There are a ton of important things in real estate investing: Lead generation, sales, lead conversion, etc.
But when it comes down to it, real estate investing is one thing: Getting the numbers right. No matter how great your marketing is, you’re not profitable if you spend more than you make.
In this episode, Chris Music tells you how he makes sure he gets the numbers right every time.
Show highlights include:
– The one book that sparked the success of many highly profitable investors (don’t read this if you’re comfortable and want to stay that way). ([7:30])
– How to become a successful full-time investor, even if you’re stuck in a job right now. ([17:05])
– Why “knowing your numbers” is what makes the difference in a falling market. ([24:30])
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You're listening to the REI Marketing Nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of Ad Words Nerds, a high tech digital agency focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition and live a freer, more awesome life. And now, your host, Dan Barrett.
Dan: Alright, this is Daniel Barrett here with Chris Music from PS Homebuyers. Oh no, I'm sorry, it's PSBuysHouses.com. Chris, you know, I literally asked you about this before we even started and I wrote it down and everything and I still said the wrong thing, so my apologies. How are you doing?
Chris: I am doing great today, Dan. [0:01:00.5] Appreciate you having me on. How is everything on our end?
Dan: Everything on my end is alright, it is cold and dry and I spent the morning without any internet because we had power lines come down, we had a whole bunch of wind and everything. It's generally Connecticut type winter weather. You however, you are over in the San Francisco Bay Area. This is where you are currently buying houses?
Chris: Yeah, that is correct. Definitely a little different weather climate than you guys are having over there, for sure. If something like that happened to me I would not be as lax about it.
Dan: So I'm curious man, I definitely want to dig to you a little bit and kind of how you got started investing and everything, but the Bay Area
is one of these things where as someone who's involved pretty tangentially, but still involved in the tech industry and kind of what I do, there is something I hear about all the time. [0:02:03.1] I've never actually been there, so like what is that market like now? What's it like to be an investor there, like what's the housing market? Paint people a picture of that area, if they're not familiar.
Chris: Yeah, I'll definitely give it my best shot, I do feel like that is a very loaded question for several reasons, but before I jump into that, I will say if you have not had the pleasure to come visit the beautiful Bay Area, you definitely should hop on a plane and get out here some time, there's a lot of fun stuff to see. The reason why I say it is kind of a loaded question is just because I don't really think that there is a "Bay Area market", there's so many different areas, even economically, just the prices of the homes all restraint and they kind of operate independently of each other so the areas that I buy in, there's just such a difference between some of them, I can't really, it doesn't do them justice to lump them all into one "market", if that makes sense. [0:03:09.6] We have homes that we buy that are $100,000, we bought homes for $2,000,000, it's all kind of within 40 miles of each other. It's just such a drastic difference depending on where you're located. A lot of that, I guess, is centered on kind of you mentioned earlier as far as the tech history. The closer you are to those kind of hubs like Silicon Valley or San Francisco, those markets are going to be a little more expensive. As you move further you know out towards inland, even getting out towards Sacramento, they just get cheaper.
Dan: When you say the Bay Area, is that a pretty like sprawling, widespread geographical area?
Chris: To me it is, but I guess once again, it's one of those things, depending on where you are located in the Bay Area, you consider the Bay Area to be a different range of stuff. [0:04:04.0] Both down in the South Bay Silicon Valley, they kind of consider just that little region to be the Bay Area, and folks who live more north or east are not quite considered to be in the Bay Area, whereas for me, I'm actually located in Concord, which is for geographical references maybe 40 minutes inland of San Francisco. I consider this to be the Bay Area, and even all the way toward Sacramento, which would be an hour inland from me. It all depends where you're from and how you define it, but for my purposes, yeah, I consider it to be this whole kind of area which is, I don't know exactly what the radius is, but from San Jose all the way out to Sacramento. A lot of housing, like I said, a lot of just different types of housing.
Dan: Tell me a little bit about you, like how did you get started with investing? [0:05:00.3] What was your introduction to real estate investing? Is your background in real estate?
