00:00:00:00 - 00:00:07:00
Unknown
Let me tell you who got hurt the most in this current market. It wasn't even the brand new investor like many would think.
00:00:07:04 - 00:00:11:05
Unknown
And it wasn't the seasoned professional. It was the messy middle.
00:00:11:09 - 00:00:20:12
Unknown
If you started in 2020 and 2021 or 20 2 or 23, even, and you're still building and the market shifts out from underneath you.
00:00:20:17 - 00:00:24:06
Unknown
This market probably punched you in the face
00:00:24:10 - 00:00:38:05
Unknown
because it was hard. It is hard. And that's what we're going to talk about today. How to win.
00:00:38:07 - 00:01:03:04
Unknown
Okay. Real estate right now is not easy. It really has never been easy. But today it is not easy. But it is simple. It's still the best thing you can do to build meaningful wealth and come from nothing, or come from little, or come from working in 80 or $100,000 a year job and create $1 million business. Literally nothing else can do that for you.
00:01:03:08 - 00:01:28:04
Unknown
And the reason that can be done for you with real estate is because of how real estate works. It's because of how debt specifically works with real estate. It allows you to leverage responsibly to gain value. There's nothing else like that. You cannot borrow money to buy more stocks, to buy Apple, to buy Bitcoin. Not in a professional, government regulated type way.
00:01:28:07 - 00:01:34:01
Unknown
And people winning in today's market really fall into two categories. Number one, the professionals.
00:01:34:04 - 00:01:38:16
Unknown
They've got 7 to 10 years of experience, maybe 5 to 10 years of experience in the game.
00:01:38:20 - 00:01:55:14
Unknown
They have tight operations. I think we underplay how important it is to have tight operations. Now look, I look at businesses in some bigger flipping mastermind all day, everyday people who are actually making money today and doing meaningful money deals.
00:01:55:16 - 00:02:14:15
Unknown
And I'll tell you, when they're the ones who didn't have tight operations, the ones who gnawed the little things, the the meeting rhythms, the process development, the checklist like the things that you install into a real business. They're the ones that got caught with their clothes off when the tide went out.
00:02:14:20 - 00:02:15:07
Unknown
Now,
00:02:15:10 - 00:02:17:18
Unknown
the ones who are winning, these professionals, they're not.
00:02:17:19 - 00:02:44:23
Unknown
They don't just have tight operations. They have tight underwriting. They understand value. They have thousands of repetitions of by waiting deals. They can look at a deal and they know we're not paying that or we're paying that. That's good. They have multiple exit strategies. You have to have that today. And they have deep local relationships. Look, this whole nationwide nonsense where you have 50 plus percent of your deals falling out.
00:02:45:01 - 00:02:59:03
Unknown
The operational inefficiency in that is garbage. Stop doing it. Stop learning that from whoever's teaching it. It doesn't work well. I got people that I truly respect in our mastermind who came from that model.
00:02:59:07 - 00:03:06:12
Unknown
Now, before they we didn't help them in that way. Before they came to us, they realized what a dumpster fire the nationwide model was.
00:03:06:16 - 00:03:14:22
Unknown
And they went all in locally. And I can tell you, they're both riding two young guns, 100 plus deals, 50 to 200 deals. No problem.
00:03:15:01 - 00:03:34:14
Unknown
They also have deep local relationships. And when we say multiple exit strategies, you also need multiple entrance strategies. Meaning how you're getting your deals. If you have the ability to buy, rehab and add value, you also got to have the ability to source deals from sources that don't cost you money.
00:03:34:14 - 00:03:38:06
Unknown
Because today your two biggest expenses are marketing and people.
00:03:38:08 - 00:03:53:14
Unknown
And today marketing cost to acquire a deal are rising. Direct mail doesn't work like it used to. It's still a primary marketing channel, but not in the way that you think. And our mastermind, we're doing it differently. We're doing way more targeted stuff. We have a system around that.
