You make failures along your journey to success. That is what today’s guests showcase as they grace this episode with wisdom. Mitch And Maeli Nelson, Real Estate Investors, Entrepreneurs, and Educators, join the Exit Rich podcast! They completed hundreds of fix-and-flips and amassed a multi-million-dollar rental portfolio that spans the United States. This power duo emphasizes the value of education and Mindset to Millions in navigating your real estate journey. With their proven expertise, Mitch and Maeli unveil their secret to becoming a real estate millionaire. Tune in to this episode because there are so many tips Mitch and Maeli share that you don’t want to miss.

—

Watch the episode here

 

Listen to the podcast here

 

Mindset To Millions: The Road To Becoming A Real Estate Powerhouse With Mitch And Maeli Nelson

In this episode, you’re in for some great golden nuggets. How many of you ever thought about real estate investing? I know I have but I’m like, “How do I get started? What do I do? I’m already too busy.” My husband and I went to Robert Kiyosaki’s event a long time ago. We sat through this event and paid a lot of money. My husband goes, “You can do this and that.” I said, “What are you going to do?” He goes, “I’m going to go to the courthouse.” I said, “That’s it.” I walked out and said, “I don’t need another job.”

I’m excited to have Mitch and Maeli Nelson join us because they are entrepreneurs and educators. Many of you want to get into the real estate business like I’ve been wanting to get into it for decades but I don’t know where to start and I don’t need another job. They’ve completed hundreds fix and flips and had a mass multimillion-dollar rental before that’s fancy entire United States. They have all documented their investing careers. They have their own careers, even though they’re husband and wife. They are the first husband and wife team on Exit Rich. That’s where we’re celebrating right there. They have their careers on the YouTube channel Flippin’ with Mitch & Maeli. You should go check it out. You should call it M&M.

People call us that all the time.

I’m Michelle so we’re the triple M’s. It exists to showcase their successes and failures. It’s not all just about success. You got failures too. Failures help you grow. You’re sharing your success and failures to help others on their journey to begin investing in real estate but wait, there are more. Mitch is the bestselling author of Mindset to Millionaire: 7 Keys to Becoming a Real Estate Millionaire.

Maeli specializes in working with women helping women get the honor to their comfort zone if they’re ready to transition from being a stay-at-home mom, which is a huge job. Let’s not diminish that. She helps them get outside of that experience and grow themselves as an individual and as a career. Welcome to the show. I’m so excited to have you both.

Thank you.

It’s an honor to be here, Michelle.

What an incredible introduction too. I’m so flattered.

Let’s dig into it. There are a lot of questions to ask but first and foremost, tell me a little bit about your background. What were you each like as a child?

I’ll take this first. My background is very unique. I grew up in an interesting religious cult. I was in a scenario where, unfortunately, I was told that all I should be able to do in life is cook, clean, and have babies. It’s more like an FLDS or Mormon cult. I don’t like to catch those together because they were very different but I do have 22 siblings so that’s very interesting.

Do you have contact with them?

Some of them, unfortunately.

It’s hard to keep up with 22.

Until I was twelve years old, I didn’t know how to read, write, and do any math. I didn’t have any bearing, no schooling, whatsoever. I was told at eleven who I was going to be married to so it was a pretty arranged marriage. I saw my siblings get married off at a very young age so I knew what was coming for me. I knew my background and that was my only purpose in life, which is devastating, to be honest. As a woman, I’m like, “That’s the only thing I’m good for?”

Most of us haven’t been raised by a cult. My heart goes out to you for not being able to read or write until you were twelve but I’m sure you’re asking yourself why did this happen for you and not to you. A lot of women are stuck in that place where they’re still expected. Now, they’re expected to do it all. They’re expected to go to work, do the grocery shopping, clean the house, take care of the children, arrange school, and be even more of a superwoman than before. You didn’t end up getting married because I see Mitch.

I didn’t. My mom got us out, my sister and I. It was an interesting time because she didn’t have any money. Just because I grew up in a cult, I feel like a lot of women can relate to me in the sense that all of us feel like we’re trapped. Unfortunately, the history of society has made it to where we feel like that is all we’re good for. We are enough if we’re not doing those activities that you just mentioned. We have to always get out of that and be like, “No, that is not my mission in life.”

Watching my mom was important to me because I learned quickly all the things that I didn’t want. People always go, “How did you even get to where you are now?” The answer is contrast brings clarity. I was able to see all the things that were happening to my mother and how she surrounded herself, how she dealt with money, and how she ran her life. I thought, “I want none of that. I want to do all the opposite things,” and so I did.

Many people focus on what they want. They don’t focus on what they don’t want. A lot of people have had a horrible childhood. Many of them have come out as amazing entrepreneurs and humans because they’re like, “I don’t want to be poor and live like this.” I did that too. That’s amazing that you were able to come out of that. Did you have a lot of deep programming that you have to go through?

Yes, for sure. Part of it is recognizing that it’s okay to be human. I loved that, in school, this was something that helped me in business and why I believe I have come as a successful business owner. This is a good tip so take this and note this down. I loved learning. I had to learn how to love learning and that was important. All of my paperwork and everything that I did when I turned it back in to the teachers was red. They were like, “This is wrong. Everything is wrong,” and because it was wrong, I went, “It’s okay to do it wrong. It’s okay to learn and keep growing.” The failure was fine for me.

