The Wisconsin Investor
Each week, we bring you interviews with some of Wisconsin's top real estate investors who share their tips, tricks, and strategies that you can implement right away. This show is dedicated to helping Wisconsin real estate investors elevate their game. Along with interviews, I'll also dive into hot topics in solo episodes and feature experts from various real estate sectors across Wisconsin.
The Wisconsin Investor
The Art of Real Estate Leverage w/ Leon Barnes (Improved Audio)
Real estate success takes more than great deals—it takes strategy, partnerships, and a mindset built for the long game. In this episode of The Wisconsin Investor, Corey Reyment sits down with Leon Barnes, longtime investor and Membership Director at Collective Genius, to talk about what it really takes to grow a rental portfolio that lasts.
Leon shares how he’s used the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat) to build a portfolio with “infinite returns,” pulling his original capital back out while keeping the cash-flowing assets. With sharp insights and zero sugarcoating, he explains why passive income isn’t truly passive—and why managing rentals requires patience, leverage, and smart systems.
They dive deep into market trends in the Midwest, from cap rates to cash flow stability, and how areas like Wisconsin and Kansas offer room for growth and forgiveness when mistakes happen. Along the way, Leon shares his approach to business partnerships, emphasizing alignment of goals and clear communication: “It’s not just about you winning—it’s about everyone winning.”
Leverage is a constant theme—whether it’s financial, relational, or operational—and Leon shows how tapping into mentorship and community through groups like Collective Genius can accelerate your growth far beyond what you could do alone.
Looking to grow your own portfolio? Start connecting with serious investors through REI Success Club in Green Bay or browse off-market properties at wisconsindiscountproperties.com.
👉 Learn more about Leon and apply to join Collective Genius at www.thecollectivegenius.com
Hey everybody, we are back with another episode of the Wisconsin Investor and, as usual, I have an amazing guest for you guys today. I'll introduce him here in a second. As usual, I'm going to also do a little commercial for our sponsor, Wisconsin Discount Properties. Today I'm going to talk about a deal that we had out to our buyers this recently. That, I think, is a great deal, and here's why we put it out for $265,000 was the ARV. This was an upper-lower duplex here in Green Bay on Winford Avenue. We just heard back from the buyer that had an ARV appraisal done on this and the ARV appraisal came back at $270,000. So we were a little bit under.
Speaker 1:We're trying to be conservative with these ARVs folks, but this buyer is going to be able to burr this thing. They might have five grand stuck in it, so it's not a complete burr, but their cash-on-cash return if they have 5,000 stuck into it is going to be incredible. Three-bedroom up or three-bedroom lower, it's going to be a beautiful thing. And so we have deals like that every single week. Guys, If you are looking for off-market deals that you can burr out of or get close to burring out of, and you're looking to build that rental portfolio. Get on our buyers list, wisconsindiscountpropertiescom. Put your information in. You're going to add it to the buyers list and you'll hear from somebody from our team either myself, Reese or Connor to talk about your goals and get you connected to the folks that you need to be connected to to accelerate that growth in your portfolio. With that, let me introduce my man, Neon Leon Barnes. What's up, Mr Barnes?
Speaker 2:I haven't heard Neon Leon since probably junior high, my friend, so it's been a while.
Speaker 1:Yeah, I like to throw a little curveball. Nicknames at people right away to see how they react right out of the gates on these.
Speaker 2:Sometimes nicknames on people right away to see how they react right out of the gates on these sometimes. So yeah, so you know, when I was in middle school we had junior high. Back then um, that's how long ago it was. Uh, deon sanders was, you know, in his prime. Prime time was in his prime.
Speaker 2:At that point I want to say it was 1989 that he was drafted and so I was 12 at that time and I just remember having the name Leon and Neon Dion. I got a lot of that back and forth, but I haven't heard it since then. Thanks for bringing it back. Bringing you back, baby.
Speaker 1:Bringing you back to old school here on the podcast. Well, leon, a reason I wanted to have you on, a lot of reasons I want to have you on, but number one, folks, this guy that I have on today, he is one of the best dudes just people that you'll ever meet.
Speaker 2:Thank you Appreciate that, Gordon.
Speaker 1:You know I've known you, leon now what seven, eight years, something like that Seven years for sure, man, we've gotten to know each other really close. We've had you up here to experience some Wisco stuff recently. On some of the more recent episodes, guys, I've been bringing you folks who are not located here in Wisconsin but they have so much value to bring, and so I always want to bring you guys the most value that I can on this podcast. I want to give you guys the best people I can bring on here, and Leon is no exception here. He is one of the best in a lot of areas but he has so much information and so much knowledge to bring to you guys. So Leon and I met through a group called the Collective Genius, and this is not a commercial for Collective Genius today. However, I will definitely be promoting it today because it's made a huge, profound impact on our business.
Speaker 1:You guys that listen every single week you know that pretty much every week I'm talking with a guest about the power of networking, and the networking that Collective Genius has brought to us has been just off the charts. Again, I get to meet amazing people like Leon, but Leon's in a unique position because not only does he operate a property management company remotely in Wichita, kansas, which is a similar, it's a Midwest right. So that's where I feel like you can relate a similar, it's a Midwest right, so that's where you know. I feel like you can relay a lot to the people here listening Leon. But Leon also has been involved as a full-time employee and as an owner in over 400 flips. He lost count on how many flips he'd done.
Speaker 2:I did lose count. That's a good thing, right when you lose count, that is a good thing.
Speaker 1:Hopefully still in the business. That is a good thing. Hopefully still in the business. Yeah, if you know I did two or three, then you're like, oh man, you might have made it out of that third one. And he also is involved in membership director at Collective Genius and so he gets to interact with people of all different experience levels from all over the country. I mean hundreds of operators of rental, land, development, flip, wholesale, you name it plus vendors. I mean you're interacting with people of all different calibers, skill levels and all these things and the amount of knowledge that he gets to take in from those interactions is just amazing. So, leon, all that to be said, welcome to the podcast man.
