Navigating Risks and Success in Real Estate: Lessons Learned from a Lawsuit with Joe DiSanto

Speaker: 00:00:00

We have Joe DeSanto with me here today. And if you wanna follow

Speaker: 00:00:04

along and Joe has a great blog with a lot of content.

Speaker: 00:00:08

play louder.com for those information for that

Speaker: 00:00:12

training material. But, Joe, I really appreciate your time.

Speaker: 00:00:16

We're going to go down the rabbit hole of business

Speaker: 00:00:20

and fractional CFO today, which that's what Joe specializes

Speaker: 00:00:23

in. But I really appreciate your time here today. Thanks, Jack. Thanks for

Speaker: 00:00:27

having me on. I appreciate it. So I'm always curious,

Speaker: 00:00:31

fractional CFOs run into I even have a couple

Speaker: 00:00:34

fellas locally that do this type of work. It's always interesting

Speaker: 00:00:38

to find out how you accidentally fell into this.

Speaker: 00:00:42

Yeah. Fractional CFO, really, I guess, another way to

Speaker: 00:00:46

say part time CFO. And I came to an I

Speaker: 00:00:49

guess you could say organically, really, I used to own

Speaker: 00:00:53

larger businesses in Los Angeles in the production and post production

Speaker: 00:00:57

space. We basically on the commercial side, we make commercials largely

Speaker: 00:01:01

for, like, large multinational ad agencies. And then on the production

Speaker: 00:01:04

side, we also produce some of our own content And we in my

Speaker: 00:01:08

bio, my mentioned, I want a cup we want a couple me's at one point

Speaker: 00:01:12

for a show we did for HBO. Very proud of that. But it was a

Speaker: 00:01:15

-- larger business. We had about 30 or so employees, and it was very time

Speaker: 00:01:18

consuming. And then long story short, we had a kid, my wife and I, and

Speaker: 00:01:22

then we actually went to spend some time with it. But we came up with

Speaker: 00:01:24

cock made me idea to, like, reinvent our whole life. We I

Speaker: 00:01:28

my partners cashed me out of the business, and then my wife and I it

Speaker: 00:01:32

will, I call retreated to cheaper ground. We moved to Florida.

Speaker: 00:01:36

And at that point, my real estate investing had definitely pumped

Speaker: 00:01:40

up our savings quite a bit. We had some cash flow from that. We had

Speaker: 00:01:43

some cash flow from other just market investments, and we

Speaker: 00:01:47

figured I could probably work part time and supplement

Speaker: 00:01:50

our passive income with part time work, and we could make it all work

Speaker: 00:01:54

and then inevitably have more time for the family. So that's

Speaker: 00:01:58

what we endeavor to do. And in with that whole

Speaker: 00:02:02

idea, I guess I consider myself a little bit of the fire ill the

Speaker: 00:02:05

financial independence retire early. I don't know if you're familiar with that term

Speaker: 00:02:09

or those folks, because I consider myself semi retired, and

Speaker: 00:02:13

then I don't work full time. And also part of what

Speaker: 00:02:16

I put in that classification is that I'm

Speaker: 00:02:20

not completely concerned with saving more. mean, your full time work,

Speaker: 00:02:24

obviously, saving for retirement's a thing. I think with what we have, if that just

Speaker: 00:02:27

continues to grow through its through the investments, then I'm comfortable with

Speaker: 00:02:31

that, so that's what I mean by semi retired or whoever wants to know.

Speaker: 00:02:35

But what ended up happening was is for my businesses, I was the CEO and

Speaker: 00:02:39

the CFO. I did all the I did all the finances all the time from

Speaker: 00:02:42

the very beginning. And my partners, when

Speaker: 00:02:46

I left, they were supportive, but they Hard to lose me. I

Speaker: 00:02:50

like to think. I did a lot of I did a lot of stuff, but

Speaker: 00:02:53

they asked me if I wanted to maybe just stay on, like, doing the finances

Speaker: 00:02:56

they would just pay me, like, a retainer or something. And I was like, yeah.

Speaker: 00:03:00

That's great. And once I put the word out to friends, it just casually

Speaker: 00:03:04

that I was doing that. I happen to have a lot of friends and own

Speaker: 00:03:07

businesses, they were like, oh, wow. Are you doing that? Would you do that for

Speaker: 00:03:10

us? Because we really need that. And it turns out that for

Speaker: 00:03:13

businesses of a certain size and, like, clients range anywhere from on

Speaker: 00:03:17

a a couple to, like, 30 employees being

Speaker: 00:03:21

my company. They don't know if there isn't a business

Speaker: 00:03:25

person that one of the partners of the company and that is, like,

Speaker: 00:03:28

tasked with managing the business of the business. It's hard to have a

Speaker: 00:03:32

full time really qualified person in that role. because it's expensive.

Speaker: 00:03:36

So there's, like, a niche there turns out to do this part

Speaker: 00:03:40

time CFOing, essentially, My clients get access

Speaker: 00:03:44

to all my knowledge and everything. They don't have to pay me a full time

Speaker: 00:03:47

salary. And, of course, I can do it for multiple clients I like and do

Speaker: 00:03:50

it as a consultant to remain in control of my time and all that sort

Speaker: 00:03:54

of stuff. And so I started saying, yeah, I'll do more of it

Speaker: 00:03:57

because I did need to fill in that part time income that I

Speaker: 00:04:01

that I had mentioned earlier, and it just became the natural

Speaker: 00:04:04

progression of what was the next the next step for me.