00:03:53:18 - 00:04:01:12
Unknown
These professionals, they've seen at least some micro cycles and they're not panicking, honestly. They're just pulling the levers and adjusting.
00:04:01:16 - 00:04:03:16
Unknown
Now here's the other person.
00:04:03:19 - 00:04:05:11
Unknown
People who are brand new.
00:04:05:16 - 00:04:21:16
Unknown
And I know it sounds weird, but if you just started in 23 or 24 or even 25, you don't have bad habits from the boom years. You don't. You don't have until reasonable expectations of what the market will do for you in 2020.
00:04:21:22 - 00:04:29:04
Unknown
The market was forgiving. You can be an idiot and buy a property and listed on the market and make money. You cannot do that today.
00:04:29:08 - 00:04:42:21
Unknown
You are new. You didn't really build your business on hedge funds buying everything like some people did. I got friends who will. The only thing they ever did was they came in the marketplace in 2019, 2020, and all they knew how to do was sell the hedge funds.
00:04:42:23 - 00:04:49:12
Unknown
They made a boatload of money, but the hedge funds disappeared. And guess what? They disappeared too. The new investors don't have that problem.
00:04:49:15 - 00:05:01:19
Unknown
They didn't build their expectations. Around 20 offer bidding wars. Meaning I list a house and I'm going to have 20 different offers, and ten are going to be cash, and five are going to be above asking.
00:05:01:21 - 00:05:05:15
Unknown
No, they had to start more conservative, more intentional,
00:05:05:18 - 00:05:14:02
Unknown
and they didn't build their margins. Assuming that the market would save them. They knew appreciation isn't the play. They had to buy right?
00:05:14:06 - 00:05:27:07
Unknown
So the seasoned professionals and the brand new investors are fine. It's you in the messy middle who's struggling because you've got all these bad habits. You didn't pivot fast enough.
00:05:27:09 - 00:05:35:11
Unknown
You probably weren't around people who had the skill sets that were pivoting to see it happening, to make the changes with the group.
00:05:35:11 - 00:05:39:19
Unknown
Honestly, the new investors, they started in today's reality, and that's an advantage.
00:05:39:22 - 00:05:41:13
Unknown
But the people in between,
00:05:41:16 - 00:05:49:03
Unknown
that's where it got ugly. If you started in that 21, 22, 20,
00:05:49:07 - 00:05:51:13
Unknown
it felt easy. I know, trust me,
00:05:51:16 - 00:06:02:07
Unknown
you could throw marketing at just about any market, be virtual, wholesale. The hedge funds get skinny spreads and still win because you could do volume.
00:06:02:09 - 00:06:06:22
Unknown
You could make poor. And let me tell you a story about a poor underwriting assumption.
00:06:07:01 - 00:06:21:19
Unknown
in those years, I would get deals that I couldn't figure out how they penciled like the logical brain that I have. The underwriting didn't make sense. I would never buy them, and I was putting them out and still making ten, 20, $30,000 wholesale fees,
00:06:22:00 - 00:06:23:07
Unknown
if that's all you know.
00:06:23:12 - 00:06:32:19
Unknown
And then July of 2022, hit rates start climbing. And by late 2023, rates peaked at almost 8%. Hedge funds shut off the spigot.
00:06:33:00 - 00:06:40:03
Unknown
Buyers could start to get super cautious. They're not buying anything. Affordability doesn't change. The prices are up,
00:06:40:09 - 00:06:42:04
Unknown
But now things aren't affordable.
00:06:42:09 - 00:06:45:20
Unknown
Your marketing cost has gone up, so your margin starts to compress.
00:06:45:20 - 00:06:46:22
Unknown
That's the massive middle.
00:06:47:02 - 00:07:06:00
Unknown
And if you are still building, still figuring out sales and how to have these conversations, you're still trying to figure out how to add team members, still, like maybe you were you weren't even tracking any numbers, but now you started adding, like, I know I need to understand my KPIs. I have investors today who've been around for a while, never track their KPIs.
