Episode 225 – Jeremy Watson

Hello, and welcome back to The Hero Show. My name is Richard Matthews. Today I have the pleasure of [00:01:00] having on a good friend of mine from our travels, Jeremy Watson. Jeremy, are you there?

Yes I am. How are you, Richard?

Awesome. Glad to have you here. I know we were just chatting before we got in. You’re in South Carolina right now.

Is that right?

Yeah, we’re in Charleston.

Yeah. For those of you been following along with my wife and I journeys, we’re actually we’re sort of stopped in Central Florida while we work on, you know, transitioning from RV to Boat life. Not sure how long that’s gonna take this, but that’s we we’re at. And so it’s like 83 degrees here.

I assume it’s cold in South Carolina. You guys frozen up there.

No, it was 78 this morning.

Oh, so you’re not getting the winter that everyone else is getting. That’s not bad.

Charleston’s gorgeous. It’s hard not to like Charleston.

Yeah, I hear the food and the nightlife up there is pretty good too.

It’s amazing. As we were talking about earlier, we traveled the country for about two years trying to find where we wanted to live. And I remember turning to my wife after spending maybe $85 on burgers in Santa Barbara. We had been in Santa Barbara for six months, and I turned to my wife and I said, you know, we can get 80% of this for an eighth of the cost in Charleston.

And [00:02:00] that’s what we’ve found. We’ve really loved the weather. The winters are wonderful. The summers are hot, but you get fun things to do. There’s always a pool, there’s always an ocean. And so yeah, it’s a wonderful place to spend some time. We’ve really, really enjoyed it.

People with normal business regulation is good. There’s just a lot to like about Charleston.

Yep. And we have sort of figured the same thing about Florida. It’s inexpensive, it’s nice, there’s good food, there’s always beaches around. And so that’s where, you know, we met while traveling, which is cool. And that’s how we’re connected now. But yeah, Florida’s where we ended up for our sort of shopping thing.

We’re still not done traveling yet, but we’re now officially Florida residents from where we started.

I can’t understand that we’ve never spent a lot of time in Florida. My wife is from Wilmington and so she’s scared of hurricanes and so Charleston’s as close as I can get her to Hurricane Alley.

Yeah, we got hit with two hurricanes last year, our first year in Florida, and we got hit by both Ian and Nicole which is fun. They weren’t as bad as I thought they’d be. You know, but[00:03:00] that’s life in Florida, I guess. But I guess before we get too far into this, what I wanna start with is just short bio.

So, Jeremy Watson, obviously you’re a traveler, you’re a serial entrepreneur, you are the the founder of Bedrock Investment Property. And you were just telling me before you got started, you’re starting a YouTube channel that’s walking through a lot of how you’re building a lot of businesses.

And I know you’ve got several other businesses as well that you’re working through. So what I wanna start off with is what you’re known for, what your business is like, who do you serve, what do you do for them?

Yeah, so I’m probably known for Bedrock. There are a lot of, okay, so I’ll give you the history of Bedrock and that’ll kind of help you understand how we got there. So I was in financial advice for about a decade. And I was in kind of an out-of-the-box financial firm in Salt Lake City. They specialized in a lot of unique approaches to things.

Their main product was called a maximum funded IUL which is a really interesting kind of Frankenstein product where you take a life insurance policy and then twist it to [00:04:00] the point where it’s like right before it starts breaking laws, right. And you twist it, twist it, twist it, twist it, twist it.

And if you twist it that far, it does a lot of really interesting things. And one of the things it does is it grows well without market risk. Without stock market risk at least it grows in a pretty safe spot and it’s liquid. And so it’s a really interesting product when you just keep twisting and you really do twist an insurance policy beyond what you would ever think and you do a lot of real weird things to it to get it there.

But that firm specialized in that. And so they specialize,

I have one of the policies.

You have a max funded IUL?

Yeah, I believe that’s what it’s called.

Yeah, well, it’s an incredible asset. I had researched them. I was looking for a career change maybe 15, 20 years ago. And I was looking at getting into insurance because my mom died when I was young and it’s one of like the few products I really believe in life insurance. And so I researched insurance and, Hey, is that something I want to get into for a really long time? Like, I called every firm in five states [00:05:00] who did that, and I ended up landing with this guy who had written a whole bunch of bestsellers on it and being like the 13th man on his team before I was hired, there was like 3,500 applications, 3,500 resumes for the job.

And so I kind of, you know, hit this moonshot, got placed with this amazing guy, kind of the father of the industry. And in that 10 years of working with that team, I saw the same problem come across my desk a lot. When you’re in financial advice and I was working with about 300 million by the time I left.

When you’re working with financial advice, you have the same conversation over, okay, well what’s your name? Tell me about your assets. And you go through and you kind of do an inventory of what they’ve got going on, right. Currently, and you’re just seeing, Hey, is there anything better we can do? Is there anything that you’re doing that you’re not happy with?

Is there anything you wanna change? Right? If you’re happy, let’s leave it. If it could be better and I can give you an idea of help you do better, let’s talk about that. Right? And so we had a lot of these that you just, hundreds of these conversations looking [00:06:00] at assets. And I kept running into the same problem with the same asset class, which is real estate.

I was working with a lot of clients in California and almost all of my California clients were like, how’s your real estate? Oh, it’s fine. I’m like, well, walk me through what finance is. It’s just, it doesn’t do much, but it’s there and it’s worth millions. I’m like, what do you mean it doesn’t do much?

And I just kept hitting this same story where someone would have $5 million of real estate and $50,000 of cash flow, 1% return cash on cash, or a million dollars of real estate, $10,000 a year of cash flow after all expenses. And I just kept doing the same things and I was like, why? Like, why, what were you saying?

I said it’s insane that they have such a low cash on cash.

Oh, it’s madness and it’s systemic madness. And so you just keep seeing, because what happened is a little old lady bought a property in the 70’s, right? She bought it for $70,000. It rented for $500 a month. If I could right now, [00:07:00] find a property for $70,000 for $500 a month, I would consider buying it as long as it wasn’t a total garbage property in the wrong part of, you know, unless it was a depreciating asset.

Right. Like if it was a decent looking little house on a decent part of town, I would consider 70,000 for $500,000. Right? And the problem is that same property she bought for $70,000 is now worth 1.5 million because the values in Northern California, Southern California, have just gone to the moon. Right?

They’ve gone to the moon over the last 40 years. And the problem is the cash flows haven’t period. Right? Because people who are buying in Northern California, in many cases, just signed with Google, got a $500,000 signing bonus, they’re gonna go drop it on their down payment for their house. Right? Or people who are buying California are foreign nationals who are coming over because they’re millionaires in whatever country and they wanna live in the sunny slopes of Silicon Valley or whatever.

Right? People who are buying apparently have infinite money. Right? [00:08:00] Or people who are renting very much don’t. Right? And so the rents have stayed pegged to kind of, Hey, I’ve got three jobs, and the buying has been like, I’ll pay whatever the sum, no matter what it is. And so rents and values have decoupled and values have sailed way off into the stratosphere.

And so this little old lady who bought a property thinking she was gonna use her for retirement income now has garbage cash flow, but she can’t sell it because if she sold it, she would get absolutely murdered. And I made murdered six ways from Sunday with taxes. All right? She would pay 20% long-term capital gains.

If she’s held at more than a year, she’d pay 12.3% California income tax. She’d pay a 3.8% transactional tax from Obamacare. And that’s just the start, like just the start. She’s gonna be paying 30, almost 35, 36% on a million, right? And let’s say she bought that property for $70,000. Now it’s worth 1,000,005.

She’s gonna pay 35, almost 40% on that [00:09:00] million five, right? And so her option is, Hey, either I caught up, you know, six, $700,000 of cash or, and this is crazy. I wait to die. And that’s the plan. The plan for all these real estate owners in Northern California is wait for death. And the reason is, if they just hold onto the property until the moment they die, their children inherit it.

It passes through a tax loophole called the stepped up basis, and their children inherited at the appraised value at time of death. And so they can sell it tax free. So they’re effectively making their children millionaires with an asset that was supposed to be a retirement asset.

And they’re just saying I guess this is what I gotta do. Like I can’t pay $700,000. I can’t shorten my children 700 grand just cause I wanna have better cash flow and be able to enjoy this asset. So I just guess I’ll hold it until I die.

So you were saying their choices, but essentially either, hold it until death or pay all that money now and [00:10:00] take that inheritance away from their kids.

Correct. So that’s the options. Hey, I can either hold it until I die and pass it onto my kids, effectively tax free. Or I can sell it now. Figure out some way to fix my cash flow. I can fix my cash flow in any number of ways. I could sell this whole asset and I could buy annuity. Right? I could sell this whole asset and I could go invest it in dividend yielding stock.

I could sell this whole asset and I could go buy bonds, right? I could sell this whole asset and I could go buy better real estate in a better market, right? Like there’s a lot of ways to fix a cash flow dilemma, but every single way besides that last one, buying just better cash flowing real estate in a better market.

Every single one of those is a horrible tax hit, period. There’s just no way around it. And so what I realized when I was meeting with client, after client, after client, I needed a 1031 exchange option, right? I needed some option that I could recommend to my clients where they could sell the properties, reinvest in more properties, do a 1031 exchange, avoid the captain expenses, push that down the road to [00:11:00] death and that they could do it.

