The American Dream is to own a property and not be afraid that a landlord will sell your house. This is all possible with the power of rehabs, buying a property to fix up, and then bringing it back to the community. This is what today’s guest does for a living. Join Chris Seveney and Jamie Bateman as they talk to David Garner about rehabbing the American Dream. David is a real estate investor and the Founder of Garnaco. His goal is to provide people with the benefits of homeownership. Learn how he deals with rehabs and how he built his amazing team. Learn how to work with tenants so that you can find the right deals. Start living the American Dream today!

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Listen to the podcast here

Rehabbing The American Dream With David Garner

We are joined by David Garner of Garnaco Companies.

It’s a hodgepodge of LLCs that I own that do various things mostly in real estate. Its official title is the Garnaco Group of Companies.

Thank you for correcting me. David, how are you doing?

I am good. Thank you. It’s crazy life as usual. I have 4 puppies, 1 slightly deranged wife. I’m working through that. I mean that in the nicest possible way. She’s the best human being I know but she’s mad as a box of frogs. Every day is a fun day.

David, before we hop into your background, why don’t we fast forward a little bit and tell the readers who you are? What are you up to these days? What’s your business look like? Why should we listen to you?

You probably listen to me because you have run out of YouTube. The main focus of my business is buying real estate. My day-to-day is buying low to moderate income housing. Those are houses mostly valued in the $75,000 to $150,000 range. We buy those for our affordable housing program, which we have monikered the Pathway to Home Ownership.

That is where we take these houses, which are often in pretty poor condition. Most of them have been landlord-owned for a long time, undermaintained. They are in the market where there are not a lot of owner-occupiers. That’s our mission. That’s what we are trying to fix. We buy those houses. We renovate them to a good standard. We put a good quality tenant in there and help the tenant to buy our home from us, either on a rent-to-own contract or with seller financing.

Our mission is to put those homes back in the hands of the communities where they were built for. It’s to provide an opportunity for those families to create generational wealth and health, and all of the benefits that go along with home ownership. It works out about maybe 50% of the time but it’s worth doing for a number of different reasons other than the fact that we make some money when we do it.

The other side to that part of the business is supported by some very kind investors in our done-for-you private lending program I created to help passive investors provide loans to real estate investors like me in a format they can understand. They don’t have to do a huge amount of the work themselves. It’s juggling those good things. I have built a team. Day-to-day, it’s more dealing with my investors, having those conversations, and dealing with the houses and contractors We have people that do that for us.

There are so many pads we could take for this conversation because you covered a lot of ground, David. If you would, bring us up to speed as far as your background and how you’ve got here.

I’ve got here largely by mistake. I had an investment consultancy business in the UK which I founded in 2008. Before that, I was working for other people. Two things happened when I started that business. We drove investor capital into a range of different projects. Some of those were in the US real estate market, which is my first exposure to it. It led to me meeting some people that became part of a team that made our first real estate note investments. That was in 2010.

Another part of that business provided the seeds to what I do. I loan some money to a guy in a private lending deal. It turned out he was a bit of a crook. We ended up getting hold of the houses which were battered houses in rough neighborhoods. We were trying to figure out an exit strategy for ourselves for those houses.

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We ended up building a business around it because we thought the exit strategy should be one that nobody considers that much. That is being through the tenant rather than through the house or the note. We built an exit strategy through the tenant. That worked out for everybody involved. That’s an abridged version.

First of all, I love the model and you already shared your good deed for everything you do. Thank you. One of the pain points I see a lot of note investors have when they do take back properties is getting them either renovated from afar or putting a team together in place. When you are taking some of these dilapidated properties and getting them renovated, was this in your backyard? Was it from afar? How did you go about putting that team together in that process? In this environment, it’s impossible to find any contractors, it seems. I’m curious to hear your feedback and opinions on that.

It was a baptism of fire. I didn’t know what I was doing. To talk you through that deal, we loaned this guy some money for a couple of houses and then a couple more houses. We put some investor money in. It was about 30 houses deep thereabout. These were only small loans, $45,000-ish, $40,000 to $50,000 loans. I had done a lot of business with this guy previously. He had always followed through. I had known him for a long time.

