Market Cycles and Their Impact on Property Values with Tim Bratz

Foreign Today's show we got Tim Bratz out of it was out of Cleveland, Ohio, but now Charleston, South Carolina, multifamily investor. And I don't want to spoil his, his bio. I'll let him do that for us. But Tim, man, appreciate you coming on, dude. Excited to be here. John, man, it's. Haven't seen you in person in a little bit and so it's, dude, great to see your face and hear your voice and excited about the podcast, man. Yeah, man, appreciate it.

So give us 30 seconds, 60 seconds overview of what you're doing. I know you're multi family, but I also know you, your portfolio looks different now than it did a year or two, three years ago. So tell us where you're at right now. Yeah, man, I've always been historically like kind of the burn method for apartments.

So I buy, renovate, rent, it, refinance and that works when the interest rates are in your favor and when costs are low and you know, appraisals are coming back way higher than what you could sell the property for. So pretty much your loan to value is what you would sell it for anyways. And now it's tax free and made a lot of sense to do that. I think when Covid hit, even for a year or two after that still worked until, you know, interest rates started skyrocketing.

22 and then insurance costs started going through the roof and labor costs started going up. Material supplies harder to come by, more expensive energy costs started going up. So across the board everything got more expensive. And that has dramatically affected values in commercial real estate. And you hear about 08 to 2010 and residential single family property values drop by on an average of 25, 29%, something like that. And it was on every news headline.

And today over the past two years from 22 to 24, commercial real estate, depending on the asset class that you're in, man, has lost about 20 to 35% value depending on the asset class that you're in. And nobody's talking about it nearly as much as they were before. Unless you're kind of in the commercial real estate space, you don't even know that. And there's been a lot of stressors in commercial real estate over the past few years.

And so people without fixed rate loans and all that kind of stuff have really, really struggled. But you know, from my perspective, dude, I, I've done a lot of work. I've been at the game for a long time, at a high level for a long time. And for me it's more of just kind of peace of mind and lifestyle. And so I'm buying cleaner deals now in my own backyard. I was in 12 different states, heavy value add, a lot of construction, a lot of headaches, a lot of management of projects and stuff.

And that, that was great. Built a lot of equity for me. But at the same time it, I'm like, dude, I'm tired. You know, I just want, I want some clean, easy deals. I have access to better resources today than I did in the past and allows me to go buy good properties in good areas my own backyard. With fixed rate debt, whether that's new debt, assumable debt, seller financing debt, we in house manage, right?

We're creating a lot of internal efficiencies, keeping everything kind of vertically aligned now that we have enough scale to do that and to the point where we're even developing an AI property management software called Smart Management which is, dude, over the top, it smokes everything else. And I've used them all. I've used Intrada, I've used Rent Manager, I've used Appfolio, Yardy, Buildium, Realpage, all of those and it smokes all those. So we're really excited about that.

That'll be launching this year. And that's kind of what the focus is. It provides the residual income that same way that real estate does and it aligns one degree from what my true business is, which is real estate investing. And so I think that's a really important. I've skewed too many degrees away and I always lose time and I always lose money. So right now I'm just like the only thing I do is apartments and then one degree of something that could support my apartments.

I think that's so smart. And it's not talked enough about because I go and I've been to a couple of your masterminds and this isn't anything on what you've done. But when you get in some of these groups and around all these real estate investors, especially the past, like what you just said, past couple years where I wouldn't say you've, you've pivoted a little bit.

But I see a lot of guys and girls changing the asset classes, struggling with finding deals and they have to do deals to keep doors, doors open so that now they're going from multifamily to, you name it, anything and everything. So how have you kind of put your blinders on? Said no, we're multifamily, this is what we do, this is what we're going to stay in. Yeah. I think people don't realize that every new asset class is a new business, right?

And every time you learn a new business, there's a learning curve to that business. And it's not a short learning curve. It's like just because you're in a marketing job for some company and you leave every couple of years, you got to start with a new company and learn the new skill sets, learn who the players are, learning the moving parts are, learn the dynamics of this new company. It's like. And that same thing happens with real estate and in different businesses.

I mean, do there's scientific proof of this that it exists that in order to become an expert at anything, you need to spend 10,000 hours doing that activity. So 10,000 hours, 50 weeks a year, 40 hours a week, it's only 2,000 hours in one year working full time on that business or on that career, that takes five years to become an expert at it.

And so that's why you see a lot of people not progressing forward in business or in their career is because, dude, they jump ship every two to three years. I'm going to dip my toe in it. That's never gotten anybody anywhere, right. You got to go all in. And maybe for some of us entrepreneurs we're a little bit off the rails where maybe we can do it in three years because we're thinking about business even when we're grilling out and hanging at the pool and taking a dog for a walk or whatever.

But at the same time it's three to five years. Every bit of it in order and be being in it full time in order to really understand and know who all the players are, know, understand all the processes, understand all the, all the systems and what works and what doesn't work and working through shitty CPAs and finding a good one and working through shitty management software and finding a good one and working through a bad contractor and finding a good one, right? Like that takes a process.

And every new asset class is a new business, which is why you see these guys jumping around and listen, dude, apartments were the shiny object five, six years ago, you know, which is what kind of put me on the map of I had just started a few years before and was already doing apartments, but now you got the blue collar businesses.

You've seen it with the Amazon stores, you've seen it with cryptocurrency, you've seen it with forex trading, you've seen it with all these different things and none of them are bad. The bad Thing is jumping from one to the other without ever becoming an expert at it, without ever, you know, planting the seeds, cultivating the seeds, watching them actually come out of the ground and grow and yield a harvest that takes five years. You cannot move forward in less time. It's not a real thing.

You got to dedicate 10,000, I'm sorry, five years that you got to take. Dedicate 10,000 hours to anything you do in order to realize there's going to be some sort of yield or some sort of return on your time and some sort of return on your investment. And so, dude, that's, that's the barometer that I use if I'm not going to dedicate five years of my life on a full time basis to this new asset class, to this new project, to this new opportunity, dude, I'm not interested. I'm not.

