Time To Buy And Legacy with Robert Orfino

TRE 22 | Real Estate Legacy

 

Is a crash eminent? What is the cost of waiting? What is a legacy and who are you doing it for? The future is designed for the generations to come. Jason and Robert get down on getting started in real estate, building a legacy, and accepting and handling failures in the business. As they talk about legacy, they also note the importance of understanding the next generation’s approach in life and in real estate. In a time when it’s so easy to succumb to failure especially with social media promoting failures for the wrong reasons, it’s important to keep in mind that failure is part of the whole life experience and there should be no shame.

Listen to the podcast here:

Time To Buy And Legacy with Robert Orfino

When And Where To Buy Real Estate

We talked about getting started at different levels, no money, little money, a lot of money. A few folks reached out to us and said, “I’m at this level in my life. I want to get going.” We want to help you get going. Let’s get some properties. Let’s reach out and start that process. What I want you to do is to figure out where you’re at. We talked about doing that self-audit. You can reach out to us. We have a couple of agents that were just hiring and they’d love to work with you. It’s Mr. Texas Real Estate Team powered by Keller Williams Platinum and these guys want to get going. I think this was the perfect time for you to reach out, whether it’s us as agents or other agents that you know and start doing it. We’ll talk about it but I’ll want to focus in on the flippers and on the wholesalers.

For those of you out there that are thinking about buying and holding notes, it’s something that you should be doing. You need to diversify your portfolio, “The market’s up, everything’s going great. Recession is canceled but I’m still only making 4%.” It’s time to start looking at real estate very strongly. We want you to reach out to us. I’ll give you the number. It’s (281) 401-9008. If you’re ready to start building your portfolio, give us a shout. We’re actually hiring a broker. She’s got fifteen years of experience. She wants to come on the team. We had some great interviews. Let’s get some houses or some small apartments. I was on the phone with a friend from California and he’s thinking about joining our Mastermind. He’s like, “Are you grabbing all the small apartments?” I’m like, “There are so many. We can’t buy them all. We can’t even look at all of them.”

In fact, as a percentage of housing stock, small apartment complexes units from let’s say 1 to 50 are a significant portion of the National Housing Stock. There are gazillions of them all over the place. It’s unlike a hundred units and above when you kick out Class A and you’re looking at Class B and C assets. These are the type of assets that investors like us can buy. We’re not buying Class A. That’s for insurance companies. That’s for hedge funds. That’s for the big boys but for the rest of us, it’s Class C and Class B assets. When you go to 100 units and above, there is not a whole lot of them. I could pull up and see how many there are in the City of Houston.

I think the last one we pulled up we had seventeen that closed in 30 or 45 days only.

There are about seven or eight that will close a month in Houston, Texas. I could pull up from Texas A&M Real Estate Center how many of those have sold in the last couple of months. How many properties selling a quarter? If 100 sell in a year, that’s a crazy wild year.

A fourplex, eightplex, twelve and fourteens. Sometimes they’re a little funky. The fourteen we looked at was a duplex four, four and four. I’m almost like, “Can we get four different loans on this?” Because they could be cheap loans and I think that’s possible. That’s what we’re exploring. They are still $75,000 too much but that’s part of the process. You’ve got to go look at it, determine if that’s something that makes sense to you and then figures out a way to turn it around and making sure that you’re going to get the rents that you’re supposed to be getting. Make sure that you improve all that CapEx stuff that comes back and haunts you and get into it. If you followed and said, “I’m one of those people that need to get started,” let’s get started.

I want you to feel good about your first step, which is going to be reaching out to either the Mr. Texas Real Estate Team powered by Keller Williams Platinum or any agent that you have out there. Go ahead and reach out to us at (281) 401-9008 and we’ll hook you up with our buyer’s reps and we’ll start looking for properties for you. We want that to happen. Make sure that you are moving forward. There’s no excuse. Go out there. If you have a little bit of money or if you have a lot of money, let’s get going. If you have no money, then obviously we talked about some of the ways to get around that. Work some more hours, Uber and some other small things you can do to start building out some of those resources you’re going to need.

