#33: John Reif, Real Estate Investor - 70-hour work weeks, creating time freedom & overcoming fear

Whenever there's confusion, aha. There's an opportunity for like a massive breakthrough, for something new to change. Because that's, you know, if we're just sitting here in life and we're not fearful, we're not confused, nothing's going to change. The only place that change occurs is when you're fearful and you're confused and you just keep going and you take action and you learn more and you keep going.

On today's episode, we have tech exec and real estate investor John Reif. Steve, this is a great opportunity to chat with somebody who's obviously successful in the tech space, but to get into his mindset of investing in real estate for the first time, you know, John found himself, I'm giving it away a little bit, but John found himself in a space where he's making a lot of money but realized he has a concentrated risk of his investments and wanted to diversify into real estate. And hearing him, hearing how he methodically approached overcoming his fear of investing and breaking out of the W2 rat race and even going to the point of asking other people to invest with him, how he got over that fear was really, really interesting and I thought pretty insightful for new investors.

I loved how John thinks. You know, it's two engineers here thinking methodically in the process. So whenever I hear somebody thinking like that, I get really excited. But one of the things John did and is really, really important, anything you do in life is find a mentor and a mentor group. And that's what John did. He found great mentors to help the old pay it forward type relationship and it moved him in the right direction and got him on that path to being that multi, multi family GP investor and, and fundraiser and overcoming the fear.

Yeah, and it was so. And again, we're jumping the gun here. But he talked about how he went from 70 hours, how many plus hour work weeks he's traveling all the time to now he has time freedom with his family. They're going to Europe this summer. And it's all because he made this mindset shift and even shift in his, in his profession, going from W2 to creating wealth through real estate. So I thought that was so, so impactful. But I don't want to give too much more away. So let's just head west. Stay tuned as we discuss escaping 70 hour work weeks, creating time freedom and overcoming fear with our guest, John Reiff. This episode is brought to you by Skyline Point Capital. If you're anything like me, you're always considering where to invest, your Money, stocks, bonds, crypto, and rental home. The list is literally endless. As we've all seen over the past year, the stock market is unstable, the housing market is just weird, and inflation is on the rise. In times like these, the clear place to invest my money is in multifamily real estate, AKA apartment complexes. Here's why. Returns on real estate investments have little to no correlation with the stock market. There's lower volatility, stable income streams, and the tax benefits are insane. And let's not forget that the apartments will typically appreciate in value over time, which means you can walk away with a pretty nice return when the complex is sold in three to five years. Best of all, multifamily investing is passive, so you get all the benefits without the hassle and headache of your typical rental home investment. Getting started has never been easier. Head to skylinepointcapital.com to learn how you can start investing today. Well, John, it's typical with heading west. We always start our conversations at the beginning. Yeah, makes sense. As the conversations always head west. Your background is super unique for an investor like yourself. You're a real estate investor. I'm sure you invest in other things, but most people, there's usually like a trajectory like you can kind of see like the very clear outline of how they got to real estate investing. But yours is a little bit unique because your background is more on the, you know, I'll call it tech side. You probably call it something a little different, but your background, IBM, Amazon, you know, you're, you're out in San Francisco and then you make a, I call it a relatively hard pivot into real estate, which, you know, without knowing the details, it seems like a little bit of a, like I'm gonna make a 90 degree turn here. Yeah, I'd love to hear what prompted that. How did you go from IBM and Amazon, sort of a tech background, computer science background to I want to invest in real estate, I want to bring other investors in to grow wealth through real estate. Walk us through where that journey began for us.

Yeah, I mean, I get that from a lot of the investors actually, because they're all tech people that I used to work with in one capacity or another. And they're like, wow, you made a lot of changes recently. But yeah, I mean, I had like a 25 year career in tech and did the typical corporate, you know, career building and was, you know, made it to director at Amazon, which was kind of one of my career milestones or achievements. And you know, when I got there, it wasn't Fulfilling. And there was some financial letdown, frankly, just when I made it to that career position. And I really was at a point in my life, I said, do I want to keep doing this, you know, for another 10, 15, 20 years, or do I want to do something new? And I was ready for kind of a new passion in life. And I said, I'm just going to quit. I just quit my corporate job. And a lot of that actually came. The genesis of that came from doing a lot of work in the Tony Robbins world. So if people know Tony Robbins, people think of him as a motivational speaker. He doesn't like that term. It's, you know, it's. It's really helping you understand your own psychology as a human.

Yeah.

And, you know, I got involved in that, funny enough. Amazon sent me to Tony Robbins in 2015. That's where I got immersed into that environment. And everything in our life kind of shifted from that space, including this decision to leave tech and become an investor in real estate. The reason I bring that up too is one of his yearly events for platinum partners, which my wife and I have both been platinum partners in his ecosystem, is, is the finance event. And I started going to that in 2017, was the first year I went. And that's really where my psychology changed. And I started to say, wow, life isn't about working really hard for a paycheck for somebody else and saving money and just put it in the bank and save enough money and you can retire. I think that's how most people kind of get brought up, or at least that's how I was brought up by my parents, was blue collar, work really hard. And even though I went into tech and got a computer science degree, I still brought that mindset. And so the shift was really that change over the course of 2017 and starting to build an investment portfolio. The other thing I really started to see was I had a lot of concentration risk. I was getting my stock from Amazon, I was getting a high paycheck from Amazon. My 401k part of it was invested in Amazon. I was really had a lot of concentration risk and I didn't have exposure to real estate. And so I had some really great friends that were from the Tony world, including Brad Somerock, Ruth Hiller, number of people that were already in real estate or had been in real estate for a very long time. And I followed their lead. You know, great mentors start to find people that have had success and model what they do.

