$900 to $4.5MM Net Worth by 34 with Robert Jones

Brandon Turner: This is the BiggerPockets Podcast show 336. This is the BiggerPockets Podcast show 337. This is the BiggerPockets Podcast show 338. This is the BiggerPockets Podcast show 339.

Brandon Turner: This is the BiggerPockets Podcast show 336. This is the BiggerPockets Podcast show 337. This is the BiggerPockets Podcast show 338. This is the BiggerPockets Podcast show 339.

Brandon Turner: All right. What’s going on, everyone? This is Brandon, host of the BiggerPockets Podcast, here with my co-host, Mr. David Greene. What’s up, buddy?

David Greene: Not much, Brand. I’m wearing one of my t-shirts I just bought when I was hanging out-

Brandon Turner: I see that.

David Greene: … in Hawaii masterminding on the … Aloha, buddy.

Brandon Turner: Aloha. Fancy, fancy stuff. Speaking of aloha, today, we are actually doing our show here in Hawaii, sort of. You’ll hear a little bit more about what today’s show is set up. Basically, I’ve got our guest live in the studio with us. He’s coming in here in a few minutes, a buddy of mine named Robert. It’s going to be an awesome show. I think you guys are going to love it.

Brandon Turner: But David is still in California. What’s up in California, David?

David Greene: Oh, it’s beautiful out here. The home buying season is ramping up, which is funny because we actually have a guest today who’s a real estate agent and a really good one. There’s a ton of information about what to look for in an agent, how to have an agent find you deals, what to avoid, in addition to amazing advice on how to build wealth through real estate, which this guy’s done a great job of.

Brandon Turner: There you go. Yeah. It’s pretty cool. So, I’m pumped. I think you are going to love this episode. In fact, today, on the show, I know it sounds like he’s coming in in a few seconds but in reality, we already recorded this thing. But we are talking about all things … He talks about how he put together some no-money-down or low-money-down deals using something called cross-collateralization. We walk through that in-depth, how it’s done. He talks about how he got this amazing deal. You’re going to be blown away by this deal deep dive on how good of a deal it was but how not good of a deal was when he first bought it.

Brandon Turner: Also, let’s see, his trip to the Caribbean, he spent three months sailing around the Caribbean or Caribbean, depending on how you say that. Really, really cool story there. And then, also, why you may not want to become a real estate agent. He actually is a real estate agent but he explains why you may and why you may not. I think those are all really just good points that he makes today. So, hang tight for that.

Brandon Turner: Before we get to that, let’s get to today’s quick tip. All right, Dave. You want to take it?

David Greene: Yes. Today’s quick tip. We talk with Robert about the importance of finding your why. Look, here’s the reality. For a long time real estate investing was a niche thing that only a few people could get into because they have the knowledge that you didn’t have. Well, the internet has changed that and BiggerPockets in particular has changed that even more. Now, there is no excuse for why you’re not investing in real estate or growing your wealth through real estate because the information is out there and the knowledge is available. What holds most people back is bravery.

David Greene: Now, you could try to be braver just by willing yourself to do it but that’s not going to work for most people. What does work for people is having a very big why. Not the letter Y but the word W-H-Y. What matters to you? What drives you? What are your goals? What is propelling you? What is motivating you? They’re all words that are describing the thing that’s going to push you through whatever your fears, your excuses or your concerns really are.

David Greene: So, if you find yourself not taking the action that you know we’re telling you that you need to, don’t beat yourself up about it. Sit down, have a long walk through the woods, Cal Newport style. Whatever you got to do, and ask yourself, “What is my why? What motivates me? What drives me, and is it worth getting over the excuses that I have to stop me from taking action?”

Brandon Turner: Oh, it’s deep stuff. Well done. Well done.

Brandon Turner: Well, before we get into today’s deep show, let’s hear from today’s show sponsor.

Brandon Turner: All right. Big thanks for our sponsor always. Now, I just want to jump right in the show. This is a fantastic show, so let’s get right into it. Without further ado, let’s introduce you to Robert Jones. All right.

Brandon Turner: All right. Welcome to the BiggerPockets podcast, Robert. How you doing?

Robert Jones: I’m doing great. How about you?

Brandon Turner: I’m doing good. This is weird. I don’t think I’ve ever done a podcast directly across from somebody. Very strange.

Robert Jones: I feel honored.

Brandon Turner: Yeah. Good. David’s over here. So, for those who don’t know, David is actually in, what, California. Robert, our guest today, and I are here in Maui, sitting across the table from each other, spitting at each other while we’re talking.

David Greene: Yeah. It looks like you guys are speed dating. It’s kind of creepy.

Brandon Turner: We pretty much are.

Robert Jones: It’s a good fit, I can tell you.

Brandon Turner: It is. It is. I like long walks on a beach and real estate. How about you?

Robert Jones: I like big, bushy beards and I cannot lie.

Brandon Turner: All right.

Robert Jones: I like big beards. All right.

Brandon Turner: There you go. So, Robert and I know each other because I am good friends with his sister and brother-in-law. In fact, they’re two of my favorite people in the entire world. Total digital minimalists, which is funny because we had Cal Newport on. They’re like perfect digital minimalists. I look up to them a lot.

Brandon Turner: But, anyway, for years, Catherine, your sister, has been like, “You need to talk to Robert. You need to get to know him. You guys are the same person.” So, we pretty much are the same person, just I have a longer beard.

Robert Jones: You have a much more impressive beard.

Brandon Turner: Thank you. I don’t know if it’s impressive or dirty but one of the two. All right. So, we’re going to go into your story today because honestly, I don’t know that much of it other than I know you do real estate and that you’re kind of like me, apparently. And David’s here on the camera, being awesome.

Brandon Turner: So, with that, how’d you get into real estate?

Robert Jones: Yeah. So, I started in 2008, which fortuitous timing.

Brandon Turner: Yes. Very good timing.

Robert Jones: Good thing we didn’t start in ’05 and was in the car business in my previous career, in the service side of things, reached a very noticeable glass ceiling after multiple promotions.

Brandon Turner: Car business, like selling cars?

Robert Jones: No. In the service side. So, if your car was broken, you came in, talked to me with the intent of managing and owning a dealership at some point.

Brandon Turner: Okay. Oh, that’s right. That’s where you met your wife.

Robert Jones: Yeah. Met my wife at the dealership. Her came in with a broken car and the rest is history, as I say.

Brandon Turner: There you go. “I can’t fix your car but I can your heart.”

Robert Jones: Yeah. Sometime like that.

Robert Jones: So, yeah. I hit a real noticeable ceiling. Growing up, I was always buying and selling stuff. Started with bicycles, then trailers, then dirt bikes, then cars, then trucks. My dad pretty much told me, “Hey, look at something with a larger profit margin.”

Brandon Turner: That makes sense.

Robert Jones: You’re great at selling things. You’re great at making deals. You should get into real estate.

Robert Jones: And really, just to shut him up, I went and had lunch with real estate legend, Larry Kendall, the founder of the group Real Estate. He’s known nationally for real estate sales training and all that, like I said, just to get my dad to shut up. If you spend any time with that individual, by the end of lunch, I figured, “Hey, I should sell real estate for a living.”

Brandon Turner: Okay. So you became an agent first?

Robert Jones: Correct. Yeah. I knew nothing about investing really at all. I didn’t even know that it was a path that I could take, so decided to go into sales first. Then, quickly after that got introduced and eyes opened a little bit.

Brandon Turner: That’s cool. That’s cool. Okay. So, by the way, since David’s awkwardly on the camera today or on the computer screen today, if you have anything you want to say, David, just yell at me or jump in but otherwise I’ll just keep asking some questions.

David Greene: Sure.

Brandon Turner: Walk us through that journey from I’m now a real estate agent to now I bought a property, your first deal.

Robert Jones: Yeah. So, well, very first house bought when we’re really young parents. Said, “Hey, smart people will buy a house.” So, bought my first house when I was 20 before I got in real estate. That was the days if literally you had a pulse, you could get a loan. Looking back at the deal, it was pretty illegal by today’s standards.

Robert Jones: So, owned one house when I got into real estate. Three to six months into the business, started doing an investment tour with one of our partners named Kevin. He ran a tour just teaching other agents about investing. That’s when things really the light bulb came on. Read Rich Dad Poor Dad and thought, “Hey. I can buy houses. Someone else will pay for them.”

Robert Jones: It didn’t click. You can jokingly call me a slow learner but I asked the guy multiple times, “Wait. Let me get this right. I can buy this house. Someone else will pay for it, and I get to keep the house?” He’s like, “Yup.” I was like, “Okay.” Rephrase the question a different way. I was like, “Let me try this again. I can buy a house without too much money down, someone else will pay for it and I get to keep the house?” The third time I rephrased the question, he’s like, “Okay. Listen, dummy. This is the way it works.”

Robert Jones: That’s all I needed to know. I wouldn’t say that I’m a hard details guy but the core concept at that point, I went home, told Sarah, “Hey, we need to go out and buy as many houses as we can.”

Brandon Turner: That’s awesome. Where was this all at?

Robert Jones: So, I’m in Fort Collins, Colorado. So, we’re about an hour north of Denver.

Brandon Turner: Nice. [crosstalk 00:08:44].

Robert Jones: So, those familiar with the market know that our price point’s a little different than … Well, on a scale of 1 to 10, a David Greene’s a 10, Detroit’s like a one. We’re probably like a hard six, hard seven.