Most businesses fail because they're undercapitalized. Click To Tweet

For those of you who are talking about maybe looking at being wholesalers. I got invited to two new groups on Facebook. One of them I got the invite months ago and I finally said, “I’ll join.” When you get invited to a group on Facebook, you still get their posts but you don’t get to participate in them. Finally, I was like, “I’ll join your group.” I joined the group and both of them are good. This one I’m sitting there and I’m reading through there and some of the posts are pretty funny. We were talking about wholesaling and this guy put up a GoFundMe page so he could have the startup capital to become a wholesaler. I said, “Instead of starting a GoFundMe page,” which is fine if you want to do that, I don’t care, “why don’t you become a real estate agent instead?” That makes you so much more sense than trying to do the wholesaling thing, become an agent.

In this town, it sure does. How many transactions a month are there?

On and off MLS is 10,000.

That’s a lot of business.

It’s a crazy amount of business.

I don’t want to put down our industry but know there’s an 80/20 rule there, probably more like 90/10. That 90% of the agents out there and there are a gazillion agents here are the ones who choose it. There are going to list their sisters-in-law or their mother’s house. There are 10% of the agents out there like Rich Nickel who are going out there crushing it. I’d say it is an industry where the barrier to getting in that top 10% is pretty low. It’s a commitment, it’s time and it’s moving forward, being motivated to do that. If you have no money and you’re going to look to wholesale and that GoFundMe stuff, I would get into being a real estate agent. If you’re in the business, I would go to Keller Williams because of the Keller Williams mortgage program, which is phenomenal and I would go and run with that. I would absolutely join up. We’ve got two people who want to join our team and they don’t want to be in the core team. They want to go do their own thing. We’re like, “Come on in.”

We’re talking about getting started on Motivation Monday, going out there and getting that first deal done.

TRE 22 | Real Estate Legacy
Real Estate Legacy: Becoming a real estate agent makes so much more sense than trying to set up a fund to do wholesaling.

 

I had an investor come to my house. I was doing the thing with Curtis in the heights and then I had to race back, but then I realized I still hadn’t gotten my car washed and I’m very finicky about that. I had to go to the carwash and yet we had Adam and his wife come up. Their kids were there.

They’ve got a bunch of them.

They’ve got three beautiful kids. One’s got a little water on himself and he immediately stripped down and he’s hanging out on my couch in his underwear. I’m like, “Get your clothes dry.” He was there and that was a lot of fun and hopefully his wife gets some things going. We talk to him about some of the things we can do in the future together. We had a husband and wife came in and they’re a typical 401(k) investors. They keep looking at the numbers. It’s like, “If the stock market goes up 19% in a year, how come you only went up 4%?”

Did they bring their portfolio and started running numbers?

We had gotten to that stuff. We explained to them about Airbnb, they like it. It’s a smaller investment. It’s not a 230 or 315 first position that we’re looking for. This was nice and they’re going to do very well on it. I have to calm and I have to be cordial, but I wanted to giggle because I could see how nervous they were. I remember being in that place myself and they’re like, “This is uncomfortable. We’re going to do it.” Whenever someone says, “I’m uncomfortable.” I like to clap because I’m like, “Yes, the magic’s happening,” but I didn’t. I smiled and went through step by step. We’ve been talking to him and his family for a few months. They come to classes, they’d been in our meetings and they’ve done things with my wife and all that stuff. I’m not going to say their name because everyone is going to hit them up for loans, but I want to give them props for actually taking that first step forward. We went through it and said, “I’m never going to say the guarantee word. This is real estate. It’s a high risk. You’ve got to know this going into this stuff, but here’s our plan and here’s our strategy to mitigate the risk.” We had a good little meeting there. They’re going to move forward and we’ll be buying furniture.