That's such a great point. Concentration risk. We haven't talked about that frequently on the podcast. But that, that, that's something that most people don't consider when thinking about their total finances. Is, is what's my risk here? If, let's say like for you, if you get laid off or you know, whatever, you lose your job at Amazon, well, maybe that doesn't affect your, what you've already have invested, but you know, definitely further funding it is not gonna be a problem. Now funding my current living situation is now a problem. You live in San Francisco, not the cheapest place to live. That's not a conversation. I think most people talk about or consider that they need to really diversify their, their, their income, let's call inputs. You know, they need to have more than just one avenue of creating income. And Steve talks about it a lot. We call it plan C, Plan cash flow. If you lose your job or if you get injured, where's the income coming from? Right Steve?

Absolutely. And it's most people just think, hey, I'm just going to work harder. If I have to work 50 hours, I'll work 60 hours. That's how I'm going to build my wealth. But that's the biggest mistake because there is no other plan.

Yeah. And for me, like at Amazon, it's a pretty intense place to work. I was there almost 10 years, you know, and worked up the career kind of ladder. And I, you know, for most of my career I was working 70 hours at Amazon. So there really wasn't more juice to squeeze out of that. We have three kids, you know, and you know, they're teenagers now, but back then we were, you know, you know, infants to toddlers to school age kids and you know, working 70 hours a week and traveling all over the country was not really a recipe that was going to work long term for my happiness and our relationship and a whole number of other things. So, you know, and the thing about concentration, risk, the interesting thing was I left in mid-2021. I'd like to say it's great insight.

But it was just luck right around the tea leaves.

I qu 2021 and I sold all my stock and I had a lot of friends that the stock was down 50% a year later. You know, so those RSUs, they look great on the way up, but all of a sudden that's your income when you, you know, when you work at a, in a tech job like that. For me, 75% of my income was coming from RSU. So that's, that's a big hit when Those go down 50% and then it often coincides with people getting laid off and know the industry. So there's a lot of layoffs from Amazon. So yeah, those, those things can strike. So really, was that diversification, getting out of concentration, risk building cash flow, which I had never created in the past? Yeah, that was huge.

I think it's a, it's a pretty natural mindset change to go from. Okay, I, I probably need to diversify my income a little bit more. Like I can keep my job at Amazon, but I need to maybe think of other alternative income streams. I think that's a pretty natural mindset shift. Conversely, I think it's a, it's a pretty big mindset shift to go from I make my money working a 9 to 5 job, a W2 job, to I'm going to make my income primarily through passive income streams. More of an entrepreneurial sort of mindset. Did you run into any, Were there any difficulties in that mindset mindset shift that you ran into? Like you said, you, from a background of blue collar, you were raised that way, your parents did that. Was there any difficulty in that mind mindset shift for yourself, for your, your, Your wife, your family? And how did you work and process through that?

Yeah, for sure. I mean, I think anytime you make big shifts in life in general, you know, your brain kind of kicks in and starts questioning like, you know, what are you doing? And you know, you're going from having all this expertise and building up, you know, this career and you're, you're kind of going in a completely different direction. So, yeah, I mean, I think the biggest thing is your, your own mind and, you know, just getting out of your way and saying, look, this is something new. And I think what helped me through that was I just have a passion for growth and learning and I just was like devouring as much as I could in understanding real estate in general, reading books, listening to podcasts, going to live events and seminars, but most importantly, being around great mentors and people that have been doing what I wanted to do, which is multifamily, for a long time. And so, you know, that I went to a live in person seminar and I was very deliberate in studying the human psychology that was going on, like, who's there, how do they speak, how do they interact, what's their social skills, what's their business acumen, how long have they been doing things, what kind of questions do they ask? And I just got around a group of people and started to really narrow down the people I wanted to partner with. Because at the start of this journey was, you know, my wife had sold her business of almost 25 years. I had left tech, invested out, you know, sold all my vested stock in Amazon. So we had, you know, liquidity to put to work. We also had a really big tax bill that was going to be due last year because we also sold our house, our primary residence, and moved in San Francisco. Well, we were in Menlo Park. Yeah. So we're more in Silicon Valley, south of San Francisco.

Yeah.

So we were in Menlo Park. We sold our house because it wasn't working for our family anymore. And actually we're renting now. And, and this is, this is a whole different story about the economics of when you really start to pencil out a pro forma and how you put your money to work. Yeah, I feel like we're stealing money, renting where we are now. Like, it's, it's so cheap relative to owning and paying property taxes and the overhead and everything else, and then putting our money to work in another state. So, you know, we had a lot of liquidity and we, we had, we're going to have a big tax bill. And so we started out, as many people do, just being passive investors, being limited partners in multifamily deals. And. But I first learned and found the good operators understood the business model, dove really deep in understanding pro forma, you know, returns and making sure I was well educated before kind of I dove in, you know, head first into too far. So, yeah, yeah, that's how we got started.

You said you were talking about a mentor, and you mentioned Ruth Hiller, who's part of the Tony Robbins. What, what was she saying about how to get into multifamily? What were, what attracted you to that from what Ruth was saying?