And what I found is after about two and a half years of really hard research on the subject, I just couldn’t find a solution. There are solutions out there. I just couldn’t find one I liked. Right? And so I did, I was the point person on our research team for two and a half years. I met with a bunch of CEOs all over the place.

I met with a bunch of different real estate investment funds, real estate investment trusts, syndication houses, turnkey outfits. Like I did a lot of research and at the end of the day, I just said, I don’t like any of these options well enough to put our stamp and our reputation behind it. I’m gonna go back to work.

And so I killed the whole project after two and a half years of very heavy research.

And that’s how you built Bedrock?

Yes. A little later on I had a job offer to be the CEO of a cryptocurrency concern. And they wanted me to stay and not take this other job offer. And they basically said, what do you want to stay? And I thought about it over the holidays and I came back and I said, I think I know what I would do [00:12:00] to fix the real estate problem.

But I want to build it and I wanna own it. And so they said, okay, we’ll give you whatever support we can just kind of be in our world and be part of our world. And so I started Bedrock. And what I did with Bedrock was kind of build a hybrid model and try to address some fundamental issues in other models that I had seen.

And so what are some of those issues and like how have you fixed them for people so they can get that cash flow and actually enjoy their retirement?

So the most common exit for a piece of real estate, if someone had my exact problems said, Hey, I’ve got crap cash flow in a property I’ve owned for a long time. It’s supposed to be a retirement asset and it isn’t, right? The most common advice would be sell your property and an invest your money in a real estate investment trust.

All right? There’s publicly traded REITs, there’s privately traded REITs. But you know, just sell your stuff and invest in REITs. Right? Because you can do a 1031 from private property to a REIT because it’s real estate based, then it can be like a kind transaction. And so that’s the most [00:13:00] common advice.

The problem is I had seen a lot of REITs while I was advising for these 10 years, and everyone I knew who had a REIT hated it for the same reasons. Number one, when you invest in a REIT, you’re saying, Hey, I’m gonna give you all this money and I’m gonna get shares in your company and your real estate investment trust, and you’re gonna guarantee me something.

Now, most REITs guarantee, a specific return like, they will give you a 5% return on the value of your shares guaranteed. It’s kind of like a dividend, but a little different. Right? The problem is in 2008, specifically when values across the board were collapsing, the values of the shares went down.

And so the 5% guarantee was based off the value of the shares. And so people thought went into this thinking, Hey, I’m gonna have my income guaranteed by this REIT. And what they realized is, I have a certain percentage of income guaranteed based off a stock in a company that I don’t control.

And if that company gets into trouble and their other things go bad, then the value of my shares [00:14:00] are going down. And the only thing I have to speak for is this percentage guarantee. On my stock value. And so they realized, wait, I traded my real estate, which I owned free and clear, and which I understood for shares of stock in a company that I’m just hoping and praying that guy knows how to run.

Right? And if that guy doesn’t know how to run it, and if that team’s not real honest and they get, you know, get involved in the bloodbath, which is commercial real estate, right? The bloodbath, which is Amazon just killing malls by the millions, right? If they get over their schemes, I don’t know how to save this thing.

I don’t know how to step in and manage it myself. And so I’ve got my assets tied up in this nebulous thing that I don’t know how to control, right? And then the second thing with REITs is, all the private REITS in 2008 that I’ve ever heard of, surrendered what are called their redemption options.

And so they got into these REITs being like, Hey, anytime you wanna sell your shares, you can sell our shares, right? You can sell your shares to someone else, or we will redeem your shares. We’ll pay you for the shares anytime you want. We’ll just buy them back from you. And then in [00:15:00] 2008 when values were going down and everyone was cash flow strapped, they all surrendered their redemption options.

And so you couldn’t have them buy your shares back, so there was no cash out option. And since there were private REITs, you really couldn’t sell your shares on a public market. And so there were people left holding the bag with these falling asset values, falling distribution values. They couldn’t get their shares bought back, which they thought they could.

And they couldn’t sell their shares on a public market because it was a private REIT. And so the only way they could get out of this thing was sell it on the secondary market like you would a timeshare, right? For pennies on a dollar. Like, Hey, who wants to buy my shares in this REIT that’s on fire for pennies on a dollar?

And so REITs, it just wasn’t gonna work, right? That is the most common security device period for this problem scape. Hey, just put your money into REIT. I have fundamental problems with that advice. Does that make sense?

Yeah. And then so you built something to solve that problem.

Yeah, so what I actually really, really liked was, I liked the business model called syndications. [00:16:00] Alright. And syndication, you’re familiar with syndications? Alright, so I with,

So, give it a quick overview.

Alright, so syndications are I really like the model. Alright. I sat down with five, six different syndication houses, they’re CEOs. We have long conversations on mitigating risks.

What you basically are doing in a syndication is it’s usually residential and they’re usually looking for a class C or B residential property. Something that’s got some deferred maintenance on it and some age on it. They’re usually looking for 50 units and up, but most big syndication players are buying apartment complexes in the range of 150 to 550 units.

Right? And what they’re doing is they’re buying these apartment complexes from people who’ve had them for a long time. Let’s say average rent on that 350 complex is a 750 bucks. It’s a little under rent. It’s a little run down. Right? It’s right on the edge of good and bad town. Right? So they hunt these properties.

They hunt them actively, and what they do is they go in and they raise money for the 20% down payment to buy it, [00:17:00] and then they raise an additional 20 to 30% to fix it up. And then they bring in really good professional management and they just dump money on the property. They go in and like, I’ve lived in a property that this in Riverside, California, back in probably 2005, like we were living there and we moved in.

It was like, this is a kind of a dodgy spot. And over the next six months, all the landscaping got renewed, all the curbing got, you know, redone all the facilities got upgraded. The, you know, the exercise room got nice. Like the property started being managed a lot more professionally. And then when our lease came around, the next time they said, Hey, it was 750, now it’s 1190.

Right? And so they raised the standard of the property, right? They do basically a 350 unit rehab, right? And so they raise the standard of the property and then they raise the rents and get it to market or, you know, market plus market nice, right? And so that’s awesome, there’s a lot of stuff in a syndication that I absolutely loved because you get economies of scale, which is amazing.

You get professional management, it was amazing. You get [00:18:00] more professional experience, hopefully, which is amazing. And you get really good economies of scale and your returns can be great. And so I love syndications. My problem with syndications is if you’re working with a team that doesn’t know what they’re doing, again, you’ve traded your ownership in a property that you owned free and clear, and that you could have stepped back in if things went bad and you’ve traded it into a percentage based ownership.

You’ve traded your asset, which you own free and clear into a Reg A security at least. And if it goes bad, if the person who’s running it gets over their schemes or they didn’t do their numbers right, or they find a 550 unit white, like black mold remediation, like if it goes haywire and they run out of money, well then they have to make a capital call.

They say, Hey, you guys all have to put more money on this or we’re gonna lose it to the bank. When a syndication goes bad, it goes very, very bad. Like everyone loses everything because they never own the thing free and clear. They raise 20% for the down payment and they raise some to rehab it. If they screw that rehab [00:19:00] number up, it’s all gone cause the bank’s gonna take the property in foreclosure.

Does that make sense?

Yep.

And so there were things I liked about syndications, but I didn’t like the level of control you’re missing. Right? I didn’t like the complexity of the product. And so what I really wanted my dream product was like, I want something you can 1031 into, but that if I suck at my job, you can fire me and be fine.

Right? I want something you can 1031 into, but still understand I want something you can 1031 into, but get better cash flows. And what I realized you needed was what we would call in the industry a turnkey company. There’s a bunch of turnkey companies out there. I can think of tin off the top of my head.

The most famous would be maybe rich uncles out of California, or like Real Wealth Network. They’re both turnkey houses. What they basically do is they help you find a property. They help you vet the property. They help you buy the property. [00:20:00] And I love that because if they’re doing their jobs right it can be great.

There’s great property in the market. There’s really good markets, there’s really good cash flow. All they are is they’re the experts who are watching the nation and saying, Hey, we’re seeing great profit in Buffalo. We’re seeing great profit in Dallas. We’re seeing great profit in, you know, in Phoenix where, and they’re, you know, turnkey houses or turnkey companies have done, they track markets all day long.

And so it’s kind of just a window into where are the market strongest for cash flow? Where are the market strongest for appreciation? Does that make sense?

Yeah. Yeah, absolutely.

So I love that. What’s that?

So you have like the pieces that you love from all three of these. Did you sort of mix all the models together?

That’s exactly what I did.

So tell me a little bit about that. What is the actual BlackRock model or not BlackRock, Bedrock.

Yeah. So the problem with turnkey real quick, so you understand. The problem with that one is if you are helping me buy a property in a market that I don’t live in, [00:21:00] I’m taking a huge risk that you are just after your fee. Right? You know, if I’m gonna pay $5,000, I’ll be fine vet and buy a property.

Right? And you helped me buy a property. I had a client while I was in financial advice who worked with one of these big companies, I won’t disparage them cause they’ll sue me, right? But he bought a property with them and he came to me. He is like, oh, I’m so excited about this property. And I bought it through this company.