It's okay to do it wrong. It's okay to learn and keep growing. Click To Tweet

That is a step forward. It’s not a step backward.

In school, they don’t teach you that. I learned that by myself because of all the red. It was okay to not do it right but I watched my friends. They would be so stressed when they got a couple of red marks. I’d be like, “Oh.” It’s fine. Mitch teaches this all the time but in business, you are always copying off of other people. You’re not trying to reinvent wellness all the time.

I am.

I know you are, for sure.

Many things have already been done. It’s very hard to be unique but with AI coming out, or Artificial Intelligence, it is going to make it easier for companies to gain an edge over their competitors that start adapting AI. That’s a great story. Thank you for sharing. Are you done deprogrammed?

No, I will always be a student.

It’s a lifetime thing. What is it? The first 1 to 5 years or 7 years of your life make up the rest of your life or your entire life. That’s what they say.

That’s why I have to be a business owner for the rest of my life because I was told no for so long in my childhood like, “No, you can’t do that or this.” If I had a boss, it would be so bad. “Do not tell me what to do because watch out, I will prove you wrong. Don’t dare me to do something either. I promise I’ll do it.”

Maeli, you’re still probably told no because you’re in sales. Anybody in sales has told no but I always say that the average is five noes. It takes five noes to get a yes. Every no is a step in getting a yes and closing a deal.

That’s a good book, Go for Yes.

We got to open up to Mitch. You’re so quiet. You have to tell me what your childhood was like as well.

I grew up in an upper-class home in a great neighborhood. We had a lot of luxuries growing up. My family traveled a lot. We had a very good life. As a child, you don’t recognize what goes into creating that. Luckily, my parents are people who taught us to enjoy the luxuries of life but also taught us to work hard. One of the greatest blessings they gave me was when I turned 22. I went out on my own, moved into my place, and then got a job.

They were there as a safety net for me and a support but they weren’t like, “Here’s a bunch of money. Go out and start your life.” It was like, “Good luck. Let us know if you need any advice.” That was the support that they offered, which was awesome because it made me realize quickly, “This is what real life looks like.” There are no luxuries built in. We’re not entitled to those things. Throughout my twenties, I got a taste for I liked what I had. I was an average American. I was making $40,000 a year at 27, which was average at the time. I was working two jobs, spending my time, and working for the man. I was living in a two-bedroom apartment and married my first wife.

Your first wife, there is a story there but we’re not going to get into it on this episode.

We can dig deep.

We’re going to stay shallow.

We’ll share the abridged version.

You all came from two very different backgrounds. You grew up middle class, I don’t know if you said the word wealthy, and you grow up in a cult. What were all associations around money? How does that work for you as a married couple and in business?

That is probably one of the first things that made me fall in love with Mitch. It was his abundance mindset because I came from a very different background and it was very scarce. It was hoarding everything because you never know when you’re going to get it and open up with, “You can have anything you want. You have to earn it. Go do it.” I didn’t have that. Every part of my body was like, “No, that’s very uncomfortable for me.” He was my coach and he still does every single day. It is so great. I’m constantly having to learn like, “I’m stepping back into that mindset where it’s debilitating to me,” rather than an abundance mindset.

It’s very easy for you to go back and have some conscience. That’s a consciousness that directs everything we do throughout our day. It can if we’re not conscious of it.

You constantly have to work on it because it’s something that you have to be conscious of and continually work on. It does get easier over time but it’s always there.

Mitch, being raised in a wealthy family, what did you learn to associate with money? What was your belief system on your parents associated with money?

As Maeli said, it was an abundance mindset. Also, things weren’t handed to me. There is a distinction there.

There are a lot of wealthy families that have silver spoon babies that are partying up all day and going through the fortune. Now, some of them are on the streets. I like that.

The lessons that we were taught were, “You can have anything you want and do anything you want if you get educated and work hard.”

Maeli, yours was, “Hold on to it. Somebody’s going to take it from you.”

Don’t spend it. Save. I’m very much like, “I need to save,” which is not what we should be doing. You shouldn’t be putting money under a couch or in a bank and holding it in a money market. You’re losing money with inflation. There was a lot of like, “What? I had no idea.” I also thought that as a business owner because I’ve been a business owner for many years. My first business was a wellness center. I make a lot of money but I thought that I had to save a bunch of money so that I could eventually go start doing real estate. That was my pivot.

I was running a solar company in California and was saving up a bunch of money so that at some point, I could take that capital and go buy a multifamily. This is a big deal because everyone is going to go through something like that transition in their life and this was it for me. I thought I had made it. I was the big divisional for the solar company. I was crushing life and making a ton of money. I stepped off the curb wrong knocking on doors and training some of my guys. My left leg goes paralyzed. I was in a wheelchair for nine months.

In Florida, I was in a boot for seven weeks and thought I was going to die. I can’t imagine being in a wheelchair for nine months.

That was my job, knocking on doors like walking. I had my retired ex-husband. There is a whole other story there. He stayed home with the kids and I was our only income. Long story short, we lost everything. We foreclosed our house, packed up all of our stuff, moved back to Utah, and had my back surgery. Thank goodness, it was exploratory surgery.

Did you hurt your back or your leg?

It was my leg that seized up but it was my back that was an issue. They found a huge cyst in my back and removed it. Within four hours, I could walk again. Seriously, it was so amazing but it took all of my savings. The pot that I was saying, I kept throwing money and that same as the account. Good thing it paid for my surgery because it was exploratory surgery. The problem was I was doing all the things wrong and that’s what I want to talk about, how I found Mitch and all the things.