Yeah, I mean, I, I knew nothing about, you know, multifamily. I was, you know, 25 years, working 70 hours a week just doing my job at Amazon and trying to raise a family. And, you know, the only thing real estate we had ever owned was our, our personal residences. Right. So what, what Ruth really, you know, I had left Amazon. I was looking for what did I want to do next? What was going to be a new passion, a new area of life to focus on. And Ruth really pushed me at one of the Tony Robbins events called Date with Destiny. She was, she was there. We spent six days together. We're working on our mindset together, and she's like, you got to come. And my wife had been telling me for a few months as well, like, you got to go to an event and learn more about multifamily. So I went to one of Brad Somerock's events, the Rat Race to Retirement and she, before that she talked to me about what she was doing in multifamily and the benefit of cash flow from, you know, properties you're getting, you're collecting rent and you know, getting quarterly distributions as a part of that. And you know, I never, I never had that when I'm invested in my 401k or in the market. Right. Like I would reinvest dividends. But I didn't look at it as a cash flow generating asset. I looked at it as more I'm going to save money, it's going to appreciate and at, you know, when I'm 55, 65, sometime in the future, I'm going to start, you know, dipping into some of that money. So yeah, definitely the cash flow. She talked to me about the appreciation and that's in the holding period. You know, really looking at a pro forma of improving a property over a, you know, three to five year, you know, period and understanding a five year hold period and the, and the business plan that's attached to that. For me, that was really easy to get my mind around because it's, it's like flipping a house. You know, it's just, you're doing it across 200 plus units and you're doing the exterior, you're creating curb appeal, you're making a community that's safe and that's updated and people want to live at. And so, you know, those things started to attract me. And then the kicker was the bonus depreciation and in 2022 that was 100%. So you know, now it's 80% here at the end of 2023. But we had this huge tax bill due on the Fed side and in California and we were able to wipe that out to zero by getting that bonus depreciation in 2022, both as an LP and then as I got more experience and build relationships than as a general partner.

You had mentioned that you jumped in looking for good partners like you, you, you have this conversation with Ruth and at Tony Robbins and you, you realize that, okay, real estate's probably, and multifamily especially is probably a good place for me to put my, my, my cash. And you had said I needed to find good partners. What did you, how did you find that criteria for finding good partners and what sort of criteria do you have now established for identifying good partners to invest with?

Well, I really looked at it as an investment in my future. Right. So, you know, I was leaving a career that I had gotten a computer science degree, and I had spent, you know, many hours and money to develop that expertise. And so I was like, I'm going to do the same thing in this new field. I'm going to invest in my education. I'm going to learn the fundamentals of multifamily. I'm going to get around and network with other people that have been doing this for a long time, and I'm going to start looking at what do they care about in a business partner, and how do they speak to and treat their business partners. And when you're first getting started, some of that's intuition, because you're just like, do I resonate with this person? You know, do I feel like they have integrity and trust? And obviously, you don't just go off of that. But so, you know, at. At that event, There was probably 1500 people. At the first event, maybe not that well. Between virtual and in person, there's probably 1500, but in person, there's probably like 900 people. And so Ruth said, these. These two guys, Dan and Mike, are, you know, just amazing men. And they've been doing a lot of. A lot of work in multifamily for a long time. I think you should meet them. So, you know, I just networked as much as possible, went to the dinners with different groups of people. I remember sitting, you know, going and sitting right down right next to Dan Breezy and saying, hey, Dan, you know, I've heard you've been doing this for a long time. And I learned about his previous career, and it resonated with me, kind of shifting from one passion to another. And I just sat with him for the three days and just asked him questions as things are coming up. And then the next thing I did, which I think was really critical, and they had an opportunity for an investment in Nashville, and I asked them. And Ruth was a general partner with Dan Breezy and Mike Roeder on that deal. I wanted to be a limited partner, and I said, hey, can I just come along for due diligence? I know I'm not going to be a gp, but I'd love to just fly out to Nashville and be boots on the ground and see what that process looked like. And, you know, I got to stay in the Airbnb with them and listen, as they were going through their term sheets for their loan and they were navigating, you know, their business plan and, you know, constructing some of that they were shooting video on site, they were going through due diligence with their contractors, and they were talking to the leasing staff and the current property management. And I just was absorbing as much as I could and listening to not only their industry expertise, but their mindset. How did they go about solving problems when issues arose? What was their communication internally within the team? What kind of systems and processes had they built to? And this was a little bit further down the road as I became a general partner with them about two months later on a project. Then I really got, over the last year and a half to be behind the scenes and see exactly how they work. So initially it was just investing in myself, investing in education, networking, meeting a lot of people, trusting some of my gut intuition on who I wanted to spend time with, asking them a lot of questions, and then seeing how they asked questions, who they respected, who they talked about, how did they think about what was going on at that point? It was April, May of 2022, so interest rates were changing quite a bit. So I was also interested in their mindset about the economy, about just, you know, how they evaluated the asset. So that's a little bit of the background on how I made that decision.

So, John, with. With your initial visit to the property as an lp, seeing how GP work, since then, you've been a GP in other deals going forward. What's it like being on the GP side as compared to the LP side?

Yeah, I really love the GP side because having been an employee for so much of my life, one of my key things when I left was to become an entrepreneur and a business owner for myself and for my family and to generate wealth through that. A lot of that, again, goes back to Tony Robbins and business masteries and being around a lot of entrepreneurs who had done that work. So key priority was one, get educated in the asset class, to start to diversify our own equity through LP investments. And then as I gained experience and connections and knowledge in the industry, start to pursue what would it be like to be a general partner. And I'd have to say I was really freaked out when I first came into this. It's a big leap, you know, and part of that was I had never raised money before, you know, so the thought of starting to go out and raise funds from, you know, friends and family and coworkers and connections that I had made in the business world was scary. You know, it wasn't. It wasn't just an easy thing to do, but what I latched on there, in making that transition To GP Steve was I was passionate about educating people and you know, I had made those mindset shifts and I wanted to pass that along to others. I wanted to kind of spread that knowledge and that, that passion and that interest for so many people that I know are super busy in their corporate world and don't have the time to really evaluate all these options. And so I started off just by doing a LinkedIn post because that's where, you know, where I lived in the corporate world, you know, I had probably 1500 connections on LinkedIn and they were real established, trusted relationships. It wasn't just like accepting LinkedIn connections from whoever it was, you know, over 25 years of a career building up a network of people that I had worked with during that time. And so I just started out and reached out to that initial group and said, hey, I'm really passionate about multifamily and I'd love to share. And I did a webinar and you know, the first webinar we had about 40 people show up from that and I was like totally surprised.

