Today’s guest grew up poor, living in a cabin without power or running water. But now he controls millions of dollars in real estate, owns several companies, and leads one of the country’s top-producing sales teams.
The story involves, of course, hard work and tenacity. It involves a book that shifted his mindset at just the right time. And most importantly, it involves teamwork.
Ben also details the seven goals that influenced his every decision and the three things every leader should do when growing his or her business. (Hint: “inspect what you expect.”)
In the “Deal Deep Dive” segment, Ben tells us how he was able to buy a company for a hefty price by controlling the terms of the deal.
He’s a big-picture guy, who will challenge you to think differently about real estate and business. If you feel held back by tasks you don’t enjoy, listen to this show for practical tips on how to delegate more effectively.
Today’s episode will inspire you and help you invest more efficiently, so you can do what you love and watch your wealth grow.
This is the BiggerPockets Podcast show 322.
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I think there’s hunters in the world and there’s gatherers or farmers. I’m a hunter. You need to set me up to kill something and then somebody else needs to process it so I can go kill something else. Well immediately by doing that I went from 24 transactions to 84 transactions. That took me from 150 or $200,000 a year to $500,000 a year in income.
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Brandon: What’s going on everyone, this is Brandon Turner, host of the BiggerPockets Podcast, here with the Man in Black Mr. David Greene. How are you doing buddy?
David: I’m doing fantastic, man I’m actually jazzed. We did one of the better or best podcast episodes I think I’ve heard in a really long time. I mean every time I listen to this guy speak I walk away with inspiration and I think the listeners are going to have the same experience today.
Brandon: Yeah I totally agree. In fact I know I say probably like all the time, but this is one of my favourite like top three of all time BiggerPockets podcasts episodes that we’ve ever recorded. Just like really you know how a book hits you in the right spot, today’s whole interview hit me in the exact spot I needed to hear today. I’ve been going through a lot of like thinking and planning envisioning.
And anyway I actually flew back from the best ever conference in Denver just last week which this now come out like in the future. But anyway back when we were recording this last week and on the plane ride back to Maui it was like a seven hour plane ride, I spent the entire thing just writing up this detailed vision of where I want to see my real estate investing business go in the future.
Because for a little now I’ve just kind of been hanging on like resting on my lorals a little bit, got my almost hundred units and I’ve been feeling pretty good about it. But I don’t know I just had like an epiphany and I’m actually looking forward to sharing it here in the near future with all of you on the podcast.
We’ll talk more about that but I’m still putting finishing touches on where I’m going. But anyway today’s episode, enough about me though. Let’s get to today’s show but before we introduce you to Ben our guest today, let’s hear today’s quick tip.
Right today’s quick tips, is really simple, look in your network right now, look around you the people that you know and who’s like the highest talented person you know? Talk to them, get to know them and ask them who are the talented people they know. And it’s one thing Ben talks about today, so much of success in any business is about who you know, who you can bring into your organisation, who can help you with stuff.
I’m not saying you have to have fulltime employee right now but start building those connections, that networking. Start talking to people immediately because it’s the talent that you bring into your organisation that’s going to define whether or not you succeed or fail. So start building those relationships right now and it’s going to help you out here, one two three five years in the future. That is your quick tip.
David: And if you live near me and you want to do that, come to my meetup where you can meet people that you can start putting this into play. I say this because I really feel when this episode is done, people are going to feel like their mind was blown. And I don’t want that to pass and you don’t take advantage of it.
So if you walk away like, “Wow I need to make some changes,” get yourself plugged into a group of people, do what Brandon said. Reach out, talk to people so that you can kind of take that and create momentum that you keep going with it. It wasn’t just a momentary experience that hit you and then passed and you fell back into your old pattern.
Brandon: Yeah that’s so good. Alright so with that, let’s hear from today’s show sponsor.
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Brandon: Alright, let’s get to today’s show. Of course if you have not yet left us a rating or review in iTunes it would really help us out a lot so please do so. Or if you’re listening to us on Stitcher or whatever just go leave a rating and/or review for us, so that people know the show is good. If you’re watching us on YouTube be sure to click that thumbs up. It helps us out a lot.
And last thing I’ll say too, you can follow us on Facebook at BiggerPockets, just go follow us on Facebook. I know there’s like a quarter million people listening to every episode of the show but we only like 150,000 followers on Facebook, which means there’s 100,000 of you who are not following us on Facebook, or maybe you don’t have a Facebook.
It’s probably not a bad thing. Alright, let’s get to today’s show. Today’s guest is Ben Kinney. This is somebody who David Greene has been gushing about for years how I need to meet this guy, I need to talk to him. David’s got like this incredible man crush on Ben Kinney and we have him on the show today.
Ben is a real estate agent, a real estate investor, a business owner and one of the smartest people I’ve ever known. I mean like it’s so clear today. He goes through like, and there’s a ton of stuff but make sure you guys listen for his discussion on flipping the triangle, that phrase is going to come up later flipping the triangle.
He talks about the five areas where he invests his money into, and then he lists his actual seven goals. He lists what his seven goals are towards the end of the show, phenomenal. And he talks about how he decides what to do, the shiny object syndrome he has a total cure for it. So listen for that later in today’s show.
And again if you love this show make sure you share it with somebody that you think could benefit from it. Again he’s got very powerful stories. So without further ado I’m going to let you hear his story, let’s get to the interview with Ben Kinney. Alright Ben, welcome to the BiggerPockets Podcast. It is really good to have you.
Ben: I’m excited to be here thanks for hosting me today.
Brandon: Yeah this should be fun. So I hear your name a lot, I mean I’m not even a real estate agent but I hear your name uttered in various circles a lot. So for years I’ve known kind of a little bit about you, we were in similar areas. But today I want to dive into your story then kind of figure out actually who is Ben Kinney and what’s kind of your background.
So why do we start at the very beginning? I mean tell us about who you are, where do you come from and kind of walk into your journey of getting into real estate in the beginning.
Ben: Sure. Well the kind of quick and simple story around that is my parents separated as pretty young age I think I was two or three. And a kind of a weird situation back then, probably today it’s even… my dad took me at two or three years old and my mum took my sister. And my sister had a rough childhood too, she went into the single ride trailer with lots of drugs and that kind of stuff.
And my dad took me up into this area called Oso Washington I don’t know if you ever heard of that Brandon.
Brandon: I’ve not heard of that.
Ben: But it’s where that big landslide was in Washington State a couple years ago that wiped out that community.
Ben: We were in a cabin that was about 270sqft, half of it was filled with kind of debris and boxes and stuff. And my dad and we slept in the other half, there was an outhouse and a wood stove. And we cooked on the wood stove when we didn’t have power and we didn’t have indoor water.
Ben: True story. It was about 100 yards to the outhouse and if I had to go the bathroom in the middle of the night, I’d run there because was still kind of scared of the dark. I’m probably still scared of the dark today.
Brandon: Yeah I understand. I still ran to the bathroom.
Ben: Yeah right. We relied on the food bank, it was a small cabin that was rented we didn’t even own. My dad had broken this couch in half and I slept on one side of the couch and he slept on the other. The adverse was every other week I went to mum’s and by seven or eight I had witnessed my first heroin overdose.
Mum used to a lot of drugs, I slept on her lap and a lot of alcohol and those sort of situations. And I say that but my mum was a hard worker, she was janitor during the day and a waitress at night. And she did everything she could with the gifts that she was given. But she went through her own bad childhood and I think you see that.
And I think that’s why I have such a passion towards money, is my mum was abused sexually and physically and emotionally from a very young age. And she used drugs to cope with that. Well over time, I kind of adopted this idea that I wanted to break the cycle of poverty for myself and for my future generations and for as many other people as I can.
So at a very young age, I decided to chase money, I thought I was going to be a school teacher because I love teaching and I love kids, that didn’t pay enough money. So I started going after whatever would pay me the most and I started into being a cable guy and then selling cable TV which gave me the gift of real estate.
And I knocked on probably 40,000 and probably cold called a quarter million people, which means I had no fear. I’ve been chased by dogs and swung at and all that kind of stuff.