It's, it's an easy way to say no to something. You're like, well, I can dedicate three months. Everybody can dedicate three months. Not everybody wants to dedicate five years. It really gets you thinking and you start being more selective with what you want to spend your time on. Yep, yep. So you're around a lot of real estate investors.

Why do you think, and I'm sure you've seen it, why do you think people are jumping ships so quickly when I guarantee they know the same rule that you just said, the 10,000 hour rule, right? They, they know this, but instead they take it. I, I don't know if it's an easier road travel, but why do you see people jumping? Because I think a lot of people make, unfortunately make permanent decisions based on temporary circumstances.

And that's a bad rule, right? You should never make long term decisions based on short term circumstances. And dude, if you are personally aware and socially aware and economically aware of how a market works, it's not a linear market, it's not an up into the right market. It is a cyclical market all the time. Everything goes up, everything goes down. And when you realize apartments were up here, of course they were up here.

Dude, when your barber's talking about buying their first eight unit apartment complex and you're like, dude, this is the top of the market, maybe I should sell or maybe I should make sure that everything's refinanced at 3% rates, which is the lowest they've ever been in history, like, yeah, dude, that's, I mean, it's hard. You think rates are going to stay that way forever because they were very low for 10, 12 years. But that's not normal, right?

Where we're at right now is more of an even keel normal interest rate. So values went up, right? And now values have come down because expenses are through the roof. But here's the thing, dude, if you can ride out the bottom part of the curve, it's coming back up. And you've seen it with, I'm sure you've seen conversations happening about the, the supply shortage in the affordable housing realm. And like, dude, we're four and a half million housing units short in affordable housing today.

And there have been all builders have been pencils down for the past three years while interest rates have gone crazy because they don't know when things are going to stabilize and they don't want to buy something today and build it. And interest rates keep on going up and then all of a sudden be totally screwed when it comes to market. So there's some products still coming online in 24 and in 25 now.

And so that have hit the market that have absorbed some of that, which is why you haven't seen some steady and sharp price increases. But dude, there's three years of inventory that has not been built yet on top of the four and a half million dollars. So despite interest rates going up, there's still a shortage of supply in residential housing and in multifamily housing.

And now we're another million housing un units short for the next three years in a row because that's what we need in order to absorb new people moving to the country, babies being born, people coming of age and all this other stuff. You need about a million housing units per year on top of the four and a half million that we're already short. So you're talking seven and a half million housing units short in the next 36 months. And anything that is coming online is all upscale stuff, right?

It's all. You can't build a house for under $300,000 today. You can't build an apartment for under, dude. Like we do a lot of scale and we build them for about 150 a door, maybe a little bit more depending on how much we're on the dirt for. So you're talking $200,000 a unit for most people. Dude, I think there's a play to go out and buy a bunch of single family homes under $300,000 or buy a bunch of these kind of workforce housing apartments and then renovate them again, right?

Like it's come full circle, right? It's back up where you can go and buy a 200 unit apartment complex in Illinois or in Georgia. And for 60, $70,000 a door, throw 15 grand per unit into it to make it really nice. And dude, you're into this thing for 75, $80,000 a door and it's worth 120 to 150. Like it's all going there, dude. Every single rental unit in the country, I think every single family house in a decent area is going to be at least 250 to $300,000 in the next two years.

And I think every multifamily unit in the country is going to be worth at least 100,000 to $150,000, depending on where it's at. And that will go with rental increase, right? Like there's no houses to buy. So now you got to rent a house. You can't rent a house. You got to rent an apartment or a townhome or something and so, or buy a condo. And so I think there's, there's going to be a big movement towards that over the course of the next few years. And guess what, dude?

Because I stayed in my lane and I just absorbed the suckiness of the market for a couple of years and dude, it was shitty and there were a lot of headaches and a lot of problems to be solved and all that stuff. But it also refined our operations where now we're able to capitalize on the next thing. And guess what? The person who jumped ship into some other industry or some other asset class wants to get back into apartments in the next two years because it's ripping again.

It'll be too late, dude. Yep. Yep. Well, you hit nail on the head too. You refine operations, which is, I think there's a lot of people that grew really fast in the past five to seven years and they didn't refine operations. They were just bye, bye, bye, bye bye operations kind of drug along and then once, you know, kind of crap hit the fan, you know, they're, they're standing out there and not knowing how to run their real estate. So for you, here's, here's how I. Here'S how I would say it.

It's like going to the gym and benching £300 with a spotter on both sides. That's what a good market and easy interest rates and low cost of capital and low operating expenses and all that. When a good market is your spotters at the gym, dude, and they're helping you and you feel like you're pumping up 3, dude. And what happened as soon as interest rates are rising, insurance costs are going up and all is those spotters go away.

And you never built the muscle and now you're like strangled because you never actually went through the process and did the reps in order to build the muscle to then operate it properly. And so that's what's being exposed. It's a bunch of people who had easy access to money and now they don't. And now they can't keep their project afloat. They don't know how.

They never learned how to raise capital, they never learned how to refine their operations and go through the profit loss statement and really like get their hands dirty. And that's what we had to do, man. And it's, it's the reality of the situation. So that's okay because it's cleaned out a lot of stuff. It's created a lot of opportunity for the people who did build the muscle. Yep. Like that analogy. That's pretty good.

So the next three to 10 years, I know you're, you're just the way you're talking and kind of, I know how your, your business somewhat set up.

You're more of a visionary. How are you planning for the next three to 10 years? Or is that your timeline that you're planning? Yeah, so I think things change dramatically. I used to plan like here's my 25 year goals and then here's my 10 year goals and then here's my 5 year goals and then my 2 year goals and then my 1 year goal or whatever.

And I found the compound effect and the whole, the whole idea of momentum and the slight edge and you've seen a couple of these books, it's a very real thing, dude. And it can dramatically change the opportunities that you have access to if you're focused. If you got your head down, not looking left, not looking right, just like head, head down. Doing the work, dude.

The way that things start compounding and the opportunities that then come about, it almost doesn't even make sense to spend the time setting goals longer than 36 months out because things change so rapidly in markets and in your competency level and your ability to get shit done and the resources, the connections and all the other stuff. So I set 36 month goals and that's kind of where my, where my head's at right now.

