This episode is brought to you by Presario Ventures, a private equity real estate firm based in the booming Austin, Texas, market. To learn how to invest in the future of Texas with Presario Ventures, visit info.presarioventures.com/bestever.
Today’s episode is the audio from our September Cincinnati Meetup, featuring Joe Fairless, Ash Patel and Slocomb Reed. In the panel, the hosts discuss the keys to successful real estate investing. They stress the importance of recognizing one's strengths, forming strategic partnerships, and understanding the psychological aspect of investing. Their insights offer valuable guidance for real estate enthusiasts of all levels.
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Transcript
Slocomb Reed:
Best Ever listeners, welcome to Cincinnati's Best Ever Real Estate Investor Mastermind.
Joe Fairless:
That's the highlight of my night right there. That's pretty impressive.
Slocomb Reed:
That was, that's good stuff. We didn't have to pretend this time. There are actually that many people here. Today's episode is brought to you by Presario Ventures, a private equity real estate firm based in the booming Austin, Texas market. To learn how you can invest in the future of Texas with Presario Ventures, visit info.presarioventures.com forward slash best ever. That link is in the show notes. We get together on the last Tuesday of every month here in Cincinnati for local investors and some people come into town from other places if they invest in Cincinnati to gather, network, shake hands with the people that we need to meet and learn from the speakers that we bring in to the meetup to share with us. Today we have a couple of absolute rock stars. We have Ash Patel who runs Invest Beyond Multifamily, which is a section of the Best Ever podcast. He's one of our hosts. He is a guru when it comes to all things non-residential commercial real estate investing. He has a mastermind, he has a conference coming up. Absolutely phenomenal information when it comes to non-residential commercial. And we have Joe Fairless, also known to the Best Ever community. His firm Ashcroft Capital has $2.7 billion in assets under management. I have no idea what they're going to say. I am just hosting, but I believe what they have prepared for us, each of them separately, is the top four mistakes that they have made in commercial real estate investing. Why don't we start with you, Ash?
Ash Patel:
Yeah, my first one is I should have gone bigger faster. I'll tell you the back story behind that. For years, I lied to myself and everyone around me, and I said there's a sweet spot in commercial real estate between $300,000 and $800,000. That was a lie because that was my comfort zone. And deep down, I probably believe that's the best returns out there. I was scared, it was fear. I was scared to do bigger deals. What if something went wrong? That's a lot of money that you're risking. In hindsight, I wasted a lot of time. I passed on a lot of deals that would have been phenomenal. So that cost me a lot of years, a lot of money that I could have made, and ultimately just a lot of time, a big mistake. And when I talk to a lot of you, I hear, yeah, I'm looking for my next single family. I'm looking for a duplex. Why not go bigger? I'm not saying be reckless. Keep using your same underwriting skills. Be conservative. Stress test your deals. But don't be afraid to go bigger. Identify what the failure would look like. Because the failure is, what if this goes wrong? What if I lose money? Okay, put it on paper. What if the deal goes south? You lose 50 grand. You lose 100 grand. You fire sell it for $200,000. What does that really look like? Once you identify that fear, you can ultimately make a better decision. So, go bigger, faster, not reckless, be conservative, but don't be afraid to push yourself out of your comfort zone.
Joe Fairless:
One thing it reminds me of is 50-50 goals. You said identify the fear. So name that monster, and then the monster's not as big. 50-50 goals, Tim Ferriss talks about this. Basically, you set your goal. And then regardless of if you achieve it or not, half of the goal's achieving it, the other half is what you accomplish along the way, who you become. So you can take those skillsets and apply them regardless of the goal outcome. So either way, you're winning. You might not accomplish the goal, but who you become along the way, you're at an elevated level. And I love that. And that's how I approach my goals too, because you're set up to win. And an example is this podcast. If nobody listens to the podcast, well, guess what? It's an interview-based podcast. So we're building relationships with 3,000 people so far have been interviewed on the podcast. That's a lot of people to be connected with and to choose who you want to develop more of a relationship with. So setting ourselves up for success, regardless of the outcome of the goal is a pretty empowering way, but it just makes us feel better because we're constantly progressing.
