Robert Leonard (03:29):

Yeah, I’ll have to check it out. I love books. I love reading. I actually have decent size collection. I have 300 books in my personal little library and I wrote my own book as well with Simon & Schuster. Definitely a big book fan, but I often find myself kind of going back and forth between reading and doing. If I have an hour to spend, I think to myself, I probably spend five minutes, 10 minutes of it thinking, “All right, do I want to read for this hour? Or do I want to open up my computer and actually get some work done?” How often are you reading and how do you balance a dynamic like this?

Brandon Blum (04:02):

I think that’s very different based on what someone’s objectives are. I think that when you’re starting out, I think that time is harder to get. And over time as your business grows, if you can staff your company efficiently and build the right processes, you can buy more time. And then success looks like, how can I put the right people in the right seats in the right place? And how do I acquire more information so that I can improve strategies to move my business life, et cetera forward? And you can buy more time. And you can work smarter, not harder.

Brandon Blum (04:36):

Sort of a vague answer to your question. But I think that the real answer, the practical answer to your question is, what are your goals? What are your goals and how do you measure it? And is your goal to flip a house and what is your knowledge base to get there? And what knowledge do you need to get there and what resources do you need, and what are you missing to get to that goal? That’s kind of how you want to do it. And I think that it’s really important to not always be in the hamster wheel of the doing. And always, always be setting out a certain amount of time to be focused on learning subjects that you think would relate to things that you want to learn, understand, whatever.

Brandon Blum (05:13):

I don’t think reading has to be as vague as people make it. My view is I like to be very specific. I like to read things that apply to, number one things I’m very interested in. And I like to find things that I think that I could be good at or just sort read and try to get through my blind spots. I don’t think there’s a formula at all that relates to how much time you should be spent reading versus doing during the day.

Brandon Blum (05:38):

I think that you have to break down what your income goals are. And you have to build a plan to get there. And your plan, reading could actually be part of your plan. What are you reading and how much time are you spending learning? So you’re not in the business, you’re working on the business for example. And how much time you doing that. And then what are the things you don’t know that you need to know? I think that’s a really simple way to put it. It’s like, what don’t you know, and what do you need to know to move your life or business forward, and kind of write those things down, and say, “I’m going to spend an hour a day or whatever, reading and learning those things, so that I can continue to improve the do.”

Brandon Blum (06:12):

Because I think what people get caught up in many times is they’re just doing, but there’s just more efficient ways to do things. And just because you’re working hard doesn’t mean you’re working intelligently. So the goal with reading is really, how can I constantly improve so that I can work more efficiently and effectively? That’s really what you’re doing.

Robert Leonard (06:33):

What have been some of the most impactful books that you’ve read?

Brandon Blum (06:37):

Oh man, I’ve read so many, I’ve read so many books. With the Internet I don’t read as many books as I used to. And I’m more, when I do read a book I’m more focused on what content I’m reading throughout the book. Because the Internet’s just so robust now with information between what you can find on Twitter, on YouTube, on Google. I mean, you can really, it’s just incredible that if you’re resourceful you can learn anything and really reach out to anyone. It’s an amazing time in that way, especially to be an entrepreneur. You really just have all resources at your fingertips, no matter where you’re at, as long as you have an internet connection. And you really do, the only limiting factor for you could be resourcefulness. That said, few great books, Ray Dalio, Principles. Really, really unbelievable book, I think as a recent that I read. It really outlines his journey of successes and failures and the principles that he personally created to eliminate more failures as he moved forward and built one of the biggest hedge funds in the world.

Brandon Blum (07:33):

And it was really a unique book and everyone can build different principles based on what their goals are and what their personal life experiences are. But it really helps you really think through, “What did I really learn from this? I mean, how do I turn this failure into more success?” And that’s really where the learning is. The learning’s generally not in the successes, the learning’s always into failures. And every failure that you learn and throw yourself into, that’s just really how you propel yourself. That’s one great lesson. And figuring out how to turn failure into a positive and not let it break you and let growth happen from that. Not just personally, but both professionally. I mean, you only go down when you have to start from scratch and whatever. I mean, there’s just ways to mitigate total loss, but allow yourself to fail and learn. And that’s really what makes that book great.

Brandon Blum (08:19):

Another one is Naval Ravikant, his Almanack. Unbelievable book. Really breaks down personal and professional. What’s important in your life. I think it’s really a good book in the sense that so many of these books are so business focused. And this really ties business and personal together. Because that’s really essentially what it is. I mean, a business is nothing more than an idea, a strategy and a group of people trying to execute something. That’s what a business is. So there really is so much personal tied into it. So it’s not just, “Hey, black and white, do X and X and make money.” It’s just a byproduct of what you’re trying to create and bring to society. By not just being so business focused only, and also being focused on tying business and personal together. Just thought it was an incredible read about what’s important to you in life, how you want to live your life. What really are your goals really based on what you might think they are? Is your goal really to make X amount of money? Well, if it is, why? What does that get you to? What do you achieve once you get that much money?

Brandon Blum (09:16):

And then two, he really breaks down the ways in which to create wealth in a really simple way I think that anyone can really understand. The ways to utilize leverage, whether it be technology leverage, human leverage, capital leverage in order to get a specific result. Really, really, really good book.

