BiggerPockets Real Estate Podcast

BiggerPockets Podcast 376: 12 Real Estate Rockstars Reveal Their No. 1 Tip for Surviving (& Thriving) Through a Downturn

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Strength in numbers!

When you finish this episode, you'll have 12-plus action items that could help you withstand the coming economic slump… and perhaps even accelerate your path to financial freedom.

Each investor featured today gives you their top piece of advice for handling an economic downturn: from mindset, to leadership, to specific strategies you can begin to put in place TODAY.

Don't miss this one, and be sure to subscribe to the BiggerPockets Real Estate Podcast for more hard-won wisdom on how to lead your business through the coronavirus crisis and beyond.

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Read the Transcript Here

Brandon:
This is the BiggerPockets podcast, show 376.

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David:
If you’re in this business for the long run, this whole time period that’s going on right now is just a bump in the road. You’re going to look back on the situation and you’re either going to look back and say, “Hey, I overcame this and I achieved” or “I crumbled and I failed,” which one is it going to be? That’s up to you.

Speaker 3:
You’re listening to BiggerPockets Radio, simplifying real estate for investors, large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com, your home for real estate investing online.

Brandon:
Hey, everybody, what’s going on? It’s Brandon Turner, host of the BiggerPockets podcast here with David Greene. What’s up, man?

David:
You completely blanked on what clever thing to say about me right there, didn’t you?

Brandon:
No. I didn’t blank on the cover. The last time you made fun of me for always bestowing upon you like my favorite, the temporary co-host.

David:
The temporary co-host in the [crosstalk 00:01:05].

Brandon:
So, I decided to remove co-host altogether and just give you the honor of being David Greene, not David.

David:
David, don’t get used to it, Greene. That’s what you told me.

Brandon:
Yeah. That’s pretty much it. How you’ve been?

David:
Well, been staying at home, getting work done.

Brandon:
Yeah?

David:
Trying to find our way through this issue, talking about a lot of real estate. I love this stuff because it forces us to dig deeper and look at stuff at a deeper level and I’m all about that. I like to understand the why of how things work, not just the what, so in a sick way, I like the change that we have going on.

Brandon:
All right. Well, yeah. I’m a big believer in that trauma forces change, so in terms of, yeah, you have a heart attack, you start eating healthier or you get diagnosed with a disease and then all of a sudden you realized what’s important in your life and so you spend more time with family. So, trauma forces change and I think this is a giant heart attack for America.

David:
Yeah.

Brandon:
And I think if you look at it like that, as this is a massive opportunity for growth for the country and for all of us individually, I think it’s not going to be as bad as I think some people think it is in terms of that.

David:
Wise words.

Brandon:
So, it sucks that people get sick and die, that’s going to be horrible.

David:
But yeah, you know what? It reminds you of 9/11, right? At 9/11, all of the party politics stopped, all the division stopped, everybody rallied together. You see a lot of that. I mean, other than everybody being mad at other people for buying the toilet paper. Absent that, we’re all getting along really, really good, so there is good to come out of it. I like that wisdom. And on that topic, we actually have a show today full of wisdom.

Brandon:
We do have a show full of wisdom, so today we're talking with a number of different investors, and just financial smart people who are going to share with us their best tip for surviving and thriving in an economic meltdown. And so basically, I just asked a bunch of people that I look up to and trust and value their opinion on what they would suggest for our audience today. And so we're going to go through a lot of them and then David and I will offer some commentary.

Brandon:
And I believe next week, we’ll probably be back to the normal interview format here on the podcast, but we just want to make sure that we are covering this stuff as it’s hitting right now. So with that said, let’s get to today’s quick tip.

David:
Quick tip.

Brandon:
Quick tip, pick up a copy or order your copy of the brand new, BiggerPockets wealth magazine. That’s right. A real magazine like floppy and sparkly and shiny and all that magazine, like in your hand magazine, that BiggerPockets has launched right now. We’re very excited about this. We’ve got some really cool stuff in there, including a feature called BP Insights. It’s full of data, like a deep dive into data about the best cash flow markets with low vacancy and high income in 2020.

Brandon:
The first issue has a ton about recession resistant investing. There's a profile of a bunch of different investors, including Joe Asamoah, who was one of my favorite podcast guests we've ever had on, talking about how he's in section eight at this time. It's really a smart idea. You can find that and you can get your subscription at biggerpockets.com/magazine. It's like 30 bucks for a six-issue subscription over the course of the year, so it's super reasonable. Pick up a copy again of yours at biggerpockets.com/magazine.

Brandon:
And now David, let’s get into this thing. You ready?

David:
Oh yeah, I’m ready.

Brandon:
All right. First clip up of today is going to be our good buddy. He was a keynote speaker last year at the BP Con, David Osborne. He’s the Operating Partner at Keller Williams, author of Wealth Can’t Wait, co-founder of GoBundance, a tribe of healthy, wealthy, generous men, which both David and I are part of, and just all around like one of the smartest, coolest guys I’ve ever met. So with that, David Osborne.

David Osborne:
Write yourself a 10-year vision, write at the top of the page is 2030. My last 10 years have been amazing. My wife and I are getting on better than ever. My health and fitness is incredible. My kids are all doing amazing. My daughter’s in college, whatever. Then get into business. You say 10 years ago today, we had this crisis, this coronavirus, the entire economy came to a halt. And I’m so proud of the way I led and the character I developed and the man I became through that time period. I made great decisions. I cut overhead quickly. I preserved cash. And then I took full advantage of the recovery, and because it was such a deep, sharp crash, that recovery was long and lasting, and there was a lot of money to be made. And that’s what really made my fortune and helped me get to a whole new level.

David Osborne:
And you remember that the worst thing about a boom is that every day you’re in a boom, you’re one day closer to a crash. Every day that you’re in a crash, you’re one day closer to a boom. And the great thing about right now is we’re in a crash, so we’re going to ride this thing out and then we’re going to write a big boom and then the future will be twice the people, twice the business people we are, twice the men we are or women, stronger fathers, stronger husbands or wives, whatever, and we’re going to do all that. And the reason it’s valuable to write about your future from today is it puts perspective on it. In 10 years, you won’t remember the pain and fear that we’re living through today, you’ll just remember the abundance that came from it, so good luck. Write your 10-year vision.

Brandon:
Awesome. Yeah. All right. So, basically the way this format of the show is going to be is we’re going to listen to a clip like that and then we’re going to talk about it a little bit, David and I. I sort of start with just saying like I had a performance coach tell me this, this week as well. He said, “Looking back, do you want to remember this time as something that changed you for the positive or something that you just squandered your time and you lived in fear?”

Brandon:
And that’s what I think David’s getting at here. It’s like, look, 10 years from now, again, we’re not going to remember all the highs and lows and the little daily mundane, like I’m locked in my house, but are we going to look back and say, “That was the moment where my life shifted a little bit.” It’s the whole analogy of a plane taking off if you just get one degree off, like 2000 miles later, they’re hundreds of miles off course because just one degree changed. So, I look at that now. I liked the idea of, yeah, writing that vision of, “This is where we’re at right now, it’s 2030 and this is what my business is like. And it all started back in 2020 because of that crisis.” What do you think?

David:
What I liked was his talk about how cycles are normal. I mean, that’s a really good point we need to point out to people. Part of my irritation with every time we start to get into a downturn and everyone panics and screams, “Well, what’s the government going to do?” Is that there’s this presupposition that you should never have a downturn, but that’s not a healthy way to live life if all you did is work out and you never rested, would you get anywhere? If all you did was work and you never vacationed or vice versa, you vacation and never worked, would you get anywhere?” Life is meant to go up and down. It’s totally normal to have a time where a business goes great then there’s a change, things go bad as we adjust and we learn how to operate under the new normal and then we come back.

David:
I mean, if you really just think about the last bubbles we had, the last crisis was a lending crisis. We were making loans on real estate and other things in a very stupid way, and we had to pay a price, we had to change, we came back. The dot-com bubble. There was a lot of people that were throwing money into websites and those people made a lot of cash, then making websites became easy and it wasn't really a big deal anymore. That whole bubble crashed. We wrote it down. We learned. We came back with a new thing. We came back up. It's okay to go through these cycles. It's okay to go through them in your personal life in your own business life. The economy in general. Don't let yourself start feeling like a victim because we entered into a market cycle that doesn't look like it's as good like Dave said, every day that you're in a boom, you're one day closer to a bust.

