Guest: Welcome to the BiggerPockets Money podcast, show number 339, where we interview billion dollar agent Pat Hiban and talk about success as a real estate agent through hard work and tenacity. It’s kind of a a little secret that most agents don’t think about, but it’s, you build on a success up, not from the ground up. So if you sell a house in a certain neighborhood, you don’t want to go market a different neighborhood. You want to go to that exact neighborhood and be like, I’m a neighborhood expert. I mean, people will hire people just because they sold one lousy house in the neighborhood and they think that they’re like been around for a hundred years and it’s their first listing, but they don’t know. They just have that social proof because this house sold.
Mindy: Hello, hello, hello. My name is Mindy Jensen and joining me today is my sensible pragmatic co-host, Scott Trench.
Scott: What a straightforward introduction, Mindy.
Mindy: Scott and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting.
Scott: That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, or start your own brokerage career, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams.
Mindy: Scott, today is an exciting day. If you are a real estate agent, if you are interested in real estate, if you are thinking of becoming a real estate agent, or if you are just looking to generate a lot of money in a new career, as we talk to Pat Hiban. Like I said earlier, he is a billion dollar agent. We are going to discuss what exactly this means. It’s actually pretty impressive and uh get tips on how he became such a such a successful agent over the course of 20 years.
Scott: Yeah, I mean it’s a phenomenal journey. This is hustle, this is grit. This is not something that’s unrepeatable. This is something that um if you’re willing to work hard and go through the the grind and the slog of getting started in those early years, you can achieve at a certain point. It’s perhaps easier to achieve today than it was when when he got started uh in his career track.
Mindy: Yes, uh I am going to hit billion dollar agency before he did, um year wise just because houses are way more expensive now. Um and I think that’s a good goal, Scott. billion dollar age Mindy Jensen, billion dollar agent. Uh but yes, I I you know, you you hit the nail right on the head. This is super repeatable and this is work. That’s how he was able, Oh, did I just spoil it for everybody? Listen, cuz there’s way more information than just do it.
Scott: No, I think you’re going to love this episode. Let’s let’s bring him in Mindy.
Mindy: Pat Hiban is one of only a few residential real estate agents to ever hold the title of billion dollar agent. That’s billion with a B, by the way, selling more than 4,000 homes totaling more than $1 billion in volume. So clearly he came from a long line of real estate magnets, right? That really wouldn’t make for a very interesting show now, would it? In today’s show, we’re going to dive into just how he was able to become so successful with nothing other than his hard work to get him there. Pat Hiban, welcome to the Bigger Pockets Money podcast.
Guest: Mindy Scott, hey, it’s good good to be here. Let’s have some fun.
Mindy: Let’s have a lot of fun. Let’s talk real estate agency, specifically billion dollar agent. Now, I’m not quite there yet. What does this mean? What do I have to get to to be a billion dollar agent?
Guest: Well, you know, here’s the thing Mindy, it’s volume, right? So if you took, you know, if if if you you took you add up all the volume of all the houses that you sell and when it becomes a billion dollars, then you can label yourself a billion dollar agent. Back when I first started, they had a club called a million dollar club. And it was only the select. It was like the top 20 in the zip code or the top 20 in your hometown were in the million dollar club, but eventually over time, it became like a joke. It’s like, damn, I I sold three houses and I’m in the million dollar club. Nowadays, you sell one house and you’re in the million dollar club. So, it’s the same thing probably that’s happening with billion dollar agent is that, uh, you know, when I rung the bell, there was only a couple of us and uh, it it it was such a buzzword and now there’s there’s probably tons of them. You know what I mean? There you’re probably there’s probably agents that have become billion dollar agents in a year somehow, just by selling these Hollywood Hills homes, you know?
Mindy: Now, that’s a true statement.
Scott: So adjusting for inflation, you’re the first trillion dollar agent or one of the first trillion dollar agents is where we’re at. That’s what we got.
Guest: Yeah, let’s let’s mark that. Let’s make that official before someone else takes it.
Mindy: Pat Hiban is the first trillion dollar agent when adjusted for inflation. Well, well let’s let’s let’s um, let’s start from the beginning. How did you get into this business? You know, uh, did was this, was this the career path you had chosen for yourself, um, as a kid coming out of high school or college? What what did that look like and how did you get started on this journey?
Mindy: He came from a long line of real estate magnet, Scott. I just said that.
Guest: Yeah, no, that that’s kind of funny because um, you know, a lot of people have thoughts nowadays of, you know, following their passion and going into um, knowing, right, knowing what they want to be and I was never that kid. I I never I I didn’t have any idea. Matter of fact, I went to two years of college without a major. I was undecided, and then the guidance counselor called me in his office the end of my sophomore year and it was like, son, you need to pick a major because you’re going to be a junior and you can’t be a junior without a major because you’ve already got enough credits. I mean, got I got all my credits. And uh I said, well, I don’t want to be a five-year, you know, I don’t want to be a five-year student. So, what do I what can I do and get out on time? And he said, history or sociology. He said, history’s 10 classes, sociology’s nine classes. I said, I’ll take sociology. And, and I became a sociology major and that’s that’s how I graduated. And um, so I really didn’t know and I didn’t know and even when I got out, I thought, you know, maybe I wanted to be a probation officer because that kind of matched up with sociology. kind of like, you know, I thought it was interesting, but then I come to find out that, you know, they had a long waiting list of uh, when they would hire, they weren’t really looking to hire. I was 21 years old when I graduated because I’m an October baby, so, you know, they they didn’t want to hire me and it they probably weren’t going to hire me. Plus it didn’t pay much money and I had always had like a chip on my shoulder of authority figures, and I’d always hated my bosses. and so I really wanted to do something where I didn’t have a boss. And lucky for me, I got turned down on a lot of sales jobs. I tried to get into sales and I just kept getting turned down, couldn’t get a job. And so, believe it or not, I went where there was a barrier of, you know, least resistance and that was real estate sales because anybody could get their license and get into it. and that’s what happened and I didn’t, I wasn’t a guy that’s like, oh isn’t this a beautiful kitchen and isn’t this a cool fireplace? And look at this. I never and and my whole career as an agent, I never probably I probably said that once, but I hated myself for saying it. Uh I just wasn’t that guy. Uh I was more about uh these commissions are really fat. Like I’m making $2,500 of commission instead of $250 a commission like my friend, the car salesman, or $25 a commission like my friend who’s selling printers or whatever. And I just saw the money in it and I saw the freedom in it. and that’s the truth.
Scott: Awesome. And so how long did it take you from graduating college to deciding that you were going to get your license and begin that career path?
Guest: Seven months. I tried a, I tried a couple of things that didn’t work. I tried a this like time share type vacation sales thing and I wasn’t that good at it because it was very canned and um, and it’s funny story. This is true. The guy who I was working for when I left to become a real estate agent says, well, if you can’t sell vacation packages, you’re not going to be able to sell real estate.
Scott: Well, that that proved true, of course. What was your lifestyle like during that period? while you were kind of figuring your way? Were you kind of just um, you know, were you were you just living really frugally? Was it tight? was it hard? Was it were you kind of finding your way?