00:07:06:00 - 00:07:15:06
Unknown
They have to now. They realize they have to now. And it doesn't feel good. When you were on Easy Street and then you come to having to be a real. By the way, this isn't just real estate.
00:07:15:10 - 00:07:25:16
Unknown
If you think you're going to go acquire a small business, an Hvac company, a roofing company, whatever is on your mind today from whatever the internet is feeding you.
00:07:25:18 - 00:07:29:19
Unknown
If you think that Kraft's not going to be hard, you're out of your mind. Running a business.
00:07:29:23 - 00:07:43:00
Unknown
You have the opportunity and the blessing to make and do so much and make so much impact through a business, because you're willing to do what it takes and what it takes. If it was easy, everybody would be doing it.
00:07:43:04 - 00:07:54:13
Unknown
So look, if you were figuring all that stuff out, you probably got crushed. You were in the messy middle and this market's unforgiving and unforgiving. Markets are going to expose half built businesses.
00:07:54:17 - 00:08:09:14
Unknown
And here's what really happened. A lot of investors scaled up during the boom. They hired a whole bunch of people. They brought up. They bought got big offices and fancy graphics, and they expanded into virtual markets.
00:08:09:16 - 00:08:17:01
Unknown
But they didn't build any operational depth. They built momentum. But momentum is not the same thing as a strong foundation.
00:08:17:06 - 00:08:18:13
Unknown
And when the market turned,
00:08:18:17 - 00:08:27:01
Unknown
the people with momentum lost the momentum. Momentum comes in spurts. It's temperamental. It's periodic.
00:08:27:05 - 00:08:29:07
Unknown
It's not always persisting.
00:08:29:10 - 00:08:36:16
Unknown
And the people with the foundation, the best investors inside the sudden vigor flipping mastermind were the people who built moats around their businesses.
00:08:36:18 - 00:08:43:22
Unknown
They were fundamentally sound. Not all the sexy bells and whistles, but fundamentally they were sound, which allowed them to pivot the fastest.
00:08:44:02 - 00:08:51:07
Unknown
And if you were in the messy middle and you were in a rookie, or you weren't really a pro, you weren't fully dialed. The headwinds hit you the hardest.
00:08:51:10 - 00:08:54:22
Unknown
I watched this happen before my eyes with so many businesses.
00:08:54:23 - 00:08:56:05
Unknown
Some even went bankrupt.
00:08:56:10 - 00:09:03:17
Unknown
The marketing cost did not come down. By the way, Duflo did not increase or even stay the same. It mostly slowed down.
00:09:03:21 - 00:09:13:04
Unknown
Cancellations went up. I'm not talking about wholesale or like investor. I'm talking about on market. People were walking away from
00:09:13:07 - 00:09:18:11
Unknown
their MDX, their their earnest money deposits. You know, they put some cash down and said they're going to buy the house.
00:09:18:11 - 00:09:43:18
Unknown
They were literally walking away on closing day. It was. And think about the mental stress of that. You've got to flip. You've been you've you've had this cash out for eight months. It's finally selling. You're expecting to get 50 K back into the business and you get to closing day and somebody walks away. Brutal. If you're not prepared with other exit strategies, other lenders like there's so many components to operational debt that if you don't have it,
00:09:43:22 - 00:09:45:00
Unknown
it's going to be brutal.
00:09:45:04 - 00:09:50:03
Unknown
And mistakes that used to cost us five grand can cost us 50 grand today.
00:09:50:06 - 00:10:06:10
Unknown
That's what the unforgiving market will do to you if you don't have the right system, if you don't have the right people, if you don't have the right operational debt, even in our mastermind. And I use that because it's like a test ground for me in addition to my business,
00:10:06:14 - 00:10:13:16
Unknown
we all install a similar operating system that we call Reebok's, the real estate business operating system.
