Interview with David Richter
Escaping the Real Estate Rat Race with David Richter
David Richter is an active real estate investor who has been essential in closing over 850 deals over the last 7 years. These deals include wholesale, turnkey, BRRRR, owner finance, rentals, lease options, and more.
While growing and building his real estate business from 5 to 25 deals a month, he quickly realized that he was losing just as much money as he was gaining.
He used the proven Profit First method created by Mike Michalowicz, to turn his real estate investing business from a cash-eating monster into a money-making machine—and now he’s helping others do the same!
As the Founder of SimpleCFO, David shows real estate companies how to increase their business revenue, build cash reserves, and maximize profit! His goal is for his clients to gain financial clarity and to stop living from deal to deal.
In today’s conversation, you’ll learn the Profit First system that helps entrepreneurs and real estate investors scale their businesses, why surrounding yourself with the right people can supercharge your profits, and the real estate investing strategies he uses to generate long-term wealth.
Featured on This Episode: David Richter
✅ What he does: David Richter is the Founder of Simple CFO Solutions and a real estate investor who has been essential in closing over 850 deals which include wholesale, turnkey, owner finance, rentals, lease options, and any other existing exit strategy. While growing and building a real estate business from 5 deals a month to over 25 deals a month, he realized that as much money was coming in, it was going right out. With the unique opportunity of being in every seat as a real estate investor, he found a calling to the company’s finance seat to help them see where their money was really going. David has helped real estate companies turn around from going out of business to building cash reserves. He’s the author of Profit First for Real Estate Investing. His goal in life is to completely transform the Real Estate Investing industry regarding how real estate investors view their finances and – bring them true financial clarity and freedom.
💬 Words of wisdom: “I’d rather pay upfront for expert help than to pay on the back end with my time, with my effort, or my headaches.” – David Richter
🔎 Where to find David Richter: LinkedIn
Key Takeaways with David Richter
- Why do people that seek to build businesses often find themselves buying a job.
- How the Profit First mindset helped him scale his company from 5 to 30 deals a month and take it from unprofitable to building cash reserves.
- What he learned from doing over 850 real estate deals and how he uses that knowledge to help other real estate investors gain financial clarity and freedom.
- The greatest mistakes he sees entrepreneurs and investors make that prevent them from increasing profits.
- His long-term strategy for buying and selling real estate that yields him higher profits while paying fewer taxes.
- Why every business can benefit from fractional leadership. Learn how the right people can turn your 5 to 6-figure business into an 8 or 9-figure one.
- The strategy he used to go from being a railroad company worker to building his real estate investing empire and designing a dream lifestyle.
David Richter on Attracting Better Tenants with Lease Options and Pride of Ownership
David Richter Tweetables“If you have someone focused on your profit, your profit expands.” - David Richter Click To Tweet “I got to see the actual lifestyle in effect of what real estate can provide. And that’s live where you want, work where you want with whoever you want, and spend time with who you want to.” - David Richter Click To Tweet
- Simple CFO Solutions
- David Richter on LinkedIn
- Simple CFO Solutions on Facebook
- Profit First for Real Estate Investing Book
- IFM Restoration
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Read the Full Transcript with David Richter
Justin Donald: Well, what’s up, David? So glad to have you on the show. Thanks for joining.
David Richter: Yeah, thanks, Justin. I’m excited to be here today.
Justin Donald: Well, this is fun because we kind of have this one-two punch with you and Mike Michalowicz. So, I had Mike on my show several sessions back. We’ll link it in the show notes. But this whole idea of profit first is so powerful. Ironically, it’s really profound to a lot of people, which is sad to me because it should be the norm, but we live in this world of like, let me value your company based on revenue, let me value your existence as an entrepreneur on revenue, not on profit. It is just a very mind-boggling and peculiar thing.
I even have some issues with the Inc. 5000 where you’ve got a lot of these companies of Inc. 5000, but a lot of them aren’t profitable companies. They’re high revenue companies with no profit, been struggling for years and years and years, in many instances, paycheck to paycheck. And so, I think it glamorizes this whole idea of like get revenue at any cost.