Brandon:
Yeah. That’s an interesting way of looking at it. When the collapse happens, if it doesn’t and maybe real estate is not going to tank like it did last time, maybe it will. We have no idea, but the world’s going to look very different a month from now, two months from now, six months from now. And chances are, there’ll be a lot of opportunity, I guess. Have you ever seen those memes like, or not memes, but like social sharing things of how many massive businesses came out of recessions? Like most of them. Billionaires were made during recessions and business.

Brandon:
And it’s not like, “Hey, we’re going to go and take advantage of the situation.” But in a way, it’s like, “Yeah, we’re going to rise to the occasion and we’re going to use this moment because now we’re starting from the ground up, and we can build again.” How many times you hear people, new investors complaining, “Well, yeah. It’s not easy to find deals anymore. It’s not 2007 or ’08 anymore?” Guess what? It is 2008 now.

David:
Yeah.

Brandon:
We’re likely going to be back there, maybe not. Again, maybe not as bad, but maybe worse. We don’t know, but gear up.

David:
Gear up. This next video that we’re about to listen to is a really good example of somebody who went through a downturn in his life to say the least.

Brandon:
Yeah.

David:
And came out of it much better.

Brandon:
Yeah. AJ Osborn is good buddy of mine and he owns a million square foot in self-storage. He was on our episode number 286 of the BiggerPockets podcast. He’s the one if you guys remember back, his story was where he woke up one day in a coma or I don’t know if you could say woke up in a coma, but his body is basically shut down, but he was awake the whole time and it’s like body was on fire for months, and he was awake during that. It was just a crazy story. Then he couldn’t walk for the longest time.

David:
His immune system was attacking him. That’s what it was.

Brandon:
Yeah. That’s what it was. Yeah. It’s just like the worst, but because he had all this cash flow coming in from rental properties, he survived it, he thrived, he got through it. So from a personal, he’s got quite the example of overcoming that adversity. So we’re going to hear from AJ now.

AJ:
Now, the way that you survive and thrive in economic downturns is by putting other people first. Let me explain. We all, of course, know cash is king and you want to get rid of bad dead, cut expenses, increase cash flows, but for every entrepreneur and real estate investor what people need during an economic downturn is solutions and lots of times solutions to hard, emotional problems. It’s a time of turmoil and a time that people need someone to step up and lead the way. And this offers very unique opportunities to those that can put others before themselves, for those that can carry the burden, and for those that will step up to the plate.

AJ:
This was a way that we expanded our portfolio massively and had a lot of wonderful opportunity when working with banks, business owners and developers as they were trying to solve problems to their real estate crisis that they had in their wakes. Every crisis is the same. You need to solve complex problems and by forgetting about yourself and putting other people first, people remember that and it really does come back and most of the time it comes back tenfold.

Brandon:
Yeah. So good. So what stands out to me here is this idea of complex problems where the economy and the world is changing right now. We’re seeing it massive ways. For example, David, have you thought about how many employees now all of a sudden realize they can do their entire job from home?

David:
Aha.

Brandon:
That they can now, right? And all of a sudden, businesses are like, “Wait. Why are we renting that giant office space that’s costing us $40,000 a month when all of our employees actually did just as well working from home?”

David:
What about other people that…

Brandon:
I wonder if that’s going to shift things.

David:
… never used Amazon because they weren’t comfortable with the internet, maybe the older demographics and now they’re like, “Oh, it’s that easy to order toilet paper? I’ll totally use Amazon.” And now when we come out of this thing, they’re not going back to grocery store as much.

Brandon:
Yeah. It’s fascinating and the idea of the meal delivery stuff, the Grab hubs, those things. This is a shift in our society that is being forced upon us and I think that thinking that these are problems that people can have, what do you do with these giant office buildings if they’re not going to be there. That’s an opportunity maybe for you to step in and lead the way to solve these complex problems.

Brandon:
And somebody brought up a great point on the webinar, I did the BiggerPockets webinar last night, and somebody said, a lot of the sickness is being spread in these retirement communities. What do you call them like nursing homes basically?

David:
Yeah.

Brandon:
Because everyone’s living so close together. Who’s going to want to send their parents to a nursing home after this, just knowing that disease is part of our life now and officially it’s like this may not be the last one we face, so maybe that’s a complex problem that we’re going to solve. Who can solve that problem of how do we take care of our elderly, like the dramatic amount of elderly people coming out, without shoving people into a giant crowded space that disease just spreads rampantly? Complex problem.

David:
What I liked about what he said had to do with the fact that you need to focus on putting others first when you’re in a scary time, because you see a lot of the opposite. Your animal instincts will tell you self-preserve, buy all of the food, buy all the toilet paper, buy everything you can get, and don’t worry about other people. And it’s in times like this, you have to be extra careful that you don’t let your fear turn you into the kind of person that you don’t want to be. Like what David Osborne was saying when he said, “We should come out as better husbands, better fathers, better business people.”

David:
Be very aware of the fact your own emotions will be trying to get you to self-preserve, because that’s always the first instinct we have, but we’re human beings, we’re not animals. We can override that if we choose to and continue to look for other people and how to help them.

Brandon:
Yeah, yeah, so good. All right, well, let’s move on to the next one. So next, we got our buddy Tarl Yarber. So, Tarl’s a regular contributor on the BiggerPockets YouTube page, as well as on our Facebook Lives, on BiggerPockets Facebook Live. He runs a big conference out in the Pacific Northwest. He’s a flipper. He’s a rental owner. He does burr. He runs a big meet-up. He’s just a super great guy. If you guys don’t know Tarl, you should know Tarl. With that let’s hear from Tarl on his advice for surviving and/or thriving in the economic meltdown.

Tarl:
Emotion kills in this business. It has killed us before this crisis and it will definitely kill us during this crisis. So, if you have something that’s happening in your business that you’ve It was out of your control, please, stop and think for a second and think about what can you control of the situation and when something’s happening to make you react, think, make a plan, and when you make that plan, do the math of the plan, mitigate the risk and measure that risk and then execute that plan. It’s no different than when we invest in real estate every single day. It’s no different now and no different in the future. We measure and mitigate risk.

Tarl:
So, last thing I want to leave you guys with is that if you’re in this business for the long run, this whole time period that’s going on right now, it’s just a bump in the road. You’re going to look back on the situation and you’re either going to look back and say, “Hey, I overcame this and I achieved or I crumbled and I failed,” which one is it going to be? That’s up to you.

Tarl:
One last thought, Brandon, I love you. Please be my best friend forever. You’re going to help me get through this, right? Please save me.

Brandon:
Tarl, he’s a funny dude. All right. A couple of things come to mind real quick. I’ve been watching a lot of Frozen 2 lately. Have you watched Frozen 2 yet, David? [crosstalk 00:14:56].

David:
I actually did.

Brandon:
Okay. We’ve been watching so much if and there’s a scene in there where the snowman, Olaf is getting icicles shoved in his head by a bunch of little kids and he’s like, “This is called controlling what you can control when you feel out of control,” or something like that. Anyways, basically what Tarl is saying here is there are a lot of things out of control right now, so focusing like Olaf on what you can control. I can’t control whether or not my tenants are going to pay rent necessarily, but I can control the letter that I sent them a week beforehand to remind them that rent still got to be paid and if they can’t pay it then let’s have a conversation, keep in contact. So again, those are the things that I can do rather than just complaining about what I can’t control. What do you think?

David:
My favorite thing is he said is isolate the risk and mitigate that risk. That is man, when you can come to peace with the fact that you cannot get away from risk in life, you’ll do so much better. It’s always there. We just don’t always see it. Right now, do I want to buy? Are prices going to go down more? The risk is, they might go down more. If I buy right now are the tenants going to stop paying rent? That’s a risk. Let’s say prices drop to 50% of where they are. If you buy now, you’re taking a risk because what if they don’t go back up. If you buy when they’re really high, you’re taking a risk because what if I bought at the top of the market.

David:
You never get away from risk, like running away and hiding from it, just make sure that you never get anything done. You have to learn to flow with it. If there wasn’t risk, there wouldn’t be opportunity. They go hand in hand. What’s the opposite of an inverse relationship? What’s the fancy word for that?

Brandon:
Exverse.