Brandon: I actually think that’s probably one of the most valuable skills a real estate investor or an agent can have is that ability to go after something knowing that nine times out of 10 or 99 times out of 100 you’re going to get a no, you’re going to get rejected. But it’s that process that if we keep with it that you generally find success. So how did you get from cable to real estate?
Ben: Yeah that’s an interesting story. I met this lady friend and she called in a trouble call for her cable TV it wasn’t working, so they sent me out there. And I walked in and fixed her cable and started talking to her. And she was like, “I just bought this place,” and I said, “Oh it’s a cute condo.” And she said it was not a condo it’s a duplex.
And I said, “Well what’s the difference?” she said, “Well I own both sides.” And I said, “Well why didn’t you just buy a house?” and she said, “Well the neighbours they cover my entire mortgage,” and I’m not a super educated bright kid. I sat back for a second and I thought, “This lady lives for free.” Yeah not only does she own real estate which my family had never done, she lived for free.
And I thought that was the greatest thing I’d ever heard. So I went out and I talked to a loan officer and he said I need $11,500 so I sold a couple things, and worked a little harder and saved up $11,500 and I got me prequel for 230 or 235 whatever it was. And then I found a real estate agent. And I told the real estate agent I want to buy a two-plex and I want the free living deal.
And he showed me one but it was too expensive and then he started showing me condos and then the houses but he didn’t understand that I wanted the free deal. So I just started driving around and writing down addresses of duplexes that I liked. And I went to the assessors’ website and started sorting through there and finding out-of-area owners.
People that have the tax forwarding address out of state. And I just tracked them down, back then I think it was White Pages or whatever it was called. And I called this person and said, “I want to buy your duplex.” And they said, “Well we’ve considered selling it.” And I said, “Okay.” But I called my agent back and said, “Hey agent I want to buy this duplex, will you make an offer for 228?” and he said that’s too low it’s a waste of time. I said okay, hang up the phone.
And I only one other agent and her name was Catherine and she was dating a guy that worked at the cable company with me and she lived three or four counties south towards Everett… And I called her and said I want to make an offer, here’s the person’s name and phone number and they already said they’d sell and here’s the address and here’s the place.
She makes the offer and they accepted it no-counter. So I got this duplex for 228, my mortgage was $1,210, and the neighbours next door paid $1,200. So I got my almost free, I had to pay $10 a month. And the bonus was once I moved in I realized there was three college girls on the other side of the duplex, which was super cool. I’d never imagined that being an option.
David: It’s not a bad ROI on $10.
Brandon: That’s cool.
Ben: That agent who’d helped me Catherine, about 2003/2004 her closing gift was not a… loose gift card, it wasn’t a basket, she gave me Gary Keller’s book The Millionaire Real Estate Agent. And I don’t know if that was the only book I’ve ever read. I haven’t read a whole lot of books in my life to be honest.
And I read it and I didn’t understand it because I hadn’t read Cash Flow Quadrants or Rich Dad Poor Dad or anything like that yet. But what it said was you could own your own business. I’d been laid off two times in the cable company I was laid off by my people a couple other times. My joke I get canned more than tuna compressed.
Man, because they lay us off all the time. And I just thought you know I don’t want to wake up like my boss that had been there for 50 years and then walk in one day and they lay you off. And so I just decided to get my real estate license and I ended up at Keller Williams because Gary and Jay wrote the book called The Millionaire Real Estate Agent and I was going to follow that plan. And that was about 2004 I think.
Brandon: That’s cool. Okay so I want to touch on something here. We talk about this a little bit lately on the show and I even posted on my Instagram the other day just this quote from Tony Robbins about modelling. About seeing what other people are doing and rather than just reinventing the wheel you just model what they’re doing and it’ll probably work out pretty similar.
And David just mentioned that he’s modelling your business and then you just mentioned how you are just modelling what they had put in their book. I just think that’s something that a lot of people don’t think about is like why don’t I just see what’s already working and go do that? Have you found that trait to be like common throughout your life or are you a little bit more of a trailblazer figuring out your own thing?
Ben: The word I hate the most is when people call me an entrepreneur. And the reason is because 98% of entrepreneurs fail in their business. And I never wanted to be associated with anything that had a 98% failure rate, right. That was like my dating record. I want to be associated with something that had 80 or 90% success rate, right.
So I never liked entrepreneurs. I wrote a message from John Maxwell once that said: Systems make the ordinary extraordinary. And I consider myself a pretty just ordinary dude, a cable guy turned real estate guy. But I’m just simple. And one of the beauties in our businesses today is I believe that people complicate things to justify their inactions.
And they come up with all these spreadsheet and odd chats and big gigantic plans and then they never do anything with it because it’s so complicated they don’t know where to start. So I just adopted a plan that I should be able to explain anything I’m going to do on a single piece of paper with a sharpie.
And in a perfect world I would have gotten that info from somebody else. I would have already modelled and maybe I change it 20% but 80% is proven that kind of answers your question there.
Brandon: Yeah that’s exactly what I was thinking. I mean like I think of everything I’ve ever succeeded at like in life, I mean like the fact that we’re on this podcast right now is because I looked at a guy named Pat Flynn who has a podcast on entrepreneurship, right. And I’m like, “Well Pat’s successful maybe I’ll just copy exactly what he’s doing.”
So we just modelled our show after Pat and after the real estate radio guys which is another real estate show. I like their show it was fantastic, I just modelled them. Almost everything I’ve done is just like what’s working for someone else. I mean even like yeah everything pretty much from fitness to business to anything is just what are they doing?
What are the healthy people eating? What are they doing to work out? And just modelling that. Alright so what happened next? Let’s go through you bought this duplex, you’re house hacking which is what we call it today like house hacking living for free. What came next?
Ben: Well I got my real estate license, joined Keller Williams 2004. I got about six sales in my first year that was like a couple of friends just random people. And then by four, five months into it, it was January and I had no pendings left and I started getting a little scared and I went and took a job at a phone company.
And I went to the phone company and I went through my training and came back and I got a sales job at the phone company and I still have my real estate license. And I sold one of the bigger accounts that had ever been sold in our department and they called me and they said, “We can’t pay you on that, it’s too big of an account.” I hit my quota for the next three years.
I did what any other responsible young man would do is I never went back. I didn’t call them and quit, I didn’t return my laptop or my key card, I just never went back. And since I’d already quit the cable company, I’d already quit the phone company and I’m scared of electricity I was like I need to make this real estate thing work, right.
So I went back and sat down with my broker and she gave me a couple of options. And the options are you work your sphere plan we call those the Brian Buffini by referral stuff but my parents and family were on drugs and alcohol and poor or in prison or that kind of stuff, that wasn’t the option for me. I didn’t the sphere, my friends were buying dirt bikes and trucks not houses.
Or it was to do open houses which were okay or it was just pick up the phone and call and I’d been used to calling my whole life. So I just started picking up the phone and calling. I’d call for sale by owners, notice of default, notice of trustee sales expired listings, whoever I could. And that quickly built the business, to I did about 25 sales that first year.
And the Millionaire Real Estate Agent book said the next thing you do is you hire an admin. And you do that so that you can do what I call increase our hourly wage. And I ask myself that question all the time, what is my hourly rate? And I’m always trying to increase my hourly rate by handing it off to somebody else.
David: Ben thank you for saying that because this is a topic of contention in my friendship with Brandon, that we go over this all the time where he is always doing stuff himself. Like remember the chair for my kid that you put together, and it took you like four and a half hours while we’re in Hawaii like the best place God ever made. And you’re spending it building chairs.
But it’s really hard to do if we’re being honest right because usually if you’re a high producer or a successful person you’re good at doing stuff and it’s because you do it a certain way. And it’s really hard to leverage that to others. But a lot of people don’t understand that they’re not going to be good at certain things that they need to be good at to be successful.
Like whether you use the DISC profile or something else. A lot of our listeners they know they’re really good at analysing properties but they’re terrible at talking to people or maybe vice versa. Can you give some advice for how you overcame that fear of letting go and choosing the right person to hire as your admin or really do anything that you feel like you don’t have to do yourself in the business.