Guest: Well, um, yeah, so I’m from a family of five kids and all within like five years of each other. It feels like, and um, uh, my mom had a rule, she had a six- month rule. She was like, if you go to college, you get six months when you get out. If you don’t go to college, you get six months before you know, you get 18 and a half and that’s it. And then you got to get the hell out. And um, so I lived at home for a little bit and then uh, and then yeah, then I found a place to rent. I had three other roommates, you know what I mean? I had this little tiny eight by eight room with three other roommates and I was at real estate agent at a two-door Toyota Celica, like I was bootstrapping it big time and got a couple sales to get a four-door car so I could actually take people around and not have to, you know, meet me at houses. That that was the thing back then is putting people in your car, putting people in your backseat. You were like an Uber driver. I don’t I don’t think they like to do that anymore, but,
Scott: Well, walk us through those first few sales. What were those like?
Guest: That’s a great, um, thing too. So my first year in real estate, I made $13,200 and I still have the, the like $10.99 for that. Um, and I got rookie of the year.
Scott: Million Dollar Agent.
Guest: Yeah, right. I think so. I think so. I think it was a million and,
Mindy: what year was this?
Guest: This was 1988 was my first full year. So, you know, all buyers, almost all buyers. I had one listing and guess who gave me the one listing? And I’ll never forget forget forget this, my dad. My, my, my parents were divorced and, um, he, um, and my dad was living in a condo that he, a one bedroom, one bath condo and then he got remarried and then moved out of town and he had it with another agent and he gave me, he fired the other agent and gave it to me, um, about halfway in my first year and the funny thing is it sat on the market for seven months and to this day, I, I’m, I’m grateful to my dad because he never harassed me and’s like, how come it’s not sold? What’s going on? And what happened was I ended up selling three other condos in the development because people would call on that listing, I’d tell him it was priced at $54,900 and they’d be like, that’s too much. And I’d be like, oh, there’s three other ones in the 40s. You want to look at those? And they’d be like, yeah, and then I’d show them and sell them. Never told that to my dad either, but, finally, his sold after you know, after I sold out the rest of the condo development. Um, and then all the rest were just buyers. I just picked up. They used to have something called floor duty and basically what it was where you volunteered to be a secretary. There was no secretary in the office. You volunteered to be a secretary. You you you sorted the mail, you did all kinds of stuff like that. And then when someone called in and says, how much is one two three Epty-emp Street? You said, it’s 179. Uh, is that in your price range? And you basically tried to get them to come into the office and show them other houses and and I just basically just volunteered myself to to sit there all the time and be the secretary, uh, and get paid leads for it.
Scott: So if you would estimate, how many hours were you working uh per week in in that in that time period? that first year, second year, early years?
Guest: So, when I first started, I was substitute teaching. Um, I think when I was getting my license, I was substitute teaching at like $50 a day. and after I sold my first house, I think I quit substitute teaching. But, um, after that, I’d say, probably like 60, I don’t know. I don’t think I even kept track, right? I didn’t really have, I had a girlfriend, my wife now and, um, I had friends but not as many friends as I had in college, right? It kind of went back to my old friends. So, my high school friend, so I didn’t, it wasn’t like I was, you know, I had like stuff to do every night. Um, I think I was pretty, I think I was pretty focused actually. I think I prob prob probably worked 60 hours a week and made, you know, five cents an hour or something, you know?
Mindy: Well, and let’s look at what we’ve got now versus what was happening back then. I wasn’t an agent in 1988, um so I don’t know what commissions were. Assuming they were around the same as 3% that we’re at right now, your $54,000 condo for your dad netted you a whopping $1,620.
Guest: $1,600 and everybody was on a 50/50 split. Like it wasn’t even negotiable. Like you couldn’t even go and go be like, hey, can I get 55? Like the broke, that was it, you know, the broker was like, everybody’s on 50/50. If you don’t like it, leave. You go down the street and it was, the broker, the brokerages were pretty much anti-trust factory, like they, they all, they all conspired to go 50-50 and that’s not higher. And then, and then interesting part of history, then Remax came in and they like dropped the bomb on that. They like, exploded that, um, and they were like, hey, we’re 100%. And everyone was like, what do you mean? And then only after maybe 10 years of of of Remax ruining that for the other brokers, then they started offering, you know, 60/40, 70/30, 80/20.
Scott: So For for those who are not agents, what what I think you’re saying Pat is that if you earned $1,000 in commissions, your employing broker would take 50% of that. So you’d only get 500 after that and you’re doing all the work. And today that’s unfathomable, right? Most agents would never would never go for anything close to that at this point in time. Um, but that was the real that’s what you’re saying is the reality back then.
Guest: Yeah, that was the reality back then. And it’s kind of come full circle today. It’s the same thing but with teams, you know, so now the teams have become the broker. Like the broker I worked for was called Grempler realty and it was a lady named Mary Bell Grempler, right? And she was like, at the time she, I mean she was probably my age now, but when I, when I, when I looked up to her back today, I think she’s probably 85 or something, right? Um, but she was probably in her 50s but her name was Mary Bell Grempler and she had like, you know, five offices and she had like 20 agents in each office and that was it, you know what I mean? And she it was Grempler realty and that’s the same thing as her having a team nowadays.
Mindy: So being the broker would be the the big money generator because she, I don’t want to belittle what she does, but she just sits there and waits for you to sell the house and then collects 50% of your commission. Uh this is,
Guest: right.
Mindy: That’s why I didn’t get licensed for so long. I did not want to give up 50% of my commission and now that there are different opportunities and different options, uh I did get my license, but I am not making $1,600 when I sell a house. Now I’m making $16,000 when I sell a house. So, I’m on your heels, Pat. I am a million dollar agent already. Good.
Guest: Yes. Good. Put that on your card. Walk us through, walk us through, what you, what you think you did differently in those initial years to become a successful agent compared to your peers at that point in time?
Guest: This is a great question. Um, So, first of all, I, like I said, my first year, I had one listing, it was my dad’s condo and probably 12 or 15 uh, rentals and uh, buyers, even sold a couple mobile homes. Um, like, you know, I was just junkyard dogging it. And my second year, same thing, junkyard dogging it, whatever I could get, if you gave me a lead, a scrap, you know, I would hold on to that thing and hound you. If you told me and the funny thing is this very hard to find nowadays, but if you told me, we’re going to move in a year and a half, that was a great lead for me and I would call you like every month religiously and just be like, you know, getting closer, getting closer because it was the old adage buyers are liars and a year and a half meant nine months. so I’m gonna keep calling them, right? So, um, so two years I did pretty much all buyers and then everything changed in my third year because in my third year I took a, a program called Sweat Hogs by Floyd Wickman. He’s um, he’s the father of Gino Wickman who created the, you know, um, attraction and all those books about the EOS system. That’s his dad. So, he created a course which was like uh, a boot camp. and he said, forget about all buyers, I only want you to be a listing agent. and he said, what I want you to do is go to the office and pick up the book. We had a we had a book back then called a Chris Cross directory and it basically had everybody’s name on every street and every phone number and you and you were allowed to cold call and just call them and ask if they had thought about buying or selling a house. and he had a script and he just you pasted the script up on front of the desk and and you know, at the time I was 23 and I would just do what I was told. And I did it and low and behold, I got a couple of listings and uh you had to go back to his class every week and if you didn’t get a listing at his class, you had to wear a dunce hat, sit in the corner and on the dunce hat it said, no, but I will. That’s how hardcore this was. And, um, I think by the time the class was over, I had like eight or nine listings and and I realized that,
Mindy: did you ever have to wear the dunce hat?
