Are you getting better and evolving? Are you becoming a better practitioner of your craft? These are the questions where a lot of real estate investors fall apart because to become successful, it is important to be progressive and adaptable to change. Jason trumps stagnancy as he shares his success story and progressive experience – from how he got started in real estate to where he is now personally and financially. It doesn’t matter how many years you have worked if you’re doing things the same way since year one. Break out of that cycle as you start a career and progress as Jason talks about the need to have an open mind to evaluate whether your skillset has improved along with your work experience.
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Jason’s Story, Progressive Experience, Evolving
I’ve gotten a lot of requests. A lot of folks said, “Jason, can you do your origin story?” I’m going to talk about how I got started in real estate, how I ended up where I am now, and where I’m at personally and financially. I want to share with you a big heartfelt thank you. Our show has exploded. In less than a couple of weeks, especially our Facebook page, our show has grown larger than a show I had done for a few years. It is enormous. I was looking at some video statistics and we have some of our videos that are getting 2,000 to 3,000 views. We have a massive following. I want to thank everybody for that. A big hearty thanks to everyone. The show is growing rapidly.
From Mentorship To Conferences
I was a young guy, I graduated from Sam Houston State University. My undergrad is in environmental science and chemistry. I went to go work for an organization in health care. Their principal charge is health care research and education, a fantastic organization. I worked off and on for several years. I worked for this guy named Bob and Bob was a fantastic mentor. He had a lot of young people in his organization right out of school, early young professionals. His big thing was mentoring. He was all about mentoring the next generation. I go to work for Bob and the team over there. It was a great place to work, great people to work with and Bob said, “You need to look at doing some graduate education.” I said, “Okay.” While I worked there, I got two graduate degrees. I enjoyed learning. Undergrad is not for everybody. You’ve got to take all these basics and then you feel you don’t get into any interesting classes until your senior year in college. I loved graduate school. I came close to getting a Ph.D.
It was an excellent experience. I was promoted along the way. I was promoted a handful of times. By 28 years old, I was the risk manager which is a nice way of saying the head insurance guy. I worked a lot on our workers’ comp. That was under my purview, workers’ compensation program, our property management program. We had about $2 billion in insured assets. I also did the business continuity plan for a little under $1 billion a year in revenue and I was 28 years old. Thinking back on it, I probably had no business doing that. I worked with a great executive team, a fantastic management team and they saw a lot of potential in me at 28 years old. I’ll never forget the first risk management conference I ever went to. I can’t remember what city it was in. We flew out. I was helping Bob with a pre-conference workshop, which I got to speak at.
We’re doing this pre-conference workshop and then the conference starts. How these professional conferences work is everybody flies into town. There’s a conference. It’s for two or three days, maybe it’s four days. There are sponsored events in the evenings. Sometimes there’s dinner, there are happy hours. It’s a lot of fun where you can get professionals together and talk about what it is you do, share best practices and war stories. I’ll never forget my first conference and we went to this happy hour. I’m sitting there with a handful of mostly men. This industry is mostly male-dominated. I’m sitting next to a couple of these guys and a gentleman is in his mid-50s. We started talking about what we do, “What do you do? I work here. What do you manage?” Every one manages a little bit different stuff despite having the same job title. He looks at me and he says, “This is it.”
I said, “What do you mean this is it?” He said, “This is what it’s like.” I was like, “What’s like?” He’s like, “This is what the many years of your career are going to look like.” I said, “Excuse me?” He said, “I’m in my mid-50s. When you get to this level, there are only a handful of other places you can go. Aside from getting promoted or going to a large organization, this is your working life for the next 35 years.” I was 28 at the time. In the back of my mind I’m like, “This is it?” He said, “Yeah, this is it.” I’m thinking, “Don’t tell me we’ve already reached the top of this thing. I got another 35 years. I’m 28 years old and this is it.”You have to change. You have to evolve based off the experience you’re having. Click To Tweet
I’ll never forget flying back to Houston. I’m sitting there and I’m having this conversation with my wife. At this point, I had started investing in real estate. We had a couple of rental properties. I had a couple of little flips going on. The twilight of your career is not supposed to start at 28 years old. A couple of years after that, I went to work for another organization. They’re a Fortune 500 company here in Houston. I’ll never forget. I was 30 at the time. My boss is going to be out of the country on vacation for a couple of weeks. He was going to have intermittent internet access and occasionally we’ll make a phone call here or there. For all intents and purposes, he was gone. He ran both the sales and the project team at this organization. I was on the project team.