Brandon Blum (09:34):

Again, it’s hard for me to answer your question too, because really depends on what subject. I’ve read books in a lot of different varieties of subjects. If you’re talking about business, there’s real estate books, there’s best ones, history books. I mean, really depends on what somebody really wants to learn.

Robert Leonard (09:49):

I have both of those books behind me on my bookshelf. I have Principles and Naval’s Almanack. I think Naval’s Almanack might be my favorite book of all time. I think-

Brandon Blum (09:58):

It’s amazing.

Robert Leonard (09:59):

Yeah, it’s really, really good. I think it is definitely my top three, if not number one.

Brandon Blum (10:04):

What is your number one?

Robert Leonard (10:06):

I think I’d say Naval. I think I would say that’s number one.

Brandon Blum (10:08):

What would you say is number two?

Robert Leonard (10:10):

I have to go with, my background before I got into real estate was in stock investing. I was just a disciple of Warren Buffet. Read every single thing I ever could from him, went out to Omaha. So I’d have to say Security Analysis, The Intelligent Investor, kind of his staple books of stock investing are definitely up there for me. This is also a good one for anybody that’s watching the video, that’s called, How to Get Rich, by Felix Dennis. Sam Parr, if you know who Sam Parr is, host of My First Million. He says this is his favorite book of all time. And I really like Sam. Him and I kind of see things a lot alike in business and kind of life. So I was like, “Oh, I should pick up that book.” I’m only a 100 pages in, but I’ve liked it so far. Another one I have next to me, I haven’t read it yet, but I’ve heard really great things is this, it’s called Company of One by Paul Jarvis. I’ve heard that that’s a really good book as well.

Brandon Blum (10:59):

I read that. That’s a good one.

Robert Leonard (11:00):

Yeah, I’ve heard that’s great. I like a lot of different books.

Brandon Blum (11:04):

Two books on business I thought were really, really useful. Mastering the Rockefeller Habits and Scaling Up by Verne Harnish. I think those have got to be some of the best business books that are out there on just how to build and run a company and create efficiency. And then how to scale the company once there’s product market fit or success or whatever, how do you grow it efficiently so that you’re able to work on the business first in the business. And really, really mapping that out in such a simple ways that are practical and can be implemented. It’s just, it’s really a great book. So I try to almost skim through them every couple years to make sure that still thinking through these things and applying a lot of these techniques.

Robert Leonard (11:44):

Yeah, I haven’t heard of that one, or those two, I’ll have to check them out. You’ve also said that you would trade focus over intelligence any day of the week. And I just mentioned in the reading example how I briefly, I kind of struggle with focus. And I’ve had some really great conversations about it. I still seem to struggle. I like to talk about it as much as I can because it’s probably my biggest problem in life, business, whatever it is, is focus. Why do you think focus is so important? And why would you choose focus over intelligence, and how do you focus?

Brandon Blum (12:16):

Number one, I said, that doesn’t mean I’m that good at it. I identify that it’s not my strength, to be clear. It hasn’t been, but I’ve recognized that because it hasn’t been my strength I’ve watched certain people with more focus actually achieve more than I have. And looking at them and saying, “I could have done what they did, but I just didn’t have the focus.” What I mean by that is a lot of times … Look, the word compounding gets thrown around a lot, but compounding relationships, compounding money, compounding everything is how you create great things in life. If you focus on one thing, for example, you might for a whole lifetime, just let’s say you’re an insurance salesman. And all you do is sell insurance and you do it for 75 years. By the time you’re 75, and if you’re doing this day in day out and you’re just focused on that. You’re just going to walk circles around someone that’s tried five to seven or 10 different things.

Brandon Blum (13:05):

Because every time you try something brand new and trying to rebuild this sort of circle of trust of people who can I trust in this environment. You have a learning curve you’re going to create failure in. And frankly, one of my personal downfalls that I’ve worked on over the years is I’ve enjoyed that process to a fault. Where I’m like, “I love this, this, I want to explore this.” Trying to see the perimeter of my capabilities and saying, “Could I take on this project? Could I do this?” And then kind of jumping in there and trying to do it, but that’s not necessarily the greatest way to wealth. It’s just not. That’s part of what Warren Buffet, as you mentioned, talks about a lot. Is just his inability, his ability to say no to a 1,000 things. What he means by that is focus. I mean, just think about the shiny, what is the expression, shiny objects syndrome, and you’re running around and there’s a million things and this guy goes, “What about this idea? This business idea.”

Brandon Blum (14:01):

And then if you’re a yes person, I mean, I’m a yes person. So for so long it’s like, “Yes, yes, let’s do that. Let’s get that done.” But it’s not necessarily a recipe for greatness. That’s what I mean by that. I mean, really focusing on something for a long sustained period of time is going to give you those compounding benefits. Whether it be relationships, finance, et cetera, that I think can really propel someone really in a great way. And it’s something that as I’ve gotten older, I’ve really become cognizant of. And that’s why I say I would trade some of, I think my creative talents, if the goal was just money making, I would trade some of those just to have more focus. If the goal was just to make the most money as an example.

Robert Leonard (14:41):

Have you found anything that helps with your focus at all?