I’ve listened to them for years. I super trust him. He’s like you know, it’s in Detroit. He’s like, I bought it for $53,000 cash and I’m like, oh gosh, because I knew real estate well enough to know that that was a mistake he was buying at like at the worst time in Detroit, there were whole swaths of Detroit that were in foreclosure or vacancy.

I just knew what the house was gonna look like. I was like, have you already bought it? Is there any way out of it? He’s like, no, there’s no way. And so he learned the hard way that he bought the wrong type of tenants in the wrong market. It was too cheap. There’s reason you don’t buy sushi from a vending machine, right?

There’s [00:22:00] reason you don’t buy sushi for 15 cents a gallon or whatever the crap right there is such a thing is too good a deal, right? And his house was just in this row of row homes that were all boarded up and there was nothing but gangs on all sides. He had to replace the tenant four times in a year.

And it cost about $4400 a time to replace this tenant. He had to keep flying out to Detroit and finding new contractors and working through evictions courts. It was a super nightmare. It was like a grenade into his retirement. And so, he and I talked about it in depth and he said, you know, the only benefit if I look for it.

He’s like, I learned a lot and I learned my lesson, but the only benefit I really got is I became a bit of a Pistons fan. And I was like, what do you mean you became a Pistons fan? He’s like, well, I kept having to go to Detroit and I kept having to be there for a couple nights and I’d catch a Pistons game, and it turns out I really love NBA basketball.

And so part of my reason for establishing Bedrock is I didn’t want anyone to become an involuntary Pistons fan, right? Where you constantly have to be going to this [00:23:00] property, it sucks all your time out. It just grenades into your retirement, and there’s no good exit strategy. Like, Hey, you have this piece of hot garbage in Detroit.

There’s nothing you can do about it. And the people who sold you this piece of hot garbage don’t have any vested interest in the success. Right? And so they can go sell to the next person, the next sucker to get them into a hot piece of garbage. And I was like, I love turnkey because I think it keeps the product simple.

I keep think it keeps the relationship simple. I think you can step into that asset and actually save it if it comes to that. But what I didn’t love about Turnkey is turnkey houses, in my opinion, have this horrible habit of cooking their performance to make the numbers look better than what they actually are.

And when you find that out on the back end through experience, it’s already in your portfolio and you’re stuck with it and they’ve already got their fee and they’re onto the next guy.

Yeah. Makes sense.

Yep.

So you’ve got three worlds that you’re pulling together.

Correct.

So what does look like?

So with Bedrock, what we decided we needed to do [00:24:00] was what you want ideally is you want to have a turnkey company, right? Who can help you find, vet and buy, but where their revenue is directly tied to property performance. Right? You want them to only earn money if you earn money. And so we looked at the model and said, Hey, are there places in the country where we think we can do that?

Where we could say, okay, here’s what we’re gonna do. We’re gonna help you find, vet and buy a property. We’re gonna collect a small fee for that. Just cause it takes a lot of time. Right? And then you are going to pay us only if the property succeeds from there forward. And we looked at that model and we looked at the math, and that’s the point at which I killed the whole deal because I just said, I don’t see anywhere to square this peg.

Because honestly, let’s say you’re gonna invest $60,000 in a single family residence right now, let’s say you’re gonna go out and borrow the rest, you’re probably borrowing 160. Right? You’ve got a mortgage on that. Your gross rent’s probably $25,000 a year. Your mortgage on, that’s probably [00:25:00] 13,000 of that.

And then other, you know, property taxes, homeowner’s insurance, property management, you know, the list goes down and down and down. At the end of the day, on a $60,000 investment, we would expect you to make between a thousand to $6,000 of positive cash flow Net ROI. Right? Thousand to $6,000 off,

Maybe $500 a month,

What was that?

Maybe $500 a month in cash flow.

You could make up to, yeah. Up to $500 a month. If you were at a hundred to $500. That’s a really realistic expectation. Right? And so as a cash flow asset class you can get really good income because. Yeah, I invested 60 grand. I’m getting 3000 a year. Great. It’s 5%. Right? That’s as good as any CD used to be, right?

It’s as good as any annuities guarantees are. Five percent’s a respectable number, but on top of that, on a single family residential, well, you’ve got a mortgage, you’re paying it off. Year one, you’re gonna pay off about 2% of that mortgage, so that’s another [00:26:00] 2%. Year one, you’re gonna get your 5% of cash on cash.

You’re gonna get your depreciation. So you’re gonna write off depreciation’s complicated, but it’s 127 and a half of 80% of your purchase price. Let’s just call that $6,000 for the purpose of this conversation, so we don’t go into it too much. But like you can’t write off a hundred percent of your property.

There’s land that’s usually 20%, so you take 80% of your purchase price. Let’s say it’s $200,000 or a hundred thousand dollars, 80% of that’s $80,000, 200 is $160,000. And then you divide that by 27 and a half, which is the IRS depreciation table for real estate. And so whatever that works out to five, $6,000, you’re gonna write that off.

And so that’s another five, $6,000 of value. Now, that’s not a yield because it’s only saving you taxes. So if you’re in the 25% tax bracket, you’re probably talking $1,800 of benefit, right? But another two grand. So you get two grand for paying your principle down, you get two grand for your [00:27:00] depreciation.

You get another, you know, 5%. So let’s say three grand for your cash on cash. And so you’re saying, okay, 2, 2, 3. Let’s say I’m sitting at a solid $5,000. And then you throw appreciation on that. Leverage single family residential is always an appreciation play in some regard, right? So you say, Hey, I bought this $200,000 house.

Let’s assume next year we had, last year we’ve had properties bought by 20% last year, right? Let’s not use that. Let’s say 10% of the mouth, that math is round, right? So 200 grand, 10% appreciation in a year is 20 grand. My investment was only 60, right? You’re talking a 30% ROI just on appreciation, plus $5,000 cash flow, plus $2,000 principle paydown plus $2,000 depreciation.

You start stacking that burger and you start realizing, hey, this isn’t just a patty. It’s not just the depreciation. It’s just layer after layer after layer and really soon you’ve got an awesome looking burger. And so we [00:28:00] love single family residential. The problem is, if I come into you and I say, Hey, I can do all the stuff you need, which is a lot, how much am I gonna need to charge for that?

So as we were working through this, we talked to our attorneys. My attorney has his master’s in tax law. He charges me almost $500 an hour. And I asked him, Hey, if I had your paralegals do this list of services for me how much would you charge me for what I’m proposing to do for my clients? And he says, if it was all paralegals and we could hammer out some systems, $6,000 a year, Right?

That doesn’t work. It doesn’t work. If your best case scenario was a thousand to $6,000 a year of cash flow and you’ve gotta pay me and my team $6,000 a year to do the job, it doesn’t work. And at that point, I just killed the whole deal. I was like, I just don’t see how to square this bag. It’s what the services you need are too expensive to pay for it outta cash flow.

Does that make sense? And then I went and thought about it for a while and [00:29:00] thought about it for a while, and I realized the way that you do it is you set it up on a service model where you defer a portion of what you learn. And so what’s unique about Bedrock that no one else has done, and no one else has done it for a lot of reasons, primarily because it’s a catastrophically expensive business to start.

I invested hundreds of thousands, hundreds and hundreds of thousands of my money really working under market wages for years to start Bedrock. But what we do is we say, here’s what we’re gonna do. Instead of charging the $2,500 a year that we need to charge, that’s our, that’s what we need to be.

We’ll charge $800 a year, and if you don’t get a 4% cash on cash return, we’ll even refund that. So if we can’t keep the property profitable, we’ll waive our fee. You know, we’ll charge $800, but we’ll refund it back to you next year. When we realize, hey, there was a vacancy, there was a whatever. Something happened, right?

And so you say to yourself, well, Jeremy, that sounds like a great way to go outta business and [00:30:00] it would be a great way to go outta business. And so we have to be able to pick up the rest of that $2,500 at some point, right? It costs $2,500 a year. It just does. And I’ll walk you through kind of all the services and it’s a very complicated onion, right?

But $2,500 a year, that’s what it needs to be. I’m willing to do it for $800 a year, and I’m willing to wait for the rest. Now, the nice thing about single family residential, is there something in the wait right? You and I both know if I pick the property well enough and I’m careful enough, I’m probably gonna pick a property that will go up over time.

Maybe not today, maybe not this year, but over the next five to seven years, which is our hold strategy. Yeah. It’s gonna go up and if it doesn’t go up in five to seven years, we’ll hold it a little longer, right? Over time, I really fundamentally believe good real estate will go up, right? And I’ve bet my whole fortune on that bet, right?

With that being the case, I can say, Hey, we will waive our fee if, you know, you’ll get a 4% return cash on cash. However, [00:31:00] when we sell the property, we get 30% of the upside. So you get all your money back, you get all your fees back. We pay all the realtors, whatever money’s left after you’re made hole.

We split that 70, 30 and our clients have been really happy with that because we’re taking the risk right alongside them. Right? If we pick them a hot garbage, that’s in the middle of the Detroit garbage. Right? We are picking an asset that’s gonna hurt us for 3, 5, 7 years. I’m signing my team up to do the work for free for 3, 5, 7 years.