Speaker 2:Thank you. That's a great introduction, probably the best introduction I've ever had. It either means I work too much or I'm spread way too thin because of all those things you just announced.
Speaker 1:Yeah, as I was rattling them off, I'm like we've got to get into how the heck you do this, because that's a lot of stuff, man, because you're still active.
Speaker 1:You're full-time with Collective Genius. That takes up a lot of your time. You're traveling multiple times a year to the different events. Every day you're in the office where you are now, you know, connecting, doing podcasts. You now run the Collective Genius podcast as well that we did a little interview on recently, and so I mean your plate is pretty full. Man. How are you handling all of this stuff while still maintaining your foot in the real estate space for your own business?
Speaker 2:So when I got into real estate 10 years ago prior to that, I was in corporate for 11 years. Very similar to you, corey, I realized very early on that entrepreneurs especially in real estate investing they did something that at the corporate level we weren't great at. I was a sales manager and you would hire people to do that work, but you typically didn't have different positions that handled all these different things. Leverage is a word that I learned very early on in real estate, and so when I started my own flipping slash BRRRR you were mentioning BRRRR out of the gates, I built my entire rental portfolio off of BRRRR. But the best way I can answer the question of how I'm able to accomplish all of that is number one. I'm not doing it perfectly. I'm trying to make sure that I'm always balancing as much as possible when you're growing. Balance is a tough, tough word, but the best way I can answer that is leverage.
Speaker 2:I have a partner. I have a partner. I um, you know I'm. I moved to tampa five years ago. That's where the collective genius is headquartered, and has been for 14 plus years now. But I worked remotely from my home market in wichita for two years and I had to build it to a point where I could make that move if I wanted to. So I have a partner and two full-time employees in that market that have, you know, continued to help grow that business. But you know, it's all leverage on the who, not necessarily how.
Speaker 1:One of my favorite books right there that you just mentioned there. Mr Ben Hardy correct.
Speaker 2:Yeah, dr Benjamin Hardy, when I think of who, not how, and I think of BRRRR strategies, I think of investors that have been doing those things for many, many years, before BRRRR was an actual coin phrase or acronym right.
Speaker 2:And I also think about all the investors and people that I knew that were landlords that have been utilizing who, not how, way, way before that book was written and published. So a lot of the things that entrepreneurs have always understood is that, yes, you've got to grind, you've got to hustle, there is a season for that, but in order to grow and scale, you're going to have to understand that I can't do all this by myself.
Speaker 1:If.
Speaker 2:I want a 2X, 3x, 10x. It's going to take more than just my own power. It's going to take the power of others and helping them get what they want.
Speaker 1:So you can get what you want 100% and there's so much to go into right there. One thing I just want to make a point of I actually was thinking about this recently with my own business is like man, sometimes I'm like gosh, am I overhead? I've got all this marketing, I've got these employees, I got to manage all this kind of stuff. But then I think about like the leverage Like you talk about, like we just spent a month traveling around. We were in Florida, we were on a Disney cruise, we get to do all this stuff and the business keeps working, even if I'm when you're early.
Speaker 1:We didn't have that luxury. It was Carrie and I just working when we could work in between times and picking those slots and stuff. But then it became okay, make that first hire, who's going to be the first hire and all that sort of stuff for you and your, your partner, how do you, how do you guys have that organized? Because I think partnerships are interesting. A lot of times on the podcast I've talked to a lot of couples. Obviously, that's a pretty natural partnership. But when you bring in an outside person first of all, what are some of the conversations that you guys had or should have had up front on that, and how do you guys make it work over this long period of time from a distance too?
Speaker 2:So I'm going to start with a disclaimer. Partnerships are not easy. In fact, one of the main reasons you know we have over 500 real estate investing members across the country in the collective jeans and across the world we have some members from other countries as well. The number one reason generally that I see businesses fall now they may get back up is business partnership divorces. So I want to put that disclaimer out there that choosing a partner, just like choosing a partner in life, is super important that you make sure that that relationship is one that you are equally aligned on goals from the beginning, Because a lot of times partnerships early on is one person is bringing the money, the other person is bringing the hustle and if you're not equally aligned on goals from the beginning, you will grow apart. There's no doubt about it. It's not much different than a personal marriage as well, so I cheat coded this one.
Speaker 2:Corey, I don't know if we've ever had this conversation before.
Speaker 1:I don't think so I'm learning that.
Speaker 2:So I've always been someone that prior in my corporate days I was always on the lookout, as a sales manager, for talented individuals specifically to sell advertising, and a lot of the times I enjoyed hiring former athletes. I enjoyed hiring former athletes because they were driven and there was nothing I could say to them to get the best from them that they hadn't already heard from a coach over their career, to get the best from them that they hadn't already heard from a coach over their career. And so I had this guy come and interview with me in 2004,. I want to say Okay, and he was a former college baseball player. You know, reminded me a lot of myself, other than he's a lot shorter than me and I hired him and you know, as I continued to go up the corporate ladder, he continued. He wasn't the best sales rep, but he was the best at listening and applying Again, former college athlete listening, coaching and applying it. And he was just so loyal and he was always in my top five as one of my salespeople. And when I got a promotion he was like, hey, if you ever get your own office, I would love to go with you.
Speaker 2:Single, no kids. We were both single, no kids at the time and I happened to get and you want to talk about hitching your wagon here? He hitched his wagon to somebody that went from Wichita running a division that was very successful to getting a promotion to run my own office in Hawaii. Wow, I went out to Hawaii for, I think, eight months. He got a transfer with that company with me. Eventually it became my kind of right hand in Hawaii.
Speaker 2:When I came back to go to work for because my start in real estate was not on my own I went to work for someone else. I did that for five years, but part of that process he stayed out in Hawaii when I came back and that was again. That was one of those things. Hey, I can't tell you that I'm going to be out here forever. So if you do come out, you'll have the choice whether you want to stay or not. He decided to stay for another couple of years and continue to work for that company and then eventually he's like all right, it's time for me to come home.
