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"I could take ANY local service business to $100k/month in 90 days using just Claude Cowork" "Well have you actually done it?" "No, of course not"

// Creating Your Own Yacht: The Art of Making People Come to You //

Craziest thing in America is that the average person could 2-5x their salary simply by taking a sales role but they're too scared of people telling them no 20 times a day

It starts getting real ugly for the "just enjoy life" guys around 30 or so No one takes them seriously anymore and they have 10 years of work to catch up on Painful to work hard in your 20s but you just have to do it

That’s because the US is an incredibly high-tax society in which - 36% goes to old people - 14% goes interest on the debt - 24% goes to poor people - 13% goes to defense - 6% to veterans So a normal working-aged person is taxed insanely high and sees no benefits

It starts getting real ugly for the "just enjoy life" guys around 30 or so No one takes them seriously anymore and they have 10 years of work to catch up on Painful to work hard in your 20s but you just have to do it

Craziest thing in America is that the average person could 2-5x their salary simply by taking a sales role but they're too scared of people telling them no 20 times a day

HOW PRIVATE EQUITY FIRMS ANALYZE DEALS: Most important metrics: 1. Stabilized yield: Since we focus on value add, the entry cap doesn’t matter, as long as we can service our debt The stabilized yield matters because it shows the intrinsic cash flow of the deal The stabilized yield is the stabilized (post-renovation) NOI divided by all the costs in the deal Very simple calculation (see below picture for ex) but very important We typically need to get to at least a 150 bp spread between the stabilized yield & the market cap rate for a deal to pencil (ex if market cap rate is 5%, need a minimum 6.5% stabilized yield) For example, buy for an in-place 4 cap, increase revenue to get to a 6.5, sell for a 5 cap. If you buy for $10MM with an NOI of $400k, put in $2MM in renovations & bump the NOI to $780k, you stabilize at a 6.5 yield ($780k/$12MM) Property is then worth $15.6MM ($780k/5% market cap), for a profit of $3.6MM Speed matters as well (quicker is better for IRR) Stabilized yield is more important than IRR because it displays the intrinsic value of the cash flow Whereas IRR is a bet on the state of the capital markets (debt financing available) at sale as well as cap rates at sale, which makes it a guess  2. Basis (you can show us any IRR you want & we’ll toss it if the basis is bad): What does this mean? It means that you want to look at comps & make sure that in any deal you buy, you’re paying less than the market average So if you take 10 comps & the average price is $100k/unit, you want to be buying for under that number Otherwise (barring the real estate being markedly better), you’re not getting a good deal, you’re simply paying “market” Furthermore that means, in order to sell for a profit, the next buyer will actually have to pay you “above market”. Which is a dangerous bet to make - you’re essentially betting on a “greater fool”, which brings us to the next metric   3. Exit basis: Heavily tied to #2 - you don’t want deals where the projected exit basis is significantly above current the market basis Ex if the current market basis is $100k/unit, you’d want to buy for $60k/unit & pencil a sale at $80k/unit That gives you a lot of breathing room & allows the next buyer to make money as well All easier said than done, but this is how disciplined underwriting works 4. Unlevered vs levered returns (IRR): This is just a gut check to make sure that our leverage isn’t out of control   You want to check to make sure that the levered returns aren’t drastically different than the levered returns Otherwise you don’t have a good deal, you just have a lot of leverage 5. Equity Multiple: Only check this to make sure that they’ll be enough profit for the deal to be worth it (no point in 20% IRR & 1.2x EM - waste of time) 6. Cash-on-cash: A lot of amateur investors emphasize cash on cash returns but it’s a far less important metric than stabilized yield because it’s reliant on the debt capital markets at any point in time, which isn’t intrinsic to the property So it’s “downstream” of the yield It’s also less important for quick flips (which is mainly what PE firms do) because a lot of units turn over during stabilization, which results in choppier revenue for those years We essentially ignore this metric & expect cashflow to be low during the hold 7. Components of NOI: Then you look at the cash flow itself What are the components of the rev? What are the components of the expenses? What risks could cause major fluctuations in either one? Are you willing to accept these risks? How do these risks compare to other deals? Want to make sure you go into each deal with eyes wide open There’re risks to every deal (unavoidable) but you want to make sure the deal makes sense on a risk-adjusted basis So this isn’t really a metric, but the deal needs to be actually viable on a risk-adjusted basis & the property has to be actually good real estate Investing in only *great* RE has allowed us to outperform

What people don't understand about the S&P is that every single person in the country who has money is also invested in it When your money goes up 15%, so does everyone else's You gained zero relative wealth. You need to outperform the S&P if you want to actually get ahead