Brandon Turner: Yeah. What is [crosstalk 00:08:57]?

Robert Jones: It’s a seven. Average price like-

David Greene: It’d be cooler that we started off talking about speed dating.

Robert Jones: Yeah. And now we’re rating you by numbers.

Robert Jones: Yeah. Our average single family price point’s about 425 right now.

Brandon Turner: Wow! Which is crazy for the Midwest. Not that Colorado’s the Midwest but it kind of … When I think originally, before I knew Denver prices, I thought Denver and Oklahoma City and Kansas City, they’re all the same, but Denver is so much different, which again, just is more evidence why it’s so important to know your market and not just rely on just general things but why is that Denver and the surrounding metro area, why is that so crazy [inaudible 00:09:36]? Because I don’t know.

Robert Jones: It’s something we talked about a bit. The quality of life and the desirability of living there, the listener’s familiar, if you’re not, fhfa.gov is a website where you can look at, since 1991, they track prices, quarterly appreciation, annual appreciation, five-year appreciation. Northern Colorado is an unstoppable machine. We’ve seen 363% appreciation since 1991, which second to DC puts us at the strongest market in the entire country.

Brandon Turner: Wow!

Robert Jones: So, I think it’s a combination of quality of life, desirability. Now, we don’t see the ebbs and flows that some other markets see, so we don’t see the meteoric rises in a single year but for sustained performance, I mean, I feel like we’re living in the holy grail for real estate.

Brandon Turner: Yeah. All right. So, walk us through the very first investment property that … What was it?

Robert Jones: Yeah. So, we come from pretty modest means, as a lot of your listeners and people you’ve interviewed. My wife looked back at our checking account recently. When we started in real estate in 2008, we had $900 in our checking account. As a first year realtor coming into 2009, we couldn’t use my income. So, my wife at the time was working at the bank making, I think it was $23,000 a year, something like that.

Brandon Turner: Balling.

Robert Jones: Oh, no. We were just out of control. We’d hit up the Chili’s like once a quarter, share a meal, have water. So, we talked about people that just keep hearing, “No.” We don’t like the answer no. So, we talked to one lender. No. Talked to another lender, no. Talked to another lender, no. We found someone that, yeah, they’d get the loan done under Sarah’s income alone which, at that point, in Fort Collins looking for a house under $150,000 it was quite challenging.

Robert Jones: So, we found at the time the most affordable single family home in the city. It was listed at $149,900. The funny thing on that prequalification, the lender called me three weeks in and said, “Hey, you need to pay off Sarah’s credit card. She doesn’t qualify the ratios.” I’m like, “Okay.” I said, “How much is it?” “$186.” I was like, “Okay. Cool.” The minimum payment’s 186?” He said, “No. That’s the balance. The minimum payments $7 a month.” We were that close on our qualifying ratios.

Brandon Turner: You were that close to not qualifying. That’s funny.

Robert Jones: So, we bought the house. Moved into it. So, for us, you don’t know what you don’t know. So, I didn’t know anything about hard money, anything about portfolio loans or these more creative ways of getting real estate. I just knew that if I moved into the house, I could do an owner-occupied loan, I didn’t need a big down payment, and we could remodel it while we’re living there.

Robert Jones: So, we did an FHA loan, which at the time it was 3% down, not three and a half. I am a licensed realtor. So, we were able to use my 3% commission, so we essentially got the house for free. So, we moved into the house and rented out my last house. That house cash flowed an entire $30 per month.

Brandon Turner: Whoa!

Robert Jones: Which I was stoked. In my mind, I thought, “Someone else, hey, they’re buying me a house. Fantastic.” Then, while living in the new house, we did a full floor to ceiling remodel while living there in 900 square feet including replacing the plumbing in the house. So, we had no plumbing for about two solid weeks. Shower at the gym, peed in a bucket. Those character-building attributes. So, that was a lot of fun.

Brandon Turner: I’m sure your wife loved that time.

Robert Jones: Yeah. It was great.

Brandon Turner: All right. So, you did what a lot of people do. I want to talk on this for a second because I think it’s one of the best ways, two things you did. Two of the best strategies for getting started with real estate. Number one, obviously the FHA move into a house, buy a house, three, three and half percent down, especially … Now, that alone doesn’t mean it’s going to be a good deal, right?

Robert Jones: Right.

Brandon Turner: But what you did is you bought a fixer-upper, something that needed to be a total remodel. You did the work yourself?

Robert Jones: I do.

Brandon Turner: Okay. So, you used sweat equity. You got in there but then the second thing you did, which was cool is that you turned that first property into a rental. That’s probably the number one way that I hear people get into real estate is, “Yeah, I just turned my house into a rental property.”

Brandon Turner: So, do you advise that for other people today when you’re talking to people, your clients or whoever that, “Yeah, turn your old property into a rental,” I mean, because you, as an agent, have a … You’d rather have them sell because you are an agent. You get money.

Robert Jones: No, absolutely. It is. So, investment real estate is a big part of my business for building millionaires, building investors. If the property makes sense, which most of them do, especially younger clients of mine, they’re living in houses that would make good sense as a rental. So, that is my absolutely first and foremost advice. And even looking at tax strategies. You still have three years to make a decision moving out of your primary with capital gains rules.

Robert Jones: So, yeah. I advise people to keep their existing home if they have the ability to. The laws related to qualification and income, even for new landlords, that’s eased up over the last couple of years, so it makes that transition easier as far as qualifying for both mortgages.

Brandon Turner: Yeah. Makes sense.

Robert Jones: So, there’s more leniency there now, too, compared to a few years ago.

Brandon Turner: And if people are wondering what that means about the capital gains thing, I’ll explain that real quick. Correct me if I’m wrong here. Basically the government says, “Hey, if you live in a property two of the last five years, you don’t have to pay capital gains when you sell. Again, we’re not CPAs but the gist is you’re not paying cap gains if you live in the house two of the last five years.

Robert Jones: Correct.

Brandon Turner: That doesn’t mean the immediate two previous years. It just means two of the last five.

Robert Jones: Correct.

Brandon Turner: So, I actually did the same thing. Recently, I lived in a house for several years, sold it. I made, I think it was $85,000 in profit. Well, I shouldn’t say … I sold it but there was two years in between when I stopped living there and when it sold it and made the $85,000. I still got the claim that two year thing because I lived there two of the last five. It just wasn’t the immediate recent two.

Robert Jones: Correct.

Brandon Turner: So, yeah. So, that’s why you have a couple years at a side.

Brandon Turner: A lot of people ask me that question. “Should I rent my house or should I sell it?” I like to say, “Yeah. You should just rent it out because it gets you into real estate,” but if you’re going to rent it out and lose 100,000 of taxes because maybe then you should have sold it and dumped it-

Robert Jones: Right.

Brandon Turner: … or something else. So, what do you usually tell people when they say, “Should I rent it or sell?”

Robert Jones: Yeah. 95% of the answer is keep it as a rental. If they have the fortitude and the personality type that it’s going to work well. Again, it’s a house that makes sense, which in our market, most houses will rent for what your mortgage is especially if you got the mortgage a few years ago and even if it’s running skinny, if you only owe one, two, three properties, you can take on a little bit tighter deals as opposed to, say, owning 10, 20, 30. So, I think you could be a little more risk tolerant in the beginning on deals that might be a little tighter.

Brandon Turner: Makes sense.

Brandon Turner: David, you got anything you want to jump in with?

David Greene: I have a couple questions I can ask, if that’s all right.

Brandon Turner: Sure.

Robert Jones: Sure.

David Greene: All right. So, one of the things you said is that you guys wanted to buy as many houses as you could once you realized what was kind of being described as house hacking in a way.

Robert Jones: Yes.

David Greene: We can get a low down payment and we can rent out part of the house. You also, I want to make sure I cover the strategy. You talked about being an agent and using your commission for a down payment because not many people talk about that but that’s an incredibly good strategy, specifically for agents.

David Greene: But I wanted to ask how are you avoiding over-leveraging or the people that want to ask the question of, “Well, if you just buy a house every single year for the rest of your life, what if you get too many of them? What are you going to do if the market turns?” Stuff like that.

Robert Jones: Sure. So, I can say, over the years, our risk tolerance personally and when I say our or we, it’s my wife Sarah and I who own all the properties. We don’t have partners outside of our marriage. Yeah. Well-played. So, in real estate or otherwise, our risk tolerance has changed significantly.

Robert Jones: So, when we started, like I said, we had $900 in our checking account. I did research what the implications were for foreclosure or bankruptcy and whether you foreclose on one house or five houses, it’s the same punishment. So, in the very beginning, we took on a pretty significant amount of risk. We were quite leveraged. I’d say the first five properties, we were 95% to 100% encumbered. So, we took on a pretty significant amount of risk in the beginning.

Robert Jones: As we moved forward, as Brendon mentioned, through sweat equity, time in the market, appreciation and just improving the properties, our equity position started growing pretty significantly. Once we started having more of a net worth on our income, all of it started increasing. My risk tolerance has changed by doing those things but again, buying on the front end, making your deal when you buy it. We weren’t doing anything really creative because I didn’t know what I didn’t know at that time.

Robert Jones: So, we were buying properties out of the MLS, just stuff where other people didn’t see value but we’d try, by the day we close, we wanted to have equity in it. Then, build equity pretty quickly upon renovations and just cleaning the place up.

