3 Degrees of Freedom

Ep 172 - Asset Management with Gary Lipsky

• Derek Clifford • Season 3 • Episode 172

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Our esteemed guest today is multifamily mogul Gary Lipsky, renowned operator and bestselling author of “Best in Class”. Gary brings our motto of three degrees of freedom to life, with over a quarter billion in real estate transactions exemplifying the shift from time-for-money work to freedom-focused investing. As President of Break of Day Capital, he positively impacts investors with radical transparency and fiduciary responsibility.

In this episode, we discuss which “freedom” Gary feels strongest in right now, his perspective on asset management as an art and a science, and keys to success like managing risk responsibly, setting expectations with property managers, and applying timeless principles from his book to today’s landscape. Gary also shares wisdom on vertical integration, the importance of tracking even passive investments, how transparency and fiduciary duty have fueled his accomplishments, tips for shifting to investment-based income, and the driving force behind the award-winning success of his firm.

Connect with Gary thru the social links below and learn more about his business:
Facebook: https://www.facebook.com/breakofdaycapitalinvesting
Instagram: https://www.instagram.com/breakofdaycapital/
LinkedIn: https://www.linkedin.com/in/gary-lipsky/
Website: www.breakofdaycapital.com

Unlock 3+1 degrees of freedom (time, location, financial + health) with our 5-Point Blueprint! https://elevateequity.org/podcastgift

If you really enjoyed this content and are looking for more, you can continue to learn more about us in several different places for free!

If you'd like to have a FREE copy of our 7 Ways Commercial Real Estate Syndications Protect and Build Wealth, simply click the link below. We are here and vested in your long-term success! elevateequity.org/7waysEbook

Welcome to the three degrees of freedom podcast, where we explore lifestyle engineering with our expert guests to bring you in alignment with your own three degrees of freedom, location, time, and financial independence.

Derek:

Hello, everyone. Today we have got a absolute treat. We've got Mr. Gary Lipsky on the Zoom call today for our podcast. Hey, Gary, how are you today? Good. Thanks for having me. Awesome. Thank you so much for coming on the show. If you guys don't know Gary, he is a renowned multifamily operator and the bestselling author of the very well written book that I've read twice called best in class, which you can see if you're on the zoom video, you can see it right behind Gary's shoulder over there. He brings, the motto or our motto of three degrees of freedom to life. He's having, he's done over a quarter billion dollars in real estate transactions, and he simply exemplifies the shift of going from traditional time for money work to the truly freedom focused approach, in doing your own business and working for yourself. He's a president of break of day capital and he impacts investors positively from a perspective of transparency and having a radical fiduciary responsibility to them. His award winning firm is one of Inc magazine's fast growing real fastest growing real estate companies in the U S. And his superpower, which is multifamily asset investment or management, coupled with his entrepreneurial spirit has led to the growth of multiple companies, independent films, co production, nonprofit launch, and a successful real estate podcast. You got a lot going on there, Gary. That was a big intro.

Gary:

Well, you know, it's, I've lived a bunch of different lives, but, multifamily. Value add has been my main focus for many years now.

Derek:

Very cool. Well, let's go ahead and jump right in. As you might imagine our main focus today, we'll be probably talking about asset management and how that. You know, how to approach it from a different ways, both passive investing and active investing for people that are on both sides of the equation. But before we do that, the traditional first question that we ask all of our guests here, right off the bat is which of the three degrees of freedom, which we talk about location, freedom, time, freedom, and financial freedom. Do you feel is the strongest in your life right now? And which one are you looking to pursue more of?

Gary:

I guess location freedom is the most powerful right now. So I live in Manhattan beach for blocks from the beach. I play volleyball twice a week, on the, on walking on the beach multiple times a week. I, my investments are all in Arizona. And the brokers are always asking me , when are you moving here? You've got, you own seven properties and I'm like, I live four blocks from the beach. I'm not going anywhere. They're like, I got it. I got it. It's a quick flight. It's an hour away. You know, I'm there often. My whole team is in Arizona already, so I just, I don't need to live there. So I feel that's the strongest because financially. I've done very, very well, but most of my, you know, my money is in my deals, so it's not like I have tons of money to spend and stuff anyway, but that's not my style. Anyway, I'd rather just keep investing.

Derek:

Yeah, very cool. Yeah. I appreciate you making that distinction. And I think that, your time freedom as well. Sounds like that's there also for you to be able to go and enjoy some of these things. Enjoy the life that you've created for yourself. Cause you've been doing this for a very long time and done it very meticulously. I can tell because over a long career to be successful this long, you have to do that. So as we jump in here, I want to talk a little bit more about what asset management really is. And more importantly, from your perspective, is it an art or is it a science? What do you think?

