Building a 9-Figure Real Estate Empire By Turning Problems into Profit with Preston Brown – EP 235

Justin Donald: Preston, good to have you on the show.

Preston Brown: Brother, thank you so much for having me. It’s an honor to be here.

Justin Donald: Well, I’m thrilled to be able to dig in. We had just a blast on your podcast, and I’m excited for people to learn more about that. And it’s just an honor that you flew in, you flew in on your jet today to spend time here with me on the show, and I really appreciate that. And you brought your team, your amazing team, and I love that you’re just so willing to hop on a plane, go wherever you need to go and hang out for a day.

Preston Brown: We learned something too. Like, we learned that we have to buy a bigger jet because all the podcast equipment we brought, not knowing you had everything here, made the jet very uncomfortable.

Justin Donald: Well, I apologize for that. I guess we need to clarify that and…

Preston Brown: I just want to put it out there for the entire world, and most importantly, my wife to hear, buying the bigger airplane is Justin’s fault.

Justin Donald: Well, I’m glad you have a scapegoat so that you can get the plane that you want to get. So, hey, it’s always fun to be able to upgrade the jet and get the next tier of luxury.

Preston Brown: Amen.

Justin Donald: I’m excited to have you on the show because you are a wealth of knowledge, not only in investing, but also entrepreneurship. You’ve done a lot of things. You’ve played the game at a high level. You’ve had a tremendous amount of success, yet you’re incredibly humble. You’re very down to earth. And so, I want to kind of explore this and even figure out how you got to where you are. But before we get into any of that, tell us, what do you do? Give us your primary business. And I know you have a lot of ancillary businesses, which we can get into, and I just want an overview so people…

Preston Brown: And so, yeah, it’s a good question. And I often looked at how do I answer this question because, oh, do I just tell people I’m a home builder? Do I tell people I’m in real estate? Do I tell people I’m a developer? These arbitrary words, but none of them are true. I automate and optimize companies. Like, I have a collection of companies, they’re all in and around the real estate industry because I like the synergy that that provides, the tax benefits, the inflation benefits, all of that, like the financing benefits. But I believe, and I mean I’m learning a lot from you also on investing, and so, I’m changing some of those beliefs, but my core belief for many years around business is real wealth is generated through business. I mean, the reason people put money into the stock market is because they understand that all of those businesses are going to become more value, go up, make more cash flow over time. And so, I always thought, well, instead of just putting money in stock, why don’t I open businesses and make those things into valuable entities? And so, I automate and structure companies and I specifically do it in real estate. That’s my favorite area to play.

Justin Donald: Now, what are some of these ancillary companies that you’ve built that now support your primary business? So, you’ve built a ton of homes. How many homes have you built?

Preston Brown: We do about 300 a year.

Justin Donald: Yeah, so good volume there. I would love to know some of your profit margin on that and then the ancillary businesses you built around it.

Preston Brown: Yeah, gross profit on the home building company is 20% to 30%, like the really affordable products when we’re just kind of taking lots, favor lots. Sometimes we’ll buy lots from a developer that we don’t really want, so we’ll go as low as 20%. On the nice lots that we really want, we’re generally getting 30%, sometimes high as 35%. And that’s on the sales price.

Justin Donald: This is in El Paso?

Preston Brown: Yeah, that’s on sales price. So, if you get $400,000 house and you’re taking, call it an average of 28% margin, if we were to average it, 28% of $400,000 is the check we get back. Now, you factor out interest, carrying costs, stuff like that, I mean, you’re doing okay at the end of the day. Like, I may not be a billionaire, but the only difference is I don’t own the island, I don’t own the airplane necessarily. I’ll travel to the island and my airplanes aren’t big enough to go to the islands there.

Justin Donald: Well, I like that. And by the way, if you’re making profit somewhere $70,000 to $100,000 per home, you’re doing 300 homes a year, that’s some serious coin. And then on top of that, you’ve got all the supporting businesses. You’ve got your title company, you’ve got your construction company, you’ve got like– kind of walk through some of those.

Preston Brown: Sure, yeah.

Justin Donald: And did you start them or did you buy them?

Preston Brown: A mixed bag. So, I started, at least my business journey, flipping homes. And this was in the day where Robert Kiyosaki and Than Merrill and all those guys were going out and teaching people how to flip homes, and all the crap they taught was so complicated. I mean, I had this simple formula and it was ARV times 0.7 minus repairs equals deal. And so, that’s after repaired value times 70%, minus the repair cost, equals what you should pay for the home. So, like simple formula. And I was like, why are people paying 50 grand to go to a seminar for that sh*t? Like, that’s really stupid. I can give it to you in a sentence and you’re going to go give some guy 50 grand, like, that guy’s f*cking smart.