Brandon Turner: Okay. Yeah. That makes sense. So, can you walk us through the rest, I mean, not the rest of your journey maybe but the next few years?

Robert Jones: Sure.

Brandon Turner: You said you were buying property. So, what did that look like? What kind of property were you buying? Were they all in Colorado? How are you financing them? How are you finding them? Just kind of walk us through the next few years.

Robert Jones: Yeah. So, we bought the first one. It was working. Like I said, we were stoked about $30 a month cash flow. Like, “Hey, this is sweet. We’ve got some extra money now.” But, again, I didn’t know about BiggerPockets. I didn’t know about these resources, so my perceptual math of what’s possible in real estate was still pretty limited.

Robert Jones: So, it became very well-versed on conventional loans and what was available in that marketplace. So, initially, we decided, “Hey, we can move once every year,” which I’m not giving advice related to owner-occupied lending laws and all that. Seek your own advice on that but we were informed that if we lived in a property for a full year, that was a safe ground. We intended and we did. We absolutely lived in the properties, we were doing everything by the books.

Robert Jones: So, our goal initially was once a year, 12 months and a day, we do a look for the next house. We’d move into it. So, 2009, we bought our first rental property, number two. A year later, we started looking. We’ll dig into this one a little bit more later but we did have a unique spot where we did an owner finance deal. That was my first experience there. So, two months later, we moved into that one. We bought a triplex and we were in there for just a couple months remodeling it. Again, I didn’t know the rules. We didn’t know what we didn’t know. Then, the light bulb. Someone told me, “Hey, man. You don’t have to stay here. This is not a convention loan.” So, literally, two, three months later, we found another good deal like, “Hey, we didn’t … “

Brandon Turner: Oh, that’s cool.

Robert Jones: There was no rules telling us we had to stay for an owner-occupied loan. So, we bought other single family home, lived there literally 12 months and a day, started looking for another one. Went out and bought another house. Then, we tried to owner occupy a triplex for our fifth property. That’s in 2011, when the guideline changes shifted and they added pending underwriter discretion.

Brandon Turner: Interesting. What’s that mean?

Robert Jones: To all the conventional guidelines. They just added that cloud. So, even if you fit in the box, it said, “Pending underwriter discretion.”

Robert Jones: So, if it felt weird to them, so we got declined for the first time after a while because we were fitting in the box. Like I said, we had a very skilled lender that knew how to navigate through this. We got declined but it was a killer deal we were under contract on. We didn’t want to lose the deal. We needed to come up, then shift it to an investor loan so we needed $90,000 in three days because the seller had a higher offer. He wanted to get out of the deal, so he wasn’t adjusting dates for us or doing us any favors.

Robert Jones: So that was our first … I’d say, we had done our hard money deal but our real introduction of considering more creative solutions and creative financing where we got what I feel is kind of our first hard money private loan. I’ll throw some big word here. We cross-collateralized against a prior one in the portfolio because, on investment property, you can’t do a first and a second but you can at the same time concurrently, do a second against a prior property. Then, show that you have funds down for the current purchase and the current acquisition.

Brandon Turner: Okay. Walk us through that again because that’s really, really good stuff and it’s really deep. So, I want to make sure people understand this strategy.

Robert Jones: Yeah.

Brandon Turner: The whole cross-collateralization.

Robert Jones: A few years in there so we had other properties through our own efforts and through market appreciation, started having some equity. So, we needed to come up with 90,000. This wasn’t with conventional means. I reached out to … And this, let me step back here. The hard money conversation I know is an ugh, you know?

Brandon Turner: Yeah.

Robert Jones: It’s scary, right?

Brandon Turner: Yeah.

Robert Jones: People don’t want to go ask. They don’t want to ask their friends for money. They don’t want to ask their family for money but this was our first opportunity to dig into that. The phone calls were scary initially. I’d say the first three were. Then, they felt really good because the people I started calling, anybody I thought my entire database. Again, I didn’t know there was guys online that did this for a business or there’s places to find money so I just called everybody I knew that I thought had money. What I experienced through that is the people that I thought had money that didn’t have the money felt really good. They felt proud that I thought they had the money. “Oh, Robert thinks I’m a big guy,” right?

Brandon Turner: Yeah.

Robert Jones: Then, some guys did have the money. Some weren’t interested but, again, grateful for the call, really, really gracious about it. Within a day and a half, I had three people that were willing to lend me $90,000 in second position against prior properties in our portfolio. So, we told them. It would be a formal note. It’s be a recorded note against that property. It wouldn’t exceed whatever their threshold was for comfort of total leverage against the property. So, the investor we ended up working with, his threshold was 80% combined leverage. So, we didn’t have enough equity in one property. So, we put it against two properties-

Brandon Turner: Nice!

Robert Jones: … on that one. We split up 40,000 here, 40,000 there, recorded the notes or 45 so that we had our 90,000. We bought that triplex and, another eye-opener for us, we were planning on moving into it. We started packing boxes. Then, I had another one. I’m a slow learner. We kept having these aha moments. I thought, “Well, crap. We don’t need to move into this. It’s not an owner-occupied loan.” So, literally, we are packing boxes to move into the house and realized, we don’t need to move into the triplex.

Brandon Turner: And something [crosstalk 00:23:53].

Robert Jones: This is a legitimate investment loan. So, two weeks later, we found a four-bedroom single family house. That one made more sense to the underwriter because it’s a single family home. It had a bigger bedroom count. It had a larger yard for our dog. We could explain it in a letter to the underwriter. So, I think two months later, we went and bought another single family house. Then, we bought another fourplex, chasing our tail again with a private second against prior real estate. Let’s see. Yeah. We bought another fourplex and then we bought a few more after that.

Robert Jones: We were entering the journey now where we did a couple more owner-occupieds. As our income increased, we started moving into little bit nicer homes, so those ones were easy to explain and our tool belt, we had more tools for creative financing solutions where we started buying more intentional investment properties. Even through all that, we still did nine moves in eight years, which it was moving a lot, which I enjoy. It wasn’t that … People think, “Oh, God. That’s terrible.” It was fun.

Brandon Turner: Yeah. And if it get you to where you’re at, then why not do it?

Robert Jones: Exactly. My wife and I always joke around. People meet us and they’re, “Oh, my God. Your wife is a saint for her to put up with all that garbage.” It’s like, “Well, our lifestyle doesn’t suck now.” So, things have changed.

Brandon Turner: And I’ll let, David, you jump in here a second, too, but I mean, could you tell us where did living in the boat for three months come in into the story? I’m just curious of where that was at and you can explain what that was.

Robert Jones: Sure. Yeah. So, we … Gosh, what was this? Almost five years into my sales business. Things were getting a little intense as far as hours worked, stress level, buying the rentals and all that. And we had set, my wife and I liked to travel a lot. We want to travel a whole lot more than we do. And we started looking at properties to buy out of country. We looked at Mexico and all their laws down there. We considered Belize, Nicaragua, Dominican Republic. We started looking at, as a foreigner, buying property down there and started digging into that. Almost every resource we dug into, there’s even one book my brother-in-law read that said, “If you’re not okay losing 100% of your money, close the book and don’t even finish reading it.” And from a risk-tolerant standpoint, I’m like, “Holy crap. I’m not okay with that.”

Robert Jones: So, the risk-tolerant standpoint was part of it. I thought, “Well, man. If we buy a property out of the country, we’re going to get really sick of going there pretty quick.” But my wife and I, we like moving around quite a bit and we like exploring different areas. We didn’t want to have just one place. Then, online, I found some family that was living on a boat that, when YouTube was just starting to gain traction, I thought, “Wow! Man, that’s pretty cool.”

Robert Jones: So, we set a goal like, “Hey, it’d be pretty awesome to live on a boat someday.” Before we really cemented that goal, we thought we should take it for a test drive. So, in 2012, like I said, five years into the business, we were at, I think, five or six properties at that point. We decided take a little sabbatical which started out, “Hey, we’re going to take a week off,” which that’s going to be vacation. It won’t feel like a life. It won’t be real. “Yeah. Let’s do two weeks.”

Robert Jones: Then, we talked to the guy we’re talking to. “How about a month?” We ended up leaving for three months. We flew into Trinidad just off Venezuela and sailed all the way through the Caribbean, BVIs, US VIs, Spanish, Culebra, all that and ended in San Juan. It doesn’t suck. As far as a test drive for our travel goal, with our family because we have children now. It cemented in our minds this is our goal that we want to achieve.

Brandon Turner: So, how did you do that? How do you take three months off because you told me earlier, you just turn your cell phone off. How do you do that and own rental property and own a real estate business, because there’s a lot of people listening right now going, “Oh, man. I would love to live in a boat,” or, “I would love to go travel Europe for a few months,” or, “I would love to just go and sit on the beach for a few months,” or whatever. People want that sabbatical, that break but they could not even imagine, “What are they do when the tenant calls and has a broken pipe.” What do you do? So, how’d you survive that?

Robert Jones: Yeah. So, three months, it was short enough we could still ask for favors. It was prior to where we have a lot of professional help. On the real estate side of things with my business, that was challenging. Not challenging to manage but challenging from a momentum perspective. David, you’re an agent. You know, if you’re not beating the street and hustling and keeping up those contacts, the momentum, it was an expensive trip from that capacity. For the rentals, my mother Stacy was a saint. She was our go-to.

Brandon Turner: That’s cool.

