Category: Jewels of Wisdom Newsletter

Why do Some Partnerships Fail?

In the mid 1980’s, when I was a kid growing up, my dad had an electrical contracting business. He also collected a few rentals. All of this was done between 4 partners. For a little while, things were good. We moved to a bigger house in a better school system. Christmas one year was overflowing for us 4 siblings. In the early to mid 1990’s the business failed, the rental houses were gone and times got tough.

Observing my dad’s actions & thoughts through the next 20 years allowed me to form an effective approach & mindset around partnerships. I’ve developed 3 rules which I bring to every partnership and in return, ask my partners to bring the same:

1. Produce MORE than Your Share – My goal is to bring more to the table than my partner is bringing. And when she does the same, we are always both satisfied, or maybe even a little bit in each other’s debt. It is almost a healthy & fun competition where the partnership gets better over time as a result.
2. Know & Grow Your Value to the Partnership – When I came to real estate broke & nearly bankrupt, I noticed that people would take my calls if I had a deal on the table to discuss. If I just called with ideas-asking about their buy box-trying to schedule a lunch to simply waste their time-the calls stopped answering. The lesson? DAN BRESLIN Would be THE BIGGEST SOURCE of profitable real estate deals in the world. This was the VALUE I recognized and still operate on today.
3. Good Partnerships Create Aligned Interests. When you & your partners interests are aligned, everyone feels properly incentivized to bring their best effort & generate the highest results. At Diamond Equity there is no “commission cap” because everyone in a Deal Making Role is paid a percentage. Doesn’t matter whether the deal nets a profit of $20,000 – $200,000 – or even $500,000 or more. The percentages remain the same.

Often, I see new investors form partnerships without understanding these rules going in. Two inexperienced people partner to go figure out the business. Often, one of those partners pours much more into the business than the other and eventually they go their separate ways.

Here’s how you setup your partnership to win:

1. Know the Value that you bring to the table
2. Define the Value that you expect your partner(s) to bring to the table
3. Align the profit share according to those values each is bringing

Once this is setup, everyone then does their best to outperform their original value. Assuming you’ve chosen a good business idea and the market agrees, this effort & value compounds over time to produce that income you set out for in the beginning.

This is how we operate here at Diamond Equity. We are all striving to deliver more than anyone is expecting. We’ve been blessed as a result – now operating since 2006 & now have more than 25 Acquisition Managers throughout the country buying & selling houses, commercial & industrial property, & land.

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The Type of Business We Buy

We are interested in buying a business with $2-$5 million in net profit per year. The ideal business already has a management team and sales team/sales system in place. Most importantly, this business would be able to grow with additional high quality lead generation-which is our value-add. If you know of a business like this which might be available for sale, please email me the details.

How to NOT Lose Money in a Buyer’s Market

Flipping houses is a strong business model in a Buyer’s Market. The real estate market is slow moving. If prices decline, it is usually driven by lower prices on dated houses & investor product. Renovated houses are a desirable product that will hold it’s value long enough for you to exit – and capture your profit.

In a Buyer’s Market, there are always owner occupant buyers looking for a place to call home. Consider, if you were the retail, owner occupant buyer, would you rather:

• Buy a tastefully designed, fully renovated house? 
• Or Buy something dated which you have to renovate over time? (these dated houses have recently (2020-2024) sold for prices equivalent to ARV minus repairs. This trend is reversing now-with dated product beginning to see more discounting in price. These houses are less desirable and in higher supply).

A renovated home is a more desirable product EVEN IN A BUYER’S MARKET.

