Building Wealth With Other People’s Money: Justin Brennan on Multifamily Real Estate

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1:52And then it's a matter of just knowing how to run them and put them together. But if the capital is there that can strike relatively quickly, then everybody gets to make money together. And if everybody's making money together, everybody's happy. You don't win by following the playbook. You win by rewriting it. 700 episodes deep with the people who actually built something real. No theory, no fluff, no shortcuts. This is Right About Now with Ryan Alford. What's up, guys? Welcome to Right About Now. Got a new format here we're working on. Calling it now in 10. We go as long as we really want. We make the rules.

2:32Y 'all know how I am. I make the rules as we go. What I always do is bring you the best, the brightest, the coolest people, the greatest cats on the earth. I got Justin Brennan. He's real estate CEO, the Brennan Pole Capital Group, and just seems like a cool dude, man. He's in San Diego today, Las Vegas tomorrow. You don't even know where you're at, Justin. What's up, brother? How's it going, man? Good day to be alive, my friend. This is true, man. I say any day you can wake up and be grateful for what you got and breathe and everything that God gave you, that's a good day. What the hell got you in real estate?

3:00I stay in my lane for the most part. I have my hands in a lot of things, but once you get to understand it, I'm kind of in the same lanes. They just might have different stripes or something. I am not in the real estate space. I own some real estate. What got Justin Brennan into the real estate space? I grew up in it a bit. My grandmother started it for our family, and she got into apartments when she was here in San Diego for years. And God bless her soul, until 91 years of age, she was driving around in her little S10 Chevy truck, collecting rent from all our tenants in San Diego. And then she kind of passed a little bit of that along to my dad.

3:31My dad was that, I'd say that transitional character. Ed Milet talks about in his book, One More, about that person that took the family from zero to hero, completely self-made, grew up in a really bad environment. His dad died when he was three. He got the crap beat out of him by his stepdad, went to Vietnam, came back, and he just saw some crazy stuff in his life. But he was that guy that said, hey, I'm going to start building some homes and doing some things. And I learned construction and development from him. And he took it zero to hero. Basically, he started building stuff all on the West Coast of the United States, big construction projects, multifamily condos, townhomes, single family.

4:04He went through four market cycles, made it through all of them except the financial crisis of 2008, and that took him down. And he had a massive bankruptcy in 2008. It imploded everything, and I watched that happen. I'd always kind of learned about real estate. My dad always taught us the value of hard work, value of a dollar, and he'd take us on his job sites and make us dig ditches simply for the purpose of digging the ditch. and learning how to grind it out and earn a little bit of money. But what I did learn watching a lot of that stuff got me into the multifamily apartment space because I didn't want to go through kind of the mimicking the cycles of real estate markets, which he did because he would build and sell, build and sell, build and sell.

4:37And he would just ride the roller coaster. I wanted more consistency, which is what apartments brought. I got into more safer asset class and that is apartment rentals. And that's kind of what started it. You buy large apartments, multifamily, and then manage the rentals. Am I hearing that right? Yeah, but we started with one condo. I mean, literally, in the midst of the financial crisis in 2010, we bought a$100 ,000 condo. And then we turned into a duplex and a fourplex. But then we got to a point where we said, we want to grow. We were trying to do it all with our own money. And that's just the biggest mistake ever.

5:07And I try and tell people this because we don't know any better. We didn't understand this game of OPM, other people's money and how to scale money. I had to learn it. It was a learned skill set. And it wasn't until about 2018 after we had about 20 units that we had built on our own and all our capital was stuck in them. And we said, we want to grow much bigger, but we can't because we ran out of our own money. I started looking at this game called syndication and then OPM using our money with some of other people's money, OPM, and how can we go buy apartments together and bigger ones and scale our money?

5:35And then from literally those 20 units and about$3 million in assets in 2018, it took us eight years to get that. Within three years, by 2021, we had over a thousand units and almost$200 million in assets because we learned that skill set of how to scale money. Same money, we just learned how to scale it with other people. And that took us off. I mean, throw us off board here, but when I hear OPM, as long as it's OPM and not OPP, I'm good. I'm just saying. My feeble mind understanding this and I like to be the voice of the audience here, making sure. When I think of other businesses, venture capital, taking on money.

