Pivot Towards Success

Mike:Welcome back, everybody. Hey, in today’s episode, we’re going to be talking to my buddy, Brandon Barnes. And we’re going to talk about . . . you know, it’s interesting. Even when you talk to a high-level people, people that have operated at a high level, done a lot of volume, there’s constant struggles. Like, you rely on a key person and that person goes away, or you rely on a key lead source, and that goes away. Whatever it might be, like, a lot of people think that if you’re doing a lot of volume, we’ve got it all figured out. And the reality is, is you don’t. You constantly are failing. And it’s just a matter how fast you reiterate and go fix things.
So we’re going to talk about today about a number of things that Brandon has gone through in his business to continue to pivot and move to find a business that kind of fits what they’re trying to do from a business standpoint and from a lifestyle standpoint.
Professional real estate investors know that it’s not really about the real estate. In fact, real estate is just a vehicle to freedom. A group of over 100 of the nation’s leading real estate investors from across the country meet several times a year at the Investor Fuel Real Estate Mastermind to share ideas on how to strengthen each other’s businesses, but also to come together as friends and build more fulfilling lives for all of those around us. On today’s show, we’re going to continue our conversation of fueling our businesses and fueling our lives. I’m glad you’re here.
Hey, Brandon, welcome to the show.
Brandon:Hey, what’s up, Mike? Thanks for having me, man. How are you today?
Mike:Always good to see you, my friend. And so, yeah, it’s exciting to talk about this because, you know, we met . . . it’s probably been a couple years ago now. But when we really got to know you when you joined Investor Fuel, and the cool thing . . . Look at you, you’re wearing a carrot hat, you’re on the Investor Fuel show, you’re pimping Corey Peterson’s cash flow shirt. I don’t know what you got on down below the waist there because I can’t see down there, but anyway. Yeah, it’s cool how there’s this incestuous family of, like, I have like a dresser full of just, like, merchandise from my buddies.
Brandon:Literally, that’s pretty much the only I wear anymore, are my Investor Fuel t-shirts, my “Rent’s Due” shirt. I’ll give Corey a shout-out. The rent’s due on the back. But yeah, I either wear those or I’m playing golf, wearing my golf shirts.
Yeah, the carrot hat’s a little tough because it’s orange. But I was just kind of feeling a hat today because I had to get in sales mode. So, you know, I’ll put the hat backwards, put my headphones on and make some sales calls.
Mike:Yeah, you’ll appreciate for the upcoming meeting in September or in August out in San Diego, we’re actually ordering new Investor Fuel hats right now. Funny little story is we had Investor Fuel hats made once before. We gave them all out, I only had one. And I went deep sea fishing in Cabo last fall and I was in the cab by myself, like 4:30 in the morning, some real early time. And I just, it was dark and I left my hat in a Mexican taxi. So I haven’t had my own Investor Fuel hat for, like . . . and that was like my favorite hat. So anyway.
Brandon:Yeah. I still have mine. [This one 00:03:08].
Mike:Yeah, yeah. So hey, so when we first met, or when you first joined Investor Fuel, you were doing a lot of volume. You guys were buying, like, 20, 30-plus houses a month, right? And it just wasn’t the right model because your margins were lower than you wanted. You were kind of beholden to a hedge fund that you were selling stuff to. And I’ve watched you pivot many times over the last couple of years, for sure. And, you know, a lot of people think that when you operate at a high level, you must have it all figured out, or it’s, like, easy for you. Why don’t you take a minute and kind of dispel that myth.
Brandon:Yeah, so there’s a word you left out there, painfully pivoted each time.
Yeah, it’s been a big learning curve for us, learning how to go from having this big kind of volume machine, to now an agile, rental-focused company, and basically a year, a little over a year, is what we’ve done it in. And there’s been a ton of people problems, there’s been a ton of process problems that we’ve had to work through that challenged us daily to figure out and really kind of dig into and [ask for 00:04:28] and get clear to where we want to be in a business. And that is to impact and inspire people, and that’s it.
And so we had to figure out, like, are we doing that through all these transactions? We’re not. Are we doing it here? We’re not. But if we’re buying rentals and helping with affordable housing and doing we want to do, are we are we kind of meeting our mission? And we finally have gotten to that point. It’s been a nice ride the last couple months, for sure.
