Episode Transcript
[00:00:00] Speaker A: All about the habits. You don't want to be the.
I don't want to be average. I just want to persevere. I just want to go.
[00:00:16] Speaker B: Hey, guys. Welcome to the Investor Agent podcast. Today I've got Rob Caldwell on. Rob's a dear friend, fellow local investor. Thanks for being on today, Rob.
[00:00:25] Speaker A: I happy to be here.
[00:00:26] Speaker B: So I like to state the intention of the podcast first, because everything's all about intention. The intention is to transform the human mindset from scarcity and lack to abundance and wealth, one conversation at a time. I hope this conversation does that for you, the listeners. And Rob just want to kick it off with, you know, I think we met back in 2007. Don't hold me to that. But we've known each other a long time and even back then you were in real estate. So what, what got you interested in the real estate game in the first place?
[00:00:54] Speaker A: Rich dad, poor dad. And just growing up with a little bit of that scarcity mindset for my family and realizing that back then in 2005 and 6, it was in all the newspapers and then the books were really flowing and that's what, that's what had me interested in it. Steve?
[00:01:14] Speaker B: Yeah. Do you remember any part in the book that just kind of shifted your mind? How? I just had like a shift from scarcity and lack to abundance and wealth because, like, the first. The first belief shift that this is possible for me were the desire to go from where you were to somewhere different.
[00:01:32] Speaker A: Back then, I didn't believe that almost anything wasn't possible.
So I think that that entire book, which I now have my son reading, there's a teen version of it. And I was on a call earlier with a friend's daughter who's 24, 25, and I recommended that to her. And I think that's just a timeless classic that just helps understand. Like, for me, it was my. My parents always worked, so I didn't understand working class because I just thought everybody worked. Like, I thought that's what adults do, they work.
And then you read the book and you understand that there's these various levels of building assets and creating wealth and creating opportunities for people. And that was just more of my natural almost belief system in myself. This makes a lot more sense than I'm going to go out and get one job or train for one thing.
I would have to say that the entire book. Steve.
[00:02:36] Speaker B: Yeah. And it sounds like it opened up the possibility from a one track of just getting a job was the only option to buying assets and having Them pay for your life versus working.
[00:02:51] Speaker A: My mom had cancer. My dad was self employed. He couldn't do the chemo and everything else while being self. It was very hard. Like his income went to 30% of what it was before. So at an early age, I unconsciously got programmed that if I am in a job or self employed, I won't be safe and if I don't have money, I won't be safe. So. So very much fear fueled the early, probably first damn near 35 years of my life to say that's what really was like. But if you have enough real estate or you can actually build. I mean, I love what Kiyosaki says. He says a company, a true definition of a company is when you leave for vacation and come back, it's making more money than when you left. But that's an art to do that. That's an art. So.
[00:03:46] Speaker B: So in the nature of the intention of this podcast, and because I've known you, you know, I kind of want to dig in on something you just said. With you, you saw firsthand that even though your dad had a job, there was pain and suffering, right. And it was like it wasn't enough and it created fear.
Probably most people listening to this can relate on some level where they watched either someone they knew or they experienced it directly firsthand in their own family, where the. The feeling of not having enough to pay the bills or the fear of, you know, is there going to be food on the table or is there going to be rent? Or maybe it's just comparing your clothes to the neighbor's clothes. Right. Depending on where people are.
Can you just share about? Because we don't tend to look back. Can you try to drop into that experience and what that experience was like for you? Because the book had enough impact that you're talking about it, you know, almost 20 years later. Right.
That means there was emotional weight to it and it shifted your perspective. And that book's been mentioned almost every one of these episodes.
But I want you to drop into that experience of what that was like.
[00:05:01] Speaker A: Okay.
[00:05:01] Speaker B: Because that fueled this entire thing.
[00:05:04] Speaker A: I think it's a building block for it for sure.
There's, you know, there's a new coach that I've hired through his entrepreneur school of entrepreneurship, and he says basically, life is about who you become.
Enjoy that part of the journey. This man's a billionaire in the home services space. Really, really solid guy. I'm really liking his material and his school.
So, yeah, it's pretty when you're growing up for some reason I was programmed like money is safety, which I believe it is in some ways to an extent.
[00:05:43] Speaker B: Right?
[00:05:43] Speaker A: To an extent for sure.
And that was from my mother's upbringing, my father's upbringing. And then you look back at the ancestry and you look. My dad was actually a big genealogist and we have a whole book about the Caldwell family and where everybody came from and all that.
And then I gone down a yogic path in the last decade and there's. Science has shown that these mini traumas and big traumas are passed to us through our DNA. So it's just kind of fascinating to realize.
[00:06:13] Speaker B: Yeah. Who came up with that belief, that scarcity belief system? Was it you or did you inherit it?
[00:06:19] Speaker A: I think it's a human nature on gist. I think it's almost in our, it's almost in our DNA to keep us alive and to keep us procreating, to keep us. When we were tribal, we needed to act a certain way so we wouldn't get kicked out of the tribe. Like. So I really, I do try to embrace it at this time and I'd like to believe that I've over the last few years shifted more from the energy of the fuel of fear to more the fuel of love and the abundance and the creation. And I'm very much motivated by, for instance, Steve, my companies, we track the percentage of our employees that own their own home and the percentage of our employees that own an investment property.