Gary:

Very quick, great question. And I'll create the distinction between property management and asset management. Cause I think a lot of people get confused and property management is the onsite team. Whether you have an in house or use, we use a third party property management company. And so. You know, there's a lack of ownership thinking that, you know they'll punch in, punch out. So we try to change their mindset, but as an asset manager. We are in charge of executing on the business plan, making sure everything is running correctly. Secret shopping doing the, checking the financials, guiding this investment from the time we take over to execution and that's really asset management.

Derek:

Yeah, that includes all those details. one of the biggest things by the way, and we're going to get into this, but just a preview for what's coming up is LASL, L A S L. Something that's very important inside the book that is in best in class, which by the way, I recommend every one of you guys pick it up. Even if you're not an asset manager, it's important to know like all of these things that need to happen in order to make an investment successful. And that's kind of where I wanted to go next. So anyway, I wanted to ask you to back up a little bit. Is this an art or a science? What do you think asset management is? Right. Right. Thanks.

Gary:

For reminding me, I think it's both because it was just, you know, we're on the call each week with our, with our property management company, and so we're tweaking rents. And so, so that's the art kind of like. How are you balancing the renewals? How many, unit turns you're doing? All that is the art and the science is all of the things that we've systematized over the years that keep us on track, you know, the KPIs. Our standing operating procedures and all that stuff is the science. So you take the two and create it and you've got, you've got a really successful asset management thesis,

Derek:

I guess. Yeah, I would agree with you. And I think there's a trick to knowing which part is science and which part is art because it's people when it comes down to it, right? There's people operating inside of your apartment building. And then there's the people that are running the property management company for you. And then there's you. And there's some people that tend to go more down the science route where I guess in the term science, I mean, like spreadsheets data, like hard numbers and everything. And then there's the trends behind it. And then the soft skills that come behind it. And every property manager and every person has different tolerance levels and desires to view each. And so you just have to figure out where you are as if you're going to be an asset manager, which I hope every owner is, by the way, in some part in an asset manager is one of the roles in your head as an investor. You gotta know which one to use an art or science. So I guess it was a trick question that I was asking you. So thanks for you passed the test. All right. The next question that I've got, is a tricky one because human beings. Typically have a hard time processing risk. Now, one of the most important things for asset management is making decisions and approaching risk responsibly. So I know that, you know, as a key successful long career that you've had, you need to have. a good approach to manage risk. And so I wanted to ask you, beyond what was stated in the book, perhaps you can give us a little bit about how you approach risk management when doing asset management. I think it's,

Gary:

It, one of the key things is not, you know, operating in a vacuum. So I want as a, as an asset manager, I want The input from my property manager for my regional manager there. They're the ones the property managers on the grounds every single day. So I want her to understand her opinion matters and get that ownership thinking. I want her feedback. My regional manager who's also managing 10 properties that are somewhat similar. I want their input as well. So it's not just me making decisions. We're all working together to, to make those decisions to solving problems. And as far as where risk becomes, you know, we're constantly trying to de risk our asset, de risk anything that. We're going to do, so we're just constantly, leveraging our experiences to, to make those decisions. And if we don't have that experience reaching out to someone that has that expertise, you know, I don't pretend to know everything, but maybe a friend does. And if he doesn't know, he probably knows someone that I could talk to get that answer. And same thing on the property management side, you know, making sure they find someone to get those answers. And this helps us. If we're taking on something that we haven't taken on before, or looking at implementing a plan, we haven't done just gaining as much knowledge for anything that we do, trying to look at a 3, 360 degrees where, you know, what are we missing? You know, it's if it looks too good to be true. Okay. What. What? What? What? What could go wrong? You know, because, you know, let's face it. And when we're asset managing thing, nothing goes perfectly and things do go wrong. So just trying to figure that out and constantly monitoring it. it's not something where anything we implement and just forget about it. We're constantly monitoring. We're constantly having those weekly calls and checking the data points and making sure we're pushing the needle and it's going

Derek:

forward. Okay. It when it comes to risks, I wanted to get a little bit more in the granularity because again, human beings are really, it's very hard for them to process risks just because it's something that isn't taking place now. And there's a possibility of it happening there in the future. So the variables are all over the place. It's the, when it's the, how much is it going to cost me? And is it, if it's going to materialize and you know, who's it going to affect and all of those things, right? So when it comes to managing the risks together as a team, is it mostly just the experience within the group, or do you guys have a formalized way of, you know, identifying some of the risks at the beginning, they're like, Oh, you know, this concrete is starting to chip up. So that could be a trip hazard. Maybe we don't need to work at it right now because we're going to be doing, we're going to be working on that building in the future and like another month or a year when the budget allows. Or when the CapEx money is ready or however you have it, do you guys have a way to log all of that? Or is that something that's more on the operations for the project property manager? No, we'll go