Mike:Yeah. I mean, at the end of the day, I could say the same. All these people that are around us, a lot of friends that we have in common, if you look back at them, they’ve made major pivots in their business. And I think that’s what entrepreneurship is, ultimately. That’s what makes an entrepreneur, right? That’s not what entrepreneurship is all about. But that’s what makes an entrepreneur, I think.
Of course, we all want success, whatever is at the end of that rainbow, right? But the truth is there’s so many people, and you know them, they’re all around me, a lot of my friends, family members, people that are not entrepreneurs that work for somebody else, is if they get the courage to try something one time, and it doesn’t work, they usually . . . “That didn’t work, I’m just going to go back to what I was doing before,” right? And we’re, like, not willing to give up. We’re like, “Man, that . . . I crashed and burned. But next time, I’m going to do this,” right?
Brandon:Yeah, no, I am a definition of that. And that’s why one of the biggest reasons I love helping as many people as I can is because, you know, I’ve lost hundreds of thousands of dollars between PPC and marketing. And, you know, luckily we haven’t lost them on houses. But we’ve paid a lot of learning curves on getting our business better. And it’s something crazy about just running through a brick wall over and over again until you start to figure things out.
And then once you figured it out, you think you have it, and it changes a little bit, the market changes. You got to be preparing for the next year or two years out, you know, especially with everybody predicting whatever they’re predicting right now. You always have to be prepared for something to change or be different.
Mike:Yeah. And I think with technology and a lot of things that have happened over the last several years in the real estate space, it’s forcing these iterations of change to happen much faster. Like in the past, it was like something might work for many years, and then it doesn’t work anymore. Where now it’s like investors and entrepreneurs, probably across all industries, truthfully, just iterate much faster, right? Something worked great and then next year, it doesn’t work at all. Right?
Brandon:I mean, just in this . . . so July will be . . . a couple, month and a half from now. [I mean 00:07:12] it just changed so much in the three years. And granted, when I first started, I didn’t know about a lot of the technology pieces. And I was probably a caveman-type investor, you know, my pen and pad, myself, my Google . . . it was a Google Voice number and some bandit signs and that’s how I started.
But now with all the CRMs and the texting and the robo-dialing, like all these things that have just come out of the woodwork in the last 30 years are mind blowing and have forced you as an investor to learn pieces of everything to understand kind of how can I best communicate my message to a seller or buyer that wants to work with us? And you have to, because like direct mail may not work in your market, or texting, whatever, may not be working and you have to change or you’re eventually going to start not getting houses the way you want.
Mike:Sure, sure. And one of the changes I’ve seen you make . . . I guess there’s really two big things going on is, first off, I think everybody that knows you is inspired to watch you try to get your health, improve your health there, and focus on that. And you’ve been . . . I mean, you came to have Investor Fuel for a week and we’re eating out at homestyle fried chicken, barbecue places, and somehow you maintained some level of . . .
Brandon:[inaudible 00:08:34]?
Mike: . . . discipline. What do you got? Yeah, yeah.
Brandon:So, look at that right there. Investor Fuel goals. [inaudible 00:08:42]. Personal goal—lose 30 pounds by next meeting. I’m trying to get the focus.
Mike:That’s awesome.
Brandon:Anyway, that is a goal that has been hanging on my microphone boom since a year ago. And it’s been, it’s taken me that long to get my mind right to finally figure my health out. But I have not stopped looking at that goal . . . I did an accountability video for the goals during the meeting and I wrote it down on that piece of paper. And it was to lose 30 pounds, would put me under 300 pound mark, which I went to the last Investor Fuel meeting under 300 pounds.
Mike:Awesome.
Brandon:And so it took me a year to get that goal, [by meeting 00:09:21] that goal. And then, you know, one was to change our assignment fees. Not to distract you on that, but yeah, no, it’s . . .
Mike:No, that’s fantastic.
Brandon:Yeah, I’m literally looking at . . . it says Investor Fuel goals. I’d forgotten that it was there for the call.
Mike:Yeah, that’s awesome. Well, and the other thing that you’ve learned is . . . and I want people to listen to this. So you guys were doing a lot of volume, but it was thin margins, right?
Brandon:Correct.