Chris: No, no. I do not have a background in real estate or anything like that, but I guess like not too uncommon from a lot of folks that are in real estate, I was gifted the book Rich Dad Poor Dad several years back, I would think it was in 2010 when I first read that book. At the time, I had just moved back to the Bay Area, I lived at a few different places but I moved back to be near my family. I got a great job, I was happy with it. Was going to be totally content to just work that job until the day I retire and have a comfortable life, but I got that book and I read it. I mean I'm sure most folks who have read it, it's not like it gives you any specific actionable plan on what you should do, but it just opened my eyes and kind of made me think about a few different things. [0:06:01.2] Because of that I started researching, jumping online, talking of folks who I thought might have some answers for me. As far as different strategies of what I could do beyond my normal 9-5 and try to change my financial picture for my family. I landed on real estate after kind of going through that process. To me it just made sense, it was something that was just real, not easy, but concrete. It's actually dirt, it's wood, it's sticks. I've got about the stocks, but the things you're going to be in the stock market, in my opinion it's just a whole different type of game. Whereas the kind with the real estate, I'm not saying it's simple, but it was definitely something that I felt like I could understand, so I kind of just focused in on real estate is what I want to do, but then it's like what do I want to do in real estate. You quickly find out there's so many different kind of avenues you can take but in this one industry. Right?
Dan: Yeah. [0:07:02.8]
Chris: That's kind of how I got into real estate and the impetus of it was just reading that book and kind of just changing my mindset of what I wanted to do with my day.
Dan: If you were going to get someone into real estate investing today, like let's say you through the magic of time travel, you he run into your younger self, and you don't disrupt the time continuum or whatever, is that the book you would give them? Rich Dad Poor Dad, it's been brought up on this podcast multiple, multiple times. Every time I hear it, I feel weird because I read it too relatively early, but it didn't hit me that way you that it's hit so many people that got into real estate investing. I'm curious, like it if you were going to try to get your younger self or someone else into real estate investing, is that a book that you'd recommend, or would you kind of advise them to do something else? If they didn't have the back in real estate, they don't even know if they want to do it? [0:08:02.6]
Chris: Yeah. Well I mean, like I guess when I read the book initially, it wasn't like it spoke to me like, "You got to dive into real estate.", it was more like, "You need to do something beyond just working this normal 9-5 job." Not that there's anything wrong with that, but just for me it opened my eyes to a different possibility of what could be out there for me. If I was to suggest a book or something to a younger individual who is interested in just learning about something, yeah, that definitely would be the book, it had a great impact on my life. I'm not saying that that specific book gave me a plan or an outline for anything, it's not like it gave you actionable steps, but it's a concept, it's more of like the paradigm shifting type read, at least it was for me, and because of that I started down this road that kind of got me to where I am today. But the thing about it, I really haven't recommended it to many people, and because I feel like it is such a powerful book and the message that it provides that - it's not for everybody in that sense. [0:09:12.6] Like it's not a book where... If you're perfectly happy with your life and you're going down this road and you are content, it can do more harm than good in a lot of ways. Like the saying that ignorance is bliss. I do try to be very mindful of that, I don't want to necessarily give it to somebody if they're not going to take actionable steps to try to change something about what's going on in their life, because you could take somebody who is perfectly happy and now make them kind of discontent, but not actually, just kind discontent enough to go do anything about it.
Dan: It's funny, man. I feel like all the best books are kind of like that. They're not for everybody. It reminds me of, this is really kind of useful general principle, and it was in the context of medicine. [0:10:00.9] Where it's like anything that really has the potential to help you, also has the potential to really hurt you. Aspirin is something that we all kind of take without thinking about it, you get a headache, you pop some aspirin or some ibuprofen or whatever it is, but there are tons of people that die from overdoses on that stuff every year. And then the flip side of that is like, if I have like, if I'm promoting some awesome medical treatment where like if I say, "Chris I'm going to smear kelp all over your face and that's going to cure your whatever, it's going to make you taller." or something right. If you ask me, "What's the side effects of that?" and I said like, "There are no side effects." It's like that means it's not doing anything. If there's no way you can misuse it, it doesn't really have the capacity to help you a whole lot. And it's interesting that you kind of raise that point about the book where it's like in the right position this can really help you, but it's not for everybody and you kind of got to be careful with that. [0:11:09.1] I feel like all the best books are kind of like that.
