September 26, 2022

JF2944: What If You Had to Start Over With Nothing? | Round Table

Each week for the Best Ever Round Table, the three Best Ever Show hosts — Ash Patel, Slocomb Reed, and Travis Watts — come together for a deep dive into a commercial real estate investing topic.


In this episode, Ash, Slocomb, and Travis discuss a hypothetical scenario: If they had to start over today with no money, no assets, and no network — but still having all of their current experience in real estate investing — how would they begin engaging in real estate investing again today?


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Slocomb Reed: Best Ever listeners, welcome to the Roundtable. I'm Slocomb Reed, an apartment owner-operator in Cincinnati, Ohio. Today I'm joined by Travis Watts and Ash Patel. The hosts of the Best Ever podcast come together every week for a deep-dive into a commercial real estate investing topic. Today we have a hypothetical scenario for you that should add value to all of our listeners, especially our listeners who are newer to investing.

Ash, Travis, I'll answer this as well... If you had to start over today with no money, no assets and no network, but still having all of your current experience in real estate investing, how would you start over engaging in real estate investing today? Let's start with Travis.

Travis Watts: Cool, man. Hey, everybody. Thanks for being here. Travis Watts, full-time passive investor. I'm a limited partner, mostly, in multifamily syndications, and Director of Education with Joe Fairless at Ashcroft capital. So Slocomb, great topic, great starting point. I think, for me, I always go back to the top four, that kind of led me into financial independence in the first place, which is working your highest and best earning potential, and I'm talking about active work... And then living on as little as possible for about 5-10 years, give or take; everyone's situation timeframe is going to look a little bit different... And then arbitraging, so to speak. So that means the difference between your income and what you're saving, invest that into real estate; for me, that's in passive income, or cashflow-producing real estate. And number four is avoid bad debt - car loans, personal loans, retail debt, etc.

So that's what I've always followed as a roadmap. I think what's changed for me today in 2022 is I have a whole lot more experience in real estate than I ever had when I first got started. So for me, back then, my highest and best was working in oil and gas, where I worked 100 hours a week, and I was away from home, and I was getting well bonuses and per diems, and a ton of overtime hours and stuff like that. So hopefully I wouldn't have to resort back to doing that again; I think it would kill me this go around. But I would probably be a JV more than likely, a joint venture partner in real estate actively; that would now be probably my highest and best. Not that I want to do that, but I just feel like I could earn more doing that than I did in oil and gas. So those are kind of my high-level thoughts on if I were to start over again.

Slocomb Reed: Travis, follow-up question. You give a very comprehensive answer there at the beginning. Thank you for that. You said you would get into an active JV, general partner, in I would imagine apartment investing, since that's your bread and butter now. Within a general partnership, what is it that you'd be focused on? What is it you'd be bringing to a partnership like that?

Travis Watts: I think I would have to reframe my mindset, and I would be the active partner in that. So I enjoy working with smaller teams, smaller groups... Assuming, to the point of your question, I'd be starting over with no money - it's kind of hard to be an LP with no money. It's kind of the name of the game, right? So I would just find a local deal, hopefully a multifamily deal, I would find a equity partner to go in with, and I would just do what I invest in, which is value-add multifamily real estate. So I don't know exactly how that would look, but try to buy as much as I could buy, and put myself in those shoes, even though that really wouldn't be that much fun. But hopefully we could figure out a split that works out, and three to five years down the road, I could be back on the track to being an LP again.

Slocomb Reed: That makes sense. It'd be pretty difficult with no network to start out in capital raising. So I can see why you would want to jump into acquisitions. Let me make a couple of assumptions here, Travis, and then I want to hear from Ash. It sounds like you'd get into acquisitions for a syndication style deal. Is that because acquisition fees, when you finally get something locked in, are going to be your best way to generate income for yourself quickly in commercial real estate?