Speaker: 00:04:08

So I really love finance. I love doing the

Speaker: 00:04:12

numbers. And I also like always I always

Speaker: 00:04:15

had an interest in doing it for myself too. I genuinely

Speaker: 00:04:19

considered my personal life. I ran it like a business because

Speaker: 00:04:23

I was running my business, and I that you do what you need to do

Speaker: 00:04:26

for that. And, of course, I would just apply those same

Speaker: 00:04:29

principles to my own income and Benson P and L

Speaker: 00:04:33

and balance sheet and all that goals and so on. And I

Speaker: 00:04:37

really started to as I started the blog and tried to communicate

Speaker: 00:04:41

my knowledge people, whoever is interested in it, that's become sort

Speaker: 00:04:45

of one of my fundamental concepts is that people really need to

Speaker: 00:04:48

run their personal lives, like business as well. And for my clients

Speaker: 00:04:52

who are business owners, I stated them, hey. I'm working on your business with

Speaker: 00:04:56

you, but, ultimately, You're in business to make

Speaker: 00:04:59

money. I know you're also realizing your dreams and all that sort of stuff, but

Speaker: 00:05:03

at the end of the day, you are headed somewhere called entirement. And if you

Speaker: 00:05:07

are not taking that seriously as well and making sure that your

Speaker: 00:05:10

business is gonna pay off for you in that sense, you're making

Speaker: 00:05:14

a mistake. So I indoctrinate them into this idea

Speaker: 00:05:18

that that you really do have to take your personal finances as seriously and

Speaker: 00:05:21

realize that it is one big system. The money comes into your life at the

Speaker: 00:05:25

at your business, but it really is not all that meaningful until

Speaker: 00:05:28

it's after tax and in your savings account. And that's when you know,

Speaker: 00:05:32

like, financially, speaking what the net result

Speaker: 00:05:36

really is. And there's also tax concerns and tax

Speaker: 00:05:39

efficiency in that system that you need to be concerned with and

Speaker: 00:05:43

not just be concerned with, but you want to be concerned with because it

Speaker: 00:05:47

can obviously help your net result as well. So I come at

Speaker: 00:05:50

it from that perspective. It's more like I do for people what I did for

Speaker: 00:05:54

myself as a business owner and entrepreneur as opposed to just, like,

Speaker: 00:05:58

being, like, their bookkeepers. know what I mean? Yeah. So that's what

Speaker: 00:06:01

my business is about. And I started the blog to

Speaker: 00:06:05

basically be able to communicate this to individuals more on a coaching

Speaker: 00:06:09

basis, but obviously, that can't afford to pay someone to be a

Speaker: 00:06:12

a CFO on retainer. So I offer

Speaker: 00:06:16

lots of pretty much all my information for free in one way or another through

Speaker: 00:06:19

my blog post, but I also offer some courses where I

Speaker: 00:06:23

distill the information down to the most pertinent that

Speaker: 00:06:27

individuals can buy and get access to,

Speaker: 00:06:30

like, good planning skills for their own future

Speaker: 00:06:34

very reasonable cause, at least in my opinion. And they can also book time

Speaker: 00:06:38

with me just like an hour at a time to have some coaching or accountability

Speaker: 00:06:42

or whatever. So That's a little bit of what I do as well, but, like,

Speaker: 00:06:46

I do that more as a side thing. This is quite interesting based on

Speaker: 00:06:49

the other investors that I'm aware of. It's rare to

Speaker: 00:06:53

find somebody to plan out their financial future for their

Speaker: 00:06:56

business in the real estate world, let alone their personal

Speaker: 00:07:00

life. Has that been typically the biggest hurdle when

Speaker: 00:07:04

you're talking to real estate investors? Yeah. Not

Speaker: 00:07:07

just real estate investors, but all investors and also

Speaker: 00:07:11

really business owners because obviously having your own business is an

Speaker: 00:07:15

investment in and of itself. But, yeah, you'd be surprised

Speaker: 00:07:18

how little planning people do both in their personal life and

Speaker: 00:07:22

even in their own business. And it's not always because people are you're responsible,

Speaker: 00:07:26

but, like, particularly owning a business, even a real estate centric

Speaker: 00:07:29

business as well, it's very time consuming. And you only get so much time of

Speaker: 00:07:33

the day, and it's like everybody always has the intention of getting down

Speaker: 00:07:37

to doing some good planning and figure out where they're headed and now they're gonna

Speaker: 00:07:41

get there and making adjustments based on good data and all that sort of

Speaker: 00:07:44

stuff. But again, depending on your size, if you don't

Speaker: 00:07:48

have a staff or someone that's partner that really takes that on. Like, it's

Speaker: 00:07:52

just one of those things that oddly falls by the wayside. So being able

Speaker: 00:07:56

to do it in this part time capacity people. It makes it much more

Speaker: 00:07:59

accessible for them. And as I said, like, they

Speaker: 00:08:03

usually are thinking, oh, I need help with my business, and

Speaker: 00:08:06

I am educating to them to the fact that you also need help

Speaker: 00:08:10

with your personal life. And how much are you saving? Is it gonna get

Speaker: 00:08:14

you where you want to go? How much return do you need on the savings

Speaker: 00:08:17

in order to get you where do you wanna go? Actually, where do you even

Speaker: 00:08:20

wanna go? You know what I mean? What is your retirement destination? Actually, one of

Speaker: 00:08:24

my courses is called the Financial Independence roadmap.

Speaker: 00:08:27

And first step is figuring out, like, where do I wanna

Speaker: 00:08:31

be in 20 or 30 years? Like, literally physically, what state would I

Speaker: 00:08:34

wanna I wanna live in where I live now? Do I wanna be in the

Speaker: 00:08:37

Caribbean? How much is that gonna cost? And how much

Speaker: 00:08:41

money do I need to sock away in order for the

Speaker: 00:08:44

passive income on that to cover that in what I'm

Speaker: 00:08:48

envisioning in my head, And then, okay. Now I have

Speaker: 00:08:51

a, like, a financial goal of savings. How do I get to that? Like, how

Speaker: 00:08:55

much do I need to save every year? How much return do I need to

Speaker: 00:08:59

get on those savings in order to get there in 20 or 30 years.

Speaker: 00:09:02

And therein lies, for me, like the real estate piece, it's

Speaker: 00:09:06

like, Real estate to me is just like any other investment.