Gary:

over that. I mean, that, that's really, that stuff will be in our due diligence report from the beginning. And so anything that's a potential hazard, you know, with a high cost to it, those things you just want to address from the beginning, you know, it's just silly when you're taking investor money. You want to, you know, anything insurance wise, get yourself covered, take care of that because it's just, those are the things where it can, it's rare, something will happen, but man, if it does happen, it will cost you an arm and a leg and those are like the non negotiables. We just don't, we won't play with anything that's low possibility, but high risk. It's just not, it's just not worth it. Makes

Derek:

complete sense. And how do you know to identify those? That's just experience and property management expertise, everything.

Gary:

Yeah. And having a good team, you know, obviously I can spot, you know, everything We manage 7 properties right now, but yes, having a property management team that is very meticulous and also having people on my team that are very meticulous as well, to look for possibilities of risk. Like, like you said, because those are the ones that if you take a punch, it's going to be a big punch.

Derek:

Yeah, couldn't agree more with that. Especially when you're dealing with people's homes, right? And people are living there every single day. Like it just, you have liability all over the place. That's why you got insurance and you taking care of those things. Just a no brainer. Hopefully a lot of it is taken care of by the time you take over if you're buying something and then you're getting ready to sell as well, but, totally understand that. Okay. That makes sense for me. I wanted to move on here with setting expectations with third party property managers. So, right now I have a lot of holdings, and I'm just going ahead and sharing with you in the audience. I have a lot, many holdings in the Midwest and a lot of the properties are, you know, anywhere between 50 and 75 units in the Midwest. And so that is a size where it doesn't allow for an onsite property manager, which is something I'm working on. I know that's something that I need to start moving myself into quickly how would you recommend people who are still working with third party property managers that are offsite, to begin having these conversations up front about here's what I'm expecting. I'm expecting LASL. I'm expecting, you know, weekly calls. I'm expecting all of that. How would you approach Type of conversation and how would you select your property managers based on that discussion? Yeah, certainly you

Gary:

want to any market you're in, you want to tour the properties of the property management company to see, hey, are they shining better than others? Is it clean? Are the staff engaging do they answer your questions specifically and we have a 100 point checklist that we use. But we've been using the same one for quite a while now, but, and then having those conversations. So I wouldn't start engaging with a property manager. As soon as you have a property on a contract, you want to spend time with them beforehand and making sure they have the same, core values that you do as well. If they don't treat their staff right, if they are penny pinches, whatever it is, like that to me is going to be a red flag. Going that extra mile for your staff, it's so important probably management could be a low margin. Thankless job. And to pay someone just a little bit more, we'll make, you'll make it back 10 fold over the long haul because you're going to have less turnover. They're going to go that extra mile. When, whenever turnover happens. It's just sets you back, you know, months, you know, so it's really difficult and we all face turnover. They don't make a ton of money in the, in on these properties. So, you've got to find ways to incentivize them. To keep them there and motivated. So, that's really important. You want to, um, and so as far as expectations to is just having that those good conversations ahead of time as well to make sure that, hey, this is what I'm expecting. Or is that does that make sense to you? Is that how you. You manage your other properties, because if they're pushing back, hey, we don't do that, or we don't provide that, then that's not a good fit as well. So you got to make sure you're on the same page as far as budget. I want to have them push back and not be like, oh, yeah, we can do that. Or our rents, we target 1200 and they were at 1100. Oh, yeah, we can do that. Something, you know, then that's a red flag, if they were at 1250, I'm at 1200. Then we could talk about that. Or, you know, maybe if we change our value plan or have some back and forth, but if there's no back and forth, and they're just agreeing to everything to I, that's not someone who I

Derek:

want to work with, you know. It seems like the common denominator here is engagement. I mean, it's communication, but also engagement. And then, you know, maybe you have to extrapolate also out, like, how are they talking to their tenants? I guess that comes down to the shopping, right? Like the shopping that you do, the surveying that you do. Um, and I guess, have you found yourself in a situation because you've got so much experience, maybe you have brought on a property manager that has less experience than you, have you found yourself in a coaching position where you're actually not teaching them how to do their job, but like saying, Hey, look, this is what we found to have the most success when setting rental rates here, or, you know, for, for tenant retention, here's what we found works on other properties and then kind of like training up property managers. Have you found that to, to also be happening too? Yeah,

