This is episode #412, and my guest today is Michael Jake. Today we talk a lot about market cycles, and how you can prepare yourself to weather the ups and downs of any market.

We talk about how not all exit strategies are a fit for all markets, and discuss some different ways that you can insulate yourself financially from more challenging times.

Michael Jake is a veteran, and a friend that I highly respect. He largely started by wholesaling, but has built up a very significant asset base with rentals and notes that allows him to work just a few days a month and live the lifestyle he wants.

Please help me welcome Michael Jake to the show.

Highlights of this show

  • Meet Michael Jake, Colorado Springs real estate investor.
  • Join our discussion of how to invest differently in up and down markets.
  • Learn the importance of building up an asset base with rentals, notes, or other cash flowing assets that can allow you to be more selective in your investing.

Resources and Links from this show:

Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

Mike: This is the Expert Real Estate Investing show. The show for real estate investors, whether you’re a veteran or brand new. I’m your host, Mike Hambright and each week I bring you a new expert guest that will share their knowledge and lessons with you. If you’re excited about real estate investing, believe in personal responsibility, and taking control of your life and financial destiny, you’re in the right place. This is episode number 412 and my guest today is Michael Jake.
Today, we talk a lot about market cycles and how you can prepare yourself to weather the ups and downs of any market. We talk about how not all exit strategies are a fit for all markets and discuss some different ways that you can insulate yourself financially from more challenging times. Michael Jake is a veteran and a friend that I highly respect. He’ll share some great knowledge with us today.
He largely started by wholesaling nearly 20 years ago, but has built up a very significant asset base with rentals and notes that allows him to work, literally, he said just three days a month and live the lifestyle he wants. It’s going to be an awesome show, it’s going to inspire you, and it’s going to help you weather the storm and up and down markets. Not just weather the storm, but teach you how to thrive. Please help me welcome Michael Jake to the show. Hey, Michael. Welcome to the show.
Michael: Thanks. Glad to be here.
Mike: Yeah, yeah. That was funny. We literally we’re just talking for a while visiting and you’ve been on the show before. I had to look at . . . I looked it up, it was episode number 147, today’s 412. So I don’t have a . . . I didn’t have the date in front of me, but that has to have been about three years ago. Yeah, so it’s been long.
Michael: Wow. You’ve been busy?
Mike: Yeah, yeah. So what’s going on, man? How are you doing?
Michael: I’m doing great, man. I can’t complain. It’s definitely an interesting market. Colorado is been, you know, kind of on the Hot List for several years now and it’s really transitioned. It’s definitely a good time to be a property owner. It’s definitely more challenging to find distressed opportunities. We have hedge funds, we have professional buyers. There’s one fund spending 100 million bucks a year in Colorado. So you got to be on your A-game if to find good opportunities, or you’re battling for the least margin.
Mike: Yeah, yeah. And I know you built up a pretty significant base of assets with rentals and partnerships, and options to buy properties and stuff like that. So, I mean, I think what you’re saying is exactly what you . . . You’re practicing what you preach, right? Which is build up some assets so that you don’t have to work so hard someday.
Michael: Sure. Well, and I mean, it’s I think we all read Kiyosaki at some point. But in the second book, he talks about the cash flow quadrant. It’s you kind of evolve from employee to business owner, not as the end all be all as a means to a) have better tax treatment, and b) create more income. But then the final square is what? Investor. It’s, you’ve got to be the investor and own assets. So I always was of the mindset that I want to buy long-term assets. I want to own them. I want to pay them off and I want to have a cash flow lifestyle.
And flipping, wholesaling, all those activities were my business that facilitated me buying those assets. And now I’m in a position where I don’t have to do anything. I’m still a deal junkie. I still like to do deals. I’m not playing the battle for the least margin game right now and I’m kind of blessed in that capacity, but it’s really just yeah, buy good assets, hold on, find higher or be good management, and hang on.