Speaker: 00:09:10

I shouldn't say exactly that. But, ultimately, as I jokingly say, unless you're gonna

Speaker: 00:09:13

go sit outside your rental properties and just look them all day.

Speaker: 00:09:17

The purpose of that is to generate a good quality return for you

Speaker: 00:09:21

on your on your investable cash, right, your savings. with the

Speaker: 00:09:25

purpose of getting you to some destination in the future, whether that

Speaker: 00:09:28

be building up enough passive income from your real estate or

Speaker: 00:09:32

building through appreciation or value add or whatever, but

Speaker: 00:09:36

ultimate real estate is an investment for that purpose. And I

Speaker: 00:09:40

do think real estate ultimately provides a better return for less

Speaker: 00:09:43

risk in general than the markets, and it has for me.

Speaker: 00:09:48

And so I educate people as to real estate is a potential

Speaker: 00:09:51

option for your saved money. Is it right for you or not? We

Speaker: 00:09:55

can talk about that, but if it's gonna produce more return, if you're

Speaker: 00:09:59

gonna get 25% compound annual growth at a real estate

Speaker: 00:10:02

versus maybe the hopeful average of 10% of the market. You're

Speaker: 00:10:06

gonna grow your savings three times as fast, but, actually,

Speaker: 00:10:10

so that's something you seriously wanna look at. You can't just leave it up

Speaker: 00:10:14

to the financial industry to get you your 7 your

Speaker: 00:10:17

7% compound annual growth and throw you in some stocks and bonds

Speaker: 00:10:21

and then call you once a year. That's the rest fee for failure. The

Speaker: 00:10:25

investment component, you know, of that planning

Speaker: 00:10:28

is very vast, obviously. Real estate is a potential piece

Speaker: 00:10:32

of that Yeah. Or it could all but it could also be markets. It could

Speaker: 00:10:36

be a combination of that too. I've actually more recently

Speaker: 00:10:40

I was mostly I was, like, probably 75, 80% real estate in my

Speaker: 00:10:44

overall portfolio. Obviously, real estate, as

Speaker: 00:10:48

Marcus, head up into last year, was in a pretty serious bull market. So I

Speaker: 00:10:51

thought I probably should maybe reevaluate

Speaker: 00:10:55

given my own personal new circumstance. and

Speaker: 00:10:58

I adjusted my asset allocation to be a little less real estate

Speaker: 00:11:02

heavy. I sold some of my single family rentals that appreciated,

Speaker: 00:11:06

and so on, I ended up actually buying some syndications though

Speaker: 00:11:09

instead that I thought might be better on the cash flow front

Speaker: 00:11:13

because I was trying to produce a little bit more spendable cash as opposed

Speaker: 00:11:17

to being in the investments on in the long term and on

Speaker: 00:11:21

the appreciation front. I did a lot of research over the last

Speaker: 00:11:25

couple of years about different things. And it ended up there's only so

Speaker: 00:11:28

many categories, but there there are private real estate investments, LS indications.

Speaker: 00:11:33

Obviously, Crip cook cryptocurrency is a thing. I don't have a lot of percentage in

Speaker: 00:11:37

that, but I have some money in that. I mostly divested a real

Speaker: 00:11:41

estate puts some more money in the market because I thought the market was gonna

Speaker: 00:11:44

be coming down off the end of 2022 sorry,

Speaker: 00:11:48

end of 2021, which obviously did So I started buying into

Speaker: 00:11:52

the market. I wish I started buying into the market today, but, sadly, I started

Speaker: 00:11:55

buying into the market about 4 or 5 months ago, but I think in the

Speaker: 00:11:58

long run, that's gonna prove to be a good a good situation. So

Speaker: 00:12:02

I and then I also even investigated some other products like life

Speaker: 00:12:06

insurance, and I put together a plan that involves some you know,

Speaker: 00:12:09

Bristol index life. And I I spread things out and made like a

Speaker: 00:12:13

new asset allocation. That's right for me at

Speaker: 00:12:16

my jumb shirt, but I try to educate my clients

Speaker: 00:12:21

in these options and, like, what the whole asset

Speaker: 00:12:24

location is about and, like, What exactly? It's in a way

Speaker: 00:12:28

they don't even know, like, what the goal of the savings is. So they

Speaker: 00:12:32

just know I'm supposed to save. I hope I'm saving. I don't know, like,

Speaker: 00:12:35

a busy a year goes by at a flash once you have kids. So

Speaker: 00:12:39

I try to bring them that perspective of a CFO. Obviously,

Speaker: 00:12:43

that's a very c customer in a business setting. You would review your

Speaker: 00:12:46

numbers on a regular basis. You would try to establish how your

Speaker: 00:12:50

business is doing, which of your products sell the best, which

Speaker: 00:12:54

ones cost the least, all these types of things, and make

Speaker: 00:12:58

informed decisions about how you're gonna make adjustments for your business

Speaker: 00:13:01

next year or what you're gonna spend more or less time on, all

Speaker: 00:13:05

that can apply to the personal life as well. Of course, I try to do

Speaker: 00:13:09

that I was glad that you just brought that up because I was gonna ask

Speaker: 00:13:12

you if we could define what a CFO actually does because

Speaker: 00:13:16

I think a lot of people classify essentially

Speaker: 00:13:19

that it's doing some accounting or something like that. But and misses

Speaker: 00:13:23

the concept that this is taking those numbers and

Speaker: 00:13:27

planning making strategic decisions and

Speaker: 00:13:30

planning for your business. And then you've mentioned a few times your

Speaker: 00:13:34

personal life. Yeah. Yeah. I mean, the funny thing is, like,

Speaker: 00:13:39

I was not didn't go to school for accounting. I I really was just, like,

Speaker: 00:13:42

an entrepreneur, and I did the finances for my business 1

Speaker: 00:13:46

out of necessity because I couldn't pay someone to do them at the beginning. And,