Ben: The real reason I hired an admin is I got to 25 sales in a year and that was my ceiling. I could close two in a month. There’s other better agents in the world that can do more but for me that was my ceiling. Because I get caught up in the paperwork and the details and dropping cheques off and calling, I’m not good at that,
I think there’s hunters in the world and there’s gatherers or farmers, I’m a hunter. You need to set me up to kill something and then somebody else needs to process it so I can go kill something else. Well immediately by doing that, I went from 24 transactions to 84 transactions. And that took me from 150 or $200,000 a year to $500,000 a year in income.
And it’s because I understood the difference between leverage and luxury. Luxury is when you give up an aspect of your role or your job and then you use that time to nap or eat ice cream or watch the Netflix or get high or whatever you do, right. When you take that time and you replace it with something that’s a hired dollar per hour activity, it’s leverage.
So as soon as I gave up those things I was able to get back on the phone and find more deals. And that progressed over time for hiring buyers’ agents and listing agents and so on and then 2008 happened. 2008 was the first time that I understood the difference between poor and broke. I was born poor, poor is something that you’re born into, you’re stuck into, it’s a societal thing or something you can’t control.
Broke is things you do to yourself. And what was happening was I was basing my budgets on future revenues. I was paying bills in my mind with pending cheques and listings instead of closings, right. And you see that with real estate investors and businesses and all types of people.
They get so optimistic that when one thing shifts or one thing changes, the lose it all. And by September of 2008, all my closings were gone, I went from $500,000 in commission pending to zero. And by October, November, December I was missing mortgage payments in order to keep paying my assistant.
David: That’s such a good point to make. And I think a lot of people get stuck in what they’re experiencing right now and they assume that it will always be that way. In 05 and 06 we had the same thing, you had a lot of discount brokerages that would sell a house for $2,000 because houses were selling themselves and everyone was worried that was going to change the real estate game.
And then when the recession came they all went away. And right now if you’re paying attention to the overall economy you’re seeing that money is very cheap right now, it’s everywhere. It is very easy to raise money. That’s one of the reasons why multifamily is so frothy everybody is in there. And we all complain, “Oh the cap rates are so low,” but no one really asks why.
Well that’s why and you see a lot of other businesses that have a ton of money coming that their investors are giving but they’re not generating a profit, they’re not making money. And I don’t want to name any names but a lot of them are trying to change the way that real estate is sold in the country.
And the same goes for investing. There’s companies out there with a ton of money that are spending way too much money on properties because they have it. And it’s easy to get too discouraged as the everyday investor who is like, “Man I can’t find anything that cash flows.” It doesn’t mean it’s always going to be that way.
And I think Ben you’re making a very good point that things change and you learned a valuable lesson but you didn’t let it discourage you. You just said, “Okay how do I prepare for the next time that’s going to happen? How do I adjust my model?” can you share a little bit about those lessons you learned and how you adapted to become more successful when the market got theoretically worse?
Ben: Yeah. I sat down with my bank statements and my credit card statements, and I’d been tracking my net worth and by January 2009 my net worth was negative half a million dollars or whatever that number was. I remember walking by this guy on the street and he was asking for quarters and I looked into his thing and he had like 68c in there.
And I thought to myself, “This dude is like 500,068c richer than me today.” And I just kept walking by thinking. But then I’d sit down with my bank statements, my credit card statements and I’d take three highlighters a red, a green and a yellow. And red was what I was going to get rid of right away, and green was something I had to keep to run my business.
And yellow was something I wanted to investigate to get cheaper or replace or to see if we could go without. And I just started cutting everything. And I cut it down to as far as I could cut it. And then once you do that you can’t solve your business problems with cutting more expenses once you get down to that point, then you got to double your activities.
And I just decided that we’d grind our way out of it. And we got on the phones more, and we did more door knocks, and we did more activities, and we dropped prices on our properties as fast as we could. And we worked our way out of there. The interesting thing was by end of 2009 we had our most profitable and productive year.
And I had set aside these reserves and I made a commitment to myself that I’ll never put myself in the situation that I was in 2008 and have that stress and that worry and put my people’s lives in jeopardy. I’m going to keep reserves and I just started building up cash reserves because the market can shift so quick.
You wake up one day and your line of credits are gone and your credit cards are frozen and you’re screwed. And with these reserves, a big evolution in my life happened. And that’s when I woke up one day and the real estate brokerage I was working at had ran out of money. And I had the cash and I made an offer to purchase that first business.
And I offered to put money in there and to pay them off over a three year period. And I made the payments due every August because that’s when I had the most amount of real estate commissions. And they get their first payment in August and they get another payment the next August over three years.
Well we immediately turned that brokerage around. Cut expenses, increased agent productivity, recruited new agents. And within a year other brokerages were calling us and I started buying real estate brokerages. Some are in our brand that we exist in today and some other ones I folded them in.
But I ended up with six brokerages in Washington State which last year they brought in about $3million in profit. And we gave about three million additionally back to our agents in profiture. But those brokerages in our sales businesses became the foundation for capital for us to do these other investments as we grew up so to speak.
Hey I want to take a break from today’s podcast to invite you to this week’s upcoming webinar, How To Make Your First 5000 a Month Through Real Estate Investing. I mean yeah 5,000 is kind of arbitrary right, it could be three or seven. But my guess is this, five grand a month could change your life.
And that’s the goal of the webinar I’m going to be going through three key strategies for getting there no matter what your financial picture looks like today. Like if you don’t have any deals right now, you don’t have money you don’t have experience, don’t worry about it. Come anyway, just go to biggerpockets.com/5000webinar. So biggerpockets.com/5000webinar. See you there.
Brandon: Yeah so I want to get into that in a second, but I just want to point out a couple of things. One you saw the opportunity, first of all you prepared for the opportunity which I think is smart in today’s market. I mean the economy is really good right now, I mean real estate is really good right now. People are making money etc.
And I think this is a good reminder that I won’t always be like it is today. It’s not always going to be like it is today. I mean we’ll have another eventually I mean maybe it won’t as bad as 2008, maybe it will be as bad as 2008, right. So again just a good reminder that just reserves are just vital even when you’re feeling really confident and successful.
But secondly you mentioned that you basically paid these people off over time. This applies to real estate investors and people in any businesses. You’re basically just capitalising in seller financing. You said hey I’ll put a little but down and I’ll just pay you off over time. That’s actually how I bought my first apartment complex the same way.
I just paid them off over time. But what’s really cool about it is how you controlled the terms of that deal. You knew that there was a certain time of the year you were going to be better off, you knew that seller financing would work and you knew that you could capitalize on it.
So I guess three just interesting points there just to point out, that you I guess went about taking advantage of that. I mean I’m curious why would they sell to you? Why didn’t they just turn it around? Why did you have success with turning those brokerages around when they couldn’t?
Ben: Well they were in financial trouble and they had gotten to that position because of the way they were running that business. And either they were trying to save themselves by selling real estate so they weren’t focusing on that brokerage. A lot of them took on too much space and they were in bad lease deals.
Which caused me in some situations I bought the assets and not the business because I had to renegotiate out the lease. So I had to move the business if I couldn’t. But they had no choice. One situation they were going to close the business on Monday and I found out on Friday and I jumped on a plane and flew back here and stopped them from closing.
Because at that point we lost all the agents which was really the asset in that business. I paid terms for those businesses because back then I didn’t have cash. And a lot of people would have used I don’t have the cash as an excuse to not invest or not have business. I just found a way to do it and from that it gave me cash to do some of these other future deals.
David: Yeah. So I think something to highlight out of what you’re saying here Ben is that you did a few things that a real estate investor can do just as easily. a) You targeted distress. And I usually talk about there’s three kinds of distress in real estate. You’ve got property distress, personal distress and market distress. So you were in a rough economic time so it’s probably quite a bit of market distress.
And then there was some actual like property distress, as in the business itself was not being run right. And just like a good hunter you’re like a cheetah, you smell that blood and you knew right where to go. And you got there, you made the kill and then you probably handed it over to somebody else to figure out okay I need you guys to help me turn this thing around, right.
But that’s why you got a good deal. So for the people that a listening saying, “Well yeah it must be nice if you find a business like that.” But Ben knew people in the industry, he had his eyes and ears out there he was out hunting for something. And when he saw that distress he had an advantage.
