268 - Best of 2025! From $0 Income to $500k a Year Through Real Estate with Sean O'Dowd

0:00We've had multiple conversations with a$60 billion investment platform, and it came from a ranking member of their team with a gray silhouetted Twitter profile because they saw something that we were tweeting about. I picked the one out of the three to not become a unicorn, so great picking on my part. With all of those in mind, we ran the math 100 different ways to Sunday, and every single time it made the most economic sense to build a fund. 100 million net asset value of the fund, the equity being worth 100 million. I went from making 500 to basically zero for two years in a row now. And it's probably going to be zero for another year or two.

0:34I'm reinvesting in hiring the team and building this out.

0:40What are you doing right now? What the heck is your business? Yeah, so I run a real estate fund. So we buy single family homes and nearly high end school districts. And then we rent them on long-term leases to families that are going to be there in a really good school district. I think that was the best explanation I've ever had somebody give. It was short, succinct, not a lot of wasted breath. It's amazing. Your thesis is to buy homes in good school districts and then rent them long-term to people with families. Exactly right. This wasn't always what you did. What did you do before the fund?

1:13How long has the fund been around? Yes, the fund's been around for about a year or so, but I was doing this personally with my own money for about three, four years before that. So I started my career in consulting, both for a big consulting firm, and then I was also doing it independently. And then was basically taking the dollars I was making on that and moving them over to the real estate so I could buy some homes. I have to do that for a couple of years. It's like, okay, there's enough need on the bone here. I can leave the consulting and do the real estate full time. Okay. So before the fund, you were just doing consulting full time?

1:44That's right. Now, was it your consulting or was it like, hey, I work for BCG or Bain? It was both. So I started my career at BCG, worked at BCG for a couple of years. left, actually joined a venture-backed startup and was an employee like 40, 50, doing strategy and operations for them. I had a lot of time on my hands. So I started doing some consulting on the side because I knew how to do it. And then that kind of quickly compounded to the point where I left the startup to do my own consulting for a couple of years. How did you actually find the work? A couple of different things. Mostly I used a platform called Catalan.

2:15I think of it as like Upwork, but a higher market, meaning the clients are Fortune 500s, they're mega private equity funds, places like that. So I would go on there and there'd be major private equity firms looking for consultants to do some work. And then I would apply for that work. Similarly to Upwork, just different clientele. So a lot of times people think about entrepreneurship as like, quit my job, bought a business, or quit my job, started a company from scratch. You did it in a way that is the way that I think is the safest way to get into entrepreneurship. You work, you get some corporate experience, you build a company around consulting, and then you, it's tech, right?

2:53Land and expand, you've heard that phrase, like you land in one thing, you expand. And then you went from consulting and you built an actual business. Was that thoughtful? Was that intentional? Or was it like, it just kind of happened because you're putting one foot in front of the other? It was a little bit of both. At the time, it was like, hey, I know how to do the consulting work. This is easy stuff. Once I have a client, I know how to go from idea to delivering something the client's happy with. Like, I just kind of fell into doing that. but to your point like you you learn pretty easily like it's like business training wheels like hey i'm doing something i already know how to do now i need to learn how to like price work how to do the legal how to do the insurance how to do ap how to do ar how to do those kind of basic things on top of something i already know how to do and then you can then get these business training wheels do something a little bit harder of like hey i still have those basic business foundations that i've now learned but now i'm doing something generally day-to-day that i don't know as well as say I used to on the consultant side of things.

3:50What was the idea behind getting into consulting and doing Catalanct? Was it to control your time or was it like, I want to be an entrepreneur and this is the next logical step? It was neither actually. So I left BCG knowing I wanted to do venture-backed startups. I was like, I want to work at a venture-backed startup. I had three offers when I left BCG. I picked the one out of the three to not become a unicorn. So great picking on my part. Good for you. all. That's core. Like I needed money. I was going to buy a ring to propose to my now wife. So that's why I started doing consulting work is like, yeah, this is a good way to make some money to go buy a ring.