Mike: Yeah, yeah. I’m excited talking about this today for folks that haven’t kind of picked up here. We’re going to talk about what it’s like to weather the storms through different market cycles? And so, we’ve talked a lot lately on the show about, hey, it’s harder to buy now. It’s harder to buy houses. It’s easier to sell houses now. It’s a seller’s market that’s why that’s easier. And so, what we found is, what Michaels talking about we’re going to talk about today is how to ebb and flow through those markets. How to insulate yourself from those markets so that you’re not a one-trick pony that can only survive in one market, right?
You’re also not on the deal treadmill forever where even if you’re wholesaling and rehabbing and everything, the music stops when you stop advertising, when you stop generating leads, or when the market gets really hard. The music might stop for you. And so, if you don’t have other sources of income, or you haven’t built up other assets, then you might struggle more. So that’s kind of we’re going to talk about today, right Michael?
Michael: Yeah, sounds good.
Mike: Awesome. Awesome. Hey, while we’re getting started here, maybe, introduce yourself to those that don’t know you yet.
Michael: Okay. Well, I am an Ohio boy that born and raised back east and moved out here to Colorado in 1999. I was riding the info-technology wave that crashed slightly after I got here. And basically, initially I was blessed to grow up with a good friend of mine. His dad got into real estate, kind of, when we were graduating high school. I got exposed to a little bit of that. My friends started buying rentals at a very early age at 19 and I kind of had the mentality of that’s what I’m going to do too. I’m going to buy some rentals as I work in my, you know, looking back, it was the cubicle career.
You know, I’m going to buy a property, I’m going to live in it. I’m going to use low down, like I used my FHA loan to buy my first property. So I only had 3% down at that point and with the plan of I’m going to eventually refinance it, conventional, go use my FHA and just kind of keep buying, and buying, and buying, and just kind of move parallel and build up a stable of rental properties. And then I got called into a big auditorium one day and was told 30% of us weren’t going to have jobs.
So I decided to kind of be a little more aggressive with my real estate goals to kind of be able to position myself to get out of that job or before the job fired me. So I did figure it out. I had a very supportive wife who is now my business partner. You know she let me dabble. I got started, I worked a part-time job and was able to actually fire my boss before they fired me and it’s been a blessing ever since. It’s really been a fun ride.
Mike: Yeah, that’s awesome. So you learned early on the importance of buy and hold. I think there’s a lot of people that started in wholesaling. Obviously, a lot of people started in wholesaling and they realize that they’re only as good as . . . over time, you realize I’m only as good as my last deal. Like right, I got to keep going. I can never stop. So you learned that lesson early on.
Michael: Let me tell you this very specific event because it had a huge impact on me. And I was talking to my buddy who’s in real estate and this was after the layoff meeting and I’m like, “Woe is me, this sucks. I may not have a job.” And I’m like, “What’s going on with you?” And he’s like, “Oh, I’m buying this big apartment building.” And I’m like, “Oh, wow.” You know, because he’d always been a single family house guy. And I’m like, “So tell me about that and blah, blah, blah.” And I’m like, “Wow, how much money you got to put down on that?” He’s like, “Yeah, about 250.” And I’m like, “250,000?”
He’s like, “Yeah.” And I’m like, “Where are you getting that money?” You know what I mean? Like I couldn’t conceive of that and he was writing the check. So it’s like, okay, I get it. These small little house deals he did over time added up to huge ability. And there I was making a wage probably still living above my means. It was a huge slap in the face to me of reality, and that’s sort of why the buy and hold was always my end goal.
Mike: Yeah, that’s awesome. If you’re an active real estate investor already doing deals and looking to double or triple your business, you should consider joining the Investor Fuel Real Estate Investor Mastermind. We’re a small group of investors that share our best practices, tips, and tricks with one another in an effort to all win. We limit our membership to only one to two members per market so everyone shares their knowledge, tips, and tricks openly and honestly.