So my three main things are I've got my education company, my masterminds and that stuff. And that's awesome. It's more of a fulfillment thing for me than anything else. Going several cool trips with my mastermind members and I learned a ton from them. As I'm giving, I also learned. So that's a cool thing where it keeps my team engaged, keeps them top, top of their game, having these, these conversations about what's out there and how we can refine operations. And it's a great, great business.

It's a cash business, which is, which is strong for quick money, keeping food on the table, right? So that checks a lot of boxes for me. It's not really an enterprise value business, but it, it has a lot of fulfillment for us and it's a good cash generator. And then I have the real estate investments and you know, we own about. We're. We were up to about almost 5000 doors and we're at about 3000 right now. I'll probably sell off another thousand to 1200 maybe, maybe even this year.

I got 600 under contract for sale. And you know, I got a couple others that I would sell this year more. So not because our bad properties do. I just want to, I want to refine.

I think in business you, you grow and then you take a step back and you grow and you take a step back. And I think that refinement stage is really important because otherwise you're just building more on top, you know, and you got to, you got to trim the fat once in a while. And for, for us, we've decided like, dude, I just, I love Texas and I love Louisiana and I love the Sunbelt out west, and I love all. But it's like. And I love Florida, but I do, I just don't have team in those areas.

And every time you open up a new market, you got to find the new attorneys, you got to find the new management companies, the new contractors and all that. So I'm like, dude, my team's in the Carolinas and Ohio and that's all that we're doing now. So. So those are the only places that we're investing. So I'm just selling the other stuff. Even though they're good properties, they're good for somebody else who's better, more local or earlier in their career.

So we're going to refine to about 1500, 1800 units, let's call it. And then I'm just buying in Cleveland and the Carolinas, newer stuff. So my buying criteria is good properties, meaning built in the past 20 years or newer in good areas, A or B class areas in my own backyard of Ohio and the Carolinas, that we can assume fixed rate, fixed rate debt with good debt. Right. Which, which is Fixed rate.

It's either assumable debt, it's new debt or it's seller financing type of debt with a decent timeline probably, you know, I'm looking at usually five to seven, 10 years before it balloons out also. And then we in house manage. So that's where my team is. It's easy for us now. In house, man. We in house manage about 2,000 of our doors right now. We're just going to keep on growing that and then we hold forever.

My plan is to never sell these and I don't need to transactionally sell anymore or even a roll up equity or anything along those lines. My plan is just good properties, good areas, good debt, good management, good in house management and then hold it forever. And so that's the buying criteria today. And then the third business that I'm focused on is our software.

And I truly think that's a, you know, whether it goes to a billion or multiple billions, or 50 million or 100 million or whatever, or whether I never do anything with it and I just use it in my own portfolio. It has helped us increase income and decrease expenses dramatically in our own portfolio, let alone, you know, what it can do for other people who are facing real struggles, who haven't built the muscle and don't understand the processes.

We put all of our processes and systems and everything in that software. So somebody who's newer can just piggyback on our experience, which is cool. And it prompts you to figure out ways to increase revenue and decrease expenses which then increases the noi, which then increases the enterprise value of the property. So those are the three things that I'm focused on. And from a goal setting standpoint, you know, the education business going great, we'll continue growing.

I don't need to push that, I don't need to do anything like. But we have goals to obviously grow the membership base. On that front. There was a lot of attrition when the market dialed back and people weren't making their acquisition fees and stuff. And so that happened to affect a lot of the education side of things in commercial real estate realm. So now that the market's pumping back again, people are doing some deals. We've seen a good resurgence of that coming back, which is cool.

As far as the acquisitions for my existing business, I'm more focused on dispoing these thousand doors right now. And then the second half of this year I'll probably pick up 30 to 50 million dollars, which for, for some people might be a lot, for some people might not Be a lot for us. It's like pretty easy for us to do that. That's like one deal a quarter. We don't deal flow enough money flow. That, that's pretty, pretty easy. But without breaking our backs.

And now we make enough in acquisition fees, we make enough in cash flow. The management company makes a couple more bucks because we in house manage. And the depreciation now offsets the acquisition fees and the coaching income. Right. Which is a big deal. And then the other thing would be really promoting the software. So if I can push out the software and get it to about 25,000 units using the software, that puts us at about $100 million valuation based on the enterprise value of it.

So you know, I got 3,000 of my own, I got tens of thousands in just my own mastermind group and know a lot of really good people. So I, I'm pretty confident that we can hit that. And who knows, that might be the best, highest, best use of my time once it starts really cranking out money. But that's, that's the goals, man. Just 12 months. But I want to, I want to. Easy, lucrative, fun business, right? It's called an elf business. Easy, lucrative, fun.

The education is a very easy for us because we're already experienced, we're in the trenches doing the work. So it's easy for us to just consult on that. It is a lucrative business. Any. Most consulting businesses are live events are not lucrative. Right? That's a, that's a. Steals a lot of money but at the same time it builds a lot of camaraderie and creates stickiness and it's a fun business. Dude, I frigging love it. The real estate investing is not easy or lucrative or fun.

When you're doing heavy value add stuff. You got to do it. It can be very lucrative, but it's usually not easy or fun. The idea here is maybe you make some upfront fees which are big pops kind of that midterm money whenever you close on something. And then dude, I do not bank on making any cash flow from it. Every dollar goes back into the property or pays down principal or creates reserves or whatever.

So I know that's a, that's a big fallacy I think in rental real estate is I'm going to get rich off of cash flow. Now did you. You pay the bills and where you really get rich is as rents start to rise and, and you start paying down the mortgage or, and you're paying down the mortgage with future more inflated dollars versus what you locked it in at today. Meaning it might be, you know, like if you take a look at 1960 to 1990, the dollar was deflated by 75%.

So if you put a mortgage on your house in 1961 and you were paying essentially 25 cents down in $1990 on your mortgage, but getting a dollar reduction, if that makes sense. So the idea is buy a great appreciating asset, let rents continue to grow, and then use future dollars to pay off the debt of that asset.