That's an, that's an important, that's a metric that I get every, every quarter.
And just last week we had somebody measurement of abundance.
[00:07:15] Speaker B: Right.
[00:07:16] Speaker A: And it's, it goes along with our mission, which is to create the opportunity for wealth for people. Like, I've realized I cannot do it all for them. But, but through property management, through real estate services, I can create the opportunity for that wealth.
And I don't know if I'm on your original question, getting back to that.
[00:07:35] Speaker B: No, it's great because it really is. I mean, it's the mindset. Right. And there's an energy behind the mindset, which is that fear that you mentioned. Right. Lack is really fear driven where abundance is. You know, you've said love, faith, it's a shift in energy. Anyone can feel that when they feel like they don't have enough. It's a fear when you feel like you have enough. And it's abundant.
It's a positive feeling, whatever you want to call it, faith, love, comfort, safety. And we want to share information about nuts and bolts, about how to create wealth, but you've seen it firsthand and experience it where you actually create wealth and the mindset's still there.
I've heard Rob mention the disease of more. Right. And I think him and I connect because we can both relate to it. Where you always want more. Right. And that's the design, that's the human design.
So you're spot on with what you're saying.
And I don't want to take it any specific way, but I like to bring that up because I see that to me, the whole intention of this podcast, yes, to create wealth, but the underlying piece is to have people shift from that scarcity and fear to the abundance and wealth or faith over fear, love over anger, whatever it may be in your mind.
[00:09:00] Speaker A: Well, for me it is in my mind. It's when my consciousness is overly concentrated on my thoughts, my personal thoughts, and not dropped into more of the heart region.
That when I am, if I'm not in a flow state of working on a project or being here fully present with you on this podcast. Right when I'm in that place that's more heart centered. The mind is used as a tool. It's picked up, it's put down. That's where it lives. But there's other parts of my world where something can happen or an event or a memory, something gets triggered. And my conscious awareness goes from that heart region up into this separate, this, this mind, the best way I have to describe it. And that is then not as it's more about what I want. And usually that's. That's like I'm there because I'm not. Okay. And I've spent a lifetime of letting my mind try to figure stuff out that it's just running different programs on. It'll just try a different program. I caught myself today, Steve. I have a big refinance going on. It's been going on for six months. I've never had one that take this long.
And I have gotten to the point where it's coming to an end. It's going to happen. Great. We're going to recapitalize millions of dollars, lower interest rates. Right.
And my mind is already done with it. Paperwork hasn't even drawn up, haven't even signed it. And it's on to the next thing to be afraid of and to work on.
[00:10:41] Speaker B: Yeah.
[00:10:41] Speaker A: And it's almost like a warehouse that's never going to run out of things to then be it even flipped to. Well in 10 years you're going to have to say it's okay. It's okay. The Bible says use the big self to raise the little self.
So I do try to talk to that mind, like, hey, bro, it's fine. Just relax, breathe. I do something called a water breath.
And for me, that has allowed me to continue to scale, continue to grow, continue to take failures as lessons, to continue to enjoy the journey. And the listeners may not know, but I built a fair amount of that wealth in real estate from pretty just loving background of parents and all that, but pretty modest. And it's working. So I want to share that part because that's what your podcast is about.
[00:11:37] Speaker B: Absolutely. Yeah. We want to work. What I really wanted to touch on, and this is why I can have this conversation with you, is we want to work on the external, which is our finances and what our lives look like and the real estate wealth creation. But I think simultaneously there's some sort of correlation to the internal. And I like to point out that once you get there, right, this doesn't internally change unless you make it, unless you take responsibility for it and you work on it. You have a practice, meaning money problems will change from not having enough money, not to say to having too much, but maybe protecting that money, reducing your taxes, spending less time making that money, whatever it may be.
[00:12:23] Speaker A: Oh, your kids have more and they're not grateful.
[00:12:26] Speaker B: What you pointed out is huge. You have this major refi going and the mind is already latching onto what's the next problem?
[00:12:33] Speaker A: What's the next conveyor belt of what am I going to cling to? What can I be afraid of? What can I fix? Managing control.
But I didn't run with it. I said thank you. Thank you for pointing that out. It's probably a very valid thing because it's working on a to do list. Yeah, but we still have this vacancy over here. Yeah, but where's the construction crew going to go to next? All very valid things.
[00:12:56] Speaker B: And this is why you're successful, right? In a sense, because the drive for that, the desire for the perfection, for the control, for the safety for the state, that the being is chasing the state through external circumstances. But what's cool about Rob, he's also, just from knowing him and watching him grow, he simultaneously let go. And what you're saying is that the work that you've done has actually helped you scale by letting go and by not being so overly obsessive about things, the mind's going to do it, Right. It's going to happen anyway. But you've, you know, that's what I was trying to point out for the listeners, just knowing Rob on a. On a, you know, his spiritual journey and his wealth journey. It's. It's a pretty cool to watch it because it's a reflection, and I get a lot from seeing and having conversations with Rob. But we can take it to the ground. For those of you that are like, all right, these guys are up in the sky. Okay, you know, about what. What did you do? Yeah. Because I think we talked about kind of the why, and now let's get into the how. Yeah. So, Rob, you currently, I know you have over 100 plus rental properties. Rent. Well, manages a ton of properties. I don't know the numbers, but you can get into that. Do you want to share a little bit about.