Guest: I never wore the dunce hat. And I, I and but but I used to drive the class with like four other agents from my office and they all had the the dunce hat because they wouldn’t do it. Like they just wouldn’t do it. Like I’d get there at 9:00 and I would just start calling and they would show up at like 3:00 or whatever and chat and they’d make like five calls, I’d make like 500 and um, so, what happened was, I saw that if I was the listing agent, I was in control. Like I, I had a thousand, 10,000 other agents that worked for me suddenly, right, that were going to sell this listing for me. All I had to do is put it in this cool thing called MLS. right? I mean, at the end of the day, we all know and there’s a lot of agents that won’t admit this, but everything’s going to sell if you price it right and put it in the MLS. And so I knew that, he taught me that, I got listings, priced them right, put them in the MLS, all these other agents sold them for me. Lo and behold, I I think I made $24,000 my second year, my third year, I made $83,000, and then my fourth year, I went over $100,000. And uh every year then, I every year after that, I was a listing agent. I was always having way more commissions from listings and buyers, and I just never went back. And I think that that was a huge lesson, and I think it’s a lesson that these agents don’t learn fast enough these days.
Scott: So let me, let me pull out two things I’m noticing here. One is, one is hustle. I’m going to make 500 calls compared to the other, the other folks in the team. And the other, you have not said this, but I’d be interested if this is true, uh, is this idea of funnels or control of your numbers, right? You’re not making 500 calls just to, just to hustle, right? You’re making 500 calls because you believe that if I make 100 calls, X percent will turn into a lead, X percent will turn into listing, X percent will turn into a commission. Um, are those two hypotheses true on my end? are those are those again, backdropping what what we just said?
Guest: Yeah, but yeah, um, but we didn’t even, uh, calculate the numbers back then. Basically, his rule was, call until you get an appointment. and so, like literally I could call until one and if I got an appointment at one, then I’d be done. If I didn’t get an appointment, I’d have to keep calling. and the funny thing about that is it worked. like, like he had these things called fair trades. Um, and what a fair trade is is something that I’m gonna offer you to come over and tell you what your house is worth. So, I’m going to, I’m going to give you a trade. So I’m gonna give you a net sheet of all the Maryland closing costs down to the penny that are going to show you not only what you would sell for but what you would actually net after your mortgage is paid off, all the transfer taxes, doc stamps, bla bla bla bla bla bla right? And that that’s kind of like a lot of people don’t understand that. so that’s kind of a fair trade, right? Or you give them, um, a, a detailed list of everything they need to do to fix up their home uh, to get it ready for sale so they don’t put a nickel in and unless they get a dime back out. Would you like that list? Um, you know, a market analysis is a list what you can get. Uh, you, you know, there’s, there’s like 10 fair trades that you could offer and the whole idea was just to keep offering these people fair trades until they let you come over. And then, then your day would be done. But, you know, they, they chances are they weren’t going to let you come over if they were never thinking about selling at least sort of thinking about selling and man when they even if they just thought of sort of thinking about selling, it usually meant they’re gonna move some point in the future. I got their name, number, they’ve met me, they know me. I’m an agent that they know now and if I’m calling them every month saying, hey how you doing, they ended up using me, you know, just because I’m that guy they know. And also, I was willing to come over and meet with them and give them one of these fair trades. Does that make sense?
Scott: That’s awesome. I love it. So it was it there wasn’t really a funnel. I I was wrong about that. It was more I’m gonna call until I get an appointment. How many days did you go without getting an appointment?
Guest: The only, yeah, the only thing we, we kept track of is is the names and numbers of the of the leads, you know what I mean? And a check mark next to people I’ve already called so I don’t call them again.
Scott: What’s the latest you had to stay before you got an appointment with this method?
Guest: You know, I don’t remember. I’m sure there were days where I didn’t get one, but his, his thing was that you had to get, you had to get one within the week, so I doubt there was a week where I got seven of them, but I think at the end of, by the end of the day, by the time it was all said and done, there were probably weeks where I had multiple appointments, and then he would, you know, he would honor the people who got, you know, multiple listings and multiple listing appointments and it was good old fashioned uh, sales motivation. It worked very well for me at such a young age. I ended up taking that boot camp every like year for like the next four years. And it’s kind of like, so Diana Kokoska from Keller Williams was in it and and then she eventually uh, created bold, which was basically, you know, some, some say it’s a copycat off of it. Um, um, but it it’s kind of like everything in American business is a is a copycat of something else. so it, let’s say it eventually merged into to bold, uh, if you’ve heard about that, and that’s kind of the idea behind it.
Mindy: Okay, so I’ve been an agent for I think eight years now, but I’ve been investing in real estate for 20 years. I feel pretty entrenched in, you know, real estate in general. Uh, I work at Bigger Pockets. Um, I have a comment about this because what I’m hearing you say is that you did the work. What I’m not hearing you say is that so many agents, what is the, what is the stat? Like 90% of agents today won’t be around in two years because they’re not making any money, they’re not, it’s like it’s not working for them. There’s this huge misconception that being a real estate agent is super easy. You go and get your license and then just bam, people come at you with all of their listings. Like, you’re just going to sell all of your friend’s houses. How many real estate agents do you know? Like, not maybe not you Pat, you kind of don’t count because you know so many real estate agents, but like the people that are listening in your daily life, how many agents do you know? You have to like, choose among your friends which of my 15 real estate agent friends would I list my house with? No, you don’t. You have to go to the one that is the best and Pat is the best because he puts in the work. His co-workers would call five people and get five nos and stop. And getting a no sucks, right, Pat? I mean, did when people are like, don’t ever call me again. That doesn’t feel awesome when you pick up the phone and you’re like, hey, I’d like to talk to you about selling your house. And they’re like swearing at you or, you know, stop calling me or slam the phone down, you know, back when, I remember the 80s, you had to slam the phone down and it hurt your ear and you know, but, but you’re doing the work and that is like across the board, if you want to succeed, you have to do the work. Whatever it is you want to succeed at, if you’re not gonna do the work, then you’re not going to succeed. It doesn’t just fall into your lap. That’s not how life goes.
Guest: I think everybody these days is is, I shouldn’t say everybody, but I think there’s a problem nowadays where everyone’s kind of delusional in the sense that they think that everybody knows them. Like literally I meet agents that have sold 10 houses and they think that like everyone knows them. They talk about like their reputation. I’m like, you have, I don’t have a reputation? Like the guy that sold 100 houses last year probably doesn’t even have a reputation. There’s no such thing, you know what I mean, reputations come and go so fast. It’s like, like, like they, you know, oh, I don’t want to, everyone might see it on social media or everyone, it might think no, they don’t, no one, people don’t think like they look at social media for like three seconds at a time. You’re like one of like a thousand people that they might look at on social media and um, there, there’s a couple of agents I know now that are, have done really well with social media. I’m sure you guys have probably interviewed them, but they have to be kind of have the same mindset I had. They you have to think I don’t care what anybody thinks what I’m doing at any time. I could be looking whatever, you know, in any way, shape or form and I don’t care. I’m just going to film myself all the time. Um and that’s what tends to work for them. Not, not someone who always has to think about rejection. just someone who’s only thinking about being on social media constantly, just like I was always thinking about calling and getting a listing appointment.
Scott: I think there’s this concept of a grind that a accompanies any level of success, really in any profession. This years-long slog of consistent, repeated action, um, with the winning formula. Um, and and you just continue it over that and that is what drives success, not your reputation, like to your point, which which if you stop doing it for a few years, you’re out. You’re you’re you’re, you know, you have to restart over with something else, almost entirely. It’s really hard to get that engine turning back on again, I think for a lot of folks once they, once they stop it or leave it. And so, well that, well, let me ask, let me test that. Did this slog, this grind, this this pattern of success continue after year four? What are the next, uh, few years look like after that?