Then you were smart enough to do like Brandon said and get it with seller financing so that you didn’t say, “Well I don’t have money I can’t buy a property.” You said, “Well I found a person who doesn’t want to own a property, they’re losing it to the bank, right you said they were going out of business.
They’ll give you a screaming good deal if it’s not a foreclosure. Right, when you find those people that are in some form of distress, you can get a deal. The key though is that you didn’t wait until you saw opportunity to go learn your craft, right. For the people that are saying, “Well there’s no deal so I don’t want to learn how to analyse a property or manage a property or rehab a property.”
You’re going to be behind the eight ball when the market does turn and you’ve got the Bens of the world and the Brandons and the Davids who are studying this every day. And when that opportunity is everywhere, we’re a like a highly tuned cheetah that’s going to go take after whatever we want and bring it down.
And that’s why we’re always preaching you got to be prepared because we don’t know when the market is going to correct we just know at some point it will. And when it corrects and people are struggling with holding a job and saving money, there’s a whole new set of problems that come out of it, it’s going to turn around.
I mean I remember in California in 2013, it turned around so fast I literally went from writing like 20% under asking price on every house to 20% over asking price, wouldn’t get the deal done. It was that fast like one spring time and boom it was gone. And that’s why I had to learn long distance investing.
So there’s a lot of lessons that we can learn from what you’re doing here and how it does well. What did you end up doing once you started buying the business? And like you said you built the foundation of real estate sales. What was next for you?
Ben: Well first thing I did is I knew if I bought a real estate brokerage and if I failed at it, that I still knew how to run a real estate business. So I put my own banking and real estate teams in each one of those brokerages. And I did that because I knew if the brokerage had a bad month we could at least close a couple transactions.
And that’s I think really how real estate expansion came into my world is I wanted to prove that I could do my business model from… and any other city and I might as well do it in another business that I own. That meant that I paid for sales in that location, those sales agents paid a split to the brokerage.
I owned the brokerage and over time I started buying the buildings that those brokerages were in as well. And we had additional services like mortgage and so on. So you ended up getting paid four or five times along that path.
Brandon: That’s cool. So you actually started buying the buildings that your properties were renting. Is that what you’re saying?
Ben: Yeah. And I did it because I learned about something that I’m sure you guys talk about often, accelerated depreciation. I had an income issue and I needed to solve my income issue because I didn’t want to give all my income to taxes. And if you buy a commercial real estate you can do accelerated depreciation and then write it off over seven or eight years.
And that reduces my taxable income and it’s much easier to do that in commercial and residential with the notes available. So I started doing that. And I think people buy real estate for three reasons; one appreciation, two would be tax benefits and three would be cash flow. And you buy different types of properties for each one of those three situations, right. And I try to have a diversification of those types of things.
Brandon: Alright so what else have you done? I mean I want to talk a little bit more about the commercial thing too but what else have you done? I mean in terms of investments, you bought some commercial properties, do you own any single families, do you own any multifamily or anything like that as well?
Ben: Yeah I own quite a few houses, vacant lots, commercial buildings, ranch in Texas, those sort of things. And I try to buy a property every couple of months or a couple of times a year at least. And I have a full time contractor that’s always remodelling and improving. I don’t believe in flipping properties.
I’m in the mind set of building assets over time and real estate is the foundation of my wealth and I want to make sure that that’s secure. So I do that to build assets and keep so I’m a holder not a flipper. And I’m always looking for deals nonstop whether it’s a business I’m buying or real estate or hire. I’m kind of a deal junkie I’m always out there looking for the right one. And I turn down a hundred of them to do one but I’m always looking.
Brandon: I love that. And I think it’s interesting to hear that the connections like as you talk about certain things like buying businesses how similar it is to buying houses. And then you mentioned people like deals. It’s almost like business is business no matter what the asset that you’re buying is or that you’re obtaining, which is kind of fascinating.
So how do you balance that with focus right? I mean you bought a ranch, you bought some commercials, some houses, how are you focusing that? Is it because you’ve got all these properties already now you can diversify like that? Or is it just you’ll buy whatever comes across your plate?
Ben: I tend to buy in areas that I want to be or areas that I’m at so locally as much as possible. And I buy those deals because I see something in the property that others don’t see like a duplex that I can turn into condos or a house that I could short-plast something off of.
Or a property that I could get some extra lots or I could add square footage to it. I’m always looking for something that other people don’t know about that property or even that business as well. I’m looking for how do I walk into this situation with instant equity?
David: Yeah and Brandon and I talk about in today’s market, you don’t find deals you got to make deals and that’s kind of what you’re describing. In a higher end market that’s what you have to do. In a lower market if you have the capital and you have the opportunity you can find the deal pretty easy but you’re not really getting better or learning when you do that.
You’re just taking low hanging fruit and if that’s what you’re dependent on well when the market turns around you have nowhere to go. But I think that Brandon to your point, I see this all time when I watch these TV shows the guys come in and take a struggling bar or a restaurant and they turn it around. They’re using the same principles we are.
Somebody owns an asset that they’re not managing well for various different reasons, it could be a lot of stuff. It would be profitable if somebody did something different. Maybe someone recognizes this bar is not doing well because they could be serving food as well or they can be charging more for alcohol if they change their ambience or whatever.
And a more experienced person steps in, buys it, turns it around and makes it profitable. And then if they refinance it which is kind of our BRRR Method that we talk about they can go buy another one, and that’s all Ben’s doing, is he took an industry he understood which is real estate because he could sell houses because he was a cable guy and wasn’t afraid to being told no.
And he learned a little bit more and it gave him opportunity and he took advantage of that, and he learned a little bit more and it gave him opportunity. And now I mean Ben we didn’t really talk about it but you’re either the top or one of the top agents in the entire country. You got expansion teams everywhere.
You’re buying companies like left and right. I mean we’ve kind of focused on your beginning but you’re basically like the second coming of Warren Buffett at this point with what you’re buying, right. But you started from a very small place and you just took advantage of the opportunities that you had. And that is one of the things that’s so inspiring about you, is you didn’t say, “Oh I can’t do it, here’s why.”
You said, “How can I do it?” and Brandon loves that too. And everybody listening could do the same thing, right you started with the house hack and that opened doors. You started selling real estate and that opened more doors and you just kept walking through them.
Ben: About six years ago we started investing in technology because I believe that technology was going to be the thing that could disrupt my agents and their families in their way of life. And that’s led down an interesting path for us, we’ve just acquired our eight real estate technology company last week. And we have about 150 people that work on our software space.
I think over time, I’ve had this real mind shift on wealth building and I’ll probably be known for buying businesses not real estate because I never talk about my real estate investments or people just don’t hear about it. But when Donald Trump was running for president couple years ago, he was talking about not sharing his taxes or whatever.
And Warren Buffett sent a tweet out or a message out that said here are my taxes I’m willing to share mine. And one my ahas and looking at Warren Buffett’s taxes was that I paid more taxes than him. And I was sitting back here thinking which one of us two guys has more money? And I’m not a fraction of a percent of what Warren Buffett’s worth.
But what he did is I call it Flipping the Triangle. If you were to take a triangle and divide it into four chunk, the vast majority of the world’s triangle looks like this. At the base of the triangle here is salary and hourly, and that’s where they make the majority of their money. They’re exchanging time for dollars.
And the reason they hit income caps in their life is because they only have so much time to exchange for dollars. As you move up the triangle you have bonuses and you have profit from the businesses that you’re in. and if you do good in your job maybe you get a bonus or if you do good running your business maybe you have some profit left over.
And that right there maybe that’s 90% of the world and that’s why they have such limits of their income. As you go up to the third piece you have residual incomes, that is money made from work done in the past. Whereas the first two pieces of the triangle are money made for things you’ve done in the present.
Well residual for me is rents above and beyond my mortgage interests. If I do loans, dividends on stocks, profits from businesses that I invested in but I don’t necessarily run myself. And that’s money that comes in every month whether I show up or not. And then at the top of the triangle is assets. And that’s what people have the very least of.
The stats that I think about around that is just the average American who is a renter has a net worth of $5,200, the average homeowner in the United States has a net worth of $238,000. You see the big difference in those two, the net worth is really through real estate for most people.