Not to brag, but your achievements to. To show. Because it's not to impress anyone, but it's to impress upon people what's possible. Right.
[00:14:18] Speaker A: I understand that. Yeah. My perspective right now is what has been created really, over the last four years has been basically buying the average of a new apartment every two weeks, fully renovating that apartment, getting it on the market, getting it rented, and then eventually recapitalizing it because it's taken longer and costs more than what I originally thought these projects would do.
And that's.
[00:14:51] Speaker B: That's part of it. That's normal.
[00:14:52] Speaker A: That's. Yes. And the culmination of that is A. About $2.2 million in gross rents on about 100,000 square feet of residential real estate. So that could be a house or an apartment.
And there's significant debt. Right.
There's insurance and taxes and all that, but that's what the portfolio looks like, mostly in the last 400,000 square feet.
[00:15:21] Speaker B: Of rentable residential space.
[00:15:22] Speaker A: Rentable residential real estate of which only a few thousand square feet is not yet renovated.
[00:15:29] Speaker B: 2 million annual gross rent.
[00:15:31] Speaker A: Yeah, 2.2. 2.2 annual potential gross income, and that'll grow. And then. So that's the RW investments and then the rent. Well, we manage a couple hundred million dollars worth of real estate for ourselves, but primarily other investors. State of Pennsylvania is one. So we handle all the state parks here locally, all those historic homes in Ridley Creek. We're responsible for all of the maintenance, all of the tenant placement, all of them, all of the accounting and reporting. That would be a larger client of ours. We have other clients with 20, 30, 40, 50 doors. Could be houses, could be apartments. And then we have hundreds of clients with a single rental property. Maybe they lived in it and now they got relocated. Maybe they have a really low interest rate and they, and they, they want to move to that next home and they want to keep it. And, and that business was the core business that, that I founded with my wife in 2009. In between those is a service company. That service company. Because you cannot scale a management company without getting the services. Well, I used to think you could or you could just outsource things and that's really problematic. So in between those is a service company. So the culmination is in my perspective, instead of having one company that's let's say at a very healthy number, which is 10 for me, it's $10 million in gross revenues or sales. That's a very healthy medium sized, small like business in this country that you have full redundant staff everywhere you like it and they grow. They then scale up to 100 million very quickly. I am in a bit of a quandary where all of those businesses are in the, you know, low to mid 2 million in revenues. And I as CEO, Chief Visionary, where, where do I get them to scale up so we have all the redundancy and we can really run a best in class operation at a higher level of scale. So yeah, that is my perspective been on. Bought my first rental property in 2005, bought three, stopped.
[00:17:41] Speaker B: Yep.
[00:17:41] Speaker A: And, and that's where I'm at today.
[00:17:44] Speaker B: All right, so that's probably a lot for the, especially the average or beginner listener to think. Well, Rob's different. He's genius. You know, he's able to scale these.
[00:17:56] Speaker A: Not a Kwanzaa. No IQ is really average.
[00:17:59] Speaker B: Rob's a smart guy. He's not giving himself enough credit. But with that said, I do believe a lot of this is possible for many people that don't think it is, especially with time. So how long has that taken? Cause I know you did mention four years, but when did you start?
[00:18:11] Speaker A: That's right. Yeah. I bought my first, I bought my first three houses in the borough of Westchester in 2005 and 2006.
[00:18:18] Speaker B: So that's 20 years ago.
[00:18:19] Speaker A: And then I did not buy another piece of real estate for a decade.
So there's no.
[00:18:25] Speaker B: Because you were focused on the property management and being a father.
[00:18:29] Speaker A: So four children born in that decade. Right. And it was, I didn't. I underestimated how hard it was to scale a property management company.
[00:18:42] Speaker B: A business is not, it's not for everyone. Right.
And property management has not done very well with many people that I know.
[00:18:50] Speaker A: It's not easy at higher concentrations of properties where you get into the on site. Yeah, that is, seems to be. I'm sure they have their own challenges, but at the scattered site, a fundamental issue is that most landlords aren't budgeting. They don't have real expectations of maintenance cost. They can see turnover costs, seasonal costs, things like the ratios of what the taxes and insurance are to the rents. And the reality of this is an asset that's depreciating. How much? To me it looks like just the flow of money, the velocity of money, if you will. So there's inherent challenges from the get go where a lot of people are in an asset class that they shouldn't be in.
A Westchester HOA rental two bedroom, two bath is going to be completely different than West Philadelphia four bedroom, one bath row home that's 100 years old. One's not better than the other, just different. It's just a different asset class. There's going to be different ratios of taxes, insurance, maintenance, upkeep, all that. And a lot of what it is, is people are, oh, everything's 5% vacancy and collections and everything is 5% maintenance and repairs. Well, yes, if you own some beautiful, you know, 300 unit complex, sure. But no, if you have a, you know, 20 single family houses that are 100 years old that you never did big improvements to. So that's the, that's what we ran up against unknowingly for years.
Right.
[00:20:30] Speaker B: I've had a similar experience. I want to go back to the Robert Kiyosaki book.
[00:20:33] Speaker A: Okay.
[00:20:33] Speaker B: This is the first time I'll ever talk shit on that book.