And all of a sudden you find yourself with this huge spread and 10 years, 20 years from now, and you're like, dude, let me just refinance it, Take millions of dollars back tax free and then do it again for another decade. So like that's the play with owning real estate. And the depreciation offsets your active income. Yep. And that's a really good point. And I don't think a lot of people talk about that to where real estate is an investment vehicle. Right now.

Self storage is a little bit different because it's real estate and business. So it has to cash flow and it can be. Which is why cash flow is more. Which is why. Yeah, like that's a, that's a really good point. And a lot of people don't get it. It's. Real estate is real estate. Right. With management becomes kind of the business where you can actually take a salary and stuff too. Right. It's similar with, with self storage. Right. It's a business with real estate.

You know, I see people trying to sell these like car washes and based on a cap rate basis, like it's a passive piece of real estate. It's not. Dude, you're getting a job and you're overpaying dramatically for the business. You know, it's a tricky way of, of doing it. Creative way of selling it. But it's. Dude, it's a bad deal. Most like, can you believe car washes are like eight to ten million dollars? It's like, how is this freaking. How does somebody. Five caps too? Five and six.

Yeah, dude, it's insane to me. And then they'll build liability. There's a lot of like, like, like environmental liability with it. Of, like, how are you disposing of, of all the, all the oils and all the, all the soaps and all this other stuff and, and the land value is substantially reduced based on that once you try to, you know, wipe it and then, and then resell. So you know, it's. I think that's a really, really good point of making sure.

That you're buying real estate or a business or if it's both, it's got to be underwritten separately. You see it with mobile homes too. People sell the mobile homes based on a cap rate. But dude, it's a depreciating car is essentially what you're, what you're buying. And, and to buy that based on a cap rate, you're going to overpay by probably five to eight times what you should be overpaying.

Now if you separate out the land, which is real estate and is rental income versus, you know, the, the mobile home rent, two separate things. But you got to underwrite it like a business and real estate. Yep. For sure.

I want to kind of go back a little bit. Two questions. So sounds like you're trying to get into less value, add less headaches on your properties. So kind of I guess confirm that. And then was it kind of hard to. And I know, I think you started in wholesaling, then single family and then build up the commercial. So eventually you have to start selling things off. But once you started getting commercial assets, was it harder for you to start selling, you know, the bottom 10% off?

No, that's, that's actually part of our business model is it's like Jack Welch at GE, dude, just trim the bottom 10% every year and backfill it with new acquisitions. And when as you backfill it, you get rid of the bottom 10%, let's call it one out of tens. And all of a sudden, dude, there's a 5 out of 10 that pops in and an 8 out of 10 that pops in. There might be a 2 out of 10, but it's still better than 1 out of 10, you know, so if you, if you're always trimming the bottom.

Now, now we've been actively trimming. Right. That's been part of our process for the past couple of years, which is just trimming the fat. I'll probably do less of that as I, as I move on. And instead I'll probably look at trimming things like, you know, certain operational type items or staffing or stuff like that on the properties as opposed to the properties themselves. But I've sold off a lot of the smaller properties. I've sold off a lot of the C class stuff.

I've sold off a lot of the out of state stuff. I sold off a lot of the third party managed stuff. And that's been kind of the barometer of are we buying, are we holding it or we, are we selling it? And you know, does it meet? Does it meet, Is it good property in a good area with fixed rate debt that we can in house manage and hold forever? That's my buying criteria. And if it checks all those boxes, typically we're holding onto it.

I still own, dude, I still own A, an eight unit mixed use building. I just bought a three unit mixed use building for 900 grand here in Charleston. But it was built in 05. It's got a restaurant tenant in there for another six years. They've been in there for four years. It's got a long term tenant upstairs in one of the apartments. The other one's an Airbnb that brings in $5,000 a month. Right. It's an easy deal. We already have local property management handling other stuff of ours locally.

So there's no additional expense for us on that front. And, and I can slap bank debt on it. Fixed rate, you know, 25 year RAM, five year balloon and, and just kind of hang on it. And it's an Airbnb, so I can take my family, we can go and hang out there, utilize all the different amenities. So it's got a lifestyle aspect too. But dude, I'm still buying even smaller deals. It's just. Does it check all those other boxes? So, and is it local?

And is it like if it, if it does, then I'm, I'm cool moving forward with it, man. I like good deals. Yeah. So I want to ask. And it seems like a lot of this isn't talked about kind of like the cash flow thing, but it seems like, you know, we all get in the real estate for the freedom. Right. Time freedom. And then at some point you've scaled to, to you've got a business. Right. And no one really talks about that kind of progression and how you have to change.

Right. Because initially it's probably just you grinding. Whatever it is, whether you're wholesaling single family rentals, whatever it is, you're probably by yourself, you're grinding. Then all of a sudden you have to kind of become a leader manager, an HR department, then a CEO and like all these transgressions that they don't, no one really talks about. So kind of talk about your journey through that. Was it difficult? And, and just kind of take us through that. Yeah, man.

You know, the, the thing early on is entrepreneurship can be a very lonely road, right? Like who do you talk to, who do you have conversations with? You know, maybe your buddies from high school and college didn't, didn't go down. The entrepreneur Road, maybe your family is not entrepreneurial. Like, and I saw these businesses and you'd see these businesses, you know, going around. You see a restaurant with a bunch of employees and you see management companies.

You're hearing about these guys on podcasts that have these big businesses. I was like, how the hell does that possibly happen? Like, how do you do that? And I didn't know. And so mentorship is a big deal, right? Finding somebody who can mentor you and coach you. And I hired some of those mentors, had some that were good people and some that were bad people. It's kind of like, you know, you can learn things from a bad mentor the same way you can learn things from a good mentor.

You just don't want to be around that that long because the bad value Start Start could influence you. And so what I really found, 10 years ago, actually this month, I was invited out to my first Mastermind and sat in a room with 15 entrepreneurs and I was like, mind blown, dude of, Holy shit, there's 15 people in this room that are better than me in some way. Some of them have bigger businesses, some of them are smaller businesses, but better health or better relationships or like.

