REIA 336 Tony Castronovo: Why Your Assumptions About Quitting Your Job Are Wrong

This is the Real Estate Investing Abundance Podcast. I'm your host, Dr. Allen. I just want to take a moment to introduce you to our company, Steedtucker Capital. Steedtucker Capital is a real estate investment firm. If you'd like to learn more about real estate investing, head over to our website, steedtucker.com. And while you're there, take a moment to get your one-page guide to the 10 steps to passive real estate investing. Downloading this PDF will also enroll you in our Enlightened Investor Circle, and by enrolling in the Enlightened Investor Circle, you'll be the first to know about any new investment opportunities that we are getting involved with. Look forward to hearing from you. Enjoy today's show. Hello, enlightened investors. Welcome back to Real Estate Investing Abundance. I'm your host, Dr. Alan Lomax. I'm so delighted to be back with you again today as we take a look at why your assumptions about quitting your job are wrong. With us is Tony Haddad. Castro Novo. He is the founder and managing partner of Nova Multifamily Group, and he is a seasoned multifamily real estate investor with experience in acquisition, due diligence, syndication, capital raising, construction, asset management, and overall asset strategy implementation. He has been invested in over 900 units, Including a combination of general partner, limited partner, and independent ownership. Tony complements his background with a 25-year management consulting career advising clients on project investment portfolio management. Finally, Tony is the founder of Grit to Growth, a transition and performance coaching business where he helps entrepreneurs And to live their life intentionally and by design. So, Tony, welcome to the show and share with us a memorable experience that helped you to be the person you are today.

Well, first of all, thank you, Alan. I appreciate being on your show. It was a pretty long bio. I'm sorry to have drug you through all that.

It was an interesting bio. So anyway, glad to be here.

It says maybe I've got a few years on me here with all that experience.

Yeah.

So maybe a good segue into what was it from more formative years that kind of got me here. You know, I could go down the typical path of, you know, some of the things my parents taught me and so forth, which, you know, I think certainly contributed to where I am. But let me actually pick one moment. I remember writing, and this is bad if my sister was listening to this, I wrote a college paper for my sister in high school.

Oh, okay.

And she wasn't really much into writing essays, and I don't know, I took it upon myself to give myself the challenge. But the title I remember very clearly, and the title of the essay was called Self-Employment: Aspiration or Asphyxiation? And that title, I start thinking about that and the whole concept of what was in the essay. And the idea was that growing up, my father was a businessman. Blue-collar worker, started an auto body business and was into cars for decades. That was his life. And as a business owner, I watched him as his son throughout the years in the great days and the not so great days. And so, you know, some days I aspire to be a business owner and an entrepreneur. And other days I was like, ah, I felt like, you know, that could just choke me to death and maybe not a pathway I wanted to go down. Fast forward, you know, several years and here I am. And, you know, I've been an entrepreneur for as long as I can remember and have started a number of companies. I left the corporate world about a year and a half ago just to pursue a side hustle that I had for several years. And, you know, here I am, you know.

Well, great. Interesting story there, which does segue into what we're going to be talking about today. And so, Tony, just how realistic is it to create enough passive income to quit your job and to live financially free?

Yeah, I think it's a bit of a— maybe I'll call it a myth out there. I mean, certainly you can if you continue to invest in real estate assets, whether it be multifamily or other. You can certainly develop a nice stream of passive income. The trick I've found is, well, if you're coming from a corporate job that pays you pretty well, and if you're doing, you know, anything half good, you're gonna keep getting raises and bonuses, and you're chasing your tail. Trying to replace that income with passive income, I think, is just sort of a hard sell for me.

Mm-hmm.

Rather, If you want to leave your job, you need to start focusing on wealth creation, not just passive income, but creating wealth. And so that's why I love real estate is it's the long game. You know, you're buying assets or maybe you're investing in syndications and basically being involved in real estate in some way to really look at driving value in those properties and down the road selling those properties for profit and receiving the wealth that those properties create. That is the way to leave your job.

I totally and completely agree. That road to entrepreneurship, while it could be very stimulating for some people, for many of us, it is like you, is it a fixation or not? And I totally agree. The way to leave your job is with preparation and to do it after you have some wealth which you can rely upon there. Well, what was your biggest surprise after you quit your job and you started full-time as a real estate investor?