Guest: So, yeah, it was, that that’s a great question too. I think I reached a point where, I remember Remax had this thing called, because I eventually went to Long and Foster. I I went to, I’ve I’ve been at, you know, in my course of my career, jumped ship like five or six times, like most agents, right? So, but, um, I remember being at Remax, I had a broker whose name was Leslie Rock and and, um, they had this club called, I think it was Platinum Club, it was where you earned $250,000 in commissions. And for three years in a row, I made the Platinum Club, but it was like 257, 258, 2585 or something. And she, she she noticed it. I didn’t notice it. I just figured, oh I made the Platinum Club again, you know, whatever. She noticed it and she sat me down and she said, do you realize that you’ve come within a couple of thousand dollars three years in a row? This is uncanny. And I said, I didn’t even notice. And and she goes, well, what are we going to do to get you out of this rut. like out of uh, you know, to get you to the next level. and I found that the way to do that was, uh, leverage, you know, IE building a team, uh, things like that. and and it was good timing for me because I was married at the time and then I had, you know, like a, I’m just making this up. I think my daughters were like two and four or something and so I needed to start spending more time at home anyways. and it all came together and then I just started building a team and that’s, that, that’s kind of where all that started and then I leverage, then I started hiring buyers agents to take away the buyers from me and the rest is history.
Scott: Awesome. That first year you put together a team. Uh, many agents I know who start their team find that their income, their take home pay goes down that first year or at least in the first few months because they’re giving away the commission to the team member um to a large degree. Did you find the same was true for you and how did you kind of overcome that mentally if so?
Guest: Well, I tell you what, what what’s guaranteed to go down and that’s your profit margin. So your margin is going to is going to drop significantly. Now, the question is, again, do you care that your margin goes down? You only really care if you’re adjusted gross income on your tax return goes down, right? because at the end of the day, it’s your EBIT, right? It’s what it’s what you’re left with. and there’s different opinions. I I so I have, this is a true story. I have two good friends. one, one, one guy’s a broker and independent broker in Florida. I think he has like 150 agents. Every agent’s on 100%, 100% split and he makes like $595 a transaction, right? Um, most of his money is coming from mortgage and title, right? And and he makes a lot of money off mortgage and title because his agents use the mortgage and title company. He doesn’t care what his margin is. He doesn’t care what his his margin per deal is because there’s nothing, right? It’s basically zips, he loses money on the deal. I know another guy, um, who does a lot of high-end houses and he only has two people on his team. It’s a highly focused team and his philosophy is keep it small and keep it all. And and and he makes like 90% of every deal after all his expenses are paid, right? And and he’s selling a couple million dollar house. He just told me he sold an eight million dollar house, so that’s like 240 grand, he’ll probably keep 220 of it, right? So like, it’s, but he does all the work, but he’s okay with that hustle part of it. Like he’s, he’s addicted to his phone, but he knows that’s part of the deal, right? He’s very professional about it. Um, so I don’t think either of them are wrong and if I compared their tax returns, they might be similar, uh, but my point is you just have to, you just have to know what your game is and not go back and forth. I think a lot of agents try to go back and forth a lot and try to say like, well, you know, I want to make a lot per deal, but I also want to pay my agents high split and have a million agents. Well, it probably’s not going to work like that. Did did that make sense?
Scott: Absolutely. Volume and volume or rate, right? It’s what we want is the total amount of profit at the end of the day and you can increase volume, you can increase, you can increase rate. Um, in a perfect world, you can do both, but not always.
Mindy: Pat, you just made a really good point. You said your friend who said keep it small and keep it all is addicted to his phone and that’s, that’s a side that we haven’t talked about yet about being a real estate agent where if you’re going to be successful, unless you’re going to spread that out amongst your team, you’re going to give up a lot. You’re going to give up nights and weekends because that’s when your clients can see houses because they have a job and they have a family themselves and you’re going to be on your phone all the time. I mean, now that we have pocket phones, we are always available and you don’t get time off and even when you’re on vacation, you don’t get time off and I mean, if you want to sell a house, go on vacation because that’s what it.
Guest: It’s another weird thing to talk about because like when I was veering off from being addicted to real estate sales. And I was addicted to real estate sales. It was an all consuming job for me. It consumed me and that’s what made me good was I was consumed by it. Like I didn’t want to lose that deal. I had to take that call. I had to show that house because, you know, at that time it was eight grand or or 10 grand or whatever. And now it’s 16 grand like you said, it’s like, it’s like, how do you turn down a $16,000 cash phone call? Like, right? If all they want you to do is bring them to a builder model and sign them in. Like you have to say yes. You know, it’s so hard. So, it was easier to spin off, I think when I was spinning off. now, everyone’s addicted to their phone. You can sit there Mindy and say, oh yeah, he’s addicted to his phone. Well guess what? My wife isn’t in a real estate agent but she’s addicted to her phone. My kids are addicted to their phones. Everyone’s addicted to their phones. I mean, you’re going to do that, we might as well not be false prophets, right? I mean, who’s not addicted to their phone? so the question is, are you going to be addicted to your phone for something that’s going to make money or you going to be addicted to your phone for TikTok or something that’s just going to, you know, serve you no purpose at all. Like what are you, what are you replacing it with unless you’re leaving your phone in your car or you’re leave you’re locking your phone in your safe, which some people do. Um or you’re just turning it off. But let’s just be real, right?
Mindy: That’s true.
Scott: So let’s let’s um, let’s hear about the next phase. You you you start a team here, um, and I imagine you’re still working long hours. but at some point, um, you you part ways with this business um and can you walk us through that shift and why you why you left um being an agent and and you know, how you thought about investing as part of that journey.