Here are 3 Keys to Avoiding Risk While Flipping in a Buyer’s Market:

1. Buy Fast – View properties & make offers quickly. Sellers & brokers can feel the lower activity in showings/offers, especially compared to 2021 & 2022. They’re willingness to accept the quickly presented, quickly closing offer is MUCH HIGHER than in years past. Closing quickly allows you to get your deal moving quicker, whenever possible. Don’t waste days in DD and simply waiting for closing because the contract says so. Time is the enemy in a Buyer’s Market for any Fix & Flip Investors.
2. Redevelop Fast – Plan your renovation while under contract. Execute that renovation as quickly as possible. It is always to goal, but those who can shave a few days, weeks, or even months off of construction time will win. In a Seller’s market, slow moving flippers often make MORE money as the market prices increase. In a Buyer’s Market, the risk is the opposite. Longer construction may mean selling below your expected exit.
3. Sell & Settle Fast – In a Buyer’s Market, prioritize SPEED of exit OVER maximizing every penny of profit. Pricing correctly is key here. A few years ago the formula for pricing was asking more than any sold sale-and getting it! In a Buyer’s Market it is often better to price right in line with the market, or, dare I say, even just a hair BELOW market. Better to sell in 30 days or less than have a 6 month marketing cycle with multiple price drops-all while your carrying costs are eating your profit.

To summarize, IT IS ALL ABOUT SPEED in a Buyers Market. GO FAST to avoid risk!!

Stocks -vs- Real Estate Investing

For most of my RE career, I’ve been a “Real Estate is the only way to wealth” kind of guy. 90% of my net worth is invested in real estate assets & partnerships. Great vehicle. However, more recently, I’m also intentionally developing my skill in investing in the stock market.

I’m currently listening to Buffett & Munger, Unscripted, a book of Charlie Munger & Warren Buffett’s discussions over the past 50 years which took place at their annual shareholder event. These discussions are organized by topic-and you can use this audiobook to condition your mind into a more disciplined investor -yes, in stocks, but also you can “translate” the thinking into real estate investing.

The Most Valuable Form of Compounding (it’s NOT interest…)

I was surprised to hear Charlie describe the compounding of knowledge as more important than the financial compounding of an investment. Sounds a bit like: “How much better to get wisdom than gold! And to get understanding is to be chosen above silver.” (Proverbs 16:16)

Charlie said, “Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Step by step you get ahead, but not necessarily in fast spurts. But you build discipline by preparing for fast spurts Slug it out one inch at a time, day by day, and at the end of the day – if you live long enough – most people get what they deserve.”

I’ve experienced this in my own life. All of these Jewels of Wisdom over time, discovered with great excitement along the way, have enabled the life I live today. This continuous improvement over time, or Kaizen, is the most important factor in long term wealth. A few books I recommend everyone on my team read can be found here.

Hold, Don’t Trade – Stocks & Real Estate

The stock market’s biggest challenge for individual investors? The sheer ease of buying and selling shares. We’ve all been there: seeing a stock dip and, in a moment of panic, hitting that “sell” button to stop the mental anguish of a “losing” position. Yet, history shows that holding for 5 to 10 years often nets those same sellers 2-3 times their initial investment.

Real Estate investing provides an automatic hedge to impulse selling because of the lengthy timeline to exit & receive your cash. List the property, wait for a buyer, go through inspections & mortgage approval, and maybe, 60-90 days later, you receive your cash. It is precisely this “forced hold” period & delayed gratification (getting the $) which has allowed me to hold properties 5 years or more-and realize the doubling or tripling of my money.

Only in the past 6 months have I personally been successful in the stock market by resisting the impulse to sell when I was down 10% or more. Now, these positions are back in the profit-some as much as 45%-in LESS THAN 6 MONTHS. The one thing I did right here is NOT SELL. Charlie calls this, “sit on your ass investing.”

Real estate naturally embodies this principle, making frequent or easy selling impractical. This eliminates a significant profit killer: selling too soon. It’s precisely why real estate remains my favorite investment and my largest long-term allocation. It always will be.

High School Drop Out Now Owns 1.5M Sq. Ft of Commercial Real Estate

I’m here in Las Vegas today at the Diamond Inner Circle commercial real estate event and hanging out with my friend & business partner Jarred Elmar. Through The Geneva Group, the commercial real estate investment firm he founded, he’s accumulated more than 1.5 million feet of commercial real estate. He’s also averaged over 30% IRR to his investors on deals exited.