In Utha, we were in the basement of my grandparent’s basement with my two kids. I had nothing to my name. Suitcases, that was it. I had to start all over again. It was like, “I’ll talk between my legs.” I saw a sign that said, “Real estate investor seeks training.” I thought, “I got nothing to lose. I got nothing.” I called that sign. It was chicken scratch handwriting and they answer the phone like, “You should come to this workshop.”

I thought I’d be like a Rich Dad education workshop because I had been to a couple of those. I went to this workshop and it happened to be this guy on stage. It’s a whole other story. We always say, “Result is not typical.” He doesn’t marry all of his students but fast forward, after two hours in that workshop that he did, I learned more about real estate but more about business specifically than I had in my entire career of many years of being a business owner.

I thought, “How could have I been a business owner for years and not know?” In two hours, he changed my perspective and everything I thought about business and my financial situation specifically. I was overwhelmed and thought, “I have to do this. I have to jump in head full-on into real estate because everyone needs to know the things that I know now.” This is where our story began.

I did forget to mention that anybody who asks questions and makes comments, and then we read it will get 3 chapters of Exit Rich and 3 chapters of Mitch’s book, which is Mindset to Millionaire. It reminds me of the other book Secrets of the Millionaire Mind from T. Harv Eker. Those are great stories. A lot of things happened to you that shape the woman and the entrepreneur you are now. A lot of people want to get into real estate. I got lots of questions coming in so we’re going to have to make these go quickly. What is the biggest financial mistake you see people making?

There are several but the biggest financial mistake people make is that they don’t get educated. We’re all giving free public education. We’re not taught how to go out and operate our finances. We’re taught so very little. A lot of entrepreneurs don’t seek out further education about their finances. I’ll give you one good example and probably the answer to your question.

Maybe talked about saving. We were taught one strategy for saving in our free public education and that was the accumulation strategy. The accumulation strategy is the idea that let’s tuck money away in savings accounts and 401(k) as one of the examples. It’s like we’re building nests and holding eggs in the nest.

With the example of the 401(k), we work our entire career stacking eggs up in this nest. We get to a certain point where we’re 65 and a half. We think, “I got a pretty good pile of eggs, I’m going to retire.” You start taking eggs out of the nest. At that point, cracking them and using them. You get down to about 75 and you’re thinking, “Things are going pretty well.” At 85, it dwindles even more. You hit 95 and you think, “Hopefully, I die before I run out of money.”

Most of us hope we live a long time but the idea of the accumulation strategy is finite. We’re going to reach the end of our lives when we are not able to go back to work and we’re going to run out of money. One of the big mistakes people make is they save rather than invest. We should be focused on buying assets. Buy the chicken that lays the egg.

Assets are sexy. Sharon is my co-author of Exit Rich.

Focus on assets rather than saving.

I do believe I have enough working capital in the bank to run your business for 1 year or 2. Many businesses fell during COVID because they did not have any working capital. They were not saving. I do believe you have to do that and have so much working capital for your household in case it wasn’t there or something happen but I 100% agree about that.

I’ll give you a good example briefly. Entrepreneurs know that it’s a roller coaster. Maeli and I are not exempted from riding the roller coaster. There have been hard times in our business but we’ve had assets that we could liquidate. They were like savings accounts but they appreciated faster. While we didn’t need to liquidate them, they were cashflowing.

Those are all things that savings accounts won’t necessarily provide. I agree with you. You need to have that working capital and security blanket. One of the questions that shows me that the person is financially uneducated is they’ll sometimes ask, “How much money do you have in your bank account?” They expect this big number $10 million, $20 million, or $25 million in my checking account.

We don’t keep that money liquid and sit it there because it collects dust. We have for our needs and we have our emergency count but when we have an excess of cash, we put that into assets. The better question to ask a wealthy individual is, how many assets do you have or what’s the value of the assets that you have?

I agree with you 1,000%. I do have a friend. I call him the Godfather of Chicago. It’s Southside because he owns so much multifamily there. He has some experiences where we were trying to invest in different things in South Africa. He’s like, “I’m not liquid. I’m going to have to sell some assets.” I always think you have to have a balance. You want to have asset-producing properties. You don’t want assets that are going to sit there and collect dust. You also want to have some liquidity if there is something you want to invest in and maybe you can’t get the financing for or something like that. I do believe there has got to be some balance there, as well. One of the things that you are an expert in is how can small businesses get more money from the IRS.

One of the things that is underutilized by business owners and real estate investors is the idea of understanding the tax law. We talked about getting educated. Understanding the tax law is so important. We’re not taught that in our free public education. That’s something that we have to seek out knowledge about but the more knowledgeable you become, the more you realize that the tax code is an incentive program. The most expensive way to pay your taxes is the W-2 tax form.

In contrast, we hear a lot of people talk about, “The wealthy don’t pay their fair share.” It’s not that they’re charged to different percentages. What it’s about is discounts. Those come from the IRS in the form of deductions. A W-2 employee only has access to fifteen deduction categories. Most of them don’t even know what those fifteen are but a business owner, who also happens to own real estate, has access to over 450 deduction categories. There are more deduction categories for those two income-generating activities alone than for any other income-generating activity combined.

That’s the tip that you should write down. If you’re a business owner, whether you’re tiny, a little guy, or a multimillion-dollar empire, you need at least one rental. One rental will change the game from your tax perspective.

