made it through and they’ve become pretty good investment opportunities for us.

Tough time, brother, but those things happen. I’m not much of a gambler, I never have been, so I never leveraged my whole life on any one thing, but from a business perspective we went all in in the real estate market during that time, and we didn’t know… We didn’t know what we didn’t know. Fortunately, we landed on the ground of some people that were experienced, some people that cared about us, and that helped us navigate through some very difficult times.

Now the foundation of our real estate business is not only strong, it is primed and ready to go to a whole other level… And I’m excited about that.

Joe Fairless: As far as the foundation goes, being ready to go to another level, what are you doing differently than you were doing before?

Terrell Fletcher: That’s a good question. A couple of things that I’ve done over the years – I’ve educated myself. Whatever market I’m operating in, whether it’s real estate, or faith, or public speaking, I’ve educated myself so that I could protect myself. As it relates to real estate, we’ve been saving money. As the market has been going up, we chose as a business strategy not to purchase right now, because we’re trying to hold on and follow trends.

We wanna be ready when the market takes a downward spiral – hopefully not as drastic as 15 years ago, but it will still take a dip, and we will be prepared to have some sound investment opportunities when that time comes.

That’s one of the first and most important things – learning how to be patient and allow the ebbs and flows of the market to work for us, instead of feeling that I can be this maverick and I’m going to be the one to go against the trend and it’s gonna work for me.

In this particular season, we’re being smart, we’re being patient. We’re taking our time. We have an end sight in view, and not so short-sighted.

The second thing is I’m starting with a good team; I’m not just starting with a good idea. The idea and the team go hand-in-hand. I’ve got a great headhunter out there doing some great research for me, I’ve got a good analytics team that’s helping out a lot… Just some good people in my ear that don’t need me to be successful; they’re already successful. So they’re not jumping on our back, trying to ride their own selves up to success. We’re partners now. That was different; I didn’t always have partners in the early parts of my business. I had guys that needed to build their name off of whatever I became. Now we’re partners, and that’s so much easier, because it feels like we’re all pulling an equal share of the weight.

So those are a handful of real practical things that I’m doing. You’re as good as your team, and you have to understand why your team members are on the team. In that way, everyone can be pulling their weight in the same direction, and you can get your business going the way you want it to go.

Joe Fairless: I was talking to Tony Delk… NBA guy – he played for a bunch of teams in the NBA – and he mentioned something that reminds me of what you’re talking about in terms of you’re partnering with people who aren’t needing you to be successful for them to be successful, because they’re already successful.

He talked about how he looks at his group, his close circle  – as either an asset or a liability, and it’s such a black and white way to look at it, but it really resonated with me… Because it’s like “Are they empowering you along the way and you’re empowering them, or are they someone who you’re constantly having to give, give, give, and it’s just draining you, whether it’s mentally, emotionally, financially etc?”

Terrell Fletcher: One of the best books I’ve read during that period of time was a book called Necessary Endings. I found that loyalty is very important, but if you’re not careful, you can be loyal to the detriment of your own destiny and your own future. Sometimes it’s important — for the time you’re in relationship, you must be very, very loyal to the commitments that you make. But there are times in every person’s business career, personal life etc. that the relationship doesn’t serve where you’re headed and where you’re going, and it’s important to have those tough conversations, to sit down and to know that some endings are necessary. Some endings are important to have, and you won’t go into your next level if you continue to hold on to certain things that served you in your last level.

I always think about life in seasons, and one of the things that prohibit people from moving into their next season of success is their desire to hold on to the things of their last season of success. Sometimes you have to know that business relationships are a handshake and a “Thank you. It was a win/win for the season we were together, and now I have to keep moving on.” Sometimes friendships are that way, because you’re not the same person in every season of your life, so it’s important to re-establish your boundaries.

It’s a funny thing – while we’re talking… I just changed my cell phone number about three months ago, and all I was doing was just re-establishing my boundaries. It’s just gaining control of my life again, gaining control of who had access and who didn’t have access. Exactly what Tony was talking about – knowing that in every season of your life there are going to be people that will put in, and people that will take out, and you cannot have too many people withdrawing from you without putting in deposits, or else you will go into a space where you’re insufficient. And you don’t wanna have insufficient energy, insufficient funds, insufficient joy, insufficient happiness, because people in your life are taking-taking-taking, and never giving back. Your team has to have a reciprocal effect with you.

Joe Fairless: Based on your experience as an entrepreneur, achieving at the highest level in your chosen profession, previous to you doing what you’re doing now, what is your best advice ever for real estate investors and entrepreneurs?

Terrell Fletcher: I think the best advice that I can give for anyone is to stay the course. Often times, as visionaries, we tell people to have the end in mind, and we don’t spend a lot of time talking about what’s gonna show up between now and the end. Barriers, enemies to your success, whether they’re external or internal – they show up along the journey, but don’t give up on the journey. Fight them, do battle with them, get victory over them… Because if you are on the right path, those barriers are not even designed to win, they’re just designed to make you stronger.

So if you know you’re on the right path, and you have a goal in mind, every barrier that shows up is meant to make you stronger, is meant to make you more wise, is meant to make you a more compassionate person, is meant to make you a warrior in your own right.

In that regard, the thing that should be your bad is actually gonna be for your good. So stick in there, go finish the deal, and change the world with your gift. I think that’s the most important thing. I wish someone would have told me that the troubles of my life were actually going to be the things that help make me the man that I am today, and I would not have run from so many things, I would have embraced the journey, understood it was a part of the process, got victory over it and kept on moving.

Joe Fairless: One of the things that Tony Robbins says is “Life happens FOR you, not TO you.”

Terrell Fletcher: That’s right.

Joe Fairless: And when you embrace that, then it really transcends your approach. I have my old banner behind me, so I can’t read it, but there’s a poster on my wall – it’s something along those lines: “Without challenges there’s no growth” or “Growth doesn’t happen when everything’s good, it happens during the challenges.” That’s when you really grow, and you have to embrace that stuff.

Terrell Fletcher: You’re saying something that’s so apropos to nature. The funny thing about seeds is that in order for seeds to grow they have to be placed under the ground, and then the seed itself has to break before something grows. And we wanna grow without breaking. That’s the challenge. You will grow big, you will grow to be enormous if you’re willing to go through the breaking process that life brings. That process is not always victories, and I know that you can attest to this; every deal that you signed up for didn’t work out the way you wanted it to, you didn’t get every deal, you didn’t get every level of compensation that you wanted. Sometimes that happens. Life is full of disappointments, it’s full of heartbreaks, it’s full of frustrations, but it’s the disappointments, heartaches and frustrations that make the joy, the happiness and the pure excitement about life that much sweeter.

If you can embrace the breaking, then you can grow. If you can embrace the breaking, then there’s no limit to how far you can grow, but you don’t get to take one without the other.

Joe Fairless: Powerful stuff. I have taken a lot of notes. Are you ready for the Best Ever Lightning Round?

Terrell Fletcher: Let’s do it!

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Commercial Break

Joe Fairless: Okay, let’s see… We’ve got a special one for you… What’s more fun – and I said “fun”, not more fulfilling…

Terrell Fletcher: Okay…

Joe Fairless: Life as an NFL football player, or life after being an NFL football player.

Terrell Fletcher: Life as a football player. [laughter] Childhood dream, you’re living it! [laughter]

Joe Fairless: What are some pros and cons, top of mind, for each of those lives?

Terrell Fletcher: Well, the football player — listen, you get to go and knock somebody upside the head and nobody’s gonna arrest you for it, right? [laughter] You roll around in the dirt all day long and people will applaud you for it. We get to do something that we would have done for free, and get paid a lot of money to do it. What can you say – it’s the dream… Children grow up saying “I wanna be a football player” before they can even catch a football or run with a football, you say “I wanna do this thing” and to accomplish it is actually one of the biggest accomplishments of life as well.

Joe Fairless: Okay. And what about a con?

Terrell Fletcher: The con of it is the investment that you have to give to it. You almost have to turn off a part of your life to be great at this part of your life. Football is all-consuming, it demands your energy, your time, it demands your physical strength, your emotional strength, and sometimes you put so much into being great at an all-consuming machine that you don’t really get to build the relationships you wanna build, or develop as the man you wanna develop as, and unfortunately many of us don’t develop until we’re older – 28, 29, out of the game, and we are essentially 30-year-old children, trying to figure out how to be a man. You somewhat lose — you have the potential, rather, to lose on the development as a human being sometimes when you spend 7, 8, 9, 10 years in a fairytale.

Joe Fairless: Pros and cons for what you’re doing now?