Yeah, I think it segues into, you know, that belief that I just described there. Imagine a conveyor belt, and a coach kind of shared this with me. It's a simple metaphor, but it really hit home for me. So conveyor belt where you are purchasing assets and you put them on your conveyor belt and that conveyor belt is kind of rolling along on a hold period for those assets. So let's say, let's go with the syndication model for a minute and say that it's a 5-year timeline for a typical exit on a multifamily asset. You get involved in that deal, Year 1. So you just put that asset on your conveyor belt and now it's operating, it's running, and you're getting some cash flow off of it. But you don't really get a big payday until possibly a capital event like a refinance, maybe in year 2 or 3. And certainly when you exit and sell the property, in that example, year 5.

Okay.

So the thing that I didn't quite realize, maybe it was my exuberance to finally have left my job in the honeymoon period. I started buying a lot of assets very quickly. I had a really interesting 2021, 2022, and I'm pulling money out of my bank account to get into these deals and putting them on my conveyor belt. And then all of a sudden, I kind of look at 2 things. I look at the balance in the bank account and it's going down. And then I looked at, okay, when is my real capital event coming up? where I'm gonna be able to pull out some money to actually either live on or roll back into the next deal or 2. And when I started looking and seeing that that was a good 3+ years out, the aha moment was, well, I better find something to generate income during that hold period between assets and their capital events.

And what did you find?

So I actually went through a bit of an exercise, and I actually do this for a lot of my coaching clients. I coach a lot of entrepreneurs and also experienced business owners. But the exercise that I went through was what I'll call the Honeybee approach. For those that have heard of Jake and Gino, they're a mentoring community in the multifamily space. They wrote a book called The Honeybee, and it's a parable and really fun read. But the premise is it's multiple streams of income, not just trying to, you know, do one thing and hope that, you know, you're going to hit a home run, but having multiple streams of income. And of course, they can be related. But for me, I just said if I had a blank canvas and I just listed everything that I either wanted to do, had passion around, had expertise in doing, what would they be? And because I have a bit of an engineering analytical mind, I put a little bit of a scorecard together and I ranked everything. And interesting that when it bubbled it all up, it kind of had some themes or clumps in these, these I guess, ideas that I wanted to pursue. And most of them happen to be around coaching, consulting, training, mentoring. And part of that, not a big surprise. I was a consultant, as you said, for 25 years. I spent a lot of time in business and management, but I think it's just part of my DNA. I've always mentored people. I love coaching people. And so I took action on that. And last fall, I started a coaching business.

Since you told us about your coaching and consulting business, tell us about the business and how it is that we can get in touch with you to take advantage of that.

Of course. Of course. And we can drop the details in the show notes. But last fall, I launched my coaching business and it was focused on entrepreneurs, specifically around helping those that have an entrepreneurial mindset Maybe in a corporate job, been running a side hustle for a few years, trying to find a way to go full-time and whatever their passion is. And then once they get there, all the bumps, you know, and the hurdles that they're going through until they really get stable and can just live that life as an entrepreneur. That's what I focus on and started last fall. Coming soon, if you will. It's technically soft launch, but I haven't done the official hard launch. I have an entirely new track that I have for experienced business owners. And the intention there is if you're a business owner who's been looking at mediocre type of profits and returns in your business and you're really looking to scale that up, I have an entire coaching program that's focused on that. I have a learning academy around business strategies that are actually in a book that I had published called Crush It. We can, we can put some links in the show notes to share some of that with your listeners. But I walk my clients through these strategies, and not just in, in coaching sessions, but there's work that my clients do behind the scenes. They get educated, they, they have worksheets, they have videos, and we unpack the strategies that make the most sense for them. And, and even kind of leading into that, before we even start moving down the path of coaching, I have a proprietary software that I sit down with my prospect or client and literally walk them through each of the strategies. And we enter in some data that they share with me, their financials and, you know, some of the direction that they're headed. And we can literally create a roadmap for what kinds of profit acceleration can they see and when can they see it. And then what do we need to do to be able to get there?

And how can they find you to take advantage of these services?