6:09Hey, I've got a business idea and I want to take on money. Is it the same thing, but just name something different in real estate? In a way, because I try and give people the analogy of how this money game works, because it wasn't until a few years ago that I learned this big problem that people have where they either have a job, they're working for someone, or they're self-employed, which simply means if you're a solopreneur, it's not that you have a job anymore. Now you simply own a job because you're a solopreneur. And the whole name of the game, this is a Robert Kiyosaki thing. The whole name of the game is to jump from that into either a business owner or into an investor role, the whole cashflow quadrants that Rich Dad, Poor Dad, Robert Kiyosaki talks about.

6:49But it's just understanding the game of money and how it's not about what you make, it's about what you keep. And so I'd say the biggest problem I found just when talking with people, whether it's high income earners, people earning 50, 60, 80 grand a year, all the way up to multi-millions of dollars a year, is how to avoid taxes. Hands down, that was the biggest problem I kept hearing from people. It's like, oh my gosh, I'm making all this money, but holy cow, now I got to pay all these taxes. Well, there's got to be a way around this. There's a reason why the IRS puts in place things that people can avoid taxes through legal loopholes.

7:21And multifamily apartments is the biggest and best way to do it through what's called bonus depreciation. And you can literally wipe out your taxes for the rest of your life. And it's the craziest thing that people don't understand. This episode of Right About Now is brought to you by Shopify. We talk a lot on this show about entrepreneurship and what it actually takes to turn an idea into a real business. In my experience, one of the hardest parts is simply deciding to start when you know you don't have everything figured out yet. That was true when I was building my storefront. I knew what I wanted the business to become, but I didn't know how to handle every part of getting it online.

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9:50That sounds like better than that jelly of the month club bonus that Carter Rizmo. And it honestly goes back to the founding of capitalism. When you go look at the definition of capitalism, the main part of it is movement of money. And so then I looked into that and I tried to understand, like, why is the IRS giving these massive tax breaks to people who move more money when you look at it. If you move more money, you get more tax breaks. It's that simple. And the only people that move enough money are business owners or investors, which is why business owners and investors get the most amount of tax breaks.

10:16And if you're a W-2 employee, you don't because you don't move enough money. And the reason why the IRS wants that money moved is because when you move that money, you create jobs, opportunities, you take risk. And when you do that, you create capitalism, movement of money. And that's the whole science behind it. And if they know if you're moving more money, you're creating more opportunity, which means capitalism grows and moves and they generate more tax revenue because of it. That's why they give the people that move the most money, the tax breaks up front. So you do more of that, which is why multifamily apartments, commercial real estate in general is one of the biggest tax write-offs ever.

10:46And it continues to be. Something really interesting you're talking about there, Justin, is you don't learn that in the textbook. The way you just described capitalism and all that, I remember my business classes at Clemson, which I barely paid attention to. A, test guy, and a D, pay attention guy. Teachers didn't like me. They don't teach you that. And that's one of the things as an entrepreneur now learning. I'll have employees or teammates over time. They'll be like, how'd you do that deal? We didn't make any money on that. I was like, no, but I kept$3 million moving in the business. Money coming in, money going out.

11:14I make money with money that's sitting there in the short term using a little bit of other people's money at time that I might not ultimately make profit on the transaction with which brought that money in, but I'm making it elsewhere because there's money moving and it's a little different than what you're describing, but it's a similar concept, which is totally the movement of money through a business is the lifeblood of it. Same thing with what you're describing on the real estate and taxes side, of course, because that's the way it's supposed to be. I've been preaching this for about a year now with the interest rates thing.

11:44And I understand inflation. We need more money moving. If there's any problem right now, there's not enough money moving because the interest rates have been high. It's kept on the sidelines. And, you know, refis and other things that would happen that bring money in that it just makes the whole thing work. And real estate and real interest rates are tied to that. I get it. We can't have 10 % inflation forever and ever and ever. You don't want the other end of that, which is stagnation of money moving much longer. 100%. It's not just in real estate, but if you just take one real estate transaction, you take one 20-unit apartment building that transacts, there's over 60 different industries, not people, industries that make money from one single transaction of an apartment building.