So I guess it's my turn to name one, right? All right. Well, first off, glad everyone's here. You could be somewhere else. You're here in this room or you're listening on the podcast. And I have a lot of respect for that. My daughter's almost five, and I just got done playing soccer with her in our backyard with my wife and fill in the blank. Everyone here could be doing something else other than being here right now. And I have a lot of respect for that because you're investing your time here. And so we're gonna make this as valuable as possible. Number one mistake I made in commercial real estate, and these I don't think are in order of significance. I just jotted down four things and I'll just touch on the first one. Who here is familiar with the first deal I did? It's the larger one in Cincinnati. Okay. Not that many of us in this room. Okay. So I'll briefly touch on it because there's context for it. The first deal I did in Cincinnati, I went from four single family homes. I was living in New York city and I raised money for a 168 unit apartment community in Amelia, Ohio. Everyone familiar with where Amelia is? All right. So path of progress, good area. for growth, but I messed it all up on the execution front. I attempted to do all the aspects of the deal. I do apartment buildings. There are three components to apartment buildings. You gotta find the deal. You gotta have the money to buy the deal, and you have to execute. Those are the three components. And I was attempting to play at the highest level for all three of those categories. And I realized that I have a unique skill set. I'm pretty good at some things, I'm average at others, and I'm bad at other things. And by attempting to do all those three categories, I was doing my investors a disservice, and ultimately myself and the whole transaction of the service. I made a lot of mistakes on it. That could be a whole nother podcast. I'm sure I've done a podcast on the show about it. The lesson I learned from that deal is that I'm not enough. And it's a humbling thing to say, but I am not enough. Because I moved from New York City, and I lived in the model unit of this apartment building. I would wake up in the morning, I would walk to the leasing office, and I would speak to prospective renters, and then I would show them this model unit that I was living in. And I would go to Home Depot after the day is over, and I would buy asphalt, whatever it's called, I don't know what it's technically called, but it fills potholes. So I put it in the trunk of my Toyota Corolla and I'd scoop it all out after the day is over and I'd just go fill potholes in the property. I would go to Kroger Marketplace in Amelia, I think it's the third largest marketplace in Ohio, which was impressive, one of the things that attracted me to the area, and I would buy cleaning supplies, and I'd clean the units too. So I was very hands-on. Not as hands-on as Gaston over here, if you ever hear his story. He's the man with that stuff. He is enough. I am not enough. I could not pull it off. And once I realized that, I decided, okay, I need to focus on what I'm really good at. And I need to double down on my unique skillset. And so a takeaway is when we venture into a business, whether it's residential or whether it's apartments or commercial. Identify what are the successful skill sets required to thrive and then look ourselves in the mirror and say which ones of those things do I have and which ones don't I have and then find the right business partners, vendors, or team members to fill those skill sets.
Slocomb Reed:
That makes a lot of sense. I've been trying to convince Gaston to let me interview him for the podcast at the meet up. You should help me out with that.
Joe Fairless:
I'll just keep calling him out and it'll be a half way interview...
Ash Patel:
Instead of Slocomb, do you want to do the interview with me?
Slocomb Reed:
Ash you have another point for us.
Ash Patel:
Yeah. Slocomb asked before we got started. Do you guys know what each other's top four mistakes are? And I don't, he doesn't know mine. I don't know his, but I'm really curious to hear his other three. So number two for me was raising capital. And I remember for years, every time I bought something and I ran into Joe, he'd be like, hey, what'd you buy lately? And I told him, and he said, did you raise money for it? I'm like, no, come on, why would I raise money? I got this. He's like, all right, should've raised money. And that's all he would say. Again, for years, I justified not raising capital because it was fear. And Joe knows this about me. I'm really good at making excuses and diverting attention. So my excuse on not raising capital, again, I justified it. I don't need other people's money. Remember, I'm in that sweet spot. So I got this. I don't need to raise capital. I was so fearful of losing investor capital that I just wanted nothing to do with it. And I had a lot of friends that would always be like, Ash, listen, if you ever need investors would love to get in on one of your deals. And instead of saying what I should have said, I'll let you know, but I don't need investors. Thank you. Just kind of brush them all away. And it wasn't until I saw a lot of my high net worth friends that were investing in bars, restaurants, marijuana companies, crypto, and they were getting no returns on their money. And I realized at that point, I would be doing them a favor if I let them into my deals. So it changed my outlook on raising capital. It's a burden to some extent, but you're really doing your investors a favor. Guys and girls out here, we're real estate people. We know how to grow money. I remember back when I had my W-2. I went to my accountant and I said, we've got extra money. Should we pay extra on our house? And you guys all know the answer to this, but I didn't. And his response to me was, if you can't grow your money more than 4%, which is what the interest rate was back then, you're doing something wrong. And I'm like, okay, I gotta go figure out how to grow money more than 4% because I don't know how. So a lot of the world is like that. They don't know how to grow money. So we're doing our investors a favor by letting them into our deal. So number two for me was I should have raised capital a lot sooner and then I could have done bigger deals. Those two go hand in hand. I was shying away because really I only had so much capital for each deal. And if I had raised capital I could have done bigger deals. I could have taken down these great deals that I did not.I wish you pushed harder back then. All you said was should have raised money.
Joe Fairless:
Well the other thing I say to people whenever they take the approach of not raising money is, first off, are they experts at what they do? And Ash is clearly an expert at what he does. So at that point, he's an expert at what he does. My thought is don't be selfish. He was being selfish by not allowing his investors to participate in those deals. And it's a different perspective from, I don't know about the risk or I just feel self-conscious, get out of your own way. Do you see what people are investing in that you named? And I'm sure some of those things will hit, but probably not as consistently as your deals.
Ash Patel:
Most of them did not hit. In fact, I think all of them did not hit.
Joe Fairless:
Well, if you got in at Bitcoin low and you sold high.