[00:20:36] Speaker A: Okay, got it.
[00:20:36] Speaker B: Because I love it. I love the book. But here's the misconception and I'm going to ask Rob a question. The answer will, you know, point, point to something. Are rental properties passive income?
The word.
[00:20:52] Speaker A: My answer would be it's a different type of income than a W2.
[00:20:57] Speaker B: It's taxed as passive income.
[00:20:59] Speaker A: It is. Yeah. What does the word passive actually mean?
I'll tell you what.
[00:21:05] Speaker B: Well, let's say, okay, let's go back to the business example.
[00:21:08] Speaker A: My short answer is no, it's not.
[00:21:09] Speaker B: You buy the rental and you go away for six months and you do nothing.
[00:21:13] Speaker A: Yeah.
[00:21:13] Speaker B: And you come back.
[00:21:14] Speaker A: Yeah.
[00:21:15] Speaker B: What are the chances it made a lot more money while you're on vacation?
[00:21:18] Speaker A: Unless you are paying a property manager that actually acts as an asset manager. And there's, there's a distinction in those.
Here's what I think did happen in those six months. Unless there was something that not good happened. I think you Paid down some debt. I think that's a balance sheet item. Oh, I know that's a balance sheet item. That's passive and I think it went up in value a little bit. That part's passive. But to work for the actual cash flows is not the passive part. So a lot of people call themselves real estate investors, but they've bought themselves a day job as a part time property manager or landlord. And if you compare that to the hourly wage that they can earn in real estate commissions. Right. For the majority of your listeners. Right. There's a disparaging amount of. They earn a lot more on an hourly basis on their commissions and what property managers end up charging on an hourly basis, they're being underpaid compared to somebody who has like a decent W2 or decent, you know, 1099, which is, you know. So I think a lot of people also think that they're going to get that rental, it's going to be passive and they're going to actually increase their lifestyle in a positive way. I never did that.
[00:22:38] Speaker B: Right.
[00:22:38] Speaker A: When I bought those three houses, you.
[00:22:41] Speaker B: Just let them go. I mean you didn't take the cash flow and live off of it.
[00:22:45] Speaker A: It got so bad that there were times where we were entertaining. My, my wife and I, we were entertaining and I said, please don't order out the pizza, just use the deshourna.
Literally. Because like the heater just broke on one. I was still putting, replacing carpets in the other. She had just left her job at the Y. I'm trying to get this property management business started and like $10 meant a lot to me back then.
[00:23:09] Speaker B: Right.
[00:23:10] Speaker A: So yeah, it's not, it's not passive.
[00:23:12] Speaker B: Yeah, it's passive. It's passive until you have a roof go, you have a tenant turnover and there's no room in the deal for you to just hire everything out as. Like you said, there's economies of scale. When you have a $10 million plus business. Yes. There's people you can pay for those things and there's room in the deal for that. But in the, in the old, you know, principal, interest, taxes, insurance is $1000 and your rent's 1500, you're going to cash flow 500 per month. Okay. You only need 10 doors and that's 5 grand a month. And now you can replace your 60,000 dollar W2, you're good to go. And that's, that's the myth.
[00:23:51] Speaker A: Yes.
[00:23:51] Speaker B: Because what Rob was alluding to earlier and he actually made a joke before we came in this room about A multifamily portfolio. Did you underwrite it like a realtor or an investor, you know, and your typical realtor will put nothing for maintenance, management vacancy, capex. Because maintenance and repairs is really different from capex. Right. Bigger expenditures. So what is the biggest mistake that you see? Rookie investors, where they get the rug pulled out from under them.
Having expectations here and then two to three years in.
What's the reality of that?
[00:24:31] Speaker A: They're grossly underestimating what, what can go wrong with wrong tenant placement and how, how long it takes to get a single family home back on the market and the unit turn costs. So they're, they're saying 5% for me, for all maintenance.
[00:24:49] Speaker B: Westchester has zero vacancy. Rob.
[00:24:51] Speaker A: Got it. Okay.
[00:24:53] Speaker B: So, and, and Rob, this building, I just renovated the entire thing. You did electrical, plumbing, windows, you know, so we don't have any maintenance and repairs.
[00:25:02] Speaker A: That's, that's good. Then you're going to be good for the first few. We're going to get a tenant in there. Hopefully we get a tenant that wants to be there for a few years.
I didn't hear you mention the roof and I didn't hear you mention the sewer lateral. Got it, got it.
[00:25:16] Speaker B: So sewer's never backed up.
[00:25:18] Speaker A: It's never backed up. That's great. I mean it's only 100 years old, probably terracotta, but so it's not having reserves because if you had a lot of cash. The most stressful I was ever in my life was, was a beautiful time because I now see the culmination of where I changed. I had to fundamentally change. I, my dad had given me almost like a line of credit for like, I think it was like $15,000. Mom dies, he remarries, he doesn't like life like decisions I'm making. And he basically says, hey man, I'm ready for that money back when you can get it back to me. And I was of the mindset that like I had a little bit more time on it and maybe I could even borrow a little bit more if I needed it. So it was incredibly stressful to me because there was a safety net there that I felt was like gone. So it's only, it's not stressful to do the sewer lateral. If you have $20,000 in reserves, like that's okay. I can, you can plan for it.
[00:26:18] Speaker B: You can do that.
