115. The State of the Market with Brandon Turner

Mike Cavaggioni: 0:00

Hey, welcome back to the average Joe finances podcast, everybody. I'm your host, Mike Cavaggioni and today's guest is Brandon Turner, AKA beardy Brandon. So I'm super excited, super humbled that you took the time to come on the show with me today. Thank you for joining us,

Brandon Turner: 0:15

Man. When I was like three years old, I was like, what my mom was like, what do you wanna do when you grow up? And I said, someday, I wanna be on Mike. I'm gonna see your last name. Right? Ready? Cavaggioni. How'd I do perfect. Someday. I wanna be on Mike Cavaggioni's podcast and she said, it'll never happen, Brandon, but you know what mom, today it happened. So dream come true today. Thank you for having me.

Mike Cavaggioni: 0:34

Awesome. Hey, thank you for that. Appreciate it. All right. Hey Brandon, there, there might be some people out there that might not know who you are. Not very muddy, but there might be sinners. Exactly. Could you share a little bit about yourself and tell us your story and who are you? Who is Brandon Turner?

Brandon Turner: 0:49

Yeah, man. All right. So it was a darkened stormy night back in July of 1985. My mother gave birth to a beautiful young baby and I came out blue, true story. Fast forward 20 years, I bought a house. I rented out the bedrooms. I turned that into then about a duplex. I lived in one unit, rented out the other units had no money. My mom's a daycare provider. My dad did meat. The meat cutter till he just retired. Now he drives he's a taxi for the am. Different story, but great career being an Amish taxi. True. And then a few years went by and I have 7,400 rental units. So my story is basically blue baby to house the duplex to 7,400 units. And that's who I am. Oh. And then somewhere in there I wrote some books and I did a podcast that had a lot of downloads. And that's me.

Mike Cavaggioni: 1:35

So actually that's one of the places where I know you from right, is from the bigger pockets podcast. When I first got involved in real estate, that was one of the first resources that was given to me. I was at a local meetup and somebody said, Hey, have you been on bigger pockets yet? I was like, I've heard that name before, but I've never. I've never checked out the website. So I went and checked out the form. I was like, oh cool. Oh, they have a podcast too. I like podcasts. So I went and got the podcast. I'm like, how have I not seen this before? And I just started binging like all the way back from the beginning. And it was insane. And the couple hundred episodes that you were there, it was just awesome. You know, and of course there's been transitions and everything, but man, what a great place, what a great resource to learn. And that's one of the things that we aim to do is making sure that we're helping people learn. And so for that, I wanna say for all my listeners too, that. Pretty sure. They listen to bigger pockets as well. Thank you for all the content and everything that you put out. It's definitely been super useful for all of us.

Brandon Turner: 2:25

Oh, thanks man. Yeah, a lot of people like don't realize that I was actually just brought up on bigger pockets too. It was just a forum before I got involved. It was just like a little forum and a little blog, but you can go back and look at my early stuff. I'm like, how do you buy a house? And I wanna buy a duplex. Like it was all like beginner questions. Cause I didn't know what I was doing. So I went on bigger pockets I learned. And then I got involved and we started the podcast and I got to. Got the lucky position of being a host on a podcast and it's yeah, but bigger pockets just phenomenal. They changed the game in terms of like free content before that it was just like gurus charging, $50,000 for their education. Then Josh who started it was like, no, I don't think we're gonna give it for free. And then did. And uh, people tend to like that. Now we got guys like you out here carrying the torch and then, uh, providing free content like this on this podcast it's awesome..

Mike Cavaggioni: 3:06

Yeah, definitely appreciate that. I want to get right into it when we talk about especially the preface of average joe's right. Yeah. So what would you say are some of the benefits of investing in real estate?

Brandon Turner: 3:16

Yeah, I say this all the time for years, I've had the same line is that real estate investing is the greatest wealth building tool on the planet for the average. Person in other words, like if you were born with millions of dollars and you just had a rich family, or you could get a loan from your dad for $7 million to start buy your real estate or a business or whatever, fine, that's different. But for the average person who maybe makes a normal salary, doesn't have super deep connections. What, like, doesn't have just weird, like fascination with like crypto or a stocks. Like you're just like, not like a hedge fund manager, like just a normal person. It just like likes to drink beer and goes to work and has a family. And like that. Real estate is such a phenomenal tool to build wealth because one it's infinitely scalable. When you can buy a single family house, you can buy a billion units and everything in between. There's so many ways to do it. So even if you're like, I don't like real estate, cuz I don't wanna be a landlord. I'm like, okay, there's 5,000 other ways to do it. So just find something that appeals to you. And then third is like, You get to put as much or little effort as you want, and you can put as much aura, little money as you want. And so you get all those benefits wrapped in and then over time it just gets better. This is one thing I love about real estate is that UN okay. You were in a business and a lot of people have worked in the, they own a convenience store. They've been working it for 30 years, every single day and the money they made 30 years ago. It's pretty similar to what they make. And the amount of work they put in 30 years ago is pretty similar to the amount of work they put in today. But real estate over time just gets better and better and you work less and less at it, which is one thing. Again, I love Eddie. You might put a little bit more work up front trying to figure it out, but again, it's like super simple stuff. You buy a house, you get a mortgage on it. The rent pays the mortgage and then some, and then over time the mortgage gets paid down. And the property goes up and you become rich. Like it's like literally it can be as simple as that. So the average person can just take that and run with it. You do not need to be intelligent. I am not intelligent. I am a very average intelligence guy, but if I can figure it out, you can figure it out. That's what I love about real estate.

Mike Cavaggioni: 5:08

Oh, I absolutely love that. It's something that it's, it sounds as simple as it really is though. It's not one of those things where it sounds good on paper. Yep. But then when you go to do it, it's I don't know what I'm doing. Of course, there's small intricacies. There. There's different things you need to learn. You need to learn how to go take out a mortgage. You need to be able to qualify for mortgage. Yep. And things like that. But once you have that basic blueprint down the, the walls, your, the world is your oyster at that point. So just shook. Yeah, love it. Yeah. I like it, man. Awesome.