Speaker 1:Yeah.
Speaker 2:And so eventually ended up hiring him in acquisitions. And then, as we both continue to grow in this going, you know what we could do this on our own, and we should, we owe it to ourselves to do this at a higher level, individually or together. And so I cheat coded this because of someone that I've known, you know, for 20 plus years and we, you know, it's like it's like a brother, and he's only a year younger than me, if that, we both former athletes, and just it's like a brother. So from that standpoint, it was very easy to know who my partner should be when we made that jump. Yeah.
Speaker 1:Well, that's a really good point there, the length of relationship. You guys have been through a lot. You've worked together. You guys apparently liked working together. If he's going to move to Hawaii to work with you, absolutely, and you were like, yeah, come, yeah, that's a pretty good sign that you're going to move halfway across the world and still be able to get along and do those sort of things that you guys could probably make it work together. I think that's an important point because a lot of people I see, like you said a lot of times, they rush into a partnership because they're hungry, they want to get going. They got a guy that's got some cash, that guy's like, sweet, I got somebody who will do all the work, let's do a partnership. And then they never have those tough conversations up front of like how's this going to end?
Speaker 1:right, because it's going to end at some point more than likely yeah, the chances are I'll die, so at some point you're going to die.
Speaker 2:Absolutely, and the likelihood that it's going to end before you die that's very high as well. The thing I would say early on as a lesson to those that are considering bringing on a partner because of money, or considering to bring on a partner because you can't afford someone, what I would say to you is this is once you give up that equity especially if you don't have a plan in place once you give up that equity, you can't get that equity back. So I would advise instead of giving up equity, just give up a higher percentage of profit. You don't have to do a certain amount of deal flow and be at a certain level in your business to qualify.
Speaker 2:But a lot of the people beforehand you know they're starting to graduate to a professional business and generally it's when they're they're getting away from those 50 50 JV splits. Yes, right, but it's OK to do those JV 50-50 splits when you're starting out 100% Because you need capital. That person wants a return, you've got deals. You need capital In order to continue to grow. You need more capital and eventually you'll get good enough to graduate into where you don't have to give up that much percentage. But give up that JV versus giving up equity in your company, especially if you see it continuing to grow. You know, and you want it to continue to scale.
Speaker 1:Yeah, and I usually recommend to people, like you said, make them a debt partner, not an equity partner.
Speaker 1:So what that means for those who don't know, I just spoke a bunch of jargon to you. Have them be like the bank, where they have a note and a mortgage on that deal in particular and you're going to pay them a certain return on that money. You don't have to do it all up front either. You could backload it so you pay them when you refinance, if you're doing a BRRRR, when you sell it, so you don't have to be making payments if you don't have a lot of liquid cash while you're trying to improve these things, and then you just pay them off when that thing sells.
Speaker 1:Versus, like now, we're 50-50 partners and now you're going to get resentment most likely, as you're doing all this hard work and they're just kicking back Scrooge McDuck in this thing, collecting their gold coins and not really having to do anything. You're going to start to feel like, man, I'm doing all the work here, they're not doing anything, and you forget that you needed them at the start and it just it breeds. It breeds some negativity. We've done a lot of JVs where it's a one deal hey, we'll 50, 50 this for this flip and that's it. It's not. We're going to form an LLC and we're going to commit to each other for X amount of deals and it gets messy. Well, this one we found. You didn't find it, so we're going to put it in our LLC. And it's just pretty soon friendships and families get broken up real quick.
Speaker 2:You just described. You know the business divorce that happens more often than any other, which is I bring in someone because of capital and all they're doing is giving capital. It's a big part, obviously, of the equation, but over time, as you're dealing with the contractors and you are up at 5 am and you're not getting home until 9 pm and this person's hey, when is that going to close? And all they're doing is calling you about a closing over time, that's where the frustration comes in. Just simply say you know what? I need to find a better way to do this, and the cost of capital should go down as you get better and it should. If it's not, then I would encourage you to continue to look at better options.
Speaker 1:Yeah, for sure, for sure, Leon, you had worked when you went to with the acquisitions guy and then you guys left that company. Can you talk a little bit about? I know there were some, maybe things that the owner did there and we don't want to disparage anybody or throw anybody under the bus, but I think there's some lessons to be learned from that divorce of when you were the I think you were the operations manager, coo or whatever you want to call it yeah, someone called it operations COO, second in command, basically the integrator of the business.
Speaker 2:Yes, what I would say is this for those that maybe they've already hired that integrator or are thinking about that in the future, so they can be that true visionary and that happens over time, that's not something that happens overnight, but you have someone handling day-to-day operations, hiring, managing all of the office personnel. That's basically what I was doing. I came from an environment where I was leading 25 sales reps selling advertising, so I had management and hiring experience. Reps selling advertising, and so I had management hiring experience, and so it was just a natural progression, for, for a business that was, you know, starting to really grow and scale, just needed that next pop and that operator to do that. I would say the the biggest lesson I would share from when you have you've gotten to that point where you can hire C-suite, executive level people Maybe not Fortune 500 C-suite, but people that have worked their way up a management ladder to run executive. They're your executive leader of your team. Just make sure that you're meeting their goals as much as they're helping you meet yours. That's good and I'll just say that again, all of your team should do this. If you're doing it at a high level. The entire team should be aligned with this, but especially the person that comes in and helps you continue to grow double and triple the business.
Speaker 2:Make sure that it's not just your goals that are being achieved, it's also that individual that is working in the trenches, treating the business like theirs, that they are also being taken care of on their goals. It's super important Now and some may say you know well, well, I don't care about that, okay. Well, just know that you run the risk, especially if you have someone high caliber. Take care of them. Yeah, because they will take care of you long term. And it's not just that one individual person. To corey's point before, you should do be doing that with all of your employees, because if you treat them right, when we go back to before, leverage has a cost. Right, leverage cannot be continued without taking care. You can't just leverage your people. You have to make sure that what they're giving you, you're building that leverage to help you grow and scale. Make sure you take care of their goals and their dreams as well, absolutely.