Chris: Yeah, that definitely makes sense and it's something I would agree with. I mean reading a book like Rich Dad Poor Dad or any truly powerful book is in a lot of ways like taking a dose of medicine. Right? It's either going to work out for you or it's going to make you feel some kind of way, but it's going to have an impact on you, one way or another. I'd imagine that's kind of the point of, or the goal of and author when they're writing a book, is to get some sort of reaction and feelings from people that are reading their words. Right?
Dan: So what was the transition for you? You mentioned like Rich Dad Poor Dad kind of got the engine running, but he didn't really have a clear map of where you want to go. So what was the transition? How did you break into saying like, "I don't have a background in real estate." How did you then transition into doing actual real estate investing doing your first couple deals? [0:12:03.5]
Chris: I think I first read the book in 2010 and it got my wheels turning and spinning. I've read a few other books from the Rich Dad line, there's lots of them out there on different topics, started doing research online, found the Bigger Pockets website, which I'm sure a lot of real estate folks are aware of, and just really dove into trying to learn everything I could on real estate and the different types of investing in real estate, started going to networking events and trying to connect with folks that were actually already doing this thing that I wanted to do. I would say that probably for about a year I was doing the research, going to networking events and stuff like that. Obviously I had a full time job at the time so it's all kind of nights, weekends, time I was putting in on the side endeavor at that time. [0:13:00.9] After that I kind of thought I had a plan and then place that I was going start executing, and so I did kind of start doing things, meeting agents, making offers, finding investors, lenders that I could leverage to actually buy properties and I found them, "building my team". There's lots of learning lessons and stumbles along the way in that process, but that's kind of how it, all at least initially started, it was just spending time educating myself, meeting folks, and then once I thought I had the idea, had it all "figured out", then I kind of started trying to do it. That's when you really learn the thing, right, is when you're out there doing it and making the mistakes.
Dan: Yeah, that's certainly definitely true. Let's fast forward now because you've been doing this for a while. So explain kind of what your business model is, like are you wholesaling, you flipping, what kind of deals you do, that kind of thing.
Chris: Yeah, yeah. Do fast forward to today, primarily what I do is flip houses, I would maybe 85-90% of it with the state transactions that I'm involved in is my company purchasing a home, remodeling it, rehabbing it and then selling it on the open market to a retail buyer. [0:14:18.8] I do on occasion do wholesale, if property isn't quite what I'm looking for, maybe it's a little too far away or my plate's just too full at the time, I'll kick that off to another investor for a fee. Last year I did acquire my first rental property, got another one going this year, so that's kind of something that I am branching into as well, those kind of more of a long term hold. There are couple other things that are happening, but the primary thing that we do is flip houses.
Dan: Cool. That's like the classic Rich Dad stuff, it's like the buying whole rental property?
Chris: Yeah, it's a whole different strategy, it's obviously kind of more long term perspective on things and just building out that you know cash flow which is a term synonymous with everything I've ever seen in the Rich Dad family, is just all about the cash flow. [0:15:11.3] My thought was, "Well I got to build up some money to go buy some cash flow." so that's where the flipping thing came into play, just you're building chunks of money quickly. I mean if you're doing it right, that is.
Dan: Yeah, ideally.
Chris: I mean that's the objective.
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Dan: [0:16:02.0] What do you think your strong suit as an investor is? Because there are a lot of people who, they read Rich Dad, they jump on Bigger Pockets and they never do it deep. They just never connect the dots in whatever it is. What do you think are like your strong suits are the things that you're particularly good at that you think have contributed to your success? Because you've been doing this for what? It's not like you started investing yesterday. What do you think that is? What do you attribute that to?