Let’s answer some questions. Jacob says, “Mitch and Maeli, I had a small question about getting into real estate. What are some common misconceptions about real estate? What advice do you have for beginners?”

The first thing that I would say is I thought in my story that I had to have a lot of money to go out and start real estate investing. I was 100% wrong. Something that I didn’t know is you can leverage other people’s time, credit, and money. That’s crazy to think about. You could go out and partner up with somebody that has a property.

They already have it in their name and the loans are already in their name. They might have a 2% interest rate right this second. You could seller finance or subject to that property and take title. It’s still your property. Give them a $20,000 down payment. You have a rental that’s cashflowing every single month. You got to read the number.

How are you coming up with $20,000?

Whatever the down payment is. I like $20,000 because they’re a distressed homeowner, which is what we focus on mostly. It’s a home that is about to get before foreclosed on or foreclosed on. It’s distressed because it has meth, mold, or radon. There are a lot of reasons why people would go, “I have to leave. I can’t stay in this house any longer.” If they’re in a position where they’re like, “I can’t do this anymore,” we show up as heroes. I was in that position. I know because I lost my house.

To have somebody like Mitch knock on my door or me, I would have been like, “Thank you.” It would have fixed my credit and healed my situation. I couldn’t have lived there anymore but at least, I wouldn’t have had a foreclosure on my name. That’s so powerful but they’re usually behind $20,000 to $30,000 on their mortgage.

I see somebody else talking about that because of COVID, there were a lot of variances where they didn’t have to call the note due on their mortgage but it is the time to start real estate investing because the note is being called due. We have to help hundreds of thousands of people get out of this bad situation because they don’t have $30,000 sitting around. They have a ton of equity in their house. We can show up, be their hero, and be like, “We got you.”

You’re going to have a lot more properties coming out available during this economy. Stephan asks, “How do you approach finding the right partners? What advice do you have for maintaining a successful business?” We can all go out there and find partners all day long but a lot of people are doomed by their partners. A lot of my clients have been embezzled by their business partners and even family members. How do you find the right partner? How do you maintain that successful relationship?

I always like to say that knowledge mitigates risk. You’ll hear us preach about getting educated around whatever area. That’s true of strategies on a high level. That’s also true of partners or specific deals. In our case, real estate deals that we’re working on or if you’re buying a business. Do your due diligence. We saw a fad that happened in the economic boom of 2020 and 2021. These wholesalers who were selling off properties were like, “Give us a non-refundable $5,000 cheque. You have to close tomorrow.” It’s like, “When can I do my due diligence on the property?” “You can’t. You just buy it.” Those aren’t my deals because we zoom in.

It feels like a con. Beware.

When you zoom in, knowledge mitigates risk so do your due diligence. There is always a risk. You can never mitigate all the risk and you can’t control that other person. You’re entering into a relationship. They could fail but sometimes failures are worth more in their educational experience than they are in the money that they provide.

Sometimes failures are worth more in their educational experience than in the money they provide. Click To Tweet

Emily asked, “How do you approach risk-taking in your business decisions? Are they any principles or guidelines you follow when evaluating potentially risky opportunities?” That’s a good one.

Back to education, Mitch and I run a very large business empire together and people would go, “How do you do that? I’d kill my husband or vice versa.” That is probably true for a lot of people but how we divide up our responsibilities is very unique. I am in charge of all acquisitions. I find the properties. I’m doing the analysis of all the properties. I’m verifying that these properties are going to either cashflow or make us a profit on the back end when we’re fixing and flipping the property.

I have to be very diligent in my numbers. My expertise is my ARV. You make money on your after-repair value. That is what I’m constantly doing. With an ARV, you don’t make money when you buy the property most of the time. You make money when you put tenants in it or when you sell the property on the back end once you’ve remodeled the home. It is very important to know your strategies. That’s a longer conversation and a lot more information that needs to go into that to answer it but I do have on our show an entire work. I break down exactly how to run numbers.

Everybody should follow them on their YouTube channel. What’s the name of that channel again?

Flippin’ with Mitch & Maeli. We have a YouTube Live if you want to jump on. I’m showing people how to write up contracts, make an offer, and get somebody to accept the contract. If that’s interesting to you, it’s live. Jump on and come say hi.

Do you all do more flips or rentals?

Our primary investment strategy is rentals. Our goal is to acquire rentals. What we found is that with private money, people are willing to lend money for 6 months or 9 months. They are less likely to lend money for 30 years and we’re talking about private individuals. We found it easy to use other people’s money, run a fix-and-flip business, take our portion of the profit, and funnel that into our rental portfolio. We do both. We have done more flips than rentals.

It's easy to use other people's money, run a fix-and-flip business, take our portion of the profit, and funnel that into our rental portfolio. Click To Tweet

That’s because we got to use and leverage other people. I do find how exciting that if you were reading and you’re like, “I’d love to start real estate investing but I don’t know how,” perfect. People come and partner with us. They are with people who are very experienced. They’re not so scared that their money is going to go fall or they’re going to do something wrong. There is a risk so we’re not saying that. It is helpful that most of our students do partner with us and we encourage it. It’s like, “Your first couple of deals, why don’t you learn the process and not just go figure it out on your own?” We all know that those are very expensive mistakes that we can make.

A lot of work goes into it. It’s not as simple as they’re making it sound and that’s why my husband is saying, “You can do that,” and I’m like, “No, I’m out.” I need it done for me. It’s what I need.