Probably easiest way is just go straight off my website, and that's grit-to-growth with hyphens in between. So grit-to-growth.com.

Enlightened investors, if you haven't done so already, be sure and click that Like button and also click that share so others can take advantage of the content. And finally, be sure to subscribe so you don't miss a single one of our upcoming episodes. Well, excellent. Since we're talking about entrepreneurship and coaching, what are the 6 stages of entrepreneurship and how can coaching actually help? to attain those?

Wow, you're going straight for it here. Okay, well, you know, it's funny because I've been through, I think, all of these multiple times. I just kind of jumped straight to the first stage, which is what I call curiosity. And it's a lot of anticipation. You know, somebody might have had that side hustle, but they're still stuck in that 40-hour-a-week job or more. But they're curious. They dream a lot about what would it be like if one day I just told my boss I'm leaving? What would my life be like if I had this time to focus all on my business? So curiosity is stage 1. At some point, there's enough courage and momentum and guts to go for it. And so once somebody makes the jump to go ahead and leave that job, Now we enter into stage 2, which is the honeymoon phase. And so just like any honeymoon, it's a lot of excitement. It's newness. It's this feeling of freedom and just elation. And then as we start to kind of get a dose of reality, time sets in, we're going about our, our, our day-to-day, we start slipping into doubt. And we start to be fearful. We start to question whether we made the right choice. And, you know, is there a way back? And things are getting tough. And, you know, I don't know if I can do this. And I think we all kind of go through that. And that's kind of where a coach can come in and be helpful, because to get to the next stage, which is envisioning, And where hope comes in. Sometimes people need a coach to help them see through these challenges and what opportunities there may be and how to get there. And once we start envisioning, we can move to stage 5, which brings a lot more enthusiasm, creativity. It's the validating stage. And so you're testing new ideas and approaches and You're seeing some success and pushing forward through those challenges until you reach stage 6, which is what I call synthesis. It's basically where things are jiving now. Things are moving along and you're starting to feel a little bit more stable. You've been through, you know, some tough challenges. You found your way through those, and now you can kind of settle in and, and just start accelerating in your business once that foundation has been set.

Is there an average timeline for moving through these steps or is it pretty much an individual concept?

Good question. I think it's an individual case by case. In fact, I don't think it's linear. You don't just go through 6 stages. I think it's a cycle. And often you can, you know, have elation and be seeing new ideas and have confidence and then you hit another bump in the road. you never hit and you slip back down into the doubt. And in the corporate world, maybe it was always easier because, hey, I'm still getting a paycheck. You know, maybe I had some struggles, but maybe I had an entire team of people in my company that helped me through that. And now it's me. So it's just something that I think you can expect to go through on a cyclical basis. And I'm not trying to push the coaching, but I do think that That's— I'm a coach, but I have many coaches. And frankly, I wish I knew about coaching many years before because it's made a tremendous impact on me.

I don't think I've talked to a single entrepreneur or investor who hasn't talked about the importance of coaching. And there's a lot of coaches out there that we can go to and we can select who. Do you have any suggestions? on how it is that we determine which coach we need to go to and which coach is really going to be a coach that can benefit us?

I think most people will start with this logic of, I want to do what they're doing. I want to get where they are. And I mean, it's just natural, right? We see somebody who's blazed a trail, been there before us, and we want them to Show us the pathway. Now, I would argue that that's really more mentorship, right? A mentor helps you to learn how they did it. A coach actually works with you. You have all the answers, but works with you to do it your way. And not just the destination, but the journey along the way. It's, it's really not, I want to get 1,000 units or I want to be earning this much in passive income. I mean, certainly you can have those goals, but you really need a coach that you feel can work with your personality type. You know, if you're a hard-driving Type A personality, you're going to want somebody probably who's very forward with you and, and doesn't sugarcoat things, just moves you along quickly. But You know, if maybe you're a little bit more, you know, take things slower, I want to analyze things a little bit more, find somebody who's got that personality type.

And would you suggest in a search for coaches, do you, do you suggest actually interviewing the coach before you get involved with them? How do you go about that?