All of a sudden, as with a note investor or a private lender, you realize there’s a problem when the payment stopped. The payment stopped. I flew out from the UK to Mississippi to see what was going on and saw the crap show that was there. He hadn’t renovated the houses and let property taxes back up three years. I had three days to find $50,000 to pay property taxes with a check at the County Clerk’s Office because it’s Mississippi and they don’t do anything online pretty much. That’s how we acquired those houses.

Going back to your question, I thought, “How do I get out of these?” I’m going to put some money in to renovate them. That will be fine. I can do that from the UK. I have managed projects all over the world. There are some things I didn’t take account of. That is number one. It’s difficult to do those things from afar when you have no network of contacts on the ground. It is difficult, especially with contractors. Compounding that issue, you have the fact that it was in Mississippi, which is a state full of lovely people but difficult to do business in if you are not a local.

I was going to say, if you spoke to them in your accent, probably people would hang up on you because you didn’t talk like them.

They thought I was Australian for a start. It was a baptism of fire. I had these rough houses in these rough neighborhoods and I had to renovate them all. If I was there, it wasn’t Mississippi and there were good contractors, probably it could have turned it around in six months. It took me three and a half years and cost me probably three times the amount of money that I thought it would be.

We had contractors rip us off, do poor jobs, tenants rip us off, wreck houses. We had a tree fall through the middle of our house one night because it’s Mississippi. We had property managers rip us off because I wasn’t there. This all goes back to your main point. It’s because I wasn’t physically there, almost everybody I found had their hand in my pocket at some point.

It took three and a half years not to get the job done so much but to build a team I could trust. The answer to the question is it’s all about team and people. The reason I’m able to build the portfolio that I have built in Pennsylvania, for example, is because I have a great team of people in Pennsylvania. I have spent the time doing business with them, working with them. I let them do their thing because they are very good at it. That’s why they work with me. That’s why I work with them.

I have somebody who’s lived in Pennsylvania all her life who’s a realtor there. We’ve got her a general contractor’s license. She manages all of our contractors. She’s grown that business from 1 contracting crew to 14 crews in 3 years because she does the job right. She’s got good systems and processes in place. I enjoy working with people and seeing their business grow as a result of the seed of doing maybe a transaction with me where they go off and do their own thing and become much bigger than what they had before. That’s great. We love that but it’s not without challenges.

It’s a blessing and a curse being this far away because it forces you to make sure that you have the right relationships in place. It allows me to be a little bit detached from the decision-making, which sometimes is a good thing. If I was buying a house and it was the house next door to where I am, I would be in there every day, checking on stuff, telling them to change the shade of the paint. I would be saying, “No, let’s do this differently. Let’s do that.” I can’t do that. I have to leave people to do what they are good at. I have no choice but to do that. It forces your hand into better decision-making.

It’s like a forced delegation thing.

You haven’t done Ohio yet.

People keep telling me to.

I mentioned that because you complain you have challenges in other states. Those will be nothing until you get to Ohio.

Chris has an acronym for OHIO.

Only Headaches In Ohio is the acronym.

It’s because I buy rental properties, I get people all the time who say, “We love your funding model. I can find us houses and we can expand you nationwide.” One thing I have learned in the past is I don’t do business with someone until I have known them long enough and seen them in action. I have made that mistake. It hurt financially, emotionally, and psychologically.

I don’t jump into bed with anybody on a business level or any other level. Ohio and Indianapolis are the ones that always come up because they are cashflow markets. People think my model only works because it’s a cashflow market. That’s not necessarily the case. I know a bunch of people who own property in Ohio. One guy got a big refund on about nineteen houses he’s got out there. He has been trying to get that refinanced for about three years.

If you would walk us through a typical deal. We are talking all about your team and everything, which is critical. What does a deal look like for you?

It has to fit the numbers financially. I bought most of my houses off the MLS and negotiated a deal. I need to buy the house cheap but I’m buying in areas where it’s mostly motivated sellers. My value add doesn’t necessarily have to be in the construction. It can be at the purchase discount. I have to buy it cheap enough because I’ve got costs with the funding model. I’ve got to pay private lenders. They are quite expensive. I’ve got to do a decent job on the rehab. We are not doing rental-level rehabs. We are not doing retail either but we are doing somewhere in the middle, so I’ve got to buy it cheap. We have built our capacity to acquire off-market properties more.