Speaker 1:First of all, you got to know what they are right, yeah, yeah, and we talk about that at Collective Genius. Eric Brewer, who's a monster in this space, did a great presentation on, you know, sitting down with your employees and we do that here. We've done that for a long time of sit down with everybody. Try to figure. Most of them are related to real estate people that come to work for us. A lot of them want to build their own portfolios, and so we take a lot of pride in helping them get started and connecting them and lending them money and doing all the kinds of stuff to help them grow their own real estate portfolios or flips or whatever they're trying to do to supplement what they're doing here, so long as it doesn't interfere with their day-to-day.
Speaker 1:You know there's got to be some boundaries. There's got to be some boundaries here, of hours here. But you being on the employee side, how did you manage that? How did you keep your and how do you still because you still have your own businesses outside of the collective genius? How do you keep those two things separate and not let it interfere with your responsibilities that you've committed to the collective genius for?
Speaker 2:So I've been very blessed to have a partner that really runs day-to-day operations. In fact, as I mentioned before, there was no way that I was moving away from my home market unless I had someone that I could trust to run day-to-day operations. And so each year that I've been here for over five years now I've continued to work less in that business. This on purpose. On purpose, we have grown this community, the Collective Genius, over. When I first started, we only had one community. Now we have four different communities under the umbrella, ranging from people doing one deal a month all the way up to people having $10 million in businesses and above. Well, this has taken a lot more of my time, and so I have purposely made sure that I have less responsibility on that side, and so even to a point where I've now teamed up with another organization to handle the acquisitions, because, frankly, my goals of that business are all about the long-term wealth building and not the acquisition piece.
Speaker 2:I don't love it anymore. I'll be honest, corey, that's not something that I absolutely love. I love this. This is my passion is getting to know and have members like yourself in a community that I can help continue to grow. That's passion, that's retirement, and so I've just continued. When I need it, I'm involved, but thankfully it's not that often, yeah no, that's awesome.
Speaker 1:And with that growth and you starting to step away, does that mean that? Have you had to give up anything to the partner saying, hey, you're doing more of the work, so now I'm going to offer you X percentage more or something? How have you guys had that conversation?
Speaker 2:That is typical, right? We had that discussion before I left, because I knew the responsibility was going to be more. And so, yeah, we negotiated a partnership at a higher percentage for him, because that business again going back to taking care of those that take care of you we would not have gotten to, I think, at our height. We were at 75 doors. We've since peeled back and sold a few. So at the height know, at 75 I would have never gotten to 75 on my own, and so we negotiated that and it was an easy negotiation. It was pretty much this is what it is, um, and you, I just need you to continue to grow that.
Speaker 2:Since then, as I mentioned before, we've just continued to look at how our goals evolved, and both he and I, our goals, have continued to evolve to stacking wealth with our portfolio, and that's the two things that he and I both want the most. And so acquisitions is a part of that, but the passion is the passion is, is, is the rentals, and eventually you know that may, you know, we may roll that into something else, we may sell those. There's so many options off of that that it's for me, again, it's become more of a retirement goal than it is the, the, the hustle and bustle of growing and, uh, you know, through acquisitions.
Speaker 1:Yeah, no, that's awesome. What do you guys love about rentals? Because I love rentals, but I'm just curious. Like you guys are in a different market. You have long-term wealth goals similar to myself, but what do you see Like why you could? You could do anything in this space, which is the sometimes the blessing and the curse of real estate there's so many different avenues you can take. You guys have zeroed in on rentals, long-term wealth building, stack assets. What was it that made you guys decide to zero in on that?
Speaker 2:Well, like you, being in a market where cap rates are possible, right where you can actually make money and build wealth at the same time. What we lack in Wisconsin and Kansas, what we lack in the upside of appreciation, we get some of it. We don't get the big swings like Florida's and the California's. We don't get those big swings either way. But we do get consistency and some appreciation, but we're still at a cash flow. We still have the ability to cash flow. And so the reason I love single family and up to four. I don't have any apartments. I do have some four plexes. What I love about that asset class it's gotten tougher and interest rates. Obviously we've purchased and burned less over the last couple of years than we had in the past when interest rates were low, we were holding everything.
Speaker 2:Yeah, and it's just taking what the defense gives you right at the time, the defense gave us low rates, we we kept as many as we possibly could. Right now, rates are a little bit higher and a little harder to cash flow and, um, our acquisitions costs have gone up. Let's, let's, let's move those via flip um or host wholesale hotel. What have you? Yeah, um.
Speaker 2:But what I love it more than anything being in a market like Wichita is I know that I have so much flexibility with that portfolio. I could sell it. I could sell it on terms. I could hold it forever, continue to add, you know, 10, 15 doors a year. There's institutions in time. To me, I think the biggest play for the future is if you are someone that is sitting on a couple hundred doors and maybe you just get tired of them. With Wall Street jumping into this asset class, I think the more doors that you can hold on to, the better, as Wall Street is going to continue to come and grab those and offer you. As the markets continue to swing, they're going to offer you much more than you would have sold it to a mom and pop, and I believe that every house that we sell to an institution will never mom and pop. Buyers will never get those houses back, right.
Speaker 1:No. Blackrock has said they want to own 75% of residential real estate. I believe.
Speaker 2:And I could see it happening because you know, if you look at 2020, 2021, the neighborhoods in places like here in Tampa, in Atlanta, charlotte, there's neighborhoods where you know there are maybe just a very small percentage of actual homeowners in neighborhoods and the rest are institutionally owned. I think you're going to continue to see that trend, especially in cities and states where the population continues to grow, and I think it's only a matter of time before you see a higher percentage of institutions, and so what I enjoy about it is the ability for it to continue to appreciate cash flow, and here's the biggest kicker. This is where you really have the cherry on top. These are all every single door that we own are all birth strategies.
