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Getting Started On Your Real Estate Investing Journey And Securing Your Retirement With David Vernich
Our special guest is David Vernich. He is a Commercial Lender with many years of experience in the banking industry. In 2007, he partnered with other investors and began his real estate journey. Now he owns hundreds of homes in Tennessee. I’m guessing he’s busy with that. Hopefully, he has a property manager, but we’ll talk a little bit about that. Warm welcome, David. How are you? I’m doing great, Chris. Thanks for having me. Dave and I are part of a group, GoBundance, which is a membership group for individuals who are looking to continue to grow and build wealth. The definition of wealth can always vary between monetary, time or experience. We’re going to talk about an interesting topic, which is retirement planning. First, why don’t you share with us what you got going on? I’m still a W-2 employee, but I’m not working your typical 40-hour work week. I have a unique situation that people are jealous of. I do have what I call The 4-Hour Work Week as my W-2. I have a lot of extra time on my hands as a result, but it took me probably 35 years to get to that point. It’s not something you can just jump right into. It takes years to develop that, where you have the contacts to be able to produce what your employer wants you to produce in the given period of time. To answer your question, what led to that? When I turned 45, I was a commercial loan officer, and I still am to this day. It was in a 40-year plan. You had mentioned the 40/40/40, especially the 40-year plan, 40 hours a week for 40% of your income. I’m going to steal that for the future. I will reference Chris as the “original source.” Essentially, I use a metaphor of a 40-year work/retirement plan that most people are on from age 25 to 65. At 45, you’re at your halfway point running into the team locker room after halftime. It’s good to make your halftime adjustments. You’re looking at the first-half stats and mine were incredibly poor to the point where I said to myself, “If I don’t change dramatically and I am far behind eight ball, I’m going to live in a van down by the river,” like Chris Farley did at Saturday Night Live, government-subsidized cheese. My wife wasn’t working at that time. I had four sons to put through college. I was bleak in the second half. I didn’t change what I was doing on the retirement side because I was essentially putting all the money I could afford to sock away in that and get my employer match. What I did change was I looked at people I knew in my banking business that was in my commercial loan portfolio that had successfully been able to retire at a younger age. Across the board, the one thing that they had in common is they were real estate investors. I said to myself, “I need to learn how to do what they did. Knowing full well, I couldn’t do 90% of what they did. I’m not a handy guy.” What kept me out of real estate longer than anything is that I suck at anything having to do with fixing and repairing. I didn’t want to spend a lot of time doing things. I’m the poster boy for you don’t want me working on anything that requires renovations and repairs. You can put your picture next to mine. I have some stories I’ll share with you about that as we go. I had to have someone teach me the whole process so that I could figure out what value I brought to the equation. The only thing that I could do and do easily was to bring capital. Luckily, real estate investing is a capital-intensive business. If you could find enough capital and marry that with people that have the time and the skills, you’ve got yourself a successful passive income side gig where you can keep your day job and let them do all the work. A few things I want to peel back from that. One is the Matt Foley reference is awesome. Chris Farley’s character is Matt Foley in the Van Down by the River. I rewatched that and it kills me. It’s such a great skit. What I liked about what you said was peeling everything back into the 40 years. If you break it into four quarters and look at things like, “You’re starting at 25. You go 35, 45, 55, 65, and look at things from that standpoint.” A few years ago, I turned 45 and I was looking at the halftime score. I’m like, “I’m behind.” That’s where I got more involved in my side gig, which is mortgage note investing. People need to realize that it is a marathon sprint four-quarter game or however you want to look at it. It’s not a 40-yard dash. That’s what I think a lot of people look at now is they want to retire by 30 or they have these aspirations, which are great to have, but what you have to realize too is the risk that you may have to take in some of those instances. As we talk real estate, one of the things I see a lot of is people over-leveraging or getting into deals that the numbers they plug into their pro-former or the nosiest of roses. If something does go wrong on some of those assets, it can set you back seven years. It’s one thing people need to look at. You mentioned you’re not able to repair anything. I’m an Engineer by degree. I worked in construction management and real estate development for 25 years. If anything ever needs to be fixed in our house, my wife is the one who fixed it. When I look at her, she laughs at me. She goes, “You’re not touching it.” I joke, I’m like, “I have a background in Management. I can manage you on how to do that properly,” and then I’ll be sleeping on the couch for the next few days. I’m not allowed to touch anything either in my house. I wish my wife would tell me aside and I’ll do it, but I told her, “You know the best. My favorite tool in my tool belt is the checkbook.” You got into real estate and you mentioned that you noticed a lot of other people. How difficult was it to get into? You have a commercial lending background, but was it still challenging for you, or what were some of the challenges that you had with getting in involved? They’re the same challenge as everybody uses as excuses. I boil it down to two different kinds of this old jokes that probably many people have heard. The question is, “What is worse? Ignorance or apathy?” The answer is, “I don’t know. I don’t care.” I use that joke to sell people ignorant about how real estate works. They think they’ve got to do everything from A to Z. That’s what I thought. Knowing that I couldn’t repair anything essentially as far as I had to go, “I don’t know how to repair anything. How am I going to get into real