Robert Jones: Our voicemails, both mine and Sarah’s said, “Don’t even leave a message. We’re not going to call you back.” Now, we did communicate via email but our financial prudence pulls as far as frugality and just making sure things are handled appropriately. I can credit a lot of that to my parents. My mom helped us when we were gone for that first trip.

Robert Jones: Now, if you ask her, she will say she would never, ever do it again. It was not her favorite three months of the year but again, we only owned six properties at that point, five or six properties amounting to probably 10 doors. So, it was before it got a little more time-intensive at least but it happened. It was easy. Any big problems, we got an email. Any emergency, whether you’re handling or someone else, if there’s a fire or flood, it has to be handled.

Robert Jones: So, whether I take the call or mom takes the call or a property manager takes the call, it has to be handled. Other issues that came up, anybody can call a plumber, anybody can call a handyman. Now, did we pay a few more bucks for some of those things? Maybe and I didn’t fix them personally but the reward of the trip far outweighed any of those challenges.

David Greene: That’s so cool. Okay. So, in order to be doing all this traveling which is this goal we all have is we want real estate to fund our life, not our life to be all about real estate. You have to put systems into place. A lot of people struggle with this because they’re playing at kind of a small scale but once you get into some bigger numbers, more properties, more projects, systems become vitally important. Can you share some of the steps you took to systemize things so that you could be traveling and it didn’t all fall apart?

Robert Jones: Yeah, absolutely. And I feel we’re definitely still on this journey. It’s something we’re still getting more skilled at but we do have a professional property manager now that manages most of our units. Even through that transition, training the manager on what our expectations are, what our budgetary limits are for certain problems that arise, where I don’t want the phone call.

Robert Jones: So, we are still in process of working on that but helping facilitate that, where, hey, if it’s A, B, or C, handle it this way. Shoot me an email just so I see it but you don’t need to call me. We can authorize these events. So, on the management side, that helps significantly. On the real estate side of things, it’s a function of two things. One, places where we do have communication. I don’t mind taking the random phone call. Being in this business, if it allows us to travel more, I manage a lot of my business remotely if we are traveling for a week, 10 days. If it’s something that needs boots on the ground, we’re at the group, our company in Fort Collins, the collaboration between partners is almost unheard of in a real estate world. It’s unique that we’re all broker-owners so having the sense of camaraderie and people willing to help out. I’ve got partners that’ll just step in. They’ll bust out a showing for me and be the boots on the ground, if an offer needs to be written I’m unavailable, they’ll write the offer for me.

Robert Jones: But again, remotely, if we have internet and cell phone, I manage a lot of that. I want you to know it stresses some people out. They want to be on vacation but it gives us the ability to do more and travel more, that works for the shorter vacations.

Brandon Turner: Yeah. Yeah, I think it’s an interesting point. I mean, obviously you don’t want to take a vacation, have to work the whole time, right?

Robert Jones: Right.

Brandon Turner: The company’s goal but then some people just won’t take a vacation because they can’t dedicate 100% of their time to vacationing. I mean, I don’t think I’ve taken a vacation in four years that I didn’t do a BiggerPockets webinar during the middle of it, every single week because it’s such a valuable thing both in terms of helping people and something I like doing and it helps BiggerPockets grow as well.

Brandon Turner: So, I do it every week no matter where in the world I am. It’s okay. If I said, “No, I’m not going to do a vacation unless I could do 100% focus,” well, then, I’m just not doing a vacation, most like.

Brandon Turner: I’m working more and more towards the trying to unplug completely like you did on the boat trip occasionally. That’s why David Greene here is going to take over doing some webinars. Jake, the new guy at BiggerPockets, is going to be doing some webinars. So, we’re working there. But anyway, I just encourage people who are listening to the show right now, don’t get stuck in that, “I can’t take a trip because I’d have to maybe do a little bit of work.”

David Greene: The reason that I can take over webinars and Jake can take over webinars is because you systemize what you do. You broke it into chunks. You said, “Here’s how it works. Here’s a formula.” Now, we can practice within that formula and so we’re good.” Then, you’re like, okay. We’ve got it down. You can go do your thing. So, systems create freedom, right?

Brandon Turner: Right. Yeah.

David Greene: Because you hear discipline creates freedom where we’ve all heard Jocko say that. Well, discipline creates systems and systems create freedom. Now, you’re in the position where you can travel the world and enjoy real estate or you can create this thing that now you bring opportunity for me to get in because you’re leveraging me and it’s a good chance for me.

David Greene: So, that’s just why I’m a big fan of systems in general is they open up doors for many people where only one person stood at one point.

Robert Jones: Yeah. And just the efficiency of having a team. I don’t know the team in the conventional sense of these large realtor teams where showing assistants, buying assistants, all that. I don’t have that but I do have a full-time assistant with our company. I’ve got an entire escrow department, a marketing team and all these other functions. I mean, the week we’re recording, I have two closings on Friday where we’re going to make $21,000 while sitting in Hawaii.

Brandon Turner: It’s not too bad. Yeah.

Robert Jones: Again, it doesn’t suck. It’s great. So, having my team members and they way they’re trained, we can facilitate this. It’s fantastic. I couldn’t imagine a better career. I mean, we love it.

Brandon Turner: On that note, let me ask that question, then. I mean, I’m assuming I know the answer but let me go a little deeper. Do you think new investors who are getting started, they have a job. Should they become a real estate agent? I know the answer’s probably yeah, they should consider it, but then I’ll even go deeper. What kind of person should consider doing it and what person should not consider becoming an agent?

Robert Jones: Sure. So, if it’s becoming a realtor solely to save the 3%, my answer’s a hard no. If you’re not full-time in it, you’re going to lose more than 3% on something you missed. You just don’t have the depth of knowledge and your finger on the pulse of the market. I’d even argue the agents are selling five, six homes a year. You’re not doing enough business to keep your finger on the pulse of the market. If they want a career change and they want to do it as a career or a full-time investor where they’re really actively analyzing those markets on a regular basis. I think it’s a very rewarding career and I think it’s fantastic but if it’s, “Oh, I’m going to get my license on top of my nine-to-five, just because I don’t want to pay that guy 3%, I guarantee you’ll lose more money. For that sake, those investors are looking for a realtor. It shouldn’t be the guy that has a good smile and you like. It should be someone that’s eats, sleeping, and breathing what you do.

Brandon Turner: Amen.

Robert Jones: The David Greenes of the world that are investors and know investments and do a really high volume of business in that market to have your finger on the pulse because a lot of these markets, especially right now we’re on the cusp on, we’ll say, some changes at least, it’s important to have the right guy in your corner or gal but someone that gets it.

Brandon Turner: So, I’m wondering, like David, I’m going to turn to you and ask you the same question. Anything you want to add to that, anything that you feel differently or the same, like who should become an agent, who shouldn’t, of our listeners?

David Greene: That’s a really good question. You should become an agent if you want to learn the business of selling real estate and earn money from selling real estate. If all you want to be is an investor and passive income is all you care about, getting your license will not help you. It might even hurt you in some ways because now you have to disclose to people that you’re buying the house from extra things because they may be taking your advice on the fact you’re a licensed professional, saying, “Well, I’ll buy your house for 100K.”

David Greene: If it’s worth 300K, you don’t want to get sued because they come back and said, “Well, when he said he’d buy it for 100, I assumed that’s what it was worth because he’s an agent and he’s representing me.”

David Greene: But if you love real estate, you might like selling it more than your current job. If you ask me, there is a huge, huge, huge gap in the number of agents that know what hell they’re doing. I mean, I don’t know a nicer way to say it. I became an agent because I was so frustrated with knowing more about real estate-

Robert Jones: That’s a pretty nice way to say it.

David Greene: Yeah. We see this all the time. They’re just not good at their job and they don’t care to be good at their job. You hit it on the head when you said, “They’re just a friendly guy with a nice smile,” and nice cologne or a girl with a pretty headshot doesn’t mean they’d understand money or finances or what goes into a deal or how to protect your wealth or how to represent your interest. I routinely destroy agents on the other side negotiating because they don’t even know what’s in the contract. I meant half asleep and I’m beating them just because I know a few things that they never bothered to learn because instead, they’re out there working on their Facebook and making smiley videos, right?

Robert Jones: Right. Yeah.

David Greene: If you love real estate, there’s a need for agent who love real estate. That’s kind of why I’m growing my team is because I’ve all these people that come to me and they say, “Hey, David. I love real estate. I want to sell houses and I want to learn it.” I’m like, “Great. We have clients who needs someone who understands how to save them money.” That’s what our job is. We’re like a lawyer in court trying to get them out of trouble or trying to help their case or get them money, not just a smiley person.

David Greene: So that is the person who should become an agent. You love real estate. You’re passionate about it. You want to take what you’ve learned for your own self and you want to ply it to your clients. If you do that, man, the top is really nice. 80% of the business goes from the top 20% of the agents. You can make really good money. If it’s just a thing you’re ho-hum about, stay far away from it because 80% of the agents have to split 20% of the business. That bottom 80%, they don’t do hardly anything and it’s really hard.

David Greene: So, thank you, Brendon, for asking that because I think a lot of people think, “Well, I want to get my license to save money on commissions when I have to sell a house.” You’re assuming that you know how to sell a house, that you’ll actually do it better than someone who’s good at it and that you’re not taking effect all the fees you’re going to be paying to hold that license for the entire time. You got to pay your broker and all the other stuff. So that’s a really good point.