Speaker 2:I have zero of my own money in those properties.
Speaker 1:It's my favorite. If you do the math on that, leon, what's your rate of return when you have no money in and it kicks out money? Isn't that called infinite? Oh my gosh yes.
Speaker 2:I mean look, it's pretty simple, right, Corey? Let me give you $0 and you give me money back. I'll take that. Yeah, it's amazing.
Speaker 1:And I love like our team. I just had a couple coaching calls with some of our team yesterday who are buying rentals and they just got their first ones. Like it's so exciting because they're like they've got their first ones. And one guy is fresh out of college, you know a year out of college, and he's just he's just getting rolling and he got his first one and he's super excited. His goals when he started were like I want a house hack, great first call. I love that.
Speaker 1:I wish I would have house house hacked out of college. Amazing, and that was his goal. I just want to get a house hack and then we'll see where the wind goes. Well, they did the first one and he's like wait a minute, I don't need to house hack anymore. Like I could, I could try to do this bird thing.
Speaker 1:And then we were running through the math on a couple of deals we have out that are we're taking offers on today, and I was like dude, this is an infinite return deal, Like you'll have no money into it afterwards. He's got a private lender so he can use the private lender for the down payment for the initial rehab phase and then refinance out of it. He'll have all of his money back. And I'm like how many of those do you want to stack? It's just, how many of those can you find? And then, how many do you want to put in your portfolio? The only thing that would hold it back is fear and money. Those are the only two things fear and access to capital for those phases. Or, if it goes wrong, you got to have a private lender who's willing to stick some cash in there with you. For the long term maybe, but outside of that there's nothing that should hold him back from building it as big as he wants to build it.
Speaker 2:You hit the nail on the head there. I wanted to make sure that you know it sounds very easy. Right, you've got to build some relationships for private money up up front to be able to, and banking relationships so you can actually refinance that out. So there's there's some work there. But when you are able to get that system set up, you know it's just a rinse and repeat.
Speaker 2:The one thing I will say as a caveat though the misnomer of I'm going to own a bunch of real estate and go, you know, in in 10 years and retire, you know that's the misnomer is that you know passive income is never passive. First of all, it is nice because you're building equity and hopefully in markets like ours, you're cash flowing as well. But the reality is is, depending upon your financial situation, you're not going to retire from an active income standpoint anytime soon, especially when you're birth strategy, because you are taking some of that equity when you do refinance that property and that could be considered active income. But the reality is you're going to need living expenses and that's a misnomer is that people think, man, I've got a hundred doors, I should be able to retire. You would think in theory, but no one tells you the horror stories of hey, my cap rate is X, I'm going to make $5,000 this year on this property. Let's just use that as a round number. Well, that's just one HVAC, yeah, right. Yeah, that's just one big repair that now you're at a break even and that's the horror stories that no one wants to tell you, and it's something that you have to make sure you consider, all things 100%.
Speaker 1:What we set for him for a goal for this, the rest of this year, is add one more duplex and do a flip. So now you've got the flip cash because burrs are you're highly leveraged.
Speaker 1:You're not going to cash flow very much on these bursts, right Like in my buy box when I realized the burst strategy and thankfully we have the active income from this business. The rentals, much like you, are very passive I still have to be involved in managing the manager and that kind of thing but they're very passive compared to wholesaling and flipping. But they require a lot of capital, especially during the acquisitions phase. You know you got to have access to the cash somewhere. So whether that's a friend or family member or you're flipping and you're, you're using those flip profits to put in the other thing.
Speaker 1:I would just say this for the audience listening out there don't forget about taxes. So if you're flipping properties and you're just like, oh, I'll just take, I made 25 grand, I'm going to put it all into this rental property, well, you're going to have a big old surprise come April 15th next year when all of a sudden the government's saying, hey, we need our 34% or 50% of that 25 grand you made and you've got it all tied up now in a property and you can't liquidate it. So just a little caveat there Make sure you're putting aside cash from those flips or wholesale deals and setting that aside for tax purposes. Now, the rentals will help offset some of that. Sure, unless you're a real estate professional by the IRS standards, we won't get into what that all means today, but you want to make sure you're setting aside some cash for the taxes and that stuff.
Speaker 2:All great advice. Almost everyone that I've had on the Collective Genius podcast. Almost every single investor that's been in this business 10, 15, 20 years including one I did yesterday most of them started their real estate career with reading Rich Dad, poor Dad, yeah, and there's a lot of good and a lot of motivation. A lot of investors that I know, obviously that started their career there and then they realize I think of Jimmy Vreeland out of St Louis immediately Like he was working in medical sales, medical device sales, making a really, really good living and got all the way after his post-military career, got all the way to 100 doors and he was like man, I am rich, I don't have to. You know I'm a full-time real estate investor now and he realized very quickly after he did not have that medical sales income coming in anymore that he was very poor, very fast, yeah, yeah.
Speaker 1:Right.
Speaker 2:And that's what you know. Yes, it can be a great. It is a great way to build wealth. Yes, but the part of that it doesn't give you is the active income that you have to make sure. And so I tell everybody that's getting into this business, especially if you're making a great W-2 salary. Number one you're very bankable when you have a great job and just milk that for as long as you can, because if you really truly want to burr, the best way to burr is when you have active income coming in that's not related to your real estate Bankers. Go, yeah, of course, come on in, you're very safe. You're very safe because I can see that you're making X amount every month and I know that you're going to pay us back because you're not relying on those rentals to pay me back.
Speaker 2:You're relying on your active income.
Speaker 1:That is such good advice. I see that mistake happen a lot of times. People get some early success, they start getting some momentum, they're doing a few flips, they picked up a couple of rentals. They're like peace, I'm out, I'm doing this full time, baby. And now?
Speaker 1:they go to their bank who they've been going to the well. But guys like, ah, yeah, you don't have any money, so we can't lend you anymore. And now they're stuck. And now they either got to go find another job or they got to scrap and go find those private lenders pretty quickly and start building that side of their business.