Brandon Turner: 5:35

Yeah, that's good. I lately I'm my Twitter. I'm not a big Twitter guy. I'm trying to become more of a Twitter guy. I've been posting these like posts occasionally that are like real simplistic, like how to make a million dollars in real estate. It's like number one, buy a house. Number two, let it go up in value. Number three, pay off the mortgage with the rents. Number four millionaire. It's like really simple stuff because, and like those posts do nominally. Well, and then I take my screenshot 'em I put on my, in, on my Instagram, Beardie Brandon. I put it over on LinkedIn and I'm like eventually gonna make videos about this stuff. And what's funny is every time I post it, people love it. Cuz like it just shows how simple real estate really is now yet, like you said, there are little things you gotta learn. How do I get a mortgage? What credit score do I need? Yeah, but those are like questions. That's why bigger pockets exist. You're like, I don't know what to do here. So you go to Google and you're like, what mortgage or what credit score do I need to get a rental mortgage? I bet you the first one or two or three responses on there is probably from bigger pockets from real people doing this, giving you the answer. It's just so simple. It's anybody can do this. Anybody can do that.

Mike Cavaggioni: 6:33

Absolutely. And one of the things that I like about it too, it's just, it's one of those you're watching everything crash and burn around you. You're looking at the crypto market. You're looking at what happened in the stock market recently. And even with all that happening real, estate's been very steady. And we're not seeing a lot of the stuff we saw back in, in 2008 and 2009 timeframe. But I do wanna ask about what you're, what you're thinking about this. So with the GDP being reported negative for the second consecutive quarter, historically, that would put us in a recession, but we have not been officially,

Brandon Turner: 7:01

not if we change a de not if we change a definition.

Mike Cavaggioni: 7:03

So we have not officially been put in a recession, but yeah. Do you think it's inevitable at this point that we're gonna be in a recession? Yeah, I

Brandon Turner: 7:10

don't see any way around it. I love these articles that keep coming out from like Forbes and whatever New York times. And they always start with the country unexpectedly had a negative growth or the inflation unexpectedly was 9.1 shocking economists across the country. And I'm like, who was surprised by this? We printed so much money and we, the supply chain shut down. So who's shocked and I'm not shocked at all. I would be shocked if that wasn't the case. I would be like blown away. Like we didn't have a recession. Like what? So that said, am I freaked out about the recession? Not at all. I think that recessions are where a lot of wealth is built in life, whether in business, entrepreneurship, real estate, whatever, for those people who are three things. And if you're listening to this right now, write this down. If you're smart, right? You have to learn what works every point of our session and recessions change rapidly sometimes. So if you're smart, If you are nimble, meaning you're willing to change with the data that you get. You're looking at the data you're willing to change with the data. And number three, if you're bold, in other words, you're taking the data how to change, and then you do that thing that you need to do now, is it guaranteed? You're gonna make millions of dollars. No, but it's bet that I will take all day long that in this part of the cycle, this type of thing works or based on this data, this is what's happening. I'll give you an example right now. The government's been printing money, like crazy. A lot of people are fleeing certain cities in certain states, especially blue states. And they're running towards these red states, like Texas or Florida. And there's no sign of that slowing down. In fact, some of the blue states, the things that drove people away, they're just double down and they're doing even more of it. So. I don't see that trend stopping. So when you look at that area like Austin, Texas, for example, Austin had a massive growth, like 30% per year for the past few years of like rent growth. And I'm like, does that mean that they've topped out and they're gonna suddenly drop rents dramatically and lose 30% of their rent? Not when 150, 50 people every day are moving there and they're only building 25, 30 units a day or whatever. Like it's such drastic like difference between the what's happening and what they're supplying. And so when you look at supply and demand, you look at economics, you look at the politics and you say, is it a, is. 20 years from now, is Austin rent gonna be way higher or way lower or about the same? I think 99.9% of people would be like, yeah, it's gonna be way higher. Cause we're looking at what's happening and we're then making educated guesses based on that. And we're going into markets based on that. So that's why I don't fear recessions. That's why I don't feel it because I'm going to be smart. I'm trying. Trying to be nimble and trying to be bold.

Mike Cavaggioni: 9:33

Absolutely love that. Those are three great points, three great things that you need to do, especially going into this future market. And I was at a conference recently and one of the things that we were talking about is just when you invest in real estate, you're investing in the future. You're not investing. To get rich right now. You're not investing to get wealthy right now. You're investing to build over time. Like you're looking 5, 10, 15 years down the road. So what you said is perfect. So you're looking at the market in Austin, 20 years from now. Is it gonna go up in value? Are the rent gonna keep going up? And you're looking at the trends and you're like, it's not that hard to figure out. So like you said, supply and demand. Yeah, all these people coming in, not enough space need to build more, need to figure this out. That's that demand is there. And what happens with that demand. It's gonna cause all the, the assets in the area, all the real estate to appreciate in value. Yeah. And it's just gonna continue, trending that way. Huge point. So definitely appreciate that. Okay. So speaking of. Recession, right. That a big R word. What would you say is the most recession proof asset that someone can invest in right now?