I wanted to flip the triangle so I wanted to get to the point like Warren Buffet where the majority of his wealth is in assets that are not realized unless he sells his stocks, sells the business, sells the real estate or cashes out. So it can continue to compound and grow and grow.
But when you’re flipping properties or when you’re always taking that money out and moving it somewhere else you end up with that having to be taxed on it. And you give up 40% of your income. So I wanted to flip the triangle and I want my assets to grow and then my residual income to grow.
And the things I don’t really care about might be what I do with my actual time. Now that led for me this idea of what’s going to grow fastest. What would be the average cap rate in the US for you guys? I don’t know.
David: Like five and a half or so I’d say right now in the commercial space.
Ben: Yeah. And last year the SMP500 if you put money into the SMP500 it may be went up 11% or 13% or whatever. That’s that range, five or 10% that you can grow annually. But all the businesses that I’ve bought, I’ve been able to grow them 40%, 100%, 200%, 150% year over year. And that’s allowed me to have massive compounded growth.
And with that excess income, I take that income and then I buy fixed assets like real estate to be the foundation in case… hits the fan and I need to survive. I put that money into I call it the five buckets; extra cash reserves, real estate that I’m going to hold, financial instruments like retirements, 401Ks or ways to defer taxes.
And businesses that I invest in that other people run and then I save the last bucket which each bucket is 20%, to give away each year to our community specifically around homelessness and hunger. And I take all the excess of those as well from all the businesses and I put them into those buckets so that I can grow my assets not just my income.
Brandon: Yeah that’s a fantastic way of looking at it. I think everyone needs to hit that rewind button on their podcast player and go back and listen to the last two minutes again. Because yeah the five bucket thing, the flipped triangle, all that just fantastic. So I want to explore this a little bit more, this idea of buying businesses.
Because again here on the show we typically focus on real estate but there is a benefit to crashing it in business. This is actually one thing I love about real estate is like you can crush it in business somehow whether you hopefully own the business, right.
You can make a ton of money and then dump that into real estate into fixed asset. Why do you do that and do you also I guess why do you do real estate not just the SMP500? Why not just throw everything in the stocks or whatever? Do you diversify? Do you focus mostly on real estate? What’s that look like?
Ben: Alright. I think our business whether it- I was talking to David about his real estate business, I think his business should be like a chair. And the more legs to the chair the more stable the chair is. And if you got all of this business from referrals if that went away his business would fall apart. If you got it all from cold calling.
So it’s about having a lot of legs to your chair. Whether you think about our parents that had all their money in their company stock plan, or the person that put all their money into real estate or all into their 401K or all into their business, one little thing could completely disrupt their retirement, their livelihood or their family. And I don’t want that to happen.
I’m not going to be in a situation, I’m okay being poor I’m not okay being broke where it’s my fault. So I try to evenly divide that out and I have adopted that for over 10 years now. And in the beginning it was $50 a month that went into each one of those buckets and then it was $200 a month that went into each one of those buckets. And over time it’s grown.
Which means 10 years ago it took me a year or two to save up enough for a down payment on the next property. And then now it can happen every month or every couple months if we choose to do so. But it’s about having that discipline of putting money into those buckets to take care of you and your family.
You can’t just be this individual that’s chasing money because money runs too fast. And you’ll never actually catch it, you’ll wake up having an unsatisfied unhappy life. You need to make sure that you’re doing things to build wealth not just build the number of doors or the number or real estate transactions or whatever those things are. Because that’s a really unfulfilling life to live you’ll wake up unsatisfied all the time.
David: Well on one hand having several legs on your stool does make it a more safe stool where it’s like a defensive metric. You’re going to lose more difficultly that’s a horrible way to say that. But it’s harder to lose. On the other hand having all these different things working together actually creates a synergy to where you’re more successful with venture F because you have venture G as well.
And I that that’s something that a lot of people getting started don’t understand that that’s kind of when we talk about the rich getting richer this is why. You actually took a real estate sales business and leveraged that into buying brokerages which leveraged that into bringing deals your way. Then you had this capital that you could then use to invest in technology companies which made it easier to sell more houses, right.
And the whole ecosystem that you’re building helps all the other little piece, so A) you’re safer and B) it’s easier to grow bigger. And that’s really how smart business people think. Now the problem is once you’ve built that ecosystem you can’t be in everywhere at one time. You’ve got expansion offices here, you’ve got investment properties here.
You’ve got companies that you’re buying that you really probably don’t even understand what they’re doing, you don’t need to. You’re the investor. Can you help us understand a little bit about your leadership qualities, what you had to learn, what you had to develop and how you run all these different businesses as just one person?
Ben: Yeah so my coach Gary Keller has always been clear with me is that I can do anything I want as long as I start with a person. So he says first who then what. Right so if I want to buy a business, the first question I’m going to ask myself; who do I have that could run it? And if I don’t have that person that would be the very first thing I’d go and do because I do not need another jump.
Well over time you start learning about leadership. And the easy thing to say is I’m not good at managing people or I’m not a very good leader. But I found that nobody is an amazing leader of marginal people. And you end up getting the wrong people on your bus, you look like a crappy leader and you feel like you’re unsuccessful. And I’m not saying they’re bad people.
But if you get the right people for you, you can do anything. And you walk in and everybody thinks you’re a genius leader, truth is we’re just actually pretty good at hiring. And we’re good at hiring because we take the time to look at enough candidates. When you have one candidate that you’re taking through the hiring process, you spend the entire time trying to proof that that’s the best candidate to yourself.
When you have three candidates, any of which you would say I would any one of these right now in my heart, right you spend the entire process figuring out which candidate is the best candidate. As they say the enemy of great is good or however they say that, right. You can’t settle, you got to make sure that you’re investing that you can balance I like to say love and results.
Meaning that that you could see yourself having that person at your kitchen table for Thanksgiving that you love them and you care about them, which means they got to have integrity. You got to like them you got to like being around them, and they got to get good results.
Any time it’s out of balance between love and results meaning you care a lot about them but they aren’t succeeding in the role, or they succeed a lot in the role but they’re kind of buttholes you end up creating resentment and it doesn’t work. So I look for this balance between love and results in all my hires and then I just let them go do it. And I get back involved if they need me but I tend to step away and just let them succeed.
Brandon: So here’s something I struggle with a lot because I’m hiring right now for both internally at BiggerPockets we’re hiring for a number of people that are going to be working with me and the marketing team. But then also I’m looking at my own real estate business looking to hire as well and try to expand the real estate investment side of things.
And both of those I get people that apply, right. And you look at their resume and everyone looks good on a resume. I mean everybody looks good on the resume and I talk to them and I get the same thing you just said. I could hire any of these people. Like at a surface level, even just talking to people the first time everyone generally looks pretty good.
I’m struggling with that right now, I got five people I’ve talked to that all could probably do the job well. How do I narrow down then like to really know that that’s the one out of the five? Like you say you look at enough people but that’s what I struggle with right now a lot.
Ben: Here’s what I do is that I make a list of the 10 or 20 things that you want that person to do in their role. Then I’d organize them one through 10 or one through 20 and then I’d go and I just cross out everything that’s below four. You are hiring for the top four not for the bottom 20. You need to find somebody that hits it out of the park on those top four things your biggest priorities, and don’t worry about the rest of the stuff.
The rest of the stuff anybody can do or you could just knock it down or get an assistant or they figure it out. Always hire to the most important priority. And then compare each person to each other just say, “Hey I got three great candidates, how do they stack up?” and we go through this multi-process hiring where we have a screen interview, a face-to face interview.
We go through what’s called a life story where I go back as far as time and I ask them what they’ve done and what they’ve made and what they’re most proud and how do they succeed. And I understand their whole history. And then we go through this process of understanding their goals, what do they want to want to accomplish in the next year, three years, five years?
To make sure that they can be on that trajectory or they’re thinking big enough or they’d be a good match with us. And then we go through a little bit of behavioural testing to make sure they’re the right behavioural map for the job by giving them a Meyers Briggs or whatever that might be. And you combine all those things into a collection of about eight hours.
And when you’re done with and you’ve done that through a couple of solid people, you’re going to feel real confident about one or two of those people. But when you rush it or do a couple of interviews and then you high five you’re just kind of playing craps and you’re going to get what you get, wherever the dice land.