To walk you through it, my partner in PA will pass me a deal and say, “Do you want to look at this?” She’ll pass it to me with a BPO. I can slot that into my Excel spreadsheet. It will tell me whether it fits on equity on a cashflow basis. If it does great, we will move it to the next stage of that very basic due diligence process. That will be getting somebody out to walk it by anything we haven’t physically stood in. Christina, for example, in Pennsylvania, when she stands in her house, she knows what to look for. She has been doing it for ten years. She has been in these neighborhoods for ten years.

She’s like, “You don’t want that street because they have sewage issues. You don’t want that particular house. You can see the foundation issues.” We don’t buy sight unseen because I have made mistakes in doing so and it hurts. If the inspection comes back, we are good at figuring out how much we are going to have to spend on our house. We will get a full scope of work from one of the subcontractors.

Are these typically vacant properties?

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Some are vacant properties. I much prefer vacant properties. Inherently, tenants rarely pay their rent. They pay, so it’s a difficulty getting them out sometimes. It can be a bit of a problem. We will get a scope of work and plug that into the spreadsheet. If it still fits, I will then put that in front of one of the lenders who has worked with me for a while that is prepared to loan us money at that stage, which is a high-risk stage to be lending at. Anything can go wrong at that point.

Once you start them, so how much metal, that’s when things go wrong or cost you more money. I’ve got a handful of lenders that will fund those deals because we put them in and out of deals, and it’s not gone wrong. We will renovate the house. Typically, we were advertising it for sale on our rent-to-own program. That didn’t work out so well for us. It didn’t attract the right people. It was very difficult. We were selling properties as opposed to selling the concept of a rent-to-own.

We drive people down the street saying, “We’ve got this house. We’ve got that house. Where do you want to live?” Instead, what we do is mention our rent-to-own program or a pathway program. We put long-term tenants in there but our tenant vetting process is very similar to the pathway vetting process. I will then use another lender to refinance out that original lender and they can fund the next deal for us.

I’ve got a short-term note on that property, maybe 36 months, and I’ve got a tenant in there. It’s fully renovated. I work with that tenant over the next 3 to 6 months. We make sure they pay their rent on time and look after the house. If they pass those very basic rudimentary baseline markets, we will offer them the opportunity to buy the house from us on a rent-to-own contract.

The difference in driving someone down the street and offering them three different homes to buy and telling someone, “You can buy this house you have been living in for six months,” it’s way easier. They want it because they have been working on this. They know that we look after them. We know that they pay their bills.

These are people with not great credit but they pay their bills. That’s what we are looking for. We will sign the rent-to-own contract. Sometimes that works out, sometimes it doesn’t. When it comes to paying off my private lender that’s got a note on there that I’ve got a number of different exit strategies, we’ve got a commercial lender. We can put our property into a portfolio loan. I may end up keeping it myself for the rest of my life.

To clarify, were you ever doing seller financing or contract for deed right up front? Were you always doing some form of rent-to-own but you are delaying the rent-to-own contract to a later point? Hopefully, that question makes sense.

We have done a mix of everything. It will depend on the tenant-stroke buyer and what deal I have negotiated with the private lender. Some of the lenders that I’ve got don’t want three-year notes. They are like, “I’ll do it if it’s a seven-year note.” I’m not a private lender. I don’t want to have to recycle my cash with investments. Other guys are twelve months max.

I have to marry the investor to the deal and make sure it works for everybody, for me, the tenant, and the lender that’s backing it as well. That’s a bit of a juggling act sometimes. That might mean seller financing. It might mean rent and then rent-to-own. I sold two houses. We put them up for long-term rent and sold them on rent-to-own on the showing day. One guy put a $30,000 deposit down. It depends. I learned a while ago that having an idea of what’s going to happen is great but what happened would probably be quite different.

You can have a plan but what you need is options and different tools because you don’t know how it’s going to go.