Brandon Turner: 10:30

So I like the word recession resistant because there's no way of guaranteeing it. So we'll go recession resistant. So I'm a big fan of anything that is a, not a commodity. It's like something that is like, people have to have. So things like food. Shelter, maybe clothing, but even that, like people can live on the clothes they have for a while, but mainly like shelter and food, those things people have to have. So I'm a big fan of investing in things like that during a recession specifically, when it comes to real estate during a recession, what happens when people get scared? When people start thinking the economy's faltering, when people's jobs are at stake, when they start losing their jobs, which this recession likely won't have job loss. I think that's most of the data points towards a strong job market during a recession, which goes against almost every other recession. We've. But what typically happens, the people that are living in the, like over the last few years who have made really good money in crypto will or in stocks or in their business or whatever, they push the envelope. Cause they're feeling confident, they're feeling good. So even though they only could afford $3,000 a month for rent, they've been paying four because they're feeling really good when people feel confident, they. Expand their budget for the things that they like, the luxury stuff. But as soon as the recession hits, everybody goes and sucks back in again. And so they start going. So the people that are paying 4,000 a month in rent, they go, oh, when we renew, let's go to that apartment. Cuz we can get it for 3000. Now the $4,000 rent person is not going to 500 bucks a month. There's no way they would allow themselves that degradation. But the people that are at thousand dollars a month might go to 500 a month. So in other words, what I'm saying is it tends to compress from the top. If you're paying $300 a month of rent, which is rare, but if you're paying 300 bucks a. Your rent's not gonna go negative. You just might go down to two 90. In fact, your rent might even go up. Cause everyone above you is trying to get down to your level, like lower and Lawrence it's compressing at the bottom. So what does that mean? I like property that's at the lower end of that. In other words, like blue collar, like average Joe housing. That's why I buy mobile home parks. I love mobile home parks. It's why I buy B and C class apartment complexes like C plus like nicer, but in an area that's maybe more like growing and the trends are moving that direction because in a recession, I wanna be there cuz those people aren't going anywhere. In fact, there it's compressing down to that level. I would not wanna be in luxury at this point. I wouldn't be doing like luxury condo flips that freaks me out right now. Because again, if a recession happens and people get scared, they're gonna con compress from the top down. So I want to be in that bottom half of America, American real estate prices.

Mike Cavaggioni: 12:50

No, that's a very fair point. And that's not even a way that I even looked at it previously where it's gonna compress from the top down. And some of the stuff that I invest in myself with the partners that I invest with, but we're investing in B minus and, and C plus assets as well and doing value add. And, I feel like that's been one of the safer bets to be in. Now. I do have some questions. I went out to my, listeners a bit and said, Hey, I have the opportunity to interview somebody that's a very high profile in the real estate investing industry. I didn't give any names, but I said, Hey, if you could ask them any questions, what would you ask them? So I've got a couple questions. from some people on my social. All right. So the first question I have is apartment buildings or self storage.

Brandon Turner: 13:28

Let me give you the pros and cons. First of all, if you're looking at apartments versus self storage, the first thing they understand is that either could work either, will make millionaires out of it. They both are good. They both will work in any market cycle, no matter what. Now there are better times for one versus maybe another, and there's a pros and cons. So I'll give you a few options. Number one, I love self storage in that humans are not creating. Junk. Like we're just getting more and more junk. That's an increasing problem. Again, I like to look in the future and see what's happening and people are collecting more and more junk. And if a recession hits, I like the idea of self storage in that people downsize. Sometimes people go more into self storage, a lot of baby boomers retiring in the future. They're gonna need self storage. So I love self storage for that reason. The thing I don't like about self storage is how easy it is to build self storage, not from a political standpoint, that can actually be a challenge, but from how quick it. To throw up self storage. In other words, let's say a certain market has a hundred thousand self storage units around that market. And then somebody comes in and over the course of a year builds another a hundred thousand. You just doubled the supply of self storage in an area which could then hurt you because now all of a sudden there's an oversupply. And so self storage tends to work in these like oversupply under undersupply trends. So something to be aware of, not that you shouldn't do it because of that, but to be smart, right. Smart and nimble and bold. So if you're gonna go sell. Keep an eye on that. I love that sell storage. You're not evicting grandma. Right? If grandma doesn't pay her bills, she's just gonna lose her couch in her China dull collection or get that gets auctioned off. Or she has to move, which is most likely unlike housing, which if grandma doesn't pay, then grandma gets evicted and that doesn't feel good. We do evictions. We have to sometimes, but it's our last possible choice. So. Sell storage. Great. But some risks, apartment complex is a lot more like per unit, a lot more expensive that said, I love the long term stability of apartments. I love that it is difficult to build new ones. I love that it's expensive. You're not doubling the supply of apartments in any given area and caps. In other words, like the value, the. Profit. You're gonna probably make, that's a very poor definition of CAPA eight, but for simplicity is pretty similar between the two. So I don't have a preference on one or the other. I don't do self simply because I chose not to do self storage. And this is an interesting point here. I don't do it because I chose not to do it. Not because of some economic decision, not because of some trend that I see in the market. I simply decided. I'm not gonna do sell storage. I don't, it doesn't fire me up the way that mobile home parks fire me up. So, so much of success comes down to understanding the market. Obviously you don't wanna go do self storage in, in an area that will way too much supply, but a lot of it comes down to the passion. You have feel the fire in your soul and follow that fire, cuz that's, what's gonna make you successful. Not some. Which is better apartments or a sell storage.

Mike Cavaggioni: 16:42

I absolutely love that you have to have a passion, right? If you don't have a passion for what you're doing, you're gonna fail every time. Yeah. If you have a passion about something that you're doing and you really enjoy it, it doesn't feel necessarily like it's work. Yeah. You really feel like you're building value for yourself. You're building value for your residents and just giving people a better place to live. Yeah. And that's one of the things about being passionate about what you do. So I absolutely love that answer, Brandon. Thank you. Okay. Another question I have. Let's see, what is your. Economic outlook. And how are you positioning yourself based on that outlook?

Brandon Turner: 17:12

Yeah. For everything I've read and studied and looked at, here's my guess, this is my crystal ball for the economy for the next few years. First of all, are we gonna be in a recession? We already probably are. And we will likely that will continue for a little while that said at the recession's not a job list recession, we had a lot of jobs. So I think that's great, which means people can afford to pay their rent. I think rent are gonna continue going up. I think property values though, especially in the single family space in some markets are going to. Slow and maybe drop a little bit. I don't see 2008 happening again. I don't see a collapse of 50% of property values in most areas. I think that we're gonna see prices actually continue to go up but much more stable, maybe 2% a year, 3% a year in a lot of normal markets. Now there are places people are fleeing like San Francisco. I would not personally buy a single family house hoping for appreciation in the next couple years in San Francisco that said if you're investing for 30 years, It doesn't like everything's gonna go up in 30 years in my opinion. So what I'm being careful about right now, more than anything is the interest rates are the biggest thing that we have to worry about right now, especially in my world of syndication. What I do is I go buy a big, I'm buying a 386 unit or no 369 unit apartment complex in Austin, Texas right now. So when I'm buying that. I don't want a one year. Like a lot of times we get what's called bridge debt, which is like a shorter term debt that we get. And then we refinance once the property's been fixed up value added, we refinance into longer term debt, the birth strategy, we're just doing the birth strategy, buy rehab, rent, refinance, repeat, we're just doing it on the large scale. I call those big birds like big they're big properties and they buy rehab rent, refinance, repeat and depreciate, which is the tax benefit. So these big birds. That we're working on the risk is what if interest rates just keep going up and up and up. And they're at 10, 12, 15, 18% in the next few years, that's gonna suck and it's gonna hurt, but I don't believe that's gonna happen. I think the government's on it right now. I think they're working to control them. I think that they're gonna go up a few more percent and then they'll come back down a little bit and stabilize somewhere, but not soon enough to avoid a recession, but we'll get. So that is my prediction for the next, I guess a little while, but again, my crystal ball is a little bit cloudy, just like everyone else is right.