[00:26:19] Speaker A: That's no problem. It's very stressful when you're behind on other things and then these unexpected cash negative cash flow items come up on a small rental portfolio. I had a lightning storm go through my Rory's Ford portfolio. I have 60 apartments there and I didn't want to put an insurance claim and it cost me $25,000amongst six different buildings because basically any mini split that was running when that lightning struck fried some, fried some boards and some of them were really cheap stuff that I didn't know was getting put in.
[00:26:51] Speaker B: You know, I thought you put that in the performance.
[00:26:53] Speaker A: You put it in. I put it under, under special projects. And I, I do that now.
[00:26:58] Speaker B: Yeah.
[00:26:59] Speaker A: So now I do.
[00:27:00] Speaker B: Right.
[00:27:00] Speaker A: But no, but it caught me off guard. Thankfully I had reserves and if that would have happened to me at a different time in my life cycle and I didn't have access to capital that I could, you know, then I don't have choices. See, when you don't have the money, you don't have the choices. And when you need the money, it's really hard to get the money. So it's this. I think I'm doing well and I'm buying properties and I'm making more money and you're exhausted and you're tired and you're painting yourself and now you want to go reward yourself. But it was only your first or second property you did and you let you cut some corners unknowingly, usually around MEPs, the mechanical, the electrical, the plumbing, the roof, the foundation, trees being too close. And there was a huge windstorm not too long ago. 60 mile an hour winds. I'm on a, I'm on an email thread. I'm like, people are like having, you know, 60 mile an hour winds in this area is not super common and yada yada yada. So I think it's cash flow, Steve, and the lack thereof and the improper planning that people do because they anticipate.
[00:28:04] Speaker B: That 500amonth for the first three years.
[00:28:07] Speaker A: Yeah, they think it's going to be linear, like their 401k and what they don't realize is even if it is that $500 a month, but then the tenant does move out and now they have a little bit of vacancy and they have maybe, maybe they didn't.
[00:28:22] Speaker B: You know, usually your best tenants want to move in right away. Right.
You know, when you have a vacancy, you can usually get a tenant.
The people that want to move in like the next day are usually your best tenants.
[00:28:33] Speaker A: Right. And if that's not a, like a studio or a one bedroom and you have a four bedroom home and they're ready to go that weekend, that might be a red flag.
[00:28:43] Speaker B: So you're saying someone that's looking like 60, 90 days out might be more responsible tenant.
[00:28:48] Speaker A: They might have some more things together.
[00:28:50] Speaker B: So you might have a little downtime. Even if you tried to time everything perfect.
You might have a couple week gap, a month gap.
[00:28:57] Speaker A: You might have that. You might actually have to pay somebody.
[00:28:59] Speaker B: Else to help place it here. If it sits for a month and a half, what's that?
[00:29:05] Speaker A: That's 12% vacancy a month and a.
[00:29:07] Speaker B: Half, you know, so 5% vacancy on this pro forma is probably going to.
[00:29:13] Speaker A: Be the average over five years, but you're going to have the periods of not only that, but when they. So it's the answer. The short answer is it is those unit turns. It is on that asset class. It's the unit turns.
[00:29:24] Speaker B: I bring this stuff up because he really gets it. When you manage hundreds of millions of real estate, you really get it that what people put down is piti. You know, they subtract the rent or they subtract the PITI from the rent and they look at their cash flow. That's a gross number, which is.
[00:29:44] Speaker A: I was at a real estate cub last night. The speaker was talking about he's getting rents a 1600 piti of 1400. And he's happy. And I'm thinking like, dude, that's great. That's a savings account for the principal you're paying down. You're getting some appreciation. I hope you're self managing. I hope you can do all the maintenance, repairs yourself. I hope you placed a good tenant and take that $2,400 a year and stack cash till you got 10 grand because you're going to need all. Because half that 10 grand is going to go away when that tenant moves out.
Those asset classes of the. And this podcast recording in Chester County, a lot of what we manage is in Delaware County, a lot of challenging landlords have bought assets, not put the right, not done the right renovations when they bought it. And then when the tenant moves out, they're spending 10 to 20 grand to get it back on the market and they just lost five years of cash flow and they really become disillusioned really quick. And not only that, they didn't buy one, they bought 20.
And they have. When you have 20 houses, you're doing a roof.
[00:30:59] Speaker B: They bought it in 2019 and sold it 2024. Right. You know. Right. All right, so I want to going back to abundance versus scarcity, right? What we just talked about, it's not scarcity, it's realism. It's this is real, you know, and we're not trying to point, to say, hey, don't do this.
[00:31:17] Speaker A: Got it.
[00:31:17] Speaker B: But how do you mitigate the risk? Right. These are the things we want to show you. You know, shine the light on the things that you can't see as a new investor.
Simultaneously, I want to flip it to. All right. That's kind of a lot of the downsides.
[00:31:31] Speaker A: Okay.
