BiggerPockets Real Estate Podcast - 614: The Cash-Flow Boosting Businesses that Savvy Real Estate Investors Own w/Codie Sanchez

Episode Date: May 26, 2022

Knowing how to buy a business is a lot like knowing how to buy a rental property. First, you’ll need to know the price of the asset, then the cash flow, followed by expenses, and finally the structure. Because buying real estate is perceived as “simpler” than buying a business, most investors decide to go the real estate route—but they could be missing out. Codie Sanchez saw this opportunity when she was working in venture capital and decided to try out the business buying route herself, just on a smaller scale. Codie can be perceived as your classic “value-add” investor, which much of the real estate investing community can relate to. She finds a business that has a strong foundation but lacks the tech or marketing to grow faster or increase its profits. When a business has a strong underlying value, just like a rental property, it’s easier than most people think to “renovate” it into something that will sell for far higher. Codie stresses that buying businesses isn’t so different from buying real estate. She also categorizes which businesses real estate investors should buy if they’re looking to maximize their cash flow and minimize their expenses. With some help from Codie, you could be relying on much more than just rent checks soon!  In This Episode We Cover What a “value-add business” looks like and how to find undervalued businesses  Evaluating and analyzing a business purchase and which key metrics to calculate before making an offer Buying off-market businesses and why most business owners never consider selling (until you ask) The three questions every investor MUST ask before buying a business  Buying instead of building and how trying to build a business can cost you much more than just money Becoming the business owner, not the operator, and outsourcing everything you can  And So Much More! Links from the Show BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast David’s YouTube Channel Hear Codie’s Interview on The BiggerPockets Business Podcast How to Use the DISC Profile to Communicate Effectively in Business “Contrarian Thinking” Newsletter Quiet Light BizBuySell Empire Flippers Connect with David: David’s Instagram David’s BiggerPockets Profile Connect with Rob: Rob's Youtube Rob's Instagram Rob's TikTok Rob's Twitter Rob's BiggerPockets Profile Connect with Codie: Codie's Twitter Codie's Instagram Codie's TikTok Click here to check the full show notes: https://www.biggerpockets.com/blog/real-estate-614 Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast podcast show, 614. That's why I like to buy instead of build as much as possible. And people are all like this because the secret is we're not that creative. Like venture capital, you know, startups and founders, they're like super creative. They're coming up with the next Tesla. I don't have that in me. But I can definitely take a business that creates financial models online, give it a new website and upgrade some pretty lipstick on the pig. And this thing can be a lot more valuable than it is day one.

What's going on, everyone? I'm David Green, your host of the Bigger Pockets podcast, the best real estate investing podcast in the world. I'm joined today by my good friend and co-host Rob Abasolo as we tackle a very interesting topic. It's how to make money in business that is related to real estate, not necessarily just real estate itself. Rob, so glad to see you today. How's your day going so far? You know, it is going really great because for the last week or so, I was, I was a little bit down for the count, a little under the weather, had a throat infection of sorts. And I'm all healed. I went to the E&T.

They did a procedure. They fixed me. I looked at my dock in the eyes, and I cried, and I said, my wife and I will never, never be able to pay you back for this majesty that you've done. So I don't even know if that made sense. But I'm feeling good, I guess I could have just said I feel good. I feel good. I recommend you go follow Rob on Instagram at

Rob built and look at, did you post the picture of the two vials of fluid that they took out of your throat? No, no, I didn't want to do that to my, I let people, let people like message me and ask. I was like, if you want to see this, message me and I'll send it. And I was like thinking, oh, it'll be like three people. And it was literally like 50 people. They're like, well, I stopped after 50. I was like, I can't do this anymore. But I feel a lot closer and more connected with my, my followers now. So that's, yeah, that's a pretty intimate thing to see what they pulled out of here. But that, I mean, and all jokes aside, that must have been horrible to have that much pressure on your throat. You couldn't swallow. You couldn't talk. Couldn't sleep. Yeah. Yeah. It felt like

I was swallowing daggers. And then the actual procedure, you're just getting poked with needles and stuff. And oh, man, it was uncomfortable to say the least. But it was literally instant, man. I was down for six days. And then I went as soon as he did that, I was like, oh, man, I have never felt so good in my life. And he was like, well, take it easy. I was like, I don't have to. I'm back. I'm back, baby, I can podcast again. I was nervous we were going to have to postpone this. Well, speaking of never having felt better, today's guest, Cody Sanchez is an amazing business person who takes what she learned at Goldman Sachs and other private equity firms about buying businesses, evaluating businesses, and now practices that in her world. Now, Cody does own

real estate and she often buys businesses involved in real estate, but she also buys and sells businesses that function like real estate, meaning you look at it, you see what it cash flows, you see what the return on your equity would be, you see how much work it's going to be, and then you go forward. So when today's ever increasingly difficult market to find cash flowing properties, we brought you an alternative that is still related to real estate, but not directly real estate if you're looking to increase your cash flow. Rob, what were some of your favorite parts of today's show? Well, Cody is like the queen of taking a very complicated, I don't know, idea such as buying a laundromat or buying a car wash or buying a SaaS product and then doing it

26 times and then explaining it to us and making it sound very, very easy and approachable. Because she talks about her different systems, the question she asks like, who should I hire, what can I automate, what can I outsource that type of thing? But she also gives us a really nice perspective on you shouldn't just be looking to acquire real estate, but maybe some of the companies that you're already paying think about. acquiring them as well. So for example, if you own long-term or short-term real estate, maybe think about acquiring the property management company that's going to manage your real estate since you're already paying them anywhere from 7 to 30% of your revenue, depending if it's on

long-term or short-term. So I thought that was just like a really nice, very clean perspective from her, and I honestly felt like we could do this. Like I'm curious. I sort of want to go buy a bakery now. Because you're always talking about because of our baker's quadrant. So if anyone doesn't understand that joke, people refer to a baker's dozen, meaning like 13 donuts. So the baker would throw in an extra one there to get you to come back for business. So a dozen is 12. A baker's dozen would be 13.

Rob and I have a way of looking at an investment property, like a matrix that we look at it through where there's five categories to it. We were trying to come up with a clever way, how we refer to five. And quadrant has four. And so Rob came up with a baker's quadrant. And that to this day is one of the funnier things that we've ever come up. I feel that way about the famous four, the baker's famous four, because we asked the four questions.

And then the last one is like, lastly, where can people find out more about you? And I'm like, well, it's not technically a question, but it is a bonus. That's right. Okay, today's quick tip before we get into the show, look for fax machines. You want to listen all the way to the end of the show because Cody talks about when she sees a fax machine, what that means to her and where she sees opportunity. Now, it doesn't have to be a fax machine, but there are many things you can look for in someone else's business that would indicate there's an opportunity there. And if you know what to look

for, you're more likely to find it. So as you're going through your day, if you make up your mind that you'd like to buy a business, figure out what the fax machines are in that business as the red flag that would draw you to that opportunity. Same thing works with real estate. Same thing works on a lot of things in life. You're going to have to listen all the way to the show for this quick tip to make sense, but please do because it's worth it. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities.

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wanting to buy a bakery. I'm calling it. I'm calling it right now. We're going to have a lot of bakers, a lot of real estate bakers. It's a bakery revolution. Cody Sanchez, welcome to the Bigger Pockus podcast. Thanks for having me. Yeah, so you are a very interesting business person as well as human being from our

interactions so far. I'm excited for today's show. Can you tell our audience what you do to make money? Sure. I buy businesses, typically, boring ones, things you wouldn't think about every day, like laundromats, car washes, video production companies, and then I cash flow off of them. Sort of like a bond instead of a stock. I don't buy, you know, companies that I think are always going to skyrocket. I buy a company doing a certain amount of profit, a certain amount of cash flow, and then that I want to hold for a long time and continue to reap the warlords of it.

So that's most of what I do. Then I also run a media company called Contrary in Thinking, where we talk about all this kind of jazz. So it sounds like what you probably do is look for a business with some form of cash flow, much like real estate. You make an offer on it based off of its current cash flows, but you see a way to add value to that business to increase it, which would also increase the value, and then you have the opportunity to exit.

Does that fair? Yep, that's right. It's sort of private equity 101, but this is called micro PE, so we do it on a little bit smaller scale. And we don't always have to grow them, actually. Sometimes we just want to own them. Now, did you learn to think this way from investing in real estate? I know you owned some real estate.

Which came first, the businesses or the real estate? No, I was investing in, at least from an investment standpoint, I was investing in businesses first. So I did the traditional route of like Goldman Sachs and, you know, how do you know somebody worked there? They tell you immediately within meeting them. But like, you know, Wall Street, a bunch of different alternative investment managers and in the private equity sphere. So I've done a lot of deals over my years.