He just released his life story, Built from Nothing, detailing his journey to the present day. If you do audible, he reads it himself-which are my personal favorite audiobooks. If you read it & love it, give him a review on Amazon. While it’s not a “how-to” commercial real estate book, there is great value in the mindset necessary to go from broke to wealthy. I recommend reading or listening.

My favorite line in the book: “N.O. stands for NOT OVER”

This useful belief leads to The Best Deal Possible. However, you must be persistent. This belief is powerful in sales and in successful Cold Calling, which Jarred has done to build his porfolio. I’ve also generated 8 figure profits from cold calls.

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More than $10M in Profit from a Cold Call

Back in 2006 one of my mentors told me to cold call houses listed for rent in the local newspaper. The goal was to find that landlord who was more interested in selling than re-renting and buy their house. Only one person answered, Craig, and he had zero interest in selling his house. I believe he still has that house in his portfolio today, almost 19 years later. Regardless, Craig changed my life.

They Assumed I was a Player!

Instead of selling me his rental property, Craig invited me to a local real estate networking event. I was 26 years old and had to get a ride from my dad because I couldn’t afford a car. However, when Craig introduced me to the big players in that room, they paid attention and assumed that I, too, must be a player. People too ME seriously. Thank God they didn’t see me getting dropped off by my pop!

How I Pissed Off Craig

Craig & I did several deals that year. Craig sent one deal which my dad & I considered, but it had water damage in the enclosed back porch. My dad tried inspecting it by pulling on the wet section of the wall-creating noticeable damage to the house. We passed on that deal. Soon, I received a call from Craig saying, “What the hell did you do to that back porch?? It looks like you dug a frigging mine in the wall!!?” He was not happy with us…

Regaining Rapport

Proverbs 21.14 says, “A secret gift calms anger”. So my dad & I constructed a “miner’s cap” to present to Craig at the next real estate event. Honestly, I felt a little foolish bringing this hard hat with a light into the event to give to Craig, but it did the trick. Last week, while in Philly for my daughter’s graduation, I used Craig’s office to run company meetings and noticed that Miner’s Cap from 2006 still displayed in his office. That gift did the trick, huh?

$10M+ in Profit, from a Cold Call

Post miner’s cap, Craig & I flipped dozens of houses in an informal partnership. We went on to formalize our partnership in Diamond Equity sometime around 2017 and went on to flip several hundred houses since. That $10.529M in profit? That’s just the last 2 years – the actual total is significantly higher than that. Craig has been a friend, mentor, private lender, & great business partner since 2006. All from a single cold call. Thank you Craig!

Are You Capable of Cold Calling to Generate Leads at a High Level?

I’d consider high level to be someone earning $200,000 per year, or more. Right now we have 26 deal makers throughout our 3 offices and buy & sell houses nationwide. We also have custom AI systems which select, in real time, the most motivated property owners throughout the U.S.

If you are a cold calling monster, I have a position that can generate $200,000 or more, per year, just sitting at a computer cold calling to generate leads to disburse across our nationwide team. You don’t have to make any offers, you don’t have to negotiate, you don’t have to run rehabs or put any cash into any of the deals. You simply generate leads & set appointments. If this is you, please reply to me directly with details on your past cold call experience.

It would be helpful to be in either Chicago, Atlanta, or Philadelphia, but I’d consider a fully remote situation for a cold call killer. You would work directly with me on this endeavor. Why don’t you & I close a few hundred deals together too?

How to Find Off Market Industrial Deals & Multiply their Value

Industrial HQ Bootcamp Jun 21-22 in Chicago

My buddy Saul is hosting an exclusive 2 day bootcamp in Chicago where he will share, in detail, how he built a $100M portfolio.

This event is perfect for experienced industrial operators or ambitious guys and gals (aka killers) looking to become elite players in real estate—specifically those working on acquisitions of industrial deals where we can invest.

Details & Application Here

Full disclosure, I am not affiliated with the event and am not earning any commission if you attend. Saul is a friend and mentor who loves building people up. I am sharing this as a favor to you-to make the introduction-if you have a burning desire to succeed in Industrial Real Estate.