Speaker: 00:13:49

2, because I was concerned that I needed to, like, know if we

Speaker: 00:13:53

were doing well. Like, it was it just seemed like it's extremely

Speaker: 00:13:56

important to know if we were, like, making a profit. Like, how much could I

Speaker: 00:14:00

pay myself? How would I know that if I don't know if the ins and

Speaker: 00:14:02

outs of the finance And it's just something I like too, so that made

Speaker: 00:14:06

it a lot easier to do. But that is my experience of what a

Speaker: 00:14:09

CFS does. It's just me doing it for myself. So in

Speaker: 00:14:13

some ways, I could answer the question and probably someone who went to a school

Speaker: 00:14:17

for accounting or whatever, it said I'm missing some thing. But at

Speaker: 00:14:21

the end of the day, for me, yeah, it's basically, you do bookkeeping

Speaker: 00:14:24

because you need data. Right? And while the bookkeeping gives you

Speaker: 00:14:28

data, to ultimately make good decisions on. But it's not just, like,

Speaker: 00:14:32

everything's going great. Hey. What can we do to improve next year? What should we

Speaker: 00:14:35

focus some, but you also have to have an emergency planner or

Speaker: 00:14:39

emergency exit plan. One of the things I would always do is I

Speaker: 00:14:43

hope for the best plan for the worst. So as a business with many

Speaker: 00:14:46

employees that you have a monthly goal that you know you need to hit. Right?

Speaker: 00:14:50

Well, if you don't hit that for a couple months in a row, you know

Speaker: 00:14:53

you're gonna have a cash flow crunch likely in 2 months is if have terms

Speaker: 00:14:56

and you're like, what if I don't hit my goal for 6 months? I don't

Speaker: 00:14:59

know. What if something crazy happens? Likely, you're gonna have to start lightening your load.

Speaker: 00:15:03

So I would have plan of who would I let go if I had to

Speaker: 00:15:06

do that, not that I want to, but, like, I have to be

Speaker: 00:15:10

prepared for all those scenarios, or where can I access funds

Speaker: 00:15:13

from if I wanna bridge the gap and take on that responsibility and not let

Speaker: 00:15:17

anyone go? because often letting people go, it's not an ideal situation because you

Speaker: 00:15:21

put so much time into training people and getting them on board and getting them

Speaker: 00:15:24

there. It's not like you you think about it in a flipping

Speaker: 00:15:28

way. And that's another thing CFOs do is they

Speaker: 00:15:32

constantly keep, like, your financing and your credit accessible,

Speaker: 00:15:35

increase your credit as needs to be, like, in my case, I also

Speaker: 00:15:39

said because I own the business and it said to my partners, hey.

Speaker: 00:15:43

We're spending so much money in rent you know, just like the idea of buying

Speaker: 00:15:47

your house, hey. I'm spending so much money in rent. Why don't I just buy

Speaker: 00:15:49

a house? We were spending so much money in rent on our business location.

Speaker: 00:15:54

when we were growing and we needed a new space, I was like, why don't

Speaker: 00:15:58

we buy a building? Might as well, why would we

Speaker: 00:16:01

setting a spent sign up for a 5 year lease for the 5 or 10

Speaker: 00:16:05

year extension, do a whole bunch of tenant improvements

Speaker: 00:16:08

on our dime just to build out somebody else is building. And we're

Speaker: 00:16:12

in post production. So, like, our office

Speaker: 00:16:16

was very nice. Like, it's you're entertaining clients there all the time.

Speaker: 00:16:20

Like, the quality of your design in your office is a

Speaker: 00:16:23

reflection of the quality of your work, basically, in a creative

Speaker: 00:16:27

field. So we actually decked at our place pretty well. And

Speaker: 00:16:31

I'm like, we're gonna we're gonna spend, like, half a 1,000,000 or $1,000,000 or whatever

Speaker: 00:16:35

doing that for someone We bought a building. And then I managed I got all

Speaker: 00:16:38

the financing together for that as being the CFO. And that worked out

Speaker: 00:16:42

really well. I in my real estate endeavors, which ultimately

Speaker: 00:16:45

was side thing for me and part of my investing,

Speaker: 00:16:50

I think we owned, about

Speaker: 00:16:53

16 properties over the last, I don't know, 15 years,

Speaker: 00:16:57

including our homes, which I do consider investments

Speaker: 00:17:00

personally. And when there's so 3 of them were our homes, but 2 of

Speaker: 00:17:04

them were buildings for our business. So in

Speaker: 00:17:08

2008, we we bought a building, renovated it, had it for

Speaker: 00:17:12

about 8 years, decided to sell it and

Speaker: 00:17:15

trade up to a slightly bigger building and a better make a

Speaker: 00:17:19

better one and one that had parking. That was probably the biggest driver

Speaker: 00:17:23

of us switching gears. So we did well on that building. It'd be

Speaker: 00:17:26

pocketed half the profits, but the other half into the new building did

Speaker: 00:17:30

the build out again. Now in those cases, those two buildings

Speaker: 00:17:34

probably are the, like, single largest driver of

Speaker: 00:17:38

profits for me in real estate, but

Speaker: 00:17:41

I manage the build out. I manage the construction. I was

Speaker: 00:17:46

basically at the beck and call those projects, and I could be

Speaker: 00:17:49

because I was a a partner in the business that it was for

Speaker: 00:17:53

So I spent a lot of time making sure those privates were successful, and

Speaker: 00:17:57

they were not small. Like, the first one was about a $4,000,000

Speaker: 00:18:00

project, and the second was 10,000,000. And there are a lot of

Speaker: 00:18:04

things that could have gone wrong, did go wrong, needed to get

Speaker: 00:18:08

fixed. It there's a time component to real estate, I guess, is my

Speaker: 00:18:11

point that you do have to factor in to your returns, I think.

Speaker: 00:18:15

But luckily, so far, for me, it's all been worth it.