Ash Patel:
It wasn't Bitcoin they were investing in. It was mining operations or just crazy variants of that. But again, people don't know how to conservatively and consistently grow money. A lot of people want real estate exposure. So what do they do? They buy the house down the street while they're working their full-time job and they realize, oh my god, what have I done? So again, we're really doing them a favor by giving them real estate exposure.
Joe Fairless:
Cool. Let me say number two, you got something.
Slocomb Reed:
I'll have some questions that I want to ask and then we'll do Q&A from the audience and move forward from there. Go for it, Joe.
Joe Fairless:
So my second is lack of situational awareness. You mentioned interest rates. Interest rates are higher now than they were, and we're doing floating loans during a time of historically low interest rates. If I could go back, I would not do floating loans. I would do fixed loans. And fortunately, all of our deals have rate caps, so we're capped out at a certain interest rate. But it still makes the deal eat up cash flow a lot faster because you're capped out at a higher interest rate, plus when you have to save up money for a new rate cap, you're saving up money for a new rate cap at today's price is not whatever you purchased it. So overall, it's an expensive endeavor. So the second mistake certainly is having better situational awareness for what's taking place right now, historically, with the context of historically and seeing where the interest rates are. Interest rates aren't that high right now, historically. They're high compared to where they were, but they're not that high right now. Relatively speaking, anyone who was investing in the 80s, I wasn't, but anyone who's invested in the 80s, some head nods, yeah, they were really high back then, I think close to 20 or so. I read the Wall Street Journal a lot more now. And also having conversations with others in the industry and acting on things and course correcting proactively a bit more than we were before.
Slocomb Reed:
I have a question for each of you based on the mistakes that you're sharing and that I want to hear from the audience first. Ash, the first thing you brought up is go bigger faster. And the second thing you brought up is raise capital so that you can go bigger faster. We're experiencing likely the end of a huge bull run when it comes to economic growth in general, absolutely the real estate market, and I can't speak to the asset classes within commercial specifically that you operate in. But my question for you is does the go bigger, faster ethos, apply the same in the second half of 2023, as it did five and 10 years ago? The opportunities, are they the same? Are they still available? And if I don't have your experience, should I really be scaling that quickly in these economic times we find ourselves in?
Ash Patel:
Yeah, that's a good question. Again, we're not rolling the dice and hoping for the best. If you are, like Joe said, a true master at your craft by all means yes. Look, there's always deals out there. In the last month by a show of hands. Who's gotten a deal in their contract? All right. So about a half dozen hands went up. There's always deals out there. Look for them. Don't sit on the sidelines waiting because you're not going to be able to time the market and what are you going to do while you're waiting? There's people that are desperate to sell. There's people that are looking to buy. Just align yourself. Find those deals that are out there. Pivot. So if you've always done single families and the prices of single families are coming up, maybe look at multi. If multi is too difficult, if it's too competitive, look at flex buildings, look at small office, small retail. I want you guys and girls to be able to look at the MLS, look at every listing as a potential deal. So become well-versed in every single asset class out there. During different market cycles, different assets hit. Towards the end of a cycle is always when industrial hits. And that's what's happening now. Industrial's on fire. Those ugly metal buildings that you see that are rusted and falling apart and leaking are an absolute gold mine right now. There's so much money to be made. They're flex buildings, they're industrial buildings, whatever you want to call them, but they're very highly sought after. We're building them. There's so much demand. Nick's building them out there. There's so much demand for different asset classes at different times. So, continue to master your craft and then never stop looking for deals. They're always out there.
Slocomb Reed:
Master your craft and then go bigger faster.
Ash Patel:
Yes.
Joe Fairless:
And I'd say there's a season for everything and then the winter some people freeze some people ski, right? Everyone's heard the Tony Robbins approach there and I'm not saying that you said this you pose a really good question for anyone who thinks that now is not a good time, it's a weak excuse because there's always opportunity to buy cash flowing deals that you can add value to, whether it's apartments, whether it's retail, office, et cetera. Macro level, office might not make sense. Who wants to buy an office building in downtown San Francisco? Maybe.
Ash Patel:
We want to buy it for pennies on the dollar.
Joe Fairless:
Exactly. So you've got opportunity even in San Francisco, but from a macro level, it matters about the specific deals. That's what I'll say.
Slocomb Reed:
Joe, if I were summarizing the advice that comes from the two mistakes that you shared, introspection, taking the time to better understand yourself, strengths and weaknesses, and also take the time to understand the circumstances that you find yourself in as a real estate investor, what's happening in the market, specifically what debt makes sense given the climate that we're in. I have a reading habit, but I don't have your reading habit. This advice makes me think that I need to read more books than you, go back to playing chess, learn meditation and yoga, and spend all of my time thinking. That's intended to be humorous. And I understand, like, you're allowed to laugh at bad jokes. But if my advice is correct based on what you're sharing, what is the point of action? At what point should I, having discovered myself and my circumstances, just get out there and take action and make something happen and go make some mistakes?