00:10:13:18 - 00:10:22:05
Unknown
It looks and smells a lot like a combination of a lot of the things you saw on these different operating systems, but it's real estate focus.
00:10:22:09 - 00:10:23:08
Unknown
IT people
00:10:23:11 - 00:10:27:07
Unknown
denied adopting the system. Those are the ones that are in pain.
00:10:27:11 - 00:10:31:07
Unknown
Now here's the good news, okay? There is good news I know feel somber.
00:10:31:11 - 00:10:34:06
Unknown
Have you survived this phase? If you're in product, you survived it.
00:10:34:06 - 00:10:47:08
Unknown
Even if you were in the middle, you are going to be absolutely dangerous in this next cycle. You are going to be lethal. You were going to have a massive operate to people who are going to lose that are in your position right now are the ones who quit
00:10:47:12 - 00:10:52:03
Unknown
because you're going to get out just before you get to the opportunity.
00:10:52:05 - 00:11:16:01
Unknown
And the ones who are still left standing, who've been fortifying their business, building their operational depth, they're going to be positioned the best to take advantage of the cycle. And these markets move in waves. Man, it's like a sine wave because up and down, up and down. And that's that's a truth like death and taxes and the people who are dialed in 2018, 2019, they already made a boatload of money in 2020, 2021.
00:11:16:03 - 00:11:37:04
Unknown
And it wasn't really because they were lucky. It's because they were ready. They were prepared. Specifically, they had the appropriate skills. And I think that's the number one thing that we don't pay attention to enough. We want to build this business so bad and get this freedom that we dream of. We forget that it takes becoming somebody new and building skills we didn't once have.
00:11:37:06 - 00:11:49:06
Unknown
And you don't build skills by watching a course or by doing only you. Build skills by executing over long periods of time, gaining experience and getting better.
00:11:49:10 - 00:12:06:22
Unknown
So those teams that were positioned to take advantage of 2020 and 2021, they were trained, they had tight underwriting, they had strong capital sources, they had clean operations. And when the tailwind came, they didn't raked in the cash.
00:12:07:02 - 00:12:22:03
Unknown
And right now we're in a headwind. If we're being completely honest, like I'm not trying to sell you anything other than what I see as reality in my own business. I can tell you for a fact, though, on this next market cycle, I am going to absolutely dominate
00:12:22:06 - 00:12:29:05
Unknown
and that is the big opportunity. These headwinds build strength. They're going to force you to be disciplined.
00:12:29:05 - 00:12:31:10
Unknown
They're going to force you to focus on margin.
00:12:31:13 - 00:12:56:11
Unknown
They're going to force you to focus on sound underwriting, real sales skills, where you actually take care of all your leads when they come in. Not like when you feel like it. Real operational efficiency and this market is sharpening the serious operators. My sword is getting so sharp right now and honestly, it's washing out the tourist, the flash in the pan.
00:12:56:11 - 00:13:16:06
Unknown
The day they were looking to get rich quick like those people are getting eaten alive and spit out. And here's the thing. You might be listening to this going, this is scary. I don't know if I can do this. And I'll tell you, you're not alone. When new investors come into some bigger flipping, the number one problem they have is they don't believe in themselves.
00:13:16:08 - 00:13:25:07
Unknown
They're not sure that they can become who they need to become in order to have the success that they actually want, the freedom mostly that they want.
00:13:25:11 - 00:13:33:03
Unknown
And it's what I called the say do gap. I say I want this, but my actions don't match
00:13:33:07 - 00:13:42:06
Unknown
because internet marketing has to make things sound easy to get you to even pay attention, because otherwise somebody else is telling you you can get rich next week.
00:13:42:12 - 00:13:45:00
Unknown
And that's where your mind goes because it sounds easy.