Speaker 2:Establish a track record. If you're going to make that jump, you need to have at least a couple of years of active income. Your profit and loss statement on your active side should be profitable. If it is profitable now you can make that jump and banks go well. All right, he's got two years of returns here. He or she has two years of returns here where I can actually see that they're bankable.
Speaker 1:When I was going to leave corporate America, I had the conversation with my lenders who we'd already worked with and I said, hey, if I quit, are you guys still going to be able to lend to me? And I went to all my banks that I had already worked with and I got their commitment that, yeah, you're good, you've shown success on the wholesale and flip stuff. You've got the rental stuff, which is fine, but we like seeing that you've got active stuff going on. You've got a few flips in the balance sheet and the hopper ready to go. We're good with you. I'm like, okay, cool, but I want to have that conversation before I pull the plug that I'm out there and that's great advice because a lot of people don't think about that.
Speaker 2:They just leave and haven't had that conversation with financial institutions that love them today. But as soon as that active income goes away, there's some different questions that you get. Can you send me your rent roll? I need to see your rent. You start getting different texts and emails from your bankers when you are doing it full time.
Speaker 1:Yeah for sure, for sure, good stuff here. Let's pivot to the collective genius. Again, I don't want this to be necessarily a commercial for collective genius, but I'm a big believer in your net worth is your net worth.
Speaker 1:I all that, which way it goes, yeah, either way, get around some smart people that are doing more than that's right. Learn a lot, right, talk a little bit about the collective genius that what you guys have because you have different levels. Now you guys you know whether somebody wants to be a part of this or not. Let's just talk about you know what, what you guys do over there briefly before we start to wrap up.
Speaker 2:So, CG aside, I preach community and coaching and mentorship. Right, take CG out of it for a second. If you are in any type of business apprenticeship, community relationship, mentorship these are all things important as entrepreneurs. What we do, not a lot of people do, and so you need to be around other people that are doing it and, hopefully, that are doing it better or ahead of you. That's what the collective genius is.
Speaker 2:When Jason Medley started this organization 14 years ago, a lot of real estate investors because he was a lender a lot of real estate investors their way of acquiring deals at the courthouse steps started to dry up and they needed to talk to other real estate investors of what are you using in California that's working for you, and I'm in Texas and this is working for me and I'm in New York.
Speaker 2:And so it was just that I mean the word mastermind and the think and grow rich is the first time that it was really mentioned in a business book 100 years ago. And so it's just that philosophy getting around other like-minded individuals that hopefully are a little bit ahead of you, that you can bring value to them and vice versa. And when I joined, I was still that COO for that business that we talked about earlier, we had just barely qualified. Now we have four different tiers that qualifications start at. You've got to be a full-time real estate investor doing at least a deal a month, all the way up to people that are net worths of $50 million maybe more.
Speaker 2:So there are different tiers, but it's four full-time real estate investors coming to learn how to continue to grow and scale, and that's the other caveat they have to want to continue to grow and scale their business grow as people, grow as business owners and all the like. But when we joined man, I talked to one individual that had no business, like he didn't have to help me at all. Yeah, had lunch with him and just that one conversation had plenty of conversations, but that one conversation led to us going from 50 flips a year to the next year doing 70. So we had increased over 20 deals in one year from the advice that I took and actually had more than one. Over 20 deals in one year from the advice that I took and actually had more than one. But I remember one specific conversation that I had that just took us over that next top, and so it was also the mind thing right, the old banister, roger's banister, the old four-minute mile right.
Speaker 2:We clearly knew that now that 50 we thought was our tops, we now knew that we were having self-limiting beliefs that we couldn't do more than that, and it's that was the biggest thing I take away. It was just I knew that I could do more, because I was seeing others do more, for sure, and so that's ultimately why, cory I think I've told you this I wanted to continue to stay in the business, yeah, but the passion that I saw in that room of connecting people with other like-minded people, I was like Jason, I don't know how I'm going to do this, but I want to be a part of it. Yeah, and here we are. I went full-time with Collective Genius seven years ago. Yeah, with Collective Genius seven years ago, I have had literally thousands of consults with investors across the country and world that have ended up joining this great group and some that didn't. And, like, I talked to someone three years ago that just joined yesterday.
Speaker 1:Wow Right, oh baby, there's a little lesson for you right there too. Well, but it's also timing right.
Speaker 2:Yeah, people got to be ready. Yeah, baby, there's a little lesson for you right there too. Well, but it's also timing right.
Speaker 1:Yeah, people got to be ready. Yeah, yeah.
Speaker 2:And it's never a sales pressure thing, it's always just you. Let me know when you're ready to continue to grow and scale, because when you are, when you are, we'll be here and I know that if you do this right, you participate at the highest level. Come to the meetings, show up for the training calls, like today. Yesterday we had one of these for our premier level. Today we're going to have one of these for our select level. These are different tiers within the group. We're going to have it all hands on deck.
Speaker 2:We had 75 people on a call yesterday going what's going on in Houston, phoenix, portland, new Hampshire All of these different areas and regions are going. Hey, what are you seeing in the market right now? Is days on market going up? Are you having issues selling properties? These are conversations that we have not only at the meetings, but we also have on our training calls and we'll have one of those today. Not only at the meetings, but we also have on our training calls and we'll have one of those today, and so I'll always know across the country what we're seeing. And, oddly enough, with that call yesterday, the biggest takeaway I had, corey, was it's much to do about nothing right now.
Speaker 1:Okay.
Speaker 2:Meaning that we should all prepare that days on market probably will continue to go up. You should expect ARV to potentially come down. The one caveat to that is this If interest rates come down, then you might not see a slow you know this continue to slowly get a little worse on days on market and ARVs going down. If interest rates come down, then all bets are off. But I would be preparing based upon that conversation, that it's not today, but I would prepare just in case the market continues the way it is and honestly, you know this, this is just normalization. The way the market was in 2017 and 18 is very similar. Inventory is still super low compared to 2017 and 18.
