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WS1299: Raising Capital the E.A.S.Y. Way | Marcin Drozdz

Struggling to raise money for your deals? At a loss for words when pitching to investors? It’s true that raising capital doesn’t come easy. But whether you’re raising six figures for your single-family deal or eight figures for your multifamily apartment investment, you will need to have conversations with potential investors in order to gain their trust and confidence so that they will entrust their money to you. But, is there a way to make capital-raising easier?

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Our guest today, Marcin Drozdz, managing partner at M1 Real Capital has devised a systematic way to raise capital from private investors. He created the E.A.S.Y. system, a four-part method of approaching potential investors to raise capital for your deals. He goes through each of the four components of the E.A.S.Y. system and teaches how they can be applied. He also talked about his own journey to a successful career in capital raising and investor relations. Click now and learn insider secrets about communicating with potential investors and raising money.

Key Points From This Episode:   

  • Marcin’s real estate background starting in private equity to multifamily investing and mentoring specializing in capital raising.
  • Marcin introduces the E.A.S.Y. system, a four-part approach to raising capital
  • Marcin explains each of the four components of the E.A.S.Y. system.
  • Why it is important to talk to potential investors in relatable terms using simple language.
  • How Marcin carved his path toward a successful career in capital and investor acquisitions.
  • The biggest challenge in Marcian’s business over the last year.
  • Current challenges in deal flow and capital raising
  • Marcin’s predictions on the real estate market and how his company prepares for a downturn. 
  • His source of news investors and the metrics that he tracks.
  • Why learning how to read financial statements is crucial to business success.
  • The daily habits that keep Marcin on track and the main thing that contributed to his success.
  • Marcin’s way of giving back and his contact details.

Tweet This!

“Demonstrating competence creates abundance.” [14:44]

“If you have a buy and hold mentality, refi till you die.” [22:12]

“Men lie, women lie, numbers don’t lie.” [24:57]

“Being a great asset manager and a custodian of somebody else’s capital is understanding how to read financial statements.” [25:16]

“Acknowledge and try to celebrate the small wins along the way.” [30:12]

Links Mentioned in Today’s Episode:

Marcin Drozdz website

Send email to Marcin Drozdz

M1 Real Capital website

Book: “The Obstacle Is the Way: The Timeless Art of Turning Trials into Triumph” by Ryan Holiday

Udemy Online Courses

About Marcin Drozd

Marcin started investing in real estate in 2006 and has since sourced nine figures in private capital that have helped acquire over 1,500 units across the US. On the tail end of the 2008 crash, Marcin and his team raised an 8-figure fund and invested in commercial properties in Arizona. 

 

Today, Marcin is the Managing Partner of M1 Real Capital where he and his team focus on acquiring value-add multifamily properties throughout the southeast. When he’s not on the lookout for opportunities, Marcin is teaching up-and-coming real estate investors how to raise capital and scale their real estate business.

Full Transcript

EPISODE 1299

[INTRODUCTION]

0:00:00.0 

Marcin Drozdz (MD):  A lot of real estate investors-syndicators have a tough time demonstrating that what they’re doing is valuable because they talk in terms of, maybe sounds fancy and smart, but 9 out of 10 people are like – what does that mean? In terms of exclusivity, don’t talk to me about going in cap rates, don’t talk to me about price per square foot. Talk to me in layman’s terms. Tell me that this building is a million dollars. We bought this under a million appraised value. Tell me that there’s $300 per month in rent. Tell me that it’s on the corner of Main and Main where there are 10,000 cars that drive by every day. Tell me it’s across the street from the VA or the hospital. Give me things that if I’m not a real estate person, I can go – you know what, that sounds interesting. That sounds valuable.