Guest: So I started investing, like I bought my like I think that first year when I became a listing agent, you know, I was like 23 years old. That’s when I bought my first house. I house hacked it. Um I rented it to two nannies from India, the basement and then I rented um to my buddy from elementary school a bedroom upstairs. And um, and then eventually I kicked them out and and my wife moved in. um, and then we moved out to something bigger and had kids and then I kept that as a rental and then I bought another rental in her name and this was all when, you know, my salary wasn’t looking good or or whatever my, let’s just say my tax return wasn’t looking great. Um, but then I stopped and I think that was a mistake. There was probably about 10 years in the 90s where the real estate market did not really change. It didn’t get worse, it didn’t get better. Real estate investing was not a thing. Like bigger pockets would have had no chance. like they people there was only like five guys around that invested in real estate. It just it wasn’t a respected asset class. It would have been like maybe gold is now. like you meet somebody on a plane, what do you do? I invest, I I buy and sell gold, right? That’s boring, right? You know, it’s that’s how real estate was. nobody bought and sold, nobody, you know, did it. And so, um, I could have bought 10 houses, I could have bought 10 houses at the exact same price for 10 years. the same house on the same street didn’t change for 10 years, but I didn’t. So I put all my money in the stock market, every like everyone else. it ran up in the 2000s. I remember the day I became a millionaire. I put this in the book, six steps to seven figures. My wife and I took a picture like our Microsoft money account went over a million dollars. It went to like a million and $12. Uh, she said, where do you want to go to dinner? I said, I don’t care so long as it don’t cost more than $12. And what year was this? It’s a true story. Um, uh, that was 1999 maybe, I think. Awesome. Yeah, and so, we ate at home. We had uh cheese steaks and budweiser and, um, and so, and then, uh, and then the market crashed and I was margined out, which means you borrow money. I had 1.2 million of value but I was borrowed like 70% of that. So, you know, I had more stocks than that. Uh some would say that’s kind of how a lot of real estate investors are now. um, uh it just in real estate versus in stocks, but but uh you know, real estate doesn’t move downwards as fast as stocks do, obviously. Um, but it all went it it it went all my 1.2 million went all the way to like 300 grand uh in one year and and I don’t think that would happen in real estate, but but um it wouldn’t. it never has. But um so anyways, so then I just said, you know what, screw the stock market. I’m going to buy more houses and I started buying uh rentals at University of Maryland, College Park. I bought seven houses. Uh I went I had a mentor and there were these houses for sale for like 150,000 and they would rent for 2400 a month to college kids because they were coming out of the dorms and of course the dorms always charged, you know, astronomical amounts. and he looked at the numbers and he said, wow, those are great numbers. They’ve, you know, it’s like the 2% rule instead of the 1% rule. He said, I’d buy 10 of them. So literally I bought seven of them within like a year and a half. Um, and then I started just buying other houses, bought some in Baltimore City, uh and rented them section eight housing. and then at some point, I decided to start buying commercial real estate and I bought a shopping center and I bought uh, I I I met a couple of other guys and we started buying multi-family projects before the before anybody was syndicating. I think we bought like three of them and then we bought a fourth and then we decided to syndicate and it was like pulling teeth. It was like calling people and sending them, sending them, fexing them a brochure and like getting on phone calls for hours with people who want to invest 50 grand in your apartment complex. Of course, now that’s it’s it’s now we have an email list and I think the last one we did, we sold out in like 12 minutes or something ridiculous. Um, but anyways, um, that was about 10 years ago. That was more than 10 years ago and now I have about 2,000 doors uh of apartments. Um and um, and so anyways, kind of telling stories that are sort of related to your question, but around 2010, I think I just got sick of it, Scott. what happened was, uh, everything changed. It’s important to to pay attention. I think what I’m saying here because a lot of agents lately have been asking me what they should really look for to determine when things have actually changed in this real estate market and I tend to say the number of units. That’s what changed for me, the number of units. And what the number of units means is the number of settlements. doesn’t matter the number of buyers, number of sellers, whatever. It’s the number of settlements. Doesn’t matter the days on the market, you you know, the what percentage of the prices dropped. It’s the number of units because like I had, I think we were averaging like 45 settlements a month and we had a certain amount of bills and to pay and I started profit at let’s say 40, right? So the last five sales were all profit to me. Well, I remember one month I went from 40 some sales all the way down to 16, like the same year, you know, in May I sold 42, let’s say and then in in June I sold 16. and it didn’t get much better and then, um, it was hard and we were shoveling water out of the boat and then, uh, and then basically in 2010 I went to my most loyalist agent and and long time uh, a guy running with me, Mike Sloan and I said, hey, you want to, you want to take over? I’m I’m done. Um, and he said yes and he kind of took over. And that was the beginning of my mental process where I after that, I just checked out, you know.
Scott: So, so the catalyst was, was, uh, overwhelming amount of of uh, of work, but also, um, just this like boom and bust uh from your business in terms of settlements, uh, and and just getting getting tired of that, probably tons of hours and then emotional turmoil and anxiety about the that part of the business. Is that is that right?
Guest: Yeah, it was just terrible. It would have been like being at the best party of your life and then there’s a shooting or something, you know what I mean? And they turn on the lights and the cops come and the fire department come. I mean, it was just bad, you know, it just, it went because, so I had a really high profit because it was all me. Like it was all, I was responsible for everything, you know, there was no partners or anything in it. I had a great uh, statement not too long ago, they said, uh, capitalism without bankruptcy is like Christianity without hell. And um, it was sort of like that. like I had gotten the fruits of capitalism and I was making a ton of money, more than any money I’d made in my life. I had a mortgage company, a title company, uh, everything I touched turned to gold and then all of a sudden, the downside of capitalism happened and I was responsible for it all, so I wanted to get out of there as soon as possible and I liken it to like going to Vegas and winning at craps and pulling all the money to myself and running up to my hotel room and putting it on the bed and watching a movie and and I just wanted to take all the winnings and get out. I didn’t want to wait for the market to come back. Does that make sense?
Scott: Yeah, so so it I mean, it sounds like you, uh, uh, you had a big boom up until the cr the housing crash and even really into a year or two into the housing crash, but eventually it started catching up with your business and just was a miserable experience running running a real estate business in that time period with lower transaction volume and all that other all that kind of stuff.
Guest: Yeah, I mean I’d like the, it would be a it might be uh, more better for my ego to say, oh yeah, well I, I, I quit at the top. You know what I mean? but it really wasn’t like that. I quit, the universe was coming to me and it, it wasn’t fun anymore. I wasn’t as excited. I didn’t like coming to work, you know, I, I tell a story. it was probably before everything crashed, but the writing, this is when I knew the writing was on the wall that I was eventually going to get out was I went on a listing appointment with actually Mike Slow, my partner at the time, um, and fell asleep.
Scott: Oh my gosh.
Gosh, did you get the listing? You were like showcasing the bed. Did that, did that help the listing? No, it’s one of those ones, you know, you like kick the curb sort of thing. you know, when you like, and I would like, I don’t know, I, I, I think I had some pasta for lunch, this lady was really hot in her house, it was like 3:30 in the afternoon, it was like prime nap time and I just was like, and I kicked the leg of the table and she was like, you fell asleep. And I go, I went to the bathroom and put water on my face and I came back out and um I did it again. Like I was like, like, like you know, it was like, you know, like you, like you catch yourself, like sometimes if you’re driving, you know, and you catch yourself,
Scott: Did you get the listing?
Guest: No, no. I didn’t even call. I didn’t even follow up. I’m not following up. I was like, I lost that one. And that was the last, last appointment I ever went on. And that was when the writing, that was when I’m like, you know what, it’s just not fun anymore for me. One last, one more thing here on this. so so this is a this is a great catalyst for leaving the business. How, what did you, what did your uh, how did you set up the rest of your portfolio to transition kind of this day and night, I’m in, I’m out and what did life look like before and after?
Guest: The technical answer is obviously you want your expenses to be paid by the passive income of your real estate. Now, the tricky part that no one talks about and David Green brings it up, um, but a lot of people don’t talk about is like when you’re doing single family homes, a lot of times it’s inconsistent, you know, you could have a you could have one of these great single family homes and then the next thing you need, need a new roof and a new air condition and then the next three years you don’t make a profit. So, I had a bunch of single families at the time and I was just starting to get into commercial, but I think more than anything is I just had faith in myself. I wouldn’t say that I had like this perfect balanced portfolio that paid every bill. I I think I had been through the stress of having a lot of things that I signed personally come off the books for me. Like I signed for a big lease. I signed for a copier that it was like $5,000 a month just for this massive copier that we did postcards with and stuff. I just signed for, we had a bunch of vehicles that I had signed for and so coming off of that just not having that liability was was a big relief. but I, I did have some passive income, but more than anything, I just had faith in myself. I knew that um, whatever I chose to do, uh, it it it would it would work itself out and I’d I’d figure it out. um, and that’s all I can really say is I just had faith. I just had faith in the universe and faith in myself.