I said, “John, I can run these national sales calls. It’s not that big a deal, but hand over the reins for a couple of weeks and I’ll send you an email every couple of days to keep you updated on what’s going on.” He looked at me and he said, “Jason, there’s a problem with that.” I said, “What’s that?” He said, “You don’t have enough gray hair.” I was like, “Who cares what the color of your hair?” He was saying I don’t have enough experience yet. That’s what I realized in Corporate America, although there are great people there and there are fantastic organizations, there’s a bureaucracy. There’s a hierarchy that in some cases you can’t breach. You’re not old enough. You don’t have enough experience regardless of how good you are.
You can be an all-star player, but there are these other metrics. There are these other criteria you have to fulfill that in some cases you can’t do anything about. You can’t make yourself older or younger. You can’t get into some of these clubs. I was doing a little bit of real estate investing. I’ll never forget my oldest son was born the first day I considered myself a real estate investor. Sometimes when I’m like, “My portfolio should be gigantic,” and then I see the seven-year-old running around. I’m like, “I’ve only been doing this for several years, full-time for about the last few.” I was listening to the radio and that’s how I found my first real estate investing organization to join.
Real Estate Investing Organizations
I’m giving you guys my story. The first real estate investing organization I ever joined. I heard an announcement over the radio, “Come learn how to do real estate investing.” I’d always wondered how it works. I can get on MLS. I can get on the HAR, Houston Area Realtors, and I can look at houses for sale and rental properties. I couldn’t figure out, “How do mom and pop turn a single-family house into a rental property?” I joined a handful of organizations in town. There are a couple of them that are good at what they teach. In the first few months of real estate investing, I bought four houses. I bought two in one day. My wife was out of town for a work trip and I get a text message from a real estate wholesaler. A wholesaler is somebody that sells their rights to purchase a property. You’ll hear this term sometimes, they’re selling you the contract.
I’d gone to half-a-dozen real estate networking events, ran into a couple of wholesalers, and one of them said, “Jason, give me your number and I’ll text you. I have a deal.” I was like, “Okay.” I worked in the medical center and I get a text to take a look at a house in Westbury. If you are familiar with Westbury here in Houston, it sits in the shadows of the Texas Medical Center. If you don’t work in the medical center or downtown, you probably don’t live in Westbury. It’s right there on the heart of all that. I get this text message, “Jason, I’ve got a property for you in Westbury.” This is 11:00, 10:00. I was like, “This is perfect. I can sneak out of here for lunch. I can go walk a property quick. Maybe if it’s something, I’ll buy it.”
I walked in, looked at it and I said, “I’ll take it.” I handed the wholesaler a $5,000 nonrefundable deposit for the property. I don’t recommend doing this when you’re a brand new investor. If you’ve got the right education, you can walk a property and go, “I’ll take it.” This thing was a gigantic piece of junk. I’ll never forget it. It was a two-storey. In Westbury, there are not many two stories. I’m standing at the bottom of the stairs, I’m looking up to the second floor and I was like, “I didn’t know they put skylights in two-storey houses. The wholesaler looks at me and goes, “That isn’t a skylight. That’s a hole in the roof.” I was like, “Are you serious?” I walked up there I was like, “It’s a hole in the roof and it’s ruining the wood floors.” I said, “I’ll take it.”
I bought that one. I went back to the office doing the typical corporate thing, going to a million meetings that sometimes don’t accomplish a whole lot. It’s getting close to 5:00, 5:30. I get a text message, “It’s Bob the wholesaler. I’ve got another deal for you.” I said, “Where’s it at?” He said, “This one’s in Steeplechase.” Steeplechase is on the east side of 290 south of 1960. Some of you in Houston are chuckling because I’m in the medical center. It’s 5:30 PM and I’m trying to get to 290 and 1960. You might as well commission a helicopter to get to that side of town. If you think 290 is bad now, imagine what it was like a few years ago. It was ten times worse.
I text the wholesaler. I’m like, “I’m in the medical center. You’re at 1960 and 290. It is going to take forever for me to get up there. That house better not be sold by the time I get there.” He said, “I’ll wait for you. There are a handful of other guys that are good buyers. You bought one from me. We’ll wait until 7:30 latest.” I said, “Perfect.” I jump in the truck. I head up to 290, 1960. I’m driving up there and traffic is horrendous. I get up to this property. I walk in the door. I look around and I said, “What do you want for it?” He told me and I said, “I’ll take it.”