Brandon Blum (14:44):

Honestly, it’s been something that’s really, really been tough for me. I think that the number one thing that I have found that has helped me change some of my inclination to jump into of shiny squirrel syndrome is staying in alignment with my passion. Making sure what I’m doing on a daily basis is enjoyable. And making sure that anything I’m working on has certain characteristics that I just would do for free. That’s really what you want to do. And sometimes you want to make the most money, you’re going to do it by doing what you want to do for free. Just as an example of that, a lot of my business right now has to do with finance in real estate. Which I enjoy and it’s very profitable, but a lot of what I’m actually been mapping out currently is I’m not doing a lot of sales right now, and I love sales.

Brandon Blum (15:33):

I live for it. I love it. I started my business on it. I love selling a good product and I’m not doing that at all currently because I have a more efficient way to make money with real estate and duplicating cash flow and compounding cashflow and compounding assets and things like that. And it’s fun, I enjoy it. But I’ve been thinking through that, right? I mean, is there a way, it’s something I’ve been working on actually with a business coach recently that we’ve been kind of brainstorming back and forth of like, could I allocate any time to certain things that I know I will enjoy and I don’t lose track of trying to continue to build wealth? But I also, it’s not the end all, be all. At the end we all end up in the same place. We can’t take our money with us. How much money do I really need to make, and why? And can I add things into the mix that I just enjoy, man? That I just like to do?

Brandon Blum (16:25):

And that’s how I think how you can get the most focus is making sure that you’re doing something that you actually want to do for the right reasons. And you’re not looking over the boat going, “I wish I was doing that.” And you’re just the more in alignment you can become. That’s the best way to get focus.

Robert Leonard (16:44):

No real estate agent or real estate sales in your future?

Brandon Blum (16:48):

Real estate agent or sales?

Robert Leonard (16:51):

Well, I mean a real estate agent would be a good combination of sales in real estate. You’d be able to do both your things.

Brandon Blum (16:57):

Doesn’t really make sense for me at this stage. My own operate real estate. And the problem for me and being a real estate, that kind of a sale would be that … And I’ll just frankly, would be-

Robert Leonard (17:08):

It’s not worth the money.

Brandon Blum (17:09):

Well, now worth the money is one piece. But if it’s taking money aside, if we’re just taking money aside from that and we take that completely out of the equation. I don’t like the concept of someone owning my time. That’s a huge value for me. And so with being a real estate agent gives X amount of people access to my time when they want my time to do X and X. And for me, that’s just not in alignment with how I have the vision for my life, which just makes that not the type of sale that would be interesting to me. So, if I was to do a type of sale, it would be something that I could continue to control my time and do the sales when I wanted to do those sales in the times that I created so that I could live the optimal life that I want to live. Not dictated by others. That’s the downside of that.

Brandon Blum (17:52):

Now that said, nothing wrong with being a real estate agent, I want to make that clear. And someone that might be in complete alignment with what somebody loves to do. And that’s great. I wouldn’t love that. And so that’s why I don’t do it. And that’s it, but there’s nothing wrong with that as a business at all, to be clear.

Robert Leonard (18:09):

You also recently tweeted about, I want to get into some of the real estate stuff. You said that the deal structure is a lot more important than the deal size. I don’t really hear much people, many people talking about their structure or any real deal structure on Twitter or even on podcast or anything. Really, it’s always about, how many units do you own? How many units is that property that you’re buying? It’s always unit count. It’s always size. So why do you think that deal structure is more important than size? And how can deal structures go wrong?

Brandon Blum (18:39):

Yeah, sometimes I’ll throw out sort of vague open ended sort of concepts. And then if people want to come in and ask questions, I’m happy to answer the questions. But as opposed to some people that are writing long, long page threads, I just don’t frankly have the time. But what I meant by that is people get really lost in unit count or things like that, as you said. And they get lost on … And ego actually comes really into play big time for people. But the reality is, it’s very similar to trying to grow, for example, a venture startup too fast or things like that. And you take on too much capital. For example, at the very beginning, you’re going to just give away more equity. It’s really that simple. So how you structure a deal, for example, assuming you’re using investors money, which generally is the case, especially for some period of time when you’re starting out. And most of the time forever, because real estate’s so capital intensive that to grow, it’s very difficult to grow maximum level without using outside capital.

Brandon Blum (19:35):

But my point was that people don’t pay attention to how they structure things and they just do what they read on Twitter or what they general do. “Okay, I’ll do a five, six preferred return. I’ll do a 70/30 waterfall.” Meaning investor gets 70% and then they do a investor gets to get their money back in three to four years. And for example, if there’s any change in interest rates on the refi, or they’re not able to recapture as much capital, for example, as they promised an investor or the timeline is extended beyond because construction takes longer than they expected, all those different things, you could completely eat up your promote or your profit on a deal very quickly. As opposed to intelligently structuring even a smaller deal where you have let’s say even more control or you don’t have so many investors potentially in a deal.

Brandon Blum (20:26):

One strategy to be clear is not better than the other at all. It really depends on what a business is trying to do. And if a business, if you’re trying to become Sam Zell or Barry Sternlich, you’re going to raise a lot of money and you’re going to buy a lot of assets. And your business plan is probably more around deploying the most money and getting a small percentage on a lot of capital. Versus a large percentage on a small deal. I probably make more money than a lot of these huge players in some cases per deal. But they could make money more as a company, but it really just depends on what it is that you want to do. And what lifestyle also are you trying to create along with the business?