Terrell Fletcher: Pros – I get to speak and I get to share my heart with people, I get to watch the a-ha moments happen, I get to motivate and to know that the things that I share transform and change people’s paradigm and their dynamic. I think the cons of what I do now is it can be somewhat limiting. It doesn’t always give me the space to express the full breadth of who I could be; the faith community by itself has its own culture, can be its own culture, and doesn’t always embrace us stepping outside of that culture to impact the world… So entertainment, or even real estate or things like that are not fully embraced by the culture that I work in. So it has its limits, but it’s hopefully rewarding, and I think that both of them have an eternal value; what I do now is soul deep, and not just wallet deep… And I appreciate being able to do that, too.

Joe Fairless: We talked about some of the hard lessons learned with real estate… What’s the best ever deal you’ve done?

Terrell Fletcher: The best ever deal I’ve done — this is not gonna be big in money, but I’ll tell you why it was the best ever deal I’ve done. It was when we sold my parents’ house to put them in the house that they’re currently in. It’s the best ever deal because when I was in college, I’d got into some trouble, and my parents were within two, three years of paying off their house, and they had to borrow every dollar on that house to keep me from having to stop my collegic career, collegic life. In my head, one of the things that I said was that if I ever made it, I was gonna buy my parents a house. And that’s what happened.

When I got to the NFL, the first dollars that I spent was making the transaction with my parents’ home to put them into the home that they eventually called home. To me, that was probably the most rewarding, gratifying deal that I’ve done, even though numbers-wise I’ve done better. But right now, that still is at the — it’s not even close to the best deal and the most rewarding deal.

Joe Fairless: I was reading your bio before we started talking and I saw you were (or are still, I’m not sure) involved with Junior Achievement; I’m on the board for Junior Achievement Cincinnati, and I did some stuff with them in New York, too. So actually I’m involved with that organization, but I’m curious what’s the best ever way you like to give back?

Terrell Fletcher: Here’s the thing with JA – it’s funny you say that, because we’ve just recently started dialog and conversation again about me volunteering time with Junior Achievement. JA was phenomenal when I played. I had opportunities to hold charity events for them, interact with young people… The journey of my second career pulled me away from some of my community service, because for the most part what I do now IS community service. So I had to really focus my attentions on some of those things.

We have built some amazing partnerships with the San Diego Food Bank with our church. We have built some amazing partnerships with Walmart, with Lincoln High School, which is a major high school right here in the city. [unintelligible [00:51:08].02] is literally 300 yards away from where our parish is. I’m really excited about the ways we’ve been able to give back.

We have live classes and Bible classes on the high school campuses of four high schools in San Diego county, in two middle schools… We’re able to be the parent to the Lincoln High School football team, we feed them every [unintelligible [00:51:35].29] we do their chapel services for them… We’re also able to be partnered with the San Diego Food Bank where we give away food on a regular basis to needy men and women in the community. We also have a major Turkey Drive that we do every year; we give away over 1,000 turkeys to families of four or greater, in partnership with Walmart and in partnership with Union Bank.

We’ve been really fortunate to give back, so in those ways — we’ve literally just had a meeting yesterday on a new mentorship program that we wanna pilot, where we want to create an opportunity for mentorship with teenagers that are coming from single-parent homes that need male mentorship in their children’s lives. So this is my life now. It all makes me proud and it all makes me happy.

DeVon Franklin just came and hung out with our peers a couple of weeks ago… In fact, it was Friday. Bringing that type of motivators and inspirational men and women to our community is at the tops. I think that’s what’s unique in the types of communities that I’ve served in.

Joe Fairless: And how can the Best Ever listeners learn more about what you’ve got going on? Where should they go?

Terrell Fletcher: Sure, you can go to my website, TerrellFletcher.com, or go to my faith website, which is TheCityOnline.org. And of course, I’m a social media head, man, so I’m on Twitter, Facebook and Instagram – find me on those. I love to live my life out in pictures and in 141 characters more than I like to live my life out on Facebook, but I’m on all of them.

It’s a great journey, man. We laugh, we talk, we inspire both traditional motivation, but also spiritual motivation, and I think you’ll enjoy the ride either way. To all your Best Ever guys, I wanna connect with you, I wanna help inspire your life and challenge your life, and your life pursuits as well. You guys do the good work, and I wanna encourage people that do the good work, so follow me, catch up with me.

Joe Fairless: Well, I’m so grateful that we had a chance to talk and learn more about what you’re doing, learn your philosophy, your approach, your story, and some lessons – I was taking notes the whole time – that I learned along the way… And all of these apply to not only real estate investors, but entrepreneurs, and that is prepare yourself for when you can’t play; we’re not talking just football, right? We’re talking about retirements, we’re talking about preparing yourself for the next season of your life, to use the analogy that you think of and you use often… And that is making sure we’re aware of where we’re at, and then where we’re headed.

In that transition, with your NFL background – you said that is your identity at the time, because it has to be, it’s all-encompassing, and when you need to create a new identity, you tested some things out and you gravitated towards people. Now your approach is to motivate, educate, inspire and entertain people you come across, and it’s very clear, and that’s the world that you live in and that’s what you do.

Another thing is – I love this – people will root for you at the level of their expectation for you. That’s something that we could probably talk about for 30 more minutes, I imagine. That’s some pretty impactful stuff, if you think about it.

And from a breaking into an industry – and this could be real estate, this could be whatever venture a Best Ever listener wants – one of the takeaways where you broke into an industry at the highest level (NFL), it was through your versatility, finding a way to be valuable. That can be applied to every business venture there is. If you wanna break into something, don’t square peg a round hole type thing — or square peg… Whatever, you get it. You want to be able to identify different ways in, and be able to maximize your unique abilities in those industries and show a lot of value in different ways, not necessarily just trying to be good at really one thing, but really what’s the best approach to take, and be versatile.

Lastly, I’ll say that when want to connect to people’s heart, you not only told us how to do it, but you showed an example of it, and we’ve talked about this earlier… An example for how to do that is put yourself in the other person’s shoes first; second, acknowledge the good that they are doing (assuming that they are doing good, which most people are), and acknowledge that because most of the times that person has not acknowledged it themselves. That’s really important, and that’s something that we can all use as a practical tip to connect with others.
Thank you so much for being on the show…

Terrell Fletcher: Absolutely!

Joe Fairless: I enjoyed it! I hope you have a best ever day, and we’ll talk to you soon.

Terrell Fletcher: Thank you so much. Thank you, thank you, thank you!

Best Real Estate Investing Advice Ever Show Podcast

JF1044: What Your Financial Planner Isn’t Telling you About Retirement

Charlie started out as a real estate agent, but wasn’t fulfilled. After becoming a financial advisor, he found a better way to plan for retirement. He’s destroying the sacred cows of “make a large down payment and pay off your mortgage as soon as possible”.  Listen in to hear how he advises to plan for your retirement, which includes making better returns than the stock market while also keeping it safer!

Best Ever Tweet:

Charlie Jewett Real Estate Background:
-Owner of Jewett Wealth Management and Member of The Estate Planning Team
-Host of The Renovating Retirement Podcast Financial Advisor specialist and insurance services
-Author of Renovating Retirement
-Based in San Diego, California
-Say hi to him at www.jewettwealth.com
-Best Ever Book: The Power of 0%

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planning for retirement and finances


Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.

With us today, Charlie Jewett. How are you doing, Charlie?

Charlie Jewett: I’m doing great, thanks for having me, Joe.

Joe Fairless: Nice to have you on the show. A little bit about Charlie – he is the owner of Jewett Wealth Management and a member of the estate planning team. He’s also the host of the Renovating Retirement podcast. He’s a financial advisor specialist and he is the author of “Renovating Retirement.” I think I’m sensing a theme here… Based in San Diego, California. With that being said, Charlie, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Charlie Jewett: Absolutely. My background was in real estate sales. I was a realtor here in San Diego, California, I realized I didn’t like working Friday nights and weekends, which is when everybody wants to close on residential properties. I did like the numbers, I liked the finances, so I crossed over into the mortgage industry and I ended up managing 80 loan officers, and through that industry, I read a couple of books that I thought would help me help my team do more mortgages, and I ended up bumping into comprehensive financial planning, which I call MERIT planning – mortgage plan, estate plan, retirement plan, insurance plan, tax plan.

I became a financial advisor, but during that time I also purchased 15 of my own homes in that short period of about nine years. So I dipped my toes in the real estate investing world, had some success – certainly not as much as I wanted. There’s things I do different that I’m learning from your show, but background of a real estate investor, real estate agent, mortgage professional, then crossed over, studied taxes, estate planning, insurance annuities and investments, and now I just do crazy comprehensive all-inclusive plans, which is what people really need.