Speaker: 00:18:19

Sure. Part of what I do calculate into the kind of

Speaker: 00:18:23

compound annual growth is how much time do I have to put into this

Speaker: 00:18:27

project and relative to some other less time consuming option

Speaker: 00:18:30

where I could put my money. And hence, lately, I wanted to spend less

Speaker: 00:18:34

time on real estate. And as I was saying earlier, I kind

Speaker: 00:18:38

of our portfolio divested some of the single family

Speaker: 00:18:42

rentals, but I like real estate. So I decided to take some of that

Speaker: 00:18:45

equity and put it into syndications where I'm not doing anything, and

Speaker: 00:18:49

I'm just collecting cash flow. Now granted you're handing

Speaker: 00:18:53

your money over to someone else, and they have to do a good job. So

Speaker: 00:18:57

it's it's never riskless, obviously, to do that. I'm

Speaker: 00:19:00

giving that a try as well. Sure. Just to remind

Speaker: 00:19:04

everybody, it's play louder.com to learn more about what

Speaker: 00:19:08

Joe does and how he can maybe help. So, Joe, you've

Speaker: 00:19:11

been working with quite a few real estate investors at this point.

Speaker: 00:19:15

Have you found some consistent or

Speaker: 00:19:19

pitfalls, if you will, some of your real estate investors? What are some of the

Speaker: 00:19:22

stories you've been seeing? that are is a consistent

Speaker: 00:19:27

problem with with us. The funny thing is it's it's the same

Speaker: 00:19:30

problem I mentioned earlier. Some people are very diligent

Speaker: 00:19:34

about it as a business, and they can answer any question you fire

Speaker: 00:19:38

off at them about the financials of their endeavor.

Speaker: 00:19:42

And other ones are just buying real estate, and I'm like, so have you done

Speaker: 00:19:45

an analysis on whether or not these properties actually have

Speaker: 00:19:49

made you any money when you consider cash flow appreciation,

Speaker: 00:19:53

like, Cap CapEx, tax implication, whatever.

Speaker: 00:19:57

And they were like, no. I probably should do more of that.

Speaker: 00:20:01

Luckily, when in a long running bull market of real estate,

Speaker: 00:20:05

it usually is worked out pretty okay, but we're not in that

Speaker: 00:20:09

anymore. You know what I mean? So it's really this p again, but

Speaker: 00:20:12

again, having the time or making the time to do that

Speaker: 00:20:17

very valuable work. And then also making

Speaker: 00:20:20

sure that you're getting, like, the most tax benefit and tax

Speaker: 00:20:24

efficiency out of your real estate holdings. So I'm understanding

Speaker: 00:20:28

how depreciation real estate may or may not

Speaker: 00:20:31

affect your other income, especially if it's a side thing and what

Speaker: 00:20:35

steps you wanna or can take to make sure you're getting the most value out

Speaker: 00:20:39

of the the potential tax benefit and so on.

Speaker: 00:20:42

Same issue. People having and or taking the time to really

Speaker: 00:20:46

do the analysis and make sure, you know, what they're doing is worth it.

Speaker: 00:20:50

Yeah. It just seems like maybe it's just a small businesses in general. We

Speaker: 00:20:53

operate off of checkbook balance versus

Speaker: 00:20:57

planning things out accordingly. Yeah. the funny thing about real estate

Speaker: 00:21:01

is it's the one thing where there's a lot of hidden financial

Speaker: 00:21:06

ins and outs with with just it's not super complicated, but

Speaker: 00:21:09

it's just with the amortization of your loan with the depreciation

Speaker: 00:21:13

and the tax effect that it has with the appreciation, like,

Speaker: 00:21:17

There's a lot going on in the potential performance of

Speaker: 00:21:21

the real estate that you have to think about before you sell. Like, once you

Speaker: 00:21:24

sell and you realize all those things. Well, you have

Speaker: 00:21:28

your end result, but in the planning of the buying of a

Speaker: 00:21:32

property and or the deciding to stay in it and

Speaker: 00:21:35

or move the money into some other property, you have to

Speaker: 00:21:39

read between the lines and figure out really what's happening. And that takes

Speaker: 00:21:43

a little bit of take some time. Actually, one of my courses, which is

Speaker: 00:21:47

about by the way, like, my content, I should say, just put a big

Speaker: 00:21:50

picture As I've created my blog and delivered my

Speaker: 00:21:54

content, I realized that for me, there's, like, kind of 3

Speaker: 00:21:57

pillars to success in life, really. Not in

Speaker: 00:22:01

financial life, which is, 1,

Speaker: 00:22:04

being entrepreneurial. I really do think being entrepreneurial key

Speaker: 00:22:08

to income generation and also time control, which both of

Speaker: 00:22:12

which, you know, are obviously the important.

Speaker: 00:22:16

2, the personal finance fees, which is the treating your personal financial life

Speaker: 00:22:19

like a business tracking your income and expenses like you would in your

Speaker: 00:22:23

business, actually having a P and L, you look at maybe once a month or

Speaker: 00:22:26

once every month and go, wow. I actually made more than I spent. Thank god.

Speaker: 00:22:30

Or holy moly. I spent more than I've made. That's bad. I have to fix

Speaker: 00:22:33

that. And then the last piece is the investing, like, understanding, like, there's