Gary:

absolutely. You know, you'll get some green staff and certainly it's your regional manager, to train them up, but. You know, we're going to come to the property unannounced and we can walk through the units and the property and say, well, you know, you, you've got, you know, that attention to detail. So important on these on the renovations kind of walk through the property, but and making sure, you give them props when they do something. Well, you want to encourage them. certainly, the 1st time that is, there's room for improvement and then if they're making the same mistakes the 2nd and 3rd time, then that's a problem. But, we try to catch them doing something good. And, when there's something that we just call it a room for improvement. And so they're not feeling beat up or anything like that. We want long term relationships. It's really based on encouragement, you know, versus. this is wrong, you know, , let's get it fixed. And then we expect it to be stay this way in the, in

Derek:

the future. Yeah. Yeah. Everyone's allowed to make mistakes once, right. As long as they learn from them. So I agree with that sentiment there too. So before I start talking to you about, you know, some of your best takeaways from the book, best in class that, I'm not sure if you wrote with Kyle, , cause I actually had Kyle on the podcast as well and he's a great guy. But I was going to ask you. How do you think things have changed since you wrote the book? Because I remember that you wrote that book a couple of years ago. At least that's when I've read it. And the landscape is shifting a little bit now, we're seeing a little bit more of a difficult situation or difficult, financial situation for people in like the C class, right? And maybe even some of the B class properties as well. Is there anything that you're doing right now that's kind of like bleeding edge for retention, for instance, or for reducing turnover, that maybe is not mentioned in the book, or maybe you have a slight nuance that's different.

Gary:

In general, we talk about it in the book that asset management is always ever changing. So there's new technology, you know, this was 2. 5 years ago. There's 1 thing that works, you know, today is not going to work in 3 months, but cutting edge. I'd love to say we were, I don't know. I don't think we're so cutting edge. The space doesn't allow it. It's very, the property management company is usually very antiquated, and slow to change. So, you know, I think there's a lot of room for innovation and just sticking to the basics. Like I'm one of those guys, if you stick to the basics, that's going to take you like 95 percent there. And so we use Google sheets to track everything. We have our KPIs. It's the same thing that was in the book from. You know, from two and a half years ago, and that works really, really well. Now we've tweaked how some of the things that we've measured and how the form looks, but for the most part, we're still doing a lot

Derek:

of the same stuff. That's good to hear. That's good. That means that I'm going down the same path as, as world class, world class operators. That's a good thing. So I appreciate that. As far as your book, best in class, for those who don't know, and again, I, this is the third time I've mentioned it, but you have to go pick up that book, even if you're not an operator, it's really important to see what operations is like and how intricate it is and how complicated it can be. And just to have respect for the science and the art that it is. I wanted to ask you, Gary, was there any specific takeaways inside the book that you think people who are already in the space that really need to double down on that's super important right now, or anything, if they had to take away two or three things from the book, that's super important, which ones would you dial in on?

Gary:

Well, I think, You know, I forget what chapter, but how you manage your property managing the manager. Basically, you still have to secret shop it on a consistent basis. That's so important going. Like I said before, doing the basics, looking, you know, having your weekly calls, even if you the property is operating well, you've had it for a year. You've instituted a lot of the. The, the business plan, just that consistency is so important because I hear from other operators that rarely see their property and then they wonder why all of a sudden things have gone sideways so quickly and. Even when you're managing the property, things can go sideways pretty quickly. Occupancy can drop, delinquency can kick up. So it's having those touchpoints with your team on a consistent basis and dropping in unannounced. We'll do that all the time. Not trying to catch them doing something bad and I've done I've brought investors without telling the staff. Like, I just want to, I want to see it without them noticing and 99 percent of time. It's all good. But I need to know if it's not and telling them I'm coming, it's not going to get that done. So, um, just doing, you know, that managing the manager is, I think is the critical piece.