Chris: Yeah, yeah. I mean I guess I can mention a couple of things that I think have really helped in me being able to develop in my real estate investing career. I'm not going to sit here and say that I'm stronger in any areas than others, because I just don't know that, but a couple of things that I think were very important to me as I was getting started and kind of further down the road today, at least initially what was huge for me was always pushing forward. [0:17:05.1] Every day I was making sure that when I got off work I sat down and I was doing a little something to further this goal of mine. Every weekend I was working, I was going to work late at night, going to work on the weekends, just put that time in that I needed to to make sure I was always pushing forward. I mean sometimes it was a slow grind, especially when you're first getting something started. Regardless of whatever you're trying to do, when you're first entering into doing something, it's going to take time, energy, and effort to get it moving, but that classic snowball thing, once it starts moving, it starts carrying itself after a while with the momentum. Just that thought that I'm going to keep pushing forward on this, regardless of the thing people are saying, "You can't do this." or it not being able to find properties or whatever. I just always had in my head somebody is doing this out there in the world, lots of people are successful at this, well I can be one of those people. That was one thing, just I guess the persistence, but another thing that I think is very important is, and I don't remember exactly where I heard it, but somewhere along the way and it just made sense to me and it stuck with me; I always try to treat every potential house that I look at or when I'm breaking it down, I do my analysis on it, stick it into my spreadsheets and I just I always try to be very, just realistic about the numbers and always stick to those numbers and those projections. [0:18:28.3] People in, general you can get emotional and when you're emotional you start to make decisions that are not the most rational, and that's not necessarily how you want to operate a business, at least in my opinion. So I've always tried to make sure that I stick to these parameters that I put in place, because they're there for a reason, to protect me from making decisions that are going to be, cost me time, money, whatever the case may be. I know like when I was, once again, taking it back to kind of getting it going is I had maybe done a couple projects but I wanted to do more, I was struggling trying to find that next house, because I didn't quite have a whole system built up yet, I was just kind of buying one house and hoping that I could buy another after that. [0:19:11.3] In that time you think, "Okay, well maybe I can kind of relax a little bit on my profit expectation or maybe I can... Maybe the rehab is not going to cost me as much as I want to think it will." Kind of just finagle the numbers a little bit so that you can buy the home. Obviously a few years back when the market's just roaring up, it probably worked out. As I'm sure a lot of real estate folks have noticed over the past handful of months, the market has turned a little bit on us at least here in the Bay Area. It's times like that where having those members, being very deliberate about sticking to what you set as your parameters is really going to protect you. That's kind of a long way in protecting me from possible problem properties as I've gone to my career. [0:20:04.3] Where I am now, if we have a couple bad ones, is it going to tank us? No. But when you first get rolling on something, you just don't have that kind of capacity. Had things gone too sideways at the beginning, I might not be here. Whether because I couldn't afford it or I just would have given up because I would have thought I wasn't able to do it.
Dan: I think that's absolutely huge. I mean I can't remember the actual quote, but I can kind of paraphrase Charlie Munger who's Warren Buffett's partner over at Berkshire Hathaway where he says like you don't have to be super smart, you can get really far by just not doing stupid stuff. It's that temptation to, "Hey, I'm so close to doing this, maybe I can just fudge my numbers and make it work." It's funny, it reminds me of like I track all my calories and everything like every day when I eat, and there's so much temptation where you're like putting something on your plate, I'm literally weighing it out. [0:21:04.0] I'm like calculating calories. I'm like, "That's like a cup, right?" And just kind of eyeballing it, and it doesn't seem like it matter as much in the moment, but then like two weeks I'll be like, "Why hasn't my weight changed?" It's like because you cheated a whole bunch. Even if it's like 1% here, 1% there, it adds up. You know what I mean? It adds up. So I think that that discipline of being like these are my numbers and if I don't hit those numbers I'm going to walk away from this deal, I think it's such a huge skill set that I think a lot of people gloss over, because they're so focused on the goal, they're so focused on like the great stuff that could happen, that they kind of forget to protect their downside. Do you think that's the case?
Chris: Yeah, I mean I think you summed it up great right there in that assessment. [0:22:01.7] I know I look at as this business or these things, they all can be you correlated to other aspects of like, you used an example of your nutrition and eating and all that, it all kind of, your mindset is towards one thing, it can be applied to these other things as well. I mean, I don't know if it's discipline or whatever the appropriate term is, but that concept of just protecting the down side or just being mindful and adverse to potential risks. When everything's going great or you're reaching for something, it's easy to kind of not take into account the weight of what could come on if the things were not to go as ideally as you were hoping. Just being able to just like set parameters and you set these things up. At the time when you did it, you did it for reasons. I'm not saying those things can be adjusted as you move forward or as market changes or your expectation changes, but you don't just do it in the moment to make it fit one particular project or one particular goal, that's sort of thing that you want, kind of rationalizing it to make makes sense, and when you start doing that you're not really being the logical business person or dieter or whatever you want to be. [0:23:14.4]
Dan: You kind of alluded to this too, but a really great market will cover up a lot of stupidity. You could get into a deal and a really amazing market, do all your numbers wrong, go way over on all your costs and still come out ahead, because the market just happened to go up enough to make you money. In a correcting market, which it seems like that's I mean pretty much the consensus of everyone that's been on the show and of my clients and the investors that I talk to who are doing hundreds and hundreds of deals, a lot of people are doing really high volume, everybody's consensus is that the market is correcting, that we've been in a really great kind of growth period and now where kind of headed back the other way. [0:24:10.9] I don't think it's crash kind of scenario, but I think it's safe to say that things are normalizing or whatever you want to call it, and in those situations knowing your numbers makes all the difference in the world. Because there's not that extra buffer of like free money kind of floating around there in the economy, I think that's absolutely huge.