And by the way, there are some businesses, some sectors, some strategies, if you’re looking for an exit, to a strategic or maybe an IPO or something in certain industries where that is warranted, but as a general rule, that’s not the norm. And it is often kind of in the face of profitability. And for most businesses, I think getting profitable first, and as a founder, being able to reap the rewards of that profitability is imperative. So, I’d love to know some of your thoughts on this because I know this is your world, you teach this, you operate in the day-to-day.
David Richter: Yes, exactly, and it is. A lot of the people I deal with are the mainstream entrepreneurs, the ones that need to make a profit. They’re not Snapchat, Facebook, Google that can go in debt and have these joint ventures and venture capitalists and all these things that are investing inside of them. And they need to make a profit.
But like you said, everything glamorizes it. And they get their mindset from people that are in a totally different position than them and they think, oh, this is the way to do it. Or they’re getting advice from someone who has never been down that road. It’s like, why are you taking advice from this person? It’s like, we need you to be actually profitable so that way, you can hire the right people, you can actually grow profitably and have the lifestyle and the business that you wanted. I mean, people started the business to get out of the rat race, and yet, they build a bigger mousetrap for themselves by thinking about, I just need to pay all the expenses, and maybe one day in the future, I’ll be profitable.
Justin Donald: So, let’s break this down a little bit because Mike talked a lot about profit first in your business as an entrepreneur. And I think that’s really important and I do think that’s foundational. And I think, for entrepreneurs, it’s really important to kind of pick your strategy. Is this a play that you’re looking to have a quick exit? Or is this a play that you’re building something for the long term?
And I think you’re going to make decisions differently based on that scenario, but I still think you can create profit and create a less risky enterprise with this philosophy of profit first. Now, your differentiator is that you are kind of like the next version, kind of digging deeper on the investment side, on the real estate side. So, you by trade are a real estate investor and you have kind of dug deep into the numbers and you’ve learned on the real estate side of things how to have profit first. So, I love that distinction and kind of how it even came about that you wrote a separate book, like continuing the series of profit first.
David Richter: So, I am a real estate investor. And my back story because about 10 years ago was when I first bought my first rental house, I fixed it up, did all the stuff to it. That was what got me the bug. I read Rich Dad Poor Dad. It’s like every real estate investor usually has that. I read this book, Rich Dad Poor Dad. I bought a house. That was still and that was me, totally, hook, line, sinker, went to real meetings like real estate investment associations and clubs and got in with the right type of people. Started working with an investing company as well too, that was doing about five deals a month, was wholesaling and fixing and flipping, and we scaled it up to 25, 30 deals. So, like, I got inundated with the real estate world and I really, really liked it.
And from there, I saw the epidemic because I started going around to masterminds. I had never seen a mastermind before in my life. And once I read the books and then saw there was a whole bunch of other people that thought how I did, I’m like, oh my gosh, I absolutely love this world. Like, this is incredible.
So, I realized too, though, the more I went to those meetings, they did, they all glamorized that top line, that revenue, like, yeah, we’re making money up here, but they have no idea of what’s down here or they do, and then they’re at the bar sobbing and crying, like honey, during the breaks and whatnot. So, that’s where I knew there was that epidemic of like, why are we not focusing on the bottom line?
Then it hit me really a lot at home when in that company, I sat in a lot of different seats, like I was a utility man. Here, put this process in place, fix it, move on. One of the seats I sat in was finance. I know, I don’t look like, if you can actually see me, I’ve got the glasses. I don’t have braces anymore, but it’s like I look like the numbers guy. I totally get it.
So, they struck a chord with me, and I did, I sat down and said to the CPA, “Teach me. I want to learn how to read the numbers. I want to learn it from beginning to end. Where should I put things?” Then once I actually absorbed all that info, I now had the story of the company.