David:
Exverse. I think totally asked the wrong person that question. That’s very funny. They have a symbiotic relationship. I don’t know. When one goes up, the other goes up, too. So if you’re looking for opportunity, by nature, you are also playing around with risk and you have to be okay with it and he made a really good point. We don’t have to hide from risk, we plan for it, we put a contingency in place. We know if X happens, I do Y. If A happens, I do B and we move forward.

Brandon:
Yeah, so good. Yeah. Last thing I’ll point out before we move on, that he mentioned was controlling your emotions, right? Emotion kills, I think is what he said. Let’s just take and realize when bad things happen like this, you could just start reacting off the caveman brain in you. It’s like run, cry, be scared, but I just want to encourage everyone just to take a step back and just breathe. This is fine. We’re going to figure this out. This is what we do. This is how we’re going to get through it and we’re going to solve these complex problems to bring back AJ’s thoughts. So yeah, don’t let emotion kill you, take a step back, move forward.

Brandon:
All right. Time to bring in our next, I guess, guest here today. We divided today’s show by the way in I think four chunks. The first one is a lot about mindset stuff. Now, we’re going to move into some financial advice from some folks and so the first guest, it’s actually a husband and wife team here we’re going to bring in. You guys know who they are. It’s Jay and Wendy Papasan. You want to talk about Jay and Wendy? Because you’re the one that first introduced me to Jay.

David:
No, I didn’t actually you introduce me to Jay.

Brandon:
Did I?

David:
Yeah.

Brandon:
No way.

David:
But I really like him. It’s because I was a Keller Williams guy and Jay is a Keller Williams guy by the way and I thought that-

Brandon:
I think you introduced me to the concept. I think you introduced me to the concept of the Jay. I really like who he was because you said he was like a big deal in Keller Williams and then I read the one thing, so that’s what I know.

David:
I like that whole, like you just created a category if you introduced me to the concept of something. Man, I could be responsible for a lot of introductions from that perspective. Yeah, I introduced to you the concept of Jay Papasan. He’s that big of a deal, but he actually has his own concept.

Brandon:
He does have his own concept. So, tell us about Jay.

David:
Jay is awesome, man. I really liked this guy. He’s becoming a friend and I got to meet him with Brandon for the first time in Austin, Texas where he lives. Jay is basically Gary Keller’s like number one man. He’s his right hand man. He’s at all of the big events that Gary does. He’s the co-author of all the books that Keller Williams publishes. They’re right behind BiggerPockets for the top publishing company and real estate.

Brandon:
I like that. Yeah, they’re right behind.

David:
Right behind us. Actually, they’re great, right? That just shows we’re even greater. I just gave us a compliment with that.

Brandon:
And let’s be honest, they’ve actually sold I think way more copies of their books than we’ve ever had of ours.

David:
Well, that’s going to tell you to crack it, right? Currently, we used to be ahead of them on Amazon at this very brief moment of time, but yeah.

Brandon:
Actually right now, we don’t.

David:
Really?

Brandon:
Yeah, their book Shift is ahead of us right now.

David:
I thought the screenshot you sent me showed I was one, you were two, and Shift was three.

Brandon:
It changed. Well, it changed.

David:
You didn’t have to say that. All right. Well, we compete with Keller Williams to be the top publishing company in real estate, but the reality is, Jay is like 100 times better author than me and probably 50 times better than Brandon.

Brandon:
Yeah.

David:
He’s a super good author. He writes incredibly good books. I’m always afraid-

Brandon:
Yeah, that book The-

David:
Which one?

Brandon:
The ONE Thing is like the book I brag about almost more than anything else. He wrote The ONE Thing with Gary Keller, and it’s a phenomenal legend.

David:
Yeah. I was on the podcast for the first time, I told people my favorite book was Millionaire Real Estate Agent, just because it's so well written.

Brandon:
Yeah.

David:
It’s just an incredibly well written book. And he also wrote Million Dollar Real Estate Investor and a lot of the other books that Keller Williams does. His wife Wendy runs a really hugely successful real estate team out of Texas with a couple expansion teams, and they’re just really good people. I mean, he’s a straight shooter. He keeps the most important thing, the most important thing. He gives terrific advice. He’s a very solid guy. It’s very hard to meet Jay and not have a lot of respect for him. So every time he talks, I get really quiet and I listen.

Brandon:
Yeah, agreed. Well, let’s hear from Jay and Wendy which by the way, they were actually on episode number 113 was the first time that Jay was on the podcast, but then Wendy and Jay together were on the podcast recently. They were together on episode 362. All right, with that, let’s hear from Jay and Wendy. I think Wendy’s first.

Wendy:
Our tip today is to cut expenses immediately and the way that you guys are going to do that is you’re going to print out three months of your credit card statements and three months of your bank statements, and you’re going to do the hard work of going through them line by line.

Jay:
That’s right. You’re going to categorize it in four ways. There’s mission critical expenses, right? This is stuff that you can’t live without. There’s stuff that you’d really, really like to keep, right? So, you’re going to hold on to that until you have to, and there’s stuff that you absolutely can cut and you’re also going to find a bunch of stuff that’s like, what the heck is this? And that stuff gets cut immediately.

Wendy:
Yep, and you’re going to do all that in the next 48 hours, right? You’re going to do it in the next 48 hours. Don’t forget, CASO is always mission critical.

Jay:
Now that’s a good tip.

Brandon:
CASO is mission critical.

David:
Brandon, what is CASO? What’s like you can’t live without it?

Brandon:
Oh man, food wise or anything wise?

David:
Any kind of perishable good?

Brandon:
I’m going to go with Kirkland Signature cookie dough protein bars, so there’s these protein bars from Kirkland things from Costco, that are cookie dough and they are probably the best thing in the world in terms of perishable food, so don’t run out of Costco ever.

David:
Interesting.

Brandon:
What about you?

David:
I was hoping you wouldn’t ask me that because I didn’t have enough time to think of anything that would actually be mission critical, like I just can’t do without it.

Brandon:
Well, you think about it while we’re talking about Wendy and Jay. So their advice? Cut all expenses. This is so smart, because how many times over time like our bank accounts, there’s so many subscription revenue things in the world today, right? Like there’s so many things that you add on to your life that you don’t use anymore, like gym memberships or random like software programs that you bought years ago, especially if you’re an investor or an agent or you’re a business person, you probably have a lot in your account.

Brandon:
In fact, I wrote a blog post recently, well, actually like recently, like two years ago, but it basically said, I found like $100,000 hidden in my bank account and the point I made was when I went to my bank account and I did exactly what Wendy and Jay said. I printed all my statement, went line by line through each item, and I found like $180 or something like that worth of stuff that I didn’t need, so I canceled it, but if you take 180 times an 8% return over the next like 30 years, it was like a couple of hundred grand and so I make that point.

Brandon:
So yeah, definitely check it out. Yeah, you can find more about, I guess, I was going to say more of like that story and my story with money because I had a funny money story on the BiggerPockets Money podcast. I was show 100, so just go to biggerpockets.com/moneyshow100 as soon as you’re done listening to this episode then you can hear my crazy, horrible money life, but Greene, what do you think? Cutting expenses?

David:
Yeah, I hate it and it’s not that I hate cutting expenses. I hate taking the time to actually go look at what I’ve been doing.

Brandon:
Yeah.

David:
I think guys like Brandon and I, we just despise having to slow down from making money to go look at what we’re making, but I mean, every single time you do it, you’re like, “What? Why are we spending money on that or are we getting anything for this? That always comes up all the time. So I hired a guy and he helps runs my finances now, Tanner and Tanner because I know that I don’t do that enough, he looks at it and he gets in front of me and says, “Why are we spending money on this or what’s the purpose of that?”

Brandon:
Nice.

David:
And it helps me make sure I’m actually deducting it as an expense. It’s another thing that if we’re just being honest, I oftentimes forget to deduct things from an expense. So what I love about doing this is that when you’re looking at… you see most of us make decisions based on emotions, I’ve talked about that before, but what we’re talking about is information, so it gets confusing. Like, “Okay, I’m looking at all these numbers. How do I know what to do?”

David:
When you see the big expenses that shouldn’t be there, it feels like a punch to your gut and it makes it very easy to get rid of them. When you’re not looking at it, it’s very easy to just keep paying it. That’s why it’s easier to spend money on a credit card than with cash because you feel it when it’s cash coming out of your wallet. When it’s a credit card, there’s no emotion tied to it.