Brandon: I read the other day that 50% of all hires end up being a mistake. Like that manager said that 50% of on average of the people they hire were wrong. Which means that it is just a gamble, it’s just 50/50. They might be good, they might be bad. And that’s how most people in the world hire.
Ben: Sounds like marriages and dating to me.
Brandon: It does, right.
Ben: Like if we put a little bit more time and energy into choosing who we spend our time with, I always say that we have three relationship in our life and they’re extremely important. Who we work with, right, who we love and marry and our mattress. And we should spend time and energy choosing all three of those things.
David: I mean that’s why Drake says I only love my… because that’s what’s important in life. Yeah as far as people who are wanting the opportunity Ben can you share a little bit about because you’re hiring people all the time, right? So this is an interesting dynamic is that Brandon, I and Ben our frustrations are we can’t find people that can do the job the right way.
Well there’s a lot of people out there that are like, “Oh I really want this opportunity tell me what I need.” And I’m trying to figure out how you marry those two worlds. Do you have any advice for the people who want the opportunity but aren’t sure what to do in themselves to be good at the role?
And then the second part that I wanted to talk to you about was we interviewed Robert Greene and he had mentioned how one of the things that he believes is people don’t change. Like who they’ve been is who they’re going to be, right. So how much do you factor that into your decision making process when you look at somebody’s track record?
Ben: Sure. I think highly successful people succeed at something in their life. So what is that track record or success? It could be that they’re number one on band camp, it could be that they’re number one in athletics. And I ask that question when I interview them, what have you been number one at in your life?
And that’s important to me, right. And then I understand that a leader has three fiduciary duties. Number one, to clearly set the standards and expectations for how that person succeeds in their 20%, not the bottom 16 things, in those four things. Number two, to inspect what we expect. To provide a layer of accountability.
And when we first get into business with somebody we meet with them and look at what they’re doing on an hourly or daily basis. And over time they earn the weekly touch and over time they earn the monthly. And over time you really just get together to give the high fives. The number three thing as a fiduciary duty as a leader is to make sure we provide the coaching, training and mentoring that they need to be successful.
And whether we hired somebody to do it or we do it ourselves, if you are not doing those three things, that person’s failure in your business is your fault, it’s not their fault. So I always ask myself before I let somebody go, “Did we do our fiduciary duty?” I take ruining somebody’s lives and putting their family in jeopardy very seriously.
So if it doesn’t work I sit back and say, “Did we set the standards? Did we inspect what we expect? Did we train them? If not we start from scratch on day one and we take them a 306090 process to get them back on track. So before we think that people can’t change I always sit back and say, “Well where is my DNA on that situation?
What could I have done to make sure that that person was successful? Or in the place that they were before were they given a fair chance? Because I found people that were very unsuccessful in their previous role but when they worked with us they flourished.
Brandon: Yeah and that attitude is what attracts me to Jocko Willink’s book, which one David that you love Extreme Ownership.
David: Extreme Ownership.
Brandon: Right, which is like when somebody is bad, the first question to ask is what have I done wrong or how could I have fixed this or how am I causing this. Because a good portion of the time it is probably that. Like I know when I’ve had bad employees in the past I’ve not set standards, I’ve not inspected what I expect and I’ve not trained them very well.
I’ve done all three of those things poorly and so it’s no wonder they didn’t work out. And then I feel really bad because now I’m looking back I’m like, “Yeah that was totally my bad or that was totally my fault.” Anyway just really good reminder. What were you going to say?
Ben: The first kind of question about how people go and find the opportunities I think is their responsibility to chase what they want in life. And it takes a lot of effort. I’ll give you an example of the reverse of that is I ended up in a situation where I was missing an important person in my company. And it was going to be the technical demise of our world.
And the previous month in that particular company I’d lost $430,000, for the month. And I knew that there was a problem. I started off on Monday with a commitment that I was going to find a replacement and I sent over 1000 LinkedIn messages. I made hundreds and hundreds of calls and hundreds of texts.
And I finally found a person that was located in another country that was right match, and I flew him and his wife over. And we got them hired in our firm. But it took six days of me only doing that one thing to solve my biggest problem.
And a lot of times why people don’t solve their biggest problems, why they don’t find real estate deals, why they don’t lose weight or whatever that is, is they give 1% effort every day over a long period of time, and it never amounts to anything.
If you have a big problem in your life, go fix that problem. Just go jump on it and you only do that until you get it out of the way and then you work on your second problem. So I’d put that back on the person that if you want to change your life, make that the only thing you focus on.
Brandon: That’s so good. I gave a speech last week at a conference and I talked about this analogy of building a tower. Let’s say you had to build a tower out of little blocks, the little toy Jenga blocks. And success was out like three feet high, right or in this case solving your problem is like three feet high.
So you start working on one little tower and then you go start working on another tower and then another tower and you’re adding one block to each tower. And pretty soon you got 30 towers but none of them ever get higher than six inches. Where if you just focused all your effort on building that one tower, I just got to fix this as the most important tower.
And that works for both problems like you’re talking about problems and for solutions, right. This is the most important thing in my life if I can just get this level I’ll be alright. But instead people are like, “I want to be a real estate agent,” and then two weeks later they’re like, “I really want to sell Tupperware on MLM,” then two weeks later they want to flip houses because they listened to a podcast on that. And they’re building 50 towers at one time and never get there.
So before we move on to the Deep Dive, do you have any advice on how people can know what is that thing that helps them identify what is the most important problem to focus on or what is the most important thing they can do? I mean when there’s a million things that a person can do, how do you focus?
Ben: I would hate for somebody to hear this call and hear that my message is do a bunch of things and get a bunch of businesses and that sort of thing because that’s not really how I believe. I believe in building a business to its maximum potential and replacing yourself with a great and amazing hire that’s proven and then taking that excess time to do something.
And this a 15 year journey for me I had three sales teams up until four years ago. Now I have 22. It’s because I put 11 years into building the foundation and building the systems and building the models and proving that it was profitable before I did that. So we’re careful we don’t do too many things at once. You do one thing, you get it going as profitable and then you add another thing.
So I would hate for that message to get mixed up. But back to your question Brandon, what we do should provide a clear path to our business, financial, relationship, health, personal and spiritual goals. And I’ve had mine written down for many years and I look at them often and I ask myself the question, “Is what I’m doing now setting myself up on a path to accomplish those goals?”
And I found a lot of time that people make those choices because they aren’t clear on where they’re actually going. So I want to share my goals with you guys because it’s on my phone at all times. Number one I want to be leveraged. I want to hire somebody for all the things that I do not enjoy, which means I had to make a list of what other things I enjoy.
I enjoy negotiating deals, recruiting talent, creating things and making them a reality and coaching training and mentoring. So I built my life around doing those things and everything else I hire somebody for. Number two, security, I want to have a certain amount saved in the bank in case the zombie apocalypse or economic whatever the thing might be.
Number three I want a net worth of a certain amount of money and it’s a big number. Four, I’d like to be married but only once, five I’d like legacy, I want to create things that I’ll be remembered for. Six I want to help 10 people become millionaires and seven is I want to donate a minimum of one million a year back to our communities that we operate in.
And I ask myself the question when somebody says, “Hey should you go do this opportunity or should I do this?” I just open up my goal sheet and say, “Is that something I’d enjoy? Is it going to affect my savings? Is it going to increase my net worth? Is it going to affect my ability to have a healthy relationship?
Is it going to be something I’m going to be remembered for? Or is it a park shop or a bar? That might make money but it’s not what I want to be remembered for so I’m not going to do that. Is it going to help somebody become a millionaire and do I love them enough to want to do that?
And is it going to affect my ability to give? And if it doesn’t hit one of those things, I bail out. So it’s important that they have clarity what they’re actually trying to accomplish. And with that, it should help them to make better decisions.
Brandon: That is so good, fantastic. I don’t have anything to add to that. So I’m just going to shift us and turn us over to the next part of our show which we call our Deep Dive.
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Brandon: Alright this is the BiggerPockets Deep Dive. It’s the part of the show where we dive into one particular deal that our guest is working on. So I hear from Kevin our producer that you’ve got a little bit different style of a deal today for today’s deal Deep Dive. What are we going to be talking about today before we jump into the questions?