Like now, I could tell this company story, and it was a train wreck because even though we were doing 25, 30 deals a month, we had 25 to 30 employees on a team, and overhead was nuts. The owner wasn’t able to take more draws or pay himself more. Like no one on the team could get any raises or bonuses. It was a nightmare from the financial aspect because no one was there to drive profitability. They were all there to drive the deals. And that’s great. You have to have deals. We had to have 25, 30 deals a month just to stay afloat. Like that, to me, was just like, oh my gosh, what are we doing here? That was the first eye-opening portion of that.
I worked with other investors, and down the line, it’s a long story, but what I really got to know was as I started working with these other investors and then seeing that where it really hit home because these were my friends, the employers, they were coworkers, co-leaders on this team. Once I saw that we weren’t able to actually accomplish what we wanted to with this company, plus we were very much faith-based, faith-centered, we wanted to bring the light to the world. Like we wanted to give and give aggressively. But it’s like that was keeping us from doing what we really wanted to do, not having that bottom line.
So, there were a couple of things like that that really struck with me, and that’s where I started working with other investors, getting their numbers in place, saw some light bulb moments. This is like just knowing my numbers, knowing this story has changed my life. I heard that several times, and that’s where I was. I reached out to a mentor and said, “I think I should create a business just to help people know where they stand.” I think that’ll just be so eye-opening. And he told me, “Have you read Profit First?” And I said, “No.”
So, that was a few years ago now. So, I read that book and said, “Great framework, love it.” Entrepreneur is going to eat it up because it’s written for the entrepreneur to actually have money in his pocket at the end of the day or her day. So, that’s where I said, “Okay, I’ll take this framework.”
So, started implementing profit first, then went to Mike after we had successfully implemented it and saw people with actual returns and actually more money and less stress in their business and life and said, “Hey, I’ve got this background in real estate, done over 850 deals so far, but I’m also implementing this. Could I write the book?” And he was like, “Yes, let’s get the book out there. Let’s get this mission out there for the real estate investing community,” because so many people have poured into me. I wanted to pour back into them and say, “Please, for the love of God, do not just idolize that top line. Get a bottom line in your business.”
Justin Donald: So, one of the things you talk about, and by the way, that is just great content and great commentary. One of the things you talk about is having financial clarity. And I’m curious what mistakes you see a lot of entrepreneurs making when it comes to just the idea of profit first or when it comes to the end result, whether you do or don’t have profit.
David Richter: Yeah. So, profit first is like the key piece at the beginning. If you have nothing in place as the business owner on the financial side, whatsoever, profit first is a great place to start because it literally deals with bank accounts and cash. It doesn’t deal with financial statements or QuickBooks software or anything like that. It’s literally about what bank accounts do I have set up? Are they the ones that are going to actually help me, the business owner? And then how do I move that money? That’s what the profit first is all about.
It’s building the profitability habit inside your business because one of those bank accounts is profit that you start pouring money in there. You can go back and listen to Mike’s episode. I’m sure he lays out the whole strategy of profit first, but that’s a great place to start because it deals with what you know as the entrepreneur, bank accounts and money. And you probably pull up your phone with your bank account more than you do a QuickBooks software. I can 100% guarantee you if you’re that owner and that driver, that business owner that loves, like going after the deals and going after the sales and all of that.
That’s where I see a lot of investors or a lot of just entrepreneurs, in general, make that one big mistake. They have one big bank account where everything goes in and out, no control. It’s like, I don’t know if I have money to do this, but it looks like I have $10,000 in there, maybe I could spend $3,000 on this marketing campaign or like whatever. It’s like, hopefully, no money else comes out any time soon, and I go belly up here on this bank account. So, that would be one thing is getting profit first implemented just for the sake of it works with you, the investor and the owner, the business owner or the entrepreneur.
A lot of other people, the other big mistake I see that you were asking me about is that they stick their head in the sand when it comes to the finances and saying, “I don’t know the questions to ask. It’s not fun. It’s not the glitz and glam side. It’s the side that I don’t want to touch. So, I’m just going to not think about it until it becomes a problem.” And they don’t think that last statement, but that’s really what ends up happening.