I stayed up way too late. I did the jacuzzi thing and the kids are playing. We’re all having a good time. I’m sitting there and I’m watching a little Joe Rogan. I’m like, “I’ve been sitting on this David Goggins interview. I’m going to watch this thing.” Finally, it was so incredibly good. One of the things that David says is, “You have to become accustomed to being uncomfortable.” He’s hardcore. There’s you at ten, that’s his one. He runs at twenty all the time. One of the things that he had said is he said, “Don’t ever double down on your strengths. Double down on the things that are weaknesses because they’re going to make you uncomfortable and they’re going to callous your mind. You’re going to become so accustomed to being uncomfortable that you become uncommon.”

Whenever I see people start squirming and get uncomfortable, I absolutely agree with like, “Now, we’re getting somewhere,” and their mindset’s changing. Do you know what’s happening? They’re actually growing. It’s no different than working out. You’re incredibly sore or why are you sore? Because muscles are growing, it’s breaking down. It’s that whole process. One of the things that David said is you’ve got to go through that process every single day. I will tell you this. If you find any of his interviews, your kids better not be in earshot because there’s a whole lot of potty talk. He is a former Navy SEAL and he has a little potty mouth. There is a lot of Jersey talk going on.

The social media world that we live in loves failure for the wrong reasons. Click To Tweet

I will tell you a story. I go see my dad every so often and I go back to Jersey. We are hanging out buddies. We’re doing real estate up there too and checking on my properties and talking to folks in REIA groups. I come back and my wife knows that for about two weeks it’s Jersey talk all over the house. Finally she was like, “Enough.” I’m like, “Why?” She’s like, “Stop it. You’re not in Jersey anymore.”

We do a boy’s weekend every year. I’m actually going to miss out on it because I’ll be doing a big bike ride. When I get back, it’s like, “We need to dial this down a little bit.” It’s so funny how fast people rub off on you. Let’s talk about getting around people. What do we have going on?

We have a special guest. His name is Merrill Chandler. He’s from a company called CreditSense and he’s the guy who actually helps you shape your business so that you become lendable. There’s a structure to that and it’s not something that happens in 30-days. This isn’t a guy who says I can fix your credit in 30-days. That’s nonsense. He says, “There’s a path to this. It’s ten steps you’ve got to go through. Once you get through this end of these things, I can show you how to get a million-dollar line of credit. I can show you how to do that in the right business, with the right business structure.” It’s business-focused and it will be very much centered on business.

What he shows you is there’s a method to that madness out there, which is known as FICO and D&B. Your FICO score is your personal credit, your D&B score is your business credit. There are ways that banks look at those. Once you understand the way that the lenders are looking at those numbers and those ratings, it is a way for you to build your business around it. Every business that you and I are building, we’re building the cell. We’re creating systems. We’re getting ourselves in the right. We’re making sure our structures clean. There’s no commingling of funds. Everything is structured straight up so that in three years if someone wanted to buy one of our businesses, there’s a nice clean trail. It doesn’t usually happen on your first one or two or three businesses. There’s always commingling. He’s going to help us as well as helping you structure your path so that you can get good lines of credit. You can improve your personal credit and you can start working on some of this stuff that makes your business more prosperous.

When you look at capital, it is one of the key drivers in your business. How fast you can grow depends on how efficient your capital structure is. You can’t always borrow hard money loans to do certain deals. Holding onto something long-term, bank financing makes more sense. Maybe you need money quicker, that’s where hard money makes a lot of sense. Depending on how big you’re going to build your business, you’re financing structure is going to dictate the type of deals that you’re able to close.

Most businesses fail because they’re undercapitalized.

They do not have enough capital, which is important. You go to have the money. In the back of my mind, I’m having these thoughts about legacy and I run into a lot of people say, “I want to get into real estate for legacy.” I’m like, “What does that mean exactly to you?” I think folks have this perverted sense of what legacy is. A lot of people think legacy is handing down stuff. That’s the best way I can describe it. I want to leave a legacy for my children. That’s what I hear. I’m like, “Explain to me tactically what that looks like.” I want to hand them this huge portfolio. I’m like, “You realize, that’s not what legacy is.” This is what throws people for a loop. What if they don’t want it? You have now built this legacy for your family that doesn’t want it. I sure would have loved to have spent a lifetime doing that and you start asking yourself the question, what is real legacy and why is it important to me and I derive satisfaction from that?