That’s it. Somebody that knows what they’re doing is going to do it and let the money ride. I do think that understanding cashflow is very important. If people are looking at this, they do want to look at it as a business owner. A lot of people don’t realize that with Fannie Mae and Freddie Mac, you can only have up to ten homes in your name. If you’re using a traditional lending institution and you’re trying to go get rentals, that’s a big problem because you tap into ten rentals.

That’s not retirement for most people. Ten rental property is only going to be making you less than $5,000 a month. That’s not a fantastic retirement. Something that I highly recommend and what we’re talking about rentals and how we acquire all of our rentals is through a seller financing leverage and other people’s mortgages. At the end of the day, we have to go to have hundreds of rentals. You can’t live off of ten. That’s not going to work.

Hayden asks, “How do you stay up-to-date with changing market trends and ensure your strategies remain relevant?”

An important factor of that is following things like interest rates. I’m not a big news watcher necessarily but I do find follow the financial markets and business news. It’s important to stay up on that. One key I will say in addition to that is your real estate investing strategy or even your business investing strategy should not be solely independent of one type of market.

You should educate yourself well enough that you can operate and have strategies for any market condition. All you have to do is react to the market. It’s not catastrophic like we’re not making money anymore because the market changed. Make sure you’re educated well enough about the strategies within your particular business. You can make those adjustments if the market’s going up or going down.

 

Emily asked, “What advice would you offer those who might be hesitant to invest in real estate to help them make informed decisions?”

I’m so glad you asked that because I hear it all the time. “Real estate is so risky.” If you know the numbers, this is it. It’s not about how pretty the property is, how cute, how it smells, or any of those things. It is about the numbers. My advice to you is to learn how to run your numbers down to the decimal so that you can know what you’re going to be making.

There are always little things that can come up but it is so much easier if you’re creating numbers and setting aside for the what-ifs. You’re creating an extra $10,000 slush fund for the what-ifs. That will save you a lot as well. The biggest thing that we do that a lot of people don’t do is due diligence. We spend between $1,500 to $2,000 on every single property we buy because of the inspection. It’s because we are testing meth, mold, radon, and every little thing you can think of and sewer scopes.

People are like, “Why would you do that when the home is only X and old?” You’d be so surprised, in America, specifically how high the meth and radon are, especially in Utah, and Park City areas. We have seen it all over the nation. Meth, mold, and radon are great opportunities as investors to get a huge discount because we know how to mitigate those problems and handle those in a very cost-effective scenario but for an individual who is trying to sell their home, that could be catastrophic.

They’re going to get a nasty paper slapped on their wall or door saying, “Contaminated.” The health department is shutting it down and they can’t go back in their house. They have to disclose that they have meth, mold, or radon issues in their home to try and sell their house. This is a great opportunity for us to know what we’re doing and be able to get a great discount on something that might not cost us a ton of money to mitigate because we know what we’re doing. That would be a great place to understand to do your due diligence and get a proper inspection.

A lot of the things that you and Mitch have been talking about are doing your due diligence and research. You’re paying $1,500 to $2,000 for the due diligence. Know your numbers. A lot of people are probably wondering, “Why is Michelle doing a show on real estate investment?” It’s because real estate is a business. Many real estate investors run the real estate business as not a business. They say, “I get the most out of this and this.”

They don’t know their number and what their portfolio is. They don’t know how to build that business for an exit because real estate businesses also sell. Real estate businesses sell for a pretty high multiple. You want to build your real estate business as a business and ensure that you are reading Exit Rich and making sure that you’re building your business on those six Ps that we talk about. What were you going down on that, Mitch?

I was agreeing with you. The quote that comes to mind from an early mentor that I had is, “If you treat it like a hobby, it’ll pay you like a hobby. If you treat it like a business, it’ll pay you like a business.”

 

A lot of real estate investors fail because they’re not treating it like a business. It gets away from them. You don’t want to just treat it like a business. You want to run it like a business. You want to build a business by having the right people in the right seats and making sure that you have multiple profit streams.

One thing that I like about Mitch and Maeli is they’re not just investing in real estate. They also have flipping and rentals. Plus, they have a real estate coaching company where they get in there and teach other individuals like me who don’t know anything. My core competency is fixing and selling companies and theirs is real estate. I would never try to do this on my own. They all have that real estate school. Also, building that business to make sure, “I have the right people. I have multiple profit streams. I have my processes buttoned up.”

A lot of real estate companies don’t have their processes but Maeli sounds like she’s got those processes buttoned up when she’s looking for those acquisitions. You want to make sure that on proprietary, you have some proprietary assets. Mitch and Maeli on YouTube have a huge show with a huge following. You want to build those assets. Plus, you want to make sure that you have patrons.

Patrons would be their investors. They have a full of investors and they’re always at upon that. They don’t have a customer concentration so 80% of the revenues should not come from 20% of their investors. It needs to be diversified, plus also getting buyers and sellers. There are a lot of moving parts to what they do and their profitability. Real estate is a business. Stephan asked, “What are some legal pitfalls that investors should be aware of? How can I mitigate these risks?”

First off, aces in their places. If you are a business owner running a business, that does not make you an attorney. You want to have a good attorney. Let’s put it this way. If you think it’s expensive to hire a professional, try hiring an amateur. It will end up costing you more in the long run and you’ll probably end up having to hire the professional anyway.