And they simply don’t know the questions to ask. Like, what should the bookkeeper be doing? What should the CPA be doing? They have no guidance or leadership because all of the books and all of the courses and everything teach the entrepreneurs how to sell, how to make money, which is awesome. And you need that top line, but you also need the back end, because I see more entrepreneurs who lose sleep at night because they don’t know where their money is going because they don’t even know if they’re making or losing money. They don’t literally know that simple fact of their business.
And so, they’re just up and down, like where? I have no idea what’s going on. At all stages of business too, I’ve seen this from people just starting out or people that are literally making seven figures and they’re like, this has become such a nightmare. I have no idea what’s going on. So, it’s those couple of mistakes that I see from a lot of people just up front when they first get in started with their entrepreneur journey.
Justin Donald: Now, take me back to, before getting into real estate, what were you doing? And besides what you were doing, like, how did you make that shift? You said you read Robert Kiyosaki’s book and you decided, was it that single event? Did you have a peer group that influenced you? I’m curious what life was like before real estate because we’re definitely going to get into what life is like post real estate and kind of what you’re up to now.
David Richter: I read that book in college. So, pre-real estate, I worked summer jobs and things like that, but my upbringing was probably lower-middle class, like of where we were. So, I had some of those mentalities, like money doesn’t grow on trees and that type of stuff that we get fed in that specific category.
When I went to college, there were a group of people that thought a little bit differently. And I had a really good friend who said, “I think you would like this book, Rich Dad Poor Dad.” I read it, and then he had the Cashflow game. So, I’m like, of course, let’s play that game. So, we played the Cashflow 101 game. That was eye-opening to me of like, okay, I could actually turn this into an asset, and this can be generating money for me or like the stock market, like just a whole new world that I never thought of.
At that time, I was a machinist at a railroad company where literally, I had worked my way up there going from grunt worker and like working on the sections of track that turned and like just doing grunt work all day to using my brain and punching in numbers. By the end of my time there, in which I would literally punch in numbers, and then that machine would run for four hours, and I would just have to make sure that it didn’t break down.
So, I was literally there in the middle of the night too, reading books, like I read Rich Dad Poor DAD, then I started consuming books and just feeding my mind as much as possible during that time. And I’m like, I got to stop this. I’ve got too much info up here not to take action. So, that’s where I start, I look for that first property with a real estate agent at that time because deals in 2012 were a dime a dozen. They were everywhere because of the crash.
At that point, it had started to come around where there were still a lot of deals, but now, other investors were still buying them from you and whatnot. So, you could actually make money on these deals. So I did, I bought my first house. And that’s kind of where it all started. But before that, I was just a young crazy guy in college that had no idea that the potential that was really out there because I had just been fed, go to school, get a good job, provide for the 40 years, retire at 65, like just the typical stuff that people get fed, like if you’re in that middle-class mindset.
Justin Donald: Yeah. I mean, so many great distinctions there with the middle-class mindset. I love the game Cashflow. I started playing that very early on, and there’s Cashflow for Kids that I’ve been playing with my daughter. It’s incredible. She loves it. She’s getting pretty savvy at some of this stuff. I’m excited for her to graduate up to the adult version, which hopefully, she can do while she’s a kid.
But it is such a different mindset, and hanging around people like that, I talk about the importance of peer group so much because you become like the people you spend the most time with. And if you can spend time with people that are playing the game of life and business and education at a higher level than you are, it’s going to raise your game. So, I think that’s really cool.
So, in real estate, you started with the house, but you’ve done all kinds of stuff. You were wholesaling for a while. You’ve owned or financed on homes. You’ve flipped. You’ve done lease options. You’ve done all kinds of different things. I’m curious if you have a favorite, if you like them all because some of them are a little more time-intensive and some of them are a lot more capital-intensive, and you protect your time. So, I’m curious, like what your evolution there was and what the sweet spot maybe for you became. And then let’s dig into what you’re doing today.