Robert Jones: A real estate agent, all they do is push a button they just put on the MLS. That’s all you have to do as an agent.

David Greene: Oh, yeah. And open a couple of doors and write up a contract. That’s all it is.

Brandon Turner: Yeah. Whatever. It’s easy. Yeah.

Robert Jones: It’s the Office Depot Easy Button. You just click it.

David Greene: Yeah. You just click the one button. It’s easy.

Robert Jones: Chip and Joanna Gaines rock so I want to sell real estate.

David Greene: Exactly.

Robert Jones: Yeah. You hit the nail on the head. The granite and stainless makes me feel warm and fuzzy. While there is a desire for that from some clients that they want someone just to hold their hands, the finding someone that has a passion to drill down and have an education for what we’re doing, like I said, That is 20% worth less of the market. I mean, I know-

Brandon Turner: I just had a conversation with a client who didn’t want to pay a million dollars for a house that was listed at a million because she felt like it didn’t have the finishes that a million dollar house should have. When I broke it down by asking questions, it turned out it didn’t have granite countertops, it didn’t have stainless steel appliances, what you just said. The houses that did were 1.2, 1.2 million, and I was able to-

Robert Jones: Appliances and counters, yeah.

Brandon Turner: … explain. Yeah, we’re talking about $5,000 for counters and maybe another six or seven for cabinets and appliances. This is $12,000. You’d rather go spend 200,000 and pay it back over the next 30 years with interest. Her eyes just opened up like, “Oh, my god. I never thought of it that way.”

Robert Jones: Hey. Calling three people and scheduling one contractor. That’s hard.

Brandon Turner: That is. Yeah.

Robert Jones: That’s at least three or four phone calls.

Brandon Turner: So, yeah. That type of thing is where people just don’t understand the value that an agent can bring if they’re good but there’s so many bad agents out there. We’ve created this problem for ourselves.

Robert Jones: Yeah. Sure.

David Greene: So, Robert walk us through where you at today, then. What’s your portfolio look like in size-wise? You can go in as much or as little as you want about what kind of cash flow do you see today, where you see yourself headed in terms of your portfolio?

Robert Jones: Yeah. So, we at the immediate moment, we’ve got 16 properties, 26 doors which in our market, our price point. I mean, we’re just shy of $8 million market value.

Brandon Turner: Wow!

Robert Jones: And about four and a half million in equity now, which, you guys talked a few months ago about I definitely will … Yeah, we got lucky in the timing of the market. That didn’t hurt. We’re not all real estate gods by any means. The market helped. Granted, a lot of sweat equity and all that stuff.

Robert Jones: Our cash flow, I still question whether we made the right decision. We refied about seven of them onto 15-year notes in efforts to try to achieve some of these goals to retire or long sabbatical, quite young. So, our cash flow, we’re about just over $10,000 a month right now net.

Brandon Turner: Awesome.

Robert Jones: Depending on our maintenance month, about 10,000 a month, which that we don’t use any of the real estate money personally at all. It’s a completely separate machine.

Brandon Turner: Yup. What do you do with it? Just recycle it into more properties?

Robert Jones: Yeah. I jokingly say depending on my financial mid-life crisis, we go from debt paydown to we’re done buying properties and then we go buy a few more and then we’re done buying properties. In the last five months, we bought three more. So, here we are-

Brandon Turner: I did the same thing.

Robert Jones: … and now we’re at 26 doors which, like I said, most of that’s professionally managed, so it’s running pretty smooth. It’s good.

Brandon Turner: Let me ask you this, then. I mean, one thing cool about an expensive market is that you were able to … I mean not expensive and, again, not New York, San Francisco necessarily but the higher tier. You were at this level. Then, it, as the market goes up …

Brandon Turner: I mean, okay. Here’s a way of explaining it. If you would have bought only $35,000 properties and the market went up 50%, you’ve just gained $15,000 on each of those properties, but you have a $200,000 property and it goes up 50%, you’ve now gained $100,000 in equity.

Brandon Turner: Now, the same thing works the opposite way. If the market drops, you can be severely under. I want to talk a little bit about the expensive market thing. How do you invest in an expensive market? Are you still finding deals today and what do you got to be careful of when you’re in that market?

Robert Jones: Sure. The numbers are definitely skinnier and significantly compared to some of the guys I hear in your podcast. “Oh, yeah. I paid 80,000 for a place and it rents for 1,200 a month.” I think, “Holy crap!” They’re talking about 1.5% lever on rents or one and a half times, which you don’t see.

Brandon Turner: Yeah. You don’t think [inaudible 00:42:32]?

Robert Jones: But like you said, the leverage and I never sell on appreciation. We want the numbers to make sense without appreciation in the spreadsheet. That’s what I tell all my clients. If it doesn’t make sense without this icing on the cake, we probably shouldn’t buy it, but having that icing on the cake, the icing’s really thick. I mean, we bought a lot of properties when Sarah and I were considering in our more risk-tolerant days. I told her, I said, “I just want more expensive real estate.”

Robert Jones: To a degree, when I felt like I saw the writing on the wall, we didn’t have a crystal ball but I felt like the market was going up and it was going to be marching up for a while. That was my strong belief. I just started buying more expensive properties, just so we had a more expensive real estate appreciating.

Robert Jones: So, there’s a few plays we made on 1031 exchanges where tax-deferred exchange into another rental property where the cash flow didn’t change at all but for an easy example sake, we went from a $200,000 house that rented for 1,500 a month to a $400,000 house that rented for $3,000 a month. It was the same cash flow but gross rents, I was increasing our portfolio and increasing our gross rents because, for us, it’s a long-term hold for sure. We’re never going to sell any of these without replacing them in some form ever is our goal right now.

Robert Jones: So, I figured, if we can increase our gross rents, regardless of cash flow at the time because we don’t need the money. We use my real estate business, my agent business to pay our bills so we don’t need the money. So, I wanted to increase dollars of real estate as well as our gross rents, which right now, they’re 39,000-ish, 39,000 and change a month, the gross rents, which once a property’s free and clear,-

Brandon Turner: Yeah. That’s awesome.

Robert Jones: … I think we probably can figure it out.

Brandon Turner: Yeah. And that’s interesting thing, too, about these higher-end properties is and I don’t know if you’ve found this but I definitely found it. There’s some irony in here as well. The more expensive a property is, the easier that property typically is for me to manage. My most irritating tenants are the ones that are in my $30,000 houses. My best tenants are the ones that are in my $1.7 million houses, like property, and like Ryan.

Brandon Turner: So, for whatever reason, I just get higher quality people who have less drama in their life. Now, they may be able to demand a little bit more and they want a little bit nicer stuff and that’s fine because then, the property stays nice. So, I would personally, this is again where I’m at in my … Earlier on, I want a cash flow above everything because I needed to get out of my job. That was number one so I bought the worst properties. Didn’t matter what they were as long as they cash flowed well.

Brandon Turner: Today, I would rather get significantly less cash flow but buy in a market where I can spend way more, like have a way more expensive property and have a way more chance for appreciation.

Brandon Turner: Again, I don’t think any of us is saying, “Buy a bad deal, loses money,” like that loses money every month. I don’t want to lose money every month, no matter what. But I would almost take a break-even property in Maui over a property that made $500 a month in Grace Harbor, Washington where I was at before because that one property, it’s not going to be worth anything later on but I’d rather, if I get truly net actually breakeven on a property here, means after maintenance, repairs, property management, all that, that I at least know the mortgage is getting paid down. The mortgage is a million dollar mortgage getting paid down significant chunks every single month and appreciation, even at 3% of a million dollar house or a half a million dollar house. That’s climbing quite a bit. Over time, I should always win. That’s just definitely a shift that I’ve had in the last few years.

Robert Jones: Well, and that for use, the value of gray matter, I call it. Even David, as good a systems as we all build, as the portfolio start to increase and we’re debating whether we’re go to go to the next step and really exponentially grow here in the future but there’s only so much space between my ears for headaches and, like you said, just garbage.

Robert Jones: So, we’ve got tenants, the whole spectrum in our market. We’ve got the most affordable rentals you can have, kind of our multi-family properties that rent for 900, a thousand a door up to single family that rents for 3,500 a month which, in our market, that’s a very high rent. And, like you said, typically, less headaches and the applications on the 3,500 a month are just bonkers. And it’s 810, 815 credit scores, a five-pound dog, no kids. Oh, yeah. “$5,000 deposit for the damage?”

Brandon Turner: Yeah. No problem.

Robert Jones: “No problem.” All that. They make three, four, five, six, 700,000 a year where at your entry level, your Section 8 and all that, it’s just different. We do own the whole spectrum but I can say is we’ve progressed in our investing. Like you said, I’ve noticed myself shift towards, I don’t know if convenience is the right word or safety, because the depth of the luxury market, in our market, it’s not that deep.

Robert Jones: So, if we flood the market with too many high-end rentals, we’re going to bring everything down but there is value. I know investors listening will cringe when I say that I’ve bought five or six new construction homes, brand new from the builder to turn into rentals. Now, we get very aggressive offers and we knew when their fiscal year ended specifically-

Brandon Turner: Nice!

Robert Jones: … through a national builder and we knew when they had to get units out the door and got two for $75,000 off, two days before the end of their fiscal year and they had to post numbers so having that extra depth of knowledge but still, they were brand new homes. They had a warranty. We had the tenants call the warranty line instead of even calling us. So, some of that, there’s value in that.