Speaker: 00:22:37

a significant difference between a 7% compound annual growth and

Speaker: 00:22:41

20%. Like, you will shave could you could

Speaker: 00:22:45

shave 10 to 15 years off of your saving and amassing

Speaker: 00:22:48

important in your life if you could get that return to be higher. So

Speaker: 00:22:52

you need to educate yourself on how to do that. You just rely on

Speaker: 00:22:56

your guy over at Fidelity through you and some index funds and let's go

Speaker: 00:23:00

be a home run. So one of my core I have a course, and she

Speaker: 00:23:03

has 3 pillars, one of them is real estate. And bay and, basically, it's

Speaker: 00:23:07

just doing real estate analysis, both the property you might buy or

Speaker: 00:23:11

properties you have. And I've create I created this sheet for myself,

Speaker: 00:23:15

which is not groundbreaking, but it's pretty

Speaker: 00:23:19

detailed. I mean, what it does is it has all these metrics you can

Speaker: 00:23:22

change like, obviously rent, interest rate in your loan,

Speaker: 00:23:26

inflation, blah blah blah. And then

Speaker: 00:23:30

it maps out your returns but pre and

Speaker: 00:23:33

post tax on an annual basis for 30 years. So you

Speaker: 00:23:37

can actually see how the performance of the

Speaker: 00:23:40

property would happen over time. And potentially

Speaker: 00:23:44

if you wanted to get out in year 5 or year 10 or year 15,

Speaker: 00:23:48

where you would be in a turn in compound annual growth based. Now

Speaker: 00:23:52

any syndicator, whatever, a higher level investor's probably

Speaker: 00:23:56

gonna have something like this. but for the smaller in

Speaker: 00:23:59

individual investor, I don't know that they go through

Speaker: 00:24:04

the length to create something like that. So my courses, basically, you

Speaker: 00:24:07

get my sheet, and then I have 7 or 8 videos where I explain to

Speaker: 00:24:11

you exactly how all the real estate investment

Speaker: 00:24:15

returns materialize and show you how tax

Speaker: 00:24:19

affects you, show you how depreciation affects you, blah. I will show you what

Speaker: 00:24:23

would happen if inflation was 7% instead of 2%

Speaker: 00:24:26

blah blah blah. So at what point does a small business

Speaker: 00:24:30

decide to engage somebody like you to help them

Speaker: 00:24:33

along. What at what point should what question should they be asking

Speaker: 00:24:37

themselves? Yeah. Sometimes, sadly, people have engaged me more when

Speaker: 00:24:41

they're concerned about their finances, which is,

Speaker: 00:24:45

unfortunately, I can't go out and make money for people. I can help them

Speaker: 00:24:48

probably figure out how to beat make more money more efficiently, though.

Speaker: 00:24:52

So sometimes that's been the case, but a lot of other times, it's really just

Speaker: 00:24:55

been word-of-mouth, friends of friends, In some cases, I it's

Speaker: 00:24:59

been like, oh, a friend of mine was like, I have these 2 friends. They

Speaker: 00:25:01

started this business. It's going really well, but I know they need help.

Speaker: 00:25:05

with their money and managing their money and making sure they don't screw it up,

Speaker: 00:25:09

and they they have a couple employees now, blah blah blah blah.

Speaker: 00:25:13

So I'll it's obviously better when people catch me on the

Speaker: 00:25:16

upswing. And I'm like, oh, we have something to work with here as opposed to,

Speaker: 00:25:19

like, the downswing, but I do have help clients get

Speaker: 00:25:23

reorganized, trim the fat, figure out where the weak spots

Speaker: 00:25:27

are, that kind of stuff. Sometimes it's been simple as you know what? You're doing

Speaker: 00:25:30

pretty good. You just don't charge enough. You need to go you need to go

Speaker: 00:25:34

charge more. And they go charge more, and it works that great. But they

Speaker: 00:25:38

just needed someone to be looking at things and tell them that and then

Speaker: 00:25:41

give them the conference to go do it. So in some ways, it's a

Speaker: 00:25:45

little bit of a therapist too, financial therapist. which I also

Speaker: 00:25:49

like. I like about in life. Yeah. It makes a lot of

Speaker: 00:25:52

sense. So, again, I just wanna remind everybody it is

Speaker: 00:25:56

play louder.com for some more information and some of

Speaker: 00:26:00

these lessons and downloads that Joe is talking about. It's very

Speaker: 00:26:03

generous to to give out this information like you

Speaker: 00:26:07

you do, Joe. We could just con continue. We could just keep going

Speaker: 00:26:10

here. but I do have some rapid fire questions I'd like to wrap up

Speaker: 00:26:14

with. But -- Lam army. But before we do, I do have

Speaker: 00:26:18

one last question regarding this. If

Speaker: 00:26:22

somebody was considering talking to a

Speaker: 00:26:25

CFO or a fractional CFO in in order to get this type of

Speaker: 00:26:29

help, Could you give us, like, top 3 questions they should

Speaker: 00:26:33

be asking to make sure that they are getting the right

Speaker: 00:26:36

partner? Yeah. Again, I guess it depends a little bit

Speaker: 00:26:40

on who you're going for the traditional sort of CFO person. The

Speaker: 00:26:44

traditional CFO person, I think, would be probably someone who has a background in

Speaker: 00:26:47

accounting might even be a CPA. Oftentimes,

Speaker: 00:26:51

larger companies have license CPA's as their

Speaker: 00:26:55

CFO, actually, my sister in law's like that.

Speaker: 00:26:59

And they're not necessarily coming at it, like, with

Speaker: 00:27:04

the business owner been in the hot seat

Speaker: 00:27:08

as the business owner perspective. They, like, maybe just, like,

Speaker: 00:27:11

strict analysis. So I guess it's like one asking, how do they approach it? Have

Speaker: 00:27:15

they ever owned a business before themselves? Maybe they have

Speaker: 00:27:18

a accounting firm that they've owned. And so they understand that because there

Speaker: 00:27:22

is the aspect of the finances of the business and trying to establish,

Speaker: 00:27:26

like, what's working, what's not. But then there's also, like, the employees, the staffing to

Speaker: 00:27:29

this, that sort of stuff. Can I also help people that I don't do HR

Speaker: 00:27:33

stuff, but I just have so much experience as a business center. Like, I can

Speaker: 00:27:37

tell them what needs to happen for those types of things, but how to get

Speaker: 00:27:40

payroll done? Like, what annual filings they need to do? All these kind of more

Speaker: 00:27:43

broader business owner things. So I guess That's a really long way to

Speaker: 00:27:47

say is, 1 establish, have they been just, an

Speaker: 00:27:51

employee in their career, or have they ever owned a business?