[00:31:32] Speaker B: I always like to point out, you know, if you only buy for cash flow, you're probably missing the biggest piece of the pie in real estate because it's the compounding effect of all the other ones, which is, Rob mentioned it. Equity, pay down, appreciation, depreciation. And then he said access to capital, which I'll use the coin, leverage. Right. And then there's that. So there's, they're the five reasons. But then you have the one where you can actually, it's active but you can add value. Right. Where Rob's bringing something that's he's buying it below market value or figuring out, okay, I'm buying a market value, but how can I increase the market value by decreasing expenses and increasing the income with a higher noi net operating income, I've just driven the value up. So I want you to talk about the compounding effect of all those together and probably if you can really touch on through that access to capital and leverage, because that's really what you mentioned was you'll kind of always be okay, it's going to heal itself. That wound on that rental property that is bleeding cash will heal itself over time, but you need access to capital.
So touch on what that compounding effect of those other components of real estate investment has, has really done. Because that's where the wealth creation comes in. Right. Over time.
[00:32:50] Speaker A: Let me just finish the last thought and I offer to all your listeners a free spreadsheet that they can fill out. We'll come up with a link for it. It's, it's just the capital expenditures. I have created a really simple spreadsheet, capex. So when you have those 20 rental properties and you're doing a new roof a year, because the roof lasts 20 years, but you just don't know which property it's going to be on, that's a really good number. That's a really good workbook for them to then say, this is what I should be putting aside in reserves a year. Because when you get to the 20 properties, how much do I need to put aside? So I just wanted to close the loop on that. You asked about appreciation Depreciation, the principal pay down. I mean for me it's a crock pot to wealth. I mean it's brewing slowly, but it just keeps cooking. I mean my own numbers are pretty significant. I mean probably over half a million dollars in net worth. Increase passive from appreciation and principal pay down.
That's real.
[00:33:51] Speaker B: On what? On an annual basis.
[00:33:52] Speaker A: On an annual basis.
[00:33:54] Speaker B: That's a 500k savings plan.
[00:33:57] Speaker A: And it's growing for savings plan. It grows every month. You pay down a little bit more principal. And because of compounding interest, which I think Einstein said was like a wonder of the world. Right. Compounding interest, it's actually appreciates a little faster. Wonder of the world.
[00:34:11] Speaker B: I believe it.
[00:34:11] Speaker A: Okay. We said it's math, it's got to be true.
[00:34:14] Speaker B: So if it's on TikTok, it's real.
[00:34:16] Speaker A: Yeah, yeah, let's put it on TikTok. Yeah, so. So yeah, it is.
Don't quit your day job. Keep selling houses. Keep stacking cash. Live below your means. Put a certain amount aside to real estate. If you have the risk tolerance for more the value add, you can then increase your turns exponentially while also increasing the value of the community around you. You take the ugliest house on the street and if you just keep the same resonance in there and don't do much to it, you're not really, nothing's really changing. Take the ugliest house in the street, you make it one of the nicest homes on the street.
Now the whole energy changes around that and that's, that's something that I do. So. And that transforms lives in a positive way. Really. Everybody wins.
Everybody wins. One could argue well, the residents that are there that are paying the $700 a month for the two bedroom that has the leak and this and that, well, they need to go find another apartment somewhere because I won't hold that asset like that. I want to have an asset that has a very productive predictable return.
So at my size, we're running about 10% for all maintenance, repairs, seasonal inspections, preventative, all of that.
[00:35:38] Speaker B: So like for maintenance, repairs and capex, right? Like if you put them all together.
[00:35:41] Speaker A: All that's all that's all together. Yep.
[00:35:44] Speaker B: And my definition of that is, you know, maintenance, repairs is stuff you, you, you know, toilet repair, this or that, capex, pest control roof, you know, where it's increasing the basis on the building and you're not taking it as a year one deduction, right?
[00:35:58] Speaker A: Yes.
[00:35:58] Speaker B: So that's really the difference. And when you underwrite multifamily that's how you kind of have to look at it. But yes, that was the one answer.
[00:36:05] Speaker A: Like, dude, it's worth it.
[00:36:06] Speaker B: Like, but, Rob, I don't have enough money.
[00:36:08] Speaker A: Yeah, okay.
[00:36:09] Speaker B: Reserves I need.
[00:36:10] Speaker A: You're the wizard. This dude. Like, seriously, I've learned.
[00:36:13] Speaker B: We're both. We both have our strengths here, so.
[00:36:16] Speaker A: I've learned a lot from you on this. So one is that mindset that. That you have on it, and you have a lot of confidence. The people don't lend money to people that don't have a lot of confidence is what I've seen. So you have to believe in yourself before anybody else will believe in you.
[00:36:30] Speaker B: If you believe, you can achieve.
[00:36:34] Speaker A: Believe, conceive, believe, achieve. Right.
[00:36:37] Speaker B: Thinking you're rich, it's got it. You got to have the desire, and then you got to have faith.
[00:36:41] Speaker A: Yeah, you. You. It helps to also have friends that aren't in real estate. We've never traded money between each other. Right. Because you don't.
[00:36:51] Speaker B: I can beat your return. No, that's exactly. That's the mindset. That is exactly right, Rob. You know, money 12% when I can.
[00:36:57] Speaker A: Get 25 or infinite.
[00:36:59] Speaker B: Right.
[00:37:00] Speaker A: Because most of the deals we're both doing, all the money's coming back.
[00:37:03] Speaker B: The velocity of the cash.
[00:37:05] Speaker A: If you have zero basis in the property.
[00:37:09] Speaker B: What do you mean by that?
[00:37:10] Speaker A: Okay, so let's say you buy a.
