You're listening to the R E I Marketing Nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of AdWords Nerds, a high high-tech digital agency focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition and live a freer, more awesome life. And now your host, Dan Barrett.
(00:40): All right. Hello and welcome to this week's episode of the R E I Marketing Nerds podcast. As always, this is Daniel Barrett here from a edwards nerds.com. And look, if you are looking to get more leads and deals online for your real estate investing business, you know where to go. It is the OGs in this game, AdWords nerds.com over a decade generating motivated sellers online and we are not slowing down. If anything, we are speeding up. All right, folks, I've got a great, great interview for you this week. I'm talking to Gary Lipsky from break of day capital.com. Gary has been a real estate investor since 2002 and has invested in over 2,800 units with a 161 million asset under management. Gary is also the co-founder of the Asset Management Summit, the Real Estate Asset Management podcast, and co-author of the best selling book Best in Class.
(01:39): His expertise in asset management is his secret sauce, and I'll tell you we dig into his background. He has a truly amazing and deeply varied entrepreneurial background. Everything from starting a food delivery service in college to helping at-risk youth develop leadership skills to real estate, to writing and producing and directing films. We get into it all. Gary brings a really, really fun point of view to this real estate game, and I think you're really going to enjoy my conversation with Gary Lipsky. All right, what's up everybody? This is Daniel Barrett and I am here with Gary Lipsky from Break of Day Capital. Gary, how are you man? Welcome to the show. I'm good, thanks for having me. I was joking before we came on the video, that's Break of Day Capital with a break of day capital.com because I always mix up how you spell capital in the capitalist context.
(02:39): So there's so much stuff I want to dig into. You are touching a whole bunch of different parts of the real estate investing landscape. For people that don't know you and maybe don't know too much about break of day, what is break of day capital? What do you guys do? What's your sort of niche within real estate? Yeah, we are value add multi-family buyers. Typically in Phoenix and Tucson, we're not chasing deals all over the country. We wanna be experts in only a few markets and we've been doing it for years. So you develop strong broker relationships, you've looked at most deals in Phoenix, in Tucson, so we have thousands of data points and this way allows us to get off market deals. We're able to move fast on things that we like and usually all of our deals are because we've moved fast, we were one of the first people to see it.
(03:30): Or we put an offer from the beginning that gives us an edge. And if we were chasing deals all over the country, we wouldn't have that edge. And we've bought deals with some hair on it. My creative side allows, it gives me a little bit of edge to look at things differently and solve other people's problems so we can find more meat on the bones. Let me ask you about that. You mentioned you wanna be an expert in a very particular thing, which in this case is the Phoenix market, the Tucson market. I wanna ask about that decision because I think a lot of people struggle with it a little bit. It's one of these sort of entrepreneurial truisms that you should pick a niche or you should pick a very specific target. Talk a little bit about why you decided to focus where you're focused, because I think for a lot of investors, a lot of business owners just in general, there's some pressure to feel like you don't want to turn anything down.
(04:27): It's always, it's like money. I could get some money by going over here, I could get some money by broadening over here, or it is not exactly my wheelhouse, but it's a deal. So how did you guys make the decision to focus where you're focused and how does that impact how your business runs today? Does that make sense? Well, in real estate in general, you hear of Airbnbs and long-term, all these different ways and make money, and that was a decision I made early on is I'm going to pick, it speaks to me because I've been an entrepreneur my whole life, it's running a business. And so I'm going to take away all that other noise, all those other investment opportunities, different asset classes and focus on multi-family. Then I'm going to narrow down my focus on just a few markets because yeah, there's there Texas, there's some great markets there, Florida, there's some great markets, but I can't be super competitive if I'm not there, if I don't have boots on the ground, if I'm not focused on that area.
(05:34): And that ability to focus on an area allows me to protect my investors most importantly, because I'll I know what things are coming down the pipeline, how, oh, we're occupancy is drifting lower, rents are kind of topping out, or we could be a lot more aggressive on rent. So having that local knowledge is so important. It gives you an edge and that's a huge difference for investors. Yeah, I totally agree. It's, it's the same philosophy that we have. We were very focused on working with real estate investors and then within that, even just motivated seller leads. And then within that, even primarily just Google ads, you get a lot more pattern matching, a lot faster pattern recognition I think when you're really focused in. So how did you get started in real estate in the first place? You mentioned your sort of creative side. I know you have kind of creative background, so what was your pathway into what you're doing today?
(06:36): So most people are going to have a different answer than me, but I'm going to say my very first house, my personal residence was an investment. I didn't look at it. My parents did as a forever home and I was looking for an up and coming neighborhood not the nicest house where I could add some value. We bought at 2002, we can open up the kitchen. We converted the garage on an office space that my company rented because I needed to make sure I could be able to pay my mortgage. We didn't put any money down, we didn't have savings at that point, so I needed that extra income from my business to pay for that. And then from there I was able to ride that into the next neighborhood and eventually I turned that house into a rental and I'd been looking at some smaller stuff and not until I sold a business at the end of 2016 did I get into real estate.