Our members include some buying one to two houses a month up to some of the most respected investors and leaders in the real estate investing industry, some of which personally done over 1,000 deals. If you’d like to be considered for an invitation-only world class mastermind, please visit to request your personal invitation. Our next meeting is coming up quickly. Go to now to learn more.
Michael: Money. You know, I mean like I couldn’t conceive of that and he was writing a check. So it’s like, okay, I get it. These small little house deals he did over time added up to huge ability. And there I was making a wage probably still living above my means. It was a huge slap in the face to me of reality, and that’s sort of why the buy and hold was always my end goal.
Mike: Yeah, that’s awesome. That’s awesome.
Michael: Not just churning them.
Mike: So let’s talk a little bit about different exit strategies and I know that one of the things that we were talking about ahead of time before we started recording here is that not every exit strategy works well in every market, right? There’s cycles and it’s easy for us to say, “Well, it shifts from a buyer market to a seller market. There’s less inventory. There’s more inventory, all those things. Yeah, that makes sense.” But what do we do differently as real estate investors? And so, let’s kind of talk about some of the exit strategy, some of the common exit strategies that work well in a bad market but don’t work so well in a good market and maybe vice versa.
Michael: Sure. Well, I mean, the market is hot right now. It is easy to sell the property if you can find the inventory. You know, when I got started, the market was fairly hot. You know, I was really getting aggressive in 2004, 2005, 2006 and we never once did a full rehab. You know, granite, stainless never did that. It was cleaned it up, clean it out, get it in financeable condition and sell it off as is. You know, we call that wholetailing now but I didn’t know it was. It was just you just had to have something for somebody to sell and the subprime market was great.
So if you had something to sell somebody was there to buy it. You know, at the same time in the rental side of things, it was really hard to find a good tenant because anybody that could fog a mirror was getting a loan. Not everybody but there was not a good tenant base at that particular time. Or probably the reality is, I wasn’t a good enough manager to know how to find them yet. So we did a lot of leases to own. And the idea was if I’m going to have a less than desirable tenant, they’re going to have some skin in the game.
So we did option consideration and a little bit of a premium in rents. You know, nowadays, I don’t have to do any of that. I don’t have to option my properties to somebody else. I can literally find and qualify excellent tenants and there’s tons of them. Like people are, just like they’re fighting to buy houses, they’re fighting to find a good rental property. So again . . .
Mike: Right, right. Yeah. I know you operated, you operated a little bit higher level of rental than what I do, per se. So if you kind of put it in the classes, you kind of were doing more of a B, B plus type property, right typically?
Michael: Yeah. Pretty much everything I have is a B plus to A right now. I have one probably . . . I have a few A pluses. And to me, those are in like the 350 range here. My Bs are kind of in the 240, 250, 260 range.
Mike: Yeah. Most of mine, of course, it has changed dramatically over the past couple years. I used to like, I’m like 80 to 110 ARV and now those 80 to 110s are kind of one 130 to 170 houses here just because of appreciation and a lot that’s happened. But yeah, more of the working class kind of blue collar working class here, you’re a little bit upstream from that.
Michael: Well, I wish I had that kind of inventory. Like, I mean, it would have been a good place . . .
Mike: Yeah. Well, yeah, a different market. Yeah, they don’t . . .
Michael: To start from and build stronger cash flow early. You know, my houses were you can probably find 1% or better a month rent ratio properties all day long. I really have a hard time finding that here in my market. So if you look at value to rent, we’re about 0.6 rent ratio per month. That’s [inaudible 00:12:44]. But if you buy good assets and you hold them long enough they become cash flow properties because rent like values inflate over time.
When we started and I had a job, we did buy, fix it, and refi’s. I did some of those. Those cash flow better, but a lot of minor creative finance, a lot of them are . . . I would put debt structures together so I could afford to hang on to them without putting you know 20%, 30%, 40% down.