Speaker: 00:27:54

2, I think because I think the personal finance thing is important. It's like,

Speaker: 00:27:58

what do they think about personal finance? What do they do for themselves? Do

Speaker: 00:28:02

they understand, like, the how asset

Speaker: 00:28:05

allocation works in per personal investing. And

Speaker: 00:28:09

they have a good grasp on just investing in general. I really think

Speaker: 00:28:13

that's important. And then 3, I do

Speaker: 00:28:17

think that as a business owner, especially if you're one with a

Speaker: 00:28:20

brick and mortar operation, just like I think buying your house is, like,

Speaker: 00:28:24

a fundamental thing. I tell young people. I think that should be your

Speaker: 00:28:28

primary first investment. I do think

Speaker: 00:28:31

If you're renting a space for your business, you should look at it the same

Speaker: 00:28:35

way and consider buying a space for your business. And

Speaker: 00:28:38

so with that in mind, do they have any experience in real estate and real

Speaker: 00:28:42

estate finance and and making good --

Speaker: 00:28:45

sound real estate decisions, and could they help them in that

Speaker: 00:28:49

capacity when the time comes fighting a good project and that

Speaker: 00:28:53

sort of stuff? Here. Joe, if you're ready, we'll go through a

Speaker: 00:28:56

few of these rapid fire questions. Yeah. One last time, it is

Speaker: 00:29:00

play louder.com for Joe's information. But

Speaker: 00:29:04

first of all, what is one real estate investing myth you'd like

Speaker: 00:29:08

to bust here today? Real estate investing myth. Oh,

Speaker: 00:29:11

okay. A one that I think the buy and

Speaker: 00:29:15

hold forever idea personally is,

Speaker: 00:29:19

like, mathematically, oftentimes, that's not the

Speaker: 00:29:22

smartest way to do real estate. 1, you don't wanna drain down your

Speaker: 00:29:26

leverage because leverage is where you pump your returns. And,

Speaker: 00:29:30

2, you know, people talk about, oh, I gotta I gotta do is buy a

Speaker: 00:29:33

bunch of houses and then get them paid off, and then they're gonna be this

Speaker: 00:29:36

endless stream of money for me. But, unfortunately, they don't say that, oh, yeah.

Speaker: 00:29:40

After 20 years, like, your rental is practically destroyed,

Speaker: 00:29:43

probably, and you need to replace every May system in there and

Speaker: 00:29:47

possibly even do, like, a whole home renovation. And you're gonna

Speaker: 00:29:50

unwind like your 15 years of, like, positive

Speaker: 00:29:54

cash flow. So I think people need to and if you actually

Speaker: 00:29:58

mathematically, if you look at how returns materialize

Speaker: 00:30:02

over 30 years, you do get peak returns in the 5 to 10

Speaker: 00:30:05

year window. So I think that individual investors

Speaker: 00:30:09

shouldn't necessarily be thinking I'm gonna buy something whole to

Speaker: 00:30:13

get paid off, and then it's gonna produce the most cash for me. They

Speaker: 00:30:17

might look at it as a 5 to 10 year timeline per

Speaker: 00:30:20

property and try to get in on all new

Speaker: 00:30:24

systems and get out before all major systems have to be replaced and

Speaker: 00:30:28

so on. But if you do the math, you'll figure that out on your

Speaker: 00:30:31

own. Sure. What book would you recommend, or what are you

Speaker: 00:30:35

reading right now? I'm gonna say rich no. I'm just kidding. I

Speaker: 00:30:39

you mentioned the funny thing about rich ed up and people say that, but there

Speaker: 00:30:42

is that's they have a series, the rich ed series, and they have other

Speaker: 00:30:46

authors do books. And one that I that was really

Speaker: 00:30:50

helpful for me was the loopholes of real estate by Garrett

Speaker: 00:30:53

Sutton. It has a lot of good detail in there and about,

Speaker: 00:30:57

like, tax benefits in real estate and that sort of stuff and

Speaker: 00:31:01

entities and various stuff that come up. So I would recommend that.

Speaker: 00:31:04

I don't know if that's on your list of people say that a lot or

Speaker: 00:31:07

not. In fact, Garrett has been on the show. So it's -- Oh, cool. --

Speaker: 00:31:10

been one of those. Yeah. That is a great book. That's a really good book.

Speaker: 00:31:14

So Another one that I'll say that I read recently was the law science of

Speaker: 00:31:18

compound interest, which, really, Frank, I'll be perfectly

Speaker: 00:31:21

honest, is a brochure for the product that the author

Speaker: 00:31:25

sells, but I do think that's fine. Number 1, because we're also

Speaker: 00:31:29

in something with our books. But, 2, There's just a lot of really

Speaker: 00:31:32

good information and thoughts in there about the kind of

Speaker: 00:31:36

fundamental problems with, like, modern retirement planning

Speaker: 00:31:40

theory and, like, how, like, it's not very

Speaker: 00:31:43

well supported by Matt based on

Speaker: 00:31:47

the average income and average savings of Americans.

Speaker: 00:31:51

Sure. So I would check that out. What is the biggest

Speaker: 00:31:55

business mistake you've made and what did you learn from it? I

Speaker: 00:31:59

should have that one, like, I should have a paragraph on that.

Speaker: 00:32:03

It's like for people to be rent. I think about this one. I get this

Speaker: 00:32:07

question, and it's I don't wanna say I've never made any mistakes because they have,

Speaker: 00:32:11

but, like, I there's nothing that really stick out to me that, like, totally

Speaker: 00:32:14

took me out because they are all kinda learning experiences.

Speaker: 00:32:18

But one I almost made I'll tell you this. What I

Speaker: 00:32:22

almost made was a real estate investment. I was gonna try out

Speaker: 00:32:26

the whole short term rental thing, the Airbnb thing.

Speaker: 00:32:30

And I was looking at Nashville as a

Speaker: 00:32:33

possible place to do it. Try to make long story short

Speaker: 00:32:37

here. So I get into contract on this thing, and I find out

Speaker: 00:32:41

the realtor was like, lately, they're getting a little more strict

Speaker: 00:32:45

the Airbnb licenses and, like, you're really only supposed to

Speaker: 00:32:49

be, like, renting out, like, a room if in your house, living there. He's, like,

Speaker: 00:32:53

plenty of people, though. They're putting it down as their address, whatever.