If you get the $20,000 increase, that’s a $6,000 payment instead of 2,500.

Correct, correct.

You’re making a better deal for yourself by taking the risk.

Yes and no. $20,000 increase is a 10% in appreciation in a single year. I think that’s high. And so I think where it really boils down to it is we’re gonna be closer to seven and a half percent, which means instead of making [00:32:00] 2,500 a year, we’re gonna make closer to 3,500 a year. Maybe 4,000 a year. And when you consider, Hey, how much would you have to pay me seven years from now to not have to pay me today?

There’s a time value of money aspect there. Like how much is money seven years from now really worth to me what not have as much as it’s worth today? Cause I could have taken it, I could’ve invested, I could’ve grown my business, right? And so we have to factor in the time value of money, of not having that revenue for me.

We structured our pay. We have three ways to get paid. And I don’t want to go into them just cause they’re complicated, but we structured our pay options. They’re all the same. Whether you pay me $2,500 a year today, cash on the barrel, you take all the risk, I get none of the upside or whether you pay me $800 a year and we waive that fee if we don’t hit our metrics and we get 30% on the back end, it all boils out the same to me.

And so the nice thing is since we’re willing to offer that contract where we’re saying we only earn money if the property is profitable.[00:33:00] We will do the work for free. We will pay my staff for free if the property is not profitable, and if we picked you a piece of garbage in the wrong area that never appreciates, then we will earn nothing then.

Right? Because we’re so deeply invested in how the property performs, then I don’t, you don’t really care which pay option you end up choosing because we vetted the property as if you were gonna choose this one, right? You vetted the property as if I was gonna be like meat deep in this product, right? And so if you end up saying, Hey, I’d rather pay you the 2,500 bucks a year outta my cash flow and you have none of the upside, cool.

You still know it was vetted as if I was gonna be deeply, deeply invested in the risk. Does that make sense?

Yeah, that’s a really, it’s an ingenious kind of model. And in the marketing world, we talk a lot about paper for performance models where it’s like, you know, you have a lot of agencies that are like, Hey, we’ll drive leads for your business. Here’s what it costs for us to do that.

And [00:34:00] then someone comes in who says, Hey, you only pay us if you close business.

It’s really hard to do.

Yeah, it is. It’s hard to do. The people who can do it have humongous businesses and make million.

Correct.

Because it’s a much more difficult business model to be in because you are guaranteeing performance, cause the performance is how you get paid. So, and it makes for a I’m gonna call it a killer offer. I kind of think it’s really difficult to say no to as a client.

It’s true. And our clients love it. We’ve never had a client who had the means. I have gotta put that caveat right. We’ve never had a client who had the means, who bought one property with us, who has not come back and bought more. We had people who didn’t buy more property. It’s because they put all the money they had in their world into buying the six or seven properties they bought with us on a 1031 exchange.

Right? They took a million and a half dollar property. We helped them buy six and then they were just outta money, right? Those people, they haven’t bought more, but they love us [00:35:00] to death. But yeah, we’ve never had someone not come back and buy more property because as they realize, like, oh wait, Bedrock’s taking care of the whole thing.

And that should be our next point of discussion. Like, what is the whole thing? What is all the work? Right? Bedrock’s taking care of all of it and they don’t get paid unless it works. Like it’s a really compelling offer and it’s a fun offer to make as an entrepreneur because if you can make an offer that’s like, Hey, I’m gonna be there with you.

We are gonna answer to you for the next five, seven years. This thing will either work as advertised or I will explain to you why it is not working as advertised. And I will lose money right alongside with you until it works as advertised. Like, that is a place I wanna be, that’s where I wanna invest my money. And it’s been fun building a company around that.

That’s a really fascinating offer. I know we’ve chatted for a bit here. We gotta hear a little bit about who you are and your origin story, how you got here. I wanna shift gears a little bit and talk about like the superpower that you sort of developed in your own life because of the work that you’re doing.

Right. We talk on this show. Every hero has a [00:36:00] superpower, whether that’s their fancy flying suit made by their genius intellect, or the ability to call down thunder from the sky. In the real world, heroes have what I call a zone of genius, which is either a skill you were born with or you developed while you were building your career.

And it’s what sets you apart and allows you to help your clients slay their villains, so to speak. And the way I always frame it is you have skills that you’ve developed and there’s probably a common thread that ties all those together. What do you think your superpower is that you have developed in building Bedrock investment property?

I’m a systems guy. I’ve got super systems. It probably started when I was dating. I’m LDS and so LDS people date a little bit differently. We date for marriage and I was poor cause I’m the last of 10 children. And so I was doing a lot of dating in college, but I was dating on a budget and I looked at kind of dating and in general and I was like, this is busted.

Like the typical date’s, what? Dinner and movie, right? So if you’re on a budget, hey let’s go see a movie together. And so like our first date’s gonna be what we’re gonna, [00:37:00] I’m gonna pick you up. You’re cute, I’m cute. Pheromones all the goodness, right? And I’m gonna take you to the movies and we’re gonna sit in the dark for two hours.

We’re not gonna get to say anything cause you gotta be quiet in the movies. I’m gonna drop 25 bucks and when we leave the movies, we’re not gonna know anything about each other besides we knew when we win it. Right? Except for that we’re good looking and common dating like, Hey, maybe we kiss at the end of the date, so we still don’t know what anything about each other, but we’re gonna get like all the endorphins pumping, we’re gonna kiss at the end.

There’s gonna be tension the whole time, right? Like, I was like, this is dumb. Like the whole thing is dumb. Number one, expensive. Number two, it doesn’t accomplish the thing that I’m looking for, which is getting to know this person and seeing if this is the person I wanna potentially build a life with.

Again, LDS people date differently. We marry earlier. We don’t sleep around before marriage, it was just a different thing. And so I was looking for someone to potentially marry forever. And so what I did is I developed a system for the date. Number one, I didn’t know how to ask girls [00:38:00] out. I was awkward.

I was a late bloomer. And so I did the same thing. My date was where all the same exact thing. Number one, I would always ask girls out similarly, we’d get a conversation, rapport going, and I’d say, Hey, How do you like food? And they’d say, great. I like food great because everyone likes food. Great. And then I would say, well, how about this?

I have a rule that I have to cook for myself at least twice a week. But I can’t cook for just myself. I have to have company. So how about this? You come over to my apartment and I’ll make you dinner. And they said, okay, that sounds great. And in college there was always like six guys sharing an apartment.

So it wasn’t as creepy an offer as that sounds. It was like, come to my apartment, there’s gonna be a ton of people there and you know, I’ll make you dinner. And so I’d bring them to the apartment, I’d make them dinner. And while we prepared dinner and as we ate, I would just riddle them with questions.

My best friend’s like, man, your first date’s insane. It’s like being on a first date with the Riddler. Right? Because I would just ask him everything I wanted to know, like, Hey, where are you from? What’s your family about? You know, did you have pets? You know, what do you think of the gospel? You know, what do you think of what do you think of this?

And I would just riddle with [00:39:00] questions, right? For as long as the meal was. And if we were having a good time, I would add to the date. I would say, Hey, we got a pool table right here in the complex. You wanna go play some pool? And if we were having a good time, I’d say, Hey, we got a chess set right over here.

You wanna go play some chess? And if we were having a good time, we would just add to that date. All of those things were free and the dinner was cheap. Does that make sense?

Yeah, yeah. You built yourself a dating system to filter people.

Dating system. And if the date sucked, I would say after we finished dinner, well this has been great. I’ve gotten early day tomorrow, let’s get you home. Right? Because there was no promise. So I built myself a dating system. And what I realized early on is, that’s kind of my superpower.

Number one, I have an ability to see where the existing system sucks, right? I was able to look at syndication and realize where it sucked, right? I was able to look at real estate investment trust and understand where it didn’t work. I was able to look at turnkey and realize where the risks were. I have an ability, X-ray [00:40:00] vision to see through companies and see where they’re broken and where the risks are, right?

And number two, I like building systems to try to counter those risks, right? And so that’s really the superpower, those two I love seeing clearly what’s something is and what the risks are, and then building systems to make sure those risks can be mitigated. So yeah, that’s what I do. I build crystals.

I love that. And I remember when we first met, it was one of the things that we connected over. Cause I’m also a systems builder. I actually have a system for building developing systems that I call the hook framework. That’s all about, you know, looking at the existing system and observing the fail points and asking questions about how you can shift it and like all the whole thing.

Anyways, like systems is such an unique superpower. And I always love when you find people who have that sort of level of nerdery, because we do, we look at everything including basic things like dating.

Everything.

And have systems for them. And my system for dating was not quite like yours, but it was not the normal dating thing.

But it [00:41:00] was I was like, I don’t like dating. And I remember in college I, like, I renamed it and I called it something like Xing or some other stupid college name that I had come up with for it. That was basically the same type of thing that realized that this whole dinner and movie thing was stupid and I didn’t wanna do it.

Oh, such a bad, such a bad system.