Mike Cavaggioni: 19:17

Hey, it's it's you could still see something in there. And I think anybody who's paying attention can see something's coming. You can see that looking into the future at whatever crystal ball you may have. You can see that the outlook isn't like. The clearest. Yeah. But as long as you plan for it, yeah. There's not much else that you should really have to worry about if you plan well. And the, one of the things that you had mentioned too, about the single family properties, I was looking at it the same way too. I don't think single family properties are gonna like completely just crash and burn like they did in 2008, 2009. And it's gonna be more of a specific to each market. Like we're I live at, out here in Oahu. Like I don't see it dropping down 10, 20, 30% it's just gonna stabilize, like what it's doing right now. Like we've plateaued. And here we are at the top and it's just stabilized. I don't think there's gonna be this cliff at the end. I think it's gonna continue to start going back up slowly. Like you said, probably two to 3%, but yeah, it's very good point. Very fair. Okay.

Brandon Turner: 20:10

Yeah. There's a quote from Wayne Gretsky that says Wayne Gretsky was good. I think he once said because I don't skate to where the puck is at. I skate to where the puck is going. I love that concept right. Of. Where is the puck headed. I'm gonna get in front of it now, could something change? Could another player come through and knock it outta the way? Sure. But if you continually have that outlook of, I am skating to where the puck is going more often than not, you're gonna be there where the puck is. You're gonna meet the puck and you're gonna knock it into the net. The same thing when you're whale watching, right? You go out a boat to whale, watch you don't travel to where the whale is. You travel to where the whale is. So that's where going, being smart, nimble and bold comes back in is you're looking at the horizon and you're saying, where is the big whale going? Where is the puck headed? I wanna get in front of it. And you might not always be right, but more often than not. And on average, over the course of a 30, 40, 50 year career, you're gonna be right a lot more than you're wrong. And because you made those asymmetric bets, which means a bet that has a lot more upside than downside if you're wrong. And it's because you made those asymmetric bets over time, they tend to compound and you make more and more wealth. And that's how people become just Uber wealthy, especially during times of recession.

Mike Cavaggioni: 21:11

Yeah, absolutely. You're always chasing the future right? You, you should always be looking like I was saying earlier five, five years plus out, so, yeah. Awesome. Yeah. And I love that quote too. I'm not looking for where the puck is right now. I'm looking for where it's going to be. All right. So I got another question from our listeners and that is, what do you think about the market for short term rentals? I know it's kinda like the new hotness right now. It's getting huge. So what do you think about that?

Brandon Turner: 21:34

Well, that's the question earlier today. Somebody said if I needed to generate the fastest cash flow possible to quit my job, what would you pursue? And the answer is for most people is vacation rental. But they're also the most dangerous or the riskiest right now, I believe. And here's why for a couple reasons, number one, the trends. When I think about, again, that, that quote, I don't wanna skate to where the puck is. I wanna skate to where the puck is going. If you're playing hockey that same quote applies to this. Where is the puck headed? When it comes to short term rentals, look at almost every major. City in the country is passing laws against Airbnb. They are all trying to crack down and limit Airbnb. So I don't like that trend that said it's been the wild west and people for years have made a killing on Airbnb because they've just not been the competition. This what happens with every new industry is the market is very inefficient. A few people who are early adopters get in and things are very inefficient and they make a ton of money. Sometimes they lose a ton of money, but then over time it becomes more efficient. It becomes. Stable. And when things get stable, the return gets lower. So for example, if people were consistently getting 25% returns on Airbnb, which has been very, I mean, that's on the low end lately, what happens wall street comes in, big business comes in and that's what makes a market efficient. And what's happening is the vacation rental market is becoming more efficient. The big players are coming in. People are getting better at it. There's more supply. The demand is maybe dropping a little bit, cuz people are finally realizing that. Kinda weird to stay in some guy's apartment that smells bad when you can stay in a Marriott for the same price. So the supply, I believe the supply is going up, the demand's dropping, but all that said, that's all negative about Airbnb and vacation rentals. There is still tremendous opportunity if you're willing to be good, not even good, meaning like how can you be different? How can you do something different and special and stand out? So for example, I bought a vacation rental here in. Now Maui is very anti Airbnb. They do not like them. They do not want them. They passed a ton of rules and got laws against Airbnb. They're very hard to get, except now that those laws have gone through and there's, we're an efficient, like stabilized market in terms of the laws, there are areas where Airbnb does work. Guess what? Because it doesn't work anywhere else. The demand is high and the supply is low. So I bought two actually in those areas that are actually zoned perfect for vacation rentals. So now that I'm there and there's not a ton of competition, each of those vacation rentals are making me like five to $7,000 a month in profit. That's crazy. Off two little vacation rentals because mine are really nice. Like they're better than anything else in those complexes, they don't look like 1993 Hawaii. They look like Newport beach, 2022. Like they're really fancy, modern, nice. And so people choose those over the other ones that are available and they pay a premium for that. Uh, and so yes, Airbnb is great. I think there's great markets, but watch what the market is doing as an economical and what the political spectrum is doing. Try to get ahead of both of those things and invest. In a way that if the changes come, you're not screwed, that if you're in a market that has not had the changes happen politically, yet, don't worry. It's coming, uh, make sure that you could rent it out or it would cash flow as a normal rental, or you could get out in some other, but that was a long answer to a short question, but I like Airbnb. Be careful.