Absolutely. I mean, you know, if you're entering into a relationship, and that's what coaching is, you should spend your time and do your due diligence. And, you know, there's— the word coach gets thrown out a lot, right? And in fact, I've been called everything from a life coach to a therapist to, you know, you name it. And I've gone through the training and I have certifications. I could be a life coach. Frankly, I, I don't even look at it like that, that, you know, I'm health and wellness or I'm, you know, business coach or whatever. There's all these niches. At the end of the day, my client is a holistic person, and they're focused maybe on business and entrepreneurship, but they have a life too. And that's what I talk about with regards to the journey is, hey, if somebody's having trouble with time management, they just can't focus the right amount of time in their business or on their business because maybe they've got young kids or they have a lot of travel in their life or whatever it might be. We work through those challenges and I'm not just gonna hammer somebody on, look, you know, we need to develop your expertise in multifamily investments and underwriting deals and whatever it takes to get a deal done if you've got life challenges that we need to work on.

And I can't imagine anybody who doesn't have those life challenges no matter how successful you are as an entrepreneur. Life is always going to happen. Tony, tell us about one of your greatest challenges in real estate and what have you done to overcome that?

How much time do we have? No, I'll pick one. I mean, look, anybody that has been in business long enough and never had a failure or setback is either lying or is too new to have had those experiences. I'll pick one, and I've had plenty. This one was, was probably one of the most impactful to me. It would kind of change my, my direction on some things. So it was about 3 months before the world changed in March of 2020. I purchased my, my second multifamily property. It was actually my first syndication. And we bought it in November of 2019 before the world changed with COVID Unbeknownst to me, we were going to have many, many challenges and constraints. For 3 months, we got real aggressive. We're moving through our renovation schedules. We're evicting non-paying residents. We're going through all that typical repositioning. And then we start having shutdowns and we start having eviction moratoriums. And all the work that I had been doing up to that point basically either got put on hold or negated. We could not remove non-paying tenants. Tenants started to understand how they could get away with a few things. And so the property was going backwards, if you will, in its stabilization.

Mm-hmm.

Then my general contractor, who was blazing a trail, working to renovate about 60 units, He had to shut his doors because he could no longer pay his staff. And so now I became the general contractor by default, and I had to start hiring subcontractors myself. I had to start managing all the subs. I had to start really squeezing on, on the dollars of how I got this, this work done and coordinate it all. And I'm still stuck in a job and trying to manage all that. I was literally driving to the property every weekend, spending all weekend there. I was hauling materials out there, doing everything I could. And yet we had delinquency problems. We had vacancy problems, and I had to pivot. And so fast forward to, okay, so what did I do about some of these things? Well, first off, I gave the property a lifeline. I took another performing property that I had and I refinanced that, pulled cash out of that property and gave that property that was troubled a lifeline of a line of credit that allowed for sufficient working capital to go faster and get through renovations and really improve that property much faster so we could start filling it the moment That you know we could actually show the property because we couldn't even show the property. It was all virtual for for months. So that accelerated everything, and we started turning the corner. Fast forward about two plus years, and we did an early exit on that property. We were over well, we were at 100 occupancy for several months leading up to the sale, and we were we're generating profits. We sold it for. Pretty nice gain and provided returns to our investors. We exited early simply because I was burned out.

Yeah.

That was, that was a lot of drain on my time, my energy. I had told myself I will sell so long as we can return profits to our investors, make them whole and give them profits to compensate for the time that they had their capital tied up with us. And thankfully, 70% of those investors in that deal moved their capital and their proceeds directly into the next deal that I had under contract within months of selling. So I call that a win. Lots of battle scars along the way, but yeah, challenge.

In just 2 minutes here, what is the number one lesson you learned from that?

Number one lesson I learned is continue to be transparent with your investors. Communicate more than when things were good. Share everything. You have to be transparent. It is not like fine wine. Bad news does not get better with age, and it doesn't go away. So you just got to be open and honest with your investors. Just put yourself in And, you know, the investor's shoes, if you invested in another deal and your sponsor hunkered down and got quiet on you and wasn't sharing what was really going on at the property, you'd be concerned. So double down on your communication and transparency.

Excellent advice, Tony. What a pleasure to have been with you. Thanks for being with us on the show today.

Of course, Alan. Thank you very much.

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