And I had 15 mentors instead of a single mentor that I had to make godlike and put up on a pedestal. It was like, okay, I can pick and choose what I like aspect wise from all these different people in the room. And I also realized it's all the same shit, dude. It's all the same pillars just in different industries, different widgets, different products or services, and at different levels as well. And so, you know, I stayed engaged and I went to a Mastermind every quarter.

And as I went every quarter, boom. I had these big breakthroughs because every time I jumped to the next level, I'd hit a ceiling. And then it'd be time for another Mastermind. And I'd say, hey, here's my biggest problem. And I. And that's how I built my business for the past decade, dude. It's just quarter by quarter of. Let me knock down the biggest domino this quarter, figure this out, and then run as fast as I can for the next 90 days with it.

Boom. And then I'm gonna, I know I'm gonna hit another problem and. But I'll be able to break through it again at the next Mastermind. So, you know, there's no shortcuts. But if there's one way that expedites it a little bit, it would definitely be joining and being part of like Mastermind groups, whether that's a local one, a regional one or a national one. Like gotta get inside a group in some capacity. So that was, that was a big deal.

And they, they downplayed the whole idea of not downplayed, they simplified the whole idea of building a team. And I thought that I needed hire all these executives and all these like amazing people. And I couldn't afford a hundred thousand dollar a year salary. And they're like, dude, you just stay focused on revenue generating activities and hire an assistant to handle everything that's non revenue generating. And I was like, okay, let me try that.

And so in 2014, it was first time I ever made $100,000. Made about 130 grand. And my biggest takeaway from my first mastermind outside of I got to stay in a mastermind, let's join a mastermind but also hire an assistant. So I hired an assistant and here's what I did. I made a simple catalog of how I spent my time. From the time I woke up at 6 o'clock in the morning to going to bed at 10 o'clock at night. I just wrote down every 15 minutes what I did.

And then at the end of the week I wrote either a dollar sign meaning it was revenue generating, or a zero, which means it was not revenue generating. And that allowed me to then allocate this is something I should be spending my time on or not. And then I put a smiley face or a frowny face of do I like doing this or do I not like doing this? And that allowed me to then focus more on things that I enjoyed doing and that made money. And then I could staff out everything else.

So all the frowny face, not all of it, but most of the frowny face stuff and all the zeros, well that was, that was the job description, right? I didn't know how to put any sort of roles and responsibilities together. I didn't have anything formal. It was literally a list of the shit that I did on a daily basis. I didn't make money and I hated doing. And I was like, who wants to work for me and do these things?

And somebody raised their hand and I hired them in February of 2015, March 1st of 2015. And I made $400,000 in the next 10 months because it removed the non revenue generating activities off my plate and allowed me to focus on making money. Revenue in business solves all problems, right? So if you can drive more revenue then you can make, you can make more hires, you can buy the software, you can build it, build out an office and bring on more team members and hit the next level.

But it's like the first you as the CEO need to be focus on revenue generating activities, hire an assistant first. The second hire should be something somebody else to help you with revenue generating activities. So another sales person, acquisitions person, marketing person, in order to then drive lead flow, deal flow to you. And the last thing that I handed off was so I had a flipping business, I had a wholesaling business. I started buying, selling and, or buying and holding some stuff.

One of the last things I let go of was dispositions. And then the final thing I let go of was raising capital. And I still raise capital quite a bit because I think if you control the money, you can, you control the rest of the business. You can kind of like steer everything by controlling the capital in the business and you keep an eye on everything if that's the last thing that you give up.

But you can give up operations, you can give up marketing and give up sales, you can give up human resources and I say operations yet, but finance and accounting and all that stuff, like the last thing that I would give up is raising capital and just paying attention to that. And if you do, dude, then you can still control the business. So it's just you don't go out and you build a whole business and hire all these people at once.

It's one at a time based on the next bottleneck that you're facing. You hire that person and hopefully you hire people that grow with you and you hire somebody at this level, but you paint the vision for them. I'm hiring you here, but this isn't where I see you. This isn't a bed I don't want you to lay down. It's a ladder of where we're going next. And I see you for these two careers advance, right?

And I can now point to different people on my team who have been with me for a decade or longer and say they came in as my executive assistant, they vested into equity as a partner in every deal that we do today. And now their net worth is millions of dollars. All because they came in and they were willing to shovel shit and learn the business and grow with us as a team. And the core values aligned, right? So I hired, not knowingly, but I hired good people.

And those good core values that aligned with mine is what really created the stickiness of our team and growth oriented. And we were reading books and we were listening to podcasts, we were helping each other and answering questions and we were bringing them out to The Mastermind events with me and it grew all of us and it grew the business substantially.

Yeah. And I want to hit on something about masterminds, but you bring teams up and, and it kind of. It just made me think that from what I've seen from the outside looking in from compared to other investors, your team has stayed together and you've grown your team and you guys have grown together. Do you think that's. There's very little attrition on my team. Very little. Do you think that's the secret sauce is that you guys all have kind of grown together and you've helped them?

I. I think hiring for core values like growth and personal development is one of our core values. Right. That's something that we ask in, in interviews. It's like what podcasts are you listening to? What books are you reading? You know, where do you want to be? Do you. Are you looking for this as like, where do you want to be? Or are you looking for the next level? I usually don't. Trying to think. I don't know if there's.

I hired an outside attorney for in house counsel that paid six figures too. And you know, they've been with us probably four, four or five years now. Otherwise everybody else, man, has essentially started in a pretty low role and has incrementally increased up into six figure roles and equity positions. I think there's seven of us that all split equity in every deal now, not evenly. Right. Depending on how long they've been there and their certain role.

Some people have a little bit more equity, some people have less equity. But there's seven people that invested into equity in deals in my company and they get a piece of everything. And even if they left, they'd still have equity in that deal. They wouldn't get equity in new deals, but they knew that I'd take care of them too. And we've been through a lot of dude, there's been a lot more tougher days than there have been great days.