Brandon:
So true. David, what’s your thought on though, I’m curious, because it’s tough because on one hand, we want to cut expenses from our life, but let’s just say your expenses are income to somebody else and during a time like this, how do you balance that? Like, I want to help support other businesses, but at the same time, I’m going to cut expenses so that way, my own life can survive. Where do you balance that?

David:
That’s really, really good. I heard somebody one time that talked about how economics professors that are trying to help companies decide how to sell products develop this like made-up I concept called a util. And a util is a unit of measurement that they would use to determine how much satisfaction somebody gets from something. So what they would say is, “Okay, how big should we make a Snickers bar?”

David:
Well, the average size of a bite of a human is this big and the first bite, they’ll get 10 utils of satisfaction. They’ll love it. The Snickers bar tastes so good. Well, your second bite is maybe like 6-1/2 utils of satisfaction, and the third is maybe 4-1/2 and at a certain point, it’s not really worth the calories that you’re taking in to keep eating. So what they were trying to do is make a bar only as big enough as they needed to, to maximize how many utils of satisfaction a human being would, like they’re actually doing studies That’s hilarious to me of like, you take a bite and write down out of 1 to 10 how good was that bite.

David:
But that concept applies to the question that you’re asking right now. You should not be spending money on something that doesn’t bring you a large return on joy, or a return on excitement or make you pumped up to want to go do something more to help your business. So like I fly out there to visit you in Hawaii and that’s an expense but every time I go, I come back and I do more than what I did when I left. That is an investment even though it’s a vacation. There’s other things that you do like going out to eat when you don’t even really want to eat that bad or you’re not that hunger or you have food at home. That is a stupid expense. It just doesn’t make sense.

David:
And I would say the same is probably true in the business. I’m happy to spend things on people in my business when they are supporting me and they’re bringing me back deals. They’re bringing me referrals. They’re helping me grow. I will continue to spend on those people all the time. If you’re someone who’s only been taking and not giving, that’s where I’m probably going to make my cuts the first.

Brandon:
Yeah, that’s good. I’ll throw one more thought out there, too, is cutting expenses super important. I’m actually going to do exactly what Wendy suggested and actually, let’s make this a challenge. Let’s make this a community wide challenge right now. Do me a favor guys. Will you leave a comment below the video on YouTube of this episode or in the comments at biggerpockets.com/show376? Let us know how much money you cut from your budget or from your expenses on a monthly basis and let’s see who can cut the most amount of money from their expenses.

Brandon:
So I’m actually going to do this. I’m going to go find out and stuff. I’m going to download my bank statement and go through it, just like they said. But here’s where I want to caution people is don’t cut stuff that’s actually going to make you less money. It’s easy to want to go like, “Oh, I’m going to go cut that thing because it’s cost me $100 a month,” but you forget like that is actually bringing you, for example, I pay a performance coach. Now this is not like a guru, like a real estate guru kind of guy, but I pay for a performance coach. Every other week, we have a conversation. He holds me accountable to all my goals, my plans, whatever, and I’ve had massive success the last couple of years, largely because of this.

Brandon:
His name’s Jason, he’s awesome. Jason Reed, and I know David, you do the same thing. In times of fear, I might say, “Well, that’s a lot of money every month. I’m paying him hundreds of dollars a month, I’m going to cut that.” But that would be stupid for me to cut that because that’s what actually generates a lot of my revenue is those questions that he asked and encouragement. So be careful not to cut things without thinking through, “Am I actually making more because of this or are we doing better?”

David:
Yeah, that’s great. So look at the return that it’s giving you, don’t just look at the expense. I know when I look at my David Greene team’s, my Keller Williams real estate team’s expenses. Oftentimes, there’s a lot of marketing expenses and like the first thing you want to do is cut those out, but those are the professional pictures and editing that we get done that drives people to the house that helps us to sell it for more money. I could cut that out, but it would hurt my clients so much. Word would get around that we’re not selling houses for more than other people and it would hurt the business.

David:
So that’s the point I was trying to make, I think you made it better, is cut the stuff that isn’t helping you first. If it is helping you, don’t just look at what you’re saving by cutting it, look at what you could be losing by cutting it.

Brandon:
There we go. So, speaking of experts, our next guest commentator here is Amanda Han. Amanda wrote The Book On Tax Strategies For The Savvy Real Estate Investor and the advanced version which is out right now. You can get it at biggerpockets.com/store. So, Amanda is actually my personal CPA as well. She’s the one that does all my taxes every year, so I decided to reach out and ask what would she recommend.

Amanda:
So as some of you might already know that IRS recently extended both the tax filing and payment deadline from April 15 to July 15. So we can take our time to capture all of our legitimate tax deductions, and there’s not a reason to rush to get the taxes filed by April 15. Of course, if you’re expecting a refund, maybe consider filing soon to get that money back into your pocket. Now that we have this rare opportunity to take time off from work and stay home to practice social distancing, now’s a great time maybe to take control of your finances. Contact your tax advisor, find ways to maximize your tax savings, and also do some proactive planning ahead for 2020 and beyond, right? So, read a good book about investing or money raising or tax savings, and don’t let this time off go to waste. All right. Stay safe, everyone.

Brandon:
I love this tip. Because, how many times have you ever said, David, because I know I’ve done it, too, it’s like, I don’t really have time to dig in because I’m so busy. I don’t have to dig into like tax strategies and all that. I just kind of want somebody to tell me what to do. But that’s just like so not extreme ownership. I should take ownership of my own finances a little bit and especially in terms of taxes.

Brandon:
So, I’m not saying that to be a CPA, but I should know more than I probably do, right? I don’t know that excuse right now. I can’t say I don’t have enough time. I can see this meme online about all the things in life I said I didn’t have time for, I now realize I had nothing to do with time, because we’re still not doing them. Like I’m still like doing my laundry even though I have all the time in the world to do it. So, this is such a great opportunity to really brush up on those skills.

David:
What I thought when she was talking was it kind of came clear to me. The reason that we don’t look at our finances or look at our budget very closely when the economy’s really good is because we’re busy making money. That’s offense. We’re scoring points, right? Well, now, there’s not a lot of points to score. There’s not as much opportunity. Things have slowed down. Why wouldn’t you shift your attention to defense? It doesn’t mean do nothing. It just means do what you can do.

David:
Now is where we should be cleaning things up and improving our systems. I know we're doing a lot of work on our database. So getting that organized, putting plans together, so it's easier to stay in touch with past clients, assigning new people in my team jobs that they can be doing to help stay in touch with people, hiring new administrators. It's all like kind of defense-oriented stuff, so that when we do come out of this little recession or pause or whatever you want to call it, we're primed to make more progress faster.

Brandon:
Yeah.

David:
Very good advice from Amanda.

Brandon:
Very good. All right. Well, our next guest today is Brian Burke. So, Brian Burke is the CEO of Praxis Capital. He’s a syndicator with over $200 million of real estate assets under management, author of an upcoming book on investing in syndications for BiggerPockets, which you’ll hear about in the future. And Brian Burke is just a super guy. He’s been on the podcast now, I think, like three times. I really look up to him a lot. Let’s hear what Brian Burke has to say about this crazy time.

Brian:
Before you can thrive in this crisis, you first have to survive it. So first, remember, you and your tenants are all in this together. You've got to be able to work with people and keep as many residents as you can, in order to survive through this market. It's going to be a challenging time for everyone, but you got to do what you can to work with your tenants, but your lenders might even be working with you. There was just something that came out today saying that the agency lenders on multifamily property are going to be doing loan forbearance agreements for a period of time for multifamily owners who are willing to delay evictions from their residents that are affected by the COVID-19 virus situation. So be sure to stay in touch with your lender, stay in touch with your residents, and you can make it through the other side. Once you make it through, then you can thrive and take advantage of all that the market's going to offer down the future.

Brandon:
All right. So like I said, Brian Burke is a massively successful real estate investor with a lot of tenants and he’s got the same concerns that I think a lot of us do landlords is what happens if our tenants just don’t pay rent. So like he said, “We have to survive first before we can thrive.” And so the first thing is, how do we like hold in our cash and how do we make sure that the tenants still pay rent? Can we work with them? How many can keep? Talk to your banks, like get that forbearance going. I think it’s all really, really good advice.