Derek:

Yeah, we've actually found that to be true, and so again, I'm glad that we're aligned here. We have, every property that we do, I happen to be remote and as a matter of fact, I'm in Tucson right now, so I'm kind of in your neck of the woods, but, we have every property that we do in the Midwest, I make sure that we have a general partner that has significant equity and role stake, like their role is to be there and they have flip, you know, they're D flips and they've done other apartment buildings. So they have connections there to help solve problems. And some of the things that I think we got to implement a little bit better is like having a regular like photo shoot or showing up unannounced to, you know, the leasing office and doing things like that. So that's one thing that I'm definitely gonna be taking away after we're done with this call, to make sure that we're implementing a little bit better than we are right now. So I appreciate you underscoring that. And if for

Gary:

some reason you can't get there, hire someone on Fiverr to shoot video, take pictures, whatever it is, go through the scenario, you know, my, when we do the secret shops. Online and I'll be a call my operations person does it and she just creates new aliases every time, you know, so there's ways to do it without having to be there. But there's, it's very powerful for you to have eyes on the property, see what's going on. Maybe a strip mall down the street, which was great when you, when you bought the property is now run down. And that's a huge warning sign. So just staying on top of what's going on in the neighborhood too, is,

Derek:

Is huge. Okay. Yeah, absolutely. Thank you. Great stuff. So I wanna talk also now about vertical integration. There's a couple of operators that I know, that have considered vertical integration and have hopped back and forth to trying it out and then not doing it, and then doing, going back and then not doing it. I wanted to hear your thoughts about when you think it's appropriate and under what conditions you think vertical integration works. And for those, by the way, just to, to line it out, Gary, for the audience, vertical integration means. Basically saying I'm taking the property management in house. Like, I'm just going to hire my own PMs. Like I'll hire them from a property management company, or from the relationships that I have, or from other people in different markets that are close by. And just bring them in and plug them into my operations directly, and then own the PM management within my, syndication business. So, that being said, yeah, I'd like to understand, what you think about vertical integration and when it's appropriate. Well, I'm in the

Gary:

minority. I don't want to be vertically integrated. My last company, we had over 700 employees and 700 independent contractors. And it was an HR nightmare, another low margin, thankless job. And so I can, hire. A company like in Tucson. They've been doing this 35 plus years. All I do is Tucson. They have 50 properties. So when we're looking at my portfolio, which is, a little more than 10 percent of theirs, I get the breadth of their whole portfolio and their expertise. So I can focus on what I do best and what they do best. But we're at the unit count where people say, Hey, now would be the time yeah. You know, 1000 units or more, I've heard even, you know, maybe more units so that you can control more. It's not necessarily to save money, but you can control more and more information. Why not now? I know my property management company isn't perfect. If we ran it in house, we wouldn't be perfect either. But I know some of the weaknesses that we can cover the gaps in. And so we try to do that. And so that, maybe there are a 7 you know, and we're covering those other gaps to try to get to a 10 which is hard in any business. but, you know, that, that's, that's how I look at it. And so if that market that I'm in, you know, we're heavily invested in Tucson at that. If we don't want to stay in that market longterm, I can easily, because I'm nimble, I can go to another market without having to move or let go of all these people that we've spent time and money building and go to any market that I deem that's a really strong market. So like I said, I'm probably more on the minority, but I feel like that allows us to play to our strengths.

Derek:

Very cool. I think, after this podcast is over, I'll tell you the names of a couple of people who also have the same approaches. You probably know them already. So you're not in the, you're not in the minority, or maybe you are, but not by much, let's put it that way. I think there's a lot of people that realize what you do as well. And I think it's a, it makes a lot of sense to me. And I think that's what I would like to do as well I. I personally have some VAs or some virtual assistants and they have, they're incredible people that, that work with me. But I just don't want like a W2 situation. I want to make sure that it's dollar, dollar per hour type of situation. And it works under the terms that it worked while it works for everyone. So really important for me as well. Okay. Next question that I have for you is, There is an approach. I mean, obviously Investors come in different forms, but there's passive and then there's active investors. It's clear that the conversation we've been having for the past, you know, 30 minutes or so has been mostly targeted towards active investors. What type of things do you want to say to passive investors about asset management? You know, what can you tell them about the importance of it? And just want, if you had a megaphone, you could talk to all LPs out there at one time, what could you tell them about, asset management?

Gary:

So I think a lot of passive investors, you know, they want to get into real estate and so they'll do a lot of single family homes. And, they that's where they've been taught and, they have to deal with toilets, trash and tenants. And usually at the worst time on the weekends when they're going away on vacation, whatever it may be. And so if you want to stay truly passive and they could focus on that. Time and freedom, or even work harder if you want to on whatever they're doing and their expertise, hire a team of experts like us, like other operators I've been doing a long time that have full time, you know, a team of full time people that, that do this. Every single day, and I've been doing it for years to manage their, the asset and this way, it, it lowers their risk and they can reap the tax benefits and focus on other aspects of their life and not have to deal with that and they have massive economies of scale