And I just saw that I was putting together these really big deals with some of my partners and varying P.E. firms or investment firms. And, you know, the main guys were taken home a ton of money. And I sort of sat there thinking, wait a second, if they can do this for a hundred million dollar deal or a billion dollar deal, why can't I take the exact same process, maybe a little simplified, and apply it on like a 50,000 or 100K deal and then scale up from there. And so that's what I started doing was just applying it.

sort of in a real estate term, applying it on like maybe my first like little tiny studio. And then I would go up to a one bedroom and then eventually I made my way to multifamily or industrial or whatever you want to call it. You know what this sounds like is when we would interview that was someone that was a CPA or they were a bookkeeper and they worked for a big firm and they said, man, our wealthiest clients tend to own a bunch of real estate. And that's what got them wanting to get into it. You sort of sounds like you were around people that were doing really big deals, pretty

smart and weren't intimidated by the thought of buying a business and you watch what they did and said, hey, I could do that too. Yeah, also I want to point out, too, that you're like, I went to traditional route of Goldman Sachs. We were putting together a billion dollar businesses and $100 million deals. And I thought, why not do this on a smaller scale? Usually people start with the boring businesses and maybe work their way up to something like that. Well, I like using house money, man. I mean, I was actually scared on my first deal. I didn't want to, you know, if I had to go out right now, and I had never bought a business, and buy a business, put down my own capital, or hell, get a loan on it. Just, it sounds scary, I think. I don't think it sounds that scary

to get a mortgage on real estate. We've sort of normalized it, but we haven't really normalized going to get a loan to buy a business with a personal guarantee on your assets. That's scary. But because I did it at first with house money, even though they were bigger deals, like I couldn't let's not like they were like, well, I'm going to take your salary, Cody, if this deal goes sideways. It was like, maybe I could get fired, but I couldn't like lose everything. And so that's what I think maybe not that scared about it. And that's why we talk about it a lot publicly because I had one CEO who told me, we get rich quietly here, Cody.

We get rich quietly. And I was like, I think other people should know about this. And now I can't shit up about it. And if you guys follow me on Twitter. Apologies, you already know that. Can confirm. Can confirm. I follow you on all of them, Cody.

You're very active on all the social medias. So I have a question here. I mean, when you're evaluating these deals, obviously there's like a very specific way to evaluate a real estate deal. You know, if you're looking at an Airbnb or multifamily, you're looking at things like cap rate, cash on cash return. You know, there's a lot of kind of standard procedures when you're looking at an Airbnb, for example. If you're looking at buying a car wash or, you know, a laundromat or something like that, is it the same scope of procedure? Like, are you looking at it the same way that you wouldn't

any typical real estate deal? How does that differ? Yeah, there's probably just slightly different terms, depending on if it has real estate, you know, involved in it, too. Lots of people use cash on cash return. So that's pretty similar. Most people think about valuing a business on a multiple of profit level. So if I make 100K, I want to buy a business for anywhere from, let's call it, 2 to 7x, my 100K, so for, you know, 200 to 700,000. So those are sort of of some of the main ways. Typically, though, when I think about a deal, because businesses can cash flow more than real estate on a like on the total amount that you put down or the total amount you buy the business for. I'm really more interested in can this deal make me X amount of money

that is worth my, you know, my annoyance that running any business or buying any business or doing any real estate deal is going to do. And so I usually think about it like, I need a deal to do to cash flow me at least 100K for me to want to do it. In the beginning, that might have been like, I need a deal to make me 2K a month. And that would be enough. So you can kind of figure it out this way. In real estate, I think a lot of times, yeah, you want the rent and certainly in Airbnb. You guys do really well. But oftentimes you want the appreciation too. I really just want the cash flow in my deals. And I think of the appreciation as like the extra sprinkles on top. Yeah. Actually, that was kind of something I was interested in knowing more about too. Like let's say you buy a car wash. You're obviously buying that business, but you're also buying the lot in all of the materials and all the structures and all that stuff too, right? Typically, yeah. So for a car wash, you would. So that's a pretty real estate or asset heavy business. A laundromat, for instance, you wouldn't. You just want to lock in like a 10 or 12 year lease, a long lease because they're expensive to build out. Most of my businesses, you wouldn't own like real estate on them or you wouldn't have to. You might own equipment like trucks or tools or machines. But I would say, you know, like the asset heavy ones are things that blur the line. Like, you know, you know, mobile home parks, car washes, RV parks, things that are pretty asset heavy, as opposed to most of the businesses, you don't have to buy the real estate. So on some of these, you're just,

you're literally buying the business and then it's just you're leasing out the real estate, but you have no association with the actual building that it's in. Yeah, that's exactly right. I mean, I have a couple friends, and I'm sure you guys do, that own commercial buildings. I don't own any commercial buildings, actually, but the own commercial buildings and inside of them have seen sort of the profits that come from XYZ company. And so then acquire some of those underlying companies as well or percentage of them. So I think that's interesting. I might do that if I already owned, you know, a commercial building basically say, well, I'm just going to also own the laundromat that's in here as opposed to just get the rent from it. And I might do that for

multiple sites or maybe I want to own the, I don't know, nail salon in there because I have a good operator that might run it. I like owning those little type of businesses too. That's exactly what I started thinking when you were describing this, that's the perfect marriage, is you buy a commercial building, one of your tenants is going into financial trouble, they're struggling, you see they don't have enough capital or they're not managing things well. There's some problem that you feel confident you can solve. You go in there and you buy their business at a discount and then you manage it. Is that more or less kind of the approach you're taking? So that's called a turnaround in my world. And I actually think you should never do a turnaround for your first deal. And, you know, I think you and Rob could do it,

obviously, because you've done a bunch of deals. You run a business like this one is. But for most people, I don't like to buy other people's problems. I'm like, I want to buy the like nice-ish house on the nice-ish block. I don't want to flip for my first one. I don't want to fix because there's enough margin in buying businesses that you don't have to think about value ad right away. I actually think that's one of the things that's most dangerous if you do it, is like

don't try to go in and fix something. Because here's the truth. There's 2.4 to 2.5 million businesses for sale right now in the U.S. today. Only one out of 12 businesses listed, publicly listed in the U.S. will sell within any 12-month period. Like, imagine that in real estate. That just, it doesn't happen. That would be wild.

If you were on a street, there are 12 houses for sale and only one of them sold. Not going to happen. So there's so many, like, good, small businesses, especially sub, let's call it, a million dollars in EBITA or a million dollars in profit. that I think what you should actually do is go out and buy like a kind of normal business and you can do some value add on top of it but not a ton. So let's say, for instance, you own a commercial strip mall or something. Instead of you having to go fix a business, maybe you've just had that building for 10 years

and you know that most business owners, something like it's a wild number, 80% of small businesses in the U.S. that are for sale right now are held by baby boomers and 50% of all small businesses in the U.S. are held by baby boomers that are nearing or at retirement age. So there's something like $5 trillion in assets that are going to transfer from these small businesses to other people. So you might just have like Dave's, I don't know, laundromat. I need to use a different example because I don't always think laundromats are the best skills. Dave's hot chicken. Okay, nope, not restaurants. We don't like restaurants. Okay, no restaurants. Dave's. No Chipotle. There we go. Dang it. Yeah, Dave's equipment rental. I like that business.

Dave's equipment rental business, it's in your commercial thing. And the guy's like 6570. He's ready to retire. He's a great tenant. They pay on time. You kind of see how he runs the business. It seems to be fine. You want to talk to that guy and just ask him, like, do you have a plan?

Does your son want to play on, you know, video games on Twitch all day? You know, does your daughter want to be on TikTok instead of run your business? I could buy you instead. You know me. We've known each other for years and I'll run this business on a go forward basis. That would be the deal I would look for. Man, that's super interesting. So I think you mentioned this before, not on the podcast, but isn't there like a wild amount of people that are just going to close down their business and not even sell it?

Like just because they don't know that they can sell it. Yeah. I mean, everybody always says, and like I'm sure people say this on the podcast notes are like, the business is profitable. Why would anybody sell it? This never happens. People all get all up in arms when I share my deal details. The TikTok comments. Oh, yeah.