Mike Cavaggioni: 24:43

It's good. And just being one island over fly, who is detrimental for Airbnb, it's very tough to get one that works, right.

Brandon Turner: 24:51

Actually, there's no reason, right. If everybody had Airbnbs here, like none of the locals could live anywhere. Exactly. And so like, I'm actually all in support of that here. In fact, I like that the more restrictions the government puts in. A lot of people are like real estate invest, especially real estate investors. Like, oh no, all these restrictions governments, you make it harder. I like hard. Cause hard kicks everybody out. And then the people that are left, figure out how to make it work. I got a buddy who invests in like LA, where there's a really strict rent control. He's like, no, man, I make a killing. Like nobody everyone's afraid of it. And so he figured out how to make it work in a hard market. And because he knows how to make it work there, he makes a killing off of it. And so don't run away from difficulties in government regulations instead say, How do I make it work in that market? And that's how you're gonna become a millionaire.

Mike Cavaggioni: 25:35

Absolutely. Don't run from problems, figure out how to solve them.

Brandon Turner: 25:38

Yeah. So you get paid in proportion to the problems you solve. And then again, must quote, it's something like that you get paid in, you get paid to the degree of proportion of the problems you solve. So solve big problems. Like how do you profit off of a market where they do not allow Airbnb? How do you make Airbnbs work there and you will make a ton of money?

Mike Cavaggioni: 25:55

Yeah. We were actually looking at doing an Airbnb in Maui in Kihei.

Brandon Turner: 26:36

Yeah. But yeah, there's, that's where mine's at. I got two in KeHE. Yeah. And they're amazing, but it was also super hard to get them because again, very low supply and they, even now, all that said, they're the legislation that went through the, the Maui county just a few months ago, that was going to not like that was gonna change the zoning on. Of all the like ocean front, perfectly designed for Airbnb or vacation rentals. It's been that way for 50 years. This legislation went through in an almost passed that was gonna knock off half of 'em and outlaw Airbnb in those, even though it's been that way forever. And it's all people do as Airbnb in those, uh, and vacation rentals, they were gonna change the law because there's just a housing shortage here now that now, thankfully mine wasn't included in that half, but it very well could have been. And that's where I go back to. Okay. If I had to, if something did change. Could I survive? Could I rent it out a traditional rental and at least pay the mortgage? And the answer was yes, I could have. And that's why having that backup plan is vital.

Mike Cavaggioni: 27:31

Yeah. Having multiple exit strategies and you can't just go in there for one thing and think, okay, this is it. This is my bread basket. When the bread starts to get moldy, everything turns right. Yes. So awesome. Okay. I've got another, uh, question from the listeners here. And if I had $150,000 to invest in anything right now to get started, With current market conditions. What is your suggestion?

Brandon Turner: 27:53

Oh, such a great question. All right, lemme repeat the question. If you have $150,000 in today's economic con like conditions, what should you invest in when it comes to real estate? Let me go through that. First of all, it depends a ton because there's a million ways to invest in real estate. I talk about this all the time. There's a million different strategies, but let's just divide it into two chunks, active and passive. If you wanna be an active investor, that means you are out there either building a company or you're doing the work yourself, that finds properties, that manages properties, that negotiates, that deals with the lender that deals with insurance that builds a funnel analyzes tons of deals. We have to analyze like 900 deals. We analyze over 900 deals this year, just to land the few that we got. So if you wanna do that work nothing wrong with it. It is exhilarating work. I love it. It's. You can do that. And 150 grand, what that would probably help you do. I'd probably, again, focus on an Airbnb strategy, but again, focus on an area where the legislation has already ch changed the market. Cause it's coming to every single market where Airbnb's getting outlawed and not outlawed, just it's getting defined. I would focus on either an Airbnb strategy in a market like that that was gonna do well or 150 grand actively would get you into either house flipping. If you wanna make like quick. Or it would be a down payment on probably a five or $600,000 Plex or fourplex in a nicer area. Let's say you go buy something in, I don't know, uh, Tacoma, Washington, or, or a market. Let's go like Texas. I love Texas. Let's go. You're gonna buy a fourplex in Dallas. Lots of people are moving to Dallas. It's a great market. If you buy a fourplex now that makes a five or 10% return on your investment every year and hold that for the next 20 years, that'd be a great use of your money. The last thing on the active side is you could do something along the lines of the Burr strategy, which is one of my favorite strategies. It's where you buy a property. Use your 150 K down as a down payment, buy a nasty property that needs to be fixed up. Maybe you use 50,000 for down payment. Use the other a hundred to actually fix. Now let's say you buy a $300,000 property. You put a hundred grand into it. Now you got 400 into it, but it's worth 600,000. Like you fixed it up. You did a value add. Now it's worth way more. You go to a bank, you say, Hey, I got this really nice property. Can I get a new loan on it? They give you a loan that pays you all of your money back. Now. You've gotten all your money back and you still own the rental property and you go do it again. And that's the repeat. You buy a nasty property. You rehab. You rent it out, buy rehab, rent it out, refinance to get your money back and then repeat the process. That's a lot of work, but that's on the active side. So there's the active business side. There's the active investment side. That's that whole world. Now let's shift gears. The passive side. Let's say you are an entrepreneur. You're a salesperson. You have a great job. You have some sort of, you don't need to flip houses or unplug toilets for your tenants. You just want to keep making money the way that you make money, because you're good at it. Focus on that. And then you're gonna dump your money into some passive methods. Let me give you three passive methods. Number one, you could find a house flipper and partner with them. So you put up the money, they do all the work. You split profits. Let's say 50 fiftys. End of the. That's an option. You gotta be able to trust the partner you find, but that's a cool passive way to invest in real estate. Number two, you could throw your money in a rate, a real estate investment trust. That is a, basically a stock. You just dump your 150 into it. You're probably averaging somewhere in the 7% range. I think the average rate return over the last 20 years will like 7% basically where the stock market's been for the last few years. In that case, you're putting your money with thousands or even tens of thousands of other people to buy really. A class, usually apartment complexes or whatever. All right. So those are two of the avenues. The third avenue is you invest in study of syndication. This is what I do. This is what a lot of guys do. I think even you do that, right? So you raise money from people. They put the 150, let's say somebody gives me 150. I get money. I get 150,000 from 50 people or a hundred people. And then we go, I go do the work. I find the property. I manage it. I fix it up. I do all of the work. And then we split profits at the end, usually in like the 80, 20 or 70 30 range, where you get the majority, you get 70, 80% of the profits. And I get like 20 or 30% of the profits, even though I did all the. Now why would I do something like that? Because I bought 650 million of real estate over the past few years with that I like taking 30% of 650 million of real estate, even though I invest in my own deals as well. Like I'm mostly using investor money. So it's the cool win-win. So again, passive side, there's a few avenues there. Active side. There's a few avenues there, but it really depends on what's your goal. Are you trying to get outta your job this week or this year or in 10 years? Uh, or, and how active do you wanna be? How much do you wanna be in the game versus working on your life and on your investments versus in your investments? Hope that helped.