Mike: Right, right, right. Okay, so we’re talking about wholesaling. You know, it’s a seller’s market now, and it’s easier to sell, harder to find inventory, right?
Michael: Absolutely, absolutely.
Mike: So, yeah. Go ahead.
Michael: Like a lot of like direct to direct to seller homebuyers are kind of coming out. And you can be a ninja trained by John Martinez, but the seller doesn’t know that and before you even come out, they’ve already got five, six buyers lined up. And they’ve already got the mentality of we’re going to see who the highest and best is. That’s what’s going on in my market. And we have some good wholesalers here. We do have some guys that are very well trained and it’s a tough battle out there.
Mike: Yeah, yep. So maybe this little bit of a tangent but what does a new real estate investor that is coming into a market like this . . . A lot of people come into this market and they by default, a lot of people want to wholesale, right? To get started because they don’t have a lot of money and they see it’s . . . They’ve been taught as a low-risk way to get in, but it’s harder to get in. So maybe talk for a minute or two to the people that are trying to get into this market without being well capitalized, and without probably proper training as well more often than not. Well, talk about that a little bit.
Michael: Sure. Well, I run a local real estate club on Meetup. And I, not too long ago, I kind of have a little lunch meeting once a month and going around the table, let everybody introduce themselves, and there’s like so many people said, “I’m a wholesaler.” I’m like, “This is cool.” I’m like, “Okay, raise your hand if you’ve done a deal in the last 30 days.” Okay, how about 60 days? Okay, how about 90 days? Okay, everyone’s calling themselves a wholesaler but nobody’s really actively wholesaling properties. So is that the best course of action for you right now? You know, if you had a little . . . I mean, I know you through a mastermind.
You know, a lot of us people go to masterminds. We’ve got a lot of experience going into a market like this. And if I wanted to be aggressive in this market, I could and I could be very competitive. To the new person getting started, you’ve got to a) get a basis of financial education, investor education, and not only that, you’ve got to be a good business operator. It’s a lot to shove down somebody’s throat at once to be competitive in a market like this. If I were getting started right now and I know what I know now, I would go back and shake myself and say, “Don’t try to be a wholesaler. Go learn management.”
I mean, the market is very good for owning assets, it’s very good for renting properties but it horrible if you’re going out and buying stuff right now because you don’t get that greater return. But the person that basically manages the asset can get cash flow from . . . Without any risk. And I learned that technique and I was a little bull-headed but another gentleman I have a lot of respect for, David Tilney teaches a concept called Master Leasing. And it’s basically, go lease somebody else’s asset, go create cash flow from somebody else’s asset. Be a good steward of the asset.
And a lot of those people that own those assets eventually want to get out and your foot’s already jammed in the door. So his son-in-law is right here in my marketplace and he’s built a portfolio of rental properties starting as a manager. And then here’s the painful story from my past, and I’ll share that with you. I was basically too good to do a master lease. I had a guy that I used to be in the cubicle farm with, he was a tech guy. He had to relocate.
He was going to Texas and he had a nice house in a nice area. And he’s like, “Hey, would you want to manage my property?” And I said, “You know, I really only manage properties as a principal. Like I’d want to have an option to buy it or something like that.” And he’s like, “Yeah, I don’t really want to sell it.” I’m like, “Well, let me get you in touch with Kurt.” So Kurt did a master lease on this property. Well, two years later, this guy’s father gets sick and he has to go back to East India. What do you think happened with that house? He’s in Texas. He’s how many miles away? He sold the house on owner financing to Kurt. So I had the relationship. I had the trust.
I got the first phone call, okay? But Kurt ended up with the house because he had a master lease on it. So he got to try the house out risk-free, he made income every month on somebody else’s asset. And when the guy was willing to sell it on owner financing, which I’m pretty sure he just kind of took over payments on it, like no cash, so he was the guy there. So that’s what I would tell people to do. I mean, the real freedom comes from passive income. You know, I just was in a class recently by a guy named Gary Johnston. I don’t know if you’ve ever had him on . . .