I was like, because long-term relationships only work if they’re built on some sort of foundation of friendship. And so I was like looking at how do you hack the building of a friendship with someone? And you know, that comes with things like, you know, breaking bread together and playing games together.

Which sounds like you found the same kind of things. Yours was probably more thought out, but same idea.

Well I actually think, if I’m totally honest, if I had geared it more towards friendship and mutual interests, that would’ve been good because what my wife and I realized is 5, 6, 7 years into marriage, we love each other. We’re we married 16 years? But we didn’t have that many mutual interests because I didn’t build it on mutual interests.

I didn’t build it towards friendship. So I think you’re actually right. I think you’ve caught us gear it towards [00:42:00] friendship. And I just didn’t do that in my system because I wasn’t married yet and I didn’t understand yet. Right? But my wife and I actually had to go back and re-engineer and look at our lives and say, okay, we don’t have that many mutual interests.

We read different books, we watch different shows. We spend our time differently. I’m kind of a workaholic. And so we really had to like, we break it down and say, okay, what are our mutual interests? And so one of the things we do is we rehab houses. Number one, cause the money is good, but number two, because we both love rehabbing houses, we both love talking about project.

And so we found mutual interests, right? But I think you actually nailed the system better than me. Excellent job with systems building.

Yeah, it’s definitely about having common projects that you can do and work on together. And so, like for my wife and I, it’s cooking and adventure. Those are the two things that we’re really into. And so we started our relationship off that way. And, you know, in the college dorm rooms as friends, cause we were friends for five years before we ever decided to get married, and we did the same thing.

We arranged our own marriage[00:43:00] and did that. So we had a whole, you know, abnormal way that we went about our life. But we did things like cooking in Crockpots in the comment in the dorm room kind of thing, cause that’s what we could do. But yeah, so, you know, adventures and cooking were our kind of things and we still do that today.

And it’s like we’re staying in a friend’s house here and my wife and I spent a good three hours, you know, cooking up all sorts of things yesterday so we could make food for our friends. So the mutual interests stay throughout the length of your relationship. So anyways, I love that as both a story and as an example of systems building.

Yeah, no. I actually remember when we met in person and when we got to know each other and our kids played together. You guys were always cooking up something awesome. So that has obviously continued until a couple years ago when I last saw you.

Yeah, yeah. My wife and I actually for Christmas this year we decided we’ve gotten good enough with cooking that we needed to sort of go next level with it. So we spent like $500 on dishes and we bought fancy plates and fancy bowls and sets of them so that we could start not just working on food, but working on food presentation.

Thinking in terms of [00:44:00] whole meals and creating sort of an experience with food as opposed to just creating good food. And so we’ve sort of like started next leveling that kind of stuff and really thinking about that. Because you know, eventually when you start getting really good at things, you gotta figure out what the next level is and that’s our next level. So,

No, I get that. It’s all systems. And the nice thing about systems building is you will know you’re never done, right?

You never done, always improving.

You can hire out pieces, you can tweak it, you can hire out pieces. But every time you get this system running smoother, you move on to working on something else that doesn’t run smooth.

And like, there’s just nothing better in my opinion than taking something that I was doing moderately well and building a system around it. And then hiring someone who’s actually good at that and watching them do it incredibly well for a 10th of the money.

So good. It’s so good I have my staff members are running my entire company right now with the exception of, you know, a few pieces that I’m still working on systems for. And every couple of weeks we get in our company [00:45:00] meetings and I’m just like, I just want you to know, I’m so blown away by how awesome you guys are because like, I know I built these systems, but I couldn’t run them to save my life.

Yeah, no, for sure. And it does take on a life of its own. Like my coder writes code a hundred times deeper than I could ever write. Even though I taught him the basics, he’s a hundred times farther than I am. My VP of operations. He has a hundred systems a hundred times deeper than what I gave him when he started.

And so that’s the idea. Like you build systems and then you hire yourself out. And that’s what I love. I love the tinkering. Right? I love the starting, I love the dating phase of businesses. And so as Bedrock has grown and grown, it’s gotten better and better and smarter and smarter with better and better systems.

It’s a complicated product. At the end of the day, it’s a hyper complicated product. Cause we’re not just doing what seems easy, which is, hey, buy a bunch of real estate, make sure they earn money. But we’re buying a bunch of real estate, making sure they earn money in 9 different states with 13 different [00:46:00] property managers, each of which you have to work with a different way.

While floating the cost.

What’s that?

Floating the cost.

Yeah, while covering the cost if we’re not doing it right. Right? And then we’ve got that middle piece of, we actually answer to the owners. The owners own these properties outright, a hundred percent. The LLC, we may set up for them, but they’re the owner in a hundred percent.

And so we have to not only keep the property managers honest, but we have to report to the owners, in a good way. In a clear way with their own systems. And so when you add that onto the workload that you’re doing, it’s not just buying a piece of property, it’s also keeping the owners abreast, but not drowning them with every single detail.

And so it’s been a complicated product to build. We’ve loved building it, but it’s been a complicated product to build.

Yeah. And it sound like it’s probably very unique in the marketplace just because of the challenges that you’re solving.

Yeah. We’re the only one, there’s no one else even close. Everything else that’s remotely close to us is partner with a [00:47:00] pro, which is a pretty common model. But the offer always is you buy the, you bring the credit and the money, we’ll bring the experience. We split everything 50:50 and that’s.

I’m familiar with that model.

Yeah, it’s pretty crap because if your pro is a bunch of hot air and his systems aren’t very good you end up with a 50:50 partnership with a lot of your money tied up and kind of a place that’s hard to get your money out of.

It ends up in lawsuits almost every time. And so I hated that model a lot. And so we wanted to say, Hey, hire us if we don’t work well, you can let us go. You can take property, you can take your ball and go home. Yeah, you’ll have to deal with a property, but it’s a single family residence. It’s not rocket science.

Yeah. We have a similar offer for our podcasting agency. Everything we do with our clients, it’s like, they’re like, what’s the contract? I’m like, the contract is, you like what we do, or you fire us.

Yep, yep.

I was like I tell people regularly, I was like, I don’t do sales calls. And I don’t do anything magical.

Everything we do in our thing, I’ll show you all of my systems, nothing’s proprietary. This is the only thing we do is we execute. Right? And you pay us for [00:48:00] execution. And either we execute or we don’t. And if we don’t execute, I don’t want your money.

Yeah, if I can’t create value, I’d rather not be in the relationship, but if I’m perfectly candid. So yeah, it’s been a fun journey.

Awesome. So I wanna talk about the flip side then, right? So if your superpower is creating systems, then the flip side of your superpower is obviously your fatal flaw. I think I know where this might go cause I know where mine is. Yours might be similar, but you know, Superman has a kryptonite and Wonder Woman can’t remove her bracelets of victory without going mad.

You probably had a flaw that’s held you back in your business. Something you struggled with. For me, I struggled with perfectionism for a long time which is I think one of our people who are really into systems, we like to have perfect things and that kept me from shipping for a good long time shipping product or shipping services cause like I can always tweak it and make it better and then you realize it’s part of the journey and you know, you can ship before it’s perfect.

And one of my other ones was lacking. What would you call it? Like lack of self-care where I didn’t have good relationships with time or good relationships with boundaries with my clients. So I’d let you know them walk all over me or let [00:49:00] you know, try to overwork and not sleep and that kind of stuff.

None of those things are healthy, so you learn to take care of yourself a little bit too. But I think more important than whatever the flaw is, how have you worked to overcome it so that you can continue to grow and continue to you know, make your business more profitable and more attractive to your clients.

Okay, so there’s two. It’s just like you said, there’s two. Number one I bore easily.

Yeah.

I bore easily, and so I’ve always told everyone, I’m not the guy you want carrying the water to the end of the row. I’m not the guy that’s gonna water 57 rows in a row and be happy doing it. I will bore and I will start doing really.

I’ll do anything else. I will see how many buckets of water I can spend above my head at a time. I’ll do anything else except for carrying water to the end of the row. Been that way since I was a child. I bore easily, and so I’ve really had to be a systems guy who is able to prioritize what my time is worth.

And I read some books a long time ago and they said, you have to assign [00:50:00] your hour of value. And it has been one of the most important things I’ve ever learned. Because even if you’re not paying yourself that my hour is a thousand dollars, it’s a thousand dollars an hour all day, every day. And the reason I’ve assigned a value and said, Hey, that’s what my hour is worth is because if I’m doing a job, a simple accounting, right, if I’m entering data from a property manager’s spreadsheet to QuickBooks, right?

I could pay someone 20 bucks to do that. Why am I still doing it a year, two, three years in, right? So I had to be willing to build systems and hand things off to people who happily do them. My executive assistant loves nothing more than taking water to the end of the row. She will water 800 rows that are identical all day, every day.

She just loves it. She’s just happy doing that. She just takes the water to the end of the row. She just gets the task done. She pays the bill. She pays the bill. She pays the bill. She pays the bill. [00:51:00] It would drive me crazy. And so just realizing, Hey, that’s not me. That’s never gonna be me. I don’t know what medicine I could take to become a different human.