I bought two houses in one day. I head back to the house. I call my wife and I said, “Guess what I did?” She goes, “You bought a house, didn’t you?” I said, “I bought two.” She goes, “I figured you would have bought a bunch of stuff while I was out of town.” Now I’m a real estate investor. Fast forward a couple of months later when the rehabs are being finished and we’re moving tenants in. We’re having our second kid and that day is when we moved in our first tenants. I like to think that was the start of my real estate career was when my second son was born. Fast forward a few years later, I was doing a handful of deals. At this point, I’ve done a little flip. I got a couple of rental properties and then I start thinking, “Maybe I can do this full-time.”
Think And Grow Rich And The Millionaire Next Door
I joined a mastermind. If you’re outside of the real estate, you’re probably like, “What is a mastermind? This is a weirdo language I read about on the internet.” There’s a book out there called Think And Grow Rich and it is going to be one of the strangest books you read in your life. It was for me. The strangest version of that book is you need to read the original 1937 edition. Don’t get the new one. It seems everybody has their brand of that book. Whatever guru out there they’ve got the Joe Bob version of Think And Grow Rich. Do not buy that one. They start talking about this infinite intelligence and tapping into all this medical, physical weirdness. I read it every year and every year it says something different.Wealth is executing on opportunities at the moment. Click To Tweet
I’m reading this book and while I’m reading that book, I’m reading The Millionaire Next Door. The Millionaire Next Door is a book that is the complete opposite of Think And Grow Rich. Dr. Thomas Stanley did several years of research on who the wealthy are in this country. He started out working for a marketing firm while he was at the university. To explain to marketing firms who wealthy people are and where they live. It’s incredibly analytical. On the one hand, you’ve got Think And Grow Rich and on the other hand, you have The Millionaire Next Door. Don’t read the original The Millionaire Next Door. Read the one he wrote after 2009. That’s a better version. Dr. Stanley has since passed away. There’s not going to be any more versions of The Millionaire Next Door.
If you want to go to the next level, The Millionaire Mind is fantastic. I would get Dr. Stanley’s book, The Millionaire Next Door, revisit it. It’s a 2010, 2011 edition, and then read the original version of Think And Grow Rich. Between that and some accounting books, that is all you need to know to start a business. It’s no more complex than that. I’m reading these two books and I’m thinking, “I should start a business in real estate because I look and see how these single-family businesses are run and they’re not great. There’s an opportunity in this marketplace.”
I’m sharing a little bit of my story. A few years ago I started looking at the single-family real estate investor landscape. There’s nobody that runs this like a business. I joined a mastermind and it was talking about two books and one book in particular, Think And Grow Rich, is the one that talks about a mastermind. It’s a group of people that come together to share ideas and best practices, to see if they can help and grow their business, wealth, or relationships. We put together a little mastermind group, my business partner and me at the time. We came up with this idea for a company called Houston House Buyers, which is now one of the largest house buying companies in the city. Fast forward a couple of years later, we started a real estate education company called Right Path Real Estate. We also started another company called Quality Property Solutions, which takes on real estate assets with the worst title issues you can imagine. We had these three companies for about a few years. I decided, “I’m done running these organizations,” and my business partner bought me out in September 2018.
One of the things Tom had always told me that I thought was fascinating was one of these great little tips you hear. Whenever we’re interviewing somebody, let’s say we’re looking for somebody who’s a bookkeeper. We want a brand new bookkeeper. We’re bringing on another bookkeeper on board. You look at their resume and it says they have twenty years’ experience. At first blush you’re like, “That’s a lot of experience.” Tom would say something like, “That twenty years’ experience, is that one year of experience repeated twenty times or is it twenty years of progressive experience?” There’s a big difference between those two. Did you repeat your rookie season twenty years in a row, where you did the same thing for twenty years?
Did you make some mistakes in year one, changed some things you did, and had a better year two? In year two, you probably made some different mistakes. Did you get better? You changed those in year three. It’s a progressive experience. It’s not simply repeating the same thing over and over again. Are you getting better? Are you evolving? Are you becoming a more or a better practitioner of your craft? That’s what that question is. Are you doing that one good year over and over again? Are you progressing? Are you changing based off the experience you were having and then applying those lessons to what you’re going to do in the future? This is where a lot of real estate investors fall apart.