Mike: I have had Gary on. And I’ve had David Tilney on the show too. You introduce me to David Tilney actually.
Michael: Yeah. And, I mean, Gary is really good at just keeping things simple. And he’s like, “The only way to really separate you from your income is collecting rent and charging interest.” You know, when I started out, I didn’t have any way of charging interest because I didn’t have any capital. But I did figure out how to option properties, how to take over payments, how to create seller financing, so I could build my assets and now I have those assets. But if I didn’t have them, I think building a master lease portfolio in my marketplace would be a much safer bet.
If I’m, I don’t know, Baltimore or some of these cities where there’s an unlimited supply of row homes that you can, buy fix and resell or by, fix, and rent, that advice might not as valid. But at a hot market, low rent ratios meaning high house value to rent, and very limited supply. A local mortgage broker gave me this statistic so I don’t know exactly how accurate it is. But he said right now in Colorado Springs, we are short 26,000 houses. So builders aren’t keeping up with pace. And I think that’s more . . . That is probably nationally now.
Mike: That’s a national issue, yeah. What you say and for those listening, what we’re talking about here’s market cycles. But also, well, it depends on what market you’re into, right? There’s some markets that are easier to operate in. If you’re in a more rural market, those still tend to be not as challenging right now as some of the major metro areas and things like that. But let’s talk a little bit about how to kind of insulate yourself from those things. You’re an old dog, you’ve been doing this for a long time. Very young, you look like you’re a teenager, though, Michael.
Michael: Thanks, thanks. [inaudible 00:20:08] my hair, right?
Mike: Yeah. But yeah, me too, yeah. Somebody said something, a guy on my team said something the other day about he’s younger than me. He just said something about, “I think I want to talk to a young guy.” And he looked at me and he’s like, “No offense.” I was like, “What are you saying here?” So anyway, but yeah. So let’s talk about how to insulate yourself. So knowing what you know now, it’s interesting because you’ve been through some ups and down markets. I’ve been through some up and down markets. Knowing what you know now if you could go back and do things differently, or just knowing what you know now how to ride the up and down markets, you know that . . .
Now, a lot of new real estate investors can’t do this, but you know, “Hey, if the markets more challenging right now, I might sit on the side-lines, right? Or I might do things differently. I don’t have to, I don’t have to go fix and flip a bunch of houses if I want to survive now. And so, people do that in the stock market, right? They’re investing and when they start to get older, or they think the markets taking a downturn. Anytime they want to take less risk, they just move out of those investments and they move it somewhere else and they mitigate that risk, right? And real estate investors are no different but people that are new to the business just don’t get that yet often is what I found.
Michael: Yeah. I think people assume they can just start doing one thing and just keep doing that one thing. And I’m not going to tell you I’ve done that many things in my marketplace, but I do them very differently throughout, through the market cycles. And when I first got started when I was a one-man operator with one assistant, wholesaling made sense to me because I didn’t have a partner or somebody that could run the construction side of things. And you and I know that that’s easy once you’ve got it all built in, but it’s really hard when you don’t.
Like to get that to understand construction to take to do a full fix and flip and do it so it’s not overwhelming your life takes a lot of strong systems and relationships with contractors. So I was always of the three nickels beats a dime. So I would go out and I would wholesale more properties. You know, get in, get out, take a wholesale check and move on to the next one.
As I at one point, I lost my assistant. Then I was too busy to train a new one and my wife had pretty much had enough of going to her . . . You know, she was a nurse practitioner, and she basically quit. She was my assistant for a nanosecond and then she took over a whole different side of the business. And initially she took over property management, but along with property management came understanding the basics of fixing up houses and things like that. And then that led to let’s do some construction on these properties and make a bigger profit as opposed to wholesaling everything.