I will be in attendance-mostly because I’m always looking to meet the best Commercial Real Estate Operators with whom I can invest my capital. Meeting operators in person is my preferred method of choosing passive investments. If Saul approves, perhaps I’ll see you there!

What is a “Killer”?

A killer is a salesperson I want on my team. They get shit done, close more deals, and outperform the average by 3-5 times. On Diamond Equity’s team, a killer earns $250K+ per year. Details on a “killer”: (to join: careers.diamondequity.com)

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How to Find Off Market Industrial Deals & Multiply their Value

This week I had lunch with my friend Saul Z. You may recognize Saul from the REI Diamonds podcast we created last year on how he’s driving value of $10M or more per deal. Saul also publishes the Value Builder newsletter each week, sharing strategies for creating & cashing out millions of dollars in value in industrial real estate. He does this through Off Market Deals & Driving High Leasing Velocity.

Industrial HQ Bootcamp Jun 21-22 in Chicago

Saul is hosting an exclusive 2 day bootcamp in Chicago where he will share, in detail, how he built a $100M portfolio.

Saul’s goal is to meet a few exceptional entrepreneurs (aka killers), who he can elevate and partner with long-term—coaching, underwriting, closing off and providing capital industrial deals using everything in his toolbox, including his new Industrial IQ software, built for small bay industrial acquisitions.

Saul will go deeper than spreadsheets and tactics. He’ll break down who you need to become to be a top tier real estate pro—the mindset, the discipline, the habits, the goals, the drive, the energy, the oomph. The whole enchilada. The stuff you can’t fake—and sure as hell can’t fit in a spreadsheet.

This event is perfect for experienced industrial operators or ambitious guys and gals (aka killers) looking to become elite players in real estate—specifically those working on acquisitions of industrial deals where we can invest.

Details & Application Here

Full disclosure, I am not affiliated with the event and am not earning any commission if you attend. Saul is a friend and mentor who loves building people up. I am sharing this as a favor to you-to make the introduction-if you have a burning desire to succeed in Industrial Real Estate.

I will be in attendance-mostly because I’m always looking to meet the best Commercial Real Estate Operators with whom I can invest my capital. Meeting operators in person is my preferred method of choosing passive investments. If Saul approves, perhaps I’ll see you there!

Case Study 90,000 Sq. Ft. Industrial – Office in Atlanta, GA MSA

All week long we’ve been dealing with Operating Agreement Details, waterfall profit distribution discussions, and sending financial docs over to the Life Insurance Company doing our loan. This will slow down once we close DD and simply await the closing. Here are the Details:

• 90,000 sq. ft. (actually a bit larger)
• 8.7% cap rate on current income
• National & Regional Tenants with 3+ yrs on Lease
• 10% Vacancy – to add to marginal value
• $17,000,000 purchase price
• $8,100,000 Capital Raise projecting 8% distributions beginning Day 31 (fully subscribed)

Why are We Buying this Deal?

This deal is projecting an 8-9% yield to Limited Partners paid monthly, beginning on day 31. If you’ve ever invested in syndications, you know this is special. It is very rare that distributions begin immediately. Normally they begin in the 1-3 year range-after a value add plan has been executed. This deal is special.

This deal is located in the Atlanta MSA, in one of the Northern suburbs. An 8.7% cap rate is a solid deal in a market like this. But, if this deal is so good:

Why the Seller is Selling?

This deal is 3 buildings, each about 30,000 sq. ft. One of these buildings is office space. The tenant was just acquired by a national company and resigned a 3 year lease. The risk is that the tenant leaves at the end of Year 3 when the National decides the location is redundant. 30,000 sq. ft. of Office Vacancy is the risk in this deal.

The Value Add – Redevelop the Office

If the office tenant leaves, we will redevelop the office building into 3 spaces of Industrial Small Bay-a red hot asset class right now. This deal only works because above the drop ceilings in the office building there is plenty of height to reconfigure the use. However, this is not cheap. A redevelopment of this size may run $500,000 or more. We’ve raised this capital up front-so Limited Partners will not receive a capital call in Year 3 if the tenant vacates.