Mike Cavaggioni: 32:28

Oh, that's very helpful. Got some good notes with that too. That's very good. But it just depends on which route you wanna go and how quick you wanna get outta your job. Like you said, having 150,000 to start is a pretty good spot to be in. Most likely had inheritance or something like that, that you came into. It's good to know that if you get like a large sum of money, That you shouldn't just hold onto it. You should take that money and have it work for you. And there's so many different ways to do that. As you described between the active or the passive side. There's so many I've invested in rets before, too, actually, that was one of the first things I started looking at. And I was like, oh, REIT is actually real estate. I, when I was investing in stocks and then I was putting two and two together, I'm like, what if I actually just go out and physically invest in the real estate myself. So it's, it's not a bad place to be. You just don't really get the tax benefits.

Brandon Turner: 33:10

Yeah, that's actually one cool about syndication. Is that a lot of syndicators, we like, like as a syndicator, we pass through a lot of the tax benefits to the investor as well. So even though you're not unplugging toilets, you can still get the loss and depreciation in some of that other stuff, which can offset a lot of other gains and obviously talk to your. Tax person about that, but there can be some really cool benefits of the syndication model. Plus usually the person you're investing with it's oh yeah. That's the guy on the podcast or that's the guy in on the book that wrote that book. I think I can trust them cuz they've got a huge reputation that would take a massive hit. If anything ever went wrong, then I was gonna take your money and, and run. It's not some wall street hedge fund. It's like just like a normal person with kids and a family and they drink beer on the weekends with their buddies. It's just, it's a cool, it's a cool model. It's like very much. Hey, we're doing this.

Mike Cavaggioni: 33:50

I love it. When I get those K1s it's one of my favorite things to get in the mail up tax time. Yeah. So besides the IRS saying I gotta pay them. Yeah. Awesome. Okay. And then the final question from the audience, and we touched on this a little bit, but it's just a very simple question. And that is how do you mitigate downturn risks?

Brandon Turner: 34:06

Great question. How do you mitigate downturn risks? All right. So real estate market is cyclical goes up and down, but it tends to go up and down to the right up into the right. So in other words, a property might be 80 years ago. It was like $10,000. Then it dropped to nine. Then it went to 13, then it dropped to 12. Then it went to 18, then it dropped to 17. So it goes up and down, but it does go to the right, which means if you can hang onto real estate long term, that overcomes almost all downturns and almost all risks. So how do you hang on to real estate over the long term? Uh, two words or maybe it's one word cash flow. I think it's two words. Cash flow, meaning the pretty makes a profit every single month. So that way, if rents dropped by 10 or 20%, you can still pay the bills. If the real estate price is dropped by 10 or 20 or 30. You got your rents coming in still like you're. Okay. No matter generally what happens? Cash flow as my buddy David Green says is a defensive metric cash flow allows you to hold onto properties long term. Now hopefully you can get some of that cash flow and spend it on like a new car or whatever. Like you can live off cash flow. But the real purpose of cash flow is just to hang on long enough. So the best way to overcome any market downturn is simply to have cash flow. The second thing you need in any kind of market downturn, like intelligence, I'll say what I mean by that is I surround myself with incredible people at open door capital. We've got, we'll typically get a thousand people to apply for every one of our positions. Like we have job openings, we will put them through a series of. To like find out who is the absolute best person for this role at this time. And when we hire that person, they're incredible because we don't have crystal balls. We can't see what the future looks like, but we can get the best people around us so that whatever happens, we'll be able to get through it. It reminds me of I'm like a Viking right back in the day. I'm the Norwegian. And I came, my ancestors came from Norway and they're all Viking. So I think of like Vikings on their ship going across the ocean. You have no idea what's out there. It could be storms. It could be, you know, sea monsters. It could be like all this stuff out there. You don't know. So what do you do? You get the best people possible on your boat? You wanna fill your boat with strong, capable, intelligent people who have a great personality, cuz you're gonna be on the ocean for a while. It doesn't really matter what comes because you have the right people to handle it. And so I'm very focused on a solid team and cash flow, everything we buy at Opendoor capital, even though we're buying hundreds of millions of dollars in real estate, it all cash flows from year one. I don't want a property that dock on cash flow for five years. It's got a cash flow year, one to one of my like requirements, and I want the best people around. So anything that does happen. We can overcome that.

Mike Cavaggioni: 36:34

That's fantastic. You know what a lot of people say it too. Cash flow is king, right? So you gotta have good cash flow. All right. I wanna transition into something. We call the final round. It's what I'm gonna ask you. Four questions, same four questions. I ask everybody that comes on the show. So if you're ready to do this, we'll get this party. I'm ready. All right. So the first question is what is the biggest mistake that you've ever made?