0:00:50.5 

Whitney Sewell (WS): Raising money is difficult. It’s going to take you a lot of time and effort. No doubt about it. I hear people often who try and fail, unfortunately. We try to help them try to talk through what they’ve done and where they’ve come, and the effort they’re putting in, and it’s not an easy process. But our guest today has a system, the E.A.S.Y. System to raise capital for your real estate deals. He’s going to lay it out very simply. I loved how our guest laid out his process for raising money. He’s going to give you these four things, and we’re going to talk about them in detail. Each of these pieces that if you don’t have, you’re going to struggle to raise money. You’re going to struggle speaking to investors. Our guest today is Marcin Drozdz. He’s a managing partner of M1 Real Capital where he and his team focused on acquiring value-add multifamily properties throughout the southeast. Over the past 16 years, he has helped acquire over 1500 units across the US and established himself as a go-to in the world of capital raising and real estate acquisitions. I enjoyed this interview with Mark, and he lays out some great steps for you,  somebody that’s active in this space, to start today and gain success in raising money and speaking with investors for your deals. I know you’re going to learn a lot.

[INTERVIEW] 

0:02:04.8 

WS: Marcin, welcome to the show. Honored to have you on. Just knowing a little bit about your background, you are going to be able to help our listeners in a big way. Because they were trying to do the same thing you have done. So, I’m looking forward to hearing more about you. Give the listeners a little more about your background because I think it’s going to be helpful as we hear about your experience and your expertise and what we’re going to talk about today.

0:02:28.1 

MD: Sure. First of all, Whitney, thanks for having me. I took some time, I looked through your podcast. You’ve been doing this for quite a while. It’s a lot of commitment on your part. What are you on? 1200 or 1300 episodes? Incredible. Yeah. So, similar to yourself, I’ve been at this real estate thing for quite a while. I started out in private equity about, I think 14, 15 years ago. I’ve been in real estate for about 16 years. And when I started in the business in a big way, it was large acquisitions, multi-family, a couple of hundred doors at a time, retirement community units, 55 plus. We were buying all throughout Arizona. If you remember back in 2010-2011, you can give these properties away. Well, we were quite bullish on the asset class, and it certainly did make a lot of sense then. It makes a lot of sense now. Over that period of time, I’ve had a really good opportunity to work with some really smart people and see how things are done at a much higher level than what I was used to when I was just finding my little multifamily properties here and there, and it’s been a lot of fun.

0:03:31.8 

MD: We started M1 Real Capital quite a while ago. I’ve put together a few different funds. We’ve done search funds where you put together the equity then you find assets. We’ve done special purpose entities where you raised specifically for an asset and kind of a mix of the two. Yes, it’s been a lot of fun. And when Covid first hit, like so many people, I was stuck at home and I had a bunch of my buddies pepper me with questions. How to do this? How to do this? And finally, my wife pleaded with me, look, you gotta do something to keep yourself busy. So, I started teaching and educating, and here we are.

0:04:04.0 

WS: Awesome. Marcin, I know you have been very successful working with investors and raising money. Obviously, on the show, we talk about that a lot. Because it’s something that if you’re going to buy a $10 million apartment building or $50 million or for most people, a one million dollar apartment building, you’re going to have to raise some money. You’re going to have to have some investors who want to partner with you or have trust in you. And that is a process that I think a lot of people take for granted. They think it’s going to be this easy thing. But you have created an easy system to help us do this, to help the listeners think through how they could do this as well. Let’s go dive in ’cause I know you’re really good at this and you’ve created a great system around that.

0:04:43.5 

MD: Thank you for that. Creating the EASY system was not easy actually. How do you systemize a lifetime of experience in a way that’s clear and concise? So EASY is an acronym for Exclusive, Abundance, Scarce, and Your allocation. So, the E, the Exclusive is the opportunity itself. So, a lot of real estate investors-syndicators have a tough time demonstrating that what they’re doing is valuable because they talk in terms, that may be sound fancy and smart, but 9 out of 10 people are like – what does that mean? In terms of exclusivity, don’t talk to me about going-in cap rates, don’t talk to me about price per square foot. Talk to me in layman’s terms. Tell me that this building is a million dollars. We bought this under a million appraised value. Tell me that there’s $300 per month in rent. Tell me that it’s on the corner of Main and Main where there are 10,000 cars that drive by every day. Tell me it’s across the street from the VA or the hospital. Give me things that if I’m not a real estate person, I can go – you know what, that sounds interesting. That sounds valuable. And you have to have three or four points for your deal buttoned down so that you’re crystal clear on why that opportunity is exclusive and why what you’re doing is valuable. So, that’s the E. 