Joe Fairless:
At what point should you go take action and make some mistakes and learn from it? Well, I would suggest understanding the business model and having the right advisor or advisors around you prior to taking any investor money.
Slocomb Reed:
Prior to taking any investor money?
Joe Fairless:
Correct.
Slocomb Reed:
Not prior to investing?
Joe Fairless:
Correct. Your money rolled the dice, baby. But with investor money, I'd say have some deals under your belt or have others who are on your team with invested interest in those deals who have experience and will help guide the process along the way. I remember listening to Tony Robbins in my New York City apartment in 2012. I discovered him on YouTube for the first time and one of the things he said, which I scoffed at, but I now know is true, he said, 80% of success is psychology, 20% is mechanics. And I was like, shut up, just give me the tactics, just let me go to work, baby. But it's true. 80%is psychology because there will be a book on syndication. I've got a book on syndication. You can read the book, but ultimately there's going to be gray area because that's life. Life's a messy thing. And what are we going to do from a psychological standpoint to handle those gray areas? I can tell you there were lots of challenging circumstances with the deal I had in Cincinnati. Ended up losing money. I paid back my investors plus 14% return out of my own pocket. But I had 12 investors. I had 12 challenging phone calls with those 12 investors. And I said, I don't know how long it's going to take. This property's going to lose money, but I'm going to pay you back every month. And 14% on top of that annualized return. And I did. And it took about two or so years to do that. So the psychological component of it is more important than the tactics, but we have to know both. And tactics are the action. And the psychological component helps us navigate through all the different mistakes that we make while we're taking action. My third point is, previously on my first deal is that I didn't speak to investors early on about the challenges of that property. And I used to think, oh, we'll get occupancy up and then I'm going to move there, which I did, and I'll get all the parking lot fixed and I'll be on site and I'll lease things up and I'll do all sorts of things. Well, essentially, I was delaying the pain, and that was a mistake. I kept thinking, oh well, eventually it will get better and I'll throw myself into it. But I delayed what I needed to address then and there. And I knew I needed to address it then and there, in the back of my mind at least. But I didn't. I kept trying to push it, push it. I should have sold the property about a year and a half prior to that. But I didn't because I kept thinking I'd actually sell for a profit. So since that first property, I don't delay the pain anymore, but that was a mistake that I made. And what I recommend, we're all going to go through crazy stuff with deals, right? Who's had a deal that at minimum hasn't gone according to plan. A lot of us are all stars then. Every deal has gone according to plan. Let me know if you need investors. I will happily invest with you. But the suggestion I have for you when you go through a deal that doesn't go according to plan, or if it goes really bad is to make that a scar. Some people get tattoos of things they wanna remember, forever, make that a scar by journaling about it and documenting it. I got a freaking deck of cards with the logo of the property in Cincinnati. I hated that thing, but I love that thing. Like, I have a deck of cards made from Walgreens with the sign of that property, because I won't go back there. Mentally, physically, like...
Slocomb Reed:
Figuratively speaking, figuratively speaking, yeah.
Joe Fairless:
I wouldn't even go to the Eastside. No, I do go to the Eastside. I go through Amelia all the time. But that is key because as human beings, we want to generally go to the path of least resistance. That's how we have survived and that's how we've thrived. And we tend to forget how freaking painful something was. And even if it was ultimately an empowering experience, which usually those things are. We go through challenges. Usually, we say at the end of it, that sucked, but I'm glad I went through it. So we start diminishing the pain that we're actually in. So document it in a journal, I do a daily journal. I've been doing a daily journal since June of 2015. Daily, I miss maybe 15 days a year. June of 2015, I can go back and I can read what was happening on that day. And it's great because it helps keep an edge whenever you go through something like that, it helps you remind yourself, man, that sucked not going back there. Because there's a tendency as things go well to get a little soft, to get a little complacent, and keep some memento of that experience top of mind.
Slocomb Reed:
The question for each of you is with the importance that psychology plays in life in general and real estate investing and with the emphasis on fear that has already been shared, what is it that you currently fear in investing or in life in general?
Ash Patel:
The fear for me would be an economic collapse similar to '99, 2008. So what do you do in that situation? You start going through the what ifs. Look at every one of your assets. Anticipate the worst case scenario. Widespread job losses, my commercial tenants not being able to pay their leases. And stress test your deals. So really that's it. I'm probably a big doomsday kind of person because I always think things are going to be much worse than they are, and that helps me prep for when they're not as bad.
Joe Fairless:
Being buried alive. That would be terrible. Worse fear.
Slocomb Reed:
That's something you actively grapple with?
Joe Fairless:
Not actively, but if anyone says what's the one way you don't want to go out, don't bury me alive.
Slocomb Reed:
No Mr. Beast videos for Joe Farless.