estate?” That was the wrong answer. The right answer is more of who, not how. Who do I know that can do that so that I can do what I’m good at? The second part of that is apathy. Even if you know you don’t know something, do you want to fix it? Do you want to do something about it? A lot of people look at it and say, “I don’t want to do real estate because I don’t want to get the calls at 2:00 AM for the toilets.” The busted toilets are always at 2:00 AM. I’ve been real estate investing for many years and have yet to get that call. Not because they haven’t happened. It’s because I do have people that handle them, not me. If you knock down these walls one by one that keeps you from doing it and seeing what the true benefit is to you, this has supercharged my retirement. I could retire 7 or 10 years earlier than I would’ve otherwise at 100% or more in this case of my angel income that I’m getting on my W-2. You’ve got to look at the prize as well. I do want to go back to one thing you mentioned earlier because it sounds like you took the book, The 4-Hour Work Week, to heart or something because you’re only working four hours. How do you pull that off? I got to know this. Two things. One is it’s the who not the how. On my real estate side, I don’t have to get involved to a deal until I have a deal that’s ready to go. That eliminates all the looking and if you’re not doing all the looking, that’s a lot of time finding the deal. My deals come to me in my inbox. I either say yay or nay within seconds just looking at the numbers. I have the people on my team that do all the fixing up and the people doing the property management. My real estate side typically only takes fifteen minutes from what I have to be involved in. My W-2 day job, which may be your question is, “How do you get away with that?” I get a budget given to me on fee income and loans I need to book for the year. Since I’m located in an offsite office, not in a branch by myself, if I can do it all on January 2nd, in theory, they don’t need to see me the rest of the year. It’s performance-based, but it’s also 30 years of contacts where people are calling me and I’m not doing the hustle and the grind anymore. It’s interesting because I like to sometimes call myself the most active-passive investor. Similar to you in the commercial lending space, we’re in the mortgage note space. We buy mortgage notes on the secondary market. When you get back to talking about toilets, termites, and tenants, we don’t deal with them because we’re the bank. We’re the lender on the deal, but we’re also extremely active because a lot of stuff we buy is distressed. It requires a lot of management and not the management of us dealing with the borrowers, but us working with our servicing company and our attorneys to come to some type of arrangement and workout. It’s active but it’s also very passive in the sense of we don’t need to know how to fix a toilet because if you ask Wells Fargo, I’m sure they don’t know how to fix a toilet either. Now I do know how because of my background, but a lot of people who invested in our space, we’re the bank and I always like to joke similar to another one is, “If you drive to any major metropolitan city and you look at the tallest building, whose name is on top of it? Typically, it’s Chase City or a bank.” As Rockefeller said, “You want to own nothing and control everything.” There are different ways for people to get involved in real estate, and like you mentioned, you have people. One of the things I view as the most important aspect of the business is putting a team around you that is top-notch. I wouldn’t be able to do it without a team and the team looking at it from the football analogy. You got your quarterback, running backs and offensive line. If you’re trying to score points, everybody’s got to do their job. One person is going to be a skilled ball handler. Another guy is going to be a giant slab of meat that’s there to block another slab of meat from finding you. Everybody’s got their skillset. If they stay in their lane, do their job and do it better than you could do it, then you’ve got an unbeatable team. Essentially everybody's got their skillet. If they stay in their lane and do their job – and do it better than you could do it – then you've got an unbeatable team. Share on X Sometimes it might not even be as better as the way you can do it because a lot of people, especially type A personalities like myself, it’s also what’s your best use of time and what is your time worth compared to others. If you say to yourself, “I would think I’m worth $100 an hour,” and it’s a task that is somebody you could pay somebody $50 an hour for. Even if it took them a 1.5-hour where it would take you 1 hour, technically it’s still better to have them do that. Whether they’re the same or even if it sometimes might even be not as great as you would do it, it’s still well above average. One of the challenges I had was letting go early on. Did you ever run into anything like that? No, because I wasn’t good at anything. I was trying to find the one thing I could do so I could join a team because it wasn’t hard to beat me in some of those areas. I had to focus on where did I bring the value. You got to be good at something because you noticed your halftime, “I need to get somewhere.” Can you talk a little bit about you knew you wanted to get into real estate? Dive a little bit deeper into the plan or what you put in place and what you found was easier than you thought it would be. What are some of the things like, “I didn’t think this would be hard?” This was 2007 when I bought my first one. I paid $6,000 to go through their class and at the end, we were going to do a house together and I was responsible for coming up with all the money for the house. I took the class, bit my tongue and did exactly what they told me to do through the whole thing, looking for the value that I brought. I realized that I wasn’t even the things I thought I could do, like finding properties. This was during a time when there were tons of foreclosures by the way. It was like shooting fish in a barrel. I still struggled even with finding the house. I was having problems getting a house and I thought this would be the easiest part. What it came down to is I figured out the easiest part was, for me anyway, getting my first property using 100% leverage, which I don’t recommend, but I didn’t have the cash to do it. What mitigated the risk of doing it that way is we bought the house for $70,000. We put $15,000 into it. When it was