Delusional Optimism – The Home Run Potential 

If the office tenant leaves, the distributions will slow down as the space is vacant & during the time of the redevelopment project. It might be a tough year or so while that occurs.

However, if the office tenant stays, and we either give NO TI money, or even a few hundred thousand dollars, this deal becomes a home run. We have already budgeted for dealing with either of these scenarios going into the deal.

I wrote this article on how Delusional Optimism plays into my decision on whether or not to do a deal.

The Office Building

How to Invest Alongside Diamond Equity

Here at Diamond Equity, we have two main types of investments:

1. Syndication Deals: 5-10 year hold periods. 18%-25% IRR
2. Private Mortgage Deals: 3-12 Month hold. 2 Points & 10% Interest.

Most of these deals mentioned above are funded through a few phone calls & texts without ever being sent out to this email list (like today’s featured Atlanta Industrial – Office deal – $8.1M fully subscribed).

If you want to be added to my personal short list to place capital in our deals, reply to this email with the estimated amount to deploy, your cell number, & two times & dates that work this coming week for a quick phone call.

On the other hand, if you prefer to just see the investment opportunities which make it to the email list, you can sign up here.

“What is Your Most Valuable Skill?”

I asked a successful real estate developer this question over a lunch early in my career. He sat back & thought a moment before answering with one word: “Vision.”

What is a Developer’s Vision?

I’d define a Developer’s Vision is seeing something that can be done with a property that no one else believes is possible within the confines of maintaining a profit. Often, there is additional investment to create a superior project to anything found in comparable sales-with the faith that your project will command a premium.

Developer’s Vision in House Flipping

House flippers with Developer’s Vision often buy houses from us in rough condition and are much more creative in their construction phase than I would imagine myself. Small one story house receives a 2nd story addition. The façade is transformed by adding a larger porch or reconfigured entry way. Both require additional investment compared to a standard renovation project where no major alterations are made.

Note that Developer’s Vision is different than simply fixing up a house and selling it. If you look at comparable sales and match the renovation to what the market has already accepted, this is not really a visionary activity. It may be the safest route to a profit, but no new, grand “Vision” was executed.

Executing a Developer’s Vision is risky because there are no comps proving the value. You build a 2nd story addition and create a 4,200 sq. ft. house in a highly rated school district where no other sold homes exist with more than the 2,100 sq. ft. home you modified within a half mile radius to “prove” the market’s willingness to accept such a home. Risky.

However, this same inability to “prove” value offers the opportunity to price much higher than you could if there were already another property just like it. This is where Developer’s Vision pays off big-assuming you’re right and the market agreed. This is how new price records can be achieved.

Here’s an example where a small additional investment, adding a small porch and “address shutter” feature transformed the curb appeal:

The interior of this home was also impeccably designed, and I’d say with optimal Developer’s Vision. (Developer credit RESolutions Team, LLC)  Photos

Managing the Risk -vs-  Reward

In conclusion, for anyone reading who has limited experience in flipping houses, I’d suggest ALWAYS matching the renovation quality found in nearby comparable sales. You might implement Developer’s Vision at a small scale, as in the front porch example above to test your design skill. Before executing a larger Developer’s Vision, such as a large addition or any project exceeding $10,000, I’d plan to have at least 20 successful projects under my belt.

My Greatest Loss

One of my first memories in life was my greatest loss. This happened somewhere around 2 or 3 years old. My favorite book at that age was The Little Engine that Could. I must have brought that book everywhere with me-so it came to pre-school on that fateful day.

Mom picked me up but placed the book on roof of the car-then drove off. The book disappeared and I was distraught. We looked around everywhere back then, but couldn’t find a replacement copy. I don’t remember the details of the event or the time period, but I still feel the sense of great loss. That feeling of loss exceeds any of the monetary losses I’ve experienced (some of which exceed 6 figures).

Alas! A Lifelong Win!

“I think I can-I think I can-I think I can-I think I can-I think I can-I think I can-I think I can-I think I can-I think I can.” This is all I remembered from The Little Engine that Could. What a fantastically strong belief system to install in the mind of a 3 year old! Most of my life, this mantra has applied: “I think I can!”