Derek:

as well. Yeah, I couldn't agree with you more. Would you say that for people that are passive. At least the, the ones that come to me for advice. I like to tell them that yes, technically it's passive, but you really shouldn't be too passive in it. I, you know, there, there's definitely a place for being able to kind of sit back and just watch things happen. But I truly am of the opinion that no investment is really fully a hundred percent passive. And I wanted to get your take on that also to see if, I mean, while it is superior and there is a lot of great, like once you do your diligence about an operator, like for instance, you have a great track record. It'd be very easy for me to be able to contribute capital into your five or six C deal. The, I guess what I'm trying to do is I want to encourage people to understand that like you shouldn't be completely just passive and just sit there and not look at things. I think it is important. And, I just wanted to underscore that asset management is very difficult. There's a lot of things moving on and it is very, it's something that really separates the best operators from good operators or even poor operators. And so I, I believe that it's worthwhile for people doing passive investments. To be a little bit active and making sure that they pick the right person who is actively working and doing well and has a great track record in asset management, because that really ties in everything. It ties the business plan together, the underwriting what's in the numbers. What the expectation of the numbers are and their track and everything. And so I just wanted to underscore that. I don't know if you want to add anything to it. I just had to have to put that out there. Yeah. I think a lot of

Gary:

people don't track their investments. You know, they put a hundred thousand here, 75 there, and they don't know. When they invested, you know, what was the business plan, how it's performing and a lot of, sponsors aren't, aren't sharing all the data, what was the, actual for the month in, in income and expenses then a Y versus the performer. Sometimes, you know, their budgets change from the performer. And so they're not showing an accurate, information with the investors and the investors should understand what is going on. So there are no surprises. And if something isn't looking right. Then they should take action, and push back, maybe try to get with other investors in that deal. Because just because you trusted someone and invested your heart and money, sometimes there's unfortunately, there are some, some bad apples out there that make us all look bad. But, you got to stay

Derek:

on top of it. Yeah, I hate to say it, but you may actually need to do some asset management on your passive investment, you know, like actually track some of the returns that come in when they come in, you know, and, and put the. The letters together and kind of see some of the writing on the wall, at least that comes with, you know, as you do more and more of it, at least that's what's happened to me. And, obviously when you, when you're an active investor and then you invest passively, it gives you an extra layer of awareness where you can start seeing trends happening and some of the stuff that they're saying, that can help you kind of speak up and be an advocate for the rest of the passive investor group, I think it's important to be active while passive. So let me shift a little bit here and talk a little bit more about some of the intangibles of your success, transparency, fiduciary responsibility. I think these are integral things that you have to have in order to be long term successful in this business, right? People have to trust you. You have to trust the partners. There has to be transparency and just clear value adding in both directions. So I wanted to ask you, how did that play a part in your success and where did it start coming up in your story? Hopefully from the very beginning, but I want to hear about specific, instances where that was tested or, something like that. Yeah. I

Gary:

mean, it's, it starts with core values, you know, being in it for the long haul. It's not, I'll do well when my investors do well. So it's not me 1st. It's a them 1st, you know, and really it's our investors and our residents. And if they're both winning, then my team and I will win as well. So we're in it for the long haul and. You know, sometimes we're like, well, do we even need to state that in our mission statement? Because it should, everyone should have it. But I, we, we keep it in there anyway, because we feel like it's great for, like, to reinforce, I think, but. Yeah, I mean, there are times when I've taken it on the chin. You know, , there's a deal 1 of our deals that, you know, I'm having to cover some of the, some of the debt service because we are, the cash flow isn't covering it, but that's something where I'm like, you know, I've got the reserves. I've always planned for reserves just in case doing really well on some, on all of our other deals. So there's no reason why I can't cover this. I'm not going to have a capital call. So it's just. It's just take being able to take a punch, you know, and for passive investors, investing with operators, I can take a punch because a lot of people got in over the last few years, they don't have a balance sheet or liquidity. And so when things go bad, they run, they bury their head in the sand. I mean, I've been doing this. Not just multifamily, but other businesses. and, you know, during the 2008 downturn and other obstacles I've had to overcome. And, you know, that's, that's just the fact of life. Nothing. There's no, direct, to the top, winning all the time. I mean, everyone will take a punch and you know, it's getting up and solving problems and pushing through. I