A for abundance is making sure you have an abundance of people to talk to. So, you never want to give an investor the impression that you’re calling them and saying as if you’re calling them and asking for their blessing to do the deal, as if they’re the one who is going to decide whether this happens or not. And there’s a fine line here because you don’t want to come across as arrogant, but at the same time, you want to let them know, hey, here’s this tremendous opportunity. I’ve got 10, 20, 50 people, whatever it is, that ask me to get back to them. I thought of you on this because I thought this might be a good fit for what you told me you were looking for. So, there’s a clear insinuation that, hey, you thought of them, but ultimately this deal isn’t reliant on them to bless it for you. As if you need their approval. The insinuation should be, hey, this is a great opportunity. I’m doing this anyway. Do you want to be part of it? And again, you gotta walk that line, you don’t want to come across as arrogant. But they need to understand that this is happening, do you want to be part of it? It’s really important that you communicate that clearly.

07:03 

MD: The S for scarcity is you need to create some urgency in the transaction without sounding like the high-pressure sales guy. So, with real estate, we have two ways to create scarcity, One is the timing of the transaction. This thing is closing on the 30th of the month. That is a real date that is happening. That’s one form of scarcity. The other form of scarcity is the capital itself. So, in other words, once you get your $500,000 or $5 million or whatever your amount is, it’s done, it’s done, it’s done. We’re finished. So, it’s really important that you can communicate that without sounding pushy. You can just say, “So, as I mentioned to you, there are X amount of people interested. We’re looking to raise $3 million and we are closing in the next 45 days.” 

By the way, one more thing for scarcity, for your closing date – and this is a freebie – don’t use the same date of your actual property closing as your financial closing. When you need the equity, this should not be the same day that you need to buy the property. Now, we all intuitively know this, but when you tell an investor, they ask you “When is the property closing?” Your answer should be whatever amount of days you think you need in between when the funds need to be in from when you’re actually closing because it’s important that you don’t have…when an investor hears the property closing on the 30th, they think, ‘Oh, okay, great, I can send you the money on the 29th.’ No, absolutely not. So, it’s very important that when you create that scarcity, you create the right expectations.  

08:34 

MD: And then finally you’ll go through the conversation, they’ll have some questions, they’ll talk to you about the market or something they read about in the paper, or their brother saw this, or they think this or whatever it is. Ultimately, you get to a point where you’ve exhausted a lot of the major conversation points but the opportunity to term fit, and you’ll say something like, “Look, it sounds like this may be an opportunity for you. Obviously, you’ve gotta do your due diligence, and I’ll send you all the documents and paperwork for your accountant, your lawyer, or whoever it is that you need to review. But, if everything did check out, is there an amount that you’d be looking at allocating for this?” And they’ll tell you, if they’re serious about it, they’ll be like, “Yeah, if it all checks out, I’d probably do $100,000 or $200,000 or X amount of dollars.”

0:09:18.9 

MD: And then they’ll tell you, ‘my brother’s gotta look at it, my uncle’s gotta look at it, my accountant’, whoever, and fair enough, they gotta do their due diligence. You gotta make sure they’re qualified, accredited. And whatever the rules are, you’re going to follow the rules. I get all that, but if they’re not interested, they’ll tell you, “Look, I actually, I’m just buying a cottage in the middle of selling my business”, whatever, whatever. Somebody who isn’t interested, well, it’s a polite way of them being able to say, “Actually, this isn’t a fit for me. In whatever way, they want to tell you. So again – Exclusive, Abundance, Scarcity and Your Allocation. By the way, Whitney, as you could probably tell, you could use this for real estate, you can use it for trying to get a tech company funded, whatever it is that you’re trying to do, this process will give you, at least, a starting point to move a conversation forward.