Brandon:
The forbearance thing is super interesting to me and we're keeping a close eye on that going forward, is can we spread out our loans? I know there's a bill going through the Senate and the House right now, that has some provisions on there if you have like a Fannie Mae, Freddie Mac loan, like on a single family or a small multi, which most people that are in real estate do that are going to allow for some forbearance options there. So, definitely keep an eye on that stuff, you guys. This is our job as real estate investors. This is when we have to go to work sometimes, and knowing what changes are coming is a big part of that. What do you think, Greene?

David:
Yeah, I think forbearance is incredibly smart on behalf of lenders. I was just having a talk with somebody yesterday. He was talking about all the corporate debt and how he’s expecting massive companies to just get completely shut down because they can’t make their payments. And I was saying to him, “If you were a lender, and you didn’t get your payment for two months or something, would you want to take over an incredibly complex organism like a huge company because they didn’t pay you? Would you want to foreclose on that company and take it over?” Probably not. You don’t even know what to do with that thing. You’re going to work with them. Maybe you impose penalties because they missed their payment. You get some kind a win somewhere, but you’re not just going to want to take the whole thing, and it’s very similar to lenders right now.

David:
They don’t want to foreclose on a house that someone just bought a year ago unless they put like 50% down. Most people don’t do that. They put down somewhere between 3 and 10% than the average number of people that are buying a house to live in. Lenders don’t want to take those back right now. They’re going to give you some time to make those payments, so I think forbearance is very smart. It’s one of the reasons I don’t think we’re going to see incredible buying opportunities just because of this virus. I do think that time will come. I don’t think it’s going to be like just flying off the shelves, everything on clearance like people thought, but this is better. It’s smart. Like there’s some flexibility. It’s not just you make your payment or you don’t. There’s a little bit of wiggle room in there.

Brandon:
Yeah, very good. All right. Well, next we’re going to bring in Noah Kagan. So, Noah is the founder of AppSumo, now, it’s just sumo.com. He was an early employee at Facebook, at men digital marketer, real estate investor. Super great guy. He was on episode, I don’t remember, Noah Kagan BiggerPockets Episode 213 of the BiggerPockets podcast. Noah is just one of my favorite people in the world, and very, very good at business, at both real estate and business. So let’s hear what he’s got to say.

Noah:
What is up, you gorgeous, BiggerPockets members? This is the time that you guys have all been waiting for. We’ve been sitting on the sidelines, waiting for real estate to be an opportunity, and I want to talk about how to survive and thrive. So, I’ve been talking about how to become recession proof, recession proof your business. I’m going to give you four things that you should go do instantly. Number one, make a plan. Once I start making a plan for myself and for our company @appsumo.com, I felt much better and I feel more control of everything going on. We have two ways that we’ve done our plans. For our company, we’ve done a 35 plan, which means we’ve assumed our revenue is going to go down 30% and we want a minimum 5% net income.

Noah:
And so we made those changes immediately, even though business hasn’t really slowed down at all for us. It’s actually gone up because more people are working from home and so they need more help and need more tools. So make a plan for your business and take action. Second thing that we’ve done personally is I’ve moved to a 70/30 cash to equities position, so that I don’t really have to worry about the market and I have cash to do the things that I want to do.

Noah:
Number two, be aggressive and defensive. So what can you cut? What subscriptions, what SAS subscriptions, go buy AppSumo and where can actually go aggressive? There’s a lot more ways that you can actually go out there and there’s a lot of opportunities, more than ever, especially now with uncertainty. I don’t want things to get more calm. I don’t want things to slow down. I want the virus to go away, but the uncertainty is where the opportunity is. Number three, be quiet. So, there’s too many opinions. There’s people like me, there’s all these pundits. Who the hell knows? Just go for a walk, come home, write down your plan. This is your Bible, this is your Torah, this is your Quran and go follow this for yourself, and you’ll feel a whole lot better. That’s definitely one thing.

Noah:
But here’s four things you can do to be creative and swift and making money during real estate, in my opinion. Number one, how can you get creative and renting your place out? Can you rent it out for short-term offices, packing distribution, video shoots? If people are doing more things online, maybe they can use it for that. Number two, make crazy low offers. The weird thing in real estate, it doesn’t cost you to make any offers. So I’ve been going out and being like, there’s a lot for sale. There’s a million dollars nearby where I live and my buddy’s like, “Let’s just offer 850?” And I was like, “Why don’t we just offer 700?” Everyone is starting to panic. The fear hasn’t fully gotten to peak, but it will happen in the next week or two as everything slows down, as everything closes down. So make crazy offers.

Noah:
Number three, I actually got nervous about making that offer and putting up 700,000 in cash right now I want to be cash strong, so I can take whatever opportunities are coming out there, so I’m hedging it by getting in groups. So if you’re thinking about some real estate, you’re a little nervous about it because you’re not sure if it’s still even overvalued or it’d start getting undervalued, getting a group of 4, 5, 10 people, use BiggerPockets to find a person and that’s chance to hedge your risk. And number four, get your renters to prepay you, so if you have any renters in any of your properties, go to them and say 30% off pay me for the year then you don’t have to worry about your rent, you don’t have to worry about your place and I don’t have to worry about any of the money coming in or out.

Noah:
So these are four things you can do in real estate right now. The opportunity is in the chaos. You guys got this.

Brandon:
Alright, so that was Noah Kagan. I like this guy because he’s super actionable like do this, do this, do this. So a couple of his thoughts. Number one, he said, get creative in renting your place out. I think that’s fantastic. A good example that we were talking with Justin Stamper recently on the podcast and then I also did like an Instagram Live with him and he talked about how he’s renting out his place to traveling nurses right now, because he had a bunch of Airbnbs, he couldn’t rent them out, so he just went over the traveling nurses and got them all rented out. And so just very smart thinking, how can I get creative on this? I think that’s awesome.

Brandon:
And then of course, making low offers like, there’s really no downside to China right now people, especially now they’re getting nervous, “Well, I got to get my money out quick. I got to get this thing before it gets worse.” Maybe now’s a good time to do that, it doesn’t hurt you. What do you think, David?

David:
Well, first off, I think I’m the only guy in the world that doesn’t know Noah Kagan. Isn’t he considered like the top networker in the entire universe? Like he just knows everyone?

Brandon:
Yeah, you kind of know him through me though.

David:
[crosstalk 00:38:33].

Brandon:
So, maybe I’m the network for Noah then.

David:
I was introduced to the concept of Noah Kagan through you, but not actually Noah yet.

Brandon:
There you go.

David:
Here’s what I’m liking about what he’s talking about. Well, first off, everybody who hears this advice, it doesn’t work in every single market. If you’re in my market in the Bay Area, and you write a low offer, it probably won’t matter. We’re still getting multiple offers on houses, even with people that can’t see them. Because we were so hot that even though we’re cooling, we’re not actually cold. Okay?

Brandon:
Yep.

David:
The thing I like about the low offer, even if it’s early, which it probably is right now, is just don’t make it insulting because you’re not expecting them to take your offer. What you’re opening a line of communication with that person, so that as their fear grows, you’re aware of it and you know when they are ready to sell. So don’t walk into this like, “I’m going to write one offer, swing my ax one time and knock down that tree.” Sometimes that works, most of the time, it’s not going to work. You write your offer, you tell them why you want to buy your house, you don’t do it in an insulting way, you keep the line of communication open, and you check in with them every week. And when they start to get really scared and you’re the person who’s right in front of them, that’s when you’re going to go into contract.

Brandon:
Yeah, and when we talk about don’t insult them, it’s not even just on the amount. It can be also just the way you would do it. You don’t just throw in a cold offer and don’t say anything like that’s-

David:
Rude.

Brandon:
Yeah, kind of rude, especially if it’s a low offer. But if you go in there with a letter or a story or get your agent to butter him up ahead of time or you have that conversation and you find out what they’re looking for, where they’re at, what they’re trying to do with the money. Now, you have context to be able to offer a lower amount. So there’s a little bit there.

Brandon:
I also really liked his advice about investing as a group. I don’t think that’s a bad idea at all right now and if you’re like, “Well, I only got 15 grand, nothing I can do in this market,” but there’s a thousand other people that are listening to this right now who’ve got 15 grand and not sure what to do with it. You get four of those together to go buy something, who cares if you’re splitting it four ways? You only got 15 grand invested in it. You’re going to learn more than you’ll ever make. The point is to learn, not necessarily to make a killing off of it, so it’s a great time to start get your feelers out that way.

David:
There you go. Cool. All right.