Derek:

want to underscore that. I think that's a great answer about Stepping up to the plate and helping to cover some stuff. When things are going bad, it shows that you have faith in the deal and that you trust your investors. Some of the other things includes the full transparency, right? Like just being honest about where you are in the situation, because to your point about some people just burying their head in the sand or literally running away, like they're after the call, I'll tell you, there's a couple of investments that there are people that have left the country. You know, to try to escape like what's been happening, leaving an empty bag for people that weren't in the asset management role and things like that. I think that it shows a lot of integrity to be there to say, this is, what I stand for because it is what you do, Gary. And, if you have a reputation, it's very quick, like it's incredible how quickly it can be tarnished. in this industry, right? Like if you make the wrong move, or if you do something out of integrity, it's going to make your, it's going to vary. It's going to cut off your career very quickly. And someone that's been doing it a very long time, this is just advice to the investors out there or to people who are looking for investments. Try to find someone that has a long track record, the heart of a teacher, someone who can listen, that you can trust that's transparent, communicates well, and has a lot of experience in a high balance or knows people with high balance net worth. In their partnerships. And I think, Gary, you've, you've earned that because you've been doing this for such a long time. So I just wanted to underscore that one more time takes time to do all of it. Last couple of questions I have here that are a little bit less traditional and not on the asset management side. I figured we'd break away from that. I think we covered it pretty well. I wanted to ask you, what tips do you have for those who wanna shift away from their traditional nine to five, to start getting into more investment based income or more entrepreneurship from a general standpoint?

Gary:

You know, do your research. I think a lot of people, fall into like. They don't set a time, a date, and there is an app for it. Cause that friend of mine showed me an app when it was like a couple of years ago, he was looking to segue out of his W2 into investing full time. And so he picked a date and every time it was like a countdown, you know, it was like, yeah, it was pretty cool. And so I got, he got other friends to use it too. But, and having a plan, I think the hardest thing is even when I sold my, my, my previous business, Like, I didn't know where I was headed. Exactly. I knew real estate where exactly in real estate. I didn't know. And real estate, there's so many, like, so many ways to make money. And so. For me, it's just finding what I want to do and then being really hyper focused. There's, you know, I'm not going to do, five different things. I want to be an expert in one specific area. And what and when someone takes that leap, then it starts really picking up speed. But until you take that leap, it's hard to build momentum because like mentally, physically, your friends like. All this momentum that you build by talking about it, by putting it out in the universe, you've got to, at some point, just make the leap and go for it. And there's no reason why you can't pivot. Each experience. Makes you stronger and able to deal with other things in the future. So, you know, don't be afraid to go for it. Is what I would say and talk, be part of other groups that if you want to get into. Self storage. Be a part of a self storage group, be around like minded people that you could share wins and losses and experiences, because that will rocket fuel that experience for you.

Derek:

I think it all starts with mindset because if your mindset is there, right? Then as you talked about, you just got to pick a point and go for it. And it's a slow build because if your mindset's there, you can, I mean, there's no limit to what you can do, even within like a short time frame. I'm talking like one to two years. It's incredible what you could do if the mindset's there and the engine is behind it. And I think that, all of the things that you said, 100 percent accurate and, definitely recommend people follow that path because I actually followed the same thing. I just, I was like, you know, I've got to, I got to try to get myself going from, for this point and something else that helped me to, to your point on the people around you. It was my wife. My wife was the one who was my strongest advocate and the one who helped me get away from my full time position and encouraged me to take the leap. And without that, you know, she reminded me, she said, you know what? Every time you do something that you're scared of, you always land on your feet. So how can this be any different? And dang it, you know, she was right again. So listen to those right people. So thank you for the advice. It's good stuff there. I want to talk about break of day capital. Can you talk a little bit about the success behind it? You know, where it came from, what the vision is behind the company. And just give us a little bit more information about that.

Gary:

Yeah, it's funny. A lot of people ask me about how the impetus of the name, because it's pretty unique. And it was, I was selling a business and, this was like a new beginning. I'm kind of like a wake up early and attack the day, every day is a new opportunity. So that, that was kind of like the genesis of it. But, you know, started small. I had one partner at the, at the time and. We hired an assistant, then we split, the assistant stayed with me and then, and the team has grown. Now we have six full time people and it's just steady growth. This is our first deal we're doing, in a year. Last year we did 132 million and four deals. So at the end of the day, it's quality over quantity. I don't need to do a billion dollars in a year. And when we talk about goals, yeah, eventually we'd like to get to a billion dollars assets on there, but it's not. That's not our driving force. We can do very well with just doing what we're doing now. But it's doing things constantly learning, and improving. Kaizen is one of our core values, that constant improvement. Because we can learn something every day from someone that's been doing it 20 years longer than me or someone that's just started out. So that's our mindset. Each time we bring on a new employee for us. It's like an opportunity to have. a fresh eyes on how we're doing things and say, hey, just because we're doing it, sorry, just because we're doing it 1 way doesn't mean we can't do it another going forward because there's always better ways to do something.