[00:37:11] Speaker B: Property, no money down. I thought you said I need money.
[00:37:14] Speaker A: Got it. So, yeah, no, you put money down, you borrow from the bank, you borrow from the bank again for your rehab. If you do, let's make it simple. $100,000 purchase, $100,000 rehab. If you can then create $300,000 for the asset to be valued conservatively, you could then refinance it and have your 100,000 purchase, $100,000 renovation, plus all your working capital that you needed. Right. You could have it all back. So you need money for the down payment. Unless you're structuring something more creative than that. The. The irr. The internal rate of return when you have all. When you have none of your own money in the project. But it's. But it's cash flowing, appreciating, depreciating, and. And principal pay down. It becomes an infinite return.
So that's a. Probably one of the main reasons that real estate guys, probably in like, 10 years or something like that, and we maybe we slow down on the acquisitions, and all we, like, are just putting money in other people's deals. That would be a great thing. I would Love to be.
[00:38:16] Speaker B: And that becomes truly much. Well, yes, much more passive. Right. You have to still stay on top.
[00:38:21] Speaker A: Of it as long as that mind that's running as long. Some people worry more than others. And I think that the non passive part is when you've given up control, you can't want and have the same thing. As soon as your mind wants it, it doesn't have it. And a lot of people want control, not realizing that they may have control.
So that's the part that for me is the least passive. When you are thinking about, really your consciousness is looking at the thoughts of worry about all this stuff going on and oh, I just gave money to this person for investment deals. Some people are going to be better at that than others.
So I would love to be at that point in the future because that would be much more passive, assuming that I trusted it and things went when they didn't go to plan, we got notified and all that. But did I answer that question?
[00:39:15] Speaker B: Yeah. And I just want to point out that, you know, the mindset is that because I have the same thing, right, where you know, we think we're in control, but I could get hit by a bus, right? Something could happen, whatever, I could have a deal just went south. Where in essence, if you, if you invested your money and you diversified in a few different operators, you could actually mitigate your risk. Right. Because the reason you want, the only reason you want control is risk mitigation.
It's the scarcity coming in. Right. You want, you want to control it because you don't want to lose it.
[00:39:45] Speaker A: It's also, you want approval. This is my deal.
[00:39:48] Speaker B: That's true. Maybe, you know, ego, but I think a lot of it comes from fear of loss. Fear of loss. And it's that scarcity that drives that. But when you actually look at it logically, you know, Rob's an amazing operator, I'm a good operator. Not as good as him, but. Right. Are we the best? No. There's someone out there that's better than us at what we're doing. And if you find the best operators and you put some money with them, you're leveraging other people's time, but other people's money too, because they're using leverage, which is giving you the increased return. So I think we need to have.
[00:40:27] Speaker A: Money to do that. That's the part that I think will be very hard to leverage. Even if you, let's say you had the fund and you're paying out a certain amount, you're making the spread on what you can get.
For me right now, it's still. And for, I think, the average one of your listeners.
[00:40:41] Speaker B: Oh, yeah, it's.
[00:40:42] Speaker A: It's get in the game as well. Like if I would have waited.
[00:40:45] Speaker B: We're going advanced, so I apologize, but not super advanced. But, you know, we're going from high school to first year in college.
[00:40:52] Speaker A: Okay, cool, cool, guys, finish that train of thought. I didn't buy properties for 10 years also because interest rates rose, prices rose.
And I, and I looked back and I said I didn't know how to get, I didn't how to work with other people's money. Prices in Westchester kept going up.
[00:41:10] Speaker B: Yeah, they can't go up like that forever, right?
[00:41:12] Speaker A: Oops.
[00:41:13] Speaker B: They have. They did up until now.
[00:41:16] Speaker A: So we'll see. In the last two years, when interest rates doubled, I kept buying. I bought three buildings in November of December of last year. I bought three the prior year to that. So my interest rates are at some of them. I was signing at 7.95%, 7.65%. Well, next Monday, I'm refinancing all that debt and fully cashing out. And I'm at 5.95.
So if I would have waited, if I would have not done it because my inch, I could no longer get 3.5 and 4% interest, which wasn't going to be sustainable in the long term anyway. So the gift that I received was, and I bought, I think 50 apartments in the last two years. So the gift that I got was going back in and looking at, through conversations like this, right, in mastermind groups and reflecting on, well, why did I actually stop buying the real estate? Right? Because we can always give our power away saying it was something outside of.
[00:42:12] Speaker B: Our control and it was the economy.
[00:42:16] Speaker A: Right. I was a father and I was starting this and I was starting that. Well, the base reality was I didn't know how to really borrow and work with other peoples and form the llc. And I was getting these NINJA loans and the nets, blah, blah, blah, blah, blah.
I didn't grow, which I'm not shaming all over myself here or shoulding all over myself. I'm just saying I learned from that experience and I didn't waste a great opportunity because when the interest rates were higher, the prices on those buildings came down. I paid a better number, and then the interest rates did lower a little bit. I got with the right broker, right? We got a good deal cut and everything's, you know, as of next week, by the time this hits, it'll be done And I'm glad I didn't waste a good opportunity. And now I'm ready for, now I'm ready for the next opportunity.