Interestingly, you mentioned a comment about some of your private lenders. I was talking with an individual about raising money. Jamie and I, a lot of the people we have worked with more the flexibility of capital to be able to pull it in a short time. While speaking to somebody about it, he chuckled and said that most people they deal with, if you tell them it’s only a 2 or 4-year deal, they are like, “I want it to be 7 or 8.” They don’t want to have to constantly keep moving their money. They want to put it somewhere for a period and get a nice return that’s collecting the interest on it, set it, and forget it from that perspective.

It gave me a little different light or perspective on things because of how we structure some of our funds or deals, not taking that into consideration. I’m also wondering, “Am I losing people because I have it shorter-term versus long-term?” People can leave it in there longer when people only sometimes see it’s a 3-year, 4-year opportunity. If it’s open-ended, they still think, “The person could still close it at any time.” I thought that was an interesting comment.

Back to my previous role when we had our investment consultancy, we structured a bond. We figured we would offer people three layers of a bond. One of them was a 12-month, another was a 36-month and the other was a 60-month. They had tiered returns. We only ever solve the 60-month bond. Would I allow extra two points because I don’t want to have another conversation with another investment company and find another group of people I trust and want to do work with if you haven’t got an opportunity when this expired? There are those people out there but I deal with both.

The beauty of the program that I have set up from my point of view and my investor’s point of view is it’s 1 deal, 1 investor, 1 note, 1 property. The deal can be whatever the deal needs to be. I don’t have a homogenized, “I’m going to pay you X percent and X points and this, that and the other.” There are some notes I discount, sell my points on. There are others that I put a high rate of interest on. It depends on what fits the deal, which is nice.

You are trying to increase home ownership and solve a lot of problems on the ground. Culturally, it adds a lot of value. The younger generation is less apt to buy a home. That may be partially because home ownership is not so affordable, which is something you are addressing. I’m curious. What would you say to someone who says, “It’s not that home ownership drives wealth. It’s the other way around?” Someone ends up buying a house because they can afford it or they have made money versus the home ownership itself drives it.

They probably had a good education. Why did they have a good education? Studies show that kids of homeowners are much more likely to go through a tertiary level of education and earn more money. It goes back generations and generations. You say, “My parents bought a home but I don’t think I will. Would your parents buy a home?” Maybe. You come for a long chain of home ownership.

At some point, in some families, ancestry, that chain can get broken. The further into the future we go, the harder it is to get back and to fix that because it gets more expensive. All of the benefits that family line had in terms of health, education, earning capacity, and access to credit which you get as a homeowner, you don’t get as a renter and household cashflow.

All of those things become out of reach and you end up in this toxic spiral of housing poverty. You get passed around from one slumlord to the other. It needs somebody to step in and offer an opportunity to get back into that. It works about 50% of the time. That’s a very honest conversation we have with all of our investors. A lot of them get onboard because they are like, “Our money can do some good as well.”

I’m like, “I’m not the only guy out there who’s not entirely focused on money. There are plenty of other options out there,” but I’ve got to be honest with you, sometimes it doesn’t work out. People will pay us a $10,000 deposit, pay their rent in every month for 24 months and then disappear. It’s happened. Some smash houses up. Stuff like that happens still. “You lead a horse to the water but you can’t make it drink.” It’s something my grandfather said. That is relevant and true in terms of this. What comes first? It is an impossible question for me to answer.

It is. I put you on the spot. It’s a tough one.

It’s fine. Regardless of where it starts, if you can give somebody the opportunity to, in their own home, access extra credit, get their kids into college, earn a better wage, have some pride in home ownership as well. That’s something immeasurable metric that we don’t think of. You are sitting in your house and thinking, “This is mine. The landlord is not going to sell it tomorrow.” There is some mental and emotional security to that which I have seen with my eyes is valuable.

My daughter had an assignment. What is the American dream? Maybe that’s why it was on my mind. It used to be, buy a home with a white picket fence. It is changing in a lot of people’s minds but I’m with you. That’s a good answer.