They have a good one to five-year run and then they don’t learn anything from those first five. They go, “We had a good five years. We flipped some houses and we have some rental properties. This is what we’re going to do for the rest of our lives.” It’s the story I started out with when I sat down with that gentleman early in my career at 28 years old, him in his mid-50s and he said, “This is it.” I said, “What do you mean this is it?” He said, “Keep doing this, 35 years from now you retire.” I’m like, “That sounds boring. You mean you don’t get better? You don’t get to change?”
It’s not a bad light. I’m not one of these guys that lost everything like a bad country song. My wife leaves me, the house catches on fire, and the dog runs away. I didn’t have that life. I had a great life like most of you guys that read this blog. I was at the same time looking forward, looking back and saying, “If I’m in my mid-50s or 60s and I look back on my life and say, “I did my rookie season over 35 years in a row.” Is that something I’m going to be proud of? It’s doing the same thing over and over again. I see it with a lot of real estate investors. I see it with a lot of people. They have a good few years and they repeat that over and over again. For a guy like me, I’m like, “I can’t do that,” especially because there’s so much changing.
I got on Facebook, I was fired up. Occasionally, I’ll get on my personal Facebook page and I call it ranting, but at least I bring some data with me. It’s not so much a rant for a lot of people, but I get on there and I’ll start ranting away. I’m working on a couple of projects we have. We’re closing on a 27-year apartment complex. We’re closing on an eleven-unit. We got another eleven-year under contract. I’m looking at the numbers on these four beach houses we’re buying. I can’t remember if it’s a radio show or a podcast talking about you should only do real estate this one certain way. In the back of my mind, I could hear that guy I was hanging out with at that happy hour at 28 years old saying, “Jason, this is the only way to do it. You’re going to have 35 years of this and then you’ll be done.” I’m like, “There’s a better way to do this and it doesn’t take 35 years.”
There are a handful of radio shows and podcasts that are on the five-year-to-retirement track. Do you know you could do that in six months? It’s not that difficult. Why don’t they say that? I don’t know. Let’s talk about that. I get on Facebook. I am fired up because I hear you can only do real estate this one way and then I said, “If you do it this way, you get five to ten times the monthly cash flow and you get a higher quality tenant, you get a way better asset. There are many advantages to doing it this other way, but people refuse to acknowledge it because they want to do business like they did their rookie season, the same thing over and over again.
I get on Facebook, I’m all fired up because I’m listening to half-a-dozen of these, “Real estate gurus and educators,” out there and they’re talking about retiring in five years or less, ten years or less, or in seven minutes. They’re like, “I got the secret to make you a millionaire in twelve days,” all that goofy stuff. I hear one of these guys is bashing short-term rentals and Airbnb. I was like, “I’m going to get on Facebook Live, I’m going to put up my spreadsheet and I’m going to compare both of these models.” I lumped short-term rentals in with Airbnb for the sake of this discussion. I pull this deal up. I fire up Facebook Live. I’m doing a screen share. There are already a couple of hundred views. It may have already hit 1,000. It’s wild how fast this stuff grows.There's a big difference between cash flow and profit. Click To Tweet
I’m buying a deal down in Surfside. It’s four properties. We’re paying about $300,000 for about $330,000. If I were to do traditional long-term rentals on these things, they would bring in $4,000, maybe $4,400 a month. That’s a typical Houston, Texas single-family real estate deal. $330,000 divided by four, that’s about $83,000 a unit. That’s low-end on a per unit basis. They’re going to bring in about $1,000 a door, maybe $1,100. Somewhere around there, it’s going to depend on the season. It depends on the demand down there at the time we put it on the market.
I’m closing on these things and I fired up Facebook Live. I’m doing the screen share of my spreadsheet. We have a cool spreadsheet. Ours is the only spreadsheet I’ve ever seen that calculates all five different ways you make money in real estate. If you want to get geeky about it, you could do an IRR calculation based on five years of ownership, ten years. That’s internal rate of return, which is what you’re trying to get to as an investor, but most people don’t teach IRR so we don’t put it in our little calculator. I’m looking at this deal. I said on Facebook Live, “If this were a traditional rental property, if I were buying it for $330,000, $4,000, $4,400 a month in gross rent, I would make $700, $800 a month in profit. It would cashflow about $1,100 a month. There’s a big difference between cashflow and profit. There are a lot of soft costs that are not calculated in most real estate calculators and in most real estate spreadsheets. I include all those. I’ve got a make ready expense, O&M expense, a vacancy expense, a capital expenditure expense, I put all that stuff in there. If I were doing a traditional rental model on this deal, cashflow is about $700 a month.