Expecting four, got 40.

Yeah, so it was great. We recorded it and we shared it and just start to kind of understand how to, to, to teach other people the business model and the benefits of not having to be. Because all. And the, the pattern I saw over and over again is they have a lot of one on one conversations with people after they went to the webinar or watched the recording and they talk about how, you know, Steve and I think Jake, you mentioned it too, is like often people, they, in a corporate career, they'll live in one city, they'll move to another city and they'll try to keep the previous, you know, house or duplex or whatever kind of property they have and then turn that into an investment property. And over and over and over again I heard the same story. One, they don't know how to do a pro forma analysis. They don't really know how to build a business plan relative to that property. Two, they're spending way too much time, you know, being a property manager on that property. They all feel like it's a second job. They don't have an exit plan on what they're going to do with that property. They don't have exit criteria. So it's kind of more of a hope and a wish and a good idea to have an investment property rather than a business plan. And so I just got really invigorated about sharing that knowledge with others. And then on the asset management side, I was brand New to this. So it was more of like how can I help my business partners with building their business? Because I had a, you know, at Amazon I ran a team of about 110 people at one point. So I had a lot of business experience in building a team and working in high pressure, but a very successful business in Amazon overall. And so I really love sharing business practices and just ideology about how somebody that's building new business in the case, Mike and Dan, just add value to them and help them and then participate in the weekly management calls and at the leasing staff and getting to know the business and just be really engaged, engaged and involved in the operations of the property. Admittedly not as the primary point person, but as somebody coming in and learning and helping and adding value.

How'd you overcome the fear? I mean you're day one, you got to call your, I'm assuming you went to friends and family and your LinkedIn contacts and now you're in a different world. You're asking for money, you're raising money for multifamily. That's, that's a little different gig than your normal 8 to 5 job. How'd you overcome that fear? Because it scares everybody their first time.

It does, and it should.

Yeah, yeah. I mean I have all the same thoughts that probably a lot of other people do. It's like, it's one thing to risk my money, it's another to like bring it to other people. And you know, the thing I always want to protect is the people I love and care about. That includes my family, my friends, all the people I've worked with. Like I want to make them successful. But I think the thing about fear is, you know, courage is not that there isn't fear, is that there's fear and you still take action and you still move forward. That's the definition of courage is when you have courage, you do those things even though you have fear. And so I knew this was right for me. I knew this was something I was really interested in and wanted to go deeper. And like I said, I had that passion for teaching and wanting to change the mindset of people that I knew were so overly concentration risk. I also knew that the people that I was working with, it wasn't their life savings that they were taking and putting into this, you know, deal that I was doing with my business partners. I knew it was an appropriate level of risk. I dove deep with them beyond the education that I shared in many to one doing many one to one conversations with, with the investors and helping really evaluate where are they at in life, what do they want, what's their goals and educating them along the way about the risks that are involved in multifamily. But also why I was confident in my business partners in the particular property, in the business plan, in the loan details, educating them on the financing and debt that we were securing and just where we de. Risk the properties. So yeah, the other was taking the energy from people that are my mentors, you know, and taking their encouragement, words of, words of wisdom. And my business partners were really supportive. You know, I had them come on as a guest speaker. So my first webinar I did, I was like, you know, I don't have any of this asset management experience. Let me bring somebody in that's going to add to my audience. Yeah, yeah.

That having that team component is so critical because you know, if you're, if you're, if you're trying to raise money and run a property by yourself, man, you're just, that's tough. That's, that's a, that's a tough proposition because there's so much, there's so much that you need to know and have experience in. But like you said, you brought in people for asset, you had no experience asset management. You brought in people who were experts in asset management. You're able to, to, to pool your guys knowledge in order to perform at a high level. And I remember thinking back to the first time I reached out to my friends and family about, about multifamily because I believe in it so hard wholeheartedly. We've invested as a family and you know, I can speak for, I can speak for Steve when I say this, and I say it for myself for sure is my reputation is the most important thing. And so I want to make sure that you know that that trust that people put in me is always maintained, is always moving up. Right. And so I was, I remember my first time suggesting, yeah, this is a great investment potentially for you to one of my, my friends and, and putting my reputation on the line there. But, but also to your. I think you brought up a great point is part of your role is educating investors so that they know more about what they're getting invested in and they have a better aptitude to understand if any particular investment is good for them, whether or not it's with you or not. Is this one good? Is the next one good? What, what is, what's the tenets of multifamily and how does it apply to my situation?