Ben: Well what I think is interesting about deals is that deals are all about terms, and terms for real estate or terms for businesses are about the same. So I’m just going to talk about a business or two that we’ve purchased in the past and how we went around structuring that deal. Because when we went into those maybe we didn’t have the capital to even do it but then we figured out a path into making that happen, if that makes sense.
Brandon: It does.
David: Yes so. This specific deal, what6 kind of deal was it?
Ben: So this was an opportunity for us to buy a software company. And when I met with the individual I said, “Are you will to sell this company?” and I he said, “No I don’t think I would.” And I said, “Well why wouldn’t you?” and he said, “I haven’t been able to get the amount of money that I want.”
And he gave an amount of money let’s say it was a million dollars. And I said, “Okay, can I ask you another question?” and he said yeah. And I said, “Well what is it about that million dollars that’s important to you? And he said, “It’s that I think I need that much money to replace the income that I get from this business to take care of me and my family until I die or pass away.”
And I said, “I don’t want to be morbid or nothing but how long do you think that is? How many years do you need?” and he was quite an older gentleman and he said, “I need at least 10 more years of income.” And I said, “So it’s not the million dollars at all that matters to you, it’s a certain amount of net income for you.”
And I said, “But what have you been making currently?” and he gave me a number, it wasn’t a large amount of money let’s say it was $50,000. And I said, “How about instead of a million dollars, what if I just gave you $50,000 a year paid in monthly payments over the next 10 or 12 years? And would you go home tonight and talk to your wife about that?”
I’ll personally guarantee it that you get that income, you don’t have to work anymore, you don’t have to show up you get to enjoy these 10 years of your life and you get to retire.” And he came back and he said, “You know what, that would work.” For me I looked at the business and said the business was already making that much in net income.
If I added what I do, we would easily replace that and I just made that a line item on the budget was paying the previous guy out. So we bought that business for zero down, paid him over a 10 year period and it was what I consider a win-win. That individual got what they needed out of the situation and it wasn’t the price.
Now he could go and tell anybody he wants that he got a big price for the business and that’s fine and that’s a win. And if that makes him feel good that’s great. But what it really did is it took care of him and his wife. And I think a lot of times we negotiate numbers but it’s not, it’s what’s the story? What are they really trying to accomplish with that?
And then you go back and you solve that problem for them. And I’ve done that in five or six if not 10 different situations where I’ve been able to put deals together that otherwise could have been undoable.
Brandon: Yeah I love that. And that applies again to yeah, any deal that you’re working through whether it’s a business, whether it’s a specific real estate deal, there’s usually something that people say that they want, right. And it’s very different from what they actually want. They just don’t know how express necessarily.
So by asking those questions you can get there. So do you mind if I dive a little bit on let’s say this particular deal and for confidentiality reasons if you can’t say what the company is that’s fine. But I’m wondering like how did you even come across the opportunity like how did you find this?
Ben: So I’m always looking for opportunities and I tend to do that a lot. I call it eight to eight, eight to eight. So from 8AM to 8PM I have to do things that make money now. That’s either taking time for family and loved ones or working out and eating or working in my job to make some money. But from 8PM to 8AM that’s my time.
And during my time I can do whatever creative I want. So at night you’ll see me often Googling companies, looking up websites, researching people. And I send hundreds and hundreds of LinkedIn messages to businesses and emails reaching out trying to find deals.
And the vast majority of deals I’ve gotten I bought a company from Zillow called Active Rain because I sent the CEO a direct message on Twitter. I bought one other company from LinkedIn time and time again because I reached out to them.
Brandon: That’s cool.
David: It might be the first time I’ve even heard someone say they used LinkedIn effectively as opposed to how most people do. So that’s awesome.
Ben: It’s a different approach though. It’s usually it’s not that I want to buy your company, it’s that I want to get to know you. And I’ll fly them out or I’ll fly there. And I’ll spend a day letting them talk to me, tell me how great they are, explain their world, show me their business. And I don’t talk about me at all and I just get to know them.
And I ask them what’s important about them. And by the end of the day or two, I’ll understand what it is in their life that’s causing them pain or what is in their life that will give them pleasure. And I’m looking for that button. And I will spend as much time as I need trying to figure out what is the button that would make a difference in this deal when everybody else jumps in there.
One particular deal we did, there was an offer on the business for three million dollars from a private equity group and we bought that business for just over a million. They accepted a two million dollars less purchase price because I figured out what was important. And for that individual it was that he wanted to keep working, he wanted his employees to be taken care of. And he wanted it to stay in the location where they operated in.
So I made a commitment that I would stay there, I would keep them employed I would increase their salaries, I would provide them benefits, right. And I got the other competing company to write me a letter that said that their intention was to consolidate all the businesses and move into the East Coast. And I brought that letter to the meeting.
Said, “You may get more money today but you’re going to have to face these people in the grocery store every time you see them to let them know that you sold their jobs out. Or you can do a deal with me and we’ll find a way to make an equivalent win. And you’ll find that money is not the only factor in a deal.
Brandon: That’s so true. Alright so on this particular one that you gave the example of earlier, you talk about buying it basically no money down, right. What did you actually do with that property then? Did you put somebody else in charge? Did you find new talent or did you raise somebody up from within the company? And then what was the outcome to that? What’s the company like today?
Ben: Yeah because the gentleman was phasing out, we paid him for a short period of time to stay in and then we hired a replacement in that business. And that business today is worth quite a bit of money because the revenue I think when we did that deal the revenue was out like a million to a year. And I think in the first 30 days of using our sales and marketing engine we brought in more annual revenue in that next 30 days than they had done their whole previous year.
Brandon: That’s good.
Ben: Because businesses traditionally have either they’re great at sales and marketing and they have a crappy product or they have a really great product and they can’t sell or market it. And we bring an approach where we find great products and we put a massive sales and marketing engine on it because we’re used to pick up the phone and cold calling and doing marketing and we do that business. Most businesses don’t fail because they have a bad product, they fail because they can’t hire or they can’t sell it.
Brandon: Yeah that’s really good.
David: Alright, what lessons did you learn from this deal in particular Ben?
Ben: I think from this deal and a whole bunch of other deals like it, we learn how hard it is to integrate technologies into each other, or to integrate leadership teams into each other. And it took time and it takes a while. You always think it’s going to be faster than it is. And it caused a lot of chaos.
In fact that month that I said that we lost that $430,000 was because of problems that were created through that integration. And we fixed it and I was just messaging with those leaders the other day and he said, “Hey there’s been times in the last two years that I’ve really wanted to quit.
And I want you to know that I still think this is one of the better decisions I’ve ever made in my life and I want to thank you.” And it wasn’t always like that. I mean there were times that we wanted to strangle each other. But that commitment to each other and our commitment to work through it we’re able to survive it.
Brandon: There we go, alright.
David: That’s really good. I think one of the things you mentioned that I just want to comment on before is that your approach wasn’t let me chase someone down, throw money at him see if they say yes or no and move on. And that strategy will work at a lot of things in life.
If you met someone you don’t know and say, “Do you want to get married?” and they say no and you move on to the next thing you’re much less likely to be affected than if you slow down and you take the time to get to know them. Brandon always talks about how dating is a funnel, he thinks everything is a funnel and in a way it kind of is.
And Brandon is right, heather is always jumping in and saying, “Brandon you’re an idiot it’s not that simple, right.” because Heather understands that yeah you have to talk to a lot of people but you have to be doing it with a purpose.
You need to be getting to know that person improving yourself before you jump right to where you’re trying to get. And if more people would build skills in that area as opposed to just I’m going to just focus on how many LinkedIn messages I can send, I think they’d be more successful.
Ben: Relationships matter, that’s the message right there ain’t it?
Brandon: There you go.
David: Yes absolutely.
Brandon: Yeah well that was the deal deep dive. Now we’re going to head over to the next segment of the show, The Fire Round.
It’s time for the Fire Round.
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Brandon: Alright it’s time for the Fire Round of course these questions come direct out of the BiggerPockets forums, which everyone can go visit at biggerpockets.com/forums. Alright Ben, we’re going to throw this at you rapid fire style, so big question Q&A nice and fast.