Brandon Turner: 36:55

Biggest mistake I ever made in we'll go in real estate. So real estate, biggest mistake I ever made. I'll give you a very tactical one or tangible one. I bought this house one time. It was a duplex and up and down duplex, that was nasty. And I got a great deal on it. I think I paid $50,000 for it in like 2011. That was really crappy area, great area, crappy property, crappy market. I then. Almost a hundred grand fixing this thing up and a year of my life, an entire year of my life, just fixing it up. I tried to sell it and I just could not sell it. It would not sell. I was trying to sell for 160,000. I was gonna make basically no money at all, ended up having to sell it for less than what I owed on it, to the hard money lender and ended up losing money on it. About 15 grand. I lost it the end of the day and about a year of my life, fixing it up now. Here's why it was a mistake. Like I learned a lot of lessons in it and I don't regret it because of that, that property was a du. But during that process to flipping it, I turn it into a single family house. I even built a stairway right at the middle of the house like myself. Like I physically built a staircase. It was awesome. Hardwood, floors, granite countertops, beautiful windows, everything. We did everything on that property. The mistake I made was not keeping it a duplex, cuz actually I could have probably put $15,000 of work into over a two month period. And it would a cash flow probably 500 a month at the beginning right away. And today it'd probably be cash flowing. $2,000 a. Furthermore today that property, this is 2012. I finally sold it. So here we are. 10 years later, that property is probably worth half a million dollars. So had, I simply kept it long term. I wouldn't have lost the $15,000, which goes back to what I always say about cash flow and what David Green told me once it's a defensive metric. If it would've cash flow, I could've just held it now. I didn't have the ability to get a loan at the time. I didn't have a job. I didn't have a like ability to get a loan, but I would've even been better off bringing in a partner, have them help me get the refinance. Even if I had to give them 50% of the off the deal someday, I still would've made more money than I actually made at that case. I focus. I was fixed on flipping houses at the time. Cause I thought flipping was cool. I didn't look at the property and say, what's the highest and best use for this property. And I wasn't looking at long term like, well, if I wasn't looking at long term, my long term life, I was looking at getting money right now, quick and easy. And those two things threw me off. So the, I guess the advice I have for people is like, when you're gonna buy a property, don't get stuck on some preconceived notion of what you want to do with the property. What is the best use for the property? And. Two, just understand that time heals all wounds when it comes to real estate.

Mike Cavaggioni: 39:20

Yeah. If you would've just held onto it, that's one of those situations. I had a duplex too similar story, but not, not as much. I was in 2020 that I bought it and actually was fortunate enough. That when the pandemic happened, I was able to sell it for about 15,000 more than what I put into it. So little bit of the opposite, but I worked out in my favor. I did not turn it into a single family home. I kept it a duplex, but the thing is about that you learn so much from that. It was one of the biggest lessons learned that you've gotten out of that. And one of the things that I hear a lot of people say, and I see this too, that when you make a mistake in real estate and you lose money. It's just an expensive education cuz you learn what not to do again the next time.

Brandon Turner: 39:57

Yeah, I got, I got one more story if you wanna hear this. Sure. Yeah, let's go for it. All right. So this is the second biggest mistake I've ever made in real estate. So I sold this, I bought this 24 unit apartment complex in Aberdeen, Washington, and then I sold it a few, like a few years later. This is now going back. I sold it probably five years ago from now, I think is when I sold it. And I did. What's called a 10 31 exchange, which means you sell the. And all the profit, I dump into another property and I buy and I don't have to pay taxes then, which is great. Like it's a cool little, it's a cool little tool from the government, but they give you a very short deadline. You have to find your next property within 45 days of selling the first one. So you like, you're under the gun, you gotta find something. So here I am in this short deadline, 45 days to find a property. And I just can't find anything. Finally on day 44, I think it was some guy brings me an apartment complex outside of Cincinnati, Ohio, and I didn't live anywhere near there, but I'm. Yes, those numbers make sense. It looks good on paper. So I bought, I put that property into contract this property in Cincinnati. I, I bought it for $600,000 and it was hell. I flew in there. I looked at it, the property was fine, needed some work. It was got a low, low, like, uh, blue collar area, maybe like a C class area, C class property. I. Had the next year of owning that property was just hell after hell. I could not get a good property manager. I went to four different property managers. I was busy with my own life trying to like move to Hawaii. And I was doing like, I was trying to build opener capital at the very beginning, trying to lie some more like stuff. Anyway, it was just like a disaster because I did not have. The mental or the physical space. I wasn't there to be able to handle that type of property, especially at a distance. Like in reality, it would take somebody who could actually be there to see what's happening to maybe manage themselves or to bring in a resident manager. Now, could I have made that work if I was working 20 hours a week at that project? Yes. I could have made that thing work. I probably would've made myself a 10% return on my investment by doing that. But it was so much effort. I finally sold that property a year later to a local person who lived there in Cincinnati within one year, he had doubled the value of that property. I sold it for what I bought it for because he was local. He was there. He did all the things that I couldn't do. So the reason I say this is this. Second biggest mistake I ever made in real estate is because I was trying to again, take what wasn't in my world. Like I was not a do I investor anymore. And I was trying to do a Doy project, like a project that needed such heavy involvement. Like to be honest, I should have just paid the tax, dumped the money into somebody's syndication. Got the big tax write off of doing that. The big depreciation loss. And I would've been making a better cash flow and better, long term appreciation than I ever made on that project. Cuz I, I was misaligned. With what I was doing, I was no longer a DIY investor. I was busy writing books and doing podcasts and trying to build my own real estate empire, like in a business format where I should not have been, trying to be an active investor on that front. So that's the other advice I have for people is if you wanna be an active investor, be an active investor, but know what you are, know you, you like you should not be buying a 24 unit across the country in a low blue collar area. If you're not willing to get your hands dirty and you don't have the time for that. So just be aware of your own capabilities and your own limitations and invest accordingly.

Mike Cavaggioni: 42:58

We always say, but don't over leverage yourself with debt, right? Yeah. Uh, don't over leverage your time and don't over leverage your abilities on what you can, what you're capable of doing. So that's awesome. Great lessons learned. All right. So speaking of things that have been learned, the second question I have is what is something that you've learned. That you wish you knew when you first started?