Brandon Blum (21:04):

So that’s really what I mean, people just get lost in that and they want to do this huge apartment complex. But you could very easily give the whole thing away to investors. And you want to negotiate a deal too that really aligns you with the investor, but also gives you some wiggle room to have some things that could happen. Construction takes a little longer than expected. Things like that. My advice to structure is that you’re just not losing the whole pie if you don’t hit metrics exactly. And having an investor who’s understanding and align with those goals and understands that, “Listen, there’s some outside macroeconomic potential factors that are maybe out of control that have nothing to do with you as a real estate operator. If these things happen, this is how we’re going to handle it. And my participation in this transaction may look like X, but doesn’t necessarily mean it need to look like zero.”

Brandon Blum (21:54):

And just, those are the kind of structures you want to walk through and really think about, or talk to a structuring attorney about, or talk to a mentor about or things like that. To really think about that. Because that’s more important than the underlying asset in many cases.

Brandon Blum (22:06):

Because it doesn’t matter what the asset looks like, the size, small, what kind of asset. It’s time, the friend of the asset? Over time, is it getting better? Are rents increasing? And if you have investors and there’s some sort of dip or something potentially from a macro perspective, do you have a structure set up that it’s long term enough to still potentially be profitable for yourself on that investment? And those are the types of questions that someone’s building a real estate company for example, is really going to want to ask themselves and align their goals, their personal goals, and make sure their investors’ goals are aligned with that and the expectations are set up properly. Those are a lot of big mistakes I made younger.

Robert Leonard (22:48):

Let’s talk about those younger days. Today you’ve done over a $100 million dollars in real estate, nearly every asset class. But going back to when you were younger, when you were just getting started. How did you get your start in real estate? What was your first real estate deal like?

Brandon Blum (23:01):

The first real estate deal I ever did was this property in Rancho Peñasquitos, California in San Diego. And I just looked online. It was in crack slab. And so I didn’t really know anything about crack slabs or anything like that. But I knew at the time, because financing was so crazy I could buy the property with no money down. Because the mortgage industry was crazy back in 2005, so I knew I could finance it with no money. And really all I understood was, “Okay, how much could I fix the slab for? And what would the property be worth if there wasn’t this crack slab issue?” And it was really that simple in my head. I wasn’t sophisticated. I didn’t know much about it. And sometimes that’s about a really big lesson by the way. Sometimes keep it simple as the smartest thing you can do, especially in real estate people over complicate, especially my I’ve done it many times.

Brandon Blum (23:48):

But that was it. And actually, so what’s interesting and funny about it’s, because I was so ignorant and novice about everything. The fact that I thought so simple was actually why this first deal was successful. Because I didn’t think about anything else. I didn’t know anything about anything. Prices of rehabbing a kitchen. I didn’t know anything. I just knew I could buy it with no money down. And I just knew that it would be worth more if there was no foundation. And I looked at what properties that had similar square footage that didn’t have foundation in the neighborhood sold for. And I could see there was, I don’t remember the numbers at all, but just call it a $100,000, Delta saying, “Okay, there’s a $100,000 in profit with properties that don’t have foundation. Okay. Well, let me just get foundation people out there to go inspect the foundation and get the quotes and figure it out.” And I think if I can remember correctly, I discovered that I could get the foundation done for 25 or 30,000.

Brandon Blum (24:37):

So I was like, “This just seems like a no-brainer.” And that’s what happened and it was successful and I fixed the foundation and then I flipped it. And that was my first real estate deal.

Robert Leonard (24:47):

Was your plan always to become kind of, I’ll use this word mogul, but was like that always your focus to become a real estate mogul or was it more just like, “Hey, maybe if I do a couple flips or I get a couple rental five, six, seven rentals I’ll be financially free, or did you always plan on really becoming a real estate entrepreneur?

Brandon Blum (25:04):

I was never planning on anything at all actually. I got into real estate by accident. Because I called my neighbor because he moved into a wealthier, a nicer neighborhood than I was in when I was 18 and bored in the summer. And I called him and said, “Hey, let me go hang out in your office and try to see what you do.” That was how I got into real estate. I had no plans of doing it. And didn’t have any specific passion about real estate. Really it’s business. I kind of still feel that way to be honest. It’s really just, I like doing deals and I like some of the creativity that you can have around it. But that was never really the plan. And I never had ego around it. I think money came a lot into the factor. Because I think I really discovered, okay, money really buys you freedom.

Brandon Blum (25:46):

That was a big thing for me. And it still is. And it’s on my board today. I have the number one things if why I do what I do. Constantly checking in them every quarter saying, “Why am I doing this? And if am I doing this for the right reasons? And if I’m not, then I need to do something else.” And freedom was a huge part. Money making and cash flow made a lot of sense to me, that was the biggest thing. When I was young and ignorant about even what I was doing or what I was building. I didn’t know what I was being a mogul or I was trying to build an empire was nothing like the name on a building. It still isn’t like that. I don’t care at all about what anyone thinks about how many assets I had. None of that really matters to me at all.

Brandon Blum (26:20):

It’s still actually the same to me now. It’s how much cash flow can I create monthly? And there’s a certain network that gets tied to that. But really essentially what you really are after is monthly cash flow. And to this day and everything that I’ve read and looked into, I just don’t see another industry or business on earth that can give you the sustainable cash flow that real estate can. There is just nothing like it. There is no business. There is just not many. I mean, I don’t want to say anything ignorant, but there’s not many things that you could buy a property today and I could potentially pass it down for hundreds of years and it could still bring in income long after I’m gone. That is just really incredible.