Joe Fairless: You gave us so much to talk about… Thank you. [laughs]

Charlie Jewett: Three hours show. It’s only gonna be a three hour show…

Joe Fairless: That’s right, that’s right. After over 1,000 episodes, why not break the mold and just start a brand new format, right? I wanna make sure I wrote this down right – 19 houses or 9 houses in 9 years?

Charlie Jewett: 15 houses in 9 years.

Joe Fairless: 15, okay. Option C, 15.

Charlie Jewett: There you go, door number C.

Joe Fairless: Yeah, door number C. 15 houses in 9 years… You said you’d do it different – let’s talk about that. What would you do and how would you do it different?

Charlie Jewett: Probably the thing that I’d do different than anybody else that’s in the traditional real estate world is I don’t finance properties the way that you’re traditionally taught to do so. When I first got into the industry, I studied what I call the three pillars of financial deception, which is you should pay off your mortgage, you should postpone taxes to a later date using [unintelligible [00:04:56].29] and you should diversify, meaning spread your money around only one type of investment, such as securities. I’ve heard your background – you realized how lacking that type of profits were… I went into real estate. I studied all three, and I 100% do not agree that you should make large down payments, pay extra principle, use 15-year fixed or try to pay off mortgages to “cashflow.” It only hurts you.

I turned around, I wrote a book on that. You mentioned Renovating Retirement, but I also wrote a book called The Two Ways To Be Debt-Free. When I work with investment property owners or just basic home owners, I’m showing them why you should have the biggest, fattest, hugest mortgage possible AND keep that money somewhere else where it’s earning 6%-7% while you pay 3%-4% tax deductible (or 4%-5%). Who knows when people are going to listen to this… Let’s call it 4%-6%, or whatever.

You should pay a mortgage while keeping your money liquid, safe, earning an arbitrage – which is earning a little bit more than you’re paying – and giving you the benefit of tax deductions, keep more of your rent (which is true cash flow). So I 100% disagree – I can prove it over and over again – with people that say you should pay off your mortgages. Other than that, I don’t have strong opinions on the subject.

Joe Fairless: [laughs] What an interesting topic, because I love this approach and I completely agree with you. There are tax advantages to having a mortgage, and the flipside is that people think “Well, I also don’t wanna be overleveraged. I’d rather just get rid of the mortgages.” But as you said, if you’re making a rate of return higher than the interest rate that you’re paying on the mortgage, then you make the difference and you have that asset that is making the higher rate of return than your interest rate on the mortgage – you have that continue to make you money.

Charlie Jewett: Right, and the biggest gift you and I could give to anybody – this is the magic of comprehensive financial planning is there is one financial plan, it’s what you do with your mortgage plan, estate plan, retirement plan, insurance plan and tax plan. It’s everything. Just like a house is not plumbing or electricity, it’s the sum of all of those workers’ efforts… It’s architectural.

So if you told a bank or an insurance company that they should be debt-free and they should listen to one of the ridiculous financial pundits who’s popular out there and pay off your mortgages because it saves you interest – if you listen to that advice or you told that to a bank or an insurance company, they would laugh in your face… Because the entire business model of banks and insurance companies is “Acquire debt, get people to put money in CDs, get people to put money in annuities or life insurance” where they pay you 2%-4%. Why do they want that debt? Why do they pay commissions to financial advisors to acquire that debt? Well, Joe, they’re turning around and lending it out at 4%-6%. If you’re paying 2% and making 4%, you’re making 100% rate of return.

Every mortgage that anybody has – you can be the bank, you can be the insurance company, but there’s one piece missing that nobody knows; when we give it to them, it’s a gift that sets them free, which is “Where do you store that money?” If you’re not gonna make a 50% down payment, but you’re gonna make a 10% or 20% down payment, where do you store the money where it makes 5%-7% tax-free, safer than being in a home, so that you’re creating an arbitrage? Where can you put the money so that you have a bigger loan, at 4.5%-5%? You can be making 5%-7%. Most people not only don’t know where to put it, worse – which is why the whole show Renovating Retirement is about what criminals and crooks the financial services industry are for ripping everybody off on a HUGE grand scheme… I’m revealing all the secrets to show you how to hold your advisor accountable, end up firing them, basically… Or hold them accountable and make them do what’s right — but you cannot build this tool without doing something that nobody wants to do, which is dropping your commissions by 75%.

If an agent doesn’t build it the right way, you’re not gonna make enough money to create an arbitrage. If it’s built the right way – and I will go to my grave just preaching this – if you can go make 5%, 6%, 7% after all fees, compounded, tax-free, where you keep it all, and you can be paying 3%, 4%, 5% tax-deductible, that arbitrage is beautiful.

Joe Fairless: So where do you put the money?

Charlie Jewett: I put the money into a certain type of life insurance that’ll shock people, but there’s book — you’re gonna ask me about the best book I’ve ever read, and I can give you a little sneak preview… The author trained me 12 years ago. There’s books on this – I wrote a book on this, and there’s probably five good books on it. E.F. Hutton in the ’70 and ’80 discovered life insurance is where you can grow money tax-free. Joe, this is pre-law of IRA. Back then you had municipal bonds, and you had nothing… Or you had what he discovered, which is life insurance.

The problem is whole life sucks; whole life’s returns are like 2%-3%. E.F. Hutton created something with a checkered past; it’s called “universal life insurance” – have you heard of that?

Joe Fairless: Yeah, yeah.

Charlie Jewett: You read Investing For Dummies, right? Universal life insurance has this checkered past, because it came out in the ’80s and the agents were showing people that they’d make 14% a year for the rest of their life, because in the ’80s some things made 14%, even [unintelligible [00:09:51].02]

That’d be like saying the stock market is gonna go up forever now because of quantitative easing or the Trump run-up, which is silly. So it has a checkered past, but as a tool, today’s indexed universal life insurance policies, minimum death benefit, lowest death benefit possible, right product, right design, drop the commissions…

There’s a video, by the way, that you can point your listeners to on YouTube called “The Six Ways To Improve Your Cash Value Life Insurance”, where I’m teaching how you do what I’m saying to a life insurance policy to make it work for you. You can get the expenses down so low, that this thing with a 30-year average of 8,2%, your expenses might be 1% or 1,5%. 8.2% – 0.5% is 7.7%, so you’re at 6.7% net compounding rate of return, tax-free, that you don’t have to share with anybody, in a product that doesn’t go backwards when the market goes down, because there’s a floor of 0% (you never lose money).

Everybody right now with rates going up should refinance every property in their portfolio to the biggest loan, the loan you’re gonna keep on it forever. They don’t know how, but I can show them 1) how you cover the higher mortgage so it doesn’t come out of your pocket; 2) the most important piece – where should you store home equity, in a home equity savings account, if it shouldn’t be inside the home, where it’s not liquid, subject to depreciation, not earning a rate of return and hurting you on taxes… Where should you put it where it is liquid, is safe, is earning a higher rate of return than the mortgage and helping you on your taxes? When we show them that tool, they go “Oh crap, it’s too good to be true.” They go study it, find out it’s true, and all of a sudden it changes everything.

Joe Fairless: I have a conversation with someone who talks about investing in life insurance policies once every seven months, and every time I have a conversation, I always highlight it but I haven’t acted on it yet. I think you’re finally pushing me over the edge where I need to act on it and do it for my own stuff, because I have some friends who also are doing this and they speak about it in such endearing ways, because it works out so well for them.
I guess the initial reaction I imagine people have when you talk to them about life insurance policies is one of suspicion, and something that sounds too good to be true, and perhaps there’s a negative connotation with life insurance salesmen or whatever, and maybe that’s where it’s coming from… But I’ve heard this a decent amount of times from people who I’ve interviewed, and I’m not doing it, but I think you’ve pushed me over to the side of actually doing it.

Charlie Jewett: Yeah, well let me give you a gift. One is you can’t get a better life insurance policy on the planet than the ones I’m building. I will stop saying that when I find one more person who’s doing the “drop your commissions by 75%.” However, for real estate investors there’s probably nothing more important than this, because every property is 100% financed – most people don’t realize that. Every single property you buy is 100% financing; if you make a down payment of 20%, you are financing 20% with lost revenue. The opportunity cost of the money you put down not being somewhere else. Does that make sense?

Joe Fairless: Yeah.