Ash Patel:
The question was, examples of key stress tests. I can't tell you how many times I've seen proformas. and the arrow goes up and to the right. Okay, I'm buying this asset and oh my God, in a year I'll be able to sell it for twice what I paid for it. But I don't see the pro forma where the arrow goes down. So when we underwrite deals, my team will tell you, we never look at what ifs in the positive, we've never done that. Maybe mentally we can do some mental math, you'll never see that on any of our pro formas. It's always how much more vacancy can we absorb? If there's an economic headwind, what kind of decline in monthly rents can we absorb till we break even? So that's primarily what we do to stress test deals is the amount of additional vacancy and reduced rents. Exits we don't worry about. We never plan on selling a property, only improving it. Years ago, one of my first properties, somebody a lot more experienced than I was said what's your exit strategy? And I scrambled to come up with what I thought might have been an intelligent answer. The truth is, I never have an exit strategy. We just make it work at all costs. We never say, OK, we're going to sell for this much or in two years we're going to sell. It's we're just going to go in there, do everything we can to make this property improve the NOI.
Joe Fairless:
Just as a follow up, how do you communicate that to investors? Because they'll say, yeah but I don't want you to have my money forever. When are you selling, and what are you assuming?
Ash Patel:
So that's a good question. When we take on investors, we follow the run of the mill five year hold period. So on deals with investors, we have to be a little bit more cognizant of what our exit is, but it's the same thing. We are just going to improve NOI as much as possible and sell for more than we paid for it. Our profits come from cash flows more so than appreciation. We never bank on selling a property for more than what we bought it for. That's how much cash on cash our deals get. We never anticipate an upside on sale. If it happens, great.
Slocomb Reed:
We're going to have to leave that one alone for now for the sake of making this less than an hour and a half. But top mistake number three, Ash.
Ash Patel:
Yeah, this might be silly, but it was not hiring an assistant soon enough. And part of it is that immigrant background. Any immigrants in here that do it yourself, so why hire somebody when you could do it yourself? Well, I did that for years. Borderline nervous breakdowns, running all over the city, doing everything myself, similar to what Joe said. I didn't realize what I was good at, not good at. I just assumed I had to do it all. I assumed that I wasn't ready to hire somebody. I haven't earned it. And another fear for hiring somebody was I thought, okay, what if I hire somebody and they come in and I'm so disorganized and they're going to say I can't work in this environment and leave or on the flip side, what if somebody comes in and they get everything situated everything organized and all of a sudden I have no more use for this person was I just creating this chaos in my head, and it's really not that bad? So all those what ifs went through my head, and when I finally hired somebody, it was an absolute godsend. It's like a drug. When you can offload something and it gets done, it's like, oh my god, why don't we hire more people? And this is a crazy epiphany for someone like me to have because in the corporate world, I managed entire departments across the Midwest. I had a lot of people report to me, and here I am running a real estate business, and I couldn't figure that out. This will lead more to number four, but really that's number three. I was inundated way too much for far too long. So any of you out there that are in that situation, you've heard the saying, what is your time worth? Well, you know how I would answer that? When I'm finding a deal, when I'm doing something that's making money, it could be $1,000 an hour, but when I'm not, it's zero. So I don't really know what my time is worth. Do this, value your time when you're spending time with your spouse, your kids, your friends, or just relaxing. Sitting on the couch being mindless is worth some amount of money. And what I mean by that is if you're cutting your lawn, would you pay $25 an hour to sit on your couch instead and just unwind or cook a meal or call a friend or call your parents? Your time is always worth something. And if you still don't grasp what I'm saying, do a time audit. Set a recurring 55 minute alarm on your phone. Every 55 minutes your phone dings, you stop what you're doing for five minutes, write down what you did for the previous 55. Do that for 8-10 hours a day. Don't look at it for a week, because if you look at it the next day, you're going to justify everything that you did. Well, it's easier for me just to do that. I could send this email out. If you wait a week, let time pass, and truly look at where you're spending your time, you're going to realize 15 minutes for this email is not worth my time. It should have been spent looking for deals. It should have been spent talking to potential investors, talking to partners, going to visit your tenants. So your time is worth a lot more than what you think it is. And I wish I learned that lesson a lot earlier than I did.
Joe Fairless:
Gary Keller, the millionaire real estate agent book talked about your first hire should be an assistant. And once I read that book, I hired the assistant and yeah, that was my first hire.
Ash Patel:
You're right, Slocomb. We should both read a lot more.
Joe Fairless:
Well, it wasn't early on though, it was a decent way through. And the other thing is, I forget what book it is, I think it might be that one, where the author talks about hiring someone to do what you're doing and the primary objection from that individual who doesn't want to delegate is, they can't do it the way I do it. And those clients, those investors, or so-and-so, they love me. I don't know. They love the service you provide them. They don't love you. They love the service you provide them. And someone else can provide similar service or better. Teach them to.
Slocomb Reed:
John Maxwell has a quote on that I think about often that if you can train someone else to do something 80% as well as you do, you should hire it out. Ash, why don't you go ahead? You were naturally leading into mistake number four. Why don't you go ahead with it?