Brandon:
Next, let’s hear from our friend Brittany Arneson, who was show 320 at the BiggerPockets podcast. Oh, she and I had a competition of who gets to 100,000 followers on Instagram first. She won. She completely dominated. And Britt is super, super cool, so let’s hear from her on what she recommends at this crazy time.

Brittany:
Hi, everybody. Britt here. So, I got the van all packed up, ready to go, do some self-isolated renovation and I’ve been thinking this might be a time where you had to be extra, extra budget conscious. And this is how we’ve been able to make our renovation the nicest in our area, which in turn gives us the best tenants and saved us a ton of money in the process. So coming up here in these tough times, you might have to start thinking about doing things DIY. You’re going to have these skills forever. It’s fun if you could get into it, maybe it’s something you need to consider.

Brandon:
Very cool. Yeah. So this is one of the things that early on in my career, I did a lot of my own work and sometimes I say that I wish I wouldn’t have done so much of my own work. But in reality, the great part about being able to know how to do stuff is that when crap hits the fan, you can go down and start doing your own work. Like for example, you could start doing your own labor potentially. You could start doing your own rehab if you had to in a tough time. You could do your own management if you had to in a tough time.

Brandon:
So one of the cool things about just owning real estate is that there’s a lot of steps down You could take as needed if your cash gets really tight, especially if you’re a brand new investor right now and you’re struggling, but you own some properties. Yeah, maybe it’s time to take it in and just start dealing with it yourself. I don’t know. What do you think, David? I know most of your properties are out of state, so obviously, you’re not going to go out and swing a hammer, but-

David:
Yeah, but I started in-state and DIY wasn’t what was right for me because I had a full time job as a police officer, but let’s talk about the concept because everyone’s different. There’s some people that like doing it, there’s some people that don’t, there’s some people that can do it, there’s some people that can’t. Some people are just not physically able to do their own work, but they’re just not capable of it, they’re sick or they have an injury, handicap anything like that.

David:
I was talking to the same person I was telling you about yesterday, I was talking about corporate debt falling and we talked about what I learned when I became a real estate agent that has nothing to do with selling houses. And really, this is where I learned how to read a profit and loss statement, how I learned how to put a marketing plan together, how to learn how to influence people through sales, how I learned how to build a team, how I learned how to be a leader, how I learned to use a CRM, all of these skills that had nothing to do with selling houses, I learned because I did it and there's a lot of the value in that.

David:
So if you’re a DIY person, don’t look at it just from the perspective of “Well, is it cheaper or more expensive?” I mean, that’s one factor, the financial impact. “Would it be cheaper for me to hire someone or cheaper for me to do it?” Also look at it from what could I learn from doing this? If you have really low confidence, and doing this gives you confidence, and it was a good idea that you did it, if it forces your brain to work in different ways and solve problems differently than you did before and you can apply that to whatever you do in life next. Well, then it would make sense that you do it.

David:
I don’t think it’s a bad idea like that Brandon puts together his tools. I mean, I like to tease him about how he does his own stuff, because I think that’s funny, but Brandon likes doing it. He gets satisfaction from it. He gets to go to Heather and he gets to say, “Look, I did this for you.” He gets to feel like a strong caveman that brings home like a help, like I just this deer pelt to give to my wife. But I have learned to look at the world from if I do this myself, A, is it a good business decision, but B, is it a good personal decision? Well, it helped me in other ways.

Brandon:
It's tough, man. All right. Well I'm going to go put together a stool. All right. Next, J. Scott, author of The Book On Flipping Houses, host of the BiggerPockets business podcast and all around. Super smart guy. Let's hear what J.'s got to say.

J:
Hey, everybody, J. Scott here. Looking for one great tip on what you can be doing right now to prepare for the potential upcoming recession? This is what you should be doing. You should be putting together a fantastic team. One of the biggest difficulties during a downturn is that there are so many opportunities. There are so many potential things that you could be capitalizing on that generally speaking, you’re not going to have enough time and energy to do it yourself. So find other people that can help contribute capital to the team.

J:
Find people that can contribute time, energy and expertise to the team. Find people that are willing to work with you so that when these great opportunities come along, you don’t have to pick and choose one or two or three of them. You can do a whole bunch of them because you have a team around you that provides you the capital, the time, the effort and the expertise to get it all done. So, start now putting together that team, so when the opportunities start to arise, you can jump on them right away.

Brandon:
Yeah, so good. Yeah. This is the time if you’re sitting at home especially, you should obviously spend time with your family, do that kind of stuff, but spend time every day on the phone with people, with other investors. Finding out what they’re good at, what do they like doing, what do they get excitement from like, what’s their thing? So you can start putting together these pieces of like, “Hey, what if we just did this together?” I mean, this is like the biggest reason that our open to our capital, my mobile home park fund, just took off so huge in the last year is because I had like five or six people that are just like rock stars at what they do and we all just came together. We’re like the Avengers and we’re able to defeat Thanos and such. I’m not the analogy guy, David. Give me an analogy.

David:
Bu I like it, Dude. I mean, you’re making progress. You brought up superheroes.

Brandon:
All right. Thanks, man.

David:
Avengers worked. I mean, you struggled with what the bad guy would be because you’re not really defeating anyone, you’re raising money, but like, hey, you were really close. I thought that was just pretty big.

Brandon:
Thanks, man. That was like a B+ effort, right? All right.

David:
I love J.’s advice because it’s the same thing that I’m doing. It’s harder to find clients to sell houses to, and it’s harder to find listings to sell because everyone’s wanting to wait and see, so I just shifted and now I’m looking for talent. I’m actively trying to find who would be a good person on my real estate team who would be a good loan officer or even learning how to do those jobs that I could bring into my team and get them trained when this downtime so that when things open up again, they’re ready to go.

David:
Too many people wait for the opportunity to start preparing for it. It’s like waiting for the Olympics before you start working out. You’ve got four years of time before it’s going to start. If you don’t take advantage of that time, you’re going to lose when the Olympics come. This is a ceasefire. This is a pause. This is an opportunity for all of us to be sharpening our axe and then when the floodgates open, we’re going to go out there and start hacking away again.

Brandon:
Yeah, very well put. That was an A- effort right there.

David:
Well, I have to keep my job, right? You’re always telling me in the intro that I might be replaced, so there’s a lot of pressure to make these analogies good.

Brandon:
You got to. I’ll find somebody who’ll do a better analogy than you. Watch out.

Brandon:
All right. Our next guest today is Lucas Hall, founder of Landlordology, Head of Industry Relations at Cozy. Lucas is a wicked smart landlord, understands a lot of the landlord's stuff, and he's got some advice for us. If you're a landlord, listen up, here we go.

Lucas:
If you’re like me, you probably have tenants from all walks of life. Some of which are in the hospitality and service industry and some things you can do to help them help you would be one, give them a little more time to pay rent. So most mortgages are officially late until the 15th of the month, maybe you could give them the full 15 days. They would certainly appreciate it and would increase your chances of actually getting paid. Another thing you can do is give them weekly payments instead of monthly payments. Instead of having a huge chunk called rent due every month, maybe for the next couple months, tell them they can pay weekly, and maybe they’ll be able to pay the smaller, more digestible chunks.

Lucas:
And lastly, you could actually credit them the money temporarily. For example, you can say, "Hey, for the next two months, you only have to pay half rent and we'll make it up later." Worst case scenario, you take another security deposit at the end of the lease. So, good luck to you. Keep that cash flow going, and I'll see you on the other side.

Brandon:
Yeah, that’s smart. Yeah, like right now, as landlords, we’ve got to make sure that cash flow stays up somehow or that we’re going make it through this because like, what’s that thing you always say, David, about like cash flow is a defensive thing that’s designed to help us.

David:
Defensive [crosstalk 00:48:27], yeah.

Brandon:
Yeah.

David:
Keep that property.

Brandon:
So, we don’t lose our properties. Yeah. So if you lose your property, then it’s all over, right? I’m not saying that all landlords need to go and just tell all their tenants, “No rent anymore because we still have bills to pay.” I put a video out last week on BiggerPockets that’s over 100,000 views now about what happens if my tenants can’t pay rent, and it’s sparked a massive debate, so much that we had to turn off the comments in the YouTube because there were so many angry tenants that were like, “Greedy landlords. You should all be just waiving all rents completely until this thing has blown over.”

Brandon:
And the point I’m making that video and then the three follow-up videos I’ve now made since then, is landlords are like “If we lose our property, then tenant you’re going to lose your home anyway eventually. We have to still pay bills. The water still has to be paid. The garbage has to be paid. The taxes, insurance, all that.”