TRE 22 | Real Estate Legacy
Real Estate Legacy: Capital is one of the key drivers in your business.

 

You start having this thought of you’re applying this mark on something. On society, on your family, on the industry in which you work. That’s what legacy is and you’ve got to figure out why that’s important to you and define what that actually means. My fear is when I run into all these real estate investors is I want to leave a legacy. I’m like, “You can leave a legacy that doesn’t have any real estate.” In fact, your legacy should not be handing down a bunch of stuff. That’s not a legacy. That’s just stuff. The other heartbreaking statistic is after three generations, they’re going to blow it all anyway, so it doesn’t matter at the end.

Because your two sons see how much you work. You’re building out a little empire. They are going to be the benefactors of that, but their kids didn’t see you do it. They know you as Grandpa Jason who sits out on the deck there and shoots his rifle or whatever. They love you for that, but they have no respect for the work you put in. It’s usually that second generation that blows, which is why I don’t care about capital gains because it all goes back to the marketplace.

What’s so funny about that, and this is something that Gary Vaynerchuk is on right now. This is the generation which a lot of families will start because we’ll have videos, we’ll have social media profiles, and we’ll have all this stuff. Instead of six pictures of your grandma and grandpa, this will be that generation where a lot of families starts because you’ve got so much content that is coming out on social media.

There is a badass picture of my dad. He’s got the whole little greased back hair and he’s got this cool short worker jacket on. He looks like a cool guy. I’m thinking, “That’s it.” There’s no video. There’s no recordings and all that stuff. If I were you guys, I’d go back with your camera and have a conversation with your dad and your mom and how you met. What were the real struggles? How did I come along? You’re going to understand that legacy a lot better. It’s not just the things you leave, it’s that mindset. Clearly, you are a reflection of your dad. You talked to your dad often and you share some of those conversations and you can see it. There’s a work ethic there. There’s a way to deal with problems there. There’s an investigative mind there from your side of it. Probably that mindset that you can always get money. You can buy restaurants, you can buy hotels, you can buy houses, you can buy surf shops but having that mindset is probably the better thing.

You get that question all the time of what happens if everything falls apart and your portfolio goes to zero and the world ends. I’m like, “We start over the next day. We’ll grind it out like we did the last five years.” The fascinating thing is once you’ve got that mindset, how do you train the next generation? How do you leave that legacy? That’s where things start to get interesting. A lot of the stuff that you’ve got to do with your kids is you can’t sit down and say, “Do this, do that.” That doesn’t work. A lot of it’s observational. They got an idea of what’s going on. You think they’re not paying attention, they are. They are absolutely paying attention to the things that you’re doing. If you’re one of these folks who are like, “I want to leave this legacy.” You’ve got to sit down and put pen to pad and say, “What does that look like?” Because you don’t want to spend a lifetime building something in which no one wants. That is going to be absolutely crushing.

That’s that restaurant we’re talking about, right?

Yeah.

Failure is part of the whole life experience and there should be no shame. Click To Tweet

The parents spent decades building an icon of a community. The mom passes away and the daughter’s like, “I’m out. This is not what I want to do. I slave enough in this kitchen. I don’t want to be here.” Understanding what that next generation wants is also pretty important.

Going back to your point, I do think legacy is the training of the mind. If you don’t want to be a real estate person, that’s fine. Let’s say you want to be an attorney or doctor, you want to be an engineer, whatever it is. Let’s use that same problem-solving skill set. How we approach life to whatever field of study you want to be involved in. At least in our household, no matter how much wealth we accumulate, we’re not going to sit around and play golf all day. Everybody’s going to work. Everybody is going to contribute. What is it that you’re going to contribute to society? Let’s approach that with an investigative mindset. We used to call it professional curiosity, where you’d try to figure out, “How do I solve these complex problems?” or maybe you don’t, which is also another side. Training that, that’s the legacy. It’s not the stuff.