Number one Corbin from Louisville Kentucky said: I just got done reading Set For Life which is a book by Scott Trench the CEO of BiggerPockets. And I’ve decided I’m going to house hack. I’m going to buy a duplex or triplex or fourplex, live in one unit rent the other ones out. Where should I start shopping? What approach should I even take to begin looking for that small multifamily?
Ben: I believe most deals that are good, everybody knows about and they’re gone if they’re on the market I mean. So do what I did, go after off market properties, look for one specifically that have out of area tax mailing addresses. Because they don’t have a good grasp of what’s going on in the market or they inherited the property whatever.
Find a property that nobody else knows about. It would take you to door knock and cold call but you’re going to end up with a way better deal.
Brandon: Yeah awesome.
David: Next question: I’m a newly licensed real estate agent and an aspiring investor. Over and over again I’ve heard investors in the BiggerPockets community complain about the lack of investor friendly real estate agents. This seems to be an opportunity. What advice would you give me for how I can curve out a niche business serving other investors? What are investors looking for in a real estate agent?
Ben: Investors are looking good deals. And if it’s a good deal, first you should just buy it yourself. And the reason you don’t buy it yourself is because you don’t have the income and the cash set aside so go fix that problem. Investors that want a long term relationship, they’re going to invest as much into you as you do into them.
You don’t want somebody that’s just going to use you and make you write low offers all day. So be careful as a real estate agent that you don’t go chase a one way relationship where they’re using you and you don’t have that long term win.
Brandon: Yeah that’s great. Number three, I’ve got a commission based job so my income is really unpredictable. It’s going to be hard for me to get a loan to invest in real estate. Any advice for somebody without a steady pay check like every real estate agent out there?
Ben: The highest paid individuals in the world in my opinion and they have jobs or are on commission. And your commission can be variable if your activities are. So if you want to have a more consistent income, double or triple your activities. And if you’re in a commission job or you’re waiting on people to walk into your furniture shop or car dealership, switch careers so that you can get to that job that has that unlimited income.
Brandon: That’s so good. I never really thought about it in those terms before but so many people talk about like their pay cheques are up and down it’s not a very steady pay cheque, well that’s because like their thinking usually it’s like zero dollars one month, 5000 the next month, zero the next month. A lot of people have that problem.
So triple your efforts, find ways to work harder, work smarter and then maybe the variable is I make 20 one month, 25 the next month, 20 the next month, and now like who cares, variables is fine. No bank is going to have a problem with that.
But also the point about if you’re waiting for business to come in find something that you can go out there and hunt for rather than sitting at home in your cave hoping a bear wanders into the cave that you can hit it with a stick, alright yeah.
Ben: That’s right.
David: Maybe not a bear, maybe something easier to kill like a rabbit or something.
Ben: Well you remember that every good thing in your life required you to quite something. Don’t be afraid of quitting in order to get to where you want to go. Be afraid of staying where you are for the rest of your life.
Brandon: That’s good advice I’m out of here guys.
David: It’s Twitter quote right there.
Brandon: Let’s move on, we’ll wrap up the fire round there. But I want to head over to the last segment of our show which we lovingly refer to as our Famous Four. Alright with that let’s get to the world famous, Famous Four. The same four question we ask every guest every week. Ben number one, do you have a favourite real estate related book?
Ben: Probably the 150 pages of The Millionaire Real Estate Investor. And I hate to beat up Jay and Gary but the first 150 pages are the best. Or Tax-Free Wealth is a big winner for me this year.
David: Awesome. Okay what about your favourite business book?
Ben: I read a massive amount of books. I hate to give Gary and Jay too much credit but The ONE Thing has definitely been an instrumental book in my life. I focus in on what is the very first priority and what is the one thing that if I’m focused on today would make everything else in my life easier or unnecessary? That book in itself changed my life.
Brandon: I’d say the same thing.
David: We’ve actually had Jay on the podcast before. So he did a really good job we’ll get that number for you guys and put it in the show notes if you want to listen to Jay’s podcast. But he’s a very smart business mind and he writes very good books. How about some hobbies Ben? What are your hobbies?
Ben: They’re not popular in today’s world but I love to fly fish, and hunt and hike and be outdoors and hang out with my golden retriever. And I love to read books and buy businesses.
Brandon: That’s awesome.
David: Pretty cool hobbies.
Brandon: Really good hobbies. Number four, Ben what do you think sets apart successful real estate investors from those who give up fail or never get started?
Ben: I think they complicate things, they come up with reasons to justify their results and they don’t take action. They don’t just start with one thing. If you want to be a millionaire in real estate and you don’t know where to start, buy a house. And then in two years buy another one and then in two years buy another one.
If you did that 10 times and you held them for 30 years, at the average price of America, you’d have a net worth of almost $8 million in 30 years. You just wanted to be an eight million dollar per year person, all you have to do would be to buy a house, rent it out and then buy another one. And you do that because the down payment is low, the interest rate is fixed and you can get a proof of financing. Just do it 10 times,
David: That’s really good. I’ve heard it said the easiest way to be a millionaire is to take a million dollars in real estate debt and let your tenants pay it off for you.
Brandon: That’s how I do the whole college hacking thing right for Rosie. Buy a property, put it on an 18 year mortgage, let the tenants pay it off and now it pays for her entire college. It would be worth 400 grand by then.
Ben: That’s amazing.
Brandon: Yeah it just pays for your kids’ college. Anyway alright cool. Well David last question.
David: Alright last question of the day. Ben for people that are fascinated by your incredible story and want to follow you on your journey to being the second coming of Warren Buffett where can people find out more about you?
Ben: They can reach out to me online. They can email me [email protected] or Facebook or Twitter, or if they ever want to come to one of our events we do events at benkinneytraining.com. Our next event is Win Make Give and it’s in April. And it’s about health, wealth leadership and legacy.
And one of the things that people may not know is we give 100% of the proceeds of all my training events to charity. And this year we’re putting that money towards providing housing solutions for fathers who are in some form of homelessness and they have children. Right now across the United States there’s nearly 3,000 organizations funded by the government for women and children.
And the last time we checked there was only one for fathers. And we want to break that cycle of homelessness. So if you come during any of our events, I don’t do it for money, that’s why we do it. So hopefully they’ll show up someday.
Brandon: That’s fantastic, really good stuff. Well thank you Ben this has been like eye opening just really good stuff today. So thank you and yeah I look forward to seeing you around.
Ben: Alright. Good to see you guys thanks for the time.
Brandon: Thank you.
David: Thanks Ben.
Brandon: Alright that was our interview with Ben Kinney business extraordinaire what did you say, the second coming of Warren Buffett.
David: Yes. I don’t know if anybody has ever told him that but I thought of it when he was talking because they think the same way. Man I mean honestly this is one that you’re going to need to listen to a couple of times because I can guarantee that with this much coming at you that fast you’ll miss some stuff while you were processing something earlier.
Just his facts alone on the filter he runs things through the seven goals that he has and he asks himself when an opportunity comes, would this help me meet my goals, like that’s worth thousands of dollars. Just that one little piece of information. And this was full of things just like that,
Brandon: Yeah really good, so awesome episode. I’m totally bumped up I actually want to just like even before this episode comes out because this doesn’t come out for a few weeks, I’m going to go and just take my Mp3 I just recorded and just go listen to the whole thing again because I’m like super jazzed.
So anyway alright everyone thank you so much for listening to our show. Again you can find the show notes at biggerpockets.com/show322. Again biggerpockets.com/show322. Follow us over in Instagram @BiggerPockets is the BiggerPockets Instagram, mine is @BeardyBrandon with a Y BeardyBrandon and David’s is @DavidGreene24. You want to take us out buddy?
David: Yes. Everybody who is listening add us on Instagram and Facebook, Twitter. Post what your goals are I want to issue a challenge for it. If you’ve got goals post what they are, tag Brandon and I. he and I are going to put our heads together and come up with how we help each other meeting our goals and we’ll probably share those with you in the future. I think that’s a great exercise. And with that being said, this is David Greene for Brandon (Everything is a Funnel) Turner, signing off.
Brandon: That’s a pretty good one.
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[End of Recording] [01:19:05]
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