Brandon:
And so anyway, I like Lucas’s suggestions here. I mean, he’s got some good ideas. The weekly thing is really interesting to me because of unemployment. The big changes in unemployment right now, a lot of our tenants that were out of work are going to be making money again, but they’re going to be getting checks weekly, like a lot of times in terms of unemployment. So if you can shift over to that, that might be a good way to help our tenant, but not actually losing your rent. It’s interesting.

David:
What I liked about it was the breaking it into smaller chunks because I think from a psychological perspective, if you’re a tenant, and your rent is $1400 a month, and you know that you can’t pay $1400 a month, that doesn’t mean that you couldn’t pay 900 a month, but most tenants are not going to think, “Well, I’ll just pay 900. If I can’t pay it, I can’t pay all of it and they don’t send you anything.”

Brandon:
Yep.

David:
But from the landlord’s perspective, you might be happy to get 900 right now and you can figure out the 500 later, maybe even trade labor or something like that and take the responsibility to tell the tenant ahead of time, “Look, I’m going to decrease your rent by this much for the next couple of months and then I’m going to split it into weekly payments.” So now they’re only having to pay 250 bucks a week or something and that seems more manageable. You can get something coming in, and then figure out the difference rather than get nothing coming in, and now you feel like “Well, my only option is eviction.”

Brandon:
Yeah. We’re doing something similar. What we’re going to do in our local business, at least out in Washington, and we’re doing a version of it in our mobile home park business is it’s not that if they can’t pay rent, if they call and say they can’t pay rent, this is what we do. If you want to know more details, check out that video on YouTube, just on youtube.com/biggerpockets and it’s what to do when tenants can’t pay rent. But what we’re going to do is when they don’t pay rent, we’re going to first ask, “Okay, what can you pay?” It’s just like you said, David. And then if they can pay, hey, their rent’s $1,000, “Well, I could pay 400.” “Okay, great. Let’s do that.”

Brandon:
And then the remainder, whatever they can’t pay, we’re going to divide up over 10 months starting in July. So July through I think it’s the following May or June or whatever 10 months is, they will pay basically 10% of their rent extra for those 10 months. So at the end of the year, like a year from now, I will have full rent coming in. But they can basically take the next two months off, if they absolutely have to and we’re going to make them fill out a form that says like, here’s why they can’t pay. Because I don’t want tenants going, “Well, I didn’t lose my job or anything, I’m fine. I just don’t want to pay rent, because the economy’s or the world’s going crazy. I’m just going to be part of the craziness.”

Brandon:
We will make them apply for it, so to speak, just to add a barrier of entry there, but yeah, that’s how we’re handling it at this point. And then with unemployment kicking in, that should help quite a bit as well. So, there we go. Thank you, Lucas. And now onto Aaron Amuchastegui. Boom! I said his last name right. I think the first time. Is that right? [crosstalk 00:51:52]

David:
First time you’ve ever said it right. Yeah.

Brandon:
I think that’s the first time ever.

David:
I’m extra proud of you because last names are your Thanos. You struggle with last names.

Brandon:
I do. Aaron is a good friend of both David and I. He's just a wicked smart expert on buying foreclosures. He was a guest on episode 325. He's one of the owners of Roddy's, which is a big foreclosure service down in Texas, 200 plus units. Just like all-around one of the smartest real estate investors I know. So with that, let's hear from Aaron to see what he suggests at this time.

Aaron:
If I can give you one piece of advice on how to survive and thrive during this economic downturn, it would be this, all in one sentence. Don't waste the crisis. Back in 2013, my company had major, major changes. A bunch of people that entered the market. We lost a bunch of cash, investors lost money, houses lost money. We were stuck with a bunch of things that we had to deal with and what I mean when I say don't waste the crisis is you're going to have to have a bunch of uncomfortable conversations with people sometimes for the first time. You could be telling the bank, "Hey, I'm not able to make that mortgage payment right now." You could be telling an investor, "Hey, instead of making money on this one, we're going to lose money or instead of making as much money as we did, we're going to make a little bit less."

Aaron:
And so when you’re having those difficult conversations anyway, you’re already telling them something that’s a complete bummer, and so take that opportunity to renegotiate the future. You say, “Hey, sorry, we lost money on this, and actually, for the near future, I think it’s going to be the same. So now the split needs to be this, this or this,” or “Hey, I’m going to miss this mortgage payment and I actually need a reduction in rate.”

Aaron:
There’s a whole bunch of things you guys can be doing right now. You can go renegotiate, lease rates with landlords if you have an office somewhere. You could go have the tough conversations with employees, maybe you need to lay some off, maybe you need to change the rates with people, maybe you need to change how much you’re paying your contractors, how much you’re paying your painters.

Aaron:
This is a great time to go out there and say, “Hey, there’s really bad news. We’re going to have to do a bunch of things to survive here, and here’s the changes we’re going to make.” Don’t waste the crisis. If you’re going to have to have a hard conversation anyway, if you’re going to have to give somebody bad news, do it now, do it quicker. If you’re going to lay somebody off, do it right away, so you can get out there and set yourself up for success in the future.

Brandon:
Yeah, this is, this is hard. I mean, it’s a good advice, but it’s hard. We are going to have hard conversations. I know a lot of real estate investors I’ve been talking with have already begun laying people off. I mean, there’s somebody we just saw in the GoBundance group that laid off like their entire staff. It is a difficult time right now, but we have to do those things.

Brandon:
So, Aaron’s advice here is like, “Look, use this opportunity to ask yourself, how can we make this better long term?” If you’re going to rip the Band-Aid off and have to do something, at least rip the Band-Aid off and make it last, like make that stuff last. So if you have to renegotiate stuff, if you have to lower salaries or lay people off, make it count. This is the time to do that. It’s hard, but this is what we got to do.

David:
Yeah, it’s really wise that you run at the problem, not away. If you avoid it, if you just say, “Oh, my God, it’s getting bad,” and you let that paralyze you and you sit at home and you don’t talk to anyone. And then you just stop writing checks, and you make them call you and say “Where’s my money?” And you go, “The thing is there’s no money.” That’s terrible.

Brandon:
Yeah.

David:
You want to be like Aaron and proactively say, “Look, we got to figure out a way to make this work. I’m giving you some control over your own fate. If you don’t want to work for me anymore, you can find somebody else. If you want to work with me, this is what I can pay you and this is why.” Everybody likes to feel like they get a say in what happens. If you just try to impose your will on someone, “You’re going to work for me at this price or you’re fired.” They hate that. When you give them an opportunity to choose if they want to partner in it with you, they’re going to like it.

David:
That’s why your idea, Brandon, for how you’re going to split up the rent payments with your tenants, you’re giving them this impression or actually the ability to play a part in their own financial well-being. They get to choose. “Am I going to choose eviction or am I going to choose to work with him?” So I really liked that idea. We all hate doing it. We never like to have difficult conversations. It’s very easy to put them off, but man, every single time that I just shut up and I go do and I rip off the Band-Aid, I’m like that was never as bad as what I was afraid it was going to be.

David:
The other thing that I want to point out is that Aaron hosts a podcast called Real Estate Rockstars and he interviewed Scott Trench on episode 876. He actually interviewed Scott on what makes a good CEO, so, Aaron’s a smart guy. He talks to smart people for a living and he interviews them like Scott Trench. And I think when he gives advice, I always listen to it because of what he does and the skill he does it at.

Brandon:
Yeah, really good. Yeah, one thing that comes to mind too, with this idea of if you have to lay people off, I mean, laying people off isn’t even necessarily the worst thing in the world right now in terms of unemployment kicking in so much, so maybe there’s options there. Also, if you’re a business owner, there are loans and grants coming down from the government here in the next couple of weeks that are going to help us, so make sure you take advantage of those.

Brandon:
But what I’m going to go with that is maybe you have an employee that you’ve been like it’s time to let them go, but maybe this is the time to have a conversation of instead of letting them go entirely, maybe it’s time to renegotiate into a commission based or a profit sharing base where like, give them the option to step up now because maybe they weren’t that great before or maybe you were concerned about them.