Brandon Blum (27:01):

I mean, when you really think about that, my thought is I don’t want some business that … The world changes so fast. You get into a business that has lots of cash flow, but most businesses eventually go under, or they shift, or they pivot, or they change, or they’re just not as constant. And so is real estate and aggregating a lot of cash flow, it’s a lot of hard work and it’s a lot of time. But once you get cash flow, it’s pretty addicting because there’s nothing that beats that really when it comes to economics. I mean, can I pay my living expenses plus more with just monthly checks that come in the mail, with making sure you have the right management in place? There’s just nothing better than that.

Robert Leonard (27:41):

So you learned about it when you were 18. Did you go to college or did you just go right into real estate full time?

Brandon Blum (27:47):

I was going to community college. I wasn’t a very good student in high school, to be honest. And I was going to community college at the San Diego state or at Grossmont College. I was planning on transferring to SDSU. That was the plan. And then actually that led to my first venture. I identified with a partner who was a Sigma Pi brother out there, a housing shortage, a major housing shortage for students. And it’s a cool lesson, actually. I love this because people ask me what the biggest lessons of this was. Because it’s really interesting because at this time I knew nothing about real estate. I knew nothing about economics. I knew nothing about anything. I only knew one thing. And that one thing made this venture really successful. I knew what the students wanted exactly. Because I was one of them. I knew what streets they wanted to be on.

Brandon Blum (28:32):

I knew all the way down to what kind of houses the guys wanted to impress girls. I knew all of that. I knew they wanted jacuzzis and where and how big the backyards. I didn’t have to know anything about real estate. That’s a really cool maybe takeaway here, a lesson, is that was it. And so I just, everything else I was able to figure out. Okay, how does construction work? How do we get a permit to take this house and turn it from three bedrooms into seven bedrooms? How do we add pools? How do we get the right bank financing? How do we get investors? Everything else was just, how, how, how.

Brandon Blum (29:03):

But it was all centered around a really simple real estate concept. And actually that’s a really big note. I think if I give any cool tidbits out is that people get lost in what real estate is, but it’s really just a business. It’s really just, do people want your product? Do people want to be where you’re at, and are more people going to come there over time? That’s it. If you buy a shopping, you’re on a street and there you have a small shopping center and are more people moving into this area that are going to need to use your shopping center or is there reason why they’ll go somewhere else? And that alone is what dictates the success of your asset. That’s it? I mean, obviously there’s government subsidies and all these different things on a macro perspective that come in and might give you some tailwinds and help or hurt your asset in the short term. But over the long term, what do you own? What are you renting it for? And is that specific property going to be in higher demand tomorrow than it is today?

Brandon Blum (30:03):

And that’s what you want to know. I mean, that’s really what you’re solving for. And if you can solve for that and you keep your debt low, you’re going to make a lot of money in real estate. If you just understand those couple principles. Like, what’s going to do well here long term? And can you withstand any market fluctuations in the meantime and hang on? That’s it. Those are the two things. If you can get those two things right, everything else you’ll figure out, what bank to call, investor. I mean, everything else is just, will be figured out. Not rocket science.

Robert Leonard (30:33):

When you say low debt, what do you mean? Like low loan to value? And if so, what LTV do you go to? 65, 70, 50 lower?

Brandon Blum (30:41):

Look. There’s not a formula that just makes all the sense of the world. I think that if you want to use a quantifiable number, let’s say let’s try to stay under 70, 65% always. Preferably under 60, 65. And maybe you’re not juicing returns to the maximum and you’re there. But really that’s just a number to look at. What you want to look at is like stress tests. You want to say, “Look, I own an apartment building with a 100 units. What has to happen for me not to pay my debt?” So forget the 65% number. So we’ll use that as a basis. But after you figure out, “Okay, I’m at 65%.” Now there might be protections there, because if the market goes down, you have to sell. There might still be equity because it’s not likely to go down more than 35%. So from that aspect, that’s why that metric might matter.

Brandon Blum (31:27):

But really what matters more is, how many units can go vacant, and how much can the rent go down before you just cannot pay your mortgage? Is it 80% occupied? If it’s a 100 units, is it 80 units? Is it 70? Is it 60? How much can rent go down? They do go down or else it doesn’t just always go up all the time. Over time it does in a good area, but it might have down years. And that’s really what you want to be comfortable with and try to be conservative. And the point is you’re better off being conservative than trying to maximize returns. Because if you just stay in the game over time, you’re going to be rich. Not trying to make 30, 40% going bankrupt every seven or eight years. That’s not the way to winning in real estate. You’re better off making moderate returns, making investors happy, tailoring expectations and just not losing money. That’s it. And if you can do that, you’ve got a really good recipe. You’ve got a really good formula.

Robert Leonard (32:23):

You’ve been in a bunch of different asset classes, which ones have been your favorites and which ones have been kind of your least favorites?

Brandon Blum (32:29):

Number one, I think that people … There’s a lot of learning curve in every asset class. Statement one is you really got to get to know certain ones. So people might favorite industrial, for example, more than I do. Because they just might understand it better. I’ve got a friend who just is so unbelievably successful in industrial real estate. And I just don’t really understand it that well. He understands the shortages, the areas where transport needs to go and how close to city, how close to whatever warehouses and Amazon or whatever it is. He just understands all the things that make that real estate valuable and why he believes that will continue to be valuable over time. Whereas I don’t necessarily understand that. I really like housing and I’ve played around in all kinds of different asset classes. I’ve done commercial, retail, I’ve bought office buildings. I’ve even done an industrial building that I’ve leased to cannabis tenants. That I built one of the first cannabis campuses in California.