Travis Watts: Yeah, that's a good question. So I actually have an investor buddy out here in Florida, also a realtor and a contractor and all kinds of things... He's always trying to get me to JV with him, and I always turn him down, because I don't want that active style of management. But I would use someone like him, maybe we could figure out some kind of 60/40 split or something like that, just overall profits. So not really the syndication model, where I'm a GP collecting the acquisition fees and asset management fees and splits on the backend and all that; I would just kind of want to go in more like a 50/50 scenario, where I'm finding it, underwriting it, I'm the asset manager... I'm doing all the work, basically, and he's just the equity piece to that puzzle.

Slocomb Reed: That makes a lot of sense. Ash, let's hear from you. No money, no assets, no network, but all of your experience. Where do you start?

Ash Patel: Yeah, great question. Hey, Best Ever listeners. Ash Patel here. You know, Slocomb, I always teach people that I mentor - you need two things: you need a deal, and you need a network. And that's all you need to get started. You're not giving me either. So the deals I can find - I've done that long ago; you're not taking my experience away. So I can go out there and find a great deal. But now I've got to find a network. So I've got to do everything I can to establish myself as somewhat of a subject matter expert in commercial real estate. How do I do that? You go to meetups, no different than what I would advise somebody just starting out maybe out of college, a young 19, 20-year-old person. You go out there, you network, you add value to others. What can I do to help you? Go at it from an altruistic approach, and you start building your network that way.

But when you have those incredible deals, it's not that difficult to get investors behind you, even if you don't have a great track record. If it's a smaller deal - much easier. If it's a larger deal, you're gonna want to find somebody that has a bit of a track record, a good network, a good reputation... So you find somebody that has the network, establish yourself through adding value, and you find that incredible deal. And essentially, deal plus network is always winning.

Slocomb Reed: Ash, that's a great answer, and thank you for shouting out to ,newer younger investors getting into the game. I think that's where we add the most value to this conversation.

Ash Patel: I'm gonna add one more thing, Slocomb. I saw on a commercial real estate Facebook forum, one that has a couple hundred thousand people on there - I saw a post where somebody wrote, "Hey, does anyone else think it's BS that people always say "If you have the deal, the money will come"? And hundreds of people chimed in and said, "Yeah, only people with money say that. Only successful people say that." Or "I've tried it, I've had great deals. No one's given me money." And ladies and gentlemen, the reason is you don't have a big enough network. And that's all it is. If you have that network, you will definitely have money, if you have a great deal. So it's truly that simple.

Slocomb Reed: The flip side of that, Ash - I've done some JV deals where when I've discussed them after the fact, with other friends, they've asked me why I didn't bring it to them. In my experience - and I'm not the guy who has all of the money... In my experience, when I have found a deal - yes, there are people there. That is, of course because of the networking that I've done.

Ash, you need a deal, you need a network... That's all it takes to get into commercial real estate investing. That's great advice and a great launching pad. Starting from nothing, Ash, where does your time go? Is it 50/50 between looking for deals and looking for partners? Or is it more heavily on deals, more heavily on partners right now?

Ash Patel: That's a great question, Slocomb. Joe Fairless was a believer in having the deal first and then raising capital. And a lot of people have differing opinions on that. I don't think either are right or wrong, but I would follow in his footsteps. I would find that killer deal. So 80% of my time would be finding that killer deal. 20% of my time would be adding value to somebody else. Once I have that deal, you flip it around: 80% of your time goes towards raising capital, 20% goes towards due diligence, crossing your T's and dotting your I's on that deal.