Ash Patel:
One thing I would emphasize all of you do is track one metric that shows your success. It's your net worth, or your balance sheet, your bottom line, your assets minus liabilities, that one number. That's a number that doesn't lie. Monthly cash flow can lie. That can fluctuate. But your net worth, your balance sheet, what you're really worth, and be honest with those numbers, never lies. So I've been doing that for years. And it's good to see at the end of every year because I may not have more money in my bank because it's all deployed. And my wife, really doesn't understand what I do. She's very supportive, she's awesome. And I've never calculated monthly cash flow. So my only metric is when I do my year end balance sheet, and I probably do it a couple times a year now, but that number increases year over year. And that's a testament to the success that all of you should be achieving as well. That number went up significantly when I started raising capital. And it went up again significantly when I had two partners come onto my business. So three of us formed a partnership and this was incredibly helpful because for so many years, I was a one man shop. Sitting in front of my computer most days and it sucked because I'm by myself, I have nobody to bounce things off of and it's important to have partners speak to you and tell you what you're doing right, what you're doing wrong, be honest with you, tell you you're not good at this, let me handle it, or why didn't you do this? Be accountable. And I never had that. I was accountable to myself and nobody watched over what I did. So getting partners, I should have done a lot sooner. I had a failed partnership early on. I was so in love with the idea of having a partner that I took on a partner for a building. This person was a home builder. And I thought perfect, because we bought a half finished office building. What a perfect partner. Somebody that can do all the construction. And that partner had a different mindset than I did. When it came time to do the construction, his crews didn't do it because they were scared of commercial. Commercial is just drywall, electric, plumbing. It's the same. But when it came time that we finished this building and it was time to get tenants in there, we had tenants coming to look at the offices that we had. I said, come with me tonight. We've got three people lined up to look at this office building. And he said, Ash, no, hire it out. I'm like, we can't hire this out. It's not worth anybody's time to rent an $800 office building. No realtor is going to do this. And he said, I don't know what you expected out of me, but I'm not putting time into this business. I thought, oh my God, the last six months, I was there every day renovating this property. What do you mean you're not gonna help me sell it? The expectations weren't clear in the beginning. Should have just asked some simple questions. So while I stress, you'll go farther together with a partner, be cautious. Just pretend you're dating. Test drive a partner deal by deal. When you know that you have something that can grow long term, go into a longer term formal partnership. But to me it's a lot more fun going together. It significantly increased my net worth once I took on these two partners because we can split up the tasks that we have to do. Each person has their own superpower. And together you can get a lot more done. So seriously consider finding the right partner.
Joe Fairless:
Yeah, I agree. And my fourth one is very similar. My mistake was, well, I'll ask a question. Who here works from home? Yeah, now we're getting some audience participation. OK. Well, a lot of you work from home. I also work from home. We have an office in New York City. We have an office in Dallas. But I work from home. And the team members who I oversee, marketing, investor relations, investor services, they all work remote. As a result of that, sometimes it gets a little lonely working from home, right? Just sitting there, and distracting too, if you have family members who are there. And the mistake that I made is that I wasn't intentional about building a peer group that I spoke to consistently. Now I do. Now every Tuesday I speak with Ash, and every Tuesday I speak with one other person. And both people are performing at very high levels. And it's partially for accountability. It's partially for building out a friendship even more. And it's fun. Our families go on vacations together, and we do all sorts of stuff. So it's more enjoyable to intentionally build out a peer group and have those conversations consistently. And that's the key: consistently. I would much rather have three really good friends I speak to consistently than 10 acquaintances. I heard a yup. That's the first yup I've heard all night. Yeah. Preach. So I'd say that is something to be intentional about. And it's elevated my game. I also, as a result of being intentional about it now, joined the mastermind. And now I am building friendships. And that's how I met the other gentleman that I speak too weekly. It's awesome to be able to talk to people who also are not in your industry. Neither one of the individuals buy multifamily that I have calls with on Tuesdays, cause I'm not looking for industry advice. I'm looking to talk more macro level, all the areas of life: professional challenges, personal stuff, fitness, health, all that stuff. So that would be an area that I was inconsistent on initially. But now I am consistent.
Slocomb Reed:
I'd like to start by shooting for a summary of Joe's mistakes and advice and then go to Ash. Joe, number one, came down to having a solid understanding of yourself, your own strengths and weaknesses and putting yourself in a position to focus on your strengths and partner out, delegate out, leverage, hire out your weaknesses. Number two was situational awareness. Take the time to understand the market, the economy, the factors that are going to play into your professional life and your investing. Three, have the difficult conversations early. Don't let them linger. And the next step to that is remember the pain that you've gone through to make sure that you don't go through it again. Number four was make sure that you are getting around like-minded people so that you can create that sense of camaraderie and accountability and pull and be pulled by other high-level operators. Is that a fair summary?
Joe Fairless:
I would have had to look at my notebook to summarize that. Man, I have... props.
Slocomb Reed:
I've been taking notes. Ash, very different approach to summarizing your mistakes and your lessons. There's one overarching trend that's going through everything that you said. First, be an expert at what you do. And then go big. And when you go big, do what it takes to be successful. Summarizing it in this way in part because I know you want the opportunity to talk about your conferences coming up and I know that becoming an expert, going big, and doing what it takes to be successful is a big part of the theme of the conference that you have coming up. Do you want to talk about that conference real quick and then we'll go into a little bit of audience Q&A?