[00:43:02] Speaker B: It's incredible. And that's, that's really what I've seen is, you know, there's, when you're looking out there on YouTube or, you know, going to these meetings, there's the flippers, there's the wholesalers, there's the, you know, now it's like Gator financing, like all. There's like, there's so many different things out there that you can get into.
What I've just seen is just the oldest trick in the book is the buy and hold strategy. You know, buy, hold, rent, refinance, the burr. Rob does it on the Big Bear kind of. Or midsize, where it's not on your single family anymore. I know you have a bunch of single families, but you're into the five to 20 doors.
[00:43:43] Speaker A: Steve.
[00:43:44] Speaker B: Right. So what I've watched just to relay my information, and Rob probably would agree with this, that the true wealth is created in market cycles over time with the five or six things that I mentioned earlier, which is the. Yes, the cash flow, appreciation, equity, pay down, depreciation, leverage, and then the value add. Right, some sort of value add. And if you get that right, then you can create a lot of wealth. And I mean, I know it's worked for Rob, it's worked for me. I hope that works for you guys. Rob, I want to wrap up just because we did a lot, but I do want you to give you the opportunity to share what has impacted you the most, whether it be mentorship, networking, books, trainings, point people in a certain direction, give them some insights as to what to do next.
[00:44:38] Speaker A: Okay, great. So if it's more of like the fear and the scarcity and you really want to change your mindset, I recommend an author that I know that you're a big fan of as well. Michael A. Singer. He's down in Florida. He's written three New York Times best selling books, the Untethered Soul, Living Untethered and the Surrender Experiment. Highly recommend all of that man's work. The other would be to, as we do every month, connect in person over a meal, break bread with other people that you believe, have your back, that want to see you be successful and be okay. To be vulnerable and share what's really going on in your world, help somebody else out, allow them to help you. Have faith that we live in a loving and caring world and let go, let God and live a good Lifestyle, have fun, do good to your neighbor and keep learning, keep growing, stay focused and enjoy the journey. Enjoy this beautiful world.
[00:45:38] Speaker B: Thank you so much for that. And to give RW services and rent well and RW enterprises or investments. A plug. What, what are the things that, how can you help other people? How can they help you?
[00:45:55] Speaker A: We create the opportunity for others to build wealth in real estate. We are very good property managers. So single family home up into those medium sized apartment buildings and we handle those in Delaware County, Montgomery County, Chester county as well as Pittsburgh Market. And if you have any large scale renovations. So right now we're wrapping up a 15 unit million dollar renovation in, in the city of Coatesville for, for another investor. For another investor, yes.
So those are the two ways so we can we really go with the larger construction projects on those medium sized multifamily where you have to work the tenant base, you have to work with zoning and architects and engineers and, and the whole community. And how do you get it and how do you manage all those cash flows?
[00:46:39] Speaker B: That's how do you maximize the building? Cause Rob doesn't just take the contracting approach he mentioned earlier. I'll attest to this. Most property managers are just property managers. Rob takes the asset manager approach. Right.
How do we take this two bedroom, turn it to a three bedroom, you know, understanding the economic, economic opportunity that could be, you know, value add increase. So I'll just give that plug for him. So, so you got, you mentioned the rw.
You mentioned rent well management, RW Services. How about RW Investments or whatever you call it, I'm not sure the name.
[00:47:17] Speaker A: But it's the culmination of like 15 different LLC that, that own companies, just real estate, the holding companies. I call that RW Investments. That's.
[00:47:28] Speaker B: Are you looking for passive investors? Are you looking for deal flow?
[00:47:32] Speaker A: That deal flow would be amazing.
[00:47:35] Speaker B: So what's your buy?
[00:47:36] Speaker A: We have, we have what's your buy Box because buy boxes. 5 to 15 units.
[00:47:39] Speaker B: 5 to 15 units in what areas?
[00:47:41] Speaker A: Chester County, Montgomery County. The rougher the better.
That is that, that, that's what we buy right now. We're becoming. So we spent three years in Royers Ford every day renovating apartments with our own crew. Three years in Coatesville. We're not sure where the universe is going to take us next. We have two buildings that we bought, Spring City. So it's looking like we might be spending some time in Spring City. So if anybody knows of anything in the Spring City market, we always protect your agent's commission.
We always do. Whatever we said we were going to settle at, we settle at that price. We don't, we don't trade after we get under agreement with the, with the sellers. And we treat all the, all the residents with respect. And if they have any handshake agreements and things that we need to honor, you know, we, you know, we're team human over here. So.
[00:48:29] Speaker B: And I can attest to all that. So any of our net, our network listeners, if you want to reach out to Rob, what's the best way for, to get a hold of Rob here?
[00:48:37] Speaker A: Yeah, Rob rentwell.com.
[00:48:39] Speaker B: All right. Thanks for being on, Rob. Appreciate the insight on the. I like how we brought. I love the spirituality side because whether you call it mindset, spirituality, you know, whatever you want to label it as, it's a real thing. You know, you gotta, you gotta be in a good place to be able to take the action and achieve these things, because it's a reflection of the inside. So it's good to see Rob grow internally, but externally with the portfolio, it's a pretty incredible thing that you've done. So thanks for being on and sharing your abundance of wealth and knowledge and hope you guys found some value in it.
[00:49:12] Speaker A: Thank you, brother.
[00:49:12] Speaker B: Thanks.
[00:49:21] Speaker A: 80.