Brandon Blum (33:21):

And I’ve just done a lot of the variety. And what I love about housing is, look, the challenge with housing is it’s no secret. What I’m saying is just not a secret. Everyone knows that someone needs a place to live. It’s just the best asset class. It just really is in terms of long-term safety, but there’s risk-adjusted return associated with it. You’re not going to necessarily make the returns you would make maybe on another asset, which could have a higher level of risk. But look, I like housing and apartments a lot. I think that you can, with a lot of confidence, for example, I just think San Diego, just as one example will just be better and better over time. I’m sitting in Pacific Beach right now and I’m looking out the window and there’s a beautiful beach and people coming from all over the world and every year people make money they come here, because they just want to be here. And people find ways to get here and they find ways to leave other places.

Brandon Blum (34:12):

Housing and places where people are trying to leave, like Flint Michigan. Flint Michigan didn’t get any of the upside of this whole big market run up at all. Everyone wanted to leave the second … If you have any money, you live in Flint Michigan, you’re out. So housing’s not going to save you if you don’t have demand. But in San Diego, I just, show me anywhere in San Diego and people are going to want to come to this climate. I believe that, and I could be wrong. But I’m willing to bet on it. I’m willing to bet that people will always come and the population of San Diego will continue to increase, no matter what dumb politicians, because there’s plenty of them right now, come into power to make all kinds of crappy rules and regulations. At the end of the day, people are coming to this amazing city and they’re enjoying the sunshine of the beaches. It’s just, that to me is just something I’m willing to bet on for the rest of my life.

Robert Leonard (34:55):

That was going to be my next exact question was, you don’t mind investing in the California laws?

Brandon Blum (35:00):

Not at all. In fact, what California laws are you talking about specifically?

Robert Leonard (35:05):

Honestly, I’m not an expert on California law at all. I don’t invest there. I just kind of avoid there. I’ve been there a couple times as a vacationer or a traveler. But you always hear that California has really strict or poor laws for landlords. They’re really tenant friendly. They’re not great for real estate investors. So I’m just kind of that stigma around California.

Brandon Blum (35:25):

And all that’s true. But a couple notes on that, right? Back in 2008 I ventured to Texas and I thought it was really cool that the zoning was so lax because I could basically do whatever I wanted and not have much of a headache. That was a young man’s thought. But as I’ve gotten older, the tight regulations, for example, starting with zoning, really are to your benefit. Because there might be a high barrier entry and it might be hell for example to go through Coastal Commission, but you know how much value you’re creating once you get through. And you can have confidence that those laws and regulations have more durability when there is regulations.

Brandon Blum (35:58):

Number one, regulations just aren’t all bad, because if there’s a moat around your business or your real estate, meaning it has its sensibility and it can’t just change the next day or someone can’t just build whatever they want next door, because it’s just very difficult. It just makes your property more valuable. So, that’s number one.

Brandon Blum (36:16):

As far as taxes go, that’s a nightmare. But again, do whatever you want with the taxes and people find a way to come here. People leave and they yell and scream and then they come and they come to San Diego and they just go, “Ugh, I’ll pay these tax.” There’s just always going to be a demographic that’s willing to do that. Always in my view, because just it’s so it’s so amazing. So that’s one an. And two, with the respect to your question on tenants. I mean, yes, that’s true. Not landlord friendly. And it makes life more difficult, but it’s not impossible. You might take longer to evict tenants. It might be more expensive to evict tenants, but those are all things you can sort at least budget for. Say, listen, this might take two years to evict a tenant or so things like that, you can sort of say, listen, I’m creating enough value that it still makes sense.

Brandon Blum (37:06):

And there might be a bit of a headache associated with that. But they can’t legally say, Hey, there’s no eviction and no one has to pay rent forever. I mean COVID was a big problem. And that sort of exaggerated what you’re talking about. The reputation because California had pretty extreme stances and no one has to pay rent and it’s kind of like, “Hey, what the hell?” But that was an aberration. COVID was a true aberration. That’s not every day. And COVID created a very big excuse culture in my view. It enabled people to say, “Okay, we’re allowed to say no one has to pay rent.” It just gave these politicians ammo to just allow things that are just completely absurd, which an example would be, no one has to pay rent.

Brandon Blum (37:45):

I don’t subscribe to the future of real estate in California being where like, “No one has to pay rent.” It’s just a silly thing to think about. And just there will always be laws that people have to pay for the places they stay in. And eviction courts and things like that might be terrible, but there’s always going to be rules and regulations that people have to just pay for what they signed up for. It’s just ludicrous to think that this temporary excuse culture was going to last forever. And to be clear, I’m not saying any of it wasn’t warrantable and there wasn’t issues on landlord sides too. I mean it goes both ways. There had to be some sensibility for tenants and sensibility for landlords. It was a really tough thing during COVID to make sure that everyone was thought about and there was sensibility for both sides. It was very difficult.