You just don’t hire any attorney. You got to make sure it’s an attorney that specializes in real estate.

You need to make sure that they’re familiar with your area of business and that you are structured correctly. With that comes educating yourself on the different types of structures. I’m talking about entities and the ways that those protect you. Make sure that your goals align with the protections that you’re choosing when you structure your company.

Keep your books clean and make sure that you have your corporate minutes every year. Follow the rules. Business in a lot of ways is a game. You can’t play the game effectively if you don’t understand the rules. The best business owner is the ones that know the rules and follow the rules. In a lot of cases, learn how to use the rules to their advantage.

Business is like a game. You can't play the game effectively if you don't understand the rules. The best business owners know the rules and follow the rules. They learn how to use the rules to their advantage. Click To Tweet

If you don’t know the rules, make sure you find an expert who does. Let me tell you something. Attorneys can give you bad advice too. I’ve had lots of attorneys who give me horrible advice and to whom I paid thousands of dollars. I always asked, “Is this ironclad or bulletproof?” That’s going to hold up in federal court or any court.

Give me examples of how it will.

I have one attorney that says, “I’m trying to get a deal negotiated here.” I’m like, “I’m not paying you to negotiate a deal. That’s what I do. I’m paying you to make sure I’m protected and if this goes to court, I win.”

Amen. That’s so important. Let’s play a fun game. We like to ask this question and this will be simply the cashflow. If you’re running a business or a real estate investing business, either/or it doesn’t matter. I want you to take a second and go, “I’m running these numbers in my head.” If you’re reading, I want you to play along. Go ahead and ask the question, Mitch.

One of the things that we always talk about is cashflow is king. We never want to focus on what the business is necessarily bringing in. We always want to focus on cashflow as the bottom line. Would you rather have a business that brings in $10 million a month but spends $10 million a month or would you rather have an asset that brings in $1 million a month but spends $500,000 a month?

 

I want to answer. That’s common sense but common sense is not so common anymore.

It is common sense. The reason we posed that question is because so many people are focused on what their revenue is. They don’t always look at what the cashflow is. I have a lot of students that come and say, “This particular real estate deal has five doors. It’s a five-plex and it brings in $10,000 a month.” It’s like, “That’s important but what’s the cashflow?” Always focus on the cashflow and that comes from what Maeli was talking about. It’s about the numbers.

Mitch, you made a very good point there. A lot of business owners are like, “I’m making $10 million or $20 million.” At the end of the day, and this is what I talked to my clients about, it doesn’t matter what you made. It matters what you take home. It matters what your EBITDA is at the end of the day. They’re all like, “I’m making $10 million. If I can get paid 6 multiples for $10 million, I’m going to sell my company for $60 million.” You’re losing money on paper.

Worry no more about your financials. You’re making $200,000 a year. Nobody’s going to pay you multiple revenues unless you’re a SaaS company. That’s a very good point that you made. That’s why I always tell my clients, “When you are rowing profit centers and revenues streams and you’re going your business geographically in different verticals, you better make sure that when you’re growing that business, you analyze what that cost or expenses are going to be to make sure you’re going to profit from that.”

Many people get stuck in a trap where they’re building their business to increase revenues but they end up decreasing their EBITDA. What Mitch and Maeli are talking about, I agree so much. It’s like people go out and want to buy a $100,000 car. If you take that same $100,000, how many properties could we get from that?

We have an episode on our channel that shows you it because we drive nice, fast, expensive cars. People are like, “Doesn’t that go against what you teach?” It’s like, “No, our rule in our household is you can have whatever you want if you have an asset that pays for it.” I have a rental that pays for my fast supercar and Mitch has three plugs that pay for his fast car. We teach that in that YouTube video on how we structured that. Buy a chicken. Buy something that’s going to produce assets.

You can have whatever you want if you have an asset that pays for your multiple businesses. Click To Tweet

Many want to go in and buy the house of their dreams and spend millions of dollars. Instead of taking those millions, buy a bunch of assets that will produce the income to buy and pay for your dream house. There are even a couple more questions here. Stephan says, “From your experience, what are some effective ways to manage and balance multiple business ventures without sacrificing quality or focus?”

This one’s worth an answer from both of us because we both have experience in this. The short answer Stephan is don’t. Focus on the business that’s going to make you money. However, that would be a hypocritical answer from me because Maeli and I do run multiple businesses. The way that we’ve been able to balance it is by making sure that those businesses are in the same vertical. That way, we’re doing an activity like lead generation, which you have to do in every business including real estate.

When we’re doing lead generation, we can be talking to the same lead and filter them based on, “Are we going to be buying your house? Is Maeli going to be listing your house? Are you potentially someone who wants to learn about investing?” These are all conversations that we can do one activity and generate leads for the same people because the multiple businesses we run are in the same vertical. Short answer, try to focus. Long answer, if you’re going to do it, try to keep them in the same vertical so that you’re not having to have three different jobs. You do one thing that feeds all the businesses.

If you will manage multiple businesses, try to keep them in the same vertical so you won't have three different jobs. You do one thing that feeds all the businesses. Click To Tweet

I will give the same answer to that. You’re adding additional revenue streams to your current business. You want to make sure it’s synergistic. If you own a restaurant, you want to go on a landscape company. You might want to own a private-label brand that’s synergistic. Emily asked, “How can investors prepare for potential downturns or economic challenges to ensure their investment remains resilient?” That happens. Remember the 2008 crash?