And then the market tanked, it’s like, well, now you can’t . . . Wholesaling didn’t apply. Like wholetail, when the market shifted, you know, when the markets going up the house in the middle, that’s not perfect tends to sell closer to the highest price. When the market is in the tank, the house in the middle tends to sell closer to the bottom end. So you have to be able we were still flipping. We were still wholesaling, we’re just doing it differently inside that.
You know, the other hard lesson I learned in the different market cycles is where you source your inventory. You know, 2008 sucked for me. You know, not because I forgot how to wholesale or forgot how to retail, but basically I was 100% off market is where I found my opportunity. And then in 2008, you know, 2010, our market peaked.
In 2008, it was, I mean, let’s just call 20% down, people’s perception was the market’s here. The market’s really somewhere here and I’m trying to buy it there. So my conversion sunk which means my cost per deal went up. And then my profit per deal went down, okay? Because the people that were actually buying as the market was going down were fewer and farther between and willing to pay less for those deals. So [crosstalk 00:24:11]
Mike: In a seller’s market we found the same thing. When you’re in a buyer’s market, you got to be the prettiest girl at the party, as I say. When you’re in a seller’s market like it is now, you just have to be at the party.
Michael:Yeah, exactly.
Mike:And I didn’t understand that until going through each an up and down cycle, then you’re like, “What will I do differently next time?” Right?
Michael: Sure. Well, at the same time when I’m having a crap year, my friend Dimitri was having a fantastic year because he was already buying at the auctions. You know, inventory was already coming through the foreclosure sales. You know, by 2009, I was doing very well. I was picking up the REOs that came through the cycle and we were kind of into a full-on fix and flip business. But we were going from clean it up, clean it out paint and carpets to full on $25,000, $35,000, $45,000 rehabs. You know, as you put it, got to be the prettiest girl at a party. So you got to have the prettiest house on the market to get it sold so.
And we’re quickly going from postcards were not . . .you know, direct mail and the offline systems were not really producing like they did before, and the market was ripe with REO inventory. So we didn’t have to do those things. But now it took a little more analytical skill set, it took more relationship skill set meaning, I didn’t have those realtor relationships. I had to scamper out there and build those realtor relationships invariably because I never did staff up very well. You know, I always had one assistant, but I’m like the deal junkie.
I like to do the deals and so I built relationships with REO agents, so they would call me first and basically give me a foot in the door so I had time to run numbers before they put it active and obviously if they brought it to me, they got both sides. I was easy. I didn’t whine. I didn’t make their life difficult. And I mean that sounds simple, but to them, like these guys got their commissions chopped. They had to have their own money out there to catch up utilities, or taxes, or water liens, or clean outs, and all this stuff. So getting the full side on the buyer side was big to them. And then I didn’t chop them. I didn’t say, “Oh, after inspections, we need you to do . . . You know, I need to . . . ” Anyway, I was just, if I set up to do it . . .
Mike: You were easy. You kind of knew you knew how to incentivize them.
Michael: Exactly. Just be easy. And that was a very good advice. I mean, in the sense that if you’re easy, they’ll call you first. If they call you first, you can get your offer in there, and that was way before the wait seven days and everybody has the highest and best thing. If you had a legitimate bid close to listing price . . . And, I mean, at the time, I kind of knew exactly where I needed to be relative to the list price. . .
Mike: Yeah. And Michael, well, talk a little bit about the level of comfort that gives you. I mean, you have, and I don’t know if you’ve really shared yet or if even want to share it. You got a pretty significant asset base now. Just the comfort that that gives you as a real estate investor. This is, by no reason, for anybody that’s listening to brag, anything like that. You have a lot of comfort when you know that you don’t have to do anything tomorrow. If you’re a wholesaler, you have to buy and you can never stop if that’s all you do, right?