4:23And then it got to the point of like, Hey, like actually I'm making a good amount of money. I'm just going to keep doing this because I can now go buy some real estate with it. So you went to Wharton. I can tell cause you're wearing a Wharton sweater. Yeah. How old are you? I'm 30. Okay. So you went to Wharton, you came out of school, you work in consulting. I've always heard consultants make really good money. Would you mind sharing? How much money did you make the last year you were a consultant? So at BCG, when I started, I've bumped it up since then. It was 80 grand base salary out of school.

4:53And then with bonus and everything, I think it was like 96 total year one. Year two was a little bit more than that. This was 2017. So there's been a couple of pay raises since then, but it was basically about a hundred right out of school. And then independently, that was between like 450 and 550 a year. Really? So it was a big jump when you went from BCG. It was a very big jump. It was a pretty, it was a material jump to the point where it was a pretty significant lifestyle change in that I've got two kids, a third on the way. We were able to like afford childcare and we were able to start buying investment property and do things like that.

5:28That's incredible. It was a big jump. Okay. So you're one out of school, a hundred grand. You're two out of school, call it 110 grand about the same time. Yeah. 115, 110 year three. What were you making year three? Year three was I was at the startup. So I think I made like 65 at the startup. And then independently on top of that, I did like five or three, five or four. It was like a smidge of a 500. So like year three was like a life changing year for lack of a better way to describe it. How many years ago was this? 2020? That was 2018, 2019. Okay. So you're like 26, making 500 grand a year? Yeah.

6:09I have 24, 25. 25. Because I had my eldest, my son. And when I was 25, I was over 500 that year. That's incredible, man. It was a really great, nuts situation that I completely fell into. A year ago, I think? I don't remember. Somehow, either you posted about it or you messaged me when I was asking about Catalan. I signed up, I went through the onboarding process and I went, I looked at it. The hard part was like, at least from my perspective, there were no jobs for me to bid on that fit my skillset. Cause I have like home health and hospice leadership. And a lot of them were project based that were not that what was your skillset?

6:47Like how did you, what was the work that you followed into Catalan? Yeah. So I, for me, it was mostly functional versus industry work. So I, I did a lot of post acquisition private equity work. Typically first like six months post acquisition, there'd be a CTO, chief transformation officer. And I was basically like a chief of staff, like lieutenant to the CTO where they had, Hey, we bought this company. We had 10 reasons why we think we're going to make it better. And like, we just need people to start knocking stuff off this list and getting stuff done for us. Were you doing one project at a time or was it like four or five projects that you took on?

7:24Yeah. So that was the challenge. So I was, I was typically doing two to three projects at a time. Back then Catalan didn't have great controls of like how busy people were. And I was winning a lot of work and they were sending more work my way. I just kept on saying yes to it, but I was, I was doing two to three full-time projects at a time. So it was a great earning year, but it was not a light work year to say the least when that that year three that we're talking about. So each one of the projects was full-time work? Was full-time work. When you won one of these projects, they're probably like a range, but typically speaking, how long were they and how much did they pay?

8:00Yeah. Projects range, the shortest was about three weeks, which that was pre-acquisition private equity work. We were helping out in the due diligence. And then post-acquisition, longest was about a year range. They did it off of daily rates and your daily rate depended on a variety of different things. The biggest one being length of project, longer the project, the less rate, because you've got more kind of security in that. Longer term projects, like 1500 a day. If you're doing like a three week diligence, you could get up to like 2250 to 2500 a day. Jeez Louise. How hard was it to get work at that time on Catalan?

8:36It's really hard to get started. The challenge with Catalan is they don't let everybody on the platform, they actually reject a lot of people who apply for it. So everybody who's on the platform has game for lack of a better way to describe it. And when you're pitching on these projects, you've got 30 people who apply, you've got industry experts, you got ex McKinsey people, you got ex Goldman people, ex Blackstone people, like you've got really high caliber competition. It's hard to win your first couple of projects. Once you do though, it's kind of like Uber in the early days where it's a close end system where you have to review each other.