Derek:

Yeah. Yeah. Completely agreed. Amazing. I appreciate that. thank you for sharing that. And, we look forward to hearing more about that. And, if you don't mind, we have five questions, five quick questions that we ask every one of our, guests. And they're meant to be answered in 30 seconds or less. So if you're ready, we'll just rapidly get them to you. Are you ready to go? Let's go for it. All right. Number one, name, any resource, including book podcast or anything else that was, or is essential in your journey to pursuing your own freedom. Yeah, I would,

Gary:

I'm going to be a little generic here, but, it was just joining, a real estate group and there's lots of different groups out there. So join one of those groups because that was the biggest rocket fuel. I didn't even, I didn't even learn much except from like teaming up with other people, but that was

Derek:

huge. Amazing. Yeah, very good. It's all about the network. Number two, if you woke up and your business was gone and you had only 500, a laptop, a place to live and some food, what would you do first to start rebuilding?

Gary:

Reach out to my network. Certainly I've got some skill sets and one of them has been my network. So letting everyone know Hey, I'm looking for work. Does anyone know where anything that is huge? Because It's just, you know, just having that in the back of their mind and having that conversation with someone else that can help get me going.

Derek:

Yeah. Love it. Great. Network is always a good answer. I love it. Number three, what does your self reflection and goal setting practice look like if you have one? Yeah.

Gary:

Certainly I want to understand what I did, right. What I did wrong. You know, cause even though we've been very successful, there's plenty of times where we've taken it on the chin, you know, that's part of investing in real estate. That's part of asset management. And so trying to look at, okay, what could I have done better and taking responsibility? even, you know, and it might take me a little bit to get there to take that responsibility. But at the end of the day, you know, I've got to look at what I could have done better. Okay.

Derek:

Very well said number four. What are the core work habits that you attribute mostly to your success? That's inherent in your personality.

Gary:

Persistence, continuous learning and, I guess those, those two persistence and never stop learning

Derek:

I think they are, one in the same. So it's all about that. I love it though. That's good stuff. Number five, what tool or process has become one of your most important time, money, or energy saving ninja magic tricks that you use every day?

Gary:

It's a very easy one. My calendar, just putting things in my calendar. And so whether it's, planning to go on vacation or planning to have a meeting or planning to get this done, having everything on my counter means it's there in front of me to get it done. So that, that's everything for me.

Derek:

I love it. There's a, there was a saying that said that if it's not in your calendar, it's not serious. You're not serious about it. You need a coach. You need, you need it in your calendar, right? For anything that you seriously want to start pursuing. So I think that's amazing. You use Google calendar, right? Or Outlook.

Gary:

Yeah. I was using Outlook for a while that kind of crashed on me. We've been, I've been using the Google calendar now. yeah, either one is great tools.

Derek:

That's great. That's great. Awesome. Well, Gary, I really had an awesome time having you on, and I know that your time is valuable here and precious. So I just want to thank you for coming on the show, but before you go, why don't you tell a little bit. About where people can find you and what you have going on. I'm just going to give you an open mic right now to talk to all of the audience out there. Absolutely.

Gary:

You can get ahead of our website, break of day capital. com. We have a live deal right now, a five or six C deal. We have a fund, that we're raising for, we have a lot of, Passive investor resources there. You can also find our social media links. We're on, LinkedIn, Instagram, Facebook, podcast, real estate investor podcast. So those are the best ways to reach out and connect

Derek:

with us. Yeah. Also, don't forget to pick up the book best in class. Please do that. It's everywhere. It's on Amazon. I think you can even pick it up in bookstores. Right, Gary? I think you can get hardcover.

Gary:

I haven't gone to a bookstore in forever, so I don't know, but I definitely Amazon

Derek:

tell you about the state of the industry, right? That's crazy. Anyway, listeners, I want to thank you guys for listening all the way to the end. Thank you guys so much. Please, wherever you're listening or watching this, please give us a thumbs up a like comment, subscribe, do anything that you can to interact with us. Because if you do that, we'll be able to appease the algorithm gods and get more and more people to listen just like you to the podcast. And in turn, we'll also be able to bring on incredible people, more incredible people like Gary, to share their wisdom with you to continue adding value. So once again, Gary, thank you so much for coming on the show. I really appreciate it. Thank you, Derek. All right. Have a great one guys. We'll see you next week. Yeah. Yeah. Okay. Mhm.