If you build up a rental portfolio and asset portfolio, seller finance notes, whatever it might be, you have some security there to where you can say, “I’m going to pull back and re-evaluate things.” But if you’re a one-trick pony, you can’t do. Just talk about, I guess what that’s meant for you to have a significant asset base built up where you’re kind of playing with the house’s money now and you don’t have to play at all if you don’t to.
Michael: Right. Well you have to start acquiring assets that are going to build additional streams of income for yourself. And basically, for me, it was the rental portfolio. All the money I made from flipping was a mechanism to a) afford, you know, you got to pay yourself. You got to live, you got to eat, put a roof over your head, but it’s basically have something leftover and invest that towards your future. And I always invested in more direct mail, more marketing to find the seller financed opportunities so I could buy rentals that made sense in my market.
And that served me very well, and I tried to do as much. You know, before I joined the mastermind where I met you, I had a very good tax position. I had a big asset base. Because I have low rent ratios, I have mortgages deduction that offsets the rent income, and then I have property depreciation on these higher-dollar assets. So all that depreciation then carry over into my S Corp, which is where I flipped. So I had several hundred thousand dollars of paper loss coming into my flip company so I could flip a lot of volume without having to pay any tax on it. Which to me it was a very, very streamlined tax position.
Now, again, I got in a mastermind group and everybody was growing your business. So what did I do? I grew my business and it [inaudible 00:29:35] taxes. But by realizing a lot more income during that phase, that also helped us to de-finance a lot of rental properties that we now have free and clear, increase our cash flow base. So it did work out. And right now, by having that asset base, by having multiple streams of income. Yes, I don’t have to get out of bed in the morning financially.
Do I have to get out of the bed and do something? Yes. We all have to feel productive. We have to feel like we’re going. But you can be a rhino, you can be a lion, but you don’t have to charge 24% of the time. You know, you charge when there’s a target worth charging at. And we do . . . You know, a friend of mine here in the market who really had made a real attempt at being a full-time fix and flipper jokes. He’s like, “You semi-retire, do more deals than I ever did on my best day.” And so I guess for me I feel like I’m being lazy, but it’s because we have the systems.
Right now, I have my real estate club. I let people know that I’ll partner with them, and that’s my marketing. I do one training meeting, I do one lunch meeting and well, I do have a little small local mastermind too. So I kind of . . . My workload is like three days for the month.
Mike: Not a week, a month.
Michael: A month. So, but I mean a lot of my deal flow comes through there. Now I can have a buyer team, I can have a staff, I can have more office overhead, more marketing overhead, and I’m going to keep about 50% of what I make on a flip. Or I can do none of those things, simplify my life drastically, help other people get started. And basically, we split the profits and they get half, I get half.
Mike: Yeah. Of course, I know you’re like me. Like there’s just something about teaching other people. You love to teach, right? I mean, it’s not all about just doing it yourself, it’s like you find a lot of value and a lot of, I don’t know, there’s something there. There’s something, the itch that you have to scratch about helping other people.
Michael: Yeah. I there was one mentor when I got started that said, “You know, if you ever get the opportunity to teach, teach because you’ll learn more teaching people than . . . You know, you’re going to be the one that gets more out of it.” So back in ’04, ’05, I think it was, they asked me to speak at one of their real estate groups and I talked on wholesaling and subject to. And, anyway, I got mobbed after that and I sort of like, “Well, maybe somebody’s trying to [inaudible 00:32:10]” So I started a mentoring program.
And that first group led to another group, and another group, and another group, and kind of did that for a while. And yes, I find a lot of satisfaction with helping other people. I love seeing them go from timid, shy, little people to hardcore closers. It’s awesome. You know, a lot of those people are local financial friends. I’ve done deals long term, short term. The bulk of my Roth IRA is invested with local financial friends and that has served me very well.