Yeah, and I mean just this last Summer, I did an eight week webinar series. So the first, you know, when I first got started, it was more of like introduction to multifamily and teaching people about the, you know, the basics. And then as my experience grew, I did an eight week webinar series on many different topics. And we recorded those, but one of them was around diversification. And I showed a pie chart not with the dollar amounts, but with the percentages of our asset allocation. Right. And I think that's super important. I think for me, I'm never going to say go 100% in multifamily because we're 30% multifamily. We're not 100% multifamily. I want to increase that sum, but I also have a threshold that I'm not going to go above because I know one every asset class has its time and there's going to be asset classes that are going to grow in different economic seasons and economic environments. And I want to have a diversified portfolio beyond just multifamily. I really love multicam. I mean, we have 2078 doors as an LP, we have 651 doors as a GP and growing. And that cash flow component and depreciation component is amazing. And I want to make sure people are really educated and knowledgeable and create a diversified portfolio. Am I a financial planner, you know, investment advisor, registered investment advisor, or any of those things? No, I'm not. And I make that very clear to them. I say use the professionals in your life. You know, get a very good CPA and lawyer that understands these things. Get your financial planner, a registered investment advisor, to help you build out that overall plan that obviously meets your needs and your goals and your stage of life and all of those things that I think many of the listeners probably know. But I reinforce that because there are a lot of people that were like me that were just kind of heads down working. They hadn't built out the knowledge and expertise. I don't want to overwhelm them. I don't, you know, that's a little bit of what I need to work on better. As an engineer, I like to explain everything. I work with a lot of engineers, so they want to know all the little details. So, so I'm working to give broad overview of things, but also where people want to dive deep, they can, and I encourage that over time. The other thing I would say working with investors, if you're, if you're new to working with investors, the energy that I like to bring is I'm just a stage in their progression of their knowledge and education. And you know, I have lots of investors that the first deal we did, they weren't at the right time. It was either there was, you know, personal circumstances, their finances, their education, their comfort level with me or with the team wasn't. And I just encourage people, that's great, that's wonderful. You're exactly where you need to be. Let's keep talking. So you build your education and down the road you might have an opportunity that works well for you. So I really encourage that with all investors, just continually build that knowledge and before you know it, I've got investors now that know everything about multifamily. They're asking me really detailed expert questions, which I love. It's amazing.

John, you were talking about getting the experts around the investor and one of the things we see in multifamily, that a lot of people think they can be a gp. A lot of people come out of a situation and go, I'm going to be a gp. And what we do at Skyline, Skyline Point is you're as a gp, you are running a business. It's not just a nice little investment, you're actually running a business. And I think that's when some of the things that GPs when they start out and that's why it's critical, like when you started out, you pick the right GPS that are running a business. This is not just buying a stock. If you're a gp, you're running the business, have to understand all aspects of it, whether it's marketing, engineering, rehab, finance, management, EQ I, iq, all those things. And how did you feel when you went, started being a gp? How did you make that transition? And you had a lot of that in your experience. But what advice could you give people that want to be a gp?

Yeah, I think, you know, it's this balance. I love to encourage people to follow their passion and you know, passion without the right skills and knowledge can get you in trouble. Right. You gotta have a good balance there. Right. So, you know, I'm always going to encourage people to invest and follow us, follow their passion. And I had done a lot of business, you know, education over time. Like, like I said, I've been a leader at Amazon for almost eight, eight, nine years when I left and had, you know, gone from leading a team of five people to 110 and in between and building programs and, and, and, and repeatable processes and what we call at Amazon mechanisms. So you definitely have to invest in your education. You. I wouldn't Expect if you've got no business experience, you're, you know, it's, it's very unlikely you're going to jump into a deal as a GP and just be completely successful. Right. So one is find your partners to, you know, get educated on what is the business of apartments, you know, what is the business of multifamily. The reason I chose multifamily, I was really excited about it, was I come from that background of repeatable, like what Amazon calls mechanisms, what a lot of people would call processes inside of a business. And when I looked at multifamily, there's not, you know, a million knobs you can turn in multifamily, right. There's a limited set of things that if you focus on, really drive the results in multifamily. So one was understanding and learning what those things were. Two was really seeing people that had honed their craft, like you said, the business partners, right, that had honed their craft over 10 plus years and seeing when they run it. I think the biggest tell of a business owner is when you run into challenges. How do you deal with those challenges, right? How do you tackle them? And I think a key thing for me is communication. Like you have to really look at your business partners, how well do they communicate and how do you test that communication? How do you ask? That's why I say, when I went along as an LP and I started to get to know them as gps, I asked them a lot of questions and more importantly, I looked at the questions they asked to try to see. Because for me, the key aspect of a business owner is not so much what you're saying or as a leader, not so much what you're telling everybody, but the questions you're asking and the energy you bring to that management style. Because the more questions you ask, the more you get your team to open up and you get access to the real data. Really what's going on on the ground, how are things going, the more informed you are to make good business decisions. So it's a combination of those things. Unfortunately, I'd love to say just do these things and you'll be a successful business owner. But we all know it takes time, time to build up that acumen and it's just investment in yourself.

It's not that linear.

Absolutely. John, you were talking about the challenges that every business has. And if you're in multifamily in the last couple years, things change quite rapidly. What challenges have you had since the time you started until today? What are you seeing and how are you overcoming those?

Yeah, well, again, I'd love to say I was a genius, but some of it is the timing in the luck. And I was very cognizant from my experience at those finance trips listening to leaders like Ray Dalio and Paul Tudor Jones and JP Diamond, Jamie Dimon and other leaders that, I mean, we're in a room of 400 people listening for six days to 20amazing experts from around the world. So I did get a lot of education in inflation and in interest rates and the way the Fed works and the way the economy works. If, if you have never seen this YouTube video, I highly recommend it by Ray Dalio. It's called how the Economic Machine Works. I recommend that to people that are brand new to investing. It's amazing resource in 20 minutes. It, it really helps people understand how this thing we have called the economy functions. Right.