9:11Once you win a couple of projects, you get five-star reviews. You suddenly start becoming like one of a few people that have a track record that's demonstrable on the Catalan platform. It becomes easier and easier and easier to win each successful project from there. Well, next month, it'll be a year since I started this podcast. I've had over a hundred interviews. It's been a ton of fun, but I promised my wife at some point I would decide whether or not this was going to be a business or we would just continue to pay for it out of our pocket. And I'm exploring monetization, to be honest with you.

9:40There's not a ton of costs, but I do want to figure out a way to cover the editing and the packaging and the promotion costs of putting this podcast together. So I am looking for sponsors. I don't know what that looks like. If you've enjoyed this podcast and you've ever found some value and you want to sponsor, reach out to me, nickatcofounders.com and let's get back into it. Do you still do any Catalan work? I can't. Not with the fund. I am not allowed actually under our fund documents. Okay. Good to know. This Catalan thing is just like shocking to me. So they essentially have large companies come on and say, this is the project work that I need.

10:16And then on the other, so that's like the supply side. And then on the demands or however you want to say it, then on the supply side, you have people like you who are like, yep, I'm an industry expert, or I can do X, Y, and Z. What functional tasks were you actually doing? Were you like running Excel models or were you actually running a team that was implementing the new CRM or the new HRIS systems? Honestly, all across the board. It depended on most of the work was that post value, post acquisition value creation work. And it was a lot of like what we just need somebody like smart to jump in and just like figure stuff out and get stuff going on.

10:50So sometimes it was a project that there were a new product introduction, MPI process where the product is a year delayed and they need to figure out why just start need somebody to start removing blockers so they can get it done. Sometimes it's like, Hey, we're moving, we're moving our supply chain optimization software and we need someone to help make sure that we don't lose. So it wasn't even like, Oh, I have a technical expertise. I'm a coder. I'm a biller or whatever. It was just, Hey, we need somebody who kind of understands this world to do these functions for us. Exactly. Right. Catalan uses the word athlete to describe it of like, we just want somebody, somebody smart that like, we think we can introduce a problem to them.

11:28They can put their arms around it for an hour and like be dangerous enough to like go do an Excel model and be like, Hey, look, like you're trying to introduce this new product. And all of the work has stopped at this one specific person. This one specific person is not getting anything done and not advancing it. Like Sean's going to go back now and tell the CTO, like, Hey, Joe Schmo in accounting is who you need to talk to because it seems like everything is stopping once it reached Joe Schmo. And they're like, okay, great. Tomorrow I need you to go figure out, like, Like we need to renegotiate these 30 vendor contracts, like put a plan together and a proposal together for how we're going to go run an RFP process for all of these guys, because we know we're being overcharged by at least half of these guys.

12:11That's sort of like athlete work. Bro, I'm going to go look at Catalan. I'm looking at Catalan tonight. I cannot. I didn't even look at those types of projects because I'm like, ah, they're probably looking for somebody who's like, this is the exact discounted cashflow model we want built. And we want to make sure that you understand, you know, the Pareto principle when applying this to the economy. It's like, I don't want to figure that stuff out, but if that's it, I could have been working all this time. Okay. So you're making 500 grand a year. And I saw that you built a Twitter audience. You started posting on Twitter about consulting in particular.

12:41So when I saw that you started this fund, buying real estate in good school districts and renting it out to people, it's like, okay, that's out of left field. How the freak did you make that transition? Yeah. So I, real estate's always been the thing for me. So I moved 22 times before I went to college. I bounced around a ton growing up and that got me interested in real estate. Finding a place to live was this thing we're doing every eight, nine months. And my mom was a teacher growing up. So I was also pretty tuned into like, hey, everywhere we live, there's a really good school district and people tend to try to prioritize living there.

13:12So I've had this idea for what is scholastic for a long time now. And I always plan to buy homes under that thesis. I just didn't expect to have the disposable income that I had at 25 to be able to start buying $500 ,000 houses as rentals. But I did. So I started buying homes and built a portfolio larger than I expected to. And I, to your point on Twitter, like I, I, I use Twitter kind of like a public Slack channel during COVID where I was just kind of like publicly posting what I was thinking about when I was doing. And it got to the point where I was sharing about what I was doing on the real estate side, people were reaching out like, Hey, like next time you buy one of these, can I kick some money in?