So, I mean, it’s just one more leverage point. You know, people say your network is your net worth. And trying to build that network as big as you can. And partly why do people want to come to my meetings? It’s because I share. It’s 10 bucks. You know, they don’t have to join a membership. It’s pretty low key. It really just covers my cost for the room. So I kind of invest my time, but I know somebody’s going to come out of there with a fire under their butt and they’re going to go out and do something. And if I can help them . . . like my backstory, when I was getting out of the cubicle farm, was I was hustling. I didn’t have a lot of money but I figured I’ll outhustle, and I’ll outwork whoever.
And by out there, beating the streets finding opportunities, I came across a guy, Brett that had credit lines. And I knew if I could find an opportunity, Brett said he’ll partner with me. Well, he didn’t say that but that’s sort of how it worked out. I just barraged him with deal opportunities and most of them weren’t good deals and he ignored me. And when I finally figured out ignoring meant bad deal, I kind of slowly siphon my way what a good deal look like. And then once I kind of got it solidified in my brain, he’s like, “What do you want out of this?” I said, “I don’t know, man” I mean, I really didn’t know. Like, look, I’ll have the sweat equity, I’d let you . . . So it ended up, we partnered. I did some sweat equity, but he really brought in the crews.
I was good at finding the opportunities and then he was good at doing the fix-up stuff and then we would split profits. So that first deal led to my first year and a half, we did multiple six figures of profit and we split it and that was really me getting off to the races. So that’s pretty much what I’m doing now. And basically, if somebody else is going to hustle. I mean, I found people . . . If people won’t do step one, go out and find opportunities, they probably won’t do step two. So I basically mentor people for free. If they go out and hustle and find opportunities, I’ll help them lock down the deal. I’ll help them negotiate the deal. Because I know if I invest in that person, they’re probably going to come and bring me another deal. You know what I mean?
Mike: Yeah, absolutely.
Michael: So raising other people up is it a) is fun, b) it’s profitable and it builds your network for the future too. A very [crosstalk 00:35:12] but just one . . .
Mike: That’s awesome. If folks want to . . . Thanks for joining us today, man. This is good stuff.
Michael: Sure, sure. Yeah. Anytime.
Mike: Hey, if folks want to learn more about you, I know you’ve got your club in Colorado Springs. Where would they go to learn more about you and what you got going on, which is only three days a week? I know you’re not working much so . . .
Michael: Yeah, yeah. No, no, the deal phone is always on, you know. Always call me if you got a deal. is my buying website. I’m on meet . . . My local real estate group is on Meetup. We’re the Colorado Springs Real Estate Investing Club. We’ve got just under 2,000 people here locally.
Mike: That’s awesome, man.
Michael: is my old training site. It’s not really modified. In fact, there’s a picture of a person sitting in front of a beach on a lawn chair right now because I’m sort of retired, so I don’t do a lot of that. I kind of felt like I’m going to operate the way I want to operate. [Crosstalk 00:36:10]
Mike: Yeah, you should.
Michael: Participate or not. So I don’t want to feel stressed out like my monthly club meetings, man. I got Iceland, Greece and Prince Edward Island trips in the summer. You know, if I’m not around, guess what? I’m not going to a meeting. So I don’t charge an annual membership because I may not be around to teach [crosstalk 00:36:32].
Mike: Awesome, man. Well, hey, thanks for joining us today.
Michael: Hey, anytime, Mike. [Crosstalk 00:36:36]
Mike: Appreciate your insights. Great to see you.
Michael: Likewise, man. Love catching up with you.
Mike: Awesome, awesome. Hey everybody, this is episode number 412 with my buddy, Michael Jake. Man, he’s got a wealth of knowledge. So if you missed any of this, you might want to rewind take some notes here. But we appreciate you guys joining us. If you haven’t yet, please go out to iTunes, Stitcher Radio, Google Play, anywhere where you might be listening to us at and subscribe or give us a positive rating. We’d appreciate that. Subscribe on YouTube and, of course, you can watch and listen to everything at So, I appreciate you for joining us, we’ll see you in the next episode.
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