Speaker: 00:32:57

And I don't like that, guys, sir, because I just don't like surprises,

Speaker: 00:33:01

and it's, like, hassle and issues, but I was like, I was, like,

Speaker: 00:33:04

really wanting to, like, try it. I found a property, and I was

Speaker: 00:33:08

like, I'll just risk it. And it was, like,

Speaker: 00:33:12

divine intervention for me, really. This keeps me up at night. Sometimes if I

Speaker: 00:33:15

start thinking about how bad it would have been, So I'm like, in contract, go

Speaker: 00:33:19

all the way to the end of the contracts. Like, last day, closing, I

Speaker: 00:33:22

literally sent all my I was buying an all cash with the plan of

Speaker: 00:33:26

refiying out some money. and I send in all the money.

Speaker: 00:33:30

And I'm like, thing. And I get a call from the realtor, and he's like,

Speaker: 00:33:33

hey. Like, FYI, I just got this bomb dropped on me. This

Speaker: 00:33:37

property is subject to a lawsuit. The owner is subject

Speaker: 00:33:40

to a lawsuit because he's been renting it out without

Speaker: 00:33:44

an Airbnb without the license. and the city

Speaker: 00:33:48

basically has tried to shut it down and now is suing him, basically,

Speaker: 00:33:51

because he hasn't shut it down. And he's but don't worry,

Speaker: 00:33:55

like, The lawsuit's not gonna transfer with the property.

Speaker: 00:33:59

It's a problem of the owner. So it's not like it affects

Speaker: 00:34:03

the property at all, but they felt like it needed to be disclosed. I'm

Speaker: 00:34:06

like, you think they needed to disclose that the guys being sued

Speaker: 00:34:10

for not having the proper license on an Airbnb when you know that I'm

Speaker: 00:34:14

buying this to be an Airbnb. And I was just like,

Speaker: 00:34:18

I gotta I'm getting out. So I just got my lawyer on the phone. I

Speaker: 00:34:21

was, like, undisclosed information, cancelled contract. They

Speaker: 00:34:24

canceled it. They sent me my money back. And it literally, it

Speaker: 00:34:28

was the last day. Like, I had I had a couple more pages to sign.

Speaker: 00:34:32

And I'm like, never again, will I do anything that

Speaker: 00:34:36

is potentially, like, not

Speaker: 00:34:39

known to be successful. If you could go back in time and give your

Speaker: 00:34:43

younger self one piece of advice, what would it be?

Speaker: 00:34:47

It's philosophical questions at home. I would say

Speaker: 00:34:51

don't be afraid to talk to people. Just go out and talk

Speaker: 00:34:55

to as many people as you can. Don't sit in the

Speaker: 00:34:58

corner. Don't be afraid of making cheesy,

Speaker: 00:35:02

small talk. Just get out there. Make as many

Speaker: 00:35:06

relationships you can. Take whatever licks you have to. People don't wanna

Speaker: 00:35:10

talk to you think you're annoying and build your relationships

Speaker: 00:35:13

because that's the key. You can't be a hermit if you wanna be successful.

Speaker: 00:35:17

Hey. Sure. Okay. I'm gonna time you on this one. You got 55

Speaker: 00:35:21

seconds. You gotta give somebody a

Speaker: 00:35:24

single tip or trick that they can implement right now

Speaker: 00:35:28

today that could have an impact on their business. Simple.

Speaker: 00:35:32

55 seconds. You gotta do the math. That's

Speaker: 00:35:36

basically it. Like, you cannot go by your gut. You cannot

Speaker: 00:35:40

go by your just your checkbook balance. If you don't

Speaker: 00:35:43

have Genuine verified data in some sort

Speaker: 00:35:47

of computer program like QuickBooks or Quicken or whatever.

Speaker: 00:35:51

you are setting yourself up for potential failure. Like,

Speaker: 00:35:55

rush to go buy the software, get it going. And I know there's

Speaker: 00:35:59

many business owners out there that don't do any bookkeeping, and they have

Speaker: 00:36:03

employees. And you like, when I learned that, I'm just like, how is how do

Speaker: 00:36:06

you sleep at night? But you are going to

Speaker: 00:36:10

mess yourself up if you don't know what's going on in your business.

Speaker: 00:36:13

It's funny to bring that up, do the math. We have this tool

Speaker: 00:36:17

that we've developed regarding. It it's just a way for us to quickly assess a

Speaker: 00:36:21

property and what we would have to acquire it for in order

Speaker: 00:36:25

to do wholesaling or flipping. And we call it the

Speaker: 00:36:28

evil calculator because we don't we plug the numbers in, and

Speaker: 00:36:32

that's the number we provided It's just completely well without emotion.

Speaker: 00:36:36

This is what we have to get it for. Right. And a lot of times,

Speaker: 00:36:39

in the last many years, that number is always, like, way lower. than people are

Speaker: 00:36:43

asking or that they want you to pay. Matt is Matt. That's why I like

Speaker: 00:36:46

it. That's why. Is there a question or concept you wish we would have covered

Speaker: 00:36:50

here today, Joe? I'm gonna say no. I felt pretty good about the

Speaker: 00:36:53

interview. Thank you. Great. One last

Speaker: 00:36:57

time, head over to play louder.com for more information. but I

Speaker: 00:37:01

hope you're coming back again sometime, Joe. Yeah. Absolutely. Might just as

Speaker: 00:37:05

the reason my website, by the way, is any Play Ladder. My slogan is work

Speaker: 00:37:08

smarter, plan, better, play louder. So, you know, if you

Speaker: 00:37:12

work smarter and plan better, you'll get a lot more fun time in your

Speaker: 00:37:15

later years. I should have asked you that. That's that is