Scott: I love that. I mean, you you think about people today who are thinking about, I just want to walk away with that and they think their their portfolio needs to generate these returns. I mean, where, where is it going to come from, right? You have this, you have, if you have a stock market portfolio, even a million bucks in there, you’re going to get 2% dividend yield on a good day, right? so that’s 200, that’s 20 grand a year on that. And if you have a rental property portfolio of single family homes at a, you know, five or six cap rate, um, absolutely, right? You’re gonna have that same problem. even if you have a million bucks there, that’s supposedly 50, 60 grand a year on paper, but then when your roof and you when you have to account for CapX, which is not included in these cap rates, um, that’s going to eat up your cash flow on to a significant degree each year. So, I mean, what, what can you do here? I think it’s you got to know what you want in your life. You need to have ideally, I think a strong cash position. Did you have some cash set aside like a significant emergency reserve when you walked away?
Guest: Yeah, I did. Um, I’ve always been kind of a a numbers guy. My mom was a math teacher and my mom is 88 years old and she logs into her Merrill Lynch account every day. Um, she’s, she, it’s something that she does. I inherited it from her. I’ve always been a saver. I’ve always been, um, you know, I’m just obsessed with with with money. Like I’m constantly moving money around. and I think it’s served me in that I think about it so much that I do sell stuff and a lot of people, you know, they don’t, they don’t sell, like, you know, they don’t cash out and then they just kind of go up and down with the markets and um, I’m always cash, I’m alwa kind of like, kind of like if you had a bunch of furniture in your house and you moved it around every month, it sounds kind of crazy, but it, I have a lot of capital events. Like I just had, I just sold a shopping center. I just sold, um, an apartment complex we have, uh, in Georgia and we bought another one in Florida. Uh, you know, just constantly doing stuff like that, but what comes with when you do that is you have to pay attention to all your numbers. so I’m I’m always updating my numbers and I’m always logging into all my different accounts and looking. So yeah, I did have a I did have a some, you know, couple million bucks to answer the question. Well let me ask you a question about about this this concept of selling. You know, one of the things I think you you that people struggle with. so I’ll use myself as an example. I have uh five properties here in Denver. They’ve done very well. They’ve gone up. I like you mentioned earlier, I’m leveraged, probably similar to the way that you were leveraged um on your margin portfolio that you you said earlier, right? with with uh probably like 60-40 um debt to equity on those on those properties. Um, but if I, here’s my problem. If I sell, which you could say, hey, I would love to reposition some of that, but then I’ve got to swap my low interest rate mortgage for a much higher interest rate mortgage, or I got to trade out of that to, you know, essentially a heloc, um, you know, or, or some something that has a a big balloon payment or a very short amortization period in the commercial space with that. so do you think that in the it’s a little easier for folks that, you know, once you get past that level of residential investing into the commercial world that the buying and and and selling component of that, um, really becomes more of a, more of a manageable game than the the long-term I’m going to buy this on the 30-year mortgage, set it and forget it approach in the single family or small multi-family space.
Guest: I think you’re correct and you’re thinking like, like the the the the one of the things I did which I write down as one of my mistakes is I had a whole bunch of those mortgages like per house, Fannie May mortgages on a bunch of the houses that I had and then I paid them all off. Um, this was probably like right around the time we were talking, probably like 2011, 12, whatever, I thought everything was going to, whatever, I’m going to pay everything off. so I paid everything off. And then like a couple of years later as things started coming back, I wanted money to invest and but I couldn’t get them because they were all in LLC, so I ended up getting a commercial note that has since, you know, I’ve had to refinance several times and it’s always at like five point something else and you know, and amortized, you know, a five-year balloon. So anyways, if if your properties are all on those Fannie May 30-year mortgages, those are the ones that probably you should just keep forever because there’ll come a time when you won’t, you won’t be able to get, not only that rate, you won’t be able to get something for 30 years, especially if you decide to put it in an LLC, then you’re really screwed because then the next time you go around, you have to get a commercial loan because your LLC doesn’t make enough money to qualify. Does that make sense?
Scott: It is hard to trade real estate right now. People are stuck because of what I just described. I mean it’s, it’s like I would love to be a a seller in some of these places, but then I’m either going to have to pay this huge capital gain and then redeploy the assets to something else that I’m going to get a way worse debt, I’m going to get way worse debt terms on than my Fannie May 30-year fixed rate mortgage. So,
Guest: Yeah.
Scott: Yeah, and the more real estate that you own, the more cost segregation and depreciation that you get, and suddenly your tax returns become so bad that you can’t qualify for a regular Fannie May mortgage anyways. That happened to me for like three years in a row. I was buying so many apartments and stuff and so much new real estate that it ruined my income and I no one would give me a loan.
Scott: So so for those listening, what what Pat is saying here is Pat is a was clearly a real estate professional. So that means that losses, depreciation, for example, on rental properties, um, can count against active income. So he could, he could buy rental properties and lose 100, $200,000 in depreciation a year. Not only that, but when you buy an apartment complex and start moving into the bigger assets, cost segregation allows you to do bonus depreciation. This is a topic we’ve covered in various videos on the Bigger Pockets YouTube channel. So you might have hundreds of thousands of dollars in losses and actually be getting tax credits as a real estate professional in in those periods. You got to be careful because you’re going to pay it all back on the back end whenever you go to sell those properties, uh, unless you continue the game of 1031 exchanging and and continuing to buy new assets in perpetuity. But it’s a, it’s a really powerful tax benefit. Now, that’s not true. You don’t get that, this’s not apply if you are a accountant, um, or a lawyer or something like that and you’re not a real estate professional, then you’re only getting passive losses, which are still valuable but have slightly different different connotations there. But that’s all, that’s an awesome tidbit.
Mindy: I want to clarify what Scott is saying, real estate professional. Each one of those words is capitalized. this is an actual, I think it’s a, what like a tax designation. This is, this is something there there’s a lot you have to do to qualify to be a real estate professional. Um, you can’t have a full-time job if, basically you can’t have a full-time job if you are a real estate professional. uh, lots of lots of hoops to jump through, but it can be very, very, very beneficial when it comes to tax time. So if you think you’re a real estate professional, talk to your accountant who will most likely slap you down and say, no, you’re not. But if you are, yay. Cause yeah, I was like, I work at Bigger Pockets, I’m a real estate agent, I have rentals, like why am I not, why don’t I qualify? And they’re like, here’s 17 reasons why you don’t qualify. I’m like,
Guest: get a different accountant. I mean it’s it’s the best thing in the tax, United States tax system. It it’s, you know, it’s it’s the reason why Donald Trump’s tax returns shows that he didn’t pay any taxes because he’s a real estate mogul.
Scott: Yeah, this is a, this is a cheat, a cheat code here and I think this is a great, um, opportunity to explore for folks like Mindy, folks like Pat, and folks that are thinking about leaving their full-time job but have a big real estate portfolio and intend to buy more because of the depreciation, um, offsetting your active income.
Guest: Yeah.
Scott: So Pat, um, you you’ve recently uh uh brought two books into the Bigger Pockets family here in the last uh last 30 days, which is pretty pretty uh remarkable. So not only are you a successful real estate agent, uh investor, uh family man, um general life, uh uh success story, but you’re now, you know, a published author a couple times over. Um, why did you bring those books into the Bigger Pockets family and can you tell us a little bit about them?