Charlie Jewett: When that somewhere else is what I’m talking about, 5%, 6%, 7% tax-free, that means for every $100,000 you are losing 5k-7k a year, and you cannot write that off on your taxes. 100% financing, which we used to be able to get before 2008 if you [unintelligible [00:13:21].03] or whatever we do today, or people that try to pay a giant down payment to “save themselves money”, all they’re doing is hurting themselves. They’re taking their money out of commission, but what your listeners don’t know and maybe you don’t know, Bill Manassero didn’t know, and he interviewed me — is if you understand life insurance and how to use it like a bank, you can have – brace yourself – second mortgages on investment property, so 100% loan-to-value at 4.3% tax-deductible, no payments due ever; no monthly payments, not due until you die and then someone else pays it off for you. Does that sound attractive for investors?

Joe Fairless: Maybe. I don’t know about leaving my kids or grandkids with a bunch of stuff they have to pay off after I die.

Charlie Jewett: That’s the key with life insurance – the death benefit is so high that it pays off all of the mortgages and leaves more to the kids, plus the value of the property. You always leave two or three times as much to your loved ones by our way, versus just pay off the home and leave them whatever’s in it. The value of the home is always the value of the home, right?

Joe Fairless: Right. So say that a little bit slower, that way I can take notes. You said with a life insurance policy you can get a second mortgage on all of your investment properties…

Charlie Jewett: Right, so if you have money inside of life insurance and you’re gonna buy an investment property, the banks aren’t gonna do this for you, nowhere else you go will do this for you, but an insurance company will. They will lend you money, you can put it down on a property as a down payment – so basically you have a second mortgage… If you’re borrowing money for a down payment it’s a second mortgage, right?

Joe Fairless: Yup.

Charlie Jewett: You have a second mortgage to 100% loan-to-value. Today’s rates are 4.3% based on Moody’s corporate bond rate (based on a bond rate), there are never any payments due on an insurance loan – unless you take all the rest of the money out and there’s no money in there, but as long as you manage the policy you’re supposed to there’s never any payments due… They will pay themselves back when you die out of a death benefit we didn’t want in the first place, which may not make sense unless you read a couple of these books. But any property handled the way I’m talking about, you never have to put a single dime of your own money in, so you’re fully leveraged, and all of the costs for the 80% traditional loan or 75% traditional loan plus this insurance company’s second mortgage – all of those costs are lower than what we’re earning where we keep the money.

So we keep our money liquid, keep it safe, keep it making an arbitrage where you’re paying 4%-5% and making 5%-6%, and your tax deductions are as high as they possibly can be, which lowers your taxes, so you keep more of your rent. That is true cash flow.

Joe Fairless: In order to have a policy — say my down payment is $20,000. In order to have the second mortgage, so to speak, and have the life insurance policy cover that $20,000, I need to have probably $20,000 in the life insurance policy, that way we’re borrowing against what we already have in? Is that correct?

Charlie Jewett: Yeah… The key to comprehensive planning is to look at the five pieces, which is like, say, plumbing, carpentry, roofing, masonry work and drywalling in the home industry. This industry just does a terrible job. People get tax advice only looking at taxes; they get investment advice only looking at investments. If you look at the whole thing and somebody redoes their mortgage plan, estate plan, retirement plan, insurance plan and tax plan all at one time, one of the things that always happens is money that you have inside of properties already, money that you have in brokerage accounts, whatever – that gets transferred to family banking, that gets transferred to some sort of life insurance vehicle that’s beating the stock market.

The safe investment is beating the stock market, the stock market becomes useless. So when you do your whole plan and you move money into these banking concepts or safe investments, whatever, that cash value then in the future is available as collateral for doing insurance company loans, which can just by more properties.

By the way, why would I do 100% financing on every property, if they still offered it? If you take the money out of the properties before depreciation happens – now, Joe, you sound young, I’m young… Mortgage meltdowns are not the only reason properties go down in value. The number one reason properties go down in value is when interest rates on loans go up, and people can’t afford the payments, so nobody’s buying, and the seller still wanna sell and they go “I’ve gotta incentivize these guys”, right?

Historically, when the rates go up, values can go down, and we haven’t even seen that in 17 years, or whatever… But that’s what happens. When rates are starting to crawl up, if you get all the money you can out before the rates go up, or before another mortgage meltdown (who knows?) and then you’re holding it somewhere safe when property values come down, that’s when you wanna be buying… You wanna be in a position of not leaving the equity in your homes so that you lose it when everything goes down; get it out first, put it somewhere safe where you can never lose it, wait for properties to crash, then you wanna buy them with none of your own money. Use bank financing, use the second mortgage from the insurance companies…

You were spot on – if you’re gonna borrow 20k, you probably want 25k-30k of cash value sitting in the life insurance policy. In my type of planning that’s easy anyway, because it’s beating the stock market; we use it for a giant piece of the money.

Joe Fairless: What would be some resources that the Best Ever listeners can watch…? I mean, you mentioned your video… What about some books?

Charlie Jewett: First we’ll do the Bible… So what’s the best book I’ve ever read in my life on this type of planning? Missed Fortune 101 by Douglas Andrews. Missed Fortune 101 is the 250-page version of this 550-page book called Misfortune, which is all that was around when I studied this in 2005. Missed Fortune 101 has three parts: why you shouldn’t postpone taxes to a later date because you’ll probably be in a higher tax bracket… The whole thing was a scam from the IRS. Second part – why you should never pay off a mortgage, because it only hurts you, because equity is not liquid-saved; you’re not earning a rate of return and it hurts you on your taxes. Third part of the book – if you’re not gonna pay extra principle to mortgages, not gonna make big down payments, if you’re gonna do a cash-out refinance and take money out of a home to borrow at 4%-5% tax-deductible and put it somewhere else, where is this somewhere else? It goes into life insurance, it does a really deep dive, basics on understanding life insurance.

You can also read Patrick Kelly’s “Tax-Free Retirement”, David McKnight’s “The Power of 0%”, my book, “The Two Ways To Be Debt-Free” on why you should never pay out the mortgage… So book-wise, you have those.

My video is at WatchCharlie.com. I made it easy. The YouTube channels – now the names are ridiculous, it sounds like r2d23cpo and then seven alphabets from Arabic languages, right? So my videos can be found at WatchCharlie.com. I just put up three hours of everything I teach: IN-Case, IN-Come, IN-Crease. You need three types of money: IN-Case accounts, IN-Come accounts, IN-Crease accounts, which could be retirement funds, yet to be taxed, or it could be after-tax money like we’re talking about. The after-tax money, the IN-Crease Accounts number two is an hour on just this tool, just how you use life insurance, why do people use life insurance; I hear life insurance is expensive and is a terrible investment, blah-blah-blah… But guess what? A Crown Victoria is kind of a crappy car, but the police departments that use Crows Victorias don’t use the crappy car; they buy it and then they fix it up, they tweak it and make it a cop car, and that’s what we’re talking about.

It’s not what club you buy, it’s how Tiger Woods (or whoever won the Masters) uses the club. I wanna teach people how to use life insurance; even if it starts out crappy, how do you tweak it, lower the death benefit, change the death benefit, assignment of level increasing, and then take out the commissions – how do you use it and tweak it and soup it up and make it beat the stock market or make it a place to hold money and borrow against to buy real estate with 100% second mortgages.

Joe Fairless: As you’ve gone through the education process and now implementation process of this approach, what mistakes or callouts would you have for listeners who plan on doing this? Either mistakes you’ve made, or mistakes you’ve seen people make in how they’re setting this up.

Charlie Jewett: Before I bought my first home, I read this book “Misfortune 101”, so it’s not arrogance – I did everything the guy said, so I didn’t make the mistakes. I did the largest mortgage possible on every property, did 100% financing every time I possibly could… I had 40-50 clients that did 100% financing on every property prior to the mortgage meltdown. When I tracked how my clients did and how I did, versus how the people who said no to me did after the mortgage meltdown, and it was incredible. My team did really well, other people got crushed, which you always will if you leave equity in the home and the values go down. But the mistakes that I’ve seen that I want people to avoid are believing the baloney that somehow making a big down payment saves you money or that mortgages are expensive, so that free paying interest or paying extra principle — I know it’s a sacred cow, Joe. I’ve been attacking this non-truth for 12 years and I understand how people respond. Only humble people can receive this truth. You have to say “I don’t care about tradition. All I care about is what it’s accurate.” When you study it, you get to the other side and you go “That is no longer accurate.”