I just had to accept, Hey, this isn’t me. It’s never gonna be me. I bore easily, and so I’m always gonna be the guy who wants it’s running. Wants to do something exciting, wants to learn more, wants to fiddle with a new system. And so some people might say that’s a fatal weakness, but yeah, you and I are far enough in our careers that I’ve realized, okay, I can build some systems, I can hire it.

But if you bore easy and you build systems and you hire it, there’s a risk of management by abdication, right? Then you have to build the systems to make sure you’re getting good products still to make sure your employees are responsible, to make sure people are accountable. And so then you end up with a whole different style of system.

Yeah. You have to build systems for quality review and culture.

Correct, correct. And so that’s stuff that we’re still working on is to, you know, the company grows and you’re always building different systems, right. But yeah, my number one is I bore easily [00:52:00] and I have to outsource stuff. So the company keeps running and keeps running well.

I really like the bore easily thing. I’m in the same boat. I didn’t list that in my fatal flaw category, but it probably is one. And my wife is the opposite. She’s the person who could bring the water at the end of the row every time over and over again. And I’m like, I’m the kind of person that, like, I like to solve the problem and as soon as I have figured out what the solution to the problem is, I no longer care. Like I don’t even have to have built out the solution, just the fact that I figured it out. I’m done like.

Yep.

Mentally checked out. So I have to build into my own systems of solve the problem, build the system that will continue to solve the problem, get someone else in that will do those. And like, that’s gotta be part of my process.

Because I know that like, once the problem is solved, my care about solving that problem continuously is gone. I need a new problem to solve.

Yeah, really plummets. It’s like I already gave you the solution here, please do it. Like I’m not gonna be, I can’t hold a hand here. This is a clear solution. Please execute this solution like,

Yeah’. I [00:53:00] need executors in my life.

Yeah.

Which is probably why, like, I won’t be the CEO of my company forever, right? Because I always look at CEO as Chief Execution Officer which I know they call it executive, but I always look at execution. Is they’re making sure that everything is getting executed.

And I’m like, Nope. I’m a problem solver. So like I could be the chief strategist for my company.

Yeah.

But at some point I’m gonna need someone else to be the Chief Execution Officer.

I think your titles maybe weird, my man.

They are.

So, COO, Chief Operations Officer, that’s supposed to be the guy who keeps the trains running on time, right?

Yeah, yeah.

CEO I’ve always seen as long-term vision, right? Finance and long-term vision and growth and growth opportunities and expansion.

That’s just my, you know, at the beginning of your business you wear a lot of hats.

You’re all, every single one.

That you’re, everything. So at the beginning you start off as Chief Execution Officer.

The beginning for sure.

Yeah. That you spend a lot of time doing execution. [00:54:00] And so like, I’ve just got my ops is going now.

So I’m getting that off of my plate. And I love that. And so I’m in that stage of getting out of being the chief execution officer.

No, I understand that. And we all learn to a degree, right? When I started Bedrock, I was working 16 hours a day and then after I got the basics in place, it went down to 10 hours a day. I can run that company now. If I didn’t want to build new systems, I could probably run it in an hour a day.

Yeah.

But I’m still actively involved three to four hours a day cause there’s new systems coming along all the time and I just don’t feel like my job there is done.

But I totally get it. You really do have to hire. And that’s one of the challenges being an entrepreneur. You have to hire, you have to know how to bring in good talent. You have to know how to get people to have buy-in. And I just think those things are enormously complicated in their own, right?

Absolutely. So, got a couple more questions for you on a different sort of track here. I wanna talk about your common enemy. Right? Every superhero has an arch nemesis. It’s thing that they have to fight [00:55:00] against in their world, right? So in the world of business, it takes a lot of forms, but I like to put in the context of your clients, the people who come to you and hire you to help them find property.

It’s a mindset or a flaw that you have to fight to overcome so you can actually get them the result they came to you for. What is that common enemy in your world?

Repeat that one more time. What is the common enemy of all my clients?

And it’s a mindset or a flaw that your clients come to you with, that you have to fight to overcome so that you can actually get them the result they come to you for.

It’s probably that the product is too complicated.

Hard to understand?

Real estate’s not that complicated, but I think people think that it’s impossible to have real estate that’s done for you, right? And to have any way to make sure it’s done for you well, right? As soon as you come to me and I say, Hey, the plan is we’re gonna sell your one property that you know and you love and you’ve had for 40 years, that’s actually total hot garbage, right?

Because it’s not doing any of the [00:56:00] things you bought it for, and it’s got a huge chunk of your net worth tied up. And instead of that, we’re gonna sell that property. We’re gonna do a 1031 exchange. We’re gonna buy three properties in Charlotte. We’re gonna buy three properties in Orlando. You’re gonna have two property managers and we’re gonna oversee all the day today we’re gonna set up LLCs in both North Carolina and Orlando.

There’s just so much that comes with the proposition that it just can feel overwhelming, right? It can feel overwhelming. It’s like, whoa, that’s way more than I know how to deal with. And so really you’ve just gotta, you know the common enemy is they’ve just gotta trust me that we know what we’re doing, right?

My companies help people buy over 4,500 houses. And so that’s the common enemy. They’ve gotta realize that this enormously complicated thing to them. It’s not complicated to me cause we’ve done it 4,500 times.

You forgot it down to a science with a good system in the back of it, which is great.

Science is a strong word. We still run into things all the time that are just [00:57:00] obnoxious. Like, there are things that we run into and I’m like, how? Like there are some things that are unsolvable as far as I can tell, they’re unsolvable. But that’s where man hours comes in. There’s some things you’re never gonna be able to just, you know, you’re never gonna be able to get all the property managers to jump through a ring the same way ever.

Right? They’re all different levels of awful. Right? You’re never gonna be able to get homeowners associations to behave in a way that makes any degree of sense.

Be logical.

Oh my gosh, they’re all little dictator kings. And they answer to no one. And there’s no public registry on where, you know, you can’t even, I can buy a rental house and I cannot know literally for a year that there’s even an HOA.

The appraisers didn’t know, the title company didn’t know the realtor didn’t know the homeowner disclosures said there was no HOA because it was an inherited property. And a year and a half later, I get a letter from an attorney threatening to foreclose. I’m like, where were you guys for 18 months? And they’re like, oh, we’ve just been mailing [00:58:00] letters to the property that your renter lives in, and there’s just no good way.

There’s some problems that are so that they’re just unsolvable. And so we just have to keep looking at every problem that comes up. And you’re probably the same way. Every time there’s ever a failure, I’m like, Ooh, that was bad. Right? It’s a system. There’s a system coming down the pipe and my team knows it.

Like if there was a mess up Jeremy’s not gonna be mad, but there is a system coming down the pipe and it is never gonna happen again. And if it happens again the same way, even though Jeremy’s thought up a good system and trained everyone on it, then he is gonna be mad. But yeah. So, you know, you just keep solving, you keep solving, you keep building systems, and the real problems become pretty few and far between.

Yeah, yeah. We have the same thing going anytime you run into problems. I always, one of my company values that we go over on all of our company meetings is the third one, is that, you know, mistakes are the stepping stone for success, right? Cause they give you the opportunity to, you know, learn and improve and build systems and build processes to fix those things.

And so, [00:59:00] like we talk about that with all of our staff regularly. So, yeah, I completely agree. And yeah, if the mistakes happen, everyone on the team knows we’re gonna look at our systems. How can we fix that, right? Because that’s what it’s mistakes are opportunities to make better systems first. Second time we make the mistake, then we got problems.

Then we made a mistake the first time we didn’t realize, like for the, honestly, the first time we may not even realize that was a mistake we couldn’t make. Right? I had a client on the phone with me other day doing an annual review and she posted like an an 82% return, just this astronomical return, right?

And she’s like, you know, I love the company and I love the properties. And she was going on and on. She’s like, but I really had a ton of frustrations when I was working with the title company in Oklahoma. And I was like, whatever do you mean? It’s just like they’ve communicated in a really obnoxious way and she like starts walking me down this path of troubles. And I’m like, why didn’t you tell us this? And she’s like, I thought you knew.

I’m like, [01:00:00] somehow that we knew that you were annoyed with a communication methodology from your title company, and emails like, no, we wouldn’t know this annoys you. And so there’s some things you just don’t even know or problems unless someone brings them up.

And so I’m with you like any mistakes, any problems, I’m always happy to see them. Cause it’s like, yeah. I can fix that forever. I just have to know the problem.

Yeah. Just have to know it’s a problem first and then we can fix it.

Yeah.

The flip side of your common enemy is what you fight against is your driving force, it’s what you fight for. So just like Spider-Man fights to save New York or Batman fights to save Gotham or Google fights to index and categorize all the world’s information.

What is it that you’re fighting for at the Bedrock Investment Property, your mission, so to speak.

We’re trying to make sure that retirement assets act like retirement assets. At the end of the day, I’ve worked too hard for the money that I’ve got to let it just sit there and be lazy, right? Like, I wanted to pick up an OR, and I wanted to be part of the equation. I have no [01:01:00] intentions of like leaving my money behind to my kids as a big old inheritance.

But I would’ve loved to have a bat in the ball financially a little bit earlier in my career so that when I had a good idea, I could take a risk and I could learn some stuff. And so I absolutely intend to leave that behind my kids. But for the people I work with, for my clients, we’re their real estate’s gonna be help pulling their fair share, all right?