complete it, was worth $115,000, which totally paid back that credit line. My original plan when I was doing this before I realized I couldn’t do many of the things I needed to do was to buy one house per year from age 45 to 65 and put a 20-year loan on each house. My house at 45 would be paid off at 65. Every year afterward, every single house would be paid off. Those would generate $1,000 a month cashflow, which would be $120,000 in retirement income in the current dollars. I thought that would be a great program until I realized I couldn’t do that. I had to team up with a team and take a smaller percentage, not take 100% because when you take 100%, you get all the headaches as well. I outsourced all the headaches to people that are capable of handling them and took a smaller piece, which meant I had to have more houses than ten. We worked out a deal where I got 25% for doing the money side, bringing in the investor and also the permanent financing. I’d had 40 houses. You would think it would take a long time, but when you had the team approach, we were doing about a house a month, so 40 came about way quicker than 10 years. I don’t know if it’s just a male ego thing. You mention a partner or team with people who are like, “No, I want to do it on my own.” Putting a team together, it’s going to be written properly and make sure everyone’s on the same page of who’s doing what. If you can share resources with partners and teams, the scalability can be significant because each person might have a different expertise or specialty. It’s not easy to put together, but if you can put it together, it can be very powerful than your case in point. My case in point was I had to have a team for all the reasons I told you about before, but secondly, I had a little brainstorm and thought, “There are very few people that have all the attributes you need to be a successful real estate investor by themselves. They’re out there and I’m jealous of them because I don’t but there are people that can do it from A to Z and they don’t need to partner. For the rest of us mortals, and that’s the majority of us or the most of us knuckleheads like me who don’t want to leave their job, you need to have a team.” That’s the missing link for a lot of people. You don’t have to do it all by yourself. You don’t have to be the superstar. In real estate, you need to have a team. That's the missing link for a lot of people. You don't have to do it all by yourself. You don't have to be the superstar. Share on X It took me almost five years to figure it out because I was working W-2 and running my note business. It got to a point I was doing everything, managing and so forth. I wanted to scale to the next level. It finally came to the conclusion, “In order to do so, I need to bring on a team.” I started out bringing on one person, who worked out excellently and was a perfect fit at that time. That ended up coming on full-time then we brought on eight other people. Now we have a team that works with us in our fund. I look back now and you can read all the books in the world. A lot of them are all very similar on the business side, “You want to focus on your business, not in your business.” It’s very true that once you start putting people in the right positions, it allows you to come back and start doing some of those things. Be a visionary for your company and allow the company to continue to grow, succeed and benefit everybody. That’s an important component of it. Doing it the way I do it, you could keep your day job. I kept mine as long as I could, but it came to a point where it was time for me where I probably could have still done some consulting for them, but it was more needed that a clean break. I wanted to spend 100% of my focus and time on my new journey and venture. That’s what I did. That’s another great point for people in real estate. I see a lot of people ask questions like, “How do I get into real estate? What type of job should I have? Should I quit and work in real estate?” Probably 95% of real estate investors have a W-2. It might even be higher. I’m throwing a dart at the wall there. Real estate is something that depends on how you want to do with it and take it. It can go up and down but it’s easy to do with a W-2. From a banker’s standpoint, if I’m the banker and I’m trying to lend money, I’d rather be somebody that has a W-2 income and real estate income versus somebody that said, “I quit my job. I’m going to buy my first one because I probably can’t help them.” I can’t tell you how many times I see people ask because we’re in marginal space, “Do you do private lending and stuff?” We’ll say, “We may do a deal, but we want to look at the structure and stuff.” They’re like, “I don’t have W-2.” I’m like, “Sorry, but we’re not even going to look at that because if the project doesn’t go well, I tell people. We require personal guarantees and a lot of other things that we would need. There’s no W-2 or nothing behind it.” They’re like, “Do you provide 100% financing?” I’m like, “Let me rub the little genie jar here.” You can get sometimes 100% financing but you got a fish for it and maybe get seller financing. It’s something that if you do find you may end up costing more. I don’t recommend it even if you can get it because of the risk profile. If property value drops by 20% and you’re 100% leveraged, all of a sudden, you have a tenant that leaves and damages a place. You’re stuck. I’ve learned a lot in many years of banking and one of which is, “Do not pile more money on somebody than they can prove that they can repay because ultimately you’re inviting Murphy’s Law to move in.”
Real Estate: Do not pile more money on somebody than they can prove that they can repay because ultimately you’re inviting Murphy’s Law to move in.

Real Estate: People always forget this. They always put the collateral value ahead of the cash flow. It’s really a loan against the cash flow secured by the collateral. It’s always cash flow first.

Real Estate: Everyone sees that they have to come up because rates aren’t going to come down like they were to zero on the fed side.

Real Estate: A lot of builders have to build just to eat, to keep their crews busy, and make payroll. And so they’re, they’re going to have to start winnowing down just like some of the tech companies.
Important Links
- David Vernich
- GoBundance
- The 4-Hour Work Week
- Middle Class To Millionaire: Making The Leap To The Next Level
- LinkedIn – David Vernich
About David Vernich

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