The American dream might be, “Don’t die of starvation when you are 60.” That means you don’t want to be paying rent when you are 60. If you haven’t bought a house by the time that you are 40, you best make that a priority because you don’t want to have to find rent checks when you are 60, 65, 70, 75. In terms of the long-term benefits because of the areas we buy in, most of these folks, that’s their end goal. They are like, “I don’t have a pension. I don’t have a nest egg. I want a house when I’m in my 60s or 70s and I can’t work.” For a lot of our tenant-buyers, that’s the main motivation behind it. It’s less about the long-term. It’s more about what’s going to happen to them in 20, 30, 40 years.

A lot of them probably don’t have retirement accounts or very little. The house is something they eventually may have to sell downsize if there’s an opportunity. That’s their only asset, you realize from a lot of people.

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It’s a false savings account in a way, paying down the loan.

The guy we sold the house to on a listing day is putting $35,000 down. That’s what he has. He has nothing else. He has no retirement accounts. That’s his cashflow. Don’t put it all down. You don’t need to. You could do this with $5,000 and keep the $30,000. He’s like, “I want to make sure my payments are as low as possible. I want to own it as quickly as possible.” He’s an older guy. That’s his motivation but that $35,000 is all he’s got.

I find a lot of people who do similar models or do the seller financing are more looking at it from the perspective of, “Let me jack up the price as much as I can. I will get a little bit of a down payment.” That’s almost setting yourself up for failure. I would rather sell the house at value with a larger down payment because I’m more secure that, that person is probably going to keep making their payments. Some of these houses, I see some lenders doing, it’s a $70,000 house and they will put somebody on a $90,000 loan and put $1,000 down.

It’s two things. One, if the person gets in trouble, they are upside down. They are probably going to destroy the place or it’s not going to be in that condition and you are going to have to take it back, renovate it again. I would rather sell it to them for $70,000, $75,000, get $5,000, $10,000 down from them. They’ve got some of that equity in there. It’s like, “I have already dropped.” When people put money into something, it’s much more difficult to get out than it is like anything, “I’ve got no money in this. I don’t care.”

One of the main reasons we accelerated this program because we found that those tenants look after the house a lot better than tenants paying $800, $900 a month in rent. They’ve got no investment. They don’t care. These are people that have been living with landlords for 20, 30 years that didn’t give a crap about them and didn’t do the repairs when they were needed. You are dealing with a mindset that’s ingrained over 30, 40 years. Number one, every rent check is buying a house. Number two, that $5,000 to $10,000 that you put in was a lot of money for you and you lose that. You screw up.

They start to prioritize differently, which is one of the main issues. There are a lot of people in the low to moderate income space that they don’t manage the cashflow that they have well. They may not be in a great position ever but they could be potentially in a better position than they are because they prioritize things incorrectly or not for their own benefit. It helps people to focus on, “I’ve got my paycheck. It’s a tight month because I’ve got these bills but I need to make sure I pay my rent on time.”

I was reading an article about a company that does seller financing back to the tenants and renters. It’s part of what they are doing because there have been so many horror stories from the early 2000s for these large funds that have been sued in many states for buying a house for $5,000, selling it on a land contract for $50,000 in some of the lower-priced neighborhoods.

Some of these new companies are doing financial management courses for these tenants/borrowers. Once a month, they will have them set up a call with a representative to go through their bills. The lenders mentioned that people think it’s a joke but for them, if people have some type of training or stay on course, it is cost but they don’t mind absorbing that cost because they said their percentages of success have increased since they started doing that.

They are explaining to people some of the big pictures. One of the biggest problems with America is people don’t have that financial knowledge, the literacy on how to manage budgets. I have a daughter who’s graduating high school. I asked her a question of, “How much do you think houses are in the neighborhood?” She was off by a factor of five.

I asked her, “How much would the mortgage be on that? You graduate from college. Here’s how much you make.” I walked her through that. All of a sudden, her eyes start popping out of her head and she’s like, “How do you afford it?” I’m like, “We have been working the last several years, even we manage.” I joke about the 40/40/40 Rule where I don’t want to work 40 hours a week for 40 years for 40% of my income. That’s what dad does on the weekends or at nights when I’m downstairs.