Guest: Absolutely, yeah. I mean you guys were, uh, you’re a dream come, come true for me for, for both of these books. like uh, I’m good friends with Matt uh, Faircloth from, uh, he’s a, he’s a member of Go Bundan and you you know, we were talk, Tim Ro and I were talking to him about our newest idea of a book, um, at that time, The Quitter’s Manifesto and he’s like, well, hey, let me introduce you to the Bigger Pockets family and, um, you know, his wife has a book with you and she really enjoys it and and of course, uh, we know Aaron Mugii and David Osborne and a bunch of, a bunch of other authors that you guys published and um, and so we were like, yeah, let’s, let’s investigate it. So, let me tell you a little bit about that book first of all, that, uh, around that same time, say 2010 when I kind of gave my business over to Mike Sloan, uh, I met a guy named Tim Rhodes, who had retired at 40 years old. Um, and I met him and I asked him what he did for a living and he said, I ski. And I, and I said, what? And he used to be a top agent himself and and and he basically taught me how to, uh, remove this identity that we’ve, that we grow. you know, if you’re a doctor, a lawyer or a real estate agent, you grow in an identity. I grew in an identity. I was like a, I, you know, I, I was a local celebrity in my town and I had a huge identity that I just gave away, well, I just gave away or walked away from. Um, and he taught me how to do that. and so when I started hearing about the great resignation and uh and all these people quitting their jobs in COVID, I called him and I say, hey Tim, you were my mentor, I’m your mentee, we both quit our occupations uh right in the middle kind of of where we probably shouldn’t have in most people’s minds. Let’s write a book about it. and as we talked about it, we decided to write a a very tactical book, not a strategic book that encouraging people to quit, but a book that’s only made for people who have already decided to quit and just don’t know the steps to go through to do it. And that’s the Quitter’s Manifesto.
Scott: Awesome. Could you give us a quick highlight of the of some of those key steps for folks who are interested in learning more?
Guest: Yeah, absolutely. So, um, you, you know, basically we’ve set the book up Scott like this. So, we know that quitting is terrifying. The reason that most people don’t quit is because they’re scared. It’s kind of like going to a cliff and looking over the cliff. If you took a thousand people to a cliff and they all looked over the cliff, one guy would jump off, one guy or one girl would jump off and create a parachute on the way down. That’s what you call an entrepreneur, right? Um, the other 999 might take a selfie and run, right? and say it’s scary. So, we said, okay, what’s going to get those people to not run away from this scary, scary, scary cliff? and so we thought of it like a circus where we would build, we would teach them how to build a safety net, like a trapeze artist has at a circus. So a trapeze artist grabs a bar and swings to the next bar and swings to the next bar and swings to the next bar. and if they fall, they land on a safety net. Well, the book Quitter Manifesto is basically a whole bunch of trapeze bars that the reader can grab onto one by one and we teach them how to build a financial safety net at the bottom. so if they drop, they land on a safety net. So now that they’ve got the trapeze bars and the safety net, they can go ahead and move forward. and this, you know, the steps range from building a quitting team, which is a, a group of people that we actually give you little outlines in the book so you can build a team to quit with people that are going to help you quit, um, all the way up to something called a soul sucking meter, which is basically a decision making meter that helps you decide whether or not you’re ready to quit or not. Um, and um, yeah, and the and the book’s done so far, it’s done extremely well and we’re we’re very excited about it.
Scott: Awesome. Well, it’s a great read. We’re very excited, um, to to to have this in the in the Bigger Pockets lineup and, um, look forward to to to sharing this with as many people as possible.
Guest: Pat, that’s not the only book that you’ve written. I mentioned several books here. Can you talk us tell us a little bit about six steps to seven figures as well?
Guest: Yeah, so absolutely. so that’s that’s a really exciting one. So in 2011 after I had essentially decided to get out of the real estate business, I decided to write a book and um, uh, it went through several versions and I sat down with Gary Keller at Keller Williams realty who’s written, you know, so many best sellers, the one thing among many other real estate books and he looked at everything that I’ve that I wrote and he’s like, Pat, the the only thing people are really going to buy that’s really important to them or what they really want is your story. kind of like how you and I just, how the three of us just chatted, right? But put it in a book and uh, stories like that. and he said, you got a ton of stories. So, I sat down and I put him in a in a huge book uh that was chronological like year one, year two, year three. and then he said it’s too long. You got to make it more of an airplane read. It went from four pages to two, 400 pages to 200 pages. and I was able to put it into six steps. six simple steps that any real estate agent could do where you could go from selling no houses to selling 500 plus houses a year. and uh, that was, uh, actually went on to make uh, the New York Times bestseller list, it made the USA Today best seller list and Washington Post bestseller list and that was a, a very exciting journey. and then about a decade past and, um, it it it was a classic, but it it it wasn’t, you know, killing it like it did when it was on the best seller list, of course. and so, um, you guys came to me and you said, hey, why don’t we do a remake? And I said, okay, what would that take? So, we decided what it would take is a chapter about how I quit, like the steps that I took after I, you know, made a million dollars, what steps did I take to actually get out of the business? because the worst thing to see is like an 87-year-old woman knocking on Fizbo doors, right? Um, still in the business, we want agents to eventually get out of the business and quit and retire. So, what it took to quit and kind of like another chapter about what I’m doing now and what I’ve done since I’ve quit. So, I took a couple of months and I put my nose to the grindstone and I wrote two new chapters, uh, kind of like two and a half new chapters and I I brought them to to bigger pockets publishing and they they read them and they said, man, this is great. And uh, we packaged together and now we have six steps to seven figures new and improved with two new chapters and uh, it’s it’s very exciting.
Scott: Awesome. and we’re we’re obviously uh, incredibly excited about both of these books. Could you give us a quick rundown for those who have not read uh six steps to seven figures, what those six steps are, um, for folks that are are brand new to the title?
Guest: Sure. Um, the the the first step is, uh, is is a firm. It’s it’s most people come out with really big goals and I learned early on to come out with little goals. Like a little goal would be kind of like what we were talking earlier, rather than, you know, be the agent of the year or rather than sell a million dollars. It’s call until you get an appointment or make 50 calls a day or five calls a day or whatever that is. a the second step would be track which goes to what you said, which is track, uh, that which is measured grows, right? Um, and, um, you know, there’s a million different ways you can track and I kind of go through like different ways I’ve tracked things uh, as an agent over the past 25 years or so as an agent. Uh, the next one was is mentors and masterminds, which is basically find people who have proven themselves in the real estate business and kind of just copy them, right? It’s just copying other agents, which I did my whole career. um, and then the the the next chapter is act, right? And act, act just means take action on it. You can’t just, act is the difference between everyone else that took that class and me. I actually took action on it and they didn’t, right?
Scott: The dunce hat or no dunce hat?
Guest: Exactly, exactly. Um, and then the fifth chapter is build and build is is most people’s favorite. Believe it or not, it’s a, it’s kind of a, a little secret that most agents don’t think about, but it’s a, you build on a success up, not from the ground up. So if you sell a house in a certain neighborhood, you don’t want to go market a different neighborhood. You want to go to that exact neighborhood and be like, I’m a neighborhood expert. I mean, people will hire people just because they sold one lousy house in the neighborhood and they think that they’re like been around for a hundred years and it’s their first listing, but they don’t know, they just have that social proof because this house sold. um, and you could do that with school teachers. I tell how I did it with school teachers, how I did it with police officers, how I did it with million dollar homes, just taking one success and then building and saying, oh, I sold a house to officer Jenkins, officer Smith, and officer Pinkney. And they’re like, oh really, you’re my agent, boom. you know, um, so, uh, build and then the last chapter is invest, which is just basically shows talking about everything you guys talk about bigger pockets, which is, you know, don’t, don’t just, as you make more money, don’t just spend more money on watches and and bigger houses and more cars and, and more things, you know, keep your expenses similar and save, do like my mom does and save money, count money, make your goal, this is how much money I have today, This is how much I want to have at the end of the year. That’s, that should be your goal rather than I want to have three Rolex watches. and and that’s kind of the the those are the six steps.