Brandon:
Maybe now, let’s instead of laying them off, let’s say, “I’m still going to keep you on, but you’re going to have to bring deals. You’re going to make 10% of whatever I make on a flip or you’re going to make $10,000 finder’s fee if you find me a rental property,” or whatever. Maybe it’s time to do that. Maybe that’d be a way to shift and to make the change for the future better long term because you’re not just thinking right now.

Brandon:
So with that, let’s get over to our last conversation today with Ms. Carol Scott, managing broker of Scott Silver Realty and co-host of the BiggerPockets business podcast. Carol is, of course, married to J. Scott and Carol is just one of my favorite people ever. I know I say that about a number of people today, but these are all my favorite people. So, Carol is just a wicked smart genius real estate investor, a real estate agent broker, had a staging company, knows all about business, and know all about so much stuff. So with that, let’s hear from Carol.

Carol:
First of all, hug your spouse, your partner, your significant other then go hug your kids. Why? Because I really want you to feel the power and the importance of that human connection. That’s what we’re all craving right now, right? We’re told we can’t be out there. We can’t be social. We can’t do those things we’re accustomed to doing, so really understand the power of connecting in person. And then go pick up the phone, okay? I’m not talking about sending a bunch of emails, I’m not talking about a bunch of Facebook posts, truly connect with people, so pick up the phone. Call other people in your family that are far away called business associates. Call random leads you’ve had here and there, not to ask for business leads, not to ask for advice, not to give advice just to simply ask, “How are you doing? How are you coping? Is there any way I can help?”

Carol:
And why is this important? Because again, establishing that human connection, especially in a time of need is so massively powerful. People will remember that and when it’s time to go back to business as usual or to adapt your business however is necessary, people are going to remember that you cared enough to pick up the phone, to reach out to show genuine concern and to lend a listening ear. So that’s my advice, I hope it helps. Now, stop listening to this video. Go pick up the phone and call somebody.

Brandon:
That’s awesome. Yeah, that’s such a great point to end on is that right now, we are self-isolating, we’re all self-distancing, and I think people will really respect down the road, especially remembering that you were there for them in that time, that you called them, that you touched base with them. So yeah, I mean, I think her advice is an amazing idea right now. And I’m thinking through right now, who should I pick up the phone and call right now and just have those meaningful conversations with.

David:
Especially if you’re a salesperson, this is all that my team and I are doing right now. We’re on the phone with people constantly. And it’s the same thing we said earlier, where, “Why don’t you talk to that person more often?” “Well, I’m just getting too busy. There’s too much going on with life.”

Brandon:
Yeah.

David:
Well, now you don’t have that excuse, right? So if you can invest in real estate or you can invest in your job, invest in your relationships. This is when you should be talking to people and checking in on them and letting them know you’re thinking of them. And she made a point that was really wise that they’ll remember this more than when you saw them at the birthday party when everybody else was there, too, right? That you checked in when they were most fearful, they’re most scared, they’re most anxious, and you are a calming presence. People appreciate that.

David:
That’s what I’m doing all day long. I’m calling clients and I’m calling friends, and I’m calling people that refer me business and I’m telling them, “It’s okay, the world’s not going to end. We’re going to be able to adjust to this. We’ve adjusted to everything before. This is actually a normal part of a business cycle.” And I hear the relief in people’s voices when we’re done. I could just feel like all that tension was released and they’re like, “Oh, yeah, you’re right.” The media is playing this up and I’m watching or looking at way too many Facebook posts from people that are not informed or not educated, giving an opinion on something that they don’t really understand very much and it just spins us into this turmoil that is really based on anything objective.

Brandon:
Yeah, that’s such a good point. I hadn’t really thought about that, but maybe it’s time for us to be like maybe we just need to be the hope in other people’s lives right now and I’m not saying be false like everything’s be fine. I’m not saying to everyone, “This is going to be over next week.” But just like, yeah, giving them a break from the constant stream of bad news that they see on their Facebook and on the news outlets when they’re watching them. Just as like, “Hey, here’s some really awesome things that are happening right now and here’s some ways that we’re coming together.”

Brandon:
And being that person in your family, it’s going to, again, pay off long term. They’re going to see you as somebody who they want to be around, they want to work with, they want to help and support for the next decade. So yeah, those relationships pay dividends long term, so build them.

Brandon:
Alright, man. Well, that was our last discussion today. So with that, I guess we’re going to wrap things up and get out of here. Any final thoughts you want to leave people with today as they’re going on about their day?

David:
Yeah, I really just want to emphasize that there’s always positive in any situation. And there’s often times more positive in times like this. It doesn’t feel that way, but I heard Robert Kiyosaki say in an interview on YouTube last night that the best time to start a business is right after like a crash or in a recession. And everyone universally agreed, the best time to do it is when things are really bad. It might not be the best time to own a business that wasn’t prepared for this, but just start with one low overhead, that’s the best time. You have to have these ups and downs in order to be able to make money in real estate. If it was just a solid linear process, you would never be able to build wealth quicker than in any other way.

David:
So even though things are different and we're having to have different conversations, that doesn't mean it's bad at all. There's a lot of people that own real estate that were never meant to be landlords that shouldn't have been doing it and they're going to get out of the business and there's people that should be landlords that are going to get into it. There's people that owned a home and they really weren't responsible and shouldn't own a home and they're going to become tenants and there's people that are tenants that are going to realize like, "Hey, I don't like this uncertainty. I want to go own a home and house hack." There's people that weren't house hacking that are going to realize, "I should be house hacking. It'd be nice to have a little bit of extra income," right?

David:
We tell our clients all the time, there’s a spectrum, on one end of it is comfort and on the other end is profit. You don’t get both. If you, “I don’t want to rent out the rooms in my house.” That’s okay, you don’t have to, but you’re not going to make as much money or it’s going to be harder to find the right deal. And when things get shaken up like this, all of a sudden, not being comfortable doesn’t seem so bad anymore and it makes it easier to make good financial decisions because you’re not valuing comfort as much when there’s so much uncertainty around you. So, that’s what I want people to be thinking about is how is this forcing them to look at stuff that they wouldn’t have looked at that will help them to make changes for the better that they just weren’t going to make when everything was good.

Brandon:
Boom! Mind trap. That’s good, man.

David:
Thank you.

Brandon:
Thanks. Well, with that, guys, thank you for listening to our show today. We appreciate you guys a lot. We’re going to be able to get through this. So thank you for listening, but then like supporting us. Everybody who leaves reviews, that leaves comments, that shares this on their Facebook, for all those things, I just thank you guys very much for supporting BiggerPockets and supporting David and I. We appreciate you guys a lot so thank you.

Brandon:
And final note, follow BiggerPockets wherever. If you’re on Facebook and you’re not following BiggerPockets on Facebook, do so. If you’re not following BP on Instagram, make sure you do that. And David is that David Greene 24 on Instagram and I am at Beardy, Brandon Beard with a Y. With that, David, do you want to take us out?

David:
Yeah. If you guys liked this, if you feel good, if you feel empowered, please share it with somebody else because they probably need a little bit of that, too. There’s a whole lot of negativity going around. When you get a ray of light, you need to spread it around. So please share the podcast if you really liked it with other people. And I can’t wait to talk to you guys again. This is David Greene for Brandon B Plus Analogy Turner, signing off.

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In This Episode We Cover:

  • Why now is the time to write a 10-year vision for yourself
  • Serving others first, even when our impulse is self-protection
  • Cutting overhead to preserve cash
  • Finding creative ways to rent out property
  • Collecting payments up front for a discount
  • Working with lenders if you’re experiencing shortfalls with rent
  • Investing as a group to hedge risk
  • Controlling your emotions when the market is volatile
  • Why you should be building a team NOW
  • The importance of picking up the phone to nurture relationships
  • And SO much more!

Links from the Show

Books Mentioned in this Show:

Tweetable Topics:

  • “Life is meant to go up and down.” (Tweet This!)
  • “The way that you survive and thrive in an economic downturn is by putting other people first.” (Tweet This!)
  • “You and your tenants are all in this together.” (Tweet This!)
  • “The opportunity is in the chaos.” (Tweet This!)

Connect with Brandon and David

Real strategies that work for real people seeking to build wealth through real estate investments. Co-hosted by Brandon Turner and David Greene, this podcast provides actionable advice from investo...
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    Mark F. Rental Property Investor from Bergen County, NJ
    Replied 4 months ago
    Brandon I love the cookie dough protein bars from costco! I ended up getting a 2 pack of them instead of one brownie one cookie dough and it was like Christmas. Great show too by the way!