Speaker 1:Yeah, well, we see that when we have the Habiba guys come in and they show us the charts of inventory levels compared to when the crash happened, right, correct, we're still a decade behind where we should be as far as new inventory goes, or new builds go. According to their data, that would show that we're gonna. We're gonna be in this spot for a while, especially as there's, you know, the hot word tariff. Right, I'm gonna throw tariffs out there. It means a great tariffs out here. It's amazing, uh they, uh working out a little bit, uh, they, but you know, you're gonna have some, some, possibly some supply chain stuff, some things. Costs are gonna go up, which could potentially hold people back from building new homes even more, which is going to cause again we're just not going to get past this little bubble for a while of low inventory. As far as the new inventory goes, from the data that I've been looking at anyway and I'm no oracle over here, no, Our job is to never predict the future.
Speaker 2:It's just to prepare you and the more information that you have, not only in your home region, because we know in the Midwest things can be slow to get to the Midwest they happen in bigger markets or on the coast. First, you know, I track what happens in Phoenix, I track what happens in San Diego and Miami and some of these bigger markets, because we know that stuff trickles. But at the same time, our appreciation again Idaho between 2020 and 2022, before interest rates went back up. I don't see that in the Midwest, you don't see that, and so therefore, my ARV I might have to adjust 5% to 10% in a slower market right.
Speaker 2:Yeah, in a slower market right they are. You know, after repair value for them or new construction values, they may have built something, thinking it was going to be worth half a million in January of 22. Interest rates changed March of 22. Now that thing is worth 300. Well, that number doesn't pencil anymore, right, and so I track that. But I also take it with a grain of salt and understand that my percentages are going to be different than those that are in those markets that had massive, massive upswings, like the Austins, the Phoenixes and specifically Boise, Idaho. All the Californians were moving there during COVID, yeah.
Speaker 1:And I think one thing go back to what you talked about before with the ARVs adjusting and what's happening currently. This is the beautiful part about rental real estate it's buy and hold it's long term. So right now you're potentially going to get a deal because interest rates are still steady. They're still higher than what we expect right, expect right. And when the interest rates drop, that value of all of your whole portfolio that you're buying today in this higher interest rate it's going to go up because there's going to be more demand in the market. So the best time to plant the tree was 20 years ago, leon.
Speaker 2:Our buddy, sam Prim, says every 15 years, your real estate portfolio will double in value. And Sam, if you don't know him, he's a good follower out of St Louis, so not too far still a Midwest guy. You know he's so right, like I. You know the beauty of having that rental portfolio is even Corey. If we got in trouble, like you know, the business was shutting down Well, I have some assets to be able to move if need be. So you start with active income, whether that's a W-2 or wholesaling, and hopefully the goal is to continue to grow assets because of tax protections, but also business protection as well.
Speaker 2:We have some people that sometimes say you know, hey, I'm struggling right now. Well, how many doors do you have? Well, I have 125. Okay, so you're not struggling. Well, yeah, yeah, I don't have, I don't have any cash flow. Well, yeah, you do. You have to sell some of the 125 doors. That's a vanity play. You continue to get your doors higher. The reality is you're going to have to sell a few of those to continue to keep the business growing. That's right.
Speaker 2:You've got to feed the beast.
Speaker 1:Yeah, and I think that's a really good point, and we'll wrap after this because I know you've got to get rolling too. But when I'm talking to some of the investors in our market, we sit there, we look at like, right now the market's hot, it's too hot, it's been hot forever. But that's sometimes what holds people back is they're like well, I'm waiting for this ARV pullback that you were talking about a little bit right. And then we get into the actual goals and it's like well, in five years I want to be able to not have to work, right, I want flexibility, so I need cash flow for my rentals to be able to do that. And then when we really look at the equity play, we're like well, if you're burying this thing, you've got 20% equity or something like that on a property.
Speaker 2:That's right, so you're already there's your profit right there.
Speaker 1:Now you start the clock the minute you buy that property right. And so now the tenant starts paying your debt down and the market, generally speaking over the last 76 years, typically appreciates, even if it's 4% or 5% a year. And now you start to create this gap between what it's worth and what you owe and it just gets bigger and bigger and bigger and in five years you look at some of these properties you've got six figures of spread on there. So you buy two a year, you sell two every five years, you just keep doing that and now you've got your income to support your lifestyle from the sale of those properties and that's your quote, unquote cashflow, even if they don't make a significant amount annually that you're putting in, or monthly, into your bank account. You're creating that equity and that wealth and that flexibility like you described earlier. It's one of the reasons why you love the rental game.
Speaker 2:Well, and here's one other thing I love that I missed before Our markets are markets where we can make mistakes, and time will cure those mistakes right.
Speaker 1:Yes yes.
Speaker 2:So when you know, I probably I think I maybe mentioned this to you before I probably got 20, 25 doors in my portfolio that were flipped, mistakes right, okay, but I've held them for eight years now and they're no longer a mistake right. And so being in markets like Wisconsin and being in markets like Kansas, we can do that, we have the ability and that's again I'm playing where I'm supposed to be playing, which is I'm laser focused on affordable homes, that if I cannot find a buyer on the flip side that I know I can, that property in cash flow it might not be much, but I know it then becomes and transforms into an equity play. I will say this as well as a last kind of point to home ownership, especially as a landlord. There's over 500 members in the Collective Genius again across the country and a few across the world.
Speaker 2:I only know of a couple that have their entire portfolios free and clear that don't have to work Now. Both of them have a little bit more gray than I do on their heads, which means they've been in this business for a long period of time, but very few own their properties free and clear and have the flexibility if they want Now that doesn't mean that you can't accomplish that, but the highest level people that I know that are always growing their business. Very few of them own outright. That doesn't mean they don't have a bunch of equity, that they have flexibility if they do want to make those changes in the future.