Chris: I definitely think that is more crucial now than it has been over the past, I mean as long as I've been doing this. The downturn there is the market's just been on the way up. I'm not saying that I hadn't been helped out a few times because of that, but as the market shifts a little bit, it's going to separate some folks. A lot of people that were doing okay are kind of getting into this thing they may not be able as inclined to do so, considering that the, like I said, the market's clicking a little bit and prices are not appreciating as rapidly as they once were. [0:25:14.7]
Dan: For people that want to learn more about you, Chris, or want to learn a little bit more about what you're doing, first of all, the web site is PSBuysHouses.com, PSBuysHouses.com. Is that the best place for people to find you or is there somewhere they can find you on social media, anything like that?
Chris: Yeah, I mean obviously just more than happy to connect with anybody who wants to chat or anything of that nature. We do have the website, which is obviously more kind of geared towards sellers, folks who may be looking to sell their property. You could email me, which would be Chris@PSBuysHouses.com. We do have all the normal social media accounts. Facebook page, Instagram, all of that. I think it's all under Proud Start LLC. [0:26:00.8] Full disclosure, I'm not the biggest kind of online savvy person, so we do have all the stuff, I do have somebody that updates it and I will get notification if you reach out through those different formats, but I think the easiest way and the most direct way if you actually want to chat with me, just shoot me an email, we could jump on a call or something. Most efficient way I would, in my opinion, to just connect with somebody.
Dan: Yeah, that's awesome. Definitely, for you guys that are listening to this and you want to reach out to Chris, I highly recommend it, he's been doing really amazing things out there in the Bay Area. He's a super, super smart guy, one of our oldest clients, I will say, Chris. One of our longest running clients, so that's pretty cool.
Chris: I did not realize that. I mean it's been a while. I've been rolling with you guys for a while, I did not realize that I had that sort of tenure within the company, though.
Dan: Yeah, when you started working with us, I think it was just me. It may have been just me, I'm not sure how far back it goes, but that was a long time ago. [0:27:02.3] It's been a while.
Chris: It's been a few years and I do remember your first conversation, it was you and I chatting. Obviously now you have a great team and I do enjoy working with them as well.
Chris: Yeah, I mean you guys, I've been very pleased and happy with what our relationship has done for my business.
Dan: Yeah, man. Well it's been my pleasure and I really appreciate it, and definitely for anybody listening, look Chris up. Like I, said you can find him at PSBuysHouses.com, he's buying houses over in the San Francisco Bay Area. Chris Music, thank you so much man, I really appreciate it.
Chris: You're welcome Dan, I do appreciate you having me on and looking forward to hearing how funny I sound on the podcast when you put it up.
Dan: If it makes you feel any better, I have never been able to listen to a complete podcast with me on it. I cannot get through it. So you don't have to feel ..., don't force it, just have someone else listen to it for you and have them tell you how it went. [0:28:04.9]
Chris: Kind of give me highlights. Definitely might do that.
Dan: Alright, cheers man, I'll talk to you very soon, Chris.
Chris: Alright, you have a good one.
When you look at experts in any field, it looks like everything they touch turns into gold. And it might even make you feel inferior when you’re not getting the same results they’re getting. The truth is that even experts in their fields are wrong. The difference lies in how they deal with being wrong.
When you live in a smaller town, you might envy big investors in Houston, Los Angeles or Dallas. After all, they’ve got more potential deals, right? It might feel like there are no deals for you and that your market is too small to become a successful investor. Today’s guest Blaine Dartez will show you