So what’s a mistake that I want other people to avoid? You do not put a giant chunk of money inside of a piece of real estate, whether it’s a primary residence or a rental. You permanently destroy one of the tax deductions you get called acquisition indebtedness, you’re hurting your cash flow, you’re hurting how much you’re worth when you’re dead, you’re hurting how much long-term carry you’re getting, you’re hurting your kids when you leave money behind in the next life — I haven’t mentioned that: long life, short life, rough life, sick life and the next life, depending on how you manage your financial plan. The mistake would be paying extra principle, using 15 year fixed mortgages or making big down payments… You don’t need to do that. You think that’s lowering your costs or what you pay monthly and increasing cash flow, and it’s not.

You can have another plan using the smallest down payment and the biggest mortgage possible (30-year fixed) and how much ever higher the mortgage payment is can be covered inside of the plan. These are budget-neutral strategies. Whether you have no mortgage or you’re 100% financing, the same out of pocket is coming out of your pocket my way, because the plan itself pays for the higher mortgage.

So the biggest mistake I think people are doing is believing the ignorance out there of the people that are still teaching that building equity inside of homes somehow saves you money or is somehow conservative when it’s not. They just need a little but of retraining. They can read my book…

Also, by the way, I’ve put an entire hour long video… I was asked to come in and teach this concept in Utah, so I’ve put an entire hour long video on the same YouTube channel, WatchCharlie.com. Just go look for the video where I’m standing up in a suit and I look kind of fat (because I was). It’s about an hour long; you can watch it and learn what I taught those people.

No one argues it. Some people say “I would feel emotionally icky, because my dad and my mom told me not to do this”, but nobody can argue the math, which is what’s important in financial planning.

Joe Fairless: Based on your experience – and I think I know what’s coming, but I’m gonna ask you the question anyway – what is your best real estate investing advice ever?

Charlie Jewett: Best real estate investing advice ever… We’ll do financing and then property choice. Financing – I would say don’t use any of your own money. 100% financing, every single time. Obviously, buying the right deal, all that kind of stuff.

So certainly, don’t take any of your money out of commission, where it could earn 5%, 6% or 7%; even if you don’t know where to do that yet – I’ll teach you, that’s fine… But don’t give up 5%, 6%, 7% to try to save yourself the cost of a mortgage, which would be 4%-5% tax deductible as of recording this.

Property choice-wise — you know Bill Manassero, right?

Joe Fairless: Yup.

Charlie Jewett: Yeah, Bill Manassero’s trying to get 1,000 doors, and he’s owned multi-unit properties… I know you guys do all kinds of stuff, but my personal experience was owning multiple single-family homes – that I was either managing myself or trying to hire a money manager – was inefficient, not a lot of fun… I was making money, but I hated it so much that I got out of the industry and said “I don’t know if I like real estate investing.” Your show, or Bill’s (show) – people like that have got me interested again, that there’s another way to do it based on my personality, which is probably not the “one house at a time” strategy, but more mobile home parks or multiple-door apartment buildings or something like that… Or even possibly being a silent partner; I don’t know if I’m the guy to manage the manager or manage the properties. But the way I did it didn’t work for me, wasn’t very efficient, but financing-wise, I could help any of your listeners to either confirm, pat them on the back and go “Yes, exactly what you’re doing is the most efficient way financially speaking” or, here’s a little tweak – “It costs the same as what you’re doing, using tools you didn’t know existed (Bill confirmed they exist) and this is gonna set you up better.”

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Charlie Jewett: Absolutely.

Joe Fairless: Let’s do it. First, a quick word from our Best Ever partners.

Break: [00:26:35].25] to [00:27:40].22]

Joe Fairless: Best ever book you’ve read, that you haven’t mentioned already.

Charlie Jewett: One I haven’t mentioned already is the Power of 0% by David McKnight – How To Put Yourself In The 0% Tax Bracket.

Joe Fairless: Best ever deal you’ve done?

Charlie Jewett: Best ever deal I did was I bought a house for $800,000, 75% negative amortization first, 25% interest-only second. It went up to $880,000, I took 80k cash out by refinancing it. Then my business fell apart in 2008, and just like the book teaches, I called them up and said “I can’t make the payments right now. What do you want me to do? Do you want the house?” and they go “No, we want you to stay there.” I go “Okay”, so I rented it to a rockstar – which you guys would recognize – and while not paying the mortgage and negotiating a loan modification, I rented it for three or four years, short-sold it for $375,000, was forgiven the difference between the 375k and the million it had gone up to, and then California waived the taxes, yet I still had put no money in it, so I could rent the whole time… I had the $80,000 I took as a cash-out – that’s what these strategies will do for you.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Charlie Jewett: A mistake on a transaction… I bought a property one time here in Mission Valley in San Diego that the builder was renting back at $7,000/month, which sounded absolutely amazing. But that really wasn’t market rent, so when I bought it I didn’t think “Well, when the builder’s done, what’s it gonna go to?” [unintelligible [00:29:03].06] Your basic young, ignorant person going “Hey, things are going well. They’re probably gonna go well forever”, as opposed to saying “Plan for the worst, assume the best.”

That’s the only property in the 15 that we lost money on. We ended up selling it for a loss when it was over.

Joe Fairless: What’s the best ever way you like to give back?

Charlie Jewett: Renovating Retirement for me is the giveback. You can tell the pioneers from the arrows in their back, but the industry doesn’t like me very much. I get hate mail and all kinds of stuff, because Renovating Retirement is me saying “Hey listen, I’m pissed off. I’m the whistleblower. I’m in this industry, but turning on my own industry, saying what we’re doing corporately is wrong. We’re stealing 30%-40% of people’s retirement from them for a little bit of extra commission up-front”, or God forbid you’re with one of the brokerage firms and they’re just jamming you into mutual funds, ripping you off for the rest of your life.

So my give back is free education, 91 podcasts – I know that sounds high to me, but oh my goodness gracious, you’re [unintelligible [00:30:01].07] so it doesn’t sound high to you… But 91 podcasts, probably 30-40 hours of education at RenovatingRetirement.com and WatchCharlie.com, or I do Truth In A T-Shirt – I teach as much as I can in a T-shirt, because who needs a suit?

Joe Fairless: Alright, cool. I would ask you what’s the best ever way of getting in touch with you, but you’ve mentioned that multiple times throughout the conversation, so I don’t think we need to do that.

Charlie, this has been an educational interview, that’s for sure… An interview about clearly something that you’re passionate about, which is enjoyable to talk to someone who is passionate about what they’re doing. I completely agree with you on the front of not paying off your mortgage early, instead invest that money into something that is paying a higher rate of return than your interest rate on your mortgage, and then you can enjoy the difference in that spread. That’s one takeaway, for sure.

And your vehicle that you use to invest that money is the index life insurance policy – I believe that’s what you’ve said.

Charlie Jewett: You’ve gotta tweak it, you’ve gotta make it a cop car.

Joe Fairless: You’ve gotta tweak it. So thanks so much for being on the show, Charlie. I hope you have a best ever day, and we’ll talk to you soon.

Charlie Jewett: Thanks, Joe.




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Best Real Estate Investing Advice Ever Show Podcast

JF1020: Your Real Estate Website Could be Illegal #SkillsetSunday

Yes, you could have an illegal website. There could be items on your site that you are not able to back up or you need a license for. You have to be very careful in today’s day and age, and our guess is about to share with you how you can.

Best Ever Tweet:

Richard Chapo Real Estate Background:
– Internet law attorney with SoCalInternetLawyer.com
– Advising small and large online businesses how to best comply with internet laws
– 24 years of experience in providing legal services
– Based in San Diego, California
– Say hi to him at www.SoCalInternetLawyer.com

Click here for a summary of Richard’s Best Ever Advice: How to Avoid Lawsuits When Offering Real Estate Related Services

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creating a legal real estate site


Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.
I hope you’re having a best ever weekend. Because it is Sunday, we’ve got a special segment for you called Skillset Sunday, and holy cow, you’ve gotta pay attention… If you have a website – which I know you do – as a real estate investor (at least an active real estate investor, I know you do), then we have a guest who is going to identify the areas that you need to address within your website from a legal website. How are you doing, Richard Chapo?

Richard Chapo: Doing well, thank you for having me on.

Joe Fairless: My pleasure and nice to have you on the show. A little bit about Richard – he is an internet law attorney at SoCalInternetLawyer.com. He has been advising small and large online businesses on how to best comply with internet laws. He’s got 24 years of experience. Based in sunny San Diego, California… Richard, before we get into the details of identifying areas that need to be addressed for our website, can you give the Best Ever listeners a little bit more about your background just for some context?

Richard Chapo: Certainly. As you’d mentioned, I’m based in San Diego. I’ve been practicing law for 24 years; I originally started out in a litigation firm – I think it was called [unintelligible [00:03:40].01] dealing with complex business issues, construction products, things of that sort. In 1999 I headed off to  Russia for a year to teach. At that time Russia was still working through the whole process of going from a communist society into something more democratic, or whatever it is they have today.