But the fulfillment that we get from having a team and kind of going to war together, Lincoln Arms and charging the front lines builds a lot of camaraderie and builds a lot of loyalty. And I would say it's also a reflection of how you manage and how you lead your team. I mean, fiercely loyal person. And I would fall on a sword for anybody on my team and I would lose money versus firing somebody over like, I'll take the L. I don't ask my team to take the L. And they realize that.

They realize that. And so because of it, they've been extremely loyal to me too. But guess what? They also perform. It's not because they don't have anywhere else to go. I mean, people have tried to recruit people from my team because I am active on social media and stuff. And so they reach out to my team members and they're like, hey, why don't you come work for me and I'll pay xyz. And then they essentially get blacklisted from our organization after that. But the reality is, people.

People acknowledge that they're some of the best of the best across the country, and they have other opportunities where maybe short term they could make more money or get a bonus or whatever, but they know long term that's not what they want. And we have a lot of fun together. And the culture, man, is more important than anything else. You can always train for skills, but you can't train a mindset. Yep. That's awesome, man. That's awesome.

So I want to get back to Masterminds here before we start to wrap up. Obviously, you said masterminds and mentorship were huge for you, especially in the beginning. How. And at the beginning, you're making these huge jumps, right? And it's kind of exciting. It's kind of scary. At the same time, how do you, I guess, keep that excitement going even though you're probably not making as big as jumps? That makes sense.

And then how are you also putting yourself in rooms where you're not the one, you know, you're not the, the biggest one in the room? How do you find rooms where you're still a smaller guy in the room? Yeah, I. I think. Good, good questions. So how. First one was, how do I stay excited? Here's what I've learned in. In business, I am as the CEO and as the visionary and as like the. The trailblazer. I am a tr. And I saw this.

I saw a speech on this by the dude who started Starbucks, who's not with Starbucks. He started Starbucks and sold out at around 12, 15 stores. And he goes around and was speaking at one of the local universities. I saw this guy talk and I was like, what an idiot, right? Like, he could have made so much money. And this guy's on stage and he's like, yeah, I sold out. And guess what? I do not regret it at all. Because I'm not a corporate executive. That's not who I am.

I am starting things from scratch. I'm excited and I like, you know, just like, like being scrappy and figuring things out and bootstrapping these things and getting businesses off the ground. He goes, that's where I excel and that's where I get the most fulfillment from. And I thought that lended a lot of wisdom and a lot of awareness that this guy's got about what actually matters to him. And it's not about chasing the dollar all the time.

And so for me, dude, I like new things, I get excited about things. But what I've realized, the longer that I'm in business is the more boring the business is, the more money it makes, right? And so everything's exciting at the beginning, and then it gets boring. And then we try to stir some things up. And I'm usually the problem, right? I create the chaos. And I think we've gotten to a point or I've matured to a point where it's like, I want peace of mind now. I don't want more headaches.

I don't want to. Dude, every frigging year at Christmas, I'm like, I'm going to take December off and just hang out. And every single year, there's a closing that happens the week of Christmas or on December 31st. Every year for 10 years of my life, this has happened. And I'm like, why do I keep doing this to myself, right? I could just say no. And so it's come to a point where it's like, okay, dude, we can do good deals, we could do easy deals. We have an amazing lifestyle.

Because what I will say is, dude, after probably 1500 doors, my lifestyle didn't get better. My lifestyle only got worse. Meaning I was signing on more loans and had more liability. I had more business partners and more personalities that I needed to manage and maintain. I had more staff, I had more people's contractors stealing from me. I had more investors that we had to answer questions for. And like, it was just. It was more headaches. And financially my lifestyle wasn't any better.

I already. I have the beach house already, right? I have a mountain house already. I can take any vacation I want. But it, but it took me away from my family. It actually took time away from spending quality time with people that I love. And so, you know, I think, I think sometimes you got to go through that in order to really understand it. I think sometimes I can tell you that it's not that cool owning those fancy Mercedes or the luxury souped up muscle car or whatever.

At the same time you're like, let me figure that out for myself, right? Like, that's at least how I Was. I was like, no, let me go. Like, dude, having a beach house is awesome. And at the same time, everything rusts and everything falls apart. I got to get a new grill every 18 months, right? It's like, dude, there's the. Like, you don't realize that until you have it. And then you're like, oh, well, you think the grass is always greener and it's not. And if it is, it's because it's.

There's piles of shit over there fertilizing it, and it takes a lot of watering and cultivation. And so I think I've gone through that. That point in my life where I have a lot more bigger picture wisdom. I had another baby two years ago, and so that, like, oh, man, I got. I can get. Reset the clock and with the kiddos and spend a lot more time with her and stuff. And so I want an easy business.

I want a good business. I have an opportunity to hit the billion dollar mark with the software. And at the same time, I don't need to, dude. And I'm over the ego piece. I think ego really drove me to a point where let me go and pound my chest and say, I own all these doors. And dude, it just. I don't know, it didn't. It didn't give me the fulfillment that I thought it would.

And that was something I needed to work on for me personally, as opposed to, you know, going out and just building a portfolio. There's. There's other ways to figure that out. So I have a lot more peace of mind and a lot more understanding of what's important to me. But, dude, it's. It's part of the process. We all go through it, right? I'll be 40 this year, and you start reflecting a lot more.

And I think, you know, 20s, it was like, grow, grow, grow, build, build, build. Really learn. I wanted all of it. And then I did that in my 30s. And the second half of my 30s has been like, let's just kind of calm down. Let's have a little bit more fun, a little bit more peace of mind. So I don't know if that answered the question, dude. Yeah, no, that's good. That's the first part, though. Now the second part. How do you stay in. In rooms where you're not the. The biggest guy or, you know.

Yeah, so. So obviously you can go around and ask. I think the best way to find a great room is looking at the leader of the room and making sure that you align with their core values. If they're a good person or they listen, they might maybe you're a shitty person and you want to be in a room with shitty people, right? Like that. Go find a shitty leader and join that room that, that you'll feel comfortable there.