0:10:04.3 

WS: Elaborate and we’ll go through a couple of these ’cause this is great. I love how you’ve broken this down in layman’s terms, even for us. So it’s like, okay, I have created this type of offering and what I have in my deal or when I’m talking to investors –  so Exclusive. You talk to me a layman’s terms, three or four points. It’s so wise. I like “don’t even tell me about cap rates” and all these things that if you’re brand-new to passive investing, you’re going to be a runoff. “I’m already so confused.” And if I’m confused, the answer is no. So, speak a little bit about the Exclusive side of that and how you do that or how you do that in your deals?

0:10:44.5 

MD: Sure. I’ll give you an example. When Covid first hit, there were a few transactions. So, I’ll give you one from last summer ’cause it probably really accentuates the point well. We bought in Memphis, Tennessee. We bought 178 doors, and about two-thirds of the building was empty. It was a huge value add, heavy-lift rental job. And most of my investors in that particular partnership came from Canada. So, to put things in context, we bought 178 doors for under $4 million which is cheap by anyone’s standards. So, for me to demonstrate Exclusivity – I forget what it was per door, it was less than 30 a door or whatever it was, 20-something a door. It was insane.  So, I talk to my buddies up in Canada where houses are starting at a million-plus. My comment was, “How much did you spend on renovating your kitchen? We pay less than that per apartment.” You make it relatable so my pitch to my buddies or to potential investors was “we buy 178 doors for under 4 million bucks. So, you can either do that with me or you can buy 10 doors in Toronto. Which would you rather do?” 

And I’m over-simplifying. I’m grossly oversimplifying it. But it’s super relatable because yeah, you can spend $400,000 to buy 10 or 12 or 15 apartments in downtown Toronto or wherever the investor is. Compared to potentially owning 15 times the amount of properties. So, it’s a really simple conversation to have. So, that was a major point. Another point was that it was right down the street from the FedEx airport terminal at Memphis International. They employ 30,000 people. Those jobs aren’t going anywhere. FedEx spends billions of dollars ingraining themselves in the community. They’re never going anywhere. Those jobs are there. That is their head office. And the other piece was, it’s right off the Airways Boulevard which has, I think, a traffic count of 50,000 cars a day. And the final thing was, if I did want to rebuild this property today from scratch, I’d spend over $20 million plus the dirt. So, all of those things combined to somebody who’s just listening goes, “Oh, okay, rationally, I understand how you got there. That makes sense.” Obviously, they’ll have more questions but at least you have my attention.

0:13:02.0 

WS: And that comes across so much more as a way to build trust as well. I can relate to all of those things you just mentioned. Even if I’m brand new to apartments, I know you need large employers like FedEx. That makes me feel better about my investment, those things you just said, versus confusing me.

0:13:17.3 

MD: I could have said, “Hey, the going-in cap rate is 9% in the market, and we’re going to be able to bring it up to a 16% cap, and then we’re going to be able to stabilize that at six” but you and I understand what that means, but most of my buddies, even if they’ve bought and sold companies or they’re successful business people, they know their stuff. They’re not in the game that we’re in. So talk to me in a language that I understand.

0:13:42.4 

WS: What about the ‘Abundant’? How do you create that?

0:13:45.4 

MD: So, creating ‘abundance’ is a function of demonstrating value in a public setting. For example, you do this really well with your podcast. You demonstrate value, you are somebody who adds value to your network by bringing people like myself and other people on to teach your audience and your network about various parts of real estate. Other people might be able to do it through a newsletter. Some people can do it through videos, on YouTube or Instagram, or whatever it is. And for somebody who’s not generally comfortable either on video or audio, like I said, you can write articles, you can write blog posts. You can comment on other people’s posts and have an informed opinion on things. The point is creating an abundance in the investors’ face as a function of you being able to demonstrate value. This isn’t an environment of manipulation and tricking people into doing things. Look, the world is too small for that with the internet today, first and foremost. 