I know what you call it. Why would the owner just keep it for them? themselves. Exactly. You're like, do you keep every house that you've ever owned for yourself, even though almost every house is appreciated over the last 20 years? Probably not. Same thing. But these business owners, like why I started is I have an uncle, Uncle Ebb, who's since passed, but he owned a plumbing company and why I started talking about this more publicly or thought it might be interesting, maybe. Maybe I thought people would think it was boring, was because he had a business that was doing $5 million in revenue and about $2 to $3 million

dollar's profit. And he had run this business called Ebhomes Plumbing in Phoenix, Arizona for like, I mean, you could look it up. It was like 12 years, 15 years, 25 years, a long time. And basically, he started getting a little sick, was looking to retire, he was in his 70s. And instead of selling the business, because he had no idea you could do that, he didn't have a college degree. Um, you know, I was too young at the time to really understand this. He wound down the business. So he had an asset that was doing two to three million dollars profit, which means he could have sold it for like six to nine million dollars and he just shut the business down. And that happens every day. That is, that's crazy. So here's what's popping in my head, right? And you know what? I'm going to give you an example

of what I see happening all the time. And then Dr. Cody, I'd like it if you could give me the prescription for this. I and many people I know, many of them work on my team. So they're entrepreneurial-minded. They're people that like Rob and I, Brandon and I. They're drawn to ways to make money. They're not afraid of hard work. And they see the value of, we're going to call it passive income, even though owning a business isn't passive and owning real estate isn't truly passive, but it's not directly tied to getting paid for their time. It's more getting paid for their ability to make solutions. I think many of our listeners are like that. So that when they're in real estate, they're like, I want to buy that house and that house and that house.

And they try to figure out a way to force that deal, that square peg through that round hole. And it very rarely works out. Well, in business, I see it can work out. But then what happens is you've got six different businesses you own, and you're the only person trying to do it all, and you're frantically running from one thing to the next. Like, to me, it feels like you're in a submarine and there's a hole, and you like stick your finger in the hole, like in the cartoons, and then another one pops out over here, and then you're sticking a finger there, and then you're sticking a toe over here, and then you're taking a finger out of this one and put it in that one, and then the water hits you there, and that's

what it's like when you're running multiple businesses, and what you realize is I need more fingers. I need other people to sit here and help, and then you try, and then those people, instead of plugging the hole or texting on their phone or they're doing their own thing. And you realize it is freaking hard to find people to help me do this. And then you're discouraged because you feel like a failure. You don't want to tell everybody because you probably believe reflects it on Instagram, tell them about this business that you own. You want to be a big deal. And then you're just getting stressed out and you hate your life and you're going to bed with anxiety.

It could quickly overwhelm you. And I don't know many people that figure a way out of that. So is the problem that they shouldn't have jumped in? Is there is there an approach that you like to take so you avoid that. Do you have a skill set other people need to build? How do you solve that problem of I own all these businesses, but I'm the only one that is doing all the work? Yeah. I mean, well, one I would say, the most important thing is you need to buy a business that has enough profit for you to put an operator in if you don't want to run the business overall. So if you are not going to be the one, plug in the holes in your business, then you need to have, let's call it at least 100K that you can outsource part of the operations of

business to somebody else. And I like to have like at least 100K because right around 100K, you can start to hire somebody really good who you can incentivize with equity on the way up or with revenue share or profit share. And that person will help you plug those holes because they think of themselves as the CEO of the company. They're operating it. And then you just have to do really good on your hiring. And you know, the what is annoying, I think, is with all the whole plug in. That's usually when you have sort of executioners, people who just execute on tasks, as opposed to somebody who operates and thinks about the business from the highest level. And so that's what you want. I sort of recommend that everybody mess around and get their hands

a little bit dirty for their first deal in buying a business because if you've never let a team before or you've never run a business, you know, how are you going to know if you have a good operator or not? I think that's really hard to do. So that's what I would say is. First thing, make sure you have enough profit to layer somebody on top of it. And then to your point, There's two ways to play this game. Decentralized leadership, which basically means you do a ton of work up front to hire the right kind of people and you put systems in place to monitor them. But mostly it is a ton. It's like a colonoscopy to start followed by. At the end, this person is like massively trusted. You know, you're not watching their every move. You're not micromanaging them because you did a lot of the upfront work. And now you just have systems in place with KPIs to make sure that they're still running the company well. Option one. Option two would be you have, you know, a process whereby you have your hands involved in a lot of oversight. And that, I think, is where people get stressed out. Like, my businesses, by and large, do not call me. And instead of calling me, they would call the COO who sort of runs the

operations. I have now only two. I used to have three businesses I was actively involved in. And now there are only two businesses that really take up my time during the day. The rest of those businesses are like bonds. I don't call to check if AT&T is going to pay me the right amount each month. They just pay me the right amount. Then that comes with hiring right and structuring the deal right, in my opinion. I think you said a lot of good stuff there because a lot of people they either want to get into a business or get into an establishing business like let's say real estate, but they don't want to work. And I understand that, right? But I also think that you have to earn your right to not work. And so I get a lot of people like students of mine that want to start Airbnb's

and they just want to go straight to a property management company. They want to hire someone to set it up. They want to hire someone for every aspect of it. And I'm like, dude, you haven't done this yet. You need to learn how to fail several times. And you need to fall on your face. And you need to like understand what it is to manage it, to deal with cranky guests, to deal with water leaks.

You need to do that for at least three months before you go and hire it out and pass it on. Because how can you communicate with the people that are running your business if you don't even know how your business runs. So I like that you said that you should get your hands dirty because I think that's pretty applicable to pretty much every facet of real estate. Yeah, I totally agree. I mean, the other thing is, I mean, quite honestly, I don't know. It's something about real estate and business is less, I think, because people know that there's lots of levers you can pull in businesses. There's not as many levers you can pull to make changes good or bad in real estate. I don't know. Correct me if I'm wrong. You guys know more about it than I do.

But for some reason, I find sometimes real estate attracts people who are like, well, I just buy this thing and then I cash flow on it and that's it. And then I never have to do anything again. And I just think first of all, yeah, I buy it and I sit on a beach. No, I think it's so boring. Like you'd get so bored and you're going to be boring because nobody wants to talk to somebody who does nothing all day. And so I actually think people don't really want that. They just think they want it because they hate what they do. But then when you like what you do, like, I couldn't pry you out of air. Airbnb some way, Rob, out of your cold dead fingers. You would be fighting me, right? Because you like what you do. I just had a very deep conversation with the COO of the David Green team yesterday about this topic, Cody. It's funny you bring it up. So I realized about myself. I was a police officer. I liked the job. I did not like having to work 20 hours a day, never having a social life, not being able to be fit, never sleeping. Like you can't really have a family and have a good quality of life because your days off for Tuesday, Wednesday. It's just, it's hard, right? So when I was, I was kind of sold this dream that you buy some real estate and then you never have to work again.

Your tenants will fund your life and you're going to travel, go on boats, sit on the beach, like just walk around with your chin up because I made it. I worked really hard for three years and I'm done. And that seeped into my mind. I think it came from a lot of places, but overall, it's usually a dream you're being sold as opposed to a reality because then we buy it. a reality. And that's what marketing is. It's to make things look better than they are. When we take pictures of listings, we don't show the bad part, right? You make the house look great. And so I started the David Green team and I figured out how to hire people. It was horribly hard. I got a system going where I had good agents. It became profitable. And I thought I'm done. I'm just going to coast

into the sunset. And every time a problem happened that pulled me back in, I was like resentful. I just in my head, I was like, why should I have to deal with this? I'm supposed to be over it. But what I noticed was when you stop paying attention to an organization like that, that they were drawn because of me. Your best people are like, well, Dave is not really around. I'm not really getting the leadership. I'm not growing the way I thought I'm going to leave. Now you've got to jump back in because a really good person left. Or the person who is running it still sort of needs your mentorship unless they've done this before. And I was, there's not a lot of people that have, it's hard to put on your resume. I ran a real estate team. There's no college

degree you get for that. So you kind of have to grow them from the ground up. And when they would need something and they could tell I was resentful, they didn't want to reach out. And that's been the case with every business I've had. I don't have to do everything. But if you just completely turn your back on it, rental properties as well, they fall apart. Your property manager is trying to do the bare minimum that they have to to keep a check coming for themselves. They are never going to be as involved in your property as you would want to be. And so I came to this epiphany that it was stupid for me to think I was never going to have to work because I made one or two good decisions.

What I got was a better type of work. I'm not working 20 hour days. I can wake up when I want to. I can work from the gym. I can work from vacation. I can work with creative elements of my mind that are fun that release dopamine. I get growth. I'm not just stuck in a factory punching some metal like Eminem and 8 mile for the rest of my life.