Brandon Turner: Yeah.

David Greene: That’s why you want a good agent, not just a smiley, friendly one.

Robert Jones: Yeah. If people actually run true, true accurate maintenance allocations, and not have their property just turn into a raging pile of crap over the years, if they run real numbers on maintenance, I think they’d be surprised at the gap between newer, not new but newer properties compared to the 60s-built piles of junk, the gap’s not as big as you’d think in some markets.

Brandon Turner: Summarize for us.

David Greene: Yeah. When we [crosstalk 00:48:43] some older investors that have invested in real estate and you ask them, “What advice do you have for me starting off?” Everyone I’ve ever talked to has said, “Location, location, location.” All this other stuff we talk about just goes right out the window from someone that’s done it for 50 years and they say, “Buy in the right area with the best schools. The appreciation you get will trump any bit of cash flow that you thought was important and you won’t have the headaches.”

David Greene: There’s something to be said for understanding. I think Brandon and I had a conversation about this when we were both trying to work our way through it that you could literally go buy a $10 million mansion in Beverly Hills and lose a couple thousand dollars a month because the rent wouldn’t cover your mortgage, but if you looked at your tax savings and your principal reduction and your increasing rent and the overall value of that mansion going from 10 million to 20 million over 10 years or 20 years or something, you would make insanely more money than if you bought a handful of [cashel 00:49:36] in places somewhere in the Midwest that just crept up.

David Greene: When you get into that cash flow is all that matters mindset, you miss the big picture of what you’re describing, which is you’ve built your net worth with a handful of properties so much more than the people we interviewed that say, “Oh, I’ve got 110 doors out there,” somewhere where they don’t get much appreciation and they have a ton of headaches because not all money is good money. Some of it is just blood money, man, like you’ve bought yourself a job. You did not buy an investment.

Brandon Turner: It’s also where we talk about the different phases of your investment right in the beginning. Like I said, in the beginning, cash flow’s all that matter. I like to say cash flow gives you freedom but appreciation gives you wealth.

Brandon Turner: So, the cash flow, again, I don’t regret buying the $30,000 junk crap house that rented for $700 a month. I don’t regret that because it helped me get out of my job. Those properties got me out, which gave me the ability to start building more wealth. As my investment in yours … I can see yours is kind of the same way, it starts shifting, you can start playing a little more appreciation.

Brandon Turner: So, just because we’re talking this conversation now doesn’t mean everyone listening is like, “Oh, screw it. I’m going to go and lose money on a Beverly Hill mansion.” That’s probably a terrible idea but …

Robert Jones: Call David Greene for $10 million [crosstalk 00:50:45].

Brandon Turner: Exactly. Call David Greene. He’ll represent you on that. He’ll tell you it’s a great deal.

Brandon Turner: But there is something to say. In fact, just another day, I was talking to a buddy of mine who said he just hung out on a boat with this billionaire real estate investor. He got invited to some special mass client thing.

David Greene: With a B.

Brandon Turner: With a B, yeah. Billionaire. And the guy’s advice, basically, what he said was starting in the 70s and 80s, I just read a book that said, “Location, location, location.” I read one book and I was like, “All right. So, I’m just going to buy in good location.” He’s like, “I just kept buying properties in the best locations around the country I could find.” I don’t remember what he did. He had some actually job that made him really good money. He’s like, “Every property I bought lost money. Every single one. I would buy property that lost money. It didn’t matter.” He just lost money but I know that one book told me to buy location, so I just did it. Today, all those properties are worth over a billion dollars.

David Greene: There you go. That’s probably how it worked for everyone else, too. You gave such a-

Brandon Turner: A billion dollars.

David Greene: … good example. Those first cash flow properties that we’re all buying, the get us out of the rat race. They get out of my nose is in the grindstone. All I can see is my boss and small thinking. They’re this little box that you step on that you can peek over the fence.

David Greene: As you peek over that fence, you’re like, “Oh, my God. There are people that are making a lot more money than me that are not nearly as smart as I am. Look at that guy. He sits in front of his pool all day long. He doesn’t even try. What is he doing?” When you get that perspective, that’s when you can start taking advantage of these other opportunities but you do need to get those first few deals which do need the cash flow. That’s why we always talk about it.

David Greene: Brandon has a perfect strategy for anyone who wants to do this. He calls is the stack. Brandon, can you tell us how the stack works to do what we’re saying?

Brandon Turner: I guess. Sure. So, for those who have not heard the stack, basically what it is is your idea, when you’re first getting started, you buy a house, like a single family house maybe or maybe a duplex, whatever. Then, a whole year later, you go from a house to a duplex.

Brandon Turner: Now, if you’ve already bought the house, that was really hard to buy the house when you’re getting started. So, then you buy the duplex but that was hard but probably equally as hard as buying the single family. You got some experience and knowledge and money coming in. Then, the next year, a whole year later, you buy a fourplex or maybe two duplexes, whatever. Everyone, don’t get caught up in the actual specifics here but then an eightplex the year after, 16, 32, 64. Maybe it looks more like one, five, 10, 50, 1,000. I thought you were going to go from 50 unit to 1,000 unit but whatever. The idea being exponential growth.

Brandon Turner: The reason that’s so powerful is because it forces you continually outside of your comfort zone to scale exponentially versus what’s comfortable is, “I’m going to buy a house and then another house and another house.” It might take you 20, 30 years to get enough property to be able to make anything of it but when you scale exponentially, it constantly pushes you outside of that comfort zone. So, anyway, talk about it.

Robert Jones: Yeah. We felt maybe it wasn’t size of units but it ended up being to a degree but our goal was to buy one house a year. And that, wow. Well, that’s getting real easy. Maybe we should be two this year. Then, the year we did two. Then, the year we did three. Then, we added a couple months where we did three. Yeah, it just got easier and easier.

Brandon Turner: It could even be, the stack doesn’t even necessarily mean, I mean [inaudible 00:53:45]. Could be, “Hey, I bought 100,000 a property. This year, I bought $200,000 of properties next year and 400,000 the year after, then 800.” There’s a lot of ways you could look at it. The key is growth. Are you growing? Are you stepping outside your comfort zone? You guys definitely have been.

Robert Jones: Yeah. We’re at a cusp again where we’ve been comfortable for far too long.

Brandon Turner: Yup. [crosstalk 00:54:04].

Robert Jones: So, we got to figure out what the next step is.

Brandon Turner: Yeah. And maybe next is just relax and go sail around the world in a boat or-

Robert Jones: Yeah. We taper down or I could see us going one of two directions but they’re vastly different. Slowing down, paying off, or really wrapping things up if beardy Brandon needs a partner in a mobile home complex.

Brandon Turner: Yes!

Robert Jones: So, but David, I want to backtrack. You mentioned location. We were adamant on that. Every single property we own except one is in Fort Collins. I firmly believe in our city and looking historically, not just warm and fuzzies but looking at actually data of the performance we’ve seen, because we have considered out of state and we’ve looked at other markets and I have some partners in my company that have invested out of state. For all the reasons we just discussed, I believe I’ve made the right decision. We’ll see if that continues to hold true.

Robert Jones: And, on the stack, the first one, you just need to buy a house.

Brandon Turner: Yeah, yeah. Exactly.

Robert Jones: I don’t even care if it makes money. I know it’s contradictory to BiggerPockets philosophy but-

Brandon Turner: No, but I agree with it. Just get something.

Robert Jones: … as far as getting your feet wet, you just need to buy a house. It doesn’t even matter what it is. Just to overcome that initial fear and start your perceptual map.

Brandon Turner: Totally agree.

Robert Jones: You just need to buy a house. My brother, older than me. He owned a condo in Windsor that for a season, like five years, it lost $200 a month. It’s a turd. I mean, it is, by any metrics of looking at a rental, you think, “Man. This thing sucks.” It still is positive if you look at all the benefits of owning real estate with taxes and appreciation and all that. Now, just this year, he’s a millionaire.

Brandon Turner: Wow!

Robert Jones: So, even writing through a dog that went through pretty cyclical market but that was one of his first rentals of getting his feet wet. Now, he owns a good number of doors in Arizona and is kicking butt on owning what most people would consider a loser and take their chips and go home. “Oh, real estate sucks. I don’t want to do this anymore because it didn’t work out.” Even though it didn’t didn’t work out. It’s still a winner, even though it feels like a loser. So that’d be my advice to anybody. Just buy a house.

Brandon Turner: Yeah. I love it. All right. So, that’s awesome.

Brandon Turner: So, let’s shift a little bit. I want to get deeper into one of your properties, get people an idea what that looks like, so why don’t we go to the deal deep dive?

Brandon Turner: All right. Deal deep drive. This is the part of the show where we dive deep into one of your particular deals, so you got a deal in mind?

Robert Jones: I do.

Brandon Turner: All right. We’re going to drill you on seven questions. I don’t actually have my questions on front of you because I don’t have my computer in front of me today so I’m going to hopefully not screw this up. Number one, what kind of deal was this and where was it at?

Robert Jones: Yeah. So, in Fort Collins. It is a triplex, a conforming legal triplex. For people that know Fort Collins, it’s on Mountain Avenue. It’s on not the most expensive street in the city of Fort Collins.

Brandon Turner: All right. David, do you remember [crosstalk 00:56:55]-

David Greene: Yeah. How did you find this deal?