I was there for a year, then I came back and I had a friend, an attorney who I partnered up with and we started getting into the internet field, because although it’s a major part of our lives today, in 2000 it was still pretty new. Google and those types of companies were really just starting to get rolling and there were a lot of interesting issues for us from a legal perspective.

I’ve been practicing since then… I represent everybody, from blogs to dating sites to software companies, both in California and around the world.

Joe Fairless: Alright, well you have quite a well-traveled background, and we’re fortunate to have you on the show. Let’s talk about — as active real estate investors, most of us have a website. We’re not experts – most of us, myself included – in 1) the programming or layouts, and also just the online approach that we need to take, but 2) we’re definitely – unless we’re lawyers – not privy to what type of disclaimers we need to have, what type of documents, or lines of copy or trademarks that we need to include on the website.

Help us understand what are the areas that we need to look at with our website in order to try and shore it up as much as possible?

Richard Chapo: Well, the interesting thing about a website, for the Best Ever listeners, is that it depends specifically on the functionality that you have on the site, but there are basic things that you wanna put in place that will help limit any risk that you would have operating online… Unlike brick and mortar businesses, there are some concerns that come up from a legal perspective that are unique to the web, and one of the biggest places to start with is privacy.

You need a privacy policy. Even if you don’t care at all about the legal ramifications, Google considers it a ranking factor; so if you’re trying to get rankings on the web, in the Google search results, you want one for that reason, if nothing else. But the bigger reason that you want one is we’re starting to see privacy become a serious issue for companies based on the type of tools that you use.

The states – particularly in the United States – there are privacy laws that require you to do things such as state whether you follow or do not track signals. What happens is some browsers – if you go on Google Chrome and other browsers – you can go into the settings and you can pick a position where you ask not to be tracked. Those browsers will send a signal to your website whenever you go to it, and the website then can either respond and stop tracking with cookies and web beacons and what have you, or not.

What’s happening with these laws is you have to make these disclosures in your privacy policy as to what your positions are.

Google Analytics is a free tool – extremely popular, extremely good tool, but Google tracks websites across a variety of websites, and what they’re really doing is they’re creating marketing profiles for users. They may not know their names, but they assign them an ID, they know the different websites they go to.

For the Best Ever listeners, if you think about it – say you’re interested in potentially buying a Toyota truck and you go to Toyota’s website, and then subsequently you go on Facebook or you go to these other sites, then suddenly there are all these Toyota ads popping up. That’s because of their tracking; that’s what they’re doing – they’re following you, they’re seeing where you’re going, and then they’re showing you ads based on your interest. The big question is “Well, should they be allowed to do that?” and in the United States the answer is yes. In the European Union, the answer is “Well, there should be a lot of disclosures and qualifiers”, and what’s happening is [unintelligible [00:07:20].21] trying to enforce those rules on Google and Facebook and these companies, regardless of where they are in the world. What that means for people that are using Google Analytics, and everything from Amazon to all these different little programs, is you need to include certain disclosures in your privacy policy. Those disclosures really should be something that you talk to a lawyer about; they have to be legalized, they have to be written in a specific form.

Basically, what they say is “We use these tools. These tools will track you across the web, and here are the links you can go to to block them.” That’s an important aspect to that.

The other thing with privacy policies that is important is that if you’re collecting information from users, one of the things that’s very common is people will say “We will not share, sell or rent your information with third-parties”, and it sounds like a noble concept. However, if you ever actually wanna sell your business or your website, that information is valuable. And on the web, if somebody wanted your site for some reason, it is usually THE most valuable thing… And you’ve just essentially barred yourself from selling the site.

Let me give you an example… True.com was a large dating site. True.com’s parent company had problems and went into bankruptcy, and True.com in their privacy policy has a statement “We will not sell, share or rent your information.” Another dating site called Plenty of Fish came along and tried to purchase True.com’s customer database for $700,000, and the attorney generals in Texas and in a variety of states objected saying “No, you said that you wouldn’t share or sell this information”, and the Court upheld that, and the transaction was terminated. So it was a significant effect for a little statement that you’ll see in privacy policies.

Joe Fairless: Yeah. Well, they shouldn’t have put “We won’t sell your info or share it with anyone else.” That’s something that I bet a lot of people don’t think of, myself included. I wouldn’t think of 20 years from now if I were to sell a certain portion of my company that since I have that statement – because I’m pretty sure I have it on my website – that I can’t do it.

Richard Chapo: I would say 90% of all websites have it. One of the beautiful things about the internet is everything is free, but one of the terrible things about the internet is legal documents are often free, and you can go get free privacy policies and things of this sort… They’re not written by lawyers, and they have these statements and they just kill companies.

Zappos… Zappos is a huge company, and Zappos’ terms were [unintelligible [00:09:41].04] by a court and it ended up costing them millions of dollars – a case where they were hacked – and they were using terms that anybody that was a first-year law student would have known never would have been enforced. This is a company that Amazon purchased for some huge amount of money, so even large companies have this problem.

As far as going back to — if we think about a real estate investing site, images… If you’re taking your own photos of properties, then you’re in perfect shape, there’s no issues there. But if you’re using photos from other sources, copyright is an issue, and you need to make sure that you have the right to use those photos. Now, if you’re pulling them from an MLS system or something of that sort, all you have to do is read through the license and there will be something in there about if you can use the photos, or just ask. But going out and pulling photos from other sites without asking or without getting permission could lead to copyright infringement claims, and you have seen this in the real estate industry where sites have gone after each other. It’s been the larger sites, because they’re pulling content from each other – it’s called scraping, and it’s very aggravating… And copyright infringement lawsuits are expensive to defend.

I realize most people aren’t gonna be doing this with nefarious intents or anything of that sort, but it is something you always wanna think about. “I have this image, I’m gonna put it up. Where did I get it from? Do I have permission to use it?” That will eliminate a lot of problems… Any kind of visual site. It’s true also with videos, it’s also true with the descriptions of the property… Anything that you’re copying from another site – make sure that you have permission for that.

Joe Fairless: What about royalty-free websites and just pulling images from there?

Richard Chapo: It sounds like a great concept; I’m always nervous about it… I have had clients that have had problems. They’ve received letter – Getty Images is kind of the famous predator online… So if the Best Ever listeners don’t know about this, Getty Images will send out these letters that basically say “You’re using this image without permission. Send us $5,000 or we’re gonna ruin your life.” They have these great predatory letters…

The problem with royalty-free sites is you just don’t know what the quality is. You always have to think about, well, okay, if I get sued and I turn around and I go back to the site and say “Hey, you told me I could use this”, well who is that site? If it’s an entity somewhere in Hong Kong or India, you’re out of luck.

So I’d prefer the paid options… The costs have really come down. There’s a company called Fotolia.com – they offer stock photos that are pretty cheap. But if we’re talking about real estate investing, obviously with the properties, if at all possible, you wanna take your own photos. You really want to take your own photos of yourself… It depends on what your unique selling position is and how you’re marketing yourself, but personalized photos is something applicable to you, your personal brand… They’re favorable over stock photos, regardless of royalties and where they come from.

When people see stock photos, they know they’re stock photos. They no longer carry the value that you’re hoping for.

Joe Fairless: I can tell you’ve got another point, so I’d love to hear it.

Richard Chapo: I was just gonna mention Terms & Conditions. Terms & Conditions, for anybody who has an iPhone or [unintelligible [00:12:36].00] but particularly Apple… Apple is infamous, they’re always requiring you to agree to the terms & conditions. With investing sites, if users aren’t required to do anything, meaning they can just browse through the site and leave, terms & conditions are difficult to enforce.

What terms & conditions are is they’re just a contract that governs the usage of the site. If you think about Netflix – Netflix is obviously streaming video… When you sign up, you agree to their terms and conditions that says you’re gonna be charged monthly, here’s how streaming will work, “We’ll get streaming to you as much as we can, however we can’t guarantee you it’s gonna be working 24/7 every possible day…” There’s all these little legal terms that you have.

What courts are saying basically at this point is that terms & conditions are not gonna be binding on your listeners or on anybody who’s using the site unless they click a box that says they essentially agree to the terms & conditions and privacy policy. This is why you see this now on various sites.