Yeah.

And, and so, yeah, like with the last few years, you know, we came in and the GP deal, as I did, I was really concerned about inflation and the interest rates and so we did fixed rate debt, you know, so first off, for, for all of our GP deals, they're all fixed rate debt. They're all, you know, a healthy rehab budget, not, you know, spending, let's say eight to $10,000 a door. So again, that part of that goes through the experience of my business partners. You know, they do a lot of the asset acquisition. I'm still learning and doing, you know, analysis of properties, but I live in California and they have people on the ground working with the brokers. Right. So I'm not going to all of a sudden jump in and expect day one to have built up all of those relationships with the brokers in those markets. But really looking at the business plan and saying, where are we de risking this business plan? What are we assuming the exit cap rate is going to be on this property? And is that too aggressive? Right. Or is it in line with things changing? What are we doing on the debt side? Who do we have as the property manager and really what's the capital improvement project look like? And how confident are we in the dollars we've set aside and with the due diligence and the contractors and everybody that's come and give us bids that we're going to be able to execute on that? And so for the three GP deals that I've done, those are the criteria right now. We may leave some returns on the table compared to other riskier operators that are doing, you know, bridge debt in some of those cases. But for me that goes back to that ethos of educate. I'm in it for the long term and I want to make sure that I'm de risking my investors capital as much as possible. So in this environment, that's the, the, the, the, you know, the tack we took on the LP side. I'm a little bit more risky. I have some, you know, deals that have bridge debt and they're going to be due in a year from now. So we'll, you know, we'll see what happens with those. I had one deal that I had to put in 10% capital call, you know, so not everything is rosy, but those were my LP deals and I knew the risk going in and there was rewards as well from bonus depreciation and other things with our tax situation. But you know, we're in 11 different deals in seven different markets with multiple different teams, you know, so again, a lot of that is in the concentration risk, reducing that and, and just working with really good operators. Right. That's another way to really de risk operators that are very strong on asset management.

Do you, are there any locations southeast, southwest, south that you try to stick in or is there just one place you're concentrated in?

Yeah, so our LP deals are in Texas, Houston, San Antonio and the Dallas Fort Worth, you know, greater metro area. So some submarkets, Abilene, Fort Worth, Garland, you know, Dallas. The other place I'm, I'm really big on is Nashville. You know, I, I think Nashville is going to be a really strong market in the future. Part of that is just seeing my old employer building. You know, I see that, I see the, you know, I saw the, the, the cards on the table already. Even when I worked at Amazon, I had employees in the Nashville area. No proprietary, I had no insight into proprietary information of any kind. But I just, I just saw like a buildup of employees, you know, being hired in Nashville. So Oracle being there, you know, Amazon, you know, other tech companies kind of going to that. No tax, you know, no state income tax, you know, state and good indicators of economic growth and population trends. And where would I want to live? Where would the people that I, you know, live around here in California? What do I hear? And some of that's anecdotal, but some of it is also looking at the metrics of like the net loss of population from California. Where are those people moving? And it's those states. Right. And so yeah, that, that's where we have both our GP and our LP positions is, is Tennessee and Texas.

You had, you had mentioned that There, there's a deal that you had where you'd put 10% more in for the capital call. And we, we, you know, we've heard this for months. There's going to be more capital calls for more deals, especially if they've got bridge debt. How did you, as an lp, so take off your GP hat as an lp, how did you handle that? Did that, did it make sense? Were you okay with it? Did it irritate you? Like, walk me through, as a lp, what was your take on the capital call? And you don't give any details? I don't, you know, we don't want to out anybody. But just as an investor, how. What was your perception?

Yeah, I would say probably the first 30 seconds to admit it, I was irritated. But again, like, I serious, like my wife and I have trained us, trained ourselves through doing all of this, you know, growth work and being very aware of our psychology is I could sit here and get frustrated and angry and all this kind of stuff about it, but the reality is that's the situation that's going on and I've got a really easy decision. Do I want to put in the.

Capital.

And maintain my, you know, I get diluted and maintain my equity position. Right. Or not? And that comes down to, you know, one. How much was it? It wasn't a significant amount in this case. You know, it was a relatively small LP position compared to our other positions. So putting in 10% wasn't a major, you know, concern. I listened to my mentor and he said, you know, if you can always put in for a capital call. Right. As, as long as you see a realistic business plan.

Yeah.

You know, you don't want to put a ton of money into a sinking ship that's clearly sinking. Right. So you got to do that analysis and understand the other thing was this, this deal there was a large private equity partner and it was a much larger deal than compared to my relative contribution. So I know there's a lot more on the line for the GP team to lose than for me as a limited partner in this case and as the private equity partner, which was the lion's stake of, of the equity in this deal. So I was also confident that they're not going to let the deal just completely go back to the bank. Yeah, they're going to work out something and I might as well take the risk of putting in that extra capital, make sure my equity position is not diluted.

John, you hear about the capital calls and that's kind of been the talk. If you're if you're reading anything in the newspaper, if you're talking about any of the REITs, anybody, anything in, in the real estate business, your capital call was 10%. Have you heard what, as your peers in the industry, what were they seeing or what are they seeing and, and the percent of their investment for capital calls?