Faced with any challenge, “I think I can!” Considering executing that first fix & flip, “I think I can!” Build a $15M development, “I think I can!” Hoping to win that next deal, “I think I can!” Once any challenge has been met, this becomes, “I know I can, because I’ve done it before.”

(Aside, as I researched an wrote this, I am now realizing my mom might has simply gotten rid of the book to avoid my likely endless requests for her to read it to me… As an adult, I’d completely understand this now if that was the case. You can see why if you read it yourself.)

I Think I Can – MAKE A DEAL!!

Here’s an example of how this created the life I live now. I am a Deal Maker. Any deal begins with: “I think I can win this deal,” and therefore I make an offer. If you don’t believe you have a shot at winning the deal, you’ll never make the offer.

Further down the track on Deal Making is your follow up. Again, “I think I can win this deal,” and therefore, I follow up. If you don’t believe you have a shot at winning the deal, you’ll never follow up. In Diamond Equity’s experience, about 45% of deals occur 30 – 1,819 days after the offer is made. That is a long, strategic follow up cycle requiring a strong belief system to stay the course.

Next time you consider a deal, remember, “I think I CAN win this deal” and MAKE THE OFFER! And when the offer isn’t immediately accepted (which is 99% of the deals that get done..), remember to follow up diligently and earn that deal!

How to Retire with $1 Million & NEVER Spend the Principle

A few months back I wrote an article on retiring with $3.2 Million. That article made some assumptions on high risk, high reward investments. There is a place for that all-in strategy mapped out in that article for some investors-probably earlier in their investing career. If you’re on the other side of your investing career, perhaps within 5 years of retiring, or already retired, the types of deals mentioned in that article (distributions don’t begin for 2-3 years) may not provide for your goals.

How I Envision a Perfect Retirement – from a Financial Perspective

The goal in a perfect retirement is a steady income which covers all expenses and NEVER touching the principle. For me, there seems some security in reaching retirement under these minimum assumptions:

1. Paid Off Housing
2. $80,000 income generated from $1 Million invested at 8% per annum receiving monthly or quarterly distributions at exactly that amount, or more.

I’ve chosen $1 million as the example here, but depending on earning power, current financial position and lifestyle, this number can be cut in half, doubled, etc and the plan still works. $80,000 per year plus social security should cover the property taxes on that Paid Off Housing and allow for all living expenses plus some travel, leisure, birthday gifts to grandkids, etc

How do You Receive 8% Returns without Losing Principle

Many reading this article know how to obtain 10% returns & even a few points by making short term Private Mortgage Investments to fund Diamond Equity’s real estate deals. Maybe you even have a few more fix & flip investors to whom you loan money. If you’ve made loans like this you know the challenge is keeping that money working for 12 months straight.

For example, you loan $200K on a deal this month, it pays off a few months later at $210K. However, the next available deal is only $140K. So $70K sits around waiting for a $70K deal which comes 18 months later.  Right now, many investors I talk with have a certain amount available at any given time and they’d love to be able to place that money and simply keep receiving returns. Perhaps an even 8% return is earned when you do the final calculations over the course of a year.

The Reason I’m Writing this Article

I have two friends who run debt funds which pay 8% preferred interest monthly. Both of their debt funds exceed $35 million in size. They borrow at 8% and then reinvest in large hard money loans that pay 10-15% depending on the risk. They shoulder the burden of losses and also the burden of paying the 8% even when the money is idle. Their investors love it because of the regular distributions and the lack of “down time” while their money sits idle. They live on that 8% return.

Finding an 8% even paying, passive return anywhere else in the market is very rare.

I am considering creating a fund of this nature myself to streamline the returns for our investors. I’ve written this article as a public method of thinking through the idea. Perhaps you have some feedback on whether something like this would be attractive?

No promises on whether an “8% Diamond Equity Debt Fund” will be launched, but in the interim, I am willing to pay 10% & 2 points on our short term loans. You can get detailed info on how those loans work and receiving the next Private Mortgage Investment Opportunity at www.FundRehabDeals.com