The reason for that is, if you think back to 2000 when legal issues were coming up on the internet for the first time and were being presented to judges, most of the judges didn’t even have e-mail. Judges now use the web just like anybody else, and they know full well that the chances of anybody ever scrolling down a website, all the way to the bottom, and clicking that link and reading those terms or reading the privacy policy is next to nil. It’s not a real world solution. So they’re very hesitant to enforce those on customers, when everybody knows they’re not being read.

So that check the box provision is really essentially a signature from the user, saying “Okay, I’ve read this.” Realistically, they haven’t read it still, but they know that it’s there and they know they’re agreeing.

So if any of your listeners are using a site where they’re causing somebody to do something, be it a purchase, be it joining a membership for advice or something of that sort where the user has to take an affirmative action, you wanna use that clause.

And it’s not even a legal [unintelligible [00:14:32].08] really. If the site is built on a WordPress template, there are plugins out there that will do that for you. If it’s built on another platform, there’s scripts [unintelligible [00:14:40].21] Javascript and what have you – that your web designer should be able to find and apply to the website. Once you do that, then the terms become binding on the users and it’s much better.

Here’s the reason why the terms are important. The beautiful thing about the internet is it’s worldwide. From a legal perspective, the danger of the internet is it’s worldwide. If a Best Ever listeners is in Florida and had investment properties, and they have a members area that they charge $9/month for, or something of that sort, if a member grows unhappy and that member is located in Seattle, if the member files a lawsuit in Seattle against the site, well, where is that lawsuit gonna be heard?

In the terms & conditions you can have something called a choice of forum clause. That clause simply says “Any and all legal disputes are gonna be heard in Florida”, or wherever the listener is located. Google uses this, Twitter, and they’re upheld about 75% if the time there’s an equity evaluation that a court will do… But they’re upheld about 75 % of the time, and just having that single clause and binding users to it can often eliminate lawsuits, because is a person in Seattle gonna go to Florida to pursue a lawsuit for something that maybe has the cost of $500? It’s pretty unlikely.

Joe Fairless: Right… It shields from the frivolous litigation. It wouldn’t from the big time stuff, but from the frivolous stuff it would eliminate some headaches just having that done.

Richard Chapo: Yes. However, there’s been a change in the law…

Joe Fairless: But wait, there’s more… [laughs]

Richard Chapo: Yes, there’s more. I’m always afraid of getting into too much of the technical area…

Joe Fairless: No, that’s good, we like it.

Richard Chapo: Okay. Well, for pretty much (I’m gonna say) about the last 80 years courts have not allowed businesses to limit the legal rights of consumers. By “limit”, I mean force consumers to enter into arbitration to litigate disputes, or waive their right to file a class action litigation. In 2011 the Supreme Court [unintelligible [00:16:32].04] we had a conservative majority; conservative judges tend to be more literal in their interpretation of law and they tend to be more business-friendly. So a case came up in 2011 called AT&T Mobility versus Concepcion, and it involved a mobile phone contract, and AT&T had an arbitration clause in there, and they were trying to enforce it.

Now, historically, that would not have been enforceable against consumers, but the Court overruled that and overruled the 80 years law, and instead they said that if something called the Federal Arbitration Act of 1925 – which to be honest, all of us lawyers had to go racing to the books to find out what the Federal Arbitration Act of 1925 was… Was binding, and its states could no longer pass laws on these issues.

So with your terms & conditions you can now include an arbitration clause and a class action waiver clause. The reason this is important is arbitrations tend to be very pro-business; they are not decided by juries, they are decided by retired judged or attorneys, so technical arguments which technically are the defenses that businesses make – and this would be true in real estate – are received better, if you will. They’re more persuasive and can lead to better results.

From an internet perspective, the class action waiver is really important. If we just go back to what we were just talking about, most transactions online (not the purchase of a home or an apartment building, but most other transactions, memberships and what have you) are for a finite dollar amount that’s fairly nominal, so to say. On Amazon you might spend $100, $200; on a membership you might spend $40/month… The dollar figures are not big, so most people are not gonna sue over those, just because it’s not worth it, and attorneys certainly aren’t gonna take the cases, because they wanna make money.

The way that you get around that problem in the U.S. is you file what’s called a class action lawsuit. Instead of just person filing — let’s say we have a defective product. Instead of one person [unintelligible [00:18:19].08] and filing an individual lawsuit, they’re all grouped together, so you end up with what’s called a class, which may be 50,000 people or 100,000. I think we’ve all been watching TV late at night when the attorney who looks like he’s on the Sopranos comes on and starts saying “Did you ever use this product? Call us at this number.”

Joe Fairless: Yeah… Is there a minimum number of people?

Richard Chapo: I believe it’s 5,000 these days. It depends if they’re bringing it under federal and state law… But that’s not the goal; the goal is to get a much larger group. Then at that point you can recover attorney’s fees…

Class action litigation has always been a little odd, because the attorneys [unintelligible [00:18:55].24], but because you have such a large class of people, they end up checks for six bucks, or something like that. So it’s been criticized for a long time.

With your terms & conditions now you can include a class action waiver clause, which say when you check that box saying “I agree to the terms and conditions and privacy policy”, you’re agreeing to these terms, and clause 23(a) says that you can’t pursue a class action lawsuit against us, you can’t participate in a class.

That clause, with the arbitration clause and with the choice of forum clause – those three clauses eliminate 85%-90% of potential lawsuits against online businesses. So you see large companies going ahead and putting these in, and some of the companies who are really on top of it in their legal departments (Instagram, for instance), they did it right away, and people sent out an e-mail saying “We’re making these changes”, and people read them and started saying “Wait, you’re essentially eliminating the ability to be sued, and we’re not happy”, and the blowback was immense. I believe Instagram actually changed their terms back at one point.

So there’s a question of do you wanna do it from a practical standpoint [unintelligible [00:20:03].22] all PR is good PR, and I think most of us know that’s not actually the case… But for companies that are starting, for small companies, small websites, real estate investors, most of the websites that the Best Ever listeners have, it would be something you would want to include if, again, there’s a situation where you can force the visitors to your site to check [unintelligible [00:20:24].08] those terms.

Joe Fairless: And those three clauses — will you summarize them? Just name those three one more time.

Richard Chapo: Sure. First one is the choice of forum clause; that’s gonna set wherever the lawsuit occurs. Second one is mandatory arbitration clause – that essentially forces the visitor to sue arbitration instead of a trial in court. Then the class action waiver clause; the class action waiver clause prevents the user from going ahead and joining a class, so it goes a long way to eliminating most serious lawsuits.

Joe Fairless: Choice of forum clause – that sets the location for the proceedings. The second one was…

Richard Chapo: A mandatory arbitration clause, and the third one would be the class action waiver clause.

Joe Fairless: Sweet. Mandatory arbitration means they have to try and get the solution outside of Court?

Richard Chapo: Yes, they would be barred from going to Court. In some situations, something that occurs in the legal [unintelligible [00:21:16].11] you’re talking about is the courts are backed up and say they will often send parties off to arbitration, if for no other reason, just to buy time. But those are not binding, so the parties will go to arbitration and they’ll present their cases and then the arbitrator will basically tell them, “Well, I think here’s how it would come out”, and try and talk reality to one side or the other. Those are not actually binding proceedings.
The clause that you would put into your terms and conditions would be binding, which would mean if the arbitration would occur, the arbitrator would render a decision and that is the decision.

Joe Fairless: So the first one, choice of forum clause, sets where it will take place if there is legal proceedings. The second one, mandatory arbitration clause, says you’re barred from going to Court, no matter where the location is. The third one, the class action waiver clause, says you can’t join a class action lawsuit.

Richard Chapo: Yes.

Joe Fairless: Well, those three clauses, Best Ever listeners, as Richard said, can eliminate up to 85% (roughly) of the lawsuits for online businesses. For us, as real estate investors, if you have a membership site, or if you just want to be super protected with your stuff, then you can include those three clauses. You can talk to Richard – we’re about to ask him where we can get in touch with him… But then one key thing that you said earlier, Richard, was to have the check box; it’s not just a passive document that’s a link at the very bottom of the website.

Richard Chapo: Correct, yes, and that’s very important. The user has to check that box and agree. If you just have a blog and there’s no area where anybody purchases anything, an eBook or anything of that sort, then those clauses are not applicable. However, if you just have a blog, chances of you being sued for anything are very low, unless you obviously go nuts and start defaming people, or something of that sort… So your risks of being sued are very low; again, copyright would probably be the only issue there. You just wanna make sure that whatever images you’re using, that you have the right to use those.

Joe Fairless: Richard, where can the Best Ever listeners get in touch with you?