However, if I were to use this same asset and turn it into a short-term rental, it rents for $1,800 a week. There are some additional expenses with that. I got to pick up utilities and I’m going to have a make ready expense that is going to be substantially higher because we’re going to be writing these things every week, every other week. It’s not a huge make ready. It’s a cleaning expense. After adding all of that stuff in, all four of these things would be renting for $1,800 a month. That’s over $7,400 a month. It’s $1,800 times 4.3 because there are 4.3 weeks in a month over a twelve-month period. That’s $7,740 a month.
You’ve got a choice here. I can rent this asset out on a long-term basis like all the other landlords have done for a gazillion years at $4,400 a month or I could use this asset as a short-term rental property for $7,740 a month. You’ve got a choice. Do you want $4,000 a month in gross rent or do you want $7,700? I’m going to choose $7,700. When you do your entire math, what drops down to the bottom line is $3,700 a month. You tell me how fast you can build wealth at $700 a month in cashflow versus $3,700 a month in cashflow. That’s the difference.
When people talk about retiring early or retiring, I’m like, “How much money do you need to make to retire?” They said, “I’ll need $10,000 a month.” I’m like, “What are your rental properties bringing you in?” They’re like, “About $300 a month in cashflow.” I’m like, “You need a gazillion of these things.” They’re like, “I need 40 of them.” I’m like, “What if you did short-term rentals and Airbnb instead?” This particular property, if I needed $10,000 a month to retire, I need three of them. The return is almost 10X. You got to ask yourself, “Do I want 34 properties or do I want three?” The reason it takes five to seven years to retire is that you have to buy many of these things. If you’re, “I’m going to retire in five years,” you need 40 properties in five years. You got to buy 80 of these things a year. What if I went and bought five short-term rentals or five Airbnbs? You could totally do that in a year and be done. Why do this in five years when you can do it in one?
The reason I bring up my background and my experience to start the show is you have to change. You have to evolve. I did those entire little rental properties. We were flipping, wholesaling and all that other stuff, but the reality is in 2019 and 2020, it’s a short-term rental, Airbnb world. What’s the worst-case scenario? Let’s say the economy slows down and I’m not able to Airbnb these things or short-term rental to corporate clients. I turn them into long-term rentals. My cashflow goes from $3,700 a month to $700 but I’m also making so much more money. That’s how wealth is built. Wealth is executing on opportunities at the moment. You can wish that your rental property made you more money or you can simply convert it to a short-term rental or an Airbnb and make five to ten times the cashflow. Are you repeating your rookie season over every year or are you progressively evolving?
You can start somewhere and end up in a completely different place. That’s better as long as you have an open mind and you’re willing to take in new ideas and data. I’m a big fan of rental properties. If you look at it, that’s what my entire portfolio is. I’ve got a handful of single-family rentals I still have. Most everything else is small apartments, Airbnb and short-term rental properties. I’m sharing with you the difference between a short-term rental and a long-term traditional landlord deal. The difference is $700 a month in cashflow versus $3,700 a month. When you add Airbnb in there, it doesn’t even make sense. It boggles the mind how much cash these things produce. You’ve got to know what you’re doing. This is not for people who are like, “I put it on the market and it brings money in.” You got to know what you’re doing.
If you want to learn how to do short-term rental properties and Airbnb, I do not know anyone in the country doing as well as we are. We’ve got all the systems. We got the checklist. We have all the vendors that do all the rental properties, all the maintenance, make ready and all that stuff for us. I don’t know anybody in the country that does as well as we do. We were looking like, “Who’s doing this better than us?” Nobody is. There are some good practitioners out there, but as far as an actual program and nobody does it as well as we do.
You’ve got to be open to new ideas. Do the long-term rental properties work? Absolutely. Huge apartment complexes, storage facilities and all that stuff, it all works, although in a given marketplace at a given time, certain assets out-produce others. I’d rather make $3,700 a month in cashflow on one asset versus $700 a month in cashflow. It’s simple math. Do you want to make more money? If yes, then this is what you need to do. Do you want to retire sooner? Do this. It’s that simple. I want to thank you for reading. I’ve got a special guest in the next episode.