David Richter: I love the lease option strategy where you put a lease in place with an option to purchase because when I did my first deal, that’s where I put a lease option tenant in there. Actually, that first deal was awesome. I put renters in there first because I knew I was going to move in six months later and live there with my wife. So, we rented it out for a little bit, had some cash flow. Then we lived there at that first house for two years and then lease optioned it after that because the tax code says, if you live somewhere two out of five years when you sell it, you pay no capital gain. So, we were like, let’s do that.
So, we did that for that first house and then put the lease option in place, and a lease option, like I said, it’s literally a lease, a regular lease with a tenant, but then they have the option. There, the first person has the option to buy that property when their credit gets good enough. And I like that, too, because the guy that came in was aggressively trying to work on his credit. He was a teacher in the schools, and this was someone who couldn’t get a normal loan.
So, I was like, he’s going to get a house, be playing towards the property and being able to pay towards that down payment. And he’s able to see and build his credit as well, too. So, he did. He was a super tenant, he paid me early, and then six months later, cashed me out. I’m like, I like this, I like this strategy a lot.
It didn’t usually work out like that, though, because with the company I was with, we built a portfolio of about 100 lease option properties. So, I got to see it on scale, too, and only four or five ever really cashed out of the options while I was there because they’d start working on their credit, but then it would get bad again or what, like they’d just go back and forth, and it’s a long-term property at that time.
But I still liked it because the people in there wouldn’t have even had that opportunity without creative financing for them as well too. So, I like long-term strategies. I buy real estate and wait and build that appreciation, build all the different aspects that real estate provides, the depreciation too, and not paying as much in taxes. I like holding properties.
I personally like to lease options because if you put a lease option tenant in there, you can tell them the way that you present it to them and position it with them is that you are actively working towards this has to become your home. So, they don’t just think about it as tenant and landlord now. They think about like, I want to make this house my home because they can’t sell it to anyone else but me. So, it puts a different type of mentality tenant inside the property as well too and gives them a better– like then it’s just the tenants and toilets. This person actually cares about the toilet when it’s breaking because they understand that this is going to be their property.
So, I would say that were a couple of the things that I like about that. And it’s a long-term play. I built a little portfolio. So, going towards that, like the other side of that, I built a little portfolio and I was able to sell it to start this business, to be able to move across the country and provided the freedom, the lifestyle, like that’s where I got to see the actual lifestyle in effect to of what real estate is really able to provide. And that’s live where you want, work where you want with whomever you want, and spend time with who you want to. That was a cool point of being able to say, this is what real estate has provided for me over the years.
Justin Donald: Yeah, that’s great. And really good point about, we do a lot of lease options and we just call it pride of ownership. When someone has skin in the game for their own home, it’s maintained better, the yard looks better, the upkeep is better, they fix stuff as it goes bad. You can even negotiate some of that in the lease where if it’s over a certain amount, then we as the landlord take care of it. If it’s under a certain amount, you would just do it yourself. It’s pretty easy, but I find that a lease option attracts a different type of tenant, and then typically, you have more retention, and then on top of that, let’s say that someone doesn’t make it, you have less rehab work to turn it for the next tenant. So, yeah, very good.
So, today, you said you sold your portfolio to be able to start the business that you have today. And today, as I understand it, you are operating as a fractional CFO in a lot of businesses. Your organization does this. A lot of people don’t even realize there’s such thing as a fractional CFO. This has been a huge need for me in my business.
So, I have a fractional CFO. I’ve had one in the past. I’ve got one currently. I’ve got a fractional COO and some different roles. And so, I think it’s important to know that you don’t have to hire someone full time, 40 hours a week or whatever the case is, or hire someone part-time. You can actually find someone who’s highly competent at what they do that can get done. Probably, someone with a lack of experience can get done. Like it takes them twice as much work as the person with the experience.
And so, with a similar compensation, so you pay more for the hours that you get, but they get it done in less hours. And so, I’d love to hear you talk about really the power of hiring fractional CFO. So, I’m a huge believer, a huge proponent. And what’s cool about this is, even prior to having you on and knowing that this was kind of your bread and butter that I can offer a testimony for the impact that this has had in my business and previous businesses.