Yeah, I mean, I don't, it would all be anecdotal. You know, Steve, I've, I've have other general partner friends that are going through this, you know, situation and I know there's larger capital calls. I can't put a particular number, you know, on it, but at the end of the day I'd say, you know, the properties. And maybe this is part of the criteria to look at. Like when you say, is the property healthy? Right? It's, is it being well run? Are they on target for the business plan and the rehab plan? What does the leasing look like relative to Performa? What's, you know, obviously the vacancy numbers, what's the debt timing? And I, I think a lot of that is just tied to, you know, when that capital call, sorry, when, when that rate cap comes due, if it's a variable rate debt, which is generally where most, most of these capital callers are coming from because it's bridge debt and there's variable rate relative to their loan and there's a cap rate that's coming due at some point in the future. I'd say the good operators are clearly communicating to their LPs and they're taking action. Like I have one that I'm in this property is there's two properties in the investment, so it's a, you know, double property investment. One of them's bridge debt and one of them's a fixed rate loan. On the bridge debt loan there they started escrowing for themselves without the, you know, anybody requiring it, you know, $40,000 a month, right. To be able to cover that new rate gap that they'd have to buy when the current one expires. You know, do I love that as an lp? No, I'm not getting cash flow from that property. But what I love is the operators are doing the right thing and they're clearly communicating and they're giving updates. They did a one year webinar on the anniversary of purchasing the property and gave an update to everyone, which I think is an amazing best practice. So for me it's like, who are the gps that are communicating, what risk are they communicating in, what action are they taking to mitigate whatever the situation is? And in those cases, yeah. I'm really excited to be a part of that team because I know there's going to be ups and downs. Not everything is going to be a straight line, but I want to see how they react in these difficult situations and what action they take.

I kicked us off with a question that led us down a rabbit hole. So I'm going to bring us back around to your transition from Amazon to real estate investor. And it's really two part, but it's, it's, we've talked about fear. Fear of going from an LP to a gp, a limited partner, where there's really no risk out except for, you know, of your principal right. To a gp, where there's, you're taking responsibility for this asset and its performance.

Yeah.

Can you walk us through your fear if there was any of going from I've never invested in multifamily or even in real estate to I'm making my first investment into real estate. What was that process like for you? What was the fear? How'd you overcome it?

Yeah, the, the first investment we made, I started off small. You know, I, I, I used it as a proving ground, a testing ground. I mean, heck, like, I'm sure a lot of the people, it's their first time doing an investment, they jump on one of these webinars and it's like 30 or 45 minutes later, they're like, what just happened? I mean, that's how I felt.

Total data overflow, you know.

So I watched the recording and I got curious where I felt overloaded, right where I felt confused. I was like, okay, this is another thing my wife and I have trained ourselves. Whenever there's confusion, aha, there's an opportunity for like a massive breakthrough, for something new to change. Because that's, you know, if we're just sitting here in life and we're not fearful, we're not confused, nothing's going to change. The only place that change occurs is when you're fearful and you're confused and you just keep going and you take action, you learn more and you, you keep going. So for that first one, it was start small. Don't get like, don't, you know, don't all of a sudden do a half a million dollar, you know, or a million dollar investment in my first property. Right.

Not advised.

We're not advised that. I don't advise my investors to do that. Now I do have some, I have some investors that have done larger investments, but they are also a very, very sophisticated investor. 30 plus years, they're already invested in private assets, you know, so it's all.

Business owners or something like that.

Business owners, you know, serial CEO right. In Silicon Valley companies. So, you know, it's a, you got to calibrate it to what stage of life you're in and what expertise you have. But I think it's good advice to just get started small, take action and where you're confused, that's a good sign. When you're fearful, that's a good sign. And just learn more.

Yeah, I think to add to that is finding great partners which you've already touched on, but find partners that you like, you trust and have a great track record of success. And you know, I can't remember who told, I think it might have been Neil Bauer told us that you want to look at people who, who point out their failures too. Like, hey, we, we projected, we double your income in five years and we came in just below that. And here's why and here's how we're protecting our future investments because of what we learned from that. So, you know, anybody who shows you all their wins but doesn't show you their failures is. I'm not. Yeah, yeah, I'd say, I'd say, you know, ask a little, couple more follow up questions to say where, where have you failed? What'd you learn? But choosing the right partners and knowing they've got a great track record, you know, if they're, if they're investing in a class A asset, but they've only ever done class C. I'm not saying they're going to fail, but you know, there's, you know, you probably want to, for your first investment or your early investments, choose somebody who's, who sticks to C's or sticks to A's. And you know, they can, they know they're different, they're completely different assets. You want, they're, they're going to, they're going to, there's going to be some learnings along the way, but those are some pretty good places to start.

Yeah. And I mean that all comes down to risk adjusted returns. Kind of what you're talking about. That's what I talked about in that diversification webinar is there's a lot of different dimensions when you evaluate risk in an investment and get educated on those liquidity and the percentage of your overall equity, your staying power to remain in deals, you know, the type of asset like you're talking about the, you know, the other factors. And I mean one thing I love about multifamily is Just the foundation of the business model. Right. It's repeatable, it's understandable, it's something that's proven and we just don't have the supply of housing that we need in this country. And that's not going to change in the future. So there's a lot of good. This is one thing I'd say as we wrap up is like I learned from Jeff Bezos and being at Amazon for so long. Jeff's one, you know, a key thing that he says he's been a luminary in a lot of different areas, but one key thing that stuck for me was you build a business on the things that don't change and you just maniacally focus on those things that are not going to change. And so for like Amazon's business, that was three criteria. It was customers are always going to want lower price, customers are always going to want more selection, and customers are always going to want to have it delivered to their, their residents as quickly as possible. So you build a business on the things that aren't going to change and you just focus on optimize, optimize, optimize in those areas.