You're not breaking your body. There's a lot of benefits to why to do this, but it's not you're just done working. And even if you bought a bunch of rental properties and made $100,000 a month, you still got to pay attention to what's happening in them. There's still a form of work. You're still going to have to solve problems. And when I accepted that life doesn't work this way where you just do nothing, but you can definitely do better, I got happy again.

The resentment went away. I was excited like you're saying. This became fun. I started like, ooh, that's a really good person. I'm excited to help change their life and I want to see them grow. And you start thinking of things just like what you were saying. But there was this block that my expectation was ridiculous. I mean, it's probably like if you're married and you think once I get married, I'm done,

I don't have to work anymore. Now I'm in a long-term relationship. I can let myself go. I don't have to pursue this. It's probably the opposite, right? You're going to work in that relationship, but it should be work you enjoy because you like the person. Is that similar to the approach that you've seen? Yeah, totally.

I think it's two sides. What I've noticed is, yes, I would be super bored if I did nothing. And so I think your reframe of, hey, every chance that I have to engage in this is actually kind of an opportunity is super important. There are some businesses. So I've had businesses kind of like the ones you talked about that really require a lot for me. I just sold one. I signed the deal yesterday, actually, because it was too much, actually.

It was like exactly what you talked about. It was not enough money for me. and then the guy wanted a lot from me. And so I basically said, I'm out. You can buy me out or somebody else can, but we're going to sell this side of the business. The flip side of that, though, is I found when you have really good operators and their incentive aligned, like humans are like Pavlov's dog.

Like, if you ring a bell and every time you ring a bell, you get a treat, it turns out like when we ring the bell, you start to salivate, right? That's like what Pavlov basically taught us. And so I think it's the same with operators and with people who run your business. You just have to do a ton of work to make sure that your property rental. So, for instance, we have a property management company and we own a bunch of, not a bunch. We own some Airbnbs. And they get a cut.

They get a cut of the rent or the total income, just like most property managers do. But they also get a cut of the overall portfolio. And so, and they get an opportunity for us to put up capital and them to do new deals and them to get equity in those deals if they find them. the deals. And I learned this from my other friend Alex who runs the same thing and now has a commercial loan on his portfolio and this guy who runs it is more like a CEO than just, you know, running a few property managers, a few properties as property manager. So I actually think the key is really finding good people that are better than you. Like if he brought me in to run this

property management company, I would be a mess. I would definitely the business would not work because he's better than me. He's incentive aligned. And he wants to keep making money and seeing this grow because you know, the bell rings and the treat is there every time. Yeah, that's such a powerful part of motivating people. I think one mistake that we make in business is we assume everyone's motivated by the same things as we are, and that's not the case. And the other part is you assume people, you underestimate the value of motivation, like what you said, is the condition, like when the bell rings, the dog salivates because it knows it wants food. It's hard if you make someone delay gratification for too long. If you're like just work and slave away and in five years this will pay off,

but they're not seeing the milestones. They're not getting that hit of like, ooh, we made progress. Most human beings are not like us that are just going to grind away until we get there. You have to set it up to where, like, have you noticed that as well? Oh, yeah. I mean, 100%. But I forget it all the time, to your point. Like I talk about all this. Like, yeah, I get it. But my usual sort of treat that I hand out is cash, right? Like, I'm like, hey, if you make this much, here's how the sort of milestone's going to kick in, and you're going to make this bonus or X and X if Y happens. And then I forget, like, some people just want to go home at five every day and, like,

not have me slack them 24 hours a day, you know? And, like, other people just, like really like what they do and want to make a good amount and don't want to be scared that they're going to lose, you know, their job. And so I make everybody do those disc things, not for them as much. It's for me. It's because I need to understand this other type of human that isn't just a total animal nonstop obsessing about business. I think you do that, right, Dave? Don't you make everyone take disc test too?

I'm a huge disc believer. To me, that was the Rosetta Stone that helped me understand why every human being frustrated me all the time. Because I did not know that I am a very rare profile and my communication style is not like everybody else's. And when I figured that out and I learned how to talk in their way, all of a sudden, they liked me, we got a long way better, our relationship improved. Before that, I was like, why is only 9% of the population get it and nobody else does? Yeah, you probably intimidate them, too. You're a big jujitsu doing dude, you know? So add that, and I don't think you're a wallflower, Dave. I imagine you come out a little strong, huh? That's what I'm told. I probably hear four

times a week I'm intimidating. And I'm always like, why? What did I do that was intimidating? But they're too intimidated to tell me, so I still haven't figured that out. 20 years as a cop will probably do it too, or however long you said. Yeah, I actually wrote an article about the Dix profile on Bigger Pocket. So people search the blog, they can see article about what we're referring to. I'm curious, Cody, what are you? What's your setup? Oh, God.

That's a really good, this shows a lack of self-reflection. So my profile, I don't remember what I am. What's the other profile that's like the, this. Myers-Briggs. Myers-Brigues. Ingram? No, I don't remember that one either. The 16 personalities won.

I'm not a commander. That's my husband. This is going to be a really great answer. I can't remember. I think you're a high D. Because a high D wouldn't care. That's the decisiveness. They make decisions really quickly.

They're comfortable in situations they haven't been before. Yes. Yes, I'm that one, Dave. Yeah, because a D wouldn't really care what the diss says. It's too busy making money and making decisions to stop. But you recognize you need to know for how you communicate with others because you're a leader. And that typically ends up being, D's usually end up. in the leadership positions.

That makes sense. So a quick rundown is these are very comfortable making decisions when they haven't been in that environment before. They're very decisive. Eyes are very interactive. Like Rob would be have a very high eye. They're they like people. They're likable.

They're the most popular people in high school, the social butterflows. Yeah. That's it. That's an eye, right? You want to get an eye to like you if you're like compliment them on something or they can tell you like them. They're, oh my God, they love you. If they think they're not liked, they don't know what to do.

It's really unsettling. S's are your stable score. This is the pace that you like to live life at. They don't like surprises. They hate change. They like predictability. They get the same thing every morning for breakfast. They want to come in the office.

If something changes, the first thing they say is, but I thought we were going to do this. They're like the hardest to get along with with Ds like me are the S's because we change everything. Like this is better. Let's switch it. And then they're like, well, wait, wait, wait, wait. I thought we were going to do something else. And C's are your conscientious score.

This is your architects, your engineers, your lawyers, your, the, doctors, the people that like everything needs to be perfect, they're really good with spreadsheets and data analysis. Hmm. Yeah, okay. Yeah, first glance, I'm like definitely an eye, I think. Yeah, I think you're an IC because you're also very good with detail. You catch a lot of detail in a lot of different scenarios.

Yeah, it's not that I want to. It's like I would rather hire someone or have someone on my team that's good at the details because like I really run free when I'm not having to be the one keeping track. or keeping notes or keeping score. I just kind of want to run with ideas. But as you grow in your wealth, your portfolio, your business, you kind of have to start being more organized or else you're not going to make,

you're going to stop making money and you're going to start losing money. So I'm kind of at that point where I'm like, so, you know, I've hired people appropriately to help me with that, I think. Yeah, I think the hard part is for me, well, I just showed you guys, but I have a really bad memory. And so what I've realized is we have to have processes and procedures for everything. Otherwise, if you're running a lot of businesses, you're going to forget it.

And so I'm really not very detail-oriented at all. And I have to hire for that constantly. Like my first hire is almost always a COO for any business or at least a chief of staff because I need somebody who's the opposite of me. Like don't worry about bringing in the sales. You know, don't worry about fundraising. You know, don't worry about sort of the growth plan overall or hiring people, but do worry about, you know, making sure that we pay payroll at, you know, 12 o'clock on a Friday every week. So, yeah, I think it's really important for sure. So, yeah, I guess I wanted to dive into that a little bit because I know you've bought 26 businesses, you mentioned, which is a lot.

And from that, you sort of have baked your philosophy or your POV on this down to three questions that everyone should be asking when they're buying these businesses. Is that about right? Yeah. Actually, my executive coach told me these. It really comes down to like, not just buying businesses, but whenever you have a problem. I basically ask myself, you know, who can I, instead of saying, you know, have you guys read the book, Who Not How? Read it. I own it. But no, I haven't read it yet. I was going to say, is that better or worse? So none of these ideas are like new or uniquely mine, but this Who Not How, I think is a incredible, it's a listen. You don't actually have to read the book. I would recommend audio. But basically every time that I have a problem, I come into asking myself, instead of how do I tackle this problem? I say, like, who can I hire?