David Richter: Awesome. I love that because when I speak about this, I call this the secret weapon of business because a lot of people don’t even understand it’s out there and it’s usually accessible for different levels. You don’t have to be Justin’s level for a fractional-type leader on the team. Because if you’re listening to this podcast, you probably have a mentor, a coach listening to this podcast for mentorship and for help from people that have been where you want to be.
So, you already understand you might be working with a mentor right now that’s elevating your own mindset from maybe a six-figure entrepreneur or investor to a seven-figure or seven to eight-figure or eight to ten. It’s like helping you get to that next level. Well, if you are building a business and an organization, you might have people in certain roles where you love that person and they’re the right fit, but they need to be elevated.
And so, a fractional-type leader, like a COO or a CFO can come in as that leader because they’ve usually been at a much higher point than where that person is currently in your business. Maybe they’ve worked on an eight or nine-figure business before, and the person that’s with you has just seen your business grow from maybe five figures to six figures to seven figures. So, that fractional person could come in to help, to help raise your team up and to talk to the owner to raise their intelligence in that department.
Like the COO comes in to help make sure the operations are running smoothly and take that headache of that leadership role from the CEO, who’s the visionary, who you want to just do the deals, the relationships, you’re all of that. You’re not the nitty-gritty person, where the fractional COO can come in to help with the nitty-gritty, the fractional CFO can come in for the financial department and say, this is the question you should be asking, or this is how the book should be set up so you know how much you’re making here so that way you can put more in your pocket or know which marketing channels are doing the best for you or where you’re getting the best returns, or what you should stop spending on and put more money in your pocket because you’ve got stuff going out the door that you shouldn’t go and that shouldn’t be going out there because usually, a bookkeeper and a CPA are rear-facing. They’re like the rearview mirror.
Like what happened in the past where our fractional CFO is like, where are we headed? Where are we going down this road? How are we going to get there? What are our projections? And what should we stop right now that will have a big impact for the future? So, that’s what the CFO does.
And the two biggest objections I get are, I’m either too small or I don’t make enough, like for a fractional-type leader. And that’s where, like I said, there are different levels of fractional leaders too. Do you need someone just to implement profit first and to get that in place? Or do you need just the basics of running a financial department? Or do you need something like Justin has where it’s a full buildout of making sure that everything’s set up? So, that’s where you have to find the right people too that can help you in that organization.
And I would counter and say you’re usually too small to have a full-time fractional leader or a fractional CFO or a full-time CFO on the team, but you’re too large not to have someone there managing the business and managing the financial aspect of the business. So, you need to know what’s going on, you need to know where your money is flowing and where it’s going because, ultimately, like we’ve said, it’s about that bottom line. If you have someone focused on your profit, your profit expands. So, that’s where I would just say the fractional CFO comes into play.
Justin Donald: Yeah, these are all great points, David. And I’d love to share three different iterations that I’ve had with fractional CFOs. And so, a number of years ago, I started a company with a couple of friends called IFM Restoration. It’s a single-family home maintenance company that does maintenance on behalf of the largest owners of single-family homes in the US.
And one of the first things we did is we brought in someone that wasn’t quite a CFO yet. We brought him in as kind of like the VP of Finance. At first, he was head of finance, and then VP of finance, but he had something else going on, he was almost like a fractional in that role. And then he came on full time because we needed that. At first, we didn’t need it, maybe we couldn’t even afford it.
But as our business grew, we had more need for that role. And then we thought, you know what? It might be smart to bring in a fractional CFO to help him become eventually the CFO. And so, we had a fractional CFO working with at that time who’s the VP of Finance, and that was a great relationship and there were some awesome things we were able to figure out there. And eventually, he was able to move into a more formal role, but we used a fractional in that way. And by the way, we could have used a fractional CFO early on. We just found a cheaper way to do it. But in retrospect, it probably took that VP of Finance a lot longer to get done what a CFO can get done just based on their years of experience.
