Ep 51: Why real estate should be the end goal of every entrepreneur

I want to answer your questions. Open up your phone, record a voice memo, give me your name and location, and ask a question you have about real estate, operations, debt, capital raising, or anything you’d like. Email it to [email protected], and I’ll start taking questions and answering them on the show.

I have three kids now–a 4-year-old boy, a 2-year-old boy, and a newborn girl. One thing I’ve noticed in life is that it’s not about how talented or intelligent you are, it’s about how confident you are. So every night I tell my boys what I love about them, giving them praise and compliments, and it’s become one of the favorite times for the kids. I highly recommend giving this a shot if you have children.

This episode is from my other podcast, Sweaty Startup, which is all about small business and entrepreneurship. So many people think of real estate as passive income, but operations is the key to success, and you can learn about operations through small business. So I’m going to start cross-posting some episodes between the podcasts here because there is a lot of overlap.

Business is about momentum, I always talk about how where you start will look nothing like where you end. I started 9 years ago trading my time for money and carrying boxes up and down stairs, now I buy and build and develop millions of dollars of self-storage facilities. 

Service businesses are complicated; you need to be somewhere at a certain time, managing logistics and risk. We operated one of the most logistically challenging businesses I could think of with student storage and knew that as soon as we started making real money we’d pivot to real estate.

You may start a cleaning company or roofing company or be a contractor, but you should make real estate part of your 5-10 year plan. Nothing is ever an emergency in real estate, it has a more passive nature, and provides huge tax advantages.

There are niche areas of real estate that people don’t even realize exist. I’m in a small subset of self-service, I buy smaller facilities in rural areas and operate them remotely. I don’t go near major markets. But there are medical buildings, offices, industrial real estate, and other classes beyond residential, and a lot of small businesses can lead to owning real estate.

Real estate is special because of its tax advantages. If you run a real estate company you get to take advantage of depreciation, which massively decreases taxes on your cash flow. You can write off interest expense, even though that’s based on what the bank lent you. And with bonus depreciation, you can sometimes write off up to 30% in year 1, which at scale can lead you to pay almost nothing in taxes.

Compared to the service industry, real estate is much more passive and low-stress. There are no emergencies, you don’t need to go anywhere, and our customer service team answers the phone only to deal with minor problems.

If you pivot from small business to real estate operations, you’ll have the operational knowledge that can give you a competitive advantage. My competitive advantage is remote operations, which means we can make the same amount of money but spend less than our competitors. In our facility in Ithaca, NY we spend $3K/year in on-site labor while the guy across the street from us spends $85K/year in payroll for a full-time manager. This makes a huge difference in driving operating income.

You’ll need to tie the experience of running a small business with the cash you grow from your small business. Most people want to get into real estate with too little cash, and I always say to go make $500K first and that’s how you get into real estate. You can make real money through small business entrepreneurship, and then unlock real wealth and power by using that to build a real estate portfolio.

P.S. If now is the time to start your own journey, the real estate community is for you. I weigh in on almost every post, and there are a lot of people smarter and more accomplished than me.

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About Me

I started the Sweaty Startup in December of 2018 because I believe the Shark Tank and Tech Crunch culture is ruining the real spirit of low-risk entrepreneurship.