Mike:You had one customer and if they went away or changed their mind, you would have been screwed. And you also kind of realized . . . over the past year, probably, we’ve kind of watched this transformation, that when you’re wholesaling . . . And there’s nothing wrong with wholesaling, obviously. Lots of people do it and it has a role. But what you realized is, like, your goal is cash flow to retire at some day, at some point, whatever it is, recurring revenue for sure, right. Is that when all you’re doing is wholesaling, you’re starting over every day, for the most part.
And so talk a little bit about how you’ve kind of morphed your model to say, “Hey, we’re going to wholesale, but we’re going to wholesale to ourselves if we can, into kind of our rental division, if you will. And we’re not going to leave any money on the table anymore when we can,” because you’ll regret that eventually.
Brandon:Yeah, and so the prime example is today, but I’ll talk about it at the end. A year, kind of end of March, beginning of April last year, we raised our first kind of . . . a little bit of private money. And I always thought that I couldn’t buy rentals because I didn’t know anybody that would lend me money to buy rentals. I’m not bankable, all the excuses that everybody kind of else made.
And so I started, so we made all these thin margins, and it was just a fight every month. It was like, all right, what’s it going to cost us run our business? How much revenue do we need to have? And just like this constant churning, every month. And if those deals didn’t come in, all that money that you had saved up, you just sold that. It just ticked slower every time.
And so probably about three or four months ago, we decided that we’re going to really focus on buying our own rentals. Because when we wholesale properties, we wholesale more rentals than we do flips. And so I’m sitting here making $5,000, $7,000, $10,000, whatever on an assignment now and then somebody else is getting a passive income, that property that they’re just renting. And so we started looking in our business and said, “Hey, if we kind of create our holding company,” which is Barbell, a really creative name, Barnes and Bell together.
But if we create our holding company, our wholesale company’s already assigning properties to other buy-and-hold investors. Why can’t we be our own buy-and-hold investor? And so I really focused on raising private money. And we’ve done a really good job at finding people who want to invest in assets and get good returns on their money, and give it in terms that makes sense for us to hold for rentals. And so now we look at our business model . . . now every lead that comes through, it’s like, “Hey, does this fit our [inaudible 00:12:38]? Can we refinance it? Do we have the private capital to kind of buy this deal?”
And if we do and it’s everything that we want, like, we pay our company our assignment fee and it goes into our rental portfolio. And we’ve amassed, we’ll be at 20 doors by the end of the month and we really just started kind of four months ago. But being intentional about it has been the most important part. And I’ll get like . . . I’ll give you an example today, a deal that we’re working. One of the hedge funds in our market wants to buy this property for us but they only want to pay us 3 grand assignment. And I’m just sitting there thinking to myself, it’s going to rent for $900. I’m going to be all in it for $55,000 and it’s worth 90. Like, why would I sell this to a fund for 3 grand when I can sell it to myself, put 3 or 4 grand in my operating, my assignment fee and then just keep for rental?
Mike:Exactly. Yeah.
Brandon:It just doesn’t make any sense to me.
Mike:And just to clarify there, you effectively, without getting into [inaudible 00:13:40], you have two companies. One of them just buys from the other and pays the wholesale fee. The significance of that, you know, people that are listening to this, understand that that assignment fee that you’re getting it, part of it . . . maybe if it’s 3 grand, not much of that’s profit. But certainly a part of that assignment fee goes back to pay your operating costs. You have staff, you have advertising. And the reason that makes it hard to typically do that is you need to feed the monster, right, you got to some money back in the business. It’s not like it’s all profit, it’s covering your costs, which enables the whole thing.
Brandon:And that’s the biggest thing is you’re either going to build a company to go direct to seller to buy it at a deep discount or you’re going to have to buy from wholesalers or MLS or something like that, which you may not get that discount that you’re looking for. And so in our minds, if we can be our biggest buyer . . . And we’re not trying to make $20,000 assignments on our own self. We still will wholesale a property out if the deal makes sense to wholesale it. But if we’re only going to make 3 or 4 grand signing it with somebody else, and it’s a good rental for us, then we would rather take that money and keep it ourselves and kind of go from there.