Richard Chapo: They can reach me through my website, SoCalInternetLawyer.com. Mention this show and I’ll be happy to give you a free consult. If you can’t find me on the website for some reason, you can also get my name, Richard Chapo, through Google; you can always find me there. Chapo is also the name of a large drug kingpin in Mexico; I am not related to him, I just wanna make it absolutely clear. [laughter] I get asked that quite frequently, because it is an odd last name.

So use either of those sources to be able to get a hold of me and I’ll be happy to talk to you.

Joe Fairless: It’s also a name of a band that I like, although they spell with one more “p” than you… They spell it Chappo. They’ve got some good songs, they’re from Brooklyn. I saw them on a tour of — there was like a boat cruise thing around Manhattan when I lived in New York and I saw them a couple times, like in 2013… They’ve gotten a little bit bigger now. But obviously, they haven’t hit the West Coast yet, because you don’t know of them, and you know all about the music scene in indie rock.

Alright, Richard… It’s been a pleasure. Thanks for talking about the three clauses to eliminate up to 85% of lawsuits for our online businesses that I just recapped earlier, as well as areas to shore up with our website, including the images and videos. You gave a resource which I’m not familiar with that I’ll check out (Fotolia), and then the terms & conditions that we talked about, with making sure that they check the box, if that is the type of business that we’re in, because in some cases that’s just gonna be overkill. In my case, that’s gonna be overkill and it’s not necessary… But if I were to have an online membership site or something, maybe that would be the case.

Thanks for being on the show. I hope you have a best ever weekend, and we’ll talk to you soon.

Richard Chapo: Okay, thank you. I appreciate it!


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Joe Fairless's real estate podcast

JF908: How to be INCREDIBLY PERSUASIVE #SkillsetSunday

Dr. Phil and Montel have had him on a their shows, he is extremely persuasive and you will hear how he does it! You can use this in your real estate business, and of course in your life!

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Ross Jeffries Real Estate Background:

– Author, writer and television personality
– Featured on programs as The Dr. Phil Show, The Montel Williams Show and self-described speed seduction expert
– Works with high-powered entrepreneurs, salespeople, and professionals to teach them his persuasion blueprint
– Over 30 years experience in teaching his technique in persuasion and featured on CNN, Fox, NBC, and more
– Based in San Diego, California
– Say hi to him at http://www.persuasionmasterysystems.com/free

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You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes.

Download your free copy at http://www.fundthatflip.com/bestever

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JF845: How to Identify and CRUSH Fear Barriers #SkillsetSunday

Fear paralyzes young and hungry entrepreneurs. Not knowing how you are going to last in your niche is scary, but today’s guest is about to show you how to conquer that fear. Do what you do and do what you love without being afraid of failure.

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Dave Daley Real Estate Background:

– Entrepreneur, Keynote Speaker, Author, The Monster Motivator! At ‎Dave Daley Enterprises, LLC
– Creator of the Knock Out Fear in the First Round program
– The Monster Motivator is his popular speaking leadership series that business book him all year around
– Built and sold three companies in three very different industries
– Based in San Diego, California
– Say hi to him at www.davedaleymm.com
– Best Ever Book: What to Say When You Talk to Yourself by Dr. Shad Helmsetter

Click here for a summary of Dave’s Best Ever Advice: http://bit.ly/2hOxpQ6

 Made Possible Because of Our Best Ever Sponsors:

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Download your free copy at http://www.fundthatflip.com/bestever


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Best Ever Show Real Estate Advice from experts

JF721: Why Probate is a RICH NICHE

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Today’s guest has connections with a big real estate icon Than Merrill, and today is sharing one of his favorite lead sources, probates! Hear about his strategies in acquiring creative real estate deals especially the probate opportunities he runs into.

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Ralph Plumb Real Estate Background:

– Entrepreneur at Mind Protein
– Began with Than Merrill in Connecticut
– Based in San Diego, California
– Say hi at http://mindprotein.com
– Best Ever Book The E-Myth by Michael Gerber

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:

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Best Ever Show Real Estate Advice from experts

JF720: Appraiser and Realtor Couple Make $8.5 MM Rental Portfolio

A couple gets together to flip houses, and they created a podcast named the Spouses Flipping Houses show! He is an appraiser and she is a realtor and the rest is history. Hear how they build their large portfolio working together and how they were able able to secure financing, this couple is one to follow!

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Doug and Andrea Van Soest Real Estate Background:

–   Founders of Spouses Flipping Houses Show
–   Have 57 doors and have done over 300 deals
–   Based in San Diego, California
–   Say hi at spousesflippinghouses.com
–   Best Ever Book: Love Does by Bob Goff

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:

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Best Ever Show Real Estate Advice

JF626: Why This Lender Suggests that You Be a Student of TRENDS

Today’s guest is notorious for being one of California’s top lenders and invest in real estate himself. He shares with us how he will roll existing profits from projects into other projects and the situations he won’t do anything at all but wait, you have to hear this show!

Best Ever Tweet:

Andre Jimenez real estate background:

-16 years of hard money lending experience
– Has managed over $350,000,000 in assets in his career
-One of California’s top hard money lenders
-Co-Managing partner of Windvest Capital
-Based in San Diego, California
-Reach him at andre@windvestcorp.com

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Do you need more leads for your real estate business and a platform to grab more leads?

Danny Johnson has a solution for you, go to leadpropeller.com set up your website for success and get more leads!

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:

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JF505: This Lender Closed a Deal for a Client that was Denied 24 Hours Prior!

Price? Cost of rehab? Retail sales price after rehab? He asks these questions to his clients hoping to qualify for a quick loan. His best move was moving to California, and there he found the hard money industry. As a hard money lender, he has made some tough decisions, but one of them turned out well…and was made in 24 hours!

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Ben Stoodley (stood-ley) real estate background:

  • Civil Engineering grad turned real estate sales person turned investor and hard money lender
  • He’s a loan originator and did over 100 loans in 2015 averaging about $1M a month on average
  • Active real estate investor as both a buy and hold and fix and flip
  • Based in San Diego, California and say hi to him at lantzmanlending.com
  • His Best Ever book recommendation: Four Hour Work Week by Tim Ferriss

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You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

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Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Best Ever Show Real Estate Advice

JF383: SPIKE Your Net Worth with an Abundance Mentality #skillsetsunday

Look around, who are the five people closest to you? What is their net worth? How is their attitude? Do they uplift, edify, and push you? These are questions that our Best Ever guest will ask today on the show. Be alert and open minded as you hear her tips on creating a power team that will revamp your personal and business goals, while maintaining a steadfast focus.


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Dawn Oree’s background:


  • 3 Ways of Making the Law of Abundance Work in Your Life

  • Been teaching the Law to business people and non-business people

  • The Abundance Summit in San Diego in March

  • Say hi to Dawn at http://www.dawnoree.com


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Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

Best Ever Show Real Estate Advice

JF 378: How to leverage MILLIONS of Dollars with Other People’s Money

Our Best Ever guest is perfecting syndication. He is putting together large scale multi family deals with OTHER PEOPLE’S MONEY! Structuring deals that are more complex, our Best Ever guest began flipping…and found it wasn’t for him. As a sponsor, his offers for the bigger deals are backed by one thing the majority of investors and syndicators would hesitate to include, hear how he closes! 




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Ryan Dunigan’s real estate background:


  • Raises money and invests in apartment buildings in Arizona

  • Has syndicated 188 units and manages another 29 units for a 3rd party

  • Based in San Diego, California 

  • Went to school at Colorado State and big snow boarder




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Made Possible Because of Our Best Ever Sponsors:



Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

Best Ever Show Real Estate Advice

JF174: How to Pencil a Deal on a Single Family Home

Here’s the step-by-step process for how to evaluate a single family home investment property.

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Leonard Baron’s real estate background:

–        Investor, past lecturer at San Diego State University and teaches continuing education to Realtors

–        Has a nationally syndicated real estate A&A at Zillow.com Featured Blog and in newspapers around the country

–        Say hi to him at http://www.professorbaron.com

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Sponsored by Patch of Land – Could you do more deals if you had more money? Let the crowdfunding platform, Patch of Land, find investors for you and fund your next deal…and your next deal…and your next deal…and…well, just go find out more at http://www.PatchOfLand.com

Best Ever Show Real Estate Advice

JF55: Creative Alternative to Just Renting Your House

Today’s Best Ever guest had a problem. She could sell her house so she was forced to turn it into a rental. But instead of simply renting it she did a lease with option to purchase. Listen to hear how that turned out…

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Holly Williams’s real estate background:

–        Successfully done a lease with purchase option contract (that turned out really well for her)

–        Creatively financed Manhattan apartment

–        Passive investor in tax liens and multifamily syndication

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