Slocomb Reed: That makes a lot of sense. Focus on finding the deal first, and then lean more heavily towards finding the people who help you put that deal together. Absolutely. Personally, given my experience, thinking that I need to generate an active income as quickly as possible, given my experience, likely return to residential real estate sales. It'll take me 90 days to get to my first commissions, but I should be able to get to those commissions fairly quickly. Again, having no network, I end up leaning heavily on networking; diving into things like the BiggerPockets forums, local communities... If I were a member of a church or another organization, I would lean heavily into that.
Sales -- in commercial real estate, it takes longer. But being that that's my background, getting into sales... This is also what I did, and what I recommend to a lot of residential investors when they want to go full-time quickly. I have a client doing this right now - getting into residential sales can generate a real full-time income very quickly, within three to six months. I would likely supplement that with a third-party property management work. It has to be third-party, because I don't own anything in this scenario. But third-party property management creates a more steady baseline of income and baseline of work, that I could use to grow. Also, I could use that property management to build experience to demonstrate to my new network that I know what I'm doing when I want to start actively investing and raising capital. Look at what I've managed, look at what I've been able to find, look at the results I've gotten doing things for others. Now I'm doing my own deals.

So thinking about starting from scratch, each of us either has or is a part of an organization that is growing. Within your new activities, whether it's Travis getting involved in a joint venture, doing as much legwork as possible, or Ash, putting together deals from scratch, or Slocombb getting into sales and property management, what is the first responsibility that you would delegate as quickly as possible? Travis?

Travis Watts: Oh, man... Well, framing it that way kind of puts a spin on it. I was gonna say I would outsource the property management and the asset management, but I was thinking along the terms of being an LP myself. So that's a great question. Ultimately, you guys, here's the deal... I'm always an advocate for do your highest and best. Ideally, try to get involved with something you're actually passionate about, or interested in. So when I was talking about being a JV, to me that would be a three to five-year plan, and then I'm out. It's kind of like I did with oil and gas. That's not a long-term sustainable thing. But man, I'm a big delegator. The one thing I always want to keep a pulse on though is my own portfolio management. I truly enjoy sourcing deals, finding deals, doing my own due diligence there, vetting out different operators, having lots of conversations, but I do not enjoy the day-to-day, and especially managing tenants. That's probably my biggest downfall as a person.

Break: [00:13:31.13] to

Slocomb Reed: Let's shift my question here a little bit. Travis, thank you for that, because I think you answered my next question already. What is the first thing you delegated, and what is the last? The first thing you delegate is the day to day organization operations, and the last thing you delegate is the deal finding and the management, the high-level management of the portfolio; that makes a lot of sense. Ash, what about you? What's the first thing and what's the last thing that you delegate?

Ash Patel: Good question. So the first thing I would delegate is probably deal finding, because I can teach people how to find great deals. The last thing I would delegate is interacting with investors... Because they need to know, like and trust the person they're writing a check to. So that's important. And I love doing that.

I do want to piggyback on your last few questions. And the great thing about this roundtable is we don't really have a strict format, so I'm going to bounce around a little bit. In terms of -- your first question was, "What would you delegate as you scale?" For everybody, I would have two triangles, with dark green up top, and red at the bottom. And audit your time and tasks -- and the two triangles are one, things you like to do up top, things you hate to do, and things that you procrastinate because you hate to do them at the bottom. And the second triangle is money - things that make you a lot of money, and things that don't make you any money.

So write down in this pyramid where all of your tasks fall, and ideally, what you want to focus on are things that intersect at the top of the two triangles. So things that you enjoy doing, and things that make you money. The things that you want to offload are things that you don't enjoy doing, and things that don't make any money. Now, let's say it's something you don't enjoy, but it's a dark green, and it makes you a lot of money. You need to keep doing that until you can effectively delegate it.

And then both of you gentlemen answered the other question, which was basically "What would you do for income if Slocomb threw you out somewhere, and you had no network and no assets?" I loosely said add value. And I would, to real estate people, to establish a network. But the other thing I would do to actually have cash flow coming in is go out there, ask ideally a real estate person, but if not, a restaurateur, a caterer or a small business person, "Hey, can I take over your social media for free? Let me take pictures. Let me do some of your posts. Let me react to comments, and I'll do it for a week or a month for free. And if you'd like it, we'll sign a contract; you could pay me to do something."