Ash Patel:
Sure. Our company is called Invest Beyond Multi-Family, and for almost 15 years I've been investing in retail, office, flex, industrial,ground-up development, medical, mixed-use, restaurants, anything non-residential. And the reason for that is my very first property was a mixed-use building where I saw the commercial, and I saw the residential. And I'm not good at dealing with plumbing leaks and calls in the middle of the night from tenants. Don't want to deal with that. So commercial tenants improve your property on their dime. We deal with business owners instead of residents. We don't have kids and pets and showers. So for a number of years, I've been doing this. I had a few people reach out to me a couple years ago, and they wanted to learn more. So I started mentoring them and long story short, it turned into a formal mastermind. A couple times a year, we host this conference. So for anybody interested in learning more about different asset classes beyond residential, this'll be a great conference. It's just a couple weeks from now, October 11th through the 13th in Cincinnati. You'll meet other people like you that were doing residential, that were doing multifamily, and they transitioned into commercial real estate investors. Our returns are significantly higher than residential. Our tenants are longer term business owners. And the second day of our conference, you'll get on a bus and tour the properties that these people have purchased. You'll see all the numbers behind the property. You'll hear the stories from the individual that's behind that building. So it's a great conference. You'll meet a lot of people, again, that started out in residential and transitioned to commercial. If you have a conference ticket, you'll have access to the recordings. The bus tour on Friday, I don't know that we'll record that. There's just gonna be a lot going on. So if you can make any part of it, the bus tour would be it. Wednesday evening is networking and dinner on us. All the meals are on us, drinks, Thursday, bus tour. It's one price that covers everything. It's $750 per person.
Joe Fairless:
I asked myself to come here and come up with four mistakes I made in commercial real estate. And the fourth one is that I was inconsistent with building my network. And this is an incredible opportunity to not only learn, different aspects of commercial real estate, but to network with people who are playing at another level. This is a huge deal that we have this conference in Cincinnati. It's so convenient for everyone to attend this conference. And when people say, I'm working on this, but I can't get over this, or I'm struggling with my residential business, at least see what the other opportunities are for commercial real estate. Because I can't name one person who has gone from single family homes to commercial real estate and then back to single family homes. When you go to commercial real estate, you love it because of all the reasons that he stated. And you would be doing yourself a disservice, you'd be doing your family a disservice, you'd be doing your potential investors in the future of disservice. If you don't, at least check it out. And there's really no reason not to unless you're not in town.
Ash Patel:
And this conference won't be in Cincinnati again for a number of years. We move it to different parts of the country wherever our mastermind students are. So would love to have you here. And again, Joe's point, whether you are a realtor, I've never seen a realtor go from residential to commercial back to residential. Contractors, same thing. It's just a different world. Let us open your eyes to it. There's so many opportunities out there. Again, I want you guys to look through the MLS in every single property, you'll know how to underwrite. Everything's a deal, whether it's office, industrial, residential, multifamily. So add these assets to your arsenal.
Joe Fairless:
I'm not getting paid to attend, to speak, although you could buy me lunch or something, right? I'll buy you a drink. But this is purely, you're here investing your time tonight and I respect that and this is something I wanted to share with you because I know it will make a difference in your life whenever you attend and then you take action as a result of attending. That's all I'll say about it.
Slocomb Reed:
We're going to open it up to a quick round of Q&A. We just released an episode on the podcast last week all about using VAs for apartment operations. I'd be happy to connect with you. Just real quick off the top, the vast majority of my experience and success is with VAs in the Philippines. And if I had 30 seconds to help you hire a VA in the Philippines, I would say that they are very good at scriptable, repetitive tasks that don't require you to be in person. So when I was a one-man band, as a property manager, literally the only thing that I was doing to get apartments leased, two things. One was showing up for the showing, that someone else followed up on the lead, pre-qualified the prospects, scheduled the showing and put them in my calendar, sent the application, processed the application and then sent me a review which I approved. Those were the only two things I had to do because everything else is scriptable and templatable and I'm already over 30 seconds, I'm sorry, but scriptable, templatable, great for communications in the Philippines. Their number one industry is basically English-speaking call centers, but you don't go to the Philippines or to virtual assistants in general, in my experience, for creative thinking or critical thinking. You wanna make sure it's for teachable, scriptable, repetitive tasks. That said, there's a lot of that stuff that we all do that could be done by someone in the Philippines for six, eight, $10 an hour, and at six, eight, $10 an hour, you're providing a serious quality of life. My $10 an hour personal assistant is saving to buy a new construction house, and she just bought her first ever car. She's in her mid-20s. So you hear those prices, and it's kind of crazy. You're actually providing quality of living and a serious, good employment opportunity while saving money, getting quality, hardworking people for repetitive, scriptable tasks.