It’s just not gonna be sitting there lazy on the sidelines doing an absolutely nothing for their day-to-day. If it’s with Bedrock, it’s gonna be pulling its fair share, it’s gonna be doing all the work that those dollars can possibly do. And I really think that in single family residential, you can have as competitive return as anything while having a lot more control, a lot less complexity.

I just wanna make sure that the assets that people have worked their whole lives for are working for them instead of just sitting there doing nothing.

Yeah, yeah. You know I see the same thing with people all the time, especially as I’m getting older, more and more of my friends and family are getting into their retirement years and you see the stuff that they’ve worked for not be able to produce the way they want them [01:02:00] to, and then they can’t do the things they wanna do in their retirement that they waited their whole lives for. And so like I see that and it gets closer every day and I’m like, man, it makes me excited to know that people like you are working on that problem. I’m not working on that problem, so, but I see it.

If you want something that’ll really blow your hair up, if you have a minute for something, that’ll really blow your mind.

Yeah, absolutely.

So, I’m LDS, right? So I served a two year ecclesiastical mission from 2001 to 2003 in Venezuela. And if you know anything about economics in Venezuela from 2001 to 2000. You’ll know that when I got to Venezuela, the Boulevard which is their currency, was trading at 800 boulevards to the dollar.

When I left Venezuela, it was trading at about 3,518 months later. And so I’ve lived,

You experience hyperinflation.

I have lived in hyperinflation as one of the few Americans who has, right? Probably 315 million Americans, maybe a million Americans, has lived hyperinflation. Maybe less than that, maybe a hundred thousand, right? [01:03:00] So I lived it for two years when I was young, 19 to 21.

And the thing people don’t realize about hyperinflation is it really doesn’t kill a wage earner, right? If you’re out working, you’re income will go up, it will adjust, right? If you’re working day-to-day driving a taxi, you’ll collect a $2,000 Boulevard note instead of a thousand Boulevard note. Stock prices will adjust.

They’ll just go up. They’ll just inflate the people that inflation kills, and I mean, kills, kills, kills with a capital K. It are retirees with fixed incomes or pensions. And the reason is, if I got to Venezuela and you had effectively a hundred thousand dollars in US spending power on your pension, when I left Venezuela, you had almost $25,000 spending power on that same pension.

When I got to Venezuela, if you had a hundred thousand dollars Social Security, Venezuelan Social Security, right? A hundred thousand dollars worth of fixed [01:04:00] income when I left, you had almost $25,000 worth of buying power.

So you almost three quarters of your buying power just died in 18 months.

Yeah. Because you had a hundred thousand dollars a year pension and all of a sudden a hundred thousand dollars a year doesn’t buy it. You know, all of a sudden gas doesn’t cost 75 cents, it costs $4, right? All of a sudden, eggs don’t cost a dollar 20. They cost $5, right? If you’re on a fixed income. Every single one of those inflationary pressures is like a dagger to the heart.

It’s like a death by a thousand paper cuts on a fixed income. Whereas, and this is what I’m, you know what I’m getting at? If you’ve got single family residential real estate, that’s leveraged for 30 years, you spent $60,000 on it. You’ve got a mortgage on it, you have a fixed mortgage payment, but your rents go up with inflation,

Your rents go up. Yup.

So my payment’s $700 a month, but my inflation, my rents go up with inflation. So my rents go from $2,000 to $2,500 to $3,000 to [01:05:00] $3,500. My rents go up, but my debt maintenance is the same, right? I’ve gotten,

Your debt payment gets pegged at wherever you got it.

Correct even more than that. I bought the asset for $200,000, but the asset value goes up with inflation. So if I see inflation go through the sky, right? All of a sudden, dollar spends for a million pesos or whatever, all right, so my property goes from $200,000 to $22 million. What do I care, right? My debt is still 180,000, right?

They’ll pay for the rent.

Yeah, inflation helps a leveraged real estate investor, right?

So random question, cause I know you’re probably more familiar with this than me. The 2008 bust was exactly that. It was the banks getting killed because the property values went through the roof and the debts did not.

Yeah. In some regards.

Interesting. So I love that’s your mission. I love that you’re working on helping people do [01:06:00] that. And I will at some point be starting to my goal in the next 18 to 24 months is to start taking the profits from our business and start putting it into real estate stuff.

So we might be calling you here in the future.

What I would do if you’ve got a lot of cash, right? Feel free to buy some real estate. If you’ve got a little cash start a max funded IUL and hoard your cash because it’s a liquid ish tool. And then you can always take the money out of an IUL and buy real estate when you’ve got enough kind of squared away and then you take the profits from your real estate and you pay off your IUL and you put the money back into cash.

Those two tools together. If I could, if I had to choose two financial products, those would be them, real estate and a maximum funded IUL because I think both of them have these amazing ability. The best financial tools in the world, in my opinion are the ones that manage it to de peg head your risk and your return.

Right? If I take medium risk, I should expect medium return. If I take high risk, I should expect high return. If I take low risk, I should expect low return. I think with real estate, [01:07:00] you’re taking low to medium risk, but getting medium to high return depending on if it’s cash or it’s leverage, right? And I think with an IUL, you’re taking low risk and getting medium return, right?

You’re managed to twist that paradigm just a little, little bit. But that little bit of twist it’s magic when you talk compounding over time.

Yeah, absolutely. I always loved the IULs because if I understand them correctly, you can do things like just put in a really simple metaphor. You have $50,000 in your IUL cash. You can loan that to yourself. Do something like buy a car. Not that you would buy a depreciating asset, but you buy a $50,000 BMW and you drive the BMW for five years and pay back your note on whatever you purchased. And at the end of the five years, you have both the interest that you earned in the IUL on the $50,000 and the interest that you paid back in on the note that you were paying. And you have the car that you’ve paid off that’s [01:08:00] now yours, which you can sell. And then take all that, put it back in.

So you got the car for five years, you got the interest that you paid back into your note, and you have the cash value that you sold the car for that you can put back into the things. So you’re like stacking assets. And again, that’s if you buy a depreciating asset. Imagine what happens if you buy a appreciating asset using that kind of money.

You’re using tools that way. I don’t know if that’s exactly right, but it’s at least in the realm of possibility.

No, all of that is accurate. That’s kind of the bank on yourself concept, right? And it’s absolutely an accurate way. The problem is, as soon as you say that, and as soon as your listeners hear that, something in their brand goes click off, because as soon as you say, I’m gonna take money and I’m gonna loan it to myself, and I’m gonna keep earning money on the money.

It’s such a foreign concept. You might as well be talking about blargh on beans or whatever, like, you might as well be way down in Mount Doom talking about giggle cus pudding or whatever, like it is. You’ve gone to some level that is so odd that people just turn off. And it takes some explanation, but yeah, [01:09:00] you’re absolutely right.

Like I can have my money in an IUL earning 6 to 8% somewhere in there year after year after year. No market risk. I can lend myself that money. And the reason for lending is actually really straightforward. If I withdraw money from an insurance contract, it’s a taxable event, right?

But lending is not.

Yeah. But if I borrow money, the last time you bought a house for $300,000 you didn’t pay taxes on $300,000 of income because you borrowed the money.

It’s not taxable income. It’s a loan, right? And the same thing. If you borrow money from an insurance company, it’s not taxable income. It’s a loan, now if the insurance company chooses to use the collateral of your insurance policy to grant you that loan, that’s a whole different story. They’re still giving you a loan legally.

They’re authorizing a loan, you’re signing the loan documents, you owe interest, all that good stuff, but you never have to pay the interest because they’re just charging it to your account, right? They’re just charging it to your collateral, which is sitting safe and sound in their bank, right?

In their bank. And so, yeah, it’s a [01:10:00] fascinating tool. It’s been a fascinating journey. I think an IUL is an incredible tool with a huge caveat. There’s so many ways to mess up an IUL. If you remember my explanation earlier, you’ve take an insurance policy and you twist it, and you twist it, and you twist it, and you twist it, and you twist it right to the point where it’s illegal, right?

And the truth is not all policies are created equal. Most policies are totally different. Some policies break at this point. Some policies break at this point, right? If you’ve got someone that doesn’t know what they’re doing, they’re just gonna break it immediately and hand you this thing and be like, yeah, that should work and it’s never gonna work.

And so it really comes down to the expertise. Who’s building it? Is that what they do? I worked at a firm that that’s all we did. People came to us from all over the country for that. And so, yeah, I love that tool, but it’s a complicated tool. It’s easy to mess up.

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Now back to the Hero show.

I have one last question here for you before we roll up this interview. And it’s your guiding principles, right? One of the things that makes heroes heroic is that they live by a code. For instance, Batman never kills his enemy. He only ever brings them to Arkham Asylum. So as we wrap up the interview, talk about the top one, maybe two principles that you live your life by.

Maybe something you’d wish you’d know when you first started out on your own entrepreneurial heroes journey.

That’s a good question. What are my guiding principles?

As far as business goes, you’ve gotta bring more value than what you charge, right? If my lawyer says it costs $6,000 to do the job, and I can create systems and get that down to 2,500 bucks, [01:13:00] but it’s still $6,000 worth of value, I’m gonna be in great shape, right? Because no one is gonna be able to do what I do without first paying the price we’ve paid to get to where we are.