Speaker 1:Yeah, and I like to think of it as chess pieces as you add more assets and you get equity. Now you can sell it or you can refinance it. You pull that out as a loan, proceed tax-free until you sell. Then you've got to pay it. But if you don't ever sell and you just keep refinancing these things, it's the gift that keeps giving tax-free, creates your own annuity tax-free. It's a beautiful thing. We could probably sit here and just love on rentals for another hour love on rentals for another hour, but we got to wrap.
Speaker 2:We got to wrap. We got to get you out of here, buddy. Well, before we get me out of here, I do want to say this about you and to your listeners in Wisconsin Coming to Green Bay to be a part of Kansas City Chiefs I'm originally from Kansas City. You invited us up, you were gracious enough to invite us up not only to your home but to the game and take part in tailgating and all those things. And I say that specifically because you know we met through the collective genius and I can say that for those in the Green Bay area anything that Corey does from a podcast or training, just do it.
Speaker 2:Whatever Corey says, just do it. Partake in any type of meetups that he's doing. He's just such a giver. I don't know many people in CG that have ever treated their employees better from the standpoint of making sure consistently making sure that they accomplish their goals of what they want Maybe to a fault, even at times right, but you and your family have such a big heart and I can say this you don't just do it for your family, you do it for your team's family, but you also do it with love for your community and it's true, a lot of people do this just to be wealthy. You do it because you want more for your community beyond just your business, which is really, really cool to see, and I wanted to make sure I said that so people in Wisconsin can hear that.
Speaker 1:Oh, I appreciate that, man. I'll send you a check after this for that little.
Speaker 2:Okay, all right. All right, send me one of those residuals. There you go.
Speaker 1:I'll get you a little residual check.
Speaker 1:I'll give you one of my units, I'll send you there the cash flow To the point of the. I appreciate that, landon, that was very thoughtful, nice. The meetups, though, we do. If you're not ready to get into something like a Collective Genius or you want something more local, regular, we do run the REI Success Club in Green Bay, so if you're not part of that, you can go on Facebook, look up REI Success. It'll bring you to the group. You can get into the Facebook group, which is a great community there.
Speaker 1:If you're not ready to come to a physical meetup, there's a great networking in there, with a lot of folks investing in Wisconsin, northeast Wisconsin mostly. In particular, there's other networking opportunities for you guys. We have a great real estate community in Wisconsin, so we're very blessed to be a part of that. There's another group called Caffeine and Cashflow. I had Zach Morgan on here a few episodes ago who runs that thing, and we will usually have somebody there to participate, and he has locations all over the eastern side of the state. Here there's Wisco Ria, which is a real estate association meetup. There's Apple. There's tons of them.
Speaker 1:So, get involved, guys. There's no excuse to get involved in the networking piece, and you guys have heard me preach this a million times. It's super impactful. Leon, if somebody wanted to inquire about the Collective Genius, what's the best way for them to go about doing that?
Speaker 2:So two ways. Number one is our website is thecollectivegeniuscom. You get all the information about all the tiers and what it is that we do. Or are you just interested in learning more about what you know, the type of members, including Corey, who just we just shot his episode here recently. We just started the podcast this year. I think we're 10 episodes in, so you can find that wherever you get your podcast. That's a good listen for sure, and we just talk about the journey of the highest and best real estate investors in the country, so it's a great listen.
Speaker 1:Yeah, and Leon's a great interviewer as well, guys. So he comes from a sports broadcasting background, so you can imagine the interview style he has. It's very comforting for the guests. I can say that from being on the other side of the microphone.
Speaker 2:I appreciate that.
Speaker 1:I'm a reporter by nature, that's right. That's right, Leon. Before we wrap, we always ask everybody favorite Wisconsin tradition or place to visit.
Speaker 2:Now you might have limited experience here based on your…. No, I actually have a little bit of experience. That sports broadcasting career took me to Milwaukee several times. Okay.
Speaker 1:Okay.
Speaker 2:And went to several Bucs games because the soccer team that I worked for played the Milwaukee Wave, which, for those that are listening to this, maybe in Milwaukee indoor soccer in Milwaukee they were like the San Antonio Spurs of that league. They won all kinds of championships and so we played them quite often when I was fresh out of college doing radio play-by-play for an indoor soccer team and they had is it Summerfest?
Speaker 1:What is it in Milwaukee? Yeah, summerfest.
Speaker 2:Wow, that's hands down, brought some beer back when I could still eat pork. That was one of my favorite experiences and I believe it or not, I'm not. I never lived in Wisconsin, but I do have family in Milwaukee, so I'm officially. You know, I've been there plenty of times, you've got some ties.
Speaker 1:Hey, by the way, that game that we went to, who won that game of the Packers versus Chiefs?
Speaker 2:Oh, you know, the Packers did win that, but I think that year someone else won the Super Bowl.
Speaker 1:So we basically won the Super Bowl because we beat the Super Bowl.
Speaker 2:How about that? Yeah, there we go.
Speaker 1:I think we all won that day. That's right. That's right. Well, Leon, I appreciate you being on, brother. I know this is going to be one of the most downloaded and shared episodes. I want to encourage you guys to share the episode. Leon talked about that one conversation he had that caused him to add 20 more flips this podcast, albeit not a conversation that those of you listening are involved in. You are listening to this and this could be the conversation somebody else needs to hear for them to be able to hockey stick their business or get them started and create generational wealth for them, their family, their community and also those sorts of things. So please share it, not necessarily for us, but for those folks out there in your network that need to hear these types of things. Leon, appreciate you being on, brother. We'll get that link in the show notes, so if anybody wants to inquire about getting involved in the Collective Genius, they can go there. Make sure they put down that they heard it on the podcast so they know where you guys came from.
Speaker 1:And any last words for the audience here.
Speaker 2:Just get involved. Again, I want to reiterate this there are not many people in this business that are more genuine than the Raymonds. You guys do a great job and, whatever meetups or communities, get involved, because they're just great human beings.
Speaker 1:Appreciate you, buddy. All right guys, Thanks for tuning in. We'll see you on the next episode.