That's really good. Yeah, I, I want to, we, we have a speed round. We always do and we'll get to it. But I want to fall. I want to finish with a question that you had said that you really invested in your education and you talked about going to Tony Robbins and you talked about some rock and a couple of the conferences. But you also said you jumped into an. And read as lot, as much as you could. Were there any books that really changed the way you think and how you approach this transition in your Life, going from W2 working at Amazon to more entrepreneurial into real estate? Were there maybe two or three books that you'd recommend for listeners that really helped you out?

Yeah, I think the first book I read for real estate was Millionaire Real Estate Investor. It's kind of a classic and oldie, but it could, but it's, it was just like the foundations of what. Why is real estate a powerful investment vehicle and frankly, like no other investment vehicle. Yeah, you know, there really is no other investment vehicle like real estate. That was the insight I got from that book.

Right.

Because as being a newbie, you know, I didn't know a lot of those things. So that was a really powerful book. Obviously Rich Dad, Poor dad. Again, a classic book, but I think for a mindset shift from the one I was making, if anybody has not read that book and isn't Where I was sitting as a W2 employee, you're just blind to those facts, you know, and of, you know, employee, self employed, business owner, investor. Right. And the cash flow quadrant. We play the cash flow quadrant game with our kids now because it's like we want our kids to get that mindset as much as possible.

So. Good.

Yeah, yeah. And I'm going to take. I'm actually going to take it to my son's local high school. He's at a private Catholic high school. We're going to run a workshop with as many teens as possible to play that game and then talk through the insights and get them, you know, kind of starting to change their mindset. The third book overall, again, I'm. I come from. I'm heavily involved in the Tony Robbins role. He's a man of just amazing heart and completely changed the direction of our lives. So I can't give enough gratitude to him. He wrote a book called Money Master the Game where he interviewed, I think it was 50 of the most amazing financial experts in the world and took all of their knowledge and condensed it down into one book. And so from just like a really deep dive on investing, Money Master the Game is very powerful.

That's great. Well, let's head into. Because we're about to wrap up. Let's head into the speed round. It's quick questions, quick answers. This just allows listeners to get to know you just a little bit better. But first question, and this is a. We've kind of answered this, but you might have a different answer. What's one book that. That's had a massive impact on you lately?

I wouldn't. I wouldn't necessarily was lately, but let's say in the last two years, we've become a lot more. I was never a spiritual person. I didn't grow up with religion. But that's been a part that's really changed in our life as well. And there's this one book by Michael Singer called the Untethered Soul. It's a really powerful book. I recommend everybody read that, even if you're. Again, if you've had no religion or spirituality in your life. Made a really big impact.

Impact on me.

What's one piece of real estate advice you give to others?

Yeah, just get educated. Right. And I would say a corollary to that because again, I talked to so many people and they're like, oh, I'm buying this property in Portugal, or my daughter's going to Berkeley and we're going to buy this house. And where people are Going to live there with her. And I just, like so many people don't get educated and actually build a performa and an analysis, a financial model of what that investment would look like. So get educated and build a detailed model of actually how that could play out.

What's one thing in life, business or real estate that's got you really excited?

Yeah, I think it's just being a father right now. We got three, almost, almost three teenage boys. We've got 17, 14 and 12. So I'm just, you know, it's three boys at home. We're doing a lot of fun stuff. Getting into real estate and building passive income has enabled us to work from home and be able to take trips when other people don't. That's actually another, like, it's funny wealth building when you can go and get the lower cost airfare, the lower cost hotel. Like you are also optimizing your expenses. And so I just, I'm excited to travel. We're going to Europe in the summer with the boys and it's their first trip to Europe. So I'm really excited.

I love that.

That's great.

I'm breaking the rules because I'm. It's not speed round anymore because I'm. I should never talk. You should never answer your answer. We had a, we had a guest on last week, Brian o', Neill, and we talked about. Not all people don't consider that financial freedom through passive income also brings time freedom, it brings choice freedom. And so to your point, you get to spend this, this extra time with your kids that most people your age and their age don't get to have. Most people don't get to take their family to Europe. And so it's just a huge benefit of passive income through real estate. Last question, then we'll wrap up. Is as you head west and heading west in this proverbial example is as you head west in life. You know, you started Amazon, you moved into real estate investing. What does the destination look like for you as you head west?

Yeah, I mean, my wife and I are just about making, you know, big impact through the relationships we have with others and paying that forward from everything. Like I said, Tony Robbins being our number one mentor is just helping other people as they go through life make the changes that are going to really make them fulfilled. And so that's both what me and my wife do. We do it in different ways. She's a feminine movement instructor and a life coach and a relationship coach. And I'm helping on the money mindset side so we're just out to kind of expand that ripple of impact and help other people change their mindset.

I love that.

That's great.

If people want to get connected with you, if they want to listen to you or even your wife, where could they find you?

Yeah. So the company that I have for real estate investing is Flatirons Equity. And that's just we. You see the. The picture behind me here on the wall. We both went to the University of Colorado in Boulder. So Flatirons Equity is. And you can go to flatironsequity.com to find us. And my email is John at Flatirons Equity. And my wife has a website called Blissful Femme, and that's the work she does with women on relationship coaching and the retreat she does. So, yeah, that's the best places. We're on LinkedIn. Like I said, I'm on LinkedIn. So you can just find me John Reeve and was at Amazon previously and now real estate investor. Probably not a lot of hits that match those feelings.

Love it. Well, John, thank you so much for joining us today on the podcast. It was an absolute pleasure to have you.

I appreciate both you, Jake and Steve. Excited to have partnered with you in the past and do more partnering in the future.

John, thanks for being on.