And secondly, people invest with people they like and trust. They think they’re competent. So, demonstrating competence creates abundance because people start to look to you. “What does Whitney think? What does Marcin think about this?” And then they start to seek you out in your opinion, and there’s value in that. Through that, when you create an abundance of people to talk to, when you do have an opportunity and you want to share it with your network, you have a much broader network with people to talk to. And that’s really important. And ultimately, when you’re dealing with investors, being able to subtly demonstrate that by mentioning it is implied that this is happening, I’m going to get this done regardless. It’s a self-filling prophecy.

0:15:22.4 

WS: When you started this business, you started raising money for your deals, how did you get in front of an abundance of people? What was your path?

0:15:30.2 

MD: Like anybody else, you’ve got to start from scratch. And when I first got into PE, it was a lot of phone calls, a lot of trying to host seminars and opportunities, and teaching people about real estate, the benefits of commercial real estate. A lot of giving. Ultimately, the first three to five years, it was a tremendous amount of giving because you’re trying to establish credibility and a track record in the marketplace. Also, it helps if you’re earlier in your career, that you hitch your wagon to somebody else that is a proven entity because I’ve had people come to me and say – Hey, I want to raise a million dollars. And I said – Great! What have you done? Well, I bought a house three years ago, and now I want to buy another one, and I want to do it with people’s money. I go – Great, but you’re going to have a tough time getting somebody who’s sophisticated to invest with you if you never had an investment property. So, if you want to learn that skillset, you’d be better off either being an LP or working as a GP in someone else’s deal and earning your stripes because you do need to build that credibility early on. I did it by working in PEI. I literally raised tens of millions of dollars for deals I had no stake in just to learn the business, to trade the craft, get the contacts and build the confidence. 

0:16:48.1 

WS: Awesome. You do have to get started somehow, right? And that credibility it is not something that comes easy and you do just have to get started in one way or another, and you gave some great options there that I’ve seen work for so many people including myself. So, Marcin, we’ll shift gears just a little bit. Tell me about the biggest challenge in your business over the last 12, or 18 months? 

0:17:09.6 

MD: So, the biggest challenge for me, I think, has been transitioning to the Zoom world. I’m accustomed to catching 50 to 75 flights a year. I’m used to getting on a plane going to meetings. And I don’t mean it as a negative challenge, it’s actually a blessing in disguise, because right now, we’re at the beach, we’re doing this podcast, and it’s the social norm to be able to connect through Zoom today. Whereas pre-Covid, we had Skype and we had to go to meetings, webinars, and all this stuff. But if I ever insinuated to one of my clients or prospects – Hey, let’s meet on whatever the Zoom equivalent was three years ago, they would have said, ‘Well, why? I don’t understand. You can come to our office, right?’ So, it’s a blessing in disguise. I had a tough time initially because I enjoy meeting people and I’m still a lot of my way to do it. But the fact that we can now do this remotely, it’s also created an opportunity for sharing more information.

0:18:09.9 

WS: What about deal flow or raising money? What’s been the most difficult recently?

0:18:14.6 

MD: Most recently, I mean, the capital-raising side has always been something that’s come naturally for us. I have people texting all the time – Hey, I just sold the company, I got this. Hey, I got that. So, that doesn’t seem to be a problem. Doing deals that I’m excited about, you need to get more creative as I’m sure you know, you know that Whitney. So, we’ve gone downstream to do things a little bit heavy or value-add now as opposed to before. We were able to do more of the light to medium reno value-add and stuff. Today, we’re doing a lot more medium to heavy down-to-the-studs value-add. And there’s more opportunity there, but it extends your cycles out a little bit further. Ultimately the returns are commensurate. I guess if I had to pick the deal flow certainly become more challenging, but at the same time, I’m finding a lot of people that maybe came into the business when it was easy, and never saw the tough part. We’re seeing a lot of those people whining right now, and that makes me very happy because that means that they were just here for a good time, not for a long time.

0:19:18.5 

WS: What about predictions that you may have for the real estate market over the next six to 12 months, and what’s changing in your business based on those things?