13:55It's like, okay, like there's interest in this thesis that I'm doing. And I've now done this for a couple of years. I feel like there's pretty good meat on the bone at this point. I feel confident in what the actual thesis is. Maybe it's time to start bringing in outside capital to turn this into a fund. I thought that was going to happen 10, 15, 20 years down the line from where it is. So why, like, why did you decide to start doing the fund? Because it sounds like you were funneling cash into these single family homes and renting them out. I have a thing against funds. I'm just like, I don't want to raise money because then I give up control and then I have people to answer to.

14:28And if I fail, I let people down, which is a big deal to me. What was the tipping point? Why did you decide, hey, I need to raise a fund? It's a great question. And I agree with you on the letting people down component to it. It's It's not easy. For the fund, it honestly came down to the investment makes more sense the more homes that we can buy for a variety of reasons. We can charge a more premium rental price the more homes we have. We can service the homes at a better, lower cost the more homes we have. We can potentially sell the portfolio as a portfolio the more homes we have. And with all of those in mind, we ran the math 100 different ways to Sunday.

15:10and every single time it made the most economic sense to build a fund. And if we were going to accept, call it any outside dollars, even if a good friend wanted to kick in 50 grand to the fund, I didn't feel right in doing it at a small scale of just say 50 grand because I know it would be a suboptimal outcome. The best financial outcome would be to make it bigger than that and make it a true fund model. When did you launch the fund? We started putting the fund together about two and a half years ago. We formally started fundraising about a year and a half ago. And then we formally started buying homes about eight months ago.

15:48And how much did you raise? We've raised about five and a half million to date. We've got another, call it 40 in the hopper right now that is likely to come through over the next year. 40 million? Correct. Jeez, man. Oh my gosh. Was that the plan? Were you like, yeah, we're going to go raise $50 million? Or was it like, well, let's start with five. The plan was to start with five. We're a rolling fund model. So one thing about our thesis, buying homes in good school districts, our tenants are families that move in the summer between school years. So buying homes right now in January doesn't make sense because there aren't tenants looking for homes.

16:24We're basically on a yearly schedule of we raise in the fall, winter, and then we go buy homes in the summer and kind of repeat that process. So year one, We did the five, 5 million. We bought 21 homes with it. That was our first cycle. And now we're, we're gearing up for cycle number two, this upcoming year, which we can go bigger now that we've got, we've got a team in place. Now we've got really good vendors. We've got a really good process and system built out. So now we can, now we can do a little bit bigger. So if I was your wife and I was like, wait a second, Sean, we're making 500 grand a year right now.

16:57You want to go raise a fund? I'm assuming, I don't know. you're not paying yourself 500 grand a year out of the fund. How was that conversation? Yes. I have an exceptionally supportive wife. I went from making 500 to basically zero for two years in a row now. And it's probably going to be zero for another year or two down the line because I'm reinvesting and hiring the team and building this out. Yeah. I have an extremely supportive wife who makes a good salary on her own that allows us to, for lack of other words, keep the lights on here. How does the fund work? So you've raised$5 million, but you're not paying yourself a salary.

17:36Are each one of the investments like their own SPV or is it all pooled together? Can you talk about how it functionally works? Yep, for sure. So it's all pooled together and we basically function like a private REIT. So investors buy into it and they get monthly distributions out. We pay distributions out third Friday of every month from the profit from the previous month of operating. That's basically the dividend for the investors. And then on the actual equity side, our accountants, the fund administration vendor, every quarter revalues the fund. So every quarter, the investors get a statement that said, hey, you put in 250 grand, it's now worth 290 and you were paid out 12 grand in distributions over the past quarter.

18:21That's basically how it works at its core. On our side, we have a one and a half percent management fee, and then we get 15 % of the proceeds. So like the old two and 20 model were one and a half and 15. And 15. Yeah, exactly. So the one and a half percent, that is for fund fees. Some funds can use, basically use that as like a profit center for us. Like we use that to build our team because we want to grow the fund and we want to make sure we're doing it right. So me not paying myself is me hiring a team basically in blue of paying myself. So does that mean if you've raised 5 million every single year, you get $75 ,000 essentially as the one and a half percent, but then you're also getting 15 % of the distributions.