It reminded me, Chris, of when I interviewed Ryan Harris, the former NFL player. We talked briefly. He’s big on financial literacy. I said my mom was a school teacher in the public school system and she will say, “We tried to teach them Financial Literacy and they didn’t want to learn.” Hopefully, my mom doesn’t read this. I don’t think she’s maybe the person that should be teaching that. Secondly, she was a great teacher. Don’t get me wrong. My point is it’s not either or. It’s not just we need more education and exposure to financial information. It’s not only that. It’s also, like you said David, “You can lead a horse to water but you can’t make it drink.”

It’s both but we can’t control the decision making of the individual tenant or buyer. The more information that we provide them, the better off. Even if it’s only 50% effective, that’s still effective. You are still making a difference. I didn’t come up with this but essentially for all three of us with our business models, you could break everything into three parts.

One is raising capital. The other is finding deals. We have talked about both of those. The third is managing those assets. Pretty much marketing and everything that may be considered ancillary should fit into 1 of those 2 categories. Which of those three would you say is the biggest challenge for you?

The deals are the deals. There are always houses to buy. I’m talking a lot at the moment about how we are going to have a housing crash. I’m not buying on house price appreciation. I’m buying at a discount. I’m buying and looking for a deal. I’m not as concerned about that as most people. That side of my business, there is always a deal out there.

I’ve got other people looking for them. Raising the money is where my passion is. That means I have more conversations. I have learned in the past more than anything else that much as I put people above anything else in terms of who I’m going to work with rather than what I’m going to work on. Investors are very much the same.

The product is the product. It’s secondary to the person they are going to do business with. This is why we have conversations like this. I had two great conversations with new investors a couple of days after posting the podcast you and I did where we talked about mindset for note investors. They were like, “We listen to it all the way through.” There’s one lady who’s like, “We like what Jamie said.” That’s half a compliment for you.

Where I find it most challenging is in the building of the systems and processes, and putting the team together to manage those. I’m not an analytical person. I have a more creative brain than I do an analytical brain. I have hired an office coordinator to take care of all of the admin that’s associated with making sure that all of the backends of the business are running smoothly. We have a loan servicer. I spoke to Shante. We are going to be taking all our loans moving forward which takes a bunch of admin off me as well.

Those are the parts of the business I’m trying to automate. The biggest challenge for me is the administrative side of juggling and remembering to make sure I have done everything right. Speaking to Shante at BIFI Loan Servicing, they are going to ask for our property taxes. That’s a job off my table. It’s a real strong selling point for my investors as well because a bunch of them have been burned by other people. The part of the business that I find most challenging is the administrative side of things, staying on top of everything.

Chris and I can relate.

Where do you see your business going in the next 12 to 36 months out of curiosity?

I have had all sorts of ideas. I’m happy with the pace at which we are growing, which is about five properties a month. There are more deals than that out there to buy. If I bought 20 properties a month for the next 3 months, I would have 50 properties boarded up that I would be paying notes on. I couldn’t get contracting cruising. It would be no point.

I see that in Mississippi a lot. There’s one wandering around Mississippi at the moment, a hedge fund either from New York or California. They come in, they look at the houses on paper and they are like, “$800 a month. I can buy it for $20,000. This is amazing.” They buy about ten of them before they realize what they are getting into, and then they leave town.

They should probably google Zillow.

Interestingly, you mentioned that because I’ve got a property in Pennsylvania. My property manager, we had an issue come up that we worked a resolution. They were shocked at how professional I was in the sense that I’m from Massachusetts originally. They were holding that a little bit against me but they said the same thing.

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They had a hedge fund go in and buy all these properties in the worst neighborhood. They took them on. They canceled the contract from the hedge fund because they went in and bought all these boarded up properties or ones that were in very bad communities. They were trying to manage them and said it was a losing battle. They were spending 90% of their time on 5% of your portfolio from this portfolio. After they canceled, the fund decided they were probably going to get out of the area anyways.

Similarly, you see these large hedge funds trying to get into certain markets. They are too big. When you hear Redfin, Zillow, and some of those companies, that’s a joke because technology companies are not real estate investors. When I look at PPMs and see the makeup of the entire group is all tech people, no offense, they know their stuff on the tech side. They don’t know real estate. It’s a completely different animal. They are going to get burned badly. We are seeing that also with a lot of these funds.