You know, how can I outsource this problem or, you know, individual issue? Who can I delegate to, you know, on this instead? And I also ask myself, can I buy it instead of build it? And so we have like these series of questions that I'm always asking myself instead of how can I do this? It's can I buy it? Can somebody else, you know, run this business for me? Can I delegate this task instead? And I kind of go back and forth between those three or four questions almost every time. We interviewed the author of that book, Benjamin Hardy, on episode 425. People would like to listen. Man, you look that up really fast. It's my high D nature.

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Don't overpay the IRS. Head to cost segregation.com before April 15th. So we've talked about who to hire. I guess let's talk about what can I buy or can I buy it? Because I know that that's something you and I have talked about several times where I'm like, man, I want to just go and build this. And you're like, well, can you just go and just buy something that even if it's not nearly as good as what you want it to be that you can make work? So is there a reason here?

I mean, I know there is, but what's your personal reason for always just buying something that may not be working? And is it because of the value add component that you can add to actual value, increase the value of your business? I think I just don't really like risk. So if I can buy a business, I already know that I'm operating with some level of profit or cash flow. And so people might think it's risky to buy a business, but I actually think it's much less

risky because if I build something, I've got to put a bunch of money down on hopes of future dreams, right? I suppose it's the same with real estate. It's like, no, I'd rather buy this house that's done. I could build it, which could mean that it's cheaper, let's say, to do it, but it's going to take a long time and maybe I don't have all the expertise on it. And it's the same for a business. So like, for instance, I want to own a, I want to own a bunch of financial models and tools for our main business contrary in thinking. That's the one that I play with the most these days, where we basically go and we talk about how to become financially free, free in your mind, free in your bank account. And I want to own a bunch of like models. So basically, you know, could you,

here's a due diligence checklist. Here's a mobile home park model. And I would like to like build out the suite of products. And so I was starting to think about, okay, well, you know, I'm going to hire a a bunch of my ex-analysts. I'm going to have them build out a bunch of these models because I don't want to do it all. And then I'm going to put it here and we're going to have this marketplace of stuff people could pick from. And then I was like, wait a second, there has to be some terrible website located on the internet that's built in the 80s that's full of financial models. Those don't actually change that much. We could slightly tweak them. Why don't I just buy this business? So I started reaching out to a bunch. I looked up this one company, I think it's called e-financial models, creative name,

terrible website, terrible UIUX. They wouldn't let me buy it. He's based in Zurich, but if you're listening, still interested. But then I found another business that's similar to it. And it would cost me in time and hours, probably, I don't know, 100K in a couple months to build to build. And I think I'll be able to buy this business for maybe 200K. So you save me three to six months on it. I pay a premium of like two, let's say, you know, 2X on the business. And then, but it's rocking and rolling day one.

And it already has income coming in to start, you know, profiting off of. So that's why I like to buy instead of build as much as possible. And PE people are all like this. Because the secret is we're not that creative. Like venture capital, you know, startups and founders, they're like super creative. They're coming up with the next Tesla. I don't have that in me. But I can definitely take a business that creates financial models online, give it a new website

and upgrade some pretty lipstick on the pig. And this thing can be a lot more valuable than it is day one. So on that financial modeling business, are you actually planning to cash flow on that business or is that just like a like a value ad that's going to be part? of the contrarian thinking brand. No, I'm going to cash flow on it. So this is, this gets the point where I guess we could talk about ecosystem or satellite businesses.

So in my land, if we think about contrary in thinking, it's a media company, like similar to bigger pockets, right? Much smaller scale. But I don't know if you like, Dave, have you guys ever grown through acquisition at bigger pockets? I know acquisition of real estate, obviously, but anything media related? I believe in general. It's, it's typically like in-house organic.

Yeah. So I like to not. that as much as possible. It's taken us a year and a half to build 100K newsletter list. We have like 1.5 million social followers across the platform. That's pretty fast growth. But, you know, some of that's like you can't make that happen. You know, some of you have to get lucky, you got to get viral, whatever. And so for contrary and thinking, we have this main newsletter business and this media around it, which is just social media. And I'm trying to figure out, I want to own the entire ecosystem of small businesses. So when people think boring businesses,

small businesses, I want them to think, Cody Sanchez, Contrarian thinking. And the reason that I'm building a big social following is because I'm going to buy all the companies on the periphery that people are interested in if they're investors in this space. So I'm going to buy this marketplace because then I have every financial model

you could ever want to analyze any small business and I'll charge you some percentage on them. I might even allow people to upload their own financial models and then I'll just take a cut and then I wouldn't have to keep uploading them. Somebody else could do that for me and I'll become more of a third-party marketplace as opposed to my own. You know, I also want to buy, well, I think we just might have closed this yesterday. We'll see once I get back to the email here.

We're buying like a chatbot service for small and medium businesses. It's a business that's been around for 25 years. And basically it's like, say you have a locksmith issue and like you're trying to get a locksmith at two in the morning. This could be like a real human that would respond to you and say, oh, yeah, great. We're going to connect you to Greg. You know, whatever, sends Greg over there. It's a customer service tool.

And so I want to buy that company and stick it into my ecosystem. And if I owned a bunch of real estate, I'd want to do the same thing. I'd want to buy companies surrounding my real estate so that I could increase my revenue and profits and diversify in, you know, non-recession, or in recession, or in recession-resistant asset classes. So what about, so let's say there's a real estate investor who's doing pretty good with real estate investing. Or they, maybe I could say it like this. A lot of people get into real estate investing because they think it's going to be passive. And once they get there, they realize to be good at this still takes a skill. Now, some people are good with bookkeeping.

Some people are good with operations. Some people are great at negotiating. Others find the deals. So whatever your natural skills are, they show up in this world. This isn't just a cookie cutter type of investment like buying a stock. So I feel like there's a lot of human beings that will get pretty good at this, but we'll realize, you know what, I don't want to have to keep doing this element of the business. I really like this one.

Those people will be naturally drawn to owning a business that sort of focuses in that area. What are some ancillary businesses that you think that real estate investors could look into buying to help supercharge their own business and increase cash flow? Yeah. Well, we have a group called unconventional acquisitions. And there were, I would say, like, there were like 10 or 12 guys that started who were all real estate guys. One's name is Lloyd. And he owned a bunch of multifamily units. I think it's in South Carolina, somewhere where there's a lot of weather, basically, and was having to do a lot of roofing repairs continuously to his relatively large portfolio of multifamilies. And so anyway, so he started sort of talking to us

about how do you do this. And we were like, well, I'd like to do something called a personal P&L review. So basically I say, for yourself personally, where do you spend money every single month, sort of track any of those businesses that are small enough for you to get to the CEO? And then for your business, do the same thing. Where do you, where does your money go? What are the owners that you could actually get to out of your P&L? And so he was like, God, I'm spending a ton of money on roof maintenance a year. He's like, why don't I reach out to this guy and see if he'll let me buy his business? And I was like, okay, definitely could do that. But Lloyd, you've told me before, like, you don't want to work a ton more and you don't want

to operate this business. And he was like, yes, both of those things are true. I'm like, okay. So instead, why don't you reach out to this guy and say, hey, I calculated that I give you, I don't know, $200,000 a year in revenue from my properties. I also have friends that have properties. of X, which would equate to Y of total revenue for your business, what I'd like to do is I'm going to buy a roofing company. It could be yours, it could be somebody else's. And I could buy one outright, or I could invest in yours. And I could invest in yours on a discounted term, because I'm already giving you $200,000 in revenue. And I could bring you these additional people. So I'll put some money on the table, but also give me an earn out for all of the new business that I bring to you

and a discount for all the business that I already have with you. And so he did that. and now he owns part of the roofing company without having to run it. So that would be a lazier person's way to do a deal like this. And the only thing you want to make sure of is that you're able to track the financials. I require that I can see into the financials or my CFO can see into the financials of all the businesses we own a certain percentage of. So I make sure nobody's skimming off the top. I'm sure they still are, but you know, not too badly.

Yeah, that's actually really smart. And I think you even mentioned this earlier about you kind of own your own property management company. And that that is starting to make a lot more sense to me where I am starting to hire more people in the Airbnb businesses like interior designers or property managers. This is a whole like rabbit hole we can go down towards. But it's starting to make a lot more sense to just sort of absorb sort of not necessarily companies, but freelancers that kind of have their own business in kind of becoming like a, it sounds sort of like what this guy is doing, like a super affiliate where you do own part of it, but you're the one that's fueling all the leads that come into that

business, and thus you get like a payout from that. Is that sort of what this roofing company is? Yeah, I mean, I call it a rev share acquisition. So basically, you buy something meaningful to you, 30 to 40 percent of a business, let's say, and you buy it through the revenue that you're already giving the business and through because you have a giant marketing bullhorn in your industry through your additional distribution. And usually for small businesses, I mean, what is the one thing most small businesses are bad at?