And so I understand like, yeah, you can do what I do. If you wanna go find one of me and you want to go spend three or $4 million and you want to go write code, you know, yeah, you could compete with me, but it would cost a lot of money to compete with me. And so, you know, that I’d say number one, you’ve gotta provide more value than what you charge.

If you can do that, you’ll never run outta clients, because people look at what I charge and they say, man, you know, at the end of the day, we paid this guy like 20 grand to make us 200 grand. Let’s buy six more of those. Right? So you’ve gotta create more, yeah. Create more value than what you charge.

And number two, you’ve gotta treat people like you would want to be treated. The old Golden Rule because at the end of the day, it’s like, I want people to be honest with me, with my finances. I want people to treat me well. I want people to treat me with respect. I want people to respond to [01:14:00] my emails in a timely manner.

I just want people to treat me like I want to be treated. And I think if we can really hold in on that and just say, Hey, how would I wanna be treated if I was on the other side of this transaction? What would feel fair on pay on the other side of this transaction? You know, what would I, you know, what type of communication would I want from my team if I was on the other side of this transaction?

That’s everything I’m gonna try to do. Now, it may be that those aren’t exactly right, but I’m gonna be 90% there before I even get my head up in building a business. Right? I’m gonna build, build, build, build, build. I’m gonna end up 90% there and then we’re gonna be at the last 10% where there’s just little tweaks that need to be made.

But just trying really hard to treat other people the way I want to be treated is a crystal clear way to do business.

Yeah, I love that. I run mine the same way. And I love the value proposition you talk about is being able to create more value than you’re asking for. And my close rate in our company over the last six months has been a hundred percent for that reason, right? Because we get to the point where people are like, I’m like, and I tell people, I just open [01:15:00] up our backend.

Here’s our systems, here’s what we do, here’s all the things we put together. And because we’ve built all these cool systems, here’s what it costs. And people are like, well, shut up and take my money then.

Yep. Shut up my money.

Shut up and take my money because I can’t do that. I mean, I could, cause you just showed me everything.

And I’m like, but there’s like, I don’t wanna.

I Hold don’t wanna. No, that would take all day, every day to do what you’re saying will take you minutes and,

Yeah.

Whatever your fee is. I would spend a thousand times that to try to do it myself.

Yep. And you know, time and business and expertise and mistakes and hiring and training and systems to make it all happen the way that we do it. You can’t do it for my price.

No way, no way. That was the goal, I told my team early on, I wanna get to the point where I can provide a better property oversight experience, a better business management experience on than single family residential than anyone can do on their own for less money than it would take them to do it in time on their own.

That was the goal, right? I wanna do a better job than you could do for less money that would cost you to do it. And if I could get there, I was [01:16:00] like, I’ll never run out of business.

Absolutely. Well, I’m glad we finally, after a couple of years, managed to get this interview on the books. Cause I remember the first time we talked, I was like, we’re gonna need to get you on our podcast at some point. And here we are a few years later, finally doing that. And I’m glad we did cause I really enjoy getting to hear your story, what you have done, and how you’ve built it.

So that’s basically a wrap on our interview, but I do finish every interview with a simple challenge I call the Hero Challenge. And I do this to help get access to stories I might not otherwise find on my own. So the question is simple and because of your clientele might be useful. Do you have someone in your life or in your network that you think has a cool entrepreneurial story?

Who are they? First names are fine. And why do you think they should come share their story with us on the show. First person that comes to mind for you.

My best friend has an interesting story, but it’s a pretty typical story. He started investing in real estate young. He started investing in real estate poor, and he built a portfolio that was large enough. So I think he retired at 32. He and his wife just travel the country [01:17:00] full-time. Like they’re laying on a beach, I think in Puerto Rico right now.

They, like a couple years ago, they spent two straight years traveling. They traveled so much, they got sick of it and came home. Right? And so, I think that’s a fascinating story. His story would, I think, and he hasn’t been on the show, but I’ll ask him if he wants to. I think his story would be kind of the value of kind of extreme frugality, right?

Every penny he could save, he did every spent he could invest, he did, every investment he could make was as conservative as he can. And you know, the market went the right direction. He was retired before. He might’ve been retired in his twenties. He might have retired at 28. I’ll have to ask him, but he’s been retired for years and so yeah, he’s been a fascinating person to watch.

Just, you know, he won the game early financially, and now he’s just been trying to do other good things.

He won in the first quarter.

What’s that?

I said he won in the first quarter. I’m looking at winning in the third quarter. So, you know,

Yeah. No, it’s true. Well, and you and I are young, right? Like I think you’re looking at winning in the second quarter. [01:18:00] Like we’re both.

I call my first quarter is 20 to 30, then 30 to 40, then 40 to 50, then 50 to 60. Those are your four quarters. And you wanna win before you get to the end game right before you get 60.

It’s not a buzzer beater. We’re shooting for, we’re not shooting for maximum nail bitting tension.

I don’t wanna be in quarter four going, is this going into overtime?

It’s like, it does look like it’s gonna go into overtime, maybe triple overtime. Yeah, no, it’s scary. But yeah, he’s been a fascinating entrepreneur to watch, but it’s a pretty typical story. You know, he’s just invested very, very wisely from very, very young.

Awesome. Well, I’d love to see if we can reach out and get him to come on the show and share his story. In comic books, there’s always the crowd at the end who are cheering and clapping for the acts of heroism. So our analogous to that on this show is where can people find you if they want your help in the future?

Where can they light up the bat signal and say, Hey Jeremy, I have one of those properties you’re talking about. I’d like to help you help me get the cash flow fixed. And I think more important than where they can go is who are the right types of people to reach out and ask for [01:19:00] help from BlackRock.

Sorry, I keep calling BlackRock. That’s another big investment firm Bedrock.

They also do property. That’s the problem but what we were thinking, Hey, the Bedrock of your finances, right? The thing that just doesn’t go away, that just produces money all the time. The website’s great. I’ll, you know, we’ll post it www.BedrockInvestmentProperty.com, all singular. You can go on there and just schedule a consult if you want to talk to us.

Really anyone with poor cash flow in their real estate should have a conversation at the least. Like I had a conversation the other day and she’s this beautiful lady, said like, Hey, here’s my property, here’s what we’ve got going on. As I looked at the numbers, I said, I’d keep it. It’s got way better cash flow than your thinking.

It’s got great appreciation. I wouldn’t sell it. And so if it’s a good asset, I’m gonna be the first to say it because I’m not gonna be the person to like have you jump through a million hoops to have generally the same return you had on the front end. That’s a great way for me to end up eating crow for the next five to seven years.

Like, why did you tell me to sell this? It was a terrible idea. [01:20:00] Right? The contract I have, like the relationship we have is long term. I’ve got an answer for this for a long time. And so yeah, like we’ll tell you if it’s a bad deal or not sell it, but really anyone can use our service.

It’s just because this whole time we’ve talked about maximizing cash flow on existing real estate. Anyone can use us. If you wanna buy a piece of rental real estate and you don’t know how to do it, feel free to hire us, right? We’ll help you learn what you’re looking for, we’ll help you learn how to look at it, we’ll help you learn how to buy it.

If you wanna take it from there, you wanna pay our fee and take it from there and manage it yourself. Feel free. If you wanna, you know, pay our fee, take it from there, manage yourself and call us when you have questions. Our standard fee is 150 bucks an hour. We’re more than happy to answer questions all day.

If you wanna have us help you find and vet and buy a property, pay our fee, and then, you know, pay us for a little while, while you kind of getting your feet into the waters, but you wanna take it over at time, there’s a way to do that. And so really anyone who’s invest interested in investing in single family residential, we can help.

Specifically the people who have underperforming real estate. We can change her whole world. We just did a video [01:21:00] the other day. We took a lady who was earning $18,000 a year, and after her 1031 exchange, her first year was $55,000. Same asset, just fixed the cash flow.

That’s life changing,

It’s a life changing amount of money.

Yeah, that’s full-time income that you created a lot of people.

From the same asset, like from the same asset. All we did was trade out a bad asset with bad cash flow for better assets, with better cash flow. It wasn’t even magic. All we did was say, Hey, investing in Northern California’s, it’s just a bad cash flow market. Let’s go buy three houses in Charlotte and three houses in Memphis.

Yeah. That’s amazing. Well we will make sure that we get your links into the show notes here. Jeremy, thank you so much for coming on today and share on your story with us. I have very much enjoyed doing this and hearing what you’re talking about. Do you have any final words of wisdom for my audience of entrepreneurs as we hit this stop record button?

No, I appreciate you guys being on. We’ve got some really interesting projects that Richard and I were talking about [01:22:00] before, but they’re early in the conversation. Maybe we’ll do another one of these down the line when that next project kicks off. I’m always interested in doing something interesting and the next project I think could be fascinating for this podcast, but we’re just a little early in the process, so we’ll keep that under our hats for now.

More than anything. Thanks for listening. You know, I appreciate you guys even giving us your time. I know it’s valuable. Thank you guys so much. We appreciate it.