Maeli is looking at me because my part of the business is how we structure the money. I will answer this one as well. You have to have multiple exit strategies. I’ll use real estate as an example but this applies to any business. Maeli and I passed up on a fix and flip that had the potential of making us $200,000 in profit. It would take us about nine months to flip. $200,000, we passed up on and the reason was because it wouldn’t have worked as a long-term rental and a short-term rental.

Those are the two primary exit strategies that we look at. What if we bought this house and three months into the project, the market changes? It did. It would have changed us and we would have been in trouble. If we only have one exit strategy and that is to sell it for more than what we put into it, we get to the back end of the project and then the market has changed.

The market value is lower than what we spent. Our only option is to lose money. Make sure you’re structuring deals in a way where you have a plan A but you also have plan B, C, D, and so forth. That’s going to protect you. Learn more than one strategy. When the market changes, you should be able to react to that and pull a different skillset out of your tool belt.

 

There are a lot of people who have lost a lot of money in real estate. How do you avoid that?

Mitch invented something called the Debt Equity Blend. Unfortunately, you’d have to see it to understand it. I don’t think you can just talk about it. I highly encourage you to reach out to us on any of our platforms and be like, “What is Debt Equity Blend?” Allow us to explain this to you and break down the numbers with you. The dept equity blend will keep you safe in any economy. It doesn’t matter what’s going on. Your money will feel very safe and it’s because of how the money is structured so that you’re never all debt. The all debt people are what gets you in trouble.

I’m sure you’re familiar with that concept, Michelle, as you’ve been operating businesses. You never want all of your capital to come from all debt or all equity. You want a healthy blend of that and that’s true in real estate too. Especially if you’re using mostly other people’s money like we do on our fix-and-flip business, a lot of people make the mistake of going and structuring all debt but that gets them in trouble when markets change. We structure a blend of debt and equity to purchase our real estate.

We might have already touched on this a little bit but Hayden’s asking, “What are some trends you’ve observed in the real estate market? How do those trends impact potential investors?”

There are so many trends like economic trends and design trends. We have to be up on all of that.

Something that we’re focusing on because of my background and my passion is we are creating these cool host homes for women. There are a bunch of trends coming in to generate a lot of income to help these individuals either from a step-down program, whether it’s sobriety or some type of drug abuse. Women and children, it doesn’t matter, or men, are coming from abusive situations, whether their childhood may be abusive, where my background came from, or whether it’s an abusive relationship that they’re in now to sex trafficking. There are all sorts of horrific things that have been happening to specifically women. That’s my focus but men are in that scenario. There are other homes for them but that is a trend.

Teenage boys get human traffic too, not just women.

That’s why I stated my focus is this and the reason why it’s my focus is that I’m creating this trend for, at least, our area and want it to go nationally. There are no homes for women at the moment. There are quite a few men’s homes and it’s because for whatever reason. I probably know the reason but men’s homes are easier to manage. Women’s homes are very difficult to manage because we’re super caddies and we don’t get along.

Who’s caddy?

Women evidently. There are very few women’s homes to provide like this scenario to serve these women. That’s a trend that we’re trying to create to help these individuals. You can create a trend. You don’t have to rely on the market.

You can create a trend. You don't have to rely on the market. Click To Tweet

That’s why I always say, “Create your economy.” Don’t worry about where the economy’s heading at. Jacob asks, “How do you determine when to hold onto an investment versus when to sell?”

A lot of that is going to be subjective. Some people have certain goals and have the idea that they want to create massive income and do it quickly. Their whole idea is going to be, “I’m going to look for properties or businesses, assets in general, that I can buy, add value to, turn around, and sell for a profit.” Other people might have the goal of, “I want to build a long-term retirement nest egg. That’s a portfolio of assets that are going to perform.” Primarily, that comes down to your specific goals and is subjective to you.

However, the market can also dictate that. As I mentioned about exit strategies, we have been in deals where we bought it, thinking it was going to be a short-term hold that we’d add value to it, turn around and sell for a profit. The market changed on us or something else happened that caused us not to be able to sell for a profit and we converted them into a hole. Luckily, in every scenario, we’ve been in a situation where we created those exit strategies from the beginning so we had to execute them. Primarily, it’s subjective. Secondarily, the market will indicate that to you.

I love how Mitch keeps talking about exit strategies. With Exit Rich, you got to always build your real estate business to be sustainable, scalable, and one day, sellable. Even if you don’t think you’re selling now, you never know what the future holds. A lot of people come to me and it’s too late. Build that sellable real estate business. Question from me, what are your predictions for the real estate market in the next few years? What advice do you have for investors looking to thrive in an evolving landscape?

Something that I see happening is that nightly rentals, short-term rentals, and Airbnb of that nature are going to come to a screeching halt. There are a lot of areas that are shutting them down rapidly.

It’s because of regulation.

Vegas for instance was the first area to be like, “No Airbnb or short-term rentals.” The hotels have such a huge pull and it’s very political. There are hundreds of areas. Every day, I get another notification saying, “This city or this county.” The state can come out and say, “No short-term rentals.” There are a couple of them.

That’s scary. Those are the things you have to look for when you get into business and invest in real estate. You got to try to predict the future as much as possible. I assure you a lot of investors did not see that coming.

None of us have a crystal ball, Michelle. You know this.