It’s our average assignment fee to ourself is, like, 5 grand, I think. It’s super, super small, but it covers the bills, it covers the lead, and then it puts a little bit of money in the account that can keep kind of moving. And then we’re still focusing on wholesaling some other properties that either are lower income, they’re out of our affordable housing price range, something that doesn’t fit to what we hold.
Mike:Sure, sure. So talk a little bit, I know you kind of adopted the profit-first kind of structure. And I think what happened is you guys were doing a lot of business over the years, but the business itself wasn’t necessarily profitable. Or sometimes what happens is you just get sloppy, like, you see your business is doing well and you don’t pull any of it off the table. You just maybe dump it back into the business in the name of growth or whatever it might be.
So for those that haven’t read, this is all based off of a book called “Profit First,” but maybe just kind of share for a minute or two how you apply that in your business and what that even means if somebody hasn’t heard of it.
Brandon:Yeah. So in order to kind of get to where we are now, we had to get our books and our business kind of, you know, really tight. And at the Investor Fuel meeting in Salt Lake in February, some guys out of Philadelphia presented about it and talked about how they started using profit first. And then we have . . . Ryan, I think is who mentioned it? And then Jesus and Felipe out of Miami also mentioned it.
And so I was like, “We need this in our business.” Like, we need to . . . because you have these phantom profits. At the end of the year, your accountant’s like, “You made this much money.” And you looked in your account and like, “I didn’t make that . . . ” Like, these two things don’t make sense. And so I was like, “We need this.”
And basically what it involves is you run an analysis of your business, takes like five minutes, and then you figure out where your kind of dead weight is. And we were able to cut a ton of expenses. We had to kind of cut some VAs, but we were able to find them jobs and they were very thankful for that. But, you know, we really kind of looked at our business and said, “Does this subscription, does this thing that we pay monthly, does it bring income into our business?” And if it didn’t, it was axed, it was gone. And we really got our business down to a manageable monthly kind of amount.
And so now it’s a math problem. It’s like, “Hey, we need this much money a month to generate, to break even.” You know, so worst case scenario, this coming deals, and we wanted to be in that three to five deal mark to where, you know, if the market corrects or something happens, then I can fall out of bed and do three deals in a month. And as long as my business operates on that three or four deals-type piece, then we’re okay. And anything above and beyond that, or bigger amounts, you know, just go to profit.
And so I’m proud to announce today’s the first day that we allocated our true profit into our profit account. Which means that you have your one bank that you kind of do all your banking, and then you have a profit bank that you transferred into that nobody has access to except for the owners. And so once it goes in there, it never comes back. You don’t pay taxes with it, it builds, you don’t . . . growth, that goes into your pocket as owner’s compensation.
Mike:That’s great. And you just start to look at your compensation as an expense. I mean, the fact is, if you were working for somebody else, you’d be getting paid, generally, irregardless of how the business is doing. And so, basically, instead of, “Hey, you’re going to eat first instead of eating last if there’s anything left,” right?
Brandon:Yeah. And you don’t do it . . . you know, like, our business wasn’t healthy enough to say, “Hey, we’re going to take 25% every month and say, you know, we’re not going to do anything with it.” And so the book kind of teaches you to do it really small and then grow on it. So we’re just doing 1% for the first quarter, something like if your business can’t take 1% out, then you need to look at your business.
Mike:Yeah, no doubt.
Brandon:And so we were able to take that money, take 1% of taxes and 1% of profit, put it in our account, and it’s there. And then basically, you evaluate, you’ll have some extra money in what they call your OpEx account, and then next quarter you can move it. And then say, “All right, we’re going to increase from 1% to 5%, or 4%.”
But the goal is every percent that you move, to never go backwards. And so you don’t want to . . . we’ve all done it in, like, the health life. We’re like, “Oh, I’m going to lose 30 pounds this month,” and then you go work really hard and you lose 10. And you’re like, “Well, I didn’t lose 30 and I’m depressed and so now I’m going to go back to doing whatever I was doing.” Where, had you just stayed there at that 10, you would’ve been okay because then you only got to do 10 more. So it’s kind of . . .
Mike:Yeah, that’s awesome. And so you kind of mentioned you heard these things from a couple people that are in the group, and plenty of people have heard stuff in the Investor Fuel family from you and then adopted it in. Maybe just take a minute to talk about . . . You’re what we call an OG. You were there for the very first meeting. I keep having this idea, I’m going to get you guys some big, like, OG gold chains or something. They might be plastic, but they’ll look like gold.