It's usually sales. Distribution is always a major pain point. So you can get access to a business sort of two ways without giving capital. One would be give them more, you know, get them more customers, so they'll give you a percentage of the business for the additional revenue,

or help them cut costs. Helping them cut costs is, I think, never as fun and it's sometimes harder to do. So I like, if I'm going to do a rev share deal with the business, I'll do it based on how much business I could bring in with them. I mean, we just did a deal the other week where we're investing as a, we're not a majority investor, but a minority investor in a company. And they are raising capital and we wanted to be meaningful in it. But the level that they're raising capital at the valuation right now is like, yeah, buddy, I want that too for you, but it's not going to happen in this world. And so I said, hey, listen, like, we'll invest in you, but we're going to invest in you at the last.

last rounds valuation, not this one. And the reason why you're going to let us in there is because we're going to be a bullhorn for you. We're going to be a foghorn for you. And we're going, is bullhorn a thing? I don't think that's a thing. Is that? Anybody know?

I don't know if foghorn's a thing either, though. Foghorn is like the br-h-h-h-h. Isn't it? That's like that. Yeah, a bullhorn is, I think, what you talk into and it amplifies your voice. Oh, so both work. No, that's a megaphone. So a bullhorn is what?

like it makes a bull sound when you blow into it. Maybe it's just the horn of a bull. I do live in Texas. Yeah, that actually makes a lot of sense, Cody. Okay, got it. You're right, David. It is an electronic device for amplifying the sound of the voice. I apologize for calling you wrong on national podcast.

Because I'm such a big person, I will forgive you for that. Literally and figuratively. Bring it a full circle there, Cody. Nice. That's exactly right. So anyway, so I think that's what I would do. I love those rev share deals for people who haven't done a lot of buyouts because it's less scary. You're like, oh, I don't have to give you a lot of money.

I just future potential money that makes it less scary, I think. That's sort of where I think, you know, I'm figuring out like where I want to be entrepreneur-wise and like real estate investor-wise, influencer, all that kind of stuff. Because I even forget I said that. editor takeout that I called myself an influencer. No, I'm just kidding. I, you know, in this space where I'm at, my platform, it does seem like there are a lot of businesses that I want to build. And I understand that there's so much time involved with doing that in the real estate space, like thinking about a, like a short-term rental product, like a service product and this and that. But it makes so much more sense to just use my platform to be sort of a super affiliate for businesses that I really,

really, really believe in because then I don't have to build the business. I can just send the leads. And it's so much easier to do that kind of in my stage right now. Yeah, agree. I just wouldn't use the term affiliate because you want ownership. I mean, you guys know this. The hardest dollars are the first dollars. And so even if you're not like materially changing the outcome of a business to like 100x,

if you are taking somebody from a business that does a million dollars to two or three, that's really, really meaningful. And so I think the problem with affiliates, just categorically, is you know, you get somebody into somebody's ecosystem, but you normally don't get paid for the lifetime of that client. And for the reciprocal of like the one client who talks to somebody else, who talks to somebody else. So I really think you want to get actual ownership.

You want equity ownership that pays dividends on an annual or, quarterly basis on the same rate as the rest of the owners so they can't cut you out of deals like if they're paying themselves they're paying you too um that's what i would say i don't do affiliate deals for that reason kind of exclusively yeah and i agree let me clarify it's more like i call it super affiliate but what i really mean is like hey once i get to once i get you to x and revenue and if that matches kind of where you're at that's when i'm sort of brought in as an actual partner equitable partner in that company or fund or whatever yeah um i like it So we talked about the roofing company. If you're a real estate investor and you're looking to broaden your horizons,

is there any kind of other real estate niche or anything that they can jump into and diversify outside of something like buying an actual company that you're spending a lot of money on? Yeah. Well, I mean, I think, so do you mean types of companies or structures of deals or both? Yeah, both, really. Anything in the real estate space. Yeah, there's a ton of sectors, I think, that makes sense for real estate. I think you should just go from proximity bias.

So like closest to real estate would be normally some of your biggest expenses. So property managers, let's say, then it might be owning the mortgage company. Then it might be owning the marketing company that does all your social media marketing for your company overall. Then it might be the higher, you know, the HR recruiting company that recruits for your underlying real estate company. So I think you kind of go out from like what's closest to your business and, you know, move that way. I have another guy that owns commercial property and buys landscaping companies.

He's bought like two or three, sold one for 10 mil. And it's because they serviced all of his commercial properties. And so he got to know the guys. They showed up all the time on time. They were underpriced. Often they weren't automated. They had no bad systems. My favorite businesses, like every time I see a fax machine,

I just get all hot and bothered. I'm like, oh, this is going to be so good because if they're still using a fax machine, like I can only imagine what their Yelp profile looks like, right? I'm real fun at a party, guys, is what I'm trying to tell you. And so anyway. Is that a fact machine back there? I know.

Like, nobody's invited her again. But I, so I like those businesses that you can add just a little bit of technology to that are close enough to real estate. So that's probably where I'd go first. Last diatribe here is I also might, like, you know how you guys probably just see it? Like, you know how you can see a property probably online or you could drive by it and you're just like, that's a good property? Like, I bet this person does X with that.

I don't have that muscle for real estate because I don't see as many deals as you guys do. Like I've sent Airbnb to Rob me. He's like, nope, 30 seconds. Let me tell you why. I'm like, oh, okay, cool. Got it. And so you get that with deals after a while. So what will happen is the second you start thinking,

how can I buy the solution to this problem instead of build the solution to this problem, you'll start talking to other owners and they'll be like, yeah, I'm retiring. I don't know what to do next. Like, I have this business. You know, I'll probably hand it off for the grandkids and they'll burn it to the ground. And you're like, are on them, like white on rice. So it doesn't always have to be exactly real estate related. It could just be in real estate.

You guys know so many people in the community. Use that to your advantage. It's really great. Well, I mean, there's a couple ways we can go with this. We can actually jump into the deal deep dive and talk about one of them or you can also, you know, rip apart one of our deals. What do you think, Dave? Let's go to the deal deep dive. I want to hear about a business that Cody has bought. Yeah. Well, let's go with a recent one. I'm going to pull up some numbers here. So I'm not lying to you guys because that's not a good way to start a relationship. So we will ask you questions. Cody, we'll fire them at you and you can just fire back. Oh, I like it. Let's go. All right. Question number one. What kind of business is this? This business is a SaaS services business. So it's a business that does like templated processes for hiring. And how did you find it?

I have a lot of the reason I am so much on social is so that people will send me deals. So this one, one of the people that follows me on social, sent me this deal. Next question. How much was the deal? This business was $120,000 with an additional $135,000 of earnout. So $255,000. Wow, that's a good deal. $1,600s back when it was a Louisiana purchase. That's funny.

That's a real, that's a historical deep cut is what we call that. Yeah, that'd be great for TikTok. That should probably go down as the best real estate deal of all time. Have we ranked like best real estate? Louisiana purchase has to be up there. I think that's up there. Oh, it's got to be up there. I don't think that one's up for a contention.

How did you negotiate it? So this one is relatively easy. This business, they've been in business for six years. It's one of the guys' projects. He has multiple projects. So it's getting kind of no love. And it's a really cool interface, but no distribution on it. So I found it because we use the tool in one of my businesses to hire people and then just reach out to him.

I was like, what are you doing with this? What's happening? Got to know the guy. I never really just usually reach out to people and say, hey, can I buy your stuff? That doesn't usually work out as well. I just say like, oh, I'd love to talk to you. This is a cool business. I get to know the guy.

And he tells me, yeah, it's just one of the things I run, but I'm really focused on this AI, such and such. I'm like, great. And so I ask him a little bit more about the sort of numbers on the business. He tells me, and then we start kind of talking sales. Okay. When you decided to buy it, how did you fund it? This one I buy with cash. Not much.

It wasn't a huge capital outlay. And I wanted it to close quickly, so 120K down. And then the earn out is that additional $135,000 that he will get. But he's funding me in seller financing over the course of, I believe it's two years. Okay. And what did you do with this business? haven't done anything yet except started to take over the business and run it. You know, it's a profitable business.