Robert Leonard (38:28):

We’ve made it through COVID now for the most part. But now we have an interesting real estate market I’d say. A lot of inflation, a lot of other issues, a lot of people are worried about a market crash, et cetera. Interesting time to be investing. How are you approaching this market? Both from an interest rate perspective, inflation, are you buying deals? Are you worried about a crash? Are you holding tight and kind of waiting to see what happens? How are you navigating the waters right now?

Brandon Blum (38:54):

Every year I get older, I realize more and more how much the macro environment isn’t relevant if you’re in the game long term. And the reason why is because you have to focus on things you can predict. And really this is something we’ve all learned from Warren Buffett. Because he makes it really clear. Okay, here’s the best investor in the world that says, “He’s never once discussed with Charlie Munger.” He says this. He says, “Not once, we have never discussed macroeconomics.” That is, think about how crazy that is. How could they be deploying billions of dollars in all kinds of industries and not even had one discussion about what’s going on with Trump, or Biden, or this, or China coming in? And it’s like, how do you not have that as a factor?

Brandon Blum (39:38):

And then the way he breaks it down as … It took me so many years, frankly, I’m almost embarrassed for how long it’s taken me to really understand this. But the reality is, the reason why it doesn’t matter is because it’s an impossible game. So you got to choose what game you can play. What game you want to play. If you’re in the game of trying to predict macroeconomics, get out of here. Maybe Ray Dalio’s been the closest thing, but it’s just not realistic that you’re going to say, “Next year this is going to happen.” Okay? Listen, did I predict that COVID was going to almost double my asset value here in San Diego? And I was going to be able to get cash out refinances at 3%. No, I thought I was going to lose all. I thought we were totally up whatever. How could I have predicted that, right? And all of a sudden now we’re in this big inflationary environment, because the government came in and injected everything with this much capital. How was I supposed to predict every single bit of that?

Brandon Blum (40:29):

So the point I’m making is if you spend your time trying to do that, it’s just an impossible feat. So what you want to do is you want to focus on what you can control. And what you can control in any real estate environment is how much debt are you willing to put on a property and what your payment is, okay? That’s one, that’s in your control. Number two, what are you paying for a property? What kind of property are you buying? And is that property something that’s likely to have more people in it today or have a higher demand in the future. And again, even that’s not guaranteed, but here’s what you can get the closest to guarantee. I can’t guarantee in three years that the rents will go up by X in San Diego, I just can’t. Even though I think that they will. But there is no guarantee. They could code down for some period of time for some reason.

Brandon Blum (41:20):

But what I can bet on is that in 10 or 15 years they will be up. So, you want to set up your real estate structure with that in mind. That’s something I keep in mind. Now that said, it’s not an easy time right now. It really isn’t. I mean, if you were operating in 2009, I mean you were picking asset. If you had capital in 2009, you had the right money behind you. I mean, game over. You’re picking up assets for pennies on a dollar and they’re flying from banks and no one knows what’s going on and you’re buying. I mean, I couldn’t believe what was going on. And honestly, I did not capitalize in the way I even could have. It just drives me nuts now because what an opportunity, and I took it for granted, because I didn’t even realize how ridiculously good it was.

Brandon Blum (42:01):

Even though I took a lot of opportunity and I did very well off of it, but I could have just been way more intense at that time. But anyways, it’s tough right now because you’ve got this inflationary environment where asset prices in a lot of cases are artificially high because of injected capital and interest rates that have been artificially kept low. And there’s not a lot of pain from sellers yet. There’s like a lot of their interest rates are still locked in low. So you’ve got this environment where even as the interest rates have ticked up, making the returns tougher, the prices for the most part haven’t come down proportionately in a lot of cases. The guys, people that I know that are doing the best, like people that I look up to and mentors of mine really. They’re not really focused on any of that. They’re just focused on where there’s a big shortage where the demand is and how do they capitalize on that from sort of a microeconomic perspective.

Brandon Blum (42:55):

And how do they get to know these local markets in a really efficient way and how do they create relationships potentially locally with brokers, et cetera, to really be the people that get those opportunities. That’s the people that are making moves. They’re not sitting around thinking about timing. They’re thinking about what assets and how they want to play and they have focus on it.

Robert Leonard (43:15):

Who are those people that you look up to? Who are you mentoring? Who do you follow? Who do you like to learn from?

Brandon Blum (43:22):

I think that people that you don’t know, I mean, I think following Barry Sternlich, following Sam Zell, following Jonathan Gray of Blackstone, I mean, what they’re doing is just really blows your mind. So any opportunity you have to read about what they’re doing or what their thesis is or why they believe what they believe. I mean, they’re just on another planet and another level than everybody else frankly, they just are. So, that’s one. And I have close friends that I’ve built over the years, that many of which have had completely alternative real estate strategies and there’s really no competitive nature.

Brandon Blum (43:54):

I’ve got a friend, I’m not going to mention any names, out of respect obviously on this podcast. But for example, I’ve got a really good friend that has just done absolutely incredible with shopping centers. And I just learned a lot from him. I’ve got another friend that’s just absolutely doing millions and millions of square feet of industrial space. And I see the way he evaluates and how his company makes decisions. And how his capital is structured so that he doesn’t go down. Those are the things I’m doing.