I know but I always say, think about the worst and hope for the best. That’s how I look at business deals. What’s the worst thing that can happen? What’s the most likely thing that can’t happen? What’s the best thing that can happen? Is it too much risk or is it still a good deal for me? How can investors identify emerging markets and capitalize on these changes?

It’s numbers. One thing I have learned is you can invest in real estate in any market. In any market condition or geographic market, there are deals. There are deals everywhere. In every city, multiple people are destressing a home for you so that you can come in and add value to it and either sell it or rent it out. Whether it’s subjective and you’re like, “I want to invest in my hometown,” it’s about the numbers. Whether it’s, “I want to go find the best place in the country,” it’s about the numbers.

 

In that case, you would look for higher incomes and lower crime rates, their growth numbers, or high growth. You would focus on the metrics and the data. Let the data make the decisions. As investors, and this is true if you’re investing in businesses or real estate, whatever your asset class, never make emotional decisions. Decisions should always be driven by data and numbers.

 

A lot of people get mad specifically at me and probably Mitch too. They’re like, “No, I love this deal.” They’re so excited about it because it’s so cute and the house is perfect. It’s in their hometown. “I like the neighbor,” or whatever it might be. They fall in love with the property or the business in a lot of your cases. If you’re falling in love with the business idea, that’s fantastic. If you’re falling in love with the house, that’s not a good idea. Fall in love with the numbers because you will give very hurt if it’s based on, “It’s so cute.” That’s not going to work.

It’s always about the numbers. You got to pay attention to the numbers. Let me ask you, what tips do you have for married couples working together? I work with my husband.

For me, have very clear expectations so communication. That’s in marriage in general. That’s a tip but when it comes to business, have clear expectations of what the other person is expected to do of the business and then stay in your lane. In our fix-and-flip world, for instance, that type of business, my job is very specific. I find the properties, run all the numbers, and make the offer on the property and I get it accepted.

Once it’s accepted and it’s through that proportion of our business, I turn it over to Mitch and then Mitch runs his numbers. He finds the money. He’s the equity partner guru. He funds the property and we closed on the property. There is a clear line and I know when I’ve done something wrong because it’s in the element of my business and vice versa. He knows his deadlines and when it’s got closed.

We have to come together and figure out negotiation tactics on a specific property. We come together when it’s talking about timelines. It’s like, “Can you extend this?” We do have to work together in the sense of making sure there is a balance on the specific acquisition. Once we have it under contract and we purchase it, I do all the design.

I’m coming up with the new trends, what’s happening, and what the market looks like because I’m in the field. I’m looking at all these properties every single day. That is my job. Mitch is behind the scenes more so. From there, he will go, “I will make sure that we’re on a budget. We’re on time.” He runs the construction side. He owns that construction company so we’re keeping it clear.

That’s strategic and vertical. Do you own a management company too?

Not yet. It’s on the list.

My brokerage has a property management company.

That’s important to stay in line. Mitch?

Respect is the biggest thing. Maeli mentioned drawing those clear lines between responsibilities. That’s important. We have a little saying, “In Maeli’s responsibility, she’s number 1 and I’m her number 2.” When it’s in Maeli’s realm and she needs help, I recognize that I’m the assistant in this case but if it’s in my wheelhouse, my area of responsibility, I am the number 1 and she’s number 2.

We respect each other in that way. We’ve had to create these systems for ourselves. It doesn’t just happen. You’ve got to do it intentionally to be able to work together as a couple. You have to have these conversations and develop these systems. Sometimes they fail and you have to create new systems but it’s communication and respect.

Do you all talk business at home?

Yes.

My husband always said, “Do not talk business when we get home.” I’m like, “That’s impossible for me.” Give me three tips for anyone thinking or looking into investing in real estate. They’re a newbie. They’ve never done it like me. I own a real estate but tell me three tips.

We’ve already talked about the two tips that I’m going to share. 1) Get educated. Don’t go out to try this and think, “We’ll give it a shot.” It’s a lot more difficult and there is a lot to risk if you don’t know what you’re doing. Don’t gamble. Get educated and be an educated investor. 2) Work hard.

Real estate investing is much more difficult and riskier if you don't know what you're doing. So don't gamble. Get educated and be an educated investor. Click To Tweet

What if you’re an entrepreneur who is trying to diversify like me? I don’t have the work to put in, which is why I walked out of Robert Kiyosaki.

You find partners and leverage relationships. There is a place for people who are in a position where they’re like, “I’m making massive amounts of money in my business. I want to put it in real estate but I don’t have the time to go learn a whole new skill.” That’s a great opportunity to partner with somebody who already has that skill.

I truly believe that entrepreneurs should diversify. I’m diversifying in different businesses like the stock market. I do have a real estate but I believe you should be balanced and diversified in all your portfolios. Thank you so much for reading another episode. I appreciate your patience. Thank you. Please share this with your network, fellow entrepreneurs, and anyone that’s looking to invest in real estate and/or run a business on real estate. Make sure you subscribe to Exit Rich. Until the next episode. Next episode, we’ll have another amazing guest. Thank you.

 

Important Links

• Mitch Nelson – LinkedIn
• Maeli Nelson – LinkedIn
• Flippin’ with Mitch & Maeli
• Mindset to Millionaire: 7 Keys to Becoming a Real Estate Millionaire
• Exit Rich
• Secrets of the Millionaire Mind

 

Love the show? Subscribe, rate, review, and share! https://www.seilertucker.com/podcast