Robert Jones: Yeah. I jokingly say that someone had to punch me in the face, get the light bulb to turn on. It was through my real estate business. It was one of my sellers who asked me to list this triplex. I was just getting everything ready, getting ready to list it. Going though, I’d sold another property for her. At the time, we only owned two properties. My perceptual map wasn’t very big. You don’t know what you don’t know. Back then, there was a lot I didn’t know.

Robert Jones: Throughout the course of getting ready to list it, she had told me a few times, “Yeah, and if people don’t qualify, I could help with the loan.” With my very limited knowledge at that time, I thought, “Oh, well. We don’t want those buyers. If they don’t qualify, we don’t want them to buy the house because that’ll be a pain and the deal probably won’t close.”

Robert Jones: So, by about the third or fourth time she said that and one of my partners said, “Hey, man. That’s a pretty cool property. Can I buy it?” I went home thinking, “Well, I should try to buy it. Well, I can’t buy it.” I don’t know if I thought about it or Sarah has slapped me in the face and said, “Hey, dummy. She said she’ll help with the loan.”

Brandon Turner: She said she’ll help, yeah.

Robert Jones: “Call her and ask her if she’ll help with the loan.” So, we called the seller. Said, “Hey, you know, you mentioned you’re interested in price of the property.” We said, “It’s probably worth,” at the time, I think we said, “It’s worth 310, 315.” I said, “What if I give you 325 for it.” Again, respecting boundaries of an agent and not letting the property go to market and all that. “But would you be interested in doing the loan?” She said, “Yeah, sure.” We had a good relationship. She said, “Well, how much money do you have down?” I said, “Well, that’s the thing. I don’t really have any money. Would you be interested in financing the whole property?” She said, “Great.” I said, “Okay.”

Robert Jones: Then, she said, “You know, what interest rate?” I said, “Well.” I pulled up on the internet and showed the banks and said, “The banks will lend me the money about X if I went out and got an owner-occupied loan, which at that time we could have in that stage of the journey. So, we did a 30-year fixed, 100% financed triplex at 4.75.

Brandon Turner: Wow! That’s awesome.

Robert Jones: So, at closing, we actually got paid.

Brandon Turner: Because the …

Robert Jones: Tenant security deposits,-

Brandon Turner: Oh, okay. I see.

Robert Jones: … prorated rents and all of that. We got paid at closing to own a triplex on one of the most desirable streets in the entire city. As far as framing perception of a win/win deal, the property when she owned it was grossly under-rented. She was only getting, combined, about 1,500 a month in rents.

Robert Jones: Once we moved in, we did some immediate renovations, just personally. I was doing all that. The first cycle we turned it over, we doubled the rents but our fixed payment to her was 1,700 a month, so she was making more money with no maintenance liability, so she was thrilled with the deal. It truly was win/win for her. We were stoked because we got into a cool property on one of the most desirable streets in Fort Collins.

Robert Jones: Now, it is built in 1885, which for us is quite old so there’s some different maintenance liabilities but that property that we paid 325 for is now worth somewhere in the 900 range.

Brandon Turner: Oh, my gosh! Wow!

Robert Jones: And we are getting 4,600 a month in gross rents.

Brandon Turner: Wow!

Robert Jones: So, it’s …

Brandon Turner: You ever talk to her and just she kick herself for selling it?

Robert Jones: We don’t.

Brandon Turner: “I want to talk about that.”

Robert Jones: But it’s … No. She’s an older gal selling off part of the portfolio. It’s more of a headache but it was one of those things, again, the light bulb didn’t come on. I just didn’t know hard money was a thing or private loans were a thing or, God forbid, opening the doors in my brain to think, “Hey! I need to be aware of these things.”

David Greene: You know what’s crazy about this?

Brandon Turner: What’s that?

David Greene: There are people that would not have bought that deal because you said, “I offered 325 and she wanted 315.”

Robert Jones: Yeah.

David Greene: That number would have just … “No. I’m not overpaying for a property.”

Brandon Turner: “I’m not overpaying for property.”

David Greene: No. Screw that.

Robert Jones: I agree, David. It’s one thing we have been skilled about in some of that area, seeing the forest through the trees. What I tell all my investors, if any deal we’re looking at. I don’t care if you’re underpaying for it, overpaying for it, whatever. If any deal doesn’t work over a number of 10 to $15,000, you shouldn’t be investing in real estate. I mean, you don’t want to blow 10 Gs on a $30,000 house. I get that.

Robert Jones: But if you buy a house, for example, in Fort Collins markets, Northern Colorado market and God forbid the day after closing, septic systems goes out and you have to pay 10, 15 Gs to fix it. If you’re so pissed off that you never want to invest in real estate to start with, you probably shouldn’t be investing in real estate. I think you need to go in with your big boy pants on or big girl pants a little bit and know that there are unforeseen challenges. Speaking of unforeseen challenges, we’ll sidebar really quick. We’ve got a property which was our first experience with methamphetamine.

Brandon Turner: Oh! Oh, that’s right. You mentioned that the other day. I wanted to dig in on that a little bit.

Robert Jones: Yeah. It was after we owned it for a while. We had owned it for a number of years. We got notified of a police report of some bad stuff going on. In the moment, it was a very unpleasant experience. Insurance doesn’t touch it. Out of pocket, we spent $32,000 fixing the problem, which is a newer investor, that’s a problem. That’s unpleasant. We paid for it all. I had a number of investor friends and client … Then, my friends that don’t invest. “Oh, my God! How much do you regret buying that, idiot?” We got a lot of that. “Oh, you’re a sucker, dude.” So, we paid $305,000 for the property. Today, it’s probably worth 675.

Brandon Turner: Wow! Do you regret that [crosstalk 01:02:39]?

Robert Jones: I don’t really care about $32,000. Not to sound flippant but a large amount of money but, again, seeing the forest through the trees, it’s all good. In over ways, the headaches and the challenges.

Robert Jones: But anyway, back to the deal deep dive. What else? Is there anything else?

David Greene: You literally answered every single question.

Brandon Turner: Yeah. Pretty much.

David Greene: I pulled it up and I was going down. The only thing left is what did you learn from the deal. You might have answered that when you said, “I learned to see the forest, not the trees.”

Robert Jones: Yeah, and it was really in that moment and to really try to expand your perceptual math, I mean, once you start … I mean, they talk about your reticular activator like if you’re talking about a Greene jeep, all you’re going to see is Greene jeeps, right?

Brandon Turner: Yeah.

Robert Jones: So, I didn’t know anything about hard money but then once I knew about hard money, it’s like, “Oh, crap. There’s a whole different ballgame here I’m not aware of.” And even to this day, as we’ve done reasonably well. I know there’s so much more that … Mobile home parks or apartments or syndications or all this other stuff that …

Robert Jones: I don’t know. My biggest encouragement for the listeners would be there’s so much good information available on BiggerPockets and other resources. If you’re not taking advantage of it, you’re an idiot and you really shouldn’t be investing because it’s free. There’s so many resources now that if they were around when I started, I’m an idiot. I was the idiot. I just didn’t know there was this other avenue. I mean wealth of information.

Robert Jones: So, you don’t need to go into it blindly anymore and just trip through it. You can have a depth of knowledge starting.

David Greene: Isn’t there a meme going around where he whispers, “It’s free real estate?”

Brandon Turner: I have no idea.

David Greene: Yeah. I’ve seen it. Go, “It’s free real estate.” That’s BiggerPockets for you right there. Yeah. You’re exactly right.

David Greene: I think I love about your story the most that you just said is you made so much equity on each of these deals, even though you did what some people would say, what an amateur would look at as overpaying. Instead of having to do this over 10 deals, you did it over one deal. You probably have very little headaches on a property that’s $900,000 property there. The tenants are top-notch, you don’t have to deal with them very often. You can totally afford to upgrade that house with really nice stuff so you get really good tenants. They probably don’t call you very often when things break, so they don’t want to bug you. They fix it themselves. You just end up with the perfect investment as opposed to the job of now managing 15 properties to get the same result where it’s a constant headache from the tenants that are asking you for everything every month.

Robert Jones: Yeah. If you’re an engineer and you could design a Canon laser printer that just shoots out $100 bills, it’s that property. I mean, even being a hundred and, what is it, now? 135 years old. Like I said, there’s some different maintenance issues. It prints money. We make net probably 2,500 a month off of one property,-

David Greene: That’s crazy.

Robert Jones: … which, like you said, for the basic investor or the first-time investor, when we bought it, it lost two to $300 a month.

Brandon Turner: Yeah. Crazy.

Robert Jones: Just rents compared to mortgage. Not even factoring in the maintenance. They would have ran it through your whole calculator like, “Oh, my god. This thing leases a thousand dollars a month.” So, it didn’t pan out just looking at just by the numbers in a calculator at all but seeing the bigger picture, it’s our favorite property. It’s our baby.

Brandon Turner: That’s cool. That’s cool. I like that story a lot. It’s neat. I also have a property that was, I think it was 1888 or 1890. That’s one of my, if not my favorite, one of my favorite property that I really like it a lot. Yeah. There’s a little bit more different maintenance. I don’t have bad maintenance concerns there but a little bit. When they do happen, they’re a little more expensive to deal with.

Robert Jones: Yeah. $10,000 boiler and …

Brandon Turner: Yeah, yeah. It’s like a little bit annoying stuff but overall, man, that property just prints money for me, too. So, anyway, very cool.