Brandon Blum (44:23):

That’s a big one too. I mean, you should always get mentors. And what’s amazing is people are willing to help. I mean, in fact, someone reached out to me on Twitter actually recently. Scared to say this now, because I don’t want million people flooding my Twitter, but I don’t have unlimited time. But someone did reach out to me and just asked me to give them some basic tips, a job or whatever. And it’s funny how rare actually that happens. I get almost nothing now. I don’t get a lot of that. And I called him back and I talked to him for half an hour and I was happy to do it and I didn’t want anything in return. I was happy to just give good karma. And he did his research on me.

Brandon Blum (44:58):

That’s a good advice, by the way. It wasn’t ego for me, maybe a little bit, to be honest, but really liked that he did the research. He really knew my background. He didn’t just say, “Oh, you’re this guy on Twitter.” He’s like, “You have done X, X, X, and X. And I listened to your podcasts that you’ve been interviewed on and things like that.” These are the specific questions. That was what really got me to the table, to be honest, it wasn’t an obnoxious message of, “How do I get rich?” Or something stupid. It was like, “How do I do these things and why’d you do this?” And I was like, “That’s a great question. I’ll tell you, no one’s ever asked me that actually. I’ll tell you exactly why I did that.”

Brandon Blum (45:35):

So anyways, I don’t know if that’s helpful, but that’s a good one. Do the research on someone’s background in bio before you reach out and you can really get incredible mentorship. Don’t just approach them and say, “Mentor me.” Say, “Listen, you’ve done these things. It’s incredible. Back these days, here’s what I know about it. And here’s how I think you should approach something.”

Robert Leonard (45:53):

I have to say, you’re probably going to get a few messages from people. I’ve been told from other guests on the show that, even some who have been on a lot of podcasts, that my show is the one that they get the most interaction from with the audience. They get the most emails, DMs, whatever it is. Your Twitter might get flooded a little bit.

Brandon Blum (46:12):

Okay. Well, I’ll tell you one thing I would love, because one thing I’m trying to learn from this or personally is, I don’t really have the inclination to build any business around teaching or coaching or anything like that. It’s just not something that really turns my wheels. However, I see a lot of crappy education or get rich quick and all these different programs, and there are legitimate ones out there for sure. But there’s a lot of just total BS out there. And it bothers me a lot, right? If someone’s going to sign up for these stupid courses and get screwed. And then you watch the guy driving a Lamborghini because he sold some idiot a course. That really, really bothers me. I’ve worked so hard to get to where I’m at and that drives me crazy.

Brandon Blum (46:56):

I certainly at some point would like to do a better job, reaching more audiences at scale. In fact, that’s the reason why I’m on this podcast and I agreed to do this the first place. I don’t have any actual hope of achieving anything from this podcast or any outcome at all. It’s simply you asked me to do it. And I thought, “Why would I not take a little bit of time to give back to an audience that’s as respectful as yours?” I mean, you really built an awesome big audience. And so it enables me to do that and I’m happy to do it and it feels good to do that. And so I’m certainly open to that in the future I’d love to do more of that as I get older, how can I give back and do it at scale so that I don’t want any money from it or I don’t want nothing to do with it.

Brandon Blum (47:34):

I just love to give away for free what people are buying for. So it’s something I want to do. Just get rid of all the courses and shut everyone’s course down by just saying, “Look here, it’s free. Enjoy, do your thing.” So, that’s on my list. I just don’t know how to do that yet, but I’m open to marketers telling me how to do it. I’m open to it.

Robert Leonard (47:50):

Well, hey Brandon, I appreciate you taking valuable time out of your day to join me. As we wrap up the show, why don’t we give everybody listening a chance to follow you, tell them where the best place is to find you?

Brandon Blum (48:05):

Thank you. Twitter is the best place to find me and where I’m posting any good content. My Instagram is probably just funny stuff. My Twitter is Brandonmblum. So follow me there @Brandonmblumm, M as in Michael, Blum as in B-L-U-M. And hopefully I can provide more value. Again, I don’t tweet for any specific purpose. I’ll have a thought and I’ll ship it out. I’m always open to any ideas on any other relevant content. People have reached out to me and said, “Hey, I really gained a lot from this post or whatever. Can you do more like it?” And that’s been incentive for me to do it many times. Yeah, and thank you so much for having me. I’m honored and privileged to be on this show. And thank you for interviewing me and giving me the opportunity to have an awesome conversation.

Brandon Blum (48:51):

Next time I want to interview you so I can learn more about your world. That’s the only thing that this is not, I don’t normally do all the talking. I’m the guy asking a 1,000 questions to be clear. That’s why I annoy people with how many questions I ask. I mean, so this is not very rare for me. So maybe I get the opportunity at some point to drill you. I’d love to hear about how you build a successful podcast like this. I didn’t get that opportunity. So maybe you give me that in the future. I’d love to learn.

Robert Leonard (49:13):

Yeah, that sounds great. Well, I’ll definitely have to do that. For anybody that’s interested in connecting with Brandon, I’ll put his contact info, Instagram, Twitter, everything, his website for his real estate business, everything in the show notes for anybody that’s interested in connecting with him there. Brandon, thanks seriously so much for your time. I appreciate you joining me.

Brandon Blum (49:31):

Hey, thank you. Talk soon.

Robert Leonard (49:33):

All right guys, that’s all I had for this week’s episode of real estate investing. I’ll see you again next week.

Outro (49:39):

Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investors’ Podcast Network. Every Wednesday we teach you about Bitcoin, and every Saturday we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consultant a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.