Now, what I would do as well, because I don't like doing the heads down stuff, is find somebody that actually does social media marketing, find somebody that's great at taking pictures, and maybe not great at sales, they're looking to grow their business even more; you go out, knock on the doors, sell the product, have this other person do the work, and there you go. And this is not hypothetical; I did this in my 20s, and that was one of my first side hustles out there. And it's fairly simple to do.

Slocomb Reed: That's innovative, Ash. I like your answer there. What is the first thing I delegate and what is the last? When it comes to the definition of an entrepreneur, I'm much more of a creator than a manager. I've realized this about myself for several years now. And as I have built businesses on my own, I've realized -- and I imagine a lot of our Best Ever listeners, especially those who are actively investing in real estate, I imagine a lot of you resonate with this. As I've built businesses on my own, sales businesses and otherwise, I've realized I'm really good at going out and getting business advising a client, getting a property under contract... But I start to lose my specialty when it comes to the backend administration, the paperwork involved...

When I was an independent real estate agent, I realized that the first thing I needed to delegate was everything that happened after the contract was signed, with the exception of due diligence, because I had expertise there and there was a potential that there would be some negotiating. But getting all the ducks in a row, all the paperwork, title company, lender, appraiser, et cetera. That's how I build my businesses now. As my organization grows, it's growing because I'm creating a new thing for it to do it, and I need someone else to come in on the backend and help. So the first thing that I delegate is administrative.

I joke often that within my organization, it's never my responsibility to remember anything; that's partially serious. Whenever there's something I will need to remember, I immediately message it to my assistants so that she can bring it up in a future meeting. And we have a daily meeting, me with some of my ,assistants specific to the questions they've needed to ask, that I haven't had a chance to answer, or the things that I've asked them to bring up because I'm not going to remember.

The last thing I delegate is the creative component. When I say "creative", I don't necessarily mean creating the social media content, like Ash was saying, but going out and getting new business, analyzing new deals, getting new clients, doing that upfront analysis, and underwriting; that's the last thing that I give away, partly because that's where my zone of strength is, but also, to Ash'es triangle analogy, that's definitely going to be upper green area when it comes to income as well, especially because administrative tasks are much more hireable than creative tasks.

Awesome. Last question here for this Roundtable episode. This hypothetical scenario for each of us is, out of the three things I just took away from each of us, our money, our assets, and our network, if you could have one back for this hypothetical, which one would it be? Ash, I have a feeling I know where you're going, so why don't you go first?

Ash Patel: Yes. Slocomb, obviously, the hardest to acquire out of those three, money, assets or network, is network. It takes the longest time to build trust with people. So that's the one thing I'm going to take. The money's easy, the assets are easy, the network is a difficult thing. And once you have a powerful network, if you treat them right, communicate often - it's done, man. It's all you need. Your network is everything. You've heard all those cliche sayings - "Your network is your net worth." It's so true.

And one of the things that, Best Ever listeners, I'd like you to try doing, is send out a newsletter to everybody. I'm talking about people you haven't talked to in 20 years, old colleagues at jobs you had four jobs ago, and just update people on what is going on in your life. I would do a combination of professional and personal. I did this a while back, and it's amazing. I had several hundred people on this list. It was people that literally I knew for a year or two, and hadn't seen them in over 25 years. And after I sent this newsletter out, I spent the next week and a half, answering emails, being on hours long phone calls, and that's how I reconnected with my entire network.

So all of your Best Ever listeners - Slocomb and Travis, this goes for you, too - I would consider doing that; a quarterly, even a once a year newsletter. It's amazing how many people you easily reconnect with, and then if you're looking for real estate investments, it's amazing how many people are sitting on the sidelines, wanting to get into real estate. So I had people that haven't spoken to in 20 years, they're like, "You know, I've got X amount of money. I've been wanting to get into real estate, just didn't know how." So do that, man. Most of you already have a great network, but we've let a lot of it go over the years. Reconnect with that network.