12:24If you think about that, some money moving through those different industries, which then jobs, all that stuff happens, which means tax revenue. All that stuff happens as a result of one simple transaction in a commercial real estate building. So why do you think the IRS then gives all these tax breaks to the person that starts that transaction? Because they know that, hey, you'll start it, but we're going to get all the revenue from that flow. That's why they do it. It's not because they love us. Trust me. It's not because they're your friend. They just understand more movement of money creates more revenue that comes into them.

12:52That's it. How are we helping people every day, Justin? Now we're using OPM and some of JBM to make more M. I got that part down. What else are we doing? Somebody asked me this the other day, and I wrote this down earlier this year because I don't know if you've ever heard this term, Ryan. It was Patrick Bet David that came up with it. He said there's seven mountains that move people and inspire a nation. And you have to have the business which helps drive revenue and brings in money for you and your family and things that you're doing. But once you're making money, you can lose motivation. And so the bigger purpose I would say in life is how are you taking that money or what you're doing in helping others, giving back, leaving a legacy.

13:30And so for me, my big three dreams, to be honest with you, is we heavily support the Tunnels to Towers organization. They basically pay off mortgages of spouses left behind with their kids from first responders or soldiers who die in the line of duty. And they give them a free and clear house because their spouse died who was the provider. They don't have it. they're scared to death and have a safe roof over their head is probably one of the best things that can happen. So they give them that. So we're a huge proponent. So I want to pay off 10 ,000 mortgages. That's number one. Number two is the SEAL Future Foundation.

13:57My family's big in the military. My dad was army. My grandfather is a Navy commander of the submarines before he passed. Even my business partner now, former Marine. So we give heavily to the SEAL Future Foundation, which helps transition team guys, SEAL guys from kind of that SEAL life of being a hero and being that camaraderie into the civilian life, which they just don't understand. Imagine being the most elite elite, and then all of a sudden that's over. And then you have to go into the civilian life where people are complaining about petty crap, and you're sitting there like going, bro. I mean, I was just in Afghanistan.

14:26You can imagine, right? And so they don't know how to do this mentally, financially, physically. And so it helps them transition so they don't kill themselves because there's an enormous suicide rate amongst Navy SEALs. It's unbelievable. Most people don't know that. And then the last big one is disadvantaged kids. I was fortunate enough to grow up with a mom and a dad and in a middle class, but then became upper class environment. So I was blessed, but most people don't have that starting point, man. And so if you can go in and give a kid who maybe had a really rough beginning, a role model belief system that they can go make things happen, then it's incredible to watch how that zero to hero journey can happen for them.

14:59And so we give a lot to that. So those are my big three drivers, my family, my kids and all that, any money and all the money that we're making and doing. And the podcast that we created abundance to give a few years ago behind like Mr. Beast, the concept, Mr. Beast. It's all positioned to go help those three main causes. I love those causes. I was hoping you would go there is kind of why I went there. And supporting our troops, people forget freedom is not free. Anything that supports the men and women that have paid the ultimate sacrifice and the fact that they would ever have to even think twice about a mortgage or suffering or the mental aspect for those that come back, I really salute you, what you're doing on supporting all of those.

15:36I have a father and family that was military. I was not, but my dad was in the Air Force and have a lot of military in the family. Definitely support you in supporting that. This episode is brought to you by High Level. Make sure to check out the link in the show notes to sign up for your 14-day free trial. If you run a business, you know leads rarely arrive when it's convenient. A call comes in while your team is helping another customer. If someone reaches out, but the follow-up gets delayed, an invoice sits unsent, or a promising lead gets stuck in the wrong stage of your pipeline. I've built enough businesses to know that growth has a way of exposing every gap in your systems.

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16:53For me, the real value of AI isn't adding another complicated tool. It's using technology to handle the work that slows your team down so your people can focus on building relationships, serving customers, and growing the business. If you're ready to create better systems and get more from every opportunity, use the link in the show notes to sign up for your 14-day free trial. Brandon, what do you tell people from a real estate perspective? I know you guys are coaching, teaching people how to do what you guys do. Where do you feel like the biggest opportunities are for people out there listening that would want to get into something like this?