Scott: Well, it’s, it’s a fantastic book. We’re very, uh, we’re very grateful that you’ve decided to publish with Bigger Pockets and uh, look forward to sharing it with as many people as possible.
Guest: My pleasure, I’m excited.
Mindy: Like I said before, I’ve been an agent for a while. I’ve been involved in real estate for a long time. and I started reading the book to prepare for the show and I’m reading and I’m like, okay, okay, you know, what am I really going to learn? I could not turn the pages fast enough. It doesn’t matter how much time you have been an agent, if you’re a new agent, if you’re an older agent, if you think you know everything like me, you’re going to learn so much from this book. It’s like a master class in being a successful real estate agent. I really loved that book. Well, where can people find out more about you, Pat?
Guest: Um, you know, here’s the thing. this is funny. so I I, so I have a, a new website. it’s called hybin.com. It’s, it’s the same website I used to have my real estate houses on and I I I just had it updated. so just go to hybin.com and everything’s on there.
Scott: Awesome. Thank you so much for coming on today, Pat. It’s a great uh, it’s a a pleasure to talk with you and uh we’re very grateful for uh you joining the Bigger Pockets publishing world.
Guest: Thanks guys. I mean, I really had a lot of fun and um, to me this is enjoyable. I I’d, I’ve been talking about the Quitter’s Manifesto for like 25 podcasts in a row. So, to do this was very refreshing and um, if you uh, if either of you guys are ever uh on vacation or sick or you need a stand-in, you know, reach out to me. I love talking, so I’d love to help out if you can if you need me to.
Mindy: Okay, Pat, this was a delight to talk to you today. Thank you so much for joining us. I had such a good time talking to you, listening to your story and uh, getting this personal master class on being a successful agent.
Scott: Okay, Scott, that was Pat Himen, uh, billion dollar agent. I think that that cannot be stressed enough because that is really impressive when you’re selling $50,000 houses. Um, his his book, Six Steps to Seven figures was, I’m not kidding. I could not stop turning the pages. I could not, I really do think I know everything and then I read this book. I’m like, oh, I could be doing that. I could be doing that. I could be doing, I am doing that. I could be doing that. I could be doing that. It’s just a fantastic book if you want to be a successful real estate agent. It’s literally the step-by-step how to, I did it, you can do it too.
Scott: Yeah, I mean that’s that’s awesome. and so so is Quitter’s Manifesto. I mean it’s just a a step-by-step guide to coming overcoming a lot of those challenges that uh are surround the idea of actually leaving your profession. We build up this kind of this concept of financial freedom for so long in our minds and um and build this portfolios, but it’s really not even about the portfolio when you talk to hundreds of people that are uh across hundreds of people I’ve communicated with and I know that that you’ve met as well, that are struggling with early retirement in a non-financial sense, uh not just in the context of their their portfolio allocations and the cash position and those types of things. We we like to talk about here at BP Money.
Mindy: Right. I mean, Carl struggled. We were, we had hit our number, we had doubled our number. and then he’s like, oh, I don’t know, I don’t know. It’s, it’s hard. What if? What if syndrome really really does hit everybody? So yeah, that’s an excellent book as well.
Scott: I do want to call out two great nuggets we got from today’s show that I really thought were powerful. One was the the concept, you know, he’s talking about buying and selling, right? And, you know, most of the time when we talk about building wealth here at at bigger pockets, it’s in the context of buying. And why is that? Well because the vast majority of people who are, you know, interested in this business are getting into it, right? I’m building my first 100 grand in net worth, my first million, my first whatever, um, 10,000. and I need to use that net worth to buy an investment and begin investing and accumulating accumulating assets. And he was talking about how not enough people talk about selling. right? And I think that’s a great point. I mean, when you have a large portfolio and you’ve got a big business asset allocation, re redeploying your capital, all that kind of stuff makes a lot of sense, but it’s also very hard for investors like us. um us being all of the people who are listening and myself included, who invest in single family or small multi-family real estate with 30-year fixed rate Fanny May mortgages. How do you trade out of out of one of those properties, right? And I’ve been I’ve been looking at this and thinking about this with my own portfolio. If I sell, I I have to, I have to pay significant capital gains taxes or I have to 1031 exchange, which involves me swapping my great mortgage for a worse one, most likely, right? Um, or if I cash out refinance, I’m doing the exact same thing and pulling taking out my great mortgage and replacing it with a much a much worse one. Um I’ve talked to some accountants recently and heard about creative things like buying, you know selling your existing portfolio and then doing a cost segregation analysis on the new purchase to offset most of the capital gains taxes. but I think that there are not a lot of great options right now for real estate investors who have 30-year mortgages on single family rentals or small multi-family investments other than to hoddle hold on for dear life, right? Um and just continue holding. I’d be really interested um if other folks had opinions on that that were contrary to that and wanted to discuss those. So, I’d love um how you think about selling and trading real estate um and accounting for the tax challenges, um which are good problems for all of us who have been investing for a long period of time. But I think that’s a really interesting point there.
Mindy: Absolutely. And I will post this in our Facebook group which can be found at facebook.com/groups/bpmoney. So please join the conversation. How do you think about selling properties and reinvesting your your uh assets into higher cost and higher interest rate investments. Um honestly Scott, my thought is, why do you have to sell?
Scott: I don’t, but I just I just thought about I thought about it in the context of of trading that real estate and it’s like, if I wanted to sell, I would have to really believe in my alternative investment because I’m going to be giving up a lot in order to do that in the form of paying taxes right now, um, and exchanging my great mortgage for a much higher one. So I, if I, if I want to avoid the taxes, I’d have to really believe in the next piece of real estate over and above my existing portfolio. So I’m not going to sell. I’m happy with my my current portfolio, but it’s a challenge for a lot of a lot of folks there um who have experienced that appreciation and don’t have an alternative to deploy it into. So the second big point though was the real estate professional status. Real estate professional status, again is a tax designation that says that if you are a real estate professional, for example, a real estate agent and you do that as your full-time or primary job, you work a certain number of hours at it, then you can use the depreciation from a rental property, the passive losses that real estate often produces to offset earning earned income and that can be a major tax benefit when deployed appropriately. And that that advantage compounds considerably for real estate investors when their portfolios begin to balloon to multiples of their annual income because you may be able to offset all of your earned income or a huge percentage of it uh with that depreciation. So it’s a really, really super powerful tax benefit and uh interesting, interesting concept there for folks to explore. And I’m sure there’s going to be a great discussion around that as well.
Mindy: And we will post that question in the Bigger Pockets Money podcast Facebook group as well. facebook.com/groups/bpmoney. Okay Scott, should we get out of here?
Scott: Let’s do it.
Mindy: From episode 339 of the Bigger Pockets Money podcast, he is Scott Trench and I am Mindy Jensen saying, thank you for listening.