Brandon:There we go.
Mike:But, anyway. What’s that?
Brandon:I said there we go. I love it.
Mike:Yeah. So talk a little bit about, you know, as part of the Investor Fuel family, the reason that I started this podcast is that the truth is we’ve been doing the FlipNerd podcast for five and a half years. And it kind of morphed into an Investor Fuel-type podcast anyway because we have so much talent, so many great people in the group that I was like, “I don’t really need to go find people to interview. These people are already in our inner circle,” and maybe just kind of share your thoughts on the power of the group. And you’ve been a massive giver, as big as anyone in the group. But kind of what that has meant for you in terms of your business. You’re adopting all these things to improve your life and your business. What has the Investor Fuel family meant for you?
Brandon:It’s meant everything. It’s a group of people that allow you to make the learning curve that much faster. And it took me a while to learn that, to understand, like, if I had this issue, there’s no reason for me to sit up all night and weed through YouTube videos, and Google, and all these things when I can go to my Facebook group and say, “Hey, guys, I’m having trouble with this. What do you do?” And then you may not have the answer, somebody may not have the answer, but you’re going to get 20 people’s opinion that you value, and then you have the ability to go and weed your way to that point.
And that’s the one of the biggest things, you know, for our business and our learning curve, is the ability to get things done exponentially faster than what you can do on your own. And that’s, you know, it’s invaluable to where we’ve gotten to so far.
Mike:Yeah. And I think you’d probably agree, like, in our group, we put a lot of emphasis on . . . I don’t know if you remember this. Matt Andrews, who’s a fellow member, I’d actually talked to Matt this morning for quite a while. He said something at . . . it wasn’t the first meeting, but a couple meetings in. He basically said, “Real estate isn’t the thing. It’s the thing that gets you the thing.” Right? And I know you’re realizing that too, with everything we just talked about.
And I always felt that way, but until I heard it, I was like, “That’s exactly how I feel.” And that’s almost the foundation that our group is built off of is we have this thing in common in that we’re all in real estate, right? But the truth is, we’re using that as a vehicle to build a better life for ourselves. And I think a lot of people don’t really get that until you start to operate at a little bit higher level, right?
Brandon:I do. I agree, because the idea of wholesaling a house or flipping a house or rehabbing a rental, like, none of that really excites me, you know. And I don’t mean to say that in like a bad way, we’ve done it over 400 transactions, but it doesn’t . . . Like, it’s the idea of knowing, you know, I’m a golfer. It’s the idea of knowing that, like, I’m going to get to a certain point in my life where I’m going to be doing this podcast from the golf course.
Mike:Yeah, that’s good.
Brandon:I’ll do something like that. Like, I’m not going to be having to grind it out every day, you know, because . . . So, a really funny story. We were at, we do a beach house for my wife’s birthday, or used to, every year. And we were all sitting around out on the back porch, kind of chatting, this is last year, I think. And I said something like, “I’m going to retire by the time I’m 40 years old.” And you know, everybody we are with, you know, hardworking, like save all your money, retire at 65 or 2, whatever the retirement age is, you just live off of what you saved up from the last 40 years of working, looked at me and laughed.
And I was like, “You got, like, eight years. I’m done.” That doesn’t mean that I won’t be doing something but as far as my goals in life, I’ll be covered in the part that I need to be worried about. And then I’m going to be moving forward on things that I enjoy doing. I’m not going to do stuff because . . . I’m not going to flip a house because I have to flip a house. I’m going to flip a house because I want to, or it’s going to be my personal residence or it’s going to be, you know, something fun.
And that let me know that I’m in a weird group of people because when I said it in investing spaces . . . because, like, we think differently.
Mike:Yeah, we’re weirdos, man.
Brandon:Yeah, our goal is, we don’t want to be grinding this out until we’re 65 years old and then, oh, all of a sudden our retirement kicks in and now we can go sit at home or do whatever. Like, I want to travel the world. I want to play golf. I want to do these things. So if I build a passive income, if I build a business, if I impact and inspire enough people over the next eight years, then I won’t have anything to worry about.