0:19:26.2 

MD: Well, look, I need you to understand this. There are over 300 MSAs throughout the US, so any prediction is obviously specific. It’s pretty difficult to make a broad market prediction. But broadly speaking, I follow a lot of economists and I listen to a lot of different schools of thought and things like this. Ultimately, what I see is, from an underwriting standpoint, traditionally, we would never factor in more than 1% or 2% rent growth. It was just irresponsible. Today, because inflation is running red hot at 7%, 10%, whatever numbers you believe, it doesn’t look like it’s going to be cooling off any time in the future. The only way that you can do deals today is if you believe that inflation will be persistent. Because if you believe it’ll be persistent, you have to re-look at your market rent growth. You can’t do 1%, 2%, and make deals make sense anymore. So, the hardest part for me was to overcome the limiting belief of maybe rents will grow 2%, 3%, or 4% per year on a consistent basis because of what we’re seeing in inflation. 

So, my prediction will be that inflation is going to continue for years and years and years. We haven’t seen this and the other side of the coin is you talk about the Fed raising rates. Goldman Sachs put out a study that they’re going to raise rates, I think it was 10 times over the course of 2022. Okay, well, 10 times a quarter-point is two and a half points. That sounds like a lot but it brings you back up to historic averages. So, I don’t know if it’s enough. I’m not an economist but how do you kill 10% inflation? Unless you make the cost of borrowing more expensive than what the money is being depreciated by.  I don’t see rates falling that high, so I think we’re going to have more inflation. And I can’t think of a better asset class than safe, clean, affordable rental housing. That’s where we’re getting quite heavily.

0:21:19.0 

WS: When you’re purchasing an asset right now, how do you prepare for a potential downturn? Or maybe the unexpected? Or maybe the ballers go out and there’s a water problem? There are numerous unexpected things. What are you doing in your underwriting or due diligence that’s saying we’re prepared for things that we don’t even know could happen?

0:21:39.7 

MD: I mean, first and foremost, if you’re buying assets where you have an expectation that your rents are going to increase exponentially, there are already inherent risks in the future. Today that you’re building that into your model and that is one former risk, there are two things you can do. You can control your expectations for income and really try to control your expenses as much as possible. So, looking at long-term fixed debt is really important. Even if you pay a slight premium for it, if you could lock in your debt for an extended period of time. Again, if you have a buy and hold mentality, refi till you die like Jason Hartman says, which is what we do. Then, you’re not worried about long-term debt because you’re not worried about the penalties because your plan is to hold regardless. So, that’s one major thing to do. 

The other thing, too, is – and again this can be contentious in some perspectives – I avoid the sexy markets, the Miamis, the major rent growth, exponential increase to the moon, rent prices where people are paying two, three grand a month rent. Will that continue? Maybe. But I don’t want things for sure, if I’m charging $800, $1200 bucks for a two-bed, two-bath in a market where their median income more than supports that today and into the future. Even with a modest rent increase as long as, like I said, FedEx keeps putting those planes on the runways, and as long as people are working in those warehouses with those good blue-collar jobs. To me, I feel pretty confident that those sectors are going to be much more resilient. And then when you factor in the replacement cost of everything, you can’t build the stuff that I’m buying for what I’m buying it for and renovating it for. So, even if for whatever reason somebody else wanted to compete, well, my God, you’d have to spend more than double of what I’ve spent. And yeah, you’ll have a new building, fair enough, but the tenants aren’t going to pay you double just because of brand-new counters.

0:23:42 

WS: What’s your best source for meeting new investors right now?

0:23:45 

MD: Well, so Whitney, I’ve been at this for 16 years. I hate to give you the cliche answer – referrals – but that’s really what it is. At this point in my life, I have so many people trying to work with us that I need to find good places for us to be invested first. Unfortunately, sometimes that means people go elsewhere with their money. And that’s okay too.

0:24:05.5 

WS: That’s a good place to be in. What are some of the most important metrics that you track?

0:24:09.9 

MD: In which context?