00:13:45:04 - 00:14:05:12
Unknown
But if you're truly passionate about real estate and community and building something meaningful with legacy and impact like you've got to get over yourself, you've got to hit the belief button in yourself. Because honestly, the path I can show you, the path like I can give you all the resources, but only you could do it.
00:14:05:16 - 00:14:18:20
Unknown
So if you're thinking, if you're if you're listening to me, that's me. Some part of this is me. I was either the new person just getting in. I sharpened the ax, I made a bunch of money, or I'm in the middle where I think most people are good,
00:14:19:00 - 00:14:20:22
Unknown
like Uncle Jocko. It's a good
00:14:21:01 - 00:14:23:08
Unknown
awareness of step one. Know where you are.
00:14:23:08 - 00:14:25:01
Unknown
Be honest with yourself.
00:14:25:04 - 00:14:45:09
Unknown
Here's what you don't do, though. You don't just scale faster. You don't just double your marketing. You don't just go chase nationwide PPC. You don't add ten tools hoping something relieves the pain you're feeling today, but really, you're just spending more money. That's what I call like panic scaling. Don't do that. And I can only tell you that because I've done it.
00:14:45:11 - 00:14:46:19
Unknown
I've personally done that.
00:14:46:23 - 00:14:53:09
Unknown
It's a bad play. I've done it a couple times. Never worked, by the way. Instead, go deeper in your market,
00:14:53:13 - 00:15:04:00
Unknown
tighten your underwriting, get around people who are in the same path or doing things the right way. Add an exit strategy that you can perfect.
00:15:04:03 - 00:15:06:09
Unknown
Focus on your return on effort.
00:15:06:12 - 00:15:12:23
Unknown
Think about going from virtual to in-person to gain a competitive advantage against people on the phones.
00:15:13:01 - 00:15:21:00
Unknown
Go in there and build real trust because people are making these decisions, not with rapport, with actual trust built.
00:15:21:03 - 00:15:32:20
Unknown
And accept that this phase is about skill building. It's not ego growth. It feels good to come to the event, stand on stage, talk about how awesome your business is, but this is about building skill.
00:15:33:01 - 00:15:33:21
Unknown
Here's the truth
00:15:34:00 - 00:15:37:09
Unknown
the market is not forgiving right now.
00:15:37:11 - 00:15:48:11
Unknown
Honestly, it's not a bad thing. Unforgiving markets create elite operators. You should be one of those elite operators. Forgiving markets are the ones that created
00:15:48:13 - 00:16:05:04
Unknown
inflated egos. Think about this if you've been looking at the Space and Consumer podcast and reading books for 5 or 6 years, how many people from 2018, 19, 20 that were all on podcasts, all in the stages are still here?
00:16:05:06 - 00:16:18:16
Unknown
Where are they? Crickets. I hear nothing, they're not here because all they cared about was inflating their egos, not building an elite operation. Look, if you're in the messy middle, you only lose when you quit.
00:16:18:19 - 00:16:25:16
Unknown
I mean that sincerely. But you can't keep doing the same thing if you're thinking about getting in or if you're in the messy middle.
00:16:25:18 - 00:16:39:03
Unknown
Look, if nothing changes, nothing changes. So stop pretending it's 2021. Because when the next tailwind comes, the people who built the businesses and this headwind,
00:16:39:07 - 00:16:40:04
Unknown
they're going to win big.
00:16:40:08 - 00:16:49:11
Unknown
I hope you got something out of this podcast. I hope you're paying attention. Thanks for listening. And as always, do me a favor. Leave us a five star review,
00:16:49:15 - 00:16:53:05
Unknown
send this podcast to somebody, post it on your Instagram or Facebook.
00:16:53:05 - 00:17:06:06
Unknown
Help me to grow this so that we can reach more people. Real talk in real estate. Like we're being honest here with everybody. And I like to get this out so people stop listening to the nonsense. I'll see you on the next podcast.