Mike:Yeah, it’s amazing how few people think like us. And a lot of entrepreneurs, but we’re like . . . you know, I don’t know if it’s a couple percentage points of people that think like us. It’s kind of funny.
I’ll give you an analogy. Today, I had to take my car in to get serviced. It was overdue, I needed tires and a bunch of stuff. And the guy’s like, “I’m going to rush you through here so you can get to work. You got to go to work? You’re going to work out for this?” And I was like, “Well, I’m going to the office.” And he’s like, “Got a busy day at work?” And I was like, “Not really, I’m going to just talk to some friends.”
And it was just kind of funny, like, his mindset . . . that’s probably a common conversation he has with most people. They’re in a rush to get to work. And I’m, like, you know, I’m strolling in there and my flip-flops and shorts on today and I don’t really look very professional, but I don’t care about looking or feeling professional anymore. I mean, you know, for the most part. I don’t have to do it to please anybody, for sure.
Brandon:I’m in flip-flops and leggings, getting ready go to the gym.
Mike:I know you’re in flip-flops, yeah.
Brandon:And I’ve had some of those same things, like I’ll get an Uber or do something, somebody’ll ask me about work. And I’m like, “I mean, I guess.” It’s different. It’s a weird kind of feeling. And it’s taken me a while to embrace it. And, you know, I’ve gone kind of both ways, like I’ve gotten to the point where I’m like, “Oh, I’ve got everything figured out so I can go and take some more time off.” And I didn’t, you know?
And so I’m learning now that if I build this stuff the right way, if I do the systems, I do the processes, I do the things that I don’t want to do, which is what we talked about kind of before filming, is like these things that are kind of energy-draining. But if I get to the other side of them so I can teach other people how to do it the ability, the opportunities in life are endless at that point. And I don’t have to worry about my family . . . and we lost everything in the crash. And so my parents had to completely reset.
I remember going through and them, you know, not having enough money to pay their bills. And my dad, I remember getting in touch with my dad one day. And he’s like . . . Sorry, Dad. He’s like, “Hey, I finally made enough money to pay my bills this month,” for the first time in, like, a year and a half. You know, it was always robbing Peter to pay Paul. And, you know, so I saw that. And that’s kind of one of the things that keeps me in like this is I don’t want to have to go through that. You know, I had to deal with it as a young adult with my family, and we’ve gotten to a good place for it. But do the things now to get you where you want to be, whatever is down the road.
Mike:Yeah, that’s awesome. That’s awesome.
Brandon, if folks wanted to reach out to you, you’re obviously pretty active on social media. Where’s the best place for them to go to connect with you, or . . . ?
Brandon:Yeah, so I’m super active on social media. My handle is BBarnesREI. So that’s YouTube, Facebook, Instagram, all of it. And then you can email me at [email protected]. So that’s kind of the two biggest places to go from there.
Mike:That’s fantastic. Everybody . . .
Brandon:And if you go to the Investor Fuel mastermind, and I’m always there Monday through Friday if you need to find me there.
Mike:Yeah, Brandon is, like, he attends it as much as my team does. He shows up early, leaves late, and huge giver. And we always appreciate that. Eventually I guess I’m going to have to get you on the payroll or something, Brandon. [inaudible 00:28:31].
Brandon:That’s right. That’s my goal.
Mike:But, man, we appreciate you so much. Everybody that’s listening right now, we’ve just started this new podcast and the truth is, it’s going to be a lot of fun for me. I’m interviewing some of my very best friends, people I care about more than anything, people that have been really loyal to me and, truthfully, the industry. A lot of big time givers on here. You’re going to see that, so.
If you’re getting value out of this, I’d love it if you subscribe. It’s a new show, obviously, and subscribers and testimonials and all that stuff, ratings are really important to us. So if you don’t mind subscribing on iTunes, Stitcher Radio, Google Play, YouTube. Or you could watch everything on FlipNerd, of course.
But we appreciate everybody for watching. Brandon, appreciate you for everything you do, my friend. Hope you have a great day. I appreciate you.
Brandon:Hey, man, I absolutely enjoyed it. Thank you for having me.
Mike:Awesome, awesome. And everybody, until the next episode, I have this little tagline. I have to remember this now. Until the next episode, stay focused on what fuels you. See on the next one.
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