Then a separate iteration is for my family, just like our own portfolio. I do a lot of investing. We have a lot of cash flows that we need to keep track of and different investments going out and just kind of high level, like managing our family wealth, if you will, and investment portfolio. And so, I hired someone for that role as a fractional, and that was incredible, took a lot off of my plate, cleaned up a lot of things, cleaned up our books. And then I hired the fractional for The Lifestyle Investor, and that has also been an incredible opportunity of just making sure that we’ve got someone that is more than qualified to be able to handle it, where I know that I can do it. I have a background in finance. I know, I’ve done this in many businesses, but it is draining for me. It is not what I love to do. It is something that I can do.
And I had a mentor once tell me, just because you’re good at digging graves doesn’t mean you should be a grave digger. And that has really stuck with me. And so, I have really made it a point to outsource the things that I don’t like or that I’m not good at, or that someone is just that much better at than I am. And so, that is a role that’s probably one of the best decisions I ever made because it keeps me in that visionary seat. If we’re talking EOS framework, where I can be big picture, I can be creative, I can handle the relationships, and creating some fun vision, strategy, content.
And I’ve got a team that runs things, I’ve got a team that handles the financials. And so, just from me, I just want to give a huge endorsement to you and to what you’re doing, David. I think it’s incredible. And I think for anyone that is in a situation where you wonder, should I be doing this? You probably shouldn’t. So, consider what it would be like if you brought on a fractional for 10 hours a week, maybe you could even start less than that. But what would 10 hours a week get you? And I think it would get you a lot further than you probably realize.
David Richter: Yeah, exactly. So, we just want to get that out there that there is this type of leadership because a lot of people don’t even know that this exists. And it’s like, instead of beating your head against the wall because you hate the finances, find someone that is at a reasonable price, reasonable expectations, and can help you get over those hurdles so you’re not beating your head against the wall all the time.
Justin Donald: And I think this is one component to something that I speak about often, which is finding a way to get out of the rat race. Most people are stuck in the rat race, right? They’re working to live. And most people, their consumption is in proportion to the income that they make. They get a pay raise, their consumption goes up, maybe they got a better quality of life or they got cooler toys. But now, they’re even more stuck in the rat race. And maybe it’s a nicer cage and it’s a nicer wheel, maybe you got a better water bottle that’s attached. And so, like, maybe you’re upgrading the quality of your rat race and the cage that’s holding you.
But the reality is, in order to pivot out of that, it’s important to have the right people in the right seats. It’s important to buy assets that produce income. It’s important to have cash flow. And so, I’m curious for you, what has that looked like for you? You were stuck in the rat race. You bought some real estate.
There is a time, I think, where real estate maybe became like you built a nicer rat cage because if you’re not careful in real estate, you can buy one passive property and you’re like, ooh, this is really cool. Let me buy another one and double up. Let me triple up. Okay, wow, I’ve got all these assets, these real estate rentals, but now, all of a sudden, I kind of have a job. I have to oversee all these rentals. Like, wait a minute, it was really cool when I only had one or two. Now, I’ve got five or ten. It’s like they own me, again. And you kind of have a new and a different job and you have responsibilities tied to it.
And so, at a certain point, you need to figure out (a) how to scale and how to put people in place or (b) how to really create a passive opportunity, whether it’s through people or whether it’s through a different type of investment. Maybe you’re not owning deeded property or maybe you are, but you have a third party that comes and manages it. But I see a lot of real estate professionals, a lot of real estate investors that get stuck, they think they’re getting out of the rat race. They maybe are for a split second or they’re on that path, and then they get deeper in. Walk me through your path and how you were able to escape the rat race once and for all.
David Richter: So, it’s probably from the mentorship I got right from the investing business I was a part of. I got to see that, oh yeah, we could save money if we didn’t have property management. We could have someone else managing it on the team, but if we had property management that helped us to free up our time to do bigger, better deals or to find more properties for the portfolio.