17:23A lot of people get stuck. I've kind of learned it's all in the mindset. They definitely get stuck with that. I hear people, if they're in a W-2 job, and maybe they're making decent money, 60, 80, 100 grand a year, whatever it is, and they want to take some of that money and put it into real estate. Maybe they want to start with single family or some rental short-term stuff, and then maybe get into some flips or wholesaling properties. And those are all great asset classes, but those also don't give you that long-term generational wealth that people... I hear it all the time. I want financial freedom.

17:50I want more passive income. I want generational wealth. And the only real ways you get even close to that, because there's nothing truly passive, is through whether it's an apartment building or some other commercial asset. We own mobile home parks. Anything that has a rental recurring money thing to it is going to be great. Great businesses do this, where you can actually create a great business that you're not having to be hands on every day. It just depends on which avenue you love most. For me, real estate's my lane, man. I feel like I came out of my mom's womb learning it from my family. Because of that, of course, I'm in it.

18:22But not everybody starts there. We have so many people, doctors, attorneys, just FedEx drivers. It's unbelievable the amount of people that want to take some of the money that they've earned and get out of the W-2. They're in a position where like, hey, in two, three years, man, I want to transition out of this W-2 working for the man and be able to have enough income doing real estate. It's been a dream of mine. How do I make this transition? I hear that all the time. That's actually why we even created the community we did. It wasn't sell mentorships and courses. Anybody can do that. There's plenty of gurus out there spitting game.

18:49It was really that how can we create a community of well-trained investors around the United States that are doing deals together, collaborating on money, finding deals, putting them together, co-partnering on them? Because if everybody's winning and everybody's doing more deals and opportunities, everybody's getting rich and wealthy, well, good. Now you can actually take that money and wealth and go give back after causes you care about. Maybe it's your church. Maybe it's your family. Maybe it's your kids. Maybe it's traveling. Other things that you love that are philanthropic to you. Money is a great resource for that.

19:15Without the money, it makes it hard to go chase other passions you have. 100%. Very few things have been spoken that are more true. Some people like to paint money as bad or something. It enables your ability to do good. Let's not paint it with too broad of a brush. Yeah. I ask people, what does money mean to you? And they'll throw out freedom or tool or other kind of words. And in my mind, when I think of money, I think of choices. If we both have$1, then we technically have the same choices. But if I have a million dollars and you have$1, I can do everything you can do. But then I have a million more choices.

19:47I mean, that's how my mind works around the money game. And so I see money simply as choices. I can go help more people. I can do more things. I can give back, obviously spend time with family and travel experiences, all those things that are near and dear to all of us. Baseball cards, baseball cards, collectibles, you know, whatever shoes, you know, I mean, yeah, I love kiteboarding. You know, I'm a water sports guy, weightboarding, kiteboarding. I'm in San Diego, right? I don't surf, by the way, but I feel like people, they're like, why don't you surf? Well, I had a shark problem when I was young.

20:18So I ask this sort of for myself. Maybe he doesn't have a ton of capital, but he's a go-getter and he gets information. How do you spot these deals? What's a good deal to spot for something like this? I totally get getting in the circles, getting around people, that part. But is there other things that wouldn't be as obvious as spotting these kind of deals that they might could bring to someone like yourself or other groups? I think you know what I'm asking. Yeah, I do. What people don't fully grasp is that you don't need a lot of capital to start this. What does that mean? I said, well, you have to understand in real estate, you're bringing one of two resources to the table and you choose which one you got.

20:57You either have what I call the check equity, which is the cash, or you have what's called the sweat equity, which is the knowledge, the skillset, the ability to go execute. Maybe you can find good deals. Maybe you're a great deal finder. Maybe you can analyze them, make sure they're a good deal. Maybe you can bring them to the table. You understand how to structure things and put them together. And because of that sweat equity, that knowledge and skill set, you become extremely valuable to people with money. Just to prove this point, our first deal, I had zero dollars in it. That$100 ,000 condo, we brought in$25 ,000 down payment.