0:24:11.3 

WS: You can use that any way you want. I ask it that way on purpose. So, what’s the most important to you? It could be something personal, it could be in business as well.

0:24:19.0 

MD: My wife’s happiness.

0:24:20.8 

WS: Good answer. That’s a good answer. Okay, now, what about business or personal? 

0:24:27.9 

MD: Sure. So, that is the most important metric for anybody who’s married – happy wife, happy life. I didn’t understand that till I got married, and yes, it is the most important KPI. As far as business goes, on the real estate side, if you’re on the asset management side, any fluctuations in your major line items on the revenue side or expense side are things that you should pay attention to. So, if you have any major deviation occurring in your gross potential rent, in your operating expenses. Men lie, women lie, numbers don’t lie. And ultimately, if you’re looking at your financial statements, knowing how to read financial statements for real estate investors is probably the most understated skill set that I don’t share a lot about in many of the podcasts or platforms. Being a great asset manager and a custodian of somebody else’s capital is understanding how to read financial statements. And for me, looking at quarterly and annual statements and seeing the deviation, the percentages change in revenue or expenses, those typically uncover the story and the conversation that I need to have with my respective property manager, asset manager, or but don’t look at myself and see what we could rely on.

0:25:42.9 

WS: Great advice. Give us just quickly. If somebody’s thinking, ‘financial statements, I don’t even know where to start.’ What would you tell them to start with to better understand how to read financial statements?

0:25:53.7 

MD: The one advice I would have given myself if I was too – ’cause I didn’t finish the secondary education thing ’cause I went off to start buying buildings ’cause when I was in school, I thought I was going to be a lawyer and I didn’t relate to it. I dropped out and I started buying buildings and kind of self-taught. But the one thing I would have done differently in hindsight is, I would have taken Accounting in college or university, just to understand the difference between an income statement, a balance sheet, and a statement of cash flows. Because as a real estate investor, if you don’t understand the flow of funds on the income and expense side and assets and liabilities more than just contextually, then you’re going to have a harder time scaling a business. I had a business in my early 20s making millions of dollars in revenue but the more we sold, the more broke I was personally, and it made no sense to me. And it wasn’t how I lost a couple of million dollars personally on that business that I was like, what the hell is going on? How come as I grow this thing, I have less cash?

0:26:55.5 

MD: And it’s because, at that point, I still didn’t know how to read the financial statements. So, the starting point, honestly, go take an accounting course, just even a basic on Udemy or some of these online classes. Just take $100, 500 bucks, or whatever it is, and understand the three different statements. As a starting point, that will give you a lot of context on how things work, and you stop doing this bank account accounting, which a lot of people are guilty of doing.

0:27:23.3 

WS: Such wise advice. I would like to do that myself. It’s just taken doing it a lot to get more comfortable with that, at understanding financial statements. But I still have a long way to go. But we hire them, and build teams that can help even on that front, right? Hiring those people that have an accounting background and whatnot so that they can see things that I can’t.

0:27:40.6 

MD: Well, Whitney, that’s actually a really good point. The alternative, if you do have access to an accountant or a CFO that has the patience or if they’re working for you full-time, make sure that they take the time to walk you through the three statements and how things move through the three. So, things like understanding the impact of accelerated depreciation, amortization, all the different non-cash expenses, just understanding all that and recapture and how things were because also, you’ll learn the difference between a really good deal and a financially engineered really good looking deal which is another difference when you do a podcast on that all together as well.

0:28:23.1 

WS: We should, we should do that. No doubt about it. Unfortunately, we are running low on time right now. But I’d love to have you back, Marcin, to talk about some of those things specifically. A couple of quick questions though before we go – give us some daily habits that you are disciplined about that have helped you achieve this level of success.