We’re talking about legacy and we’ve said it’s more about the lessons than the properties because your grandkids are going to spend all that money anyway. The big lesson here is still how this social media world that we live in loves failure for the wrong reasons. They love to see people fail. It’s because roughly 86% of the population cannot be entrepreneurs. It’s just a number. It’s 11% to 14% of the population can be entrepreneurs and for us, we’re like, “Yes, we failed. We’re going to fail again.” For Elon Musk, “Your rocket blew up.” He’s like, “I’m going to build another one.” The backlash that 86% of the world gives him because he’s going through it.

I love that he trolls back, he’s like, “Why don’t you show me the rocket that you build? You don’t have a rocket. You’re still using a candle like a caveman.”

If we could teach this next generation that failure is part of the whole life experience and there should be no shame, because I think that’s what keeps people down. I think personally, there are a lot of flippers in this market who are underwater on properties because of the Harvey 2.0 and nobody’s talking about it. Everyone’s having problems selling their houses and it’s a dirty secret that nobody wants to say. We’re the only guys up here saying, “This house is sucking because it got flooded.” I’m about to refi out. I’m going to do an Airbnb and it’s going to be great for the next five years, but these last nine months were horrible. I don’t hear anyone else selling that. Even though I can look at the numbers and I can hear the words. We’re even in this entrepreneurial real estate investor community, we’re still embarrassed of our failures.

At some point, we will do a How to Lose Money in Real Estate. I used to do it for years. There will be 400 people. It gets crazy how many people show up and it’s all about, “Let’s talk about our biggest failures and what our most recent ones were.” If you look at the Avengers movie, it was all about failure. To me, it was so funny because the failure then manifested in fear. If you get down to that movie, that’s exactly what’s going on. Everyone was so invested in the win. They have one big failure, half of the population disappeared. That’s a big one but you can’t win them all. Here we have this big failure and how many people couldn’t move on from that failure?

You can drive anything you want. I don’t care and it’s cool. You can drive a 1990 car, you can drive a Lambo and it doesn’t matter. If you’re going to represent that as your success in a community where I know that people are having problems, even just the whispers that come. When I hear, “I’ve got a new agent for the flip.” I’m like, “I know what that means.”

TRE 22 | Real Estate Legacy
Real Estate Legacy: Legacy is the training of the mind. It’s more about the lessons than the properties because your grandkids are going to spend all that money anyway.

 

“I need to get to a new stage. I had one stage before.

I’m dealing with photography. I’m like, “I got it.”

It’s not selling.

We put our product out into a market that didn’t want it. That’s how the market works and it’s okay to say it.

Why not? I don’t understand. It can’t be the Lambos and jets. I think it’s only real estate. There are a lot of these industries that are like that.

Multilevel marketing is even worse. It is even worse in that world. They all pretend they’re super rich and they’re all broke. Even the guy who says, “I crushed it with this with this.” I’m like, “Why are you still on YouTube? What are you doing?” I want to be able to say, “I failed. I’m in trouble. I’ve got some things going on.” I’ve shared already on the show and we got one of the three little problems turning around and the next ones are pretty close to being charged around, so we work on it. If you’re not teaching your kids that there’s no shame in failure, the shame becomes if you do not learn from that failure. Fool me once, fool me twice. The real shame is, “I didn’t learn from this failure. I’m a knucklehead.” It usually takes me about two times of failure to figure things out. Eventually, I learned from it. You have to learn from that. I think if any legacy out there is possible, teach your children, teach your brothers and sisters, your mother, your father, anyone at any point in life that, “If we fail, we’re just learning.”

I was explaining this to a friend of mine. I said, “You don’t understand. There’s no outcome in which I don’t win in this thing.” For me, there’s no failure in it. We’ll see what happens with this 27-unit. If we can’t get it funded, it’s like, “What are the other options we have available to us?” I’m going to win at that game. It may not be the way I wanted to, but we’re going to end up winning either way.