For me, the people that I want to be around, I realize the people in the room are going to be a lot like the leader is. And so if the leader's a hard charger and they're very egotistical and they just want to break records and grow the biggest portfolio possible, there are groups that, and if that's what your goal is, dude, there's awesome groups that align with that. There's also groups that, guess what, they don't have the biggest portfolio but they have the biggest lifestyle.

They own a bunch of free and clear. They might be sitting on 10 million liquid and they're lending money and that's a lifestyle type business. Or they have amazing relationships and they bring their family out to all these different. Like we just got back from Hawaii, right? And literally I would say over, definitely over 80, maybe 90 of everybody who attended brought their family and didn't come for a two day event. They stayed the entire week and they just kicked up, man.

We had some amazing conversations, some great time and some depth in conversation that went way beyond how many doors do you have or how much money you make in this year it was more, you know, figuring out how you, how you have a great business with great personal mindset and mental, you know, clarity with a great, with great relationships and being great parents, being a great spouse along with having awesome health and living long a long life that's really enjoyable and checking all these

different boxes of not just the money side. For me that's important. So that's what I talk about and then I attract people who. That's important to, right? And the people who are only health oriented or they're only relationship oriented or they're only money oriented, they might go to other groups and we kind of change that up a little bit of what we're talking about at each event. So that way everybody gets a little bit of everything. But we also do the tactical stuff.

We have daily boardroom calls which are very tactical technical in what we do. So anyways, look for a good leader or a leader that aligns with what your values are and what you're looking for. The group will then align to that leader. So that's an easy way to look at that. Or you can look at members of that group who've been there for probably three years or longer. That gives you a pretty good indication of the kind of people that stay and that are, that they're attracting to that group.

So those are some good, some good metrics. The other thing I would say is create one. You know, if you, if you want a group with only, you know, people worth a hundred million dollars or more, my buddy Bobby went and created that, right? He was over $100 million. Didn't have, he's worth, he's worth about 500 million, a little over $500 million. And he was like, you know, there's not a group out here with people who are worth over 100 million and talking about this next level of life, right.

And so he created a mast with $100 million plus net worth. And average net worth is probably closer to 250 or 500, I can't remember. There's a couple billionaires in there, some, some big names that you would know. And out of that he just had the ambition to start it, right? Of what he wanted to attract. And so depending on what you're looking for, those absolutely exist.

But there's also great groups that have like, dude, there's people with bigger portfolios in my group than I have and people with bigger ambitions to grow their portfolio in my group than I have. And I've kind of pivoted my mindset like we were talking about. But there's absolutely some rockstar groups out there with big portfolios.

If that's what you're focused on and to focus on it with some of these other aspects or you join multiple masterminds, one that's heavy about growing the business, one that's heavy on relationships. You take your wife out of this one, you take your COO out to that one. So I'm part of multiple masterminds and I plug in when I can and that changes too. But I would try to stick to any mastermind.

Same thing going Back to the 10,000 hour rule, three to five years dedicating of a commitment, I would try to stick to that because I think the first year in a mastermind you're just planting the seeds. You're trying to figure out who's who, who, what's everybody going on. You're learning all the different stuff and trying to, you know, it's information overload.

Year two is that cultivation stage of now starting to do some deals with some folks in the group and you're starting to like see who I want to do more business with and less business and really refining some things. Maybe you Start bringing your team out to the mastermind. And so they're starting to grow with you. And then year three is really the harvest. And now you're one of the veterans. Now you're the ones that people are bringing deals to. And you got way more opportunity.

Again, the compound effect sets in where you've got all this, all this deal being, and you're being put up on stage now there's this additional edification and all this other good things that can come. But people want to know that you have the commitment, dude, that's. Investors want to know that you're going to be doing this business for the next five years. Right.

The leader of the organization wants to know that you're going to be in the Mastermind for another 3 years or 5 years or whatever before they put you on stage. There's certain things that doors that open up once you're there.

And in a lot of masterminds, the veteran members don't do deals with early, newer members because they want to make sure that they're not just there for the transactional side of trying to extract from the, from the mastermind, but they're actually there for the relationship of long term, you know, wealth building on multiple levels.

And so I think that's, you know, figuring out and identifying and having clarity over what's important to you and then figuring out just asking which groups exist and get some referrals and references on that stuff and then interview or have a conversation with the leader of that organization and make sure that they align with you. That would be the path that I took in order to find a mastermind of whatever I was looking for. It's awesome, man. Awesome, man. Well, it's been an awesome show.

Do have three quick questions and you've actually kind of answered one. Another one. We've answered two of them, but we'll still cover them. Yeah. What's one thing you're better at than everybody else? Kind of your superpower. Casting a vision. I can, I can cast a vision.

I can show somebody from where they are to where they can be both employees, team members, joint venture partners, mentees of mine, and kind of talk people through the tough times and let them know, listen, this doesn't last forever. Let's get you over to here. Like getting people actionable in order to then show them what can be. And, and I think a big part of getting them to take action is showing them the why of what really, really matters.

Yeah. Did you develop that or do you think you've already always had that, that trait. You know, it's. It's. It's kind of tricky because, like, I was the guy who always organized Friday nights and Saturday nights in high school, right? Where I was like, if Bratz wasn't going out, everybody just stayed home. And it's not because I was the guy who had all fun, but I was the one who organized everything and like, visionary together and said, hey, we're going to this. This house at this time.

Let's go and hang out and we're doing poker night this night or whatever. So I've always had some leadership mentality. I always hacked. Not hacked, but I always had like, some sort of a entrepreneurial type thing where I was like, making. I would make, like, mixed CDs, right? Hey, give me a list of 15 songs you want. I download them on Napster Audio Galaxy or whatever, put them on a CD and selling my buddies for five bucks. Or I'd cut hair.

And I. I gave everybody haircuts in high school and college, and that's how I kind of made some money. So I've always had some entrepreneurial bug. I don't know if the. The visionary piece was there, but I. Or being able to paint, you know, it's. I think it's something that I. I would say it's more of a skill that you can develop and really understanding, influence, understanding psychology, understanding. That stuff's always been interesting to me. So I've always watched shows on that.