It's not huge. It probably does something like, you know, $8,000 to $13,000 a month in profit. And this business is one that what I want to do is plug it in with this other company that I'm going to buy. And I already have the operator that's running this new business. And he's going to run both of them. And then I'm going to integrate it into everything else that we do. So like, it would be like, I guess if you have a business, had like a lead gen software or something like that or a hiring software or something like that for

your real estate company. I just want to plug it into my ecosystem, make it easier for my company to grow, and then I'm going to distribute it through our social and media following. Awesome. All right. So so far, what has the outcome been? The outcome here has just been, I mean, sales are standard. I mean, I got this deal. So if we're making, let's split the difference and say we're making $10,000 a month just to be even across the board. That's a hundred. That's a 120k a year. And that's essentially what I put down. So I bought the business for 1, 1x down what the total value of the business is, or I'm sorry, what the total profits of the business is. And then let's call it another 2. I don't know, 1x on the, I'm sorry, another 1.1X on the future revenue of the

business. So right now, you know, we're profitable buying this business inside of two years, if nothing grows. Like at the end of two years, every dollar that we make on top of it is gravy. So that in itself would make me happy. But the thing that we're going to do is connect it with this other company. And then I think this thing could be worth a few million dollars. I mean, my target for it, I modeled it out and thought we could turn this into a $5.7 million business, sort of with our ecosystem and not buying any other companies. So we'll see. 5.7 million, oddly specific, but I love it.

Yeah. Last question for you. What lessons did you learn from this deal? probably a couple of things I don't know if I learned from this one in particular but first would be keep the deal terms really simple so this is an older you know kind of gentleman that was running this company and he didn't want a bunch of like I wouldn't give him a full term sheet basically I typed out bullet points this is what we're going to do nothing else besides you know these main terms will get snuck in there and that allowed us to turn around the deal within like 48

hours and and then we papered it with the attorney so I would say keep it really stupid simple and you'll close a lot faster and not scare the seller off. Awesome. All right. Well, thank you, Cody. We don't get to hear every day about, you know what, let me ask you one last question before we get out of here. Yeah. If somebody is interested in either buying a business or selling a business they have, how do you find the equivalent of a real estate agent to handle that transaction? Yeah, it's called a broker. You can't really do it for, there aren't really brokers for you if you're buying a business. You can get on the Rolodex of a bunch of sell side brokers. That's the So any broker is almost always going to represent the seller.

There's not like buy side brokers. Unless maybe you're really big and then you bring them in-house. And those are usually called business development guys. So the way that you find them is you go to somewhere like quiet light brokerage. You could go to e-commerce flippers. You could look on biz by sell. And they're going to have a lot of brokers listed that you could work with that are reping deals.

And then you start to develop a relationship with them like, hey, when you next get a seller that's doing X, Y, or Z, call me if it's these parameters. And I do like to develop relationships with them. They'll give you, especially if you buy something from them once, they know you're a player, you're not going to waste their time. They'll give you a lot of deals. So would you just Google like business broker?

Yeah. Well, I would go to those three. I really like, if you're going to buy online businesses, I'd go to Quietlight brokerage or e-commerce flippers. But yes, you could just Google business brokers. You could Google, I would try to be more specific. I might say like, business brokers in this geography, I might say, business, you know, HVAC business brokers,

laundromat business brokers, kind of like narrow down what your specific segment is. Because there's oftentimes specialists and like support groups, industry specific groups, basically. So when are you going to buy a business brokerage to make money from businesses that are sold and then get the first shot at businesses that are coming available at TOTUSIN. Boring business inception. Yeah. Now everybody knows. Boring Business Inception.

Nobody's listening, right? Funny story, actually. So when I was first starting to do this, this is only funny to a nerd. But I reached out to this company called Biz by Sell. And they have this like terrible interface. It's super 1980s. It's not optimizers. There's a bunch of trash on the website.

And, you know, I'm not a billionaire. But I reach out to these people and I'm like, hey, you know, has anybody ever? spoken to you about buying your business. Like, I'd like to buy biz by sell. And, you know, I don't get a response. And I don't, and I kind of like try to get a bunch of different ways. And then I, um, Google who the parent company is and realize that they're owned by Coremark, which is like a 47.3 billion dollar company. And so, so I have tried to buy business buying sites. But the really good ones are very valuable. Like, I bet that company is worth 60 to a

hundred and 60 million dollars, something like that. I'd still buy it at those terms if they would sell it, actually. I just need other investors. But I might invest in two smaller marketplaces that I'm looking at right now. There's not great options to go up against them. Like we need a Zillow or Redfin for businesses that's really well done, and it just doesn't quite exist yet for hard asset businesses. For online businesses, there are some options.

I wonder if there's anyone on this podcast that's capable of taking that on. I don't know. Guess we'll see. I would like to talk to them because this is an issue that I often have. You know what?

Here, Cody, I'm going to kind of tie this together. What I love about this and why we wanted you on the show, well, first off, you're awesome at what you do. It is very rare you come across someone that can do what you do

and it also is personable enough to explain it. Typically, the people like you are very hard to understand. They can't articulate what's in their head. It's, you know what I'm getting at. But in this era, we're finding it harder and harder to find cash flowing real estate. It's getting increasingly difficult

because in general owning real estate is less work than owning a business. So all this money's been printed by the government. It falls in the hands of smart people. They have to deploy it. It's usually less risky and less time consuming to go buy a bunch of real estate than it is to go by a business where you have to like you were looking at. You have to oversee it. Make sure people aren't skimming out the top. It's a little more labor-indusive. So that has created this really big bubble in the real. I shouldn't say bubble because it's not like it's going to pop, but it's created a very hot, market where it's harder to find real estate deals. But business deals are everywhere. Like you're saying, there's all these baby boomers that are aging out. There's an epidemic of fax machines that are

screaming, come by me, right? So this is a way that if you're into real estate and you want to work in the space that you can become an owner of a business and still find income coming in from something without just buying real estate. So I want to thank you for sharing this and for Rob for you. How do you guys know each other, by the way? I never asked that. I don't even remember. How did we become friends? Oh, you asked for your podcast like a year ago, I think. But did I just meet you online? Was I just following you? Yeah, yeah, I think so.

You were like, oh, this guy builds tiny hosts. I'd like to have them on my podcast. And then I think I'd ghosted on accident. I was busy. Did you? I was busy learning who I was. And then you emailed me like three more times. I was like, fine.

I'll do it. And then I was like, oh my gosh, he's so cool once we actually did the podcast. And then we've been buds ever since. Yeah. And then you came and spoke at my conference, which was rad. That's right. Man, that was really, that was really, really, really fun. Thank you for having me up.

You're a killer speaker. That's good. Oh, stop, stop. Yeah, you should be on a podcast or something. All right. Well, this has been mind-blowing. I love talking this stuff. I hope we can have you back on Cody again to talk about it in a little more depth because

I think with the market we're in, it only makes sense for real estate investors to sort of broaden their perspective, look around a little bit and say, hey, I still want to buy real estate, but I could buy some of these businesses that complement real estate, that's a big thing Brandon and I talked about was the synergy, right? Like, if you're flipping houses and then you go to the Burr strategy, it's not a huge jump. You're not doing something completely new. If you run a glue factory and then you want to go start like a lumberjack business, that's a really bad idea. You don't, there's no congruency between the two things. So what we're talking about is if you already love real estate,

you already know how to value it, you kind of get how the world works. Why not consider running a business that's in that world? It's not a huge jump. So thank you for that. All right. right, we're going to move on to the last segment our show. It is the world famous, famous, famous four at this segment of the show, Cody, we ask every guest the same four questions. And I will start. Question number one, if you have one, what is your favorite real estate related book? It's so cliche to say rich dad, poor dad. I guess that would, I don't, that's actually terrible. I don't have any real estate books that I would read besides rich dad, poor dad, or actually, nor where I would go, Dale Carnegie's biography. Not exactly.

actually real estate, but one of the largest real estate owners in the country at his time. And I think anytime you can read the biography of great men who have amassed massive wealth, you walk away learning a ton. I think Walter Isaacson wrote that book, who's also an incredible biographer, but check my facts on that one. Okay. Question number two. Favorite business book? This is also a little controversial.

It's not for the political leanings, but, you know, Dave, you already know that I like to be controversial. So we'll just throw it in there. We'll get everybody canceled early. There's a book, there's a book called Atlas Shrug that lots of people talk about, another one called Fountainhead. And the reason I like those books, they're novels written by a woman who came over from communist Russia to the U.S. And the reason I like them is because they were the first books that I ever read that make me feel like it made sense when you love business. I don't know if you guys or anybody listening relates that like some people just like their eyes glaze over.

They like can't. And I would love nothing more than to talk business all day. I don't care what's on TV. I don't care about your kids. I don't want to hear about the dog. The weather's out of the question. But if you want to talk business strategies, like I'm there for it all day. And that book made me realize, oh, maybe there's other people like that.