(07:33): And really, so how old were you? This the first house, which wasn't a forever home. You're thinking of it as an investment. How old were you at that point? Yeah, so I was 33 and I had been looking for a while. I had a kid on the way and at that time I thought, Hey, I missed out. I should have bought earlier. These prices are insane. That house is worth over three times the amount what I paid for now. I mean, it's just crazy. Yeah. And I've been very lucky and I think it's part of a skill, but picking the right neighborhoods to extract a lot of money out of my house that I've now, the place that I live in now, I've refied twice, pulled out money and I'll gladly pay the 4% and I'm making 20, 30% of my money in my own deals really more.
(08:27): But just the arbitrage is fantastic. And you said you were kind of going back to that first house and your 33 kid on the way. What was your business at that point? Because you mentioned that your business rented the office. Was that real estate at that time or that was pre real estate? Yeah, was the real estate. I had just started a business maybe six months before we were running afterschool programs, outdoor ed and leadership development for mostly at risk kids in la. I had grown that by the time I sold that in 2016 to working with 9,000 kids daily. And we had over 700 employees and about 700 independent contractors that was gigantic. Want to find motivated seller leads online but don't know where to start? Download our free motivated seller keyword report today. Edwards nerds have spent over 5 million this year researching the most profitable keywords for finding motivated seller leads. And you can grab these exact keywords when you download our report at www.adwordsnerds.com/keywords.
(09:44): I have five employees and I feel like that's for employees too many a lot of the time, so I cannot imagine. So I definitely want to come back to that, but I want to talk a little bit about breaking down the specifics, right? Because I think a lot of people will say they hear you, you know, were looking for a neighborhood that's up and coming. You're sort of buying it early, even at the time you were like, oh, I missed them. Like everybody else feels like they missed it, right? It's too late now. Our prices are crazy, but you know, were trying to buy early with the idea that you can add value. So put yourself back in your shoes. You're 33. What specifically did you look at or think about when it came down to picking that neighborhood? Was it, were you trying to project out demographic trends?
(10:31): Were you looking at, was it as personal as like, oh, the bar I is in this neighborhood and the rest of it's kind of run down? How did you make that decision back then? Because obviously you didn't have all the experience you have now. Did you remember what that process was like? Yeah, it was very rudimentary. I wasn't checking all the data that I have at my fingertips now, but I knew, okay, I could buy a lot more house by a freeway now long term, that wouldn't really make sense. So I was looking for kind of family friendly things that were near areas that were growing. So not super expensive, but okay, I feel like people, more and more people are going to be drifting into this neighborhood. You saw people investing in their homes, so I felt like that was a good place. I can get some good value outta that.
(11:28): Yeah. Let's talk a little bit about your business before you got into real estate. You mentioned you were, you're working with at-risk kids, you're teaching leadership development and kind of outdoor stuff, which is awesome. Let's talk a little bit about just the general topic of that and leadership development. Because I always say this podcast is secretly a venue for me to ask questions I need to ask. So I am in the process of I'm trying to mentor leaders in my company and I'm trying to teach leadership skills, which in many ways are a lot more difficult than a technical skill where you can just say, here is how you do it. So when you're working with at-risk kids, you're working with people who maybe have traumatic backgrounds or they've got a lot of experience they're bringing to this kind of situation. How did you think through teaching them leadership?
(12:20): Did you have a really strong philosophy of leadership that you were directly expressing? Was it like, hey, it's more about personality traits and we build sort of grit and all that stuff. How did you think about that process? Does that make sense? Yeah, yeah. So it started again, ru rudimentary. It wasn't like, okay, this is my end goal. Part of it was I wanna make a difference. I don't want to sit behind a desk, I want to be active. And we were solving problems a lot with La Unif Los Angeles Unified School District, and then it kind of grew from there. And some other schools that had, we had a low ropes course that we built basically that was about problem solving skills and we kinda let the kids run with it. And then it grew from there. The school districts would get grant money on smoking cessation programs.
(13:22): And so we got money and we gave them money to the kids, but with the focus of like, okay, you guys are going to put on this smoking cessation event versus teachers doing it or parents doing it, the kids did it. They were empowered to come up with cool ideas. I mean, they would walk out with a casket with a thousand butts that they picked up on the campus and different, we had music and just cool events that the kids put together. And so it was that much more impactful and these weren't necessarily your typical leaders at the school, but then we gave them that creative outlet we gave them, we kind of guided that the talk, whatever, the round table and let them come up with the ideas. And then it just kept growing from there. We had anti violence campaigns and we had the grand event that we did at the end of the year.