19:0250 % of the distributions. Correct. Sorry. Did you say five, zero or one, five, one, five, one, five, five, zero would be a lot. Dang. All right. And the way like this typically at least for dumb people like me, is you'll have this GP LP model where the LPs are the limited partners, typically they're the ones contributing capital. And then you've got the GPs, the general partners who are operating the business. And so I think what you're saying is 85 % of the fund equity essentially is owned by the LPs. 15 % is owned by the GPs, you and your partner. That's right. That's exactly right. Is there a preferred return to the LPs?

19:42Do they have a pref? So we have two different unit models. One has a preferred return. It's got an 8 % pref and then a split above that. And then we also have a model that doesn't have a split. The math is almost exactly the same between the two. So we have them both as options. We have some LPs who prefer one versus the other. What do you prefer? I'm indifferent. The math is basically the same for us. It really depends on how LPs are thinking about it and what they're looking for for their investment. So if you get to that 40 million and you've got$45 million under management, then then you're at a spot where you're doing, what is that?

20:17450, 700 call it actually more than that 750 in management fees. Where does that money go? Who are you hiring besides just you? And is it you and a partner or how many other multiple partners? Yeah. So we have, the team's actually quite large. So it's myself and my, my, my, my actual partner in the business, Twitter gentleman, actually. And then we've got six advisors who each have a percent of the business. Gentleman from Blackstone, gentleman from Tricon, gentleman from a big single family fund in Louisville. They've got a percentage of that GP, that 15%. Correct. Okay. Okay. That's exactly right.

20:54That's called the advisory team. On the day-to-day, it's myself, I've got a operations manager and I've got an asset manager. We're hiring a controller and accountants right now. But to your point on that 750, like that 750 goes to hiring a leadership team and a fund that's not cheap. So for example, for us, like we'll need a CFO. CFO is about 400 a year. We need a VP of IR. They'll be around three to 350. And then we need a VP of asset management. They're about 300 as well. All right, now's the part of the show where I feel the most uncomfortable, but my therapist says I need to face my fears.

21:30So here we are. I've started a newsletter and I want you to subscribe. And what you're going to get every single week are the aggregated conversations from that week that I have on this podcast with an overview of what their business actually looks like. I'm also going to throw in a review of one or two businesses that are listed for sale. I'll give you my opinion on whether or not the EBITDA multiple is good or there's customer concentration or there's red flags or green flags. And then lastly, I'm going to give you one piece of actionable advice every single week on how to buy your first business.

21:57So click the link below, subscribe to my newsletter, and let's get back on the shelf. It's not like you can just go, I'm going to get a fractional CFO, or I'm going to go overseas and hire talent in LATAM. These are highly specialized, specific positions. The CFO of a fund is very specific because there are regulatory requirements for the way the fund is supposed to operate, disclose, report, all of those things. Is that why they cost so much? That's exactly right. We have a lot. I mean, we're an SEC regulated industry. We have a lot of rules and requirements that we have to follow. My team right now is based in Latin America, and they're fantastic.

22:33And they are always going to be a member of the team. But when I hire a leadership team, when I hire a CFO, I need somebody who is stateside. They are probably chartered. They have a significant amount of experience with the SEC. They're used to working with institutional investors who are deploying large amounts of capital and have a certain expectation of experience dealing with SSC rules and regulations. I'm just doing the math, right? I'm like, cool. Sean goes from making$500 ,000 a year. Amazing. To making no money per year. And even if you raise the 40 million and you're at 45 million, you're still$750 ,000.

23:12That's just going to pay administrative fees. Yep. Right. And then you have other partners who are a part of the GP, I don't see a world where in the near future, Sean's making$500 ,000 a year. Yeah. What is the thesis with this fund? Is it to operate it for a couple of years and sell and have a big liquidity event? And what size are you aiming for? Yeah. So where the fund makes sense is as we continue to grow and get bigger. The sweet spot for us is getting over, once we get over about 100 million, then things get more and more interesting from a financial perspective for myself. the remainder of the partners.