Brandon Turner: 43:18

I, when I got started, I grew very like conservatively or linearly is the word I like to use, like in a line, like I bought a house, duplex house, Plex house, duplex, and I stayed in my comfort zone. I wish I would've been encouraged to go outside my comfort zone first of all, and to get bigger and bigger deal. So secondly, I wish I would've focused on higher level tasks, for example. Changing a toilet is a $30 an hour job. You can pay somebody 30 bucks an hour to change a toilet, or to paint a room, trying to negotiate with a seller. An off market deal is a thousand dollars an hour job. Like you can make a thousand bucks or 5,000 or $10,000 for that work. Knowing how marketing works to find off market deals. It's gonna be a $10,000 an hour job. There's higher dollar per tasks out there. And I focused way too much on the lower level tasks, uh, because they were easy and they were in my comfort zone. And so I wish I would've been focused more on the business of running a business than working. In the business and that's probably the biggest lesson that I've learned over the past few years.

Mike Cavaggioni: 44:15

That's fantastic. You gotta focus on that higher amount, the higher cost per hour job, right? Love it, Brandon. Okay. Next question I have is, do you have any tips or tricks that you would recommend to someone that is just getting started today?

Brandon Turner: 44:28

Yeah. Understand that real estate investing is very. Like numbers game and very boring. What I mean by that is there's a few simple tasks that you just do over and over, and you're gonna get the result, right? Just like fitness. It's very simple. We all know how do you lose weight? You die in exercise. Like we, the problem is not in the, is the knowledge. The problem is in the doing. So what I encourage new people, if there's one piece of advice I give is by those boring tasks and they're different at different phases, right? In the beginning, it might be education. So your boring task might be read 12 real estate books. like the boring task might be to go to three conferences. This. The boring task might be to listen to a bunch of podcasts or whatever. Like you're in the education phase, what's the boring task, defy it, track it and get accountability. Those three things identify the boring task or the repetitive task track. It know, are you doing those boring tasks? And third, get accountability to that. Whether you have to hire a coach, you form a mastermind group. You just get a buddy to hold each other account. Get that done. Now, ma later in your career, it might be making offers. It might be analyzing deals. It might be talking to banks. It might be holding presentations for lenders at every stage of your real estate. There are boring tasks that need to be done today. I need to like, I have 1100 investors that have invested with me at Opendoor capital, my boring tasks today, which I actually can enjoy it. But I need to talk to these people. Like the main thing I can do is to talk to my team and keep building my team up and to take time to think and to talk to my investors. Those are the things I need to make sure I do. What's really a lot easier to do is to like scroll on Instagram or to make a TikTok video, to do the things that are fun or my comfort zone rather than the boring things. So identify the boring thing in your life, track it and get some accountability. And that applies to not just real estate. That's everything in life you are. They, I often say you are what you repeatedly do. I like to say you. The result of what you repeatedly do. Like my, my entire philosophy of success can be boiled that one phrase, you get the result of what you repeatedly do. That's it?

Mike Cavaggioni: 46:20

Absolutely love it. Okay. The final question of the final round. And this is gonna be besides your own or besides bigger pockets. Do you have a favorite business investing or real estate related book or podcast or both.

Brandon Turner: 46:34

Yeah, I don't listen to a ton of podcasts cause I don't commute very much. Don't listen to a lot, but uh, like my commute is 30 seconds into my office here in my yard. I built a shed here. Let's see, let's go some books. I'm a huge book nerd. I read like a hundred books a year, maybe 50 this year, but I love the book traction by gen Wickman. That was really important for helping me know how to run a business. I love that book. I love the power of moments from Chip and Dan. I love rich dad, poor dad from Robert Kiyosaki cash flow quadrant from Robert Kiyosaki. I love let's it. This one, the wealthy gardener by John Sephora is a great personal development book. Who not how by Dan Sullivan is one of my favorite books on how to outsource things in your, like, get more stuff done. The ruthless elimination of hurry by John Mark Comer is a great book. It's written by a Christian pastor who just basically talks about slowing down in. And not packing every second of every day into hurry. Like how can we just breathe more and just have more enjoyment in life? And that book made a huge impact on me. Man. There's so many good ones out there, but, uh, I'll give you those to start with.

Mike Cavaggioni: 47:29

That's a fantastic list. Some of those are on my list of read or going to read and some of 'em need to add, thank you for sharing that with me. Appreciate that. All right. That was it for the final round. I do have one more question for you though, Brandon, and this is probably the most important question of all. So for the people that are sitting here, listening, saying, Hey, really love this episode and what Brandon's talking about, I wanna know more about him. I wanna know more about open door capital, where can they find that information?

Brandon Turner: 47:54

Yeah, man, I'll give you three things. First of all, social media in general, I'm pretty active on all the channels, but, uh, I love Instagram the most, but they I'm active on everything. And it's usually Beardie Brandon like beard with a Y beard. Why Brandon Beardie Brandon. And then that's the first thing. My open door cap is the name of my company O D fund. Dot com is where you can sign up for my email list. There, you can see what deals we have, what we're offering. We typically work with accredited real estate investors, meaning you've pretty high net worth or high income earners. So we work with you guys and we do the majority of the work and we give you the majority of the profit. And third, if you wanna join Mike. Text letter. I have a weekly newsletter that goes out via text message. I think it's pretty cool. It's Beardie brandon.com. You can join there. And I send out book recommendations every week, whatever I'm reading. I tell you what I'm reading, whether I like it or not. I tell you something that I learned something that I can teach, like some kind of topic. And then I answer real estate questions every single week and it's totally free. So it's, Beardie brandon.com.

Mike Cavaggioni: 48:44

Awesome. And you're talking about your BTB texts and, uh, BTB. There it is. Yeah. Behind the beard. So I, I get those too. And one of the things I like about them is they're not very spammy. You sign up for text message alerts and stuff. And a lot of times they feel very spammy. Like yours always has good content or good information in it. Good little tidbits for people to use. I'm signed up for that with disclaimer, but yeah, really good stuff. Hey, so Brandon, seriously, super humbled and excited that I got to have this conversation with you. Thank you so much for coming on the show and joining us. Yeah. Thank you, man.

Brandon Turner: 49:12

This has been a lot of fun dream come true, man.