I sold one of my houses in Mississippi to one of these funds. I signed the contract. They are great guys but I have seen it because I have been in that market for years. Every twelve months, you get a new one to come in. It’s the same story and they do the same thing. I have seen it in PA as well, Chris. I understand what you are saying.

They are not real estate people. They were not deals-people and they are not people-people a lot of the time. They are numbers and tech people. It doesn’t work, especially if you are going into low to moderate income housing and rough neighborhoods. You’ve got to be a people person. If you want that rent check on that tenant, you’ve got to know how to have a conversation with someone. You’ve got to have a fair, strong constitution as well because you are going to have a fairly rough-edged conversation sometimes.

It reminded me of when we were doing some government contracts and go interview people for the RFP interviews. Some of them down is like certain military installations. In the South, if you show up in a suit and tie for that interview, they don’t even bother walking in the door because that’s not who they are.

It’s similar to understanding who your client and the tenant is. If you try and bully or force them and use your so-called authority above them or try and use some type of, “I’m better than you,” type of thing, you are not going to get anywhere with them. You need to work with them and relate with them in the struggles they have gone through.

Jamie and I talked about this a little bit. You have to understand the borrower. You have to have some empathy for their situation. If you walk into somebody’s life like if I walked into one of my tenants’ life, they’ve already got probably more stresses than I have in their life. Things are already tight. They don’t have amazing jobs and a wealth of income.

If I walk in there and start being a pompous ass, it is not going to end well for me. They are living in my asset. It’s not the way to do it. There’s a guy in Pennsylvania in New Castle who got internet famous because he got caught on camera being horrendously racist to one of his tenants. I ended up buying a few of his houses at knocked-down prices because he got locally famous. It went viral. All of his tenants weren’t paying rent.

He was a well-known local landlord. He would come up and rent in cash door-to-door. He was a very rude guy and this guy filmed him. He was using the worst words as you can imagine. He ended up having to sell his whole portfolio because of the power of the people. Everyone was like, “We are not paying you rent. Go screw yourself.”

You and I were talking about empathy. I was reading a Brené Brown book. She was saying how your personal principles aren’t any different than your business principles. You should pick two principles. Ultimately, it reminded me of that because it’s the golden rule, treat people how you would want to be treated thing, whether you are going to the grocery store or you are running a rent-to-own business, it still applies. Go ahead.

The comic effect of doing good business is a very real thing.

We were talking about technology versus people. I’m dealing with this ID theft issue. Our discussion reminded me of that because someone applied for a PPP loan fraudulently in the name of one of my businesses. As I spoke with the small business association rep about this, he was explaining that this particular lender who lent $190,000 two days after this application was submitted, that lender was given broad discretion because they rely so much on technology. You can look at the application and see several things blatantly wrong with it if you google my business.

It didn’t matter and also the fact that they are not lending their own money, they are lending the governments but that’s a different conversation. They were officially given large amounts of discretion to lend out money because their technology is so good. There’s still the human element of fact-checking. That’s never going to go away. That’s refreshing. It sounds like you try to keep people front and center, whether it’s your tenants, investors or your team that works for you and with you. It sounds like that’s a common theme from this episode that I’m taking away. You are a people-first person, which is awesome

I struggle to shut up sometimes. I spent time talking to people and building relationships and I enjoy it. I enjoy hearing people’s stories. I learn from other people. It has been a long time coming. It took me a long time to get to the point where I’m at. I am not the smartest person in the room and nor do I want to be.

If I’m the smartest person in the room, I’m in the wrong room. I try and remain teachable. I get things wrong a lot. I do my best to put them right. The golden rule is always communicating. Even if something is going wrong, communicate with whoever else is involved in whatever it is that’s going wrong and you won’t go far up.

As we wrap up here, we typically like to drop a Note and Bolt for our readers. You dropped a couple of them there. Maybe you can share a little nugget of wisdom with our readers, as far as something they may not learn in a training.

I want to say lead with value but you stole that in the last episode that we did.

This is a different one. You can use it.

Chris didn’t listen to that one.