Joe Fairless:
Mindset, why did I go from single-family homes to large apartment community? He also has four single-family homes. And it was the whole dynamic of on the spreadsheet, I should be making a thousand dollars a month, 250 bucks per house. But in reality, I would until someone moved out or there was an expense, and then I'd wipe away all the profits and I knew I needed to scale to get the true cash flow that I was seeking, but I didn't have the money to buy a large apartment building. So that's why I ventured down the path of syndication. Was there a business coach or a mentor involved in helping you make that transition? Yes, there was. And mixed feelings on the advice I got, but yes, there was. To answer your question directly.
Slocomb Reed:
Yeah, I'm not, I'm not. I'm not looking for name dropping or anything like that, but I've heard you answer this question before and part of your answer in the past has been that you sought out a coach that could help you expand your mindset and prepare you the 80% that is psychologically for making that kind of room.
Joe Fairless:
Absolutely. Yeah.
Ash Patel:
And the people in this room use each other. The Best Ever listeners that are listening to this online, find somebody. If you don't have a partner. Find somebody that you can be accountable to. Find somebody that you can go out to lunch and ask these good questions to. Everyone's at a different level, so there's always something you can add value with and that you could take away from someone else. So use each other. You come to these meetings. Don't just come to listen to the speakers. Come to engage with this network that you have in front of you.
Slocomb Reed:
Last question. When you're associating with your peers, people who are on your same level professionally or in other ways, There's a tendency to have similar limiting beliefs because you're at a similar level in that space. The question is asking for examples of times that you associated with or got around people operating at a higher level than you and what that experience was like, how it changed things for you.
Joe Fairless:
And how to find them and how to cultivate that for yourself. Two ways. One, when you come across them, maybe not physically grab them, but pretty close to grab them and then have a follow up call. I met someone through a mastermind, which is my second point I was going to make for how to do this. The second one is join a mastermind where they cultivate it already for you, and then find the people. So they're doing the work for you. It costs money, but attention is the most precious resource that we have. So how we focus our attention and who we focus it on, that's the most precious resource, not the money. And so that's why I love these meetings and I love these conferences that Ash puts on. But an example of that is I joined the mastermind and I met someone and then we hit it off. And I thought, well, we've got to do calls. So I reached out and he felt the same way and so we do calls. And then you build a relationship. My focus has always been when I attend a meetup or a conference, one new relationship a day. That's it. And it's pretty easy and it sets us up for success. Versus I want to meet as many people as possible and business card. Who wants a business card? Just one new relationship a day. And when we focus on that, things tend to work out and a great video to watch: Tim Ferris, how to hack South by Southwest. He talks about that.
Ash Patel:
I'll share a story where somebody wanted my time and they got it and they got a lot more. This individual reached out to me, and it was a Facebook message. He said, my name is so and so. I am a wholesaler currently, but I want to learn commercial real estate. I've been stalking your Facebook, and these are your favorite restaurants. Pick one. I'll buy you lunch or dinner. I just want 15 minutes of your time. And I thought, what a cool approach. So I had a conversation with this person. I said, yeah, listen, I'm an hour from Cincinnati. I'm gonna be out there for most of the summer. You're more than welcome to come out here. He said, tell me when and where, and I'll be there. Probably a Tuesday afternoon, he came out and we started talking for 30 minutes. All he asked were, what were your bottlenecks? What are your pain points? And I finally had to stop the conversation. I said, okay, enough, what can I do for you? And his answer was no. I just want to know how I can add value to you. And I had to overly insist. Let's get beyond that. I get it. You've earned my respect. What can I do for you? And I've mentored this individual for years. He's done $10 million worth of deals from that. So I don't know that I'm as aggressive as Joe and I would just grab somebody. I would, so to speak. But I admire that. And I'm rethinking my approach. Don't be intimidated by talking to the person that you want to be in front of. Everybody's human. Everyone has flaws. So just because you think they're at a much higher level, do not be intimidated. Everybody's human. This is my opinion. If there's a connection, great, follow up. If not, move on. There's plenty of high level people out there. Find somebody that you naturally have a connection with.
Slocomb Reed:
Awesome advice. Joe, Ash, it's been an awesome conversation. I feel like there's more than one podcast episode here. So Best Ever listeners, don't be surprised if this is a two-part series for the meetup today. Best Ever listeners and Best Ever mastermind attendees, thank you for taking the time, investing your time to be here, to listen. If you have gained value from this conversation today, please do subscribe to our podcast. Leave us a five star review, and share this episode with a friend so that we can invite to them as well. Thank you and have a Best Ever day.
Joe Fairless:
Hi Best Ever listeners, Joe Fairless here again. And one last thing before you go, would you like to receive a short weekly email with proven tips from experienced investors, free tools and resources, and a roundup of the week's most relevant news and Best Ever content? Well, if so, join the community of nearly 15,000 commercial real estate passive and active investors who receive the Best Ever newsletter. Just go to bestevercre.com forward slash access. and you'll get the very next one. I hope you enjoyed this episode. And as always, thank you for listening and have a best ever day.