So I really like that book. I think that's what Rich Dad, Poor Dad did to a lot of people when it comes to finance and real estate is it was, that is what I've been feeling this whole time. And now I don't feel crazy. There's other people out there that feel it too. And those are always impactful moments when you have that, like, yes, now it makes sense. Like that's what the disc profile was for me with communications. Oh, that's how you got to do this.

So these are powerful books. Even if you end up not agreeing with everything that's in the book, I don't think there's anything wrong with reading it, trying to understand the viewpoint of the person that wrote it, and seeing if those principles might apply it some other part of your life, even if it's not business. Yes, agree. Actually, I will say credit to your conference. When I was there and I was in the green room with all the speakers, that's how I felt.

I was like, oh, this is how like other entrepreneurs, like think and they all like the synapse business were going. Everyone's like talking about the game plan. Everyone, you know, just super, super successful. And I was like, wow, this is, I felt very elevated being in a room with other people that were like, same, you know, same mindset. I love that. So when you are not buying 26 businesses and working them and, you know, hiring the team and operators and doing all that whole thing. What are some of your favorite hobbies?

You know, you brought up Jiu-Jitsu earlier, Dave, but my husband's really into Jiu-Tzu. I actually really like Muay. So we do a lot of Muay, a lot of yoga. I think, you know, our saying it contrary in thinking is civilize the mind, make savage the body, build the bank account. And so I try to do things every single day that I think are hard physically. That's maybe one of my favorite things because it makes everything else easier. Then it's like, oh, we lost some money this month. Okay, whatever. Is anybody going to die? So I would add MMA, I would add yoga, and then I would add I'm really into lately saunas and cold plunges. I think that's become a thing now. But those are some of my favorite activities. So pretty much anything you can do that is hard. Yeah, I don't like heights. Does that

count? Yeah, that's not my favorite. All right, let's go skydiving. I'll set it up. I'll do it. I just won't like it, Rob. All right. In your opinion, what makes successful investors different from those who give up, fail, or never get started? Ego. It's all about the ability to ask questions. I used to think that I had to be really smart. Private equity is a weird world, and lots of people are not the nicest in that space. And so for a long time, I was really quiet and just like would nod my head, like, of course, of course I know what, you know, pari-pasu means. And then I'd go Google, like, pro rata pari pasu what's that mean and um and then i realized wait a second like none of these people actually know and the thing that is their Achilles heel is that they're all pretending that they know

everything so they sound smarter than everybody else and i realized the smartest investors were like explain that to me like i'm a toddler and they had no it didn't mean that they weren't smart they just didn't care if they didn't know all the answers um and so i'm a former journalist and that really opened my eyes to a lot i was like oh if i just asked the right question I can get any answer. I don't have to have all the answers. I love that. So, former journalist Goldman Sachs ex-worker slash crazy business owner with 26 owners, really quite the resume, Cody. Thank you so much for joining us. Can you tell us where people can find out more about you on the interwebs? Yeah. I'm Cody Sanchez pretty much everywhere.

We're pretty big on TikTok and Twitter and Instagram. And then contrary in thinking, if you want any of the business breakdowns. That's where those will be. Yeah. Yeah, definitely. Go follow her on Instagram. TikTok. Literally, Cody went from like, I don't know. It was annoying. 150,000 followers to like 800,000 followers in like a week. And I was like, dang it. Now I'll never catch up. That is not going to be on my tombstone. I don't know that we're going to care about that in a year or two. So I think you got to worry about it. But we care about it now, Cody, especially Rob. Yeah, that's right. I won't sleep until I beat you. This was always what I had to feel when Brandon was on the show. He would be like, hey, follow me and he'd get 9,000 followers, and I'd get like four,

mostly the four people that felt bad. Like, oh, but like, what about David? Like, just give him a pity follow. And what people don't realize is I am perfectly fine with a pity follow. I'm not above that whatsoever. True. He is. Well, I will want to say one, one quick warning to everybody.

Go follow Cody. Go follow. Go follow photo or follow me at Robbilt. David at David Green, 24. What's going to happen is you'll follow us immediately upon following us, you'll probably get a robot that follows you back. Oh, yeah. Don't fall for the robot, guys.

Don't fall for the robot. They're out there. We're all working on the blue checks. I don't know, Cody, you might have a blue check, but me and David are working on it. Yeah, none of us talk about crypto. So there's your first trigger. Yeah. They talked to you about trick crypto.

Although, I hate to say it. Now that you said it, it's out there now. Oh, wow. Also, I think like, there's a little bit of like Darwinism happening here because I'm like, you guys, if you're falling for these bots, maybe you needed to once. because you're never going to fall for it again. Like this is like, this is like, you know, your Nigerian prince from Africa calling. Like, yeah, come on, guys.

You got to get smarter than the bots. Yeah, I have a lot of people that will send me the screenshot and they're like, hey, this is reliability tito do, two, two, two, four, five, six, seven, eight. Is this you? And I'm like, no, you're, you're messaging me. This is me. It is established that this is my account. When you get is that you, did you make up another fake account, spell your name wrong

on purpose, copy all your own pick the same pictures from. the one you had to the other one, just to message me from that one. It's understandable that they're confused. It's just funny that that's the way that they phrased the question to it. I'm not kidding you. I get minimum, minimum 30 to 50 of those messages a day. Oh, yeah, ditto. The same. My favorite thing is just I go on my, like another account just because you know, they block you from seeing them. So I can't ever see my stammer. Yeah, so I go to this other account and then I just do a screen share of like the 452 versions of Cody. which is funny because like nobody even cares about the one Cody.

I don't know why they think the 400, but somebody out there's fallen for it. So you gotta wake up because if people don't buy this stuff anymore, I think the scammers go away and then we're solved. Wait until I get scammed. Then I'll come back on here and you guys can ridicule me mercilessly. Well, everybody cares about the one Cody. All right.

Let me clear that up for everybody. Yes. And on that note, thank you so much, Cody, for being on the show, for sharing your expertise, for giving us a new perspective on how we can make money through real estate and enjoy what we do. Again, what's your preferred method for people to

reach out if they do want to talk to you? Where we usually do the most engaging is probably Twitter. So get at me on Twitter. I respond to all the comments on our tweets. And I think Twitter's actually pretty fun and you can engage with humans. They're easily. TikTok, forget about it. I don't know. No promises. What's your thoughts on a business person in Elon Musk buying Twitter? I think you probably know where I'm going. I think he's crazy for doing it. I wouldn't, you couldn't pay me enough money to buy Twitter with all the nonsense that goes on from there. But I think it's good for the platform. Okay.

Do you think it was good for him as a business? You think that made sense? No, no. I don't think it's, I mean, maybe he's a rocket scientist, so he actually, you know, knows how to do a much more difficult problem, which is send rockets to space. I think you can probably figure out how to stop people from, you know, corrupting our free speech problem here in the U.S. So I think it probably makes sense to some degree. But I'm curious what type of synergy there is between his goals and Twitter. Because like as we were just saying, you buy a business if it's related to something you already do.

So there's some angle I'm sure Elon Musk is seeing. Would you agree? Well, he kind of said when he bought, when he set out to create Tesla and SpaceX, he said, they're really hard problems to solve. I think we have about a 10% chance of solving them. But they're worthy problems of solving. So I'm going to start it regardless. And so I think he probably feels the same.

Free speech is worth saving. It's a hard problem, but it's worth trying to do. And then he said, it's not in my nature to give up. And so that makes me think he'll probably be successful with Twitter, just like everything else. That is a good point. Rob, what's your preferred medium where you'd like to be contacted? Oh, YouTube.

You can follow me on YouTube at Rob Built or Instagram at Rob Built. All righty. I'm at David Green 24. Facebook Messenger is probably the best way. to get a hold of me if you have something important. I'll give you guys a little secret there. It's not a secret now that I've said on the podcast. But Instagram, we get like 700 messages a day.

Facebook Messenger, I get two. So if you really want to get a hold of somebody important, that's the best way to go about it, assuming they have the app on their phone. That's like my go-to move if I ever want to get in touch with somebody famous or something is until I have a blue checkmark. They don't know which of the David Greens it is. So I use Facebook Messenger.

And then you can follow my YouTube at David Green Real Estate. Very boring, just like me. Cody, any last words before we get out of here? No, just, you know, go diversify. Try to buy something, even if you don't use money. There we go. Rob, anything from you? Mm-mm.

I'd say go diversify and, you know, go make money. Or even if you don't have to spend money. Sounds smart. All right. Well, I get us out of here. Thank you, guys. This is David Green for Rob copying Cody's ending line. Abas Solo, signing off.

Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calicoke content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own.

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