Slocomb Reed: Ash, that's great. I remember receiving one of those newsletters; it might have been your first when you sent it out. Think how cool it was. My father, actually, who's a listener of the podcast, sends out an annual newsletter to update his sphere on what's happening in his family... And he writes it from the perspective of his dog every year. He's done this for several years with a few dogs now. And I think he does it that way because he knows people are more likely to read it if a dog wrote it. Travis, what about you? Money, assets, network - which one do you take back for the sake of building your commercial real estate empire?

Travis Watts: Great points, Ash. A couple things I want to piggyback on there. First of all, things like a newsletter are awesome. Things like podcasts are awesome. Blogs, articles... Just get your story out there and share it with people. Because if you're going to be in the active side of the business, people do business with people that they know, like and trust. So how else besides the obvious of your immediate family and friends are people getting to get to know you. So you've gotta have some kind of platform for that.

So what you guys have really been hitting on really pertains mostly to, again, the active side of the business. So being that I'm a limited partner and I'm on the passive end, I would choose money out of those three, because it's not always true that it takes money to make money, but in the case of an LP, it kind of does. So I would just be trying to save up and invest and get my portfolio back up where I can start living on cashflow again. So that's what I would choose there.

The last thing I want to say is your previous topic about highest and best earning potential in sales... Something I'm trying to help instill in my nephews who are now entering college is I would always recommend making sales something else that you study lifelong; because it really doesn't matter what industry you're in, if you can find a way into sales, a lot of those sales jobs don't have income caps. And that was a mistake that I made for many, many years, when I was a W-2 employee - I was always getting myself into jobs that you are capped out. So I find myself fighting for the five or 10% raise because I'm doing more work than everyone else, and I'm just not really getting rewarded for it.

So I think I would have performed a lot better in sales. Even though I don't see myself as a sales guy, even though I'm not a capital raiser and never have been... I just like to affiliate and share on things that are working for me and trying to help people out with their goals as well. So great points, both you guys.

Slocomb Reed: That's interesting, Travis. I didn't know where you were gonna go with that one.

Travis Watts: Me neither.

Slocomb Reed: And I decided now that my answer is going to be assets, because that's the one that hasn't been picked yet... For a couple of reasons, one of them being - and for our Best Ever listeners, if you are not here yet, I hope you get to this point soon... I have assets sufficient to cover my lifestyle. Again, I'm an active investor, I self-manage... So in the self management of my portfolio, I have sufficient income for my lifestyle, meaning right now I don't need the money. I don't need the network, given what I already have, which is a great place to be. This is not about bragging, this is about the value of having assets. This may sound selfish, but that's fine. I think there's a lesson here.

First thing professionally that I poured my life into building was a youth ministry program for a church. And it was what I obsessed over. It was what I thought about; it's what broke me and built me back up more than anything else for over five years, just that first youth ministry program. And I realized that when I left that church, and literally as well as figuratively handed over the keys to the next director of youth ministry, that that youth program wasn't mine anymore, and it was going to go in a completely different direction. A good direction; I'm a big fan of the person who took over for me, but it wasn't mine anymore. My capacity to influence through that program was done... And I was done being compensated for that work that I had done.

One of the great things about real estate investing is that the vast majority of the work that has to be done to acquire, build up, sustain a property is done on the frontend. And when you get all of that work done, when you have it acquired, when you have it updated, upgraded, stabilized, you are putting yourself in a position where you can reap rewards for the long-term.

So I say assets because having had the opportunity to build assets for the last several years, I'm at a place now where a lot of that hard work is done already, and I could sustain just with what I have moving forward.

So there you have it - you have Ash's network, you have Travis's money, and you have Slocomb's assets. Best Ever listeners, I hope you gained value from this conversation, an idea of where three people who are operating at a high level in the space currently would start over if they had to, given that they get to keep their experience, but nothing else. Assuming we have added value here, please do subscribe to the show. Leave us a five star review and share this with a friend that you know that we can add value to through the conversation that we've had in this episode. Thank you, and have a Best Ever day.

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