If you want to make over $500k, you’re going to have to be “the guy” The guy who drives in revenue, the guy people turn to when things go wrong There’s no way around this. People have this dream where they make a ton of money and don’t have any responsibility. It doesn’t exist

W-2 era is over. If you don't own equity, it's going to be a brutal next 20 years Can already see it start to happen in luxury areas. Majority of new homeowners = business owners

Lot of people assume they'll keep working until they're 65 But in many high-earning careers, you get pushed out in your 40s. Cheaper to hire younger 45-65 is when people really regret not owning a business. Kids, high burn rate & one decision away from losing all their income

It starts getting real ugly for the "just enjoy life" guys around 30 or so No one takes them seriously anymore and they have 10 years of work to catch up on Painful to work hard in your 20s but you just have to do it

I've looked at a few hundred boomer owned businesses at this point, a few thoughts: - wide majority aren't sellable - 30-40% are engaging in blatant tax fraud - about the same are engaged in insurance fraud - the ones that are sellable are really good businesses - they have zero clue how businesses are valued (they think showing zero profit is a positive - no taxes!) - very few have an actual leadgen system (word of mouth doesn't count), which is insane for businesses that have been operating for 20+ years - most can't go line-by-line in a P&L and explain their expenses - most pay their employees horrendously - fair amount actually do run their businesses passively/absentee, contrary to popular belief that it's not possible Really a different world than the younger generation of business owners

I've never met a single person who was incredibly enthusiastic and treated each day like a gift who wasn't successful long term Attitude is 100% controllable and yet the average person mopes through life acting like each day is a unique form of punishment

In September 2021, I bought a deal for $2.6MM. This week I sold it for $6.4MM. Turned $800k into $4.1MM in less than 2 yrs I wrote a 3,000 word case-study explaining the exact process I used step-by-step To get a copy of this 7-pg case-study sent to your DM, reply "deal" below

What people don't understand about the S&P is that every single person in the country who has money is also invested in it When your money goes up 15%, so does everyone else's You gained zero relative wealth. You need to outperform the S&P if you want to actually get ahead

Craziest thing in America is that the average person could 2-5x their salary simply by taking a sales role but they're too scared of people telling them no 20 times a day

Have a 30-unit boutique hotel Aside from: - SEO - Airbnb/Vrbo/Expedia/etc - Social media - Email campaign What are some creative ways to drive bookings?

There's an epidemic of people who have "wealth" but never use it Million dollars in their 401k, won't take out $50k to start a business. $1.5MM in home equity but won't spend $15k on a vacation At a certain point you're not even living anymore

Bought: September 2021 for $2.6MM Sold: July 2023 for $6.4MM Initial Equity: $800k Total profit: $3.4MM Equity multiple: 5.2x IRR: 145%

There's an epidemic of people who have "wealth" but never use it Million dollars in their 401k, won't take out $50k to start a business. $1.5MM in home equity but won't spend $15k on a vacation At a certain point you're not even living anymore

Craziest thing in America is that the average person could 2-5x their salary simply by taking a sales role but they're too scared of people telling them no 20 times a day

// Creating Your Own Yacht: The Art of Making People Come to You //

There's an epidemic of people who have "wealth" but never use it Million dollars in their 401k, won't take out $50k to start a business. $1.5MM in home equity but won't spend $15k on a vacation At a certain point you're not even living anymore

I've looked at a few hundred boomer owned businesses at this point, a few thoughts: - wide majority aren't sellable - 30-40% are engaging in blatant tax fraud - about the same are engaged in insurance fraud - the ones that are sellable are really good businesses - they have zero clue how businesses are valued (they think showing zero profit is a positive - no taxes!) - very few have an actual leadgen system (word of mouth doesn't count), which is insane for businesses that have been operating for 20+ years - most can't go line-by-line in a P&L and explain their expenses - most pay their employees horrendously - fair amount actually do run their businesses passively/absentee, contrary to popular belief that it's not possible Really a different world than the younger generation of business owners

Base-level expenses (if in a major city) basically $7,500-$10,000/mo now Easily $10k-$20k/mo if you're any bit of a spender Means ~$100k post-tax is breakeven, roughly $140k pre-tax. Need to be making ~$200k to start saving a dollar, $300k+ to save anything meaningful

It starts getting real ugly for the "just enjoy life" guys around 30 or so No one takes them seriously anymore and they have 10 years of work to catch up on Painful to work hard in your 20s but you just have to do it

I've never understood the obsession with off-market deals Would you rather have to convince someone who doesn't want to sell to sell - or convince someone who already wants to sell to sell to you? Off-market owners are by definition not sellers

That’s because the US is an incredibly high-tax society in which - 36% goes to old people - 14% goes interest on the debt - 24% goes to poor people - 13% goes to defense - 6% to veterans So a normal working-aged person is taxed insanely high and sees no benefits