So I think it didn't feel like formal education. And I think that that might be why I don't think I was born with it, but at the same time, feels more natural to me. But. But yeah, dude, I think I'll give you an example. Like, my son, very stubborn, very. He's seven years old, very stubborn, very timid, and kind of quiet, reserved, insanely smart. Like, like, off. Like, he's in first grade. He reads their fourth grade level, and he literally reads two to three books a day.

He was sad when I was like, let's make sure we read at least one book a day. He goes, but I want to read like four or five books a day. Yeah. I was like, all right, all right, you can. So anyways, we're in Hawaii last week, and he's had this tooth dangling for like three months, dude. And I'm like, let me pull this thing out, kind of mess with them. And I slap him in the mouth a little bit and he's like, yeah.

And so I was like, I know how much he loves books, and I Was like, I'll give you $100, and we'll go straight to the bookstore as soon as we get back from Hawaii.

Right? If you let me pull out your tooth on stage in front of 100 people. Right? And so. And so he's like, no, no, I can't do it. No. Well, I'll do it. I don't want to do it on stage. I was like, hey, it's $100. But I don't focus on $100. I focus on what the hundred dollars can buy, and what it can buy is these books. And I understand the feeling. Right.

What's going to sell him on this is the feeling he's going to get by having the full book collection, being able to sit back and read these books and know he's got all of them. And so that's what I really leaned into. Of. Think about the feeling. Think about this, man. Think about. And I painted the vision of him hanging out in his room reading these books and looking over and having the whole book collection. And by the last day, he's like, all right, let's go ahead and do it. Right?

And so I was able to move him to action by doing that. Now, it didn't go as well. I would never, ever suggest anybody do this, because it took me, like, 4, 45 seconds to pull this tooth out. Dude. It was brutal to do. It was brutal to watch. He's. He says he's glad he's did it, but I was like, I'm going to jail. Like. Like child service. Get me? But it was. It was pretty fun to kind of see him through the. And he's like, super excited. Tooth.

His new tooth's already in or coming in, and it would have fallen out anyways, but he made 100 bucks. We went to the store. He's all excited. He's smiling with a big gap in his mouth now, and. But it's all from painting. Vision. Yeah. That's awesome. Make sure he sticks to books and not doing money for other stuff going forward. That's funny. That's a good story. What's next for you? I know you've kind of talked about it, but anything else on your horizon? No, man. Like, it's.

Dude, I've been thinking about simplicity. Simplicity. Simplicity, Right. There's a. A book called Walden by Henry David Thoreau, and there's a chapter in there. I never read a book in high school, by the way. I would just take reports from my brother, who was five years older than me, who took all the same Classes and I would just copy those reports and turn them in. And one of them was on Walden and this book and one of the chapters said it, simplicity, simplicity, simplicity.

And I always think back to that of this is a guy who lived in the woods who just had a simple life and. But he was like very stoic and new, like seen as like this thought leader. And he's saying that shit doesn't have to be complicated, right? Make it as simple as possible. And I think there's something to be said about less is more. And I think that's kind of where I'm at stage in life wise of. I want to do less travel for, you know, business type stuff and more travel with a family.

I want to do, I want to own less properties, but better properties. I want to, you know, just focus on health, focus on family, focus on hanging out and, and that to me is more life, right? And less of the business stuff, more on the lifestyle at, you know, having being a pivotal year of 40 years old seems like a good year to really make a shift on that side of things and be very intentional about how I want to design my life for the next 40 years, hopefully more and worked hard enough.

And I think that was, that was great for a good season of my life because it put me in a position where, guess what, dude? I can go lifestyle up and never do another deal ever, right? I gotta see through what I currently have. But if I never bought another deal, I'd be, I'd be just fine and still have an amazing, amazing lifestyle.

So I think there's something to be said about putting your head down and working your ass off for a decade and then hitting that compound effect, stacking cash, stacking assets, and then, you know, refining. So it worked. It worked out pretty well. I don't, I don't regret anything. I learned a lot and had a ton of fun. But for the next stage, I think it's more. Less is more for sure. Love it. So where can people find you? Obviously you've got a mastermind and some coach, a coaching program.

Where can people find you? Yeah, man. I mean, social media is the best way. So at Timbratz, on Instagram, shoot me a DM if I can be a resource or be a connection or point you in the right direction on anything. You know, Tim Bratz on Facebook and yeah, man. So yeah, that's, that's usually the best way. And then like smart management for anybody who owns a rental property, check that out. Smart management.com, probably out in like June time frame. But I'm really excited about that.

I think it's going to really make a big difference for a lot of operators who have, you know, felt like they got punched in the gut over the past couple of years where all these expenses are going up. We've integrated AI in IT where you don't need as many employees to manage a property. You can save a $60,000 a year salary and that increases at a 6% cap rate. Dude, that's 60 grand goes in the NOI. That increases the value by a million dollars.

And so I'm really excited about how that's going to empower owners and to fix and clean up their troubled deals maybe and making them profitable or making a profitable deal even more profitable and also empowering them to bring management in house and not having to rely on third party managers who consistently, you know, just kind of let you down and so really, really excited about that. And that's, that's a, that's a big focus of mine this year. It's awesome, man. It's awesome.

Well, I can attest I actually took your commercial empire course. I don't even know when that was. 1920. It's been five or six years, I think. I did not get in the multi family. I was getting in the storage at the time, but I still learned a ton from it. Ton of value for as little as what you charge to. Awesome stuff. And obviously you've got a mastermind too. I can attest that you've got some great people in that group. Great information.

So if you guys are looking, definitely check Tim out, man. Appreciate you coming on. Awesome stuff. Awesome, insightful. Just stuff that you shared with us. And again, appreciate it, man. Yeah, man, I appreciate you. Appreciate all the value you're always putting out there and love that we're, we're buddies and able to, you know, get together and come together and have some awesome conversations even though we haven't seen each other in a couple years. So really, really cool stuff, man.

Appreciate you. Love it, man. Appreciate it. See you guys next time. Thanks for following subscribing and listening to this episode of the Do More podcast hosted by John Farling. To learn more or ask questions, go to L4Investing.com.