When you run into challenges, it's the folks around you that are actually doing the business that becomes irreplaceable. Click To Tweet

We’re still on pace for $25 million.

We’re still going to buy $25 million.

There’s nothing anyone can say to me this point that’s going to hurt me.

We were chatting in the hot tub. We did a little hot tub networking Friday night. Even if this deal goes completely down in flames, it’s like, “How much have we bought in the last three, four months?” It’s a rounding error at this point. It’s a big number.

We definitely learned a lot from that. We definitely learn the time on the contract and all these other clauses in the contract. We’re not making that mistake again. We’ve already sent out another commercial contract for $1.1 million. We should get it countersigned. It’s about making sure we have the right time. Making sure we have the finance contingencies. We have syndication that’s getting started. We work with Jillian again saying, “Put that document together for us.” We’re never going to be at the whim of a commercial banker. We still want relationships with them, but on some of these deals, I’d rather syndicate then take the time to find a nice 20, 25-year loan product.

Let’s talk about why the Mastermind is so much more important than real estate coaching. When you run into challenges and you will, it’s those folks around you that are actually doing this business that becomes irreplaceable.

That peer-to-peer sharing is sharing failures.

TRE 22 | Real Estate Legacy
Real Estate Legacy: Be around people that fail but can help you turn around.

 

That is exactly what it is.

Nobody in that room was talking about how great they are. We’ll cut you off. Come over here because we want to learn. I think that peer-to-peer sharing is phenomenal. I don’t see other than those big companies out there that are still progressing. I don’t see a lot of us signing up for coaching anymore in our lives. We’re teaching the public here that there’s a better way to do it. It’s not a $35,000 backpack. It’s a $7,500 peer-to-peer sharing. You’re going to get a lot more out of it. Don’t be afraid of failure.

Be around people that fail but can help you turn around. We’re talking about legacy and getting started and we’re talking about failures. The whole idea behind our peer-to-peer sharing groups and our Mastermind, really it’s our peer-to-peer stuff because our Mastermind doesn’t meet enough, long enough. In our peer-to-peer sharing groups, it’s, “I’m having a challenge here.” How do we address that challenge and move forward? I’m willing to bet, the vast majority of the people in that group, whatever problem you’re having, they have solved once before. You don’t have to do this alone and it’s not a real estate coaching program where you come in and get your backpack.

It’s collateral, some videos and stuff.

The real value is in the network. If somebody in that room doesn’t know the answer to that question, I can guarantee you within three emails, I can find a guy or gal who does know the answer. I had a challenge. We were looking for a business evaluator. I asked one guy and literally four minutes later, we had one of the best guys in the city. We had an appointment in his office.

It was a very interesting meeting.

Literally within a week, we already had an appointment. We had all this stuff resolved. That’s the kind of network you want to be in. We were having some issues on the commercial side. A couple of phone calls, a handful of emails later and the problem solved. This is how you do it.

We could have taken a $5,000 class but we sat down with an attorney and said, “This is how you do it.” He didn’t charge us anything.

He said, “Do this and this and this and call me if you need anything.” That’s what you want to be as a part of that network. The phone number is (281) 401-9008. That’s the number in which you can send Rob a text saying, “I’d love to know where the Meetup is or I’d like to be a part of one of your groups.” Just send that as a text message.

I’ll probably go back and hit everyone who’s texting me so far and give them the schedule. If you are in our ARM Mastermind that meets once a month, we’ll definitely be doing our 6:00 before the regular meeting. We’ll be sitting down with the folks that have joined up for the ARM membership and they’ll be getting some one-on-one with Merrill and his team that is going to be there. There are always folks who slip in. We’re going to guard it because this is some pretty good knowledge and obviously this is what those folks paid for. We do appreciate everyone who’s following. Go out there, go get some real estate. Reach out to an agent. Don’t be afraid of failure. Thanks a lot. See you next time.

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