Brandon Turner: All right. We are going to move on. Rush, you’re going to skip the fire round because I don’t have any fire round questions because I don’t have a computer in front of me today and those are the ones from the forum, so we’re just going to bypass that completely and jump right into the famous four.

Brandon Turner: All right. The famous four. These are the same four questions we ask every guest every week and we’re going to throw them at you right now. Number one, Robert?

Robert Jones: Yes.

Brandon Turner: Favorite real estate investing book.

Robert Jones: I don’t know if I’d say favorite but most impactful, Rich Dad Poor I have to defer to everybody.

Brandon Turner: Nice.

Robert Jones: That’s what got just the candle lit of, “Hey!” And, for me, I didn’t have … My parents are amazing. They taught us all sorts of great things but as far as a depth of financial education, short of, “Hey, don’t go into a bunch of debt. Buy a house when you’re young.” Beyond that, I don’t know that I knew the term asset and liability and some of those base foundation blocks. So, it was instrumental in changing our thought process on that.

Brandon Turner: Cool. Yeah. Number two.

David Greene: Next question, what is your favorite business book?

Robert Jones: Business? I got to cheat and say a few. Brandon and I were talking that I love Audible and that you can crank it up to 2X speed so I can just cram so much more in. Pieces of a lot of books. Never Split the Difference, Chris Voss recently. There was some gold nuggets there that were just exceptional. Brandon’s delightful wife Heather Turner and The Book on Managing Rental Properties by BiggerPockets. That for my business, I’m ashamed to say that until more recently this year but it will change my business in the way I manage my real estate business in that the hours it’s going to save me of explaining this to every single young investor I work with because I do. My business, I built a lot of young investors. We’ve got a lot of young guys that are … I’ve got a buddy that owns 11 doors, another one with six, another one with eight. My little brother, Ben, 24 years old, is working on his fourth unit right now.

Brandon Turner: Oh, no way. That’s awesome.

Robert Jones: He’s got a legal duplex, finishing a basement, kicking butt.

Brandon Turner: That’s awesome.

Robert Jones: For those young investors, again, David talks about ramping up a high-volume real estate business, I don’t have the time to go through some of that. So that book, I’m excited.

Brandon Turner: You can hand these out.

Robert Jones: Oh, I’m going to go buy 15 copies to keep in my office and just every closing, “Hey, read through this.”

Brandon Turner: That’s funny.

Robert Jones: “If it doesn’t handle the topic, give me a holler. We’ll spitball through it.” So that’s exceptional.

Robert Jones: What else? There’s an older book, Smart Talk by Lou Tice.

Brandon Turner: I don’t know that one.

Robert Jones: For Mindset is very good. The 4-Hour Workweek, parts of it. If I could take 25% of each of these books and just jam them together, it’d be the unicorn of business books.

Brandon Turner: Was that a coconut just fell? The sky is falling.

David Greene: Right. You got to go get that, Ryan. We got to show these people what this is.

Brandon Turner: That’s hilarious. Yeah. It’s like everyone’s all sitting in my office here. All of a sudden, I hear thunk, dunk, dunk, dunk, dunk, dunk, splash. I think a coconut falls off a tree, bounces down.

Robert Jones: Into the pool?

Brandon Turner: Yeah. Into the pool. This time, it did fall in the pool, this one.

David Greene: It sounded like it might have put a [crosstalk 01:09:24].

Robert Jones: Yeah.

Brandon Turner: There we go. Look at this thing.

David Greene: Maui fresh.

Brandon Turner: Maui fresh coconut. We’re going to have to cut this thing open later. Isn’t that cool? Here. Want to catch? It’s heavy. Nice catch.

Brandon Turner: All right. Anyway. Funny. Okay. Where were we? We were talking business books.

Robert Jones: Business books. Yeah.

Brandon Turner: So, next, David.

David Greene: Next up, what are some of your hobbies?

Robert Jones: Hobbies? I like working on houses.

Brandon Turner: Nice.

Robert Jones: We like traveling like we talked about, venturing into sailing. We’re not big sailors but we will be. Lot of old man sports, softball, volleyball, mountain biking, off road and all that stuff. We stay pretty active.

Brandon Turner: Cool. Yeah.

Brandon Turner: All right. Last question from me. What do you think separates successful real estate investor from those who give up, fail, or never get started?

Robert Jones: Probably grit. I mean, it boils down to … Or I’ve heard it defined as do you have a big enough why? Your why doesn’t even need to be real estate. Why do you want to invest because if you don’t have a passion or … I mean, everybody’s … “Yeah. I want to make some money. Yeah. I want to be rich,” but no one’s willing to do what it takes to do it. If your why’s big enough, I think you’ll find out how. Yeah. And some bravery, taking that first step, just getting after it because there’s no excuse any more for education. There’s no excuse anymore for ability. In the land of the free in the USA and the knowledge that’s available, those are not excuses anymore. You just got to want it bad enough to get after it.

Brandon Turner: I don’t think we’ve talked about … I don’t know if anyone’s ever used that word bravery before here on the show for that, answer that question. Can you think that ever been given, David? I can’t.

David Greene: Nothing even close to that.

Brandon Turner: Bravery! But I love that. And some level, you have to be willing to just go, “You know what? I’m scared. I’m going to do it anyway. I’m nervous. I’m going to do it anyway.”

Robert Jones: Yeah. Well, if you’re that guy like us, the first rentals, join the real estate and a company, mind you, that the desk fee’s … Well, with an office, 37,000 a year desk fee. We had $900 in our checking account, or if you’re in that market. If you’re in Detroit or Kansas, whatever else and you’ve got $50, there’s ways to buy houses. You just got to get through enough nos to find the guy that says, “Yes,” which … But if you’re in that situation, who cares if your credit score gets screwed up. You know, like get after it. That’s the time to take on the risk.

Brandon Turner: Yeah. Do it, anyway. Yeah.

Robert Jones: Be brave. Be bold.

David Greene: Well, you gave a good example on your deep dive about how you did that very same thing. Didn’t have any money. Made it work for the other person. All the pieces were in place because it was a great deal. You could add value to the rent. It was a really good location. You just went all out and said, “Whatever I got to do to get this property, I’m going to do it.” and it wasn’t even that hard. It was like, “Oh, yeah. Okay. I can do that.”

Robert Jones: Yeah. Your self-talk is telling you, “Oh, this is a little bit scary,” but like you said, “Everybody was stoked and smiling and laughing at closing.” Be bold. Be brave. Get after it. Or find a why. If you don’t have a why, find a why.

Brandon Turner: Yeah. Very, very good. Very good. So, David, I’ll let you take the last question and then we’ll wrap this thing up.

David Greene: I like that. I like that find a why. We should write a blog post on that and put the cover of alphabet soup, like some got to get a spoon in there looking for the Y in the alphabet soup. Find a why.

Brandon Turner: Well I was thinking we should get a t-shirt that says, “Find your why,” and you can do the alphabet soup. Find your why. Yeah.

David Greene: That’s even better. That’s why you’re the marketer. [crosstalk 01:12:46].

Brandon Turner: I’m the marketer because then we can sell it for $20 and make $5 a t-shirt.

David Greene: A lot of good …

Robert Jones: Like you said, if you want to sit around watching Dancing with the Stars, you don’t need rentals, right.

Brandon Turner: Yeah. Who needs it? Just sit around watching Dancing with the Stars all day.

David Greene: In your T-shirt.

Brandon Turner: All right. Last question. Robert, this has been fantastic. I’ve really loved you as a guest. I also think I should point out that you sound a lot like I think Brian the Dog from Family Guy.

Robert Jones: Fantastic.

David Greene: And we did interview Mark Hentemann, one of the producers of Family Guy so if ever need a job and he needs a backup for Brian, I think we can probably connect you with that.

Brandon Turner: We can [crosstalk 01:13:16].

Robert Jones: Yeah. If we need some additional voice for … I can get some additional streams of income so go abundant style here.

Brandon Turner: There you go. Yeah.

Robert Jones: I can do voiceover Brian. That’d be great.

David Greene: God. You’re like the perfect guest.

David Greene: Okay. For those who want to buy a house in Colorado, sell a house or just simply learn more about their fascinating brain, how can they find out more about you?

Robert Jones: Yes. I’m not on a lot of platforms but my website is easy. It’s robertforrealestate, Robert F-O-R-

Brandon Turner: Oh, F-O-R.

Robert Jones: … real estate. So, really easy. Robertforrealestate. You can’t forget it. It’s stuck on my truck. It’s on my scooter, my bicycles. My wife says I should tattoo it on my forehead.

Brandon Turner: You probably should, backwards so you remember it [crosstalk 01:13:50].

Robert Jones: Yeah. That way if you’re-

Brandon Turner: Yeah. In the mirror.

Robert Jones: … looking at a mirror and you can see it and … But yeah, that’s easy. That’s where I’m at.

Brandon Turner: robertforrealestate.com.

Robert Jones: That’s it.

Brandon Turner: Cool. All right. This has been a fantastic show. Thank you very much for joining me in the sea shed. Not the she shed. The sea shed today and …

Robert Jones: The she said by the sea shed.

Brandon Turner: Yeah. The she shed by the sea shed. And I don’t know. I’ll let David, you take it out today.

David Greene: All right. Thank you very much, Robert. This is David Greene for Brandon speed dating real estate bachelor Turner, signing off.