You stole mine, David, believe it or not. The reason why is I was going to mention the comment he made about wanting to be “the dumbest person in a room,” not the smartest, and if you are, then leave. That’s why I was going to touch upon it because I joined a group called GoBundance and slowly starting to get involved in it.

I have heard about it from a gentleman from BiggerPockets. He has been in it but one of my investors mentioned it. It’s a group of accredited investors who are a lot of doers. It’s a smaller group and they have pods on different things. There could be different types of aspects of investing. It’s a lot of people who are similar to myself, Jamie, and you, David, that get together on calls.

They have events throughout the year at different locations where people get together. It’s networking and discussions that most of us do. If you are successful in your business, it’s difficult sometimes to be hanging out with your friends and explain what you do, or talk about any of those challenges or saying, “I made this much but I’m trying to do this,” because it’s uncomfortable. They set it up more in the sense of, “Everybody is in the same position.”

That’s the norm.

It’s okay to say, “It was a rough year because we went from $500,000 down to $300,000.” If you said that to your buddies who are making $100,000 a year, they would be like, “You arrogant prick.”

I will piggyback on that. I went part-time from my 9:00 to 5:00 in 2015 but was working several days a week. I found that over the last couple of years, I couldn’t even, and relate to my coworkers. I certainly had great coworkers, don’t get me wrong. It’s a mindset shift that I couldn’t relate to them anymore unless it was talking about craft beer. As far as financial wealth building, I couldn’t relate to them. That is awesome. I didn’t know you joined that.

The product is always secondary to the person you're going to do business with. Share on X

To circle back to what you said, Jamie, try and be teachable. We are going to die stupid. The amount of knowledge you can acquire in a lifetime is so minuscule compared to what’s out there, you are going to die stupid. Remain teachable. That will serve you in the short and long-term in my experience.

I don’t have a genius Note and Bolt but I’m going to use the reference to that podcast I made. It’s called Capital Hacking. That’s a good podcast I listen to. They bring on a lot of different types of investors. They are big in the human capital. That’s what made me think of it from this episode.

That’s something you are pretty focused on, David. It’s human capital. They are in GoBundance. They are big into raising capital. They are personally in the hotel space and high-end resorts but that’s not what the podcast is about. It’s more about mindset, helping each other, and focusing on not just the actual capital but the human capital element of things. I encourage the readers to go check that out.

David, as we wrap up this episode, how do people reach out to you? What’s the best way for them to contact you?

The easiest place is through our website, which is Garnaco.net. Hop on the website. There are plenty of opportunities to join. Our priority investor list is where we send you the deals that we are doing every week. Once a month, I send a newsletter out with some rants and raves on it, which is quite well-received. That’s probably the easiest way to get ahold of me. I’m not massive on social media.

You do put out some good stuff on LinkedIn. I have seen your blog posts.

We are into it. I spent a period of time away from my wife because she was living in Australia and I was in the UK before she got a UK visa. I spent a lot of time bored on my own. I’ve got into Facebook rabbit holes and ended up detesting the place. I try not to spend too much time there but I have re-found LinkedIn. I’m trying to add some more value there if I can.

I’ve got the email from you. My new investment opportunities are in. I have to check them out.

That’s where tech works on our side.

David, this has been good. We covered a lot of valuable ground. Our readers are going to get a lot of value. Chris, is there anything you want to add?

No, I’m good. As we typically end every episode as always, please make sure to leave us a review on your favorite listening station and go out and do some good deeds.

Take care, everyone.

Important Links:

• Garnaco
• Ryan Harris – Past episode
• BIFI Loan Servicing
• GoBundance
• BiggerPockets
• Capital Hacking
• LinkedIn – David Garner
• Blog – Garnaco Group of Companies
  

About David Garner

David brings a wealth of experience and astute commerciality to the Garnaco business with over 10 years’ experience as an active investor in the US real estate market.

He has participated in over $20 million of real estate transactions as Principal and/or Advisor, including the successful acquisition, rehabilitation, management and disposal of physical real estate assets and both performing and non-performing real estate debt.

On a day to day basis, David oversees all Group real estate acquisitions, and manages our relationships with the private investors and lenders that support our various housing programs.