So, I was very privileged I’ve had a lot of good people in my life and to see that in action. So, when I started building that portfolio, when I tell you that first story, even of the lease option, I had someone else find the lease option tenant, paid them a portion of the fee for the down payment or the option deposit and the first monthly rent or whatever it was at that time to help me because I wasn’t the expert. I knew that I needed that help so that even on that first deal helped me realize I’d rather pay upfront for expert help than to pay on the back end with my time, with my effort, or my headaches.
So, I got that ingrained to me during that time from transitioning from that business of working at the railroad company to working inside of real estate at another company and then starting to build a portfolio. It’s like having the property management in place right away. I’d rather get that 8% to 10% away to them to manage the property. So, that way, even at that time, okay, maybe I’m making a little bit less, but I also don’t have to worry about calling the tenant or the tenant calling me or even knowing my name, really.
If it’s set up with an LLC, it’s like they know the property manager, and then I get to talk with the property managers. And now, I’m managing a business. I think most people don’t realize when you go into real estate, that’s still a business. Buying properties is a business. It’s not a side hustle. It’s not a job. It is a business that if you want to create, like you said, it’s so scalable systems that you have to create.
So, even as we scaled the bigger portfolio inside, we were always creating the better system as we built more properties. It was like, we want them to just flow through this system and make sure that we knew that the team could always be collecting the rent and whatnot, and a lot of that as well too. So, I got to see that. Then I got to see it in my own rentals.
Then once I built a portfolio and then sold them, that was more like, okay, now I have excess cash to do what I want to, started building this business as well too, and then got to see at the beginning, it was a job. At the beginning of this, I was still building it and creating it. And then as we built out our team and we have over 30 CFOs on the team now, and I’ve got a whole leadership team as well, those are the people that are in the day-to-day helping to make sure that the clients have the best experience and that it’s going well, that I’m there just to oversee now.
And because I saw the mistakes of the past and what other people had done and like going to these mastermind events or having mentorship with Justin, like if people do with you, it’s like getting that at an early age helped me fast track a lot of these second and third businesses that I’ve started and been a part of and helped me get out of the rat race in each level quicker. So, it’s like now, I could be on a podcast. Literally, today’s schedule was I’m like on three or four podcasts, I spent an hour this morning with my daughter, like I’ve got an hour blocked off later for, like her dance class to go with my wife. It’s like I get to build this lifestyle now because I saw that along the way.
And now, if I want to create another business, it’ll be the same thing. I’ll take the money from this one, go start the other one and say, “How can I get out of the rat race as fast as possible with systems, the money, the people, profit first, making sure that we’re getting the right things in place?”
Justin Donald: Well, that’s incredible. And I feel like this is a great place to kind of wrap things up because it is where everyone wants to be and wants to get to. And so, you’ve done this beautifully and you’ve shared an incredible story. Where can people find out more about you, David, and more about your company?
David Richter: Sure. So, SimpleCFOSolutions.com, and that’s kind of like our one-stop shop for everything. But if you go to SimpleCFOSolutions.com/lifestyleinvestor, I’m going to give you a book, a portion of the book, Profit First for Real Estate Investing. Also wrote another short book as well, too, and I’ll give you the whole book there of that. It’s basically the bullet points of Profit First for Real Estate Investing if you just want a bite-sized portion and getting that.
Then it’s also got some tools. If you listen to Mike Michalowicz’s episode and then you listen with mine and you’re like, I want to get profit first implemented, I want you to be able to take action. I want you to be able to do something from this episode to actually do something that will move you further on your path. So, there are a couple of different ways that you could get a hold of us, and if you want those gifts as well, too, so you can start on your journey.
Justin Donald: Love it. We’ll share all that in the show notes. David, thanks for taking the time with us today. I think this is incredibly valuable information and insights, so I appreciate your time. And to my audience, I just want to encourage you, as I do every week, to challenge you, what is the one step you can take today to move towards financial freedom, towards a life by design, not by default, a life on your terms, one that’s inspiring and compelling, and just brings you so much energy and joy? Thanks. And we’ll catch you next week.