(14:19): We had a program at Paramount Studios. We did this for, I don't know, five different five years where we had music competitions, art spoken word, all these different arts that were getting cut from schools and just allowed them to really put it on. And so it really evolved to something hugely impactful. And thankfully we were able to get grant money through the school districts and we partnered with a couple other community organizations that to lead this. Yeah, I think so. It's such a cool idea, right? Because I think so much of that stuff that you're talking about, it's more impactful when it comes from the peer group rather than saying, Hey, fellow kids, put the hat backwards and that kind of thing. I think it's so much more effective that way. Well, so let me ask you, because that's such a wide range in sort of experience that strikes me because you are both building the organization, which like you said, think it's that 700 employees.
(15:24): So this massive organization and you teaching kids and empowering kids to develop these traits. I'm curious for you today in when you are outbreak of day capital and you're thinking about your business today, how do you assess leadership in other people? What do you look for if you're looking at a new hire or you're looking at a team member or something like that? What do you look for to indicate to you that person has the capacity to be a really good leader? Great question. And everyone's leadership, everyone's style will be different. Not one person's going to be the same. And so proactiveness is key built in consensus, consensus, consensus. Although the person still needs to make their own decision, but you need to empower others and get their input. And that's really important. We were doing site visits yesterday and the property manager was like, well that's just my opinion.
(16:25): And I'm like, it matters like your boots on the ground, I need to hear from you. I need your voice. You'll know better than anyone what happens at your site. So proactiveness, building consensus being able to communicate that in a clear and concise way and just having, holding that person's able to hold himself accountable too, because that's very important. It can't be someone that is laming others all the time. They have to be accountable. Probably the most important thing they're wanting to learn and grow and be accountable. I mean just that part is huge and it's hard to teach that or maybe impossible to teach that in a lot of ways. I mean, I very much had a very experience that aligns with that very closely. And that was the one thing where I ended up parting ways with this person and been on my team for a long time.
(17:23): And the way I ended up feeling about it was, I would do anything to give you what you need, but I can't make you care about being accountable to this standard. That's just table stakes. That's how you get in. And if you're not there with me, then there's not really much we can do. So let me ask you this because I'm curious about this too. Obviously lots of real estate investors, particularly when they start to scale and they start to scale up their deal flow, they start to build a team for the first time or think about adding an acquisitions person or whatever, even even a virtual assistant, something like that. So where do you think most entrepreneurs go wrong when it comes to leading their teams, being the leader? What are the mistakes that you see people making that you think are slowing their growth or maybe holding them back?
(18:15): Yeah, I think there's accountability. Measure, trust, but verify. Because when someone leaves, typically you're like, oh, I thought they were doing all these different things. And you're like, you didn't know that because you didn't check. All right. I feel like you're reading my diary now. secretly off camera. Cause I've just went through this where I was like, oh this person's doing a great job. And then they left and I was like, oh, let's get the thinking. I was like, oh no, they weren't doing that. Yep. Yeah, I'm sorry, I didn't mean to cut you off, but yeah. And I think an employee is typically you don't trust me. You're micromanaging me cuz I've had that pushback a lot. I'm like, no, I just need to s I to see measurables. I just need, show me. I don't care if you got a hundred rejections, show me the list and let's talk about what didn't work, work together and figure it out.
(19:11): I'm going to make mistakes. You're going to make mistakes, that's fine, but let's learn together so we can improve it. And it's not about like, oh, you're getting it done. I have some conversations around it. Right? It's funny that difference in reaction, I think I've told this story before, but there's one time I went on a vacation with my wife. It was like the first time we'd been on a vacation with that since we'd had kids and it was just us. So my mom took the kids or whatever, it was a big deal. We went out to La Jolla in California is beautiful out there. It was awesome. And on the plane there, I read a blog post about some c e o guy who every quarter has his wife make him a report card of a husband report card. Where am I falling down?
(19:57): Where am I doing well because he wants to be a really good husband, really good father, et cetera. And I was like, oh, that's right at my alley. I love this so much, I want this. So I'm pitching my wife on it. I was like, we should do this. This is great. I want you to give me a report card. And she is like, okay, sure, but why don't you do mine first? Right? I was looking back on it now like this was where I completely drove off the cliff, but I was like, oh, I'd probably rate you 85 out of a hundred or whatever, which I thought was good. And she was like 85. And then we got in a huge fight, almost rode the vacation. So I was, to me it was like, oh, having a score excites me because it shows me where I can do better.
(20:42): But there are some people too that when you give them, you're a number, here's you're accountable for, they interpret that as like, well, that's where I'm falling down and they feel judged, so it does strike me that you've gotta handle that in the right way to get that across to your team. Do you find out to be the case? Yeah, it's very important to sandwich all the good stuff. Then talk about a couple things to work on and back to the good stuff again. And that humans are emotional. I learned, I relearn that all the time. We just had a conversation about that yesterday. We're all sensitive and we forget that you just really don't need to beat around the bush, but just be cognizant of other people's feelings and how they're going to receive things. Yeah, that layer of emotion, sometimes it's easy to forget that it's there. If you're like a spreadsheet guy, which I am spreadsheet guy. I love that kind of stuff.
Hey guys, hope you enjoyed part one of this episode. It's just too good to limit to one show. Join us next week to hear the rest.
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