0:28:40.1 

MD: I get up at 5 AM and I try to meditate every morning. I don’t do it, I try to meditate every morning, and it’s something that I’m consistently trying to get better at. But the thing I actually do is – I stretch, I do workouts. I get that out of the way first thing. For those of you who are listening, and you can’t see this, I’m a plus-sized model. I am not built to run. Fight or flight? I’m going to be the guy that fights. I’m not going to be the guy that runs. Because running is, can’t detest running more, and I do it because of that. I get it out of the way first thing. I run my two miles, four miles, five miles, whatever I feel like running that day. And I get it out of the way and I feel fantastic. And it gives me the confidence to handle anything else because at that point, everything is just easier. So, I do the thing I hate first thing in the morning. The other major habit for me is acknowledging wins. So, when I was in my 20s, even in my early 30s, I would never allow myself to stop and smell the roses, so to speak, or be happy.

0:29:41.5 

MD: I would always say, oh yeah, when we buy this building, I’ll be happy. Okay, we bought the building. Move on. Okay, next thing. Okay, and then we do that thing. Yeah, okay, great. So, I would never acknowledge the thing that just happened and what it took to get it done. I never just acknowledge that and celebrate that success. And what ended up happening in my 20s to my 30s, like literally went like this (snaps fingers). And I woke up and I’m like – Why am I feeling miserable all the time? With all this cool stuff? And it was ’cause I never take the time to acknowledge it along the way. So today, I acknowledge and try to celebrate the small wins along the way.

0:30:16.4 

WS: Very wise advice. If you could pick one thing that’s contributed to your success, what would that be?

0:30:21.1 

MD: There’s a book that I really resonate with, and I’ll share it with you. It’s called, “The Obstacle is the Way” and it’s written by a guy named Ryan Holiday. It’s rooted in a philosophy called stoicism which was really popular in the Roman Empire, and it kind of faded. Stoicism is essentially the thought process that nothing happens to you, everything happens for you. So in other words, you’re dealt a certain hand of cards, and ultimately what you do with that matters more than what you actually received. And for me, that’s been the biggest change throughout my 20s, into my 30s, and going into my 40s here. Because ultimately, life’s not fair, things happen, people cross you, things will happen, and ultimately what you do with it matters more than what happened.

0:31:08.8 

W2: I’ve not read that book yet. It’s been on my wish list for a while. I’ve heard it recommended a few times, I appreciate you sharing that. And how do you like to give back?

0:31:16.9 

MD: The inner circle that we have for the educational platform that we do with M1 inner circle is a lot of fun for me. There are some causes there for students to join but really for me, it’s just I enjoy the teaching. I enjoy the educational side. That to me is a lot of fun. Especially the students that are just having those light bulb moments. I got a text from a student literally yesterday. She said, “I’ve accomplished more in the last two weeks than I did in the last two years. Thank you.” I was like, that’s awesome. For me, that is just beautiful because that next house or next small apartment building she buys, that may be the difference between her quitting her 9 to 5 or not.

0:31:57.7 

WS: Wow. Marcin, it’s been an honor to meet you and have you on the show. You’ve shared so much with the listeners in a short period of time that I know that today they can take action on the things that you laid out and see success. You laid it out very clearly in layman’s terms and very well. I hope that that will resonate with many of them, I know I will. I hope that they’ll really apply that to their business and as they’re talking to investors and as they’re learning about these opportunities. You’ve really helped them today. Marcin, how can they get in touch with you or learn more about M1?

0:32:27.9 

MD: Sure, yeah. So,  M1RealCapital.com is the real estate side of the business. And for people that want to learn more about what we do with our buildings, you can go there. The other side of the business, if somebody’s actively building their own real estate investing portfolio, I actually have a free mini-course on the EASY system on my website at MarcinDrozdz.com.  You can put that in your show notes because of the spelling — there are a few Zs in there. They can go there. They can download the free mini-course for free at my website and yeah, we’ve got tons of resources there as well. 

[END OF INTERVIEW]

[OUTRO]

0:32:58.1 

WS: Thank you for being a loyal listener to the Real Estate Syndication Show. Please subscribe and like the show. Share it with your friends so we can help them as well. Don’t forget, go to the www.LifeBridgeCapital.com where you can sign up and start investing in real estate today, Have a blessed day!

[END]

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