And so, I went around and I started telling people, “Oh, yeah, if you join my real estate brokerage,” I teamed up with a broker when I was flipping and he gave me part of his company. And so, he just gifted me half of the brokerage. And I told people, “I’ll teach you how to flip homes.” And so, they all left their brokerage and joined my brokerage and I taught them all how to flip homes. Then I realized, wow, they all need money. So, I started a hard money lending company and our joke is, “Loan so easy, we’ll make your money hard” because we’re really politically correct, right?

And I realized, you get benefits in keeping properties. Like, I loved COVID. I mean, I exited probably about 100 houses that everybody told me I was an idiot for buying. Oh, you don’t make cash flow in single family. Yeah, you do when you sell it. I bought homes at 30 grand 10 years ago, sold them at 380, 390, 400 in El Paso. Like, what’s your ROI? Like, I don’t look at necessarily the month over month always. I know that’s important and I’m learning that from you, but my internal rate of return is stupid on those homes. You’ve got to look at the IRR of the deal too. And since I kept them, I opened a property management company. That happened on accident. Like, sometimes I open businesses when I get mad, like…

Justin Donald: For a property manager, like, I’m going to solve this myself.

Preston Brown: I love disrupted marketplaces. When there’s stupid people doing things and you’re not stupid, it’s a business opportunity. Okay? Like, this guy comes at me and he is like, yeah, I’m going to charge you for fixing a toilet in your rental. And it was like $800 and he was repairing a toilet. And this is like 15 years ago. A toilet is like 40 bucks at Lowe’s. And so, I was like, $800, why are you repairing it? What? What? And you got to read the receipts that people are sending you. Like, I mean, sometimes people don’t read the receipts and that toilet, talk about a sh*tty situation, made me a property manager. And then since I had all the realtors, I told them, well, why don’t you just go ahead and refer us any listings you can’t sell? And we’ll give you 500 bucks. The next thing we knew, we had 500 or 600 properties inside of a few years. And now, we’re making money.

I couldn’t get my pool serviced. Nobody would service my pool. And so, I went to the best pool servicing companies that couldn’t seem to service my pool. And I realized inflation made it to where they couldn’t afford to pay their people well because they didn’t know how to price their products. So, I hired their people, okay, and I paid them a fair wage. And then I went on the MLS and looked at homes that sold with pools. And then I knew people were disorganized when they just bought a new home with a pool.

Justin Donald: Right.

Preston Brown: And I went and I said, “Hey, why don’t we give you free pool servicing for 30 days? And if you like us, you keep us, no risk.” And all of a sudden, we have 100, 200 pools that we’re servicing overnight. And now, my pool service for free, like business is the way to like create wealth. Now I’m getting out of the pool servicing business, but you create wealth by business. Business is just solving a problem, like every sale is a solution to a problem.

Justin Donald: Yeah, that is brilliant. And by the way, something that you are a ninja ad. And we were talking about this offline and I’d love for people to hear about this. I’d love our audience to kind of hear some of the things you do because you enter these businesses, you find what’s wrong, and you fix it. And I’d love for you to talk a little bit about just all the ROIs that you look at. You talked about an ROT, return on time. I mean, you had like ROs for everything, ROM, return on marketing. Like, I’d love to hear that, but I want to hear how you systematically and systematize the businesses, where you’re finding, like, how are you finding these issues? How do you find them so quickly? How do you fix them so quickly?

Preston Brown: Well, so I mean, you solve the problem you can see, right? I mean, I’ve just looked at businesses probably the way that most people, well, hopefully most people should look at their health. Like, if you’re bleeding, you kind of know, I should go to the hospital right now. But if your business is bleeding, how do you figure that out? So, I’ve created little formulas that are just reference points for me to think of, like, there’s a formula to creating a culture in your business. Like, what’s the first four letters in culture? Cult, right? Yeah, and people don’t realize that that’s relevant to what a culture is. What is a cult? We all think of Waco, Texas, and David Koresh and, like, horrible things, right? But there’s a good side and a bad side, like, every business is a cult. A cult is a group identity. That’s all it is.

Well, if there’s a group identity around creating a product and/or a service and there’s a whole bunch of pieces of the puzzle for creating that group identity, that give people a wonderful feeling when they’re there and you can meet all of their human needs and they love working there and it becomes part of their mission, then you create a culture. So, you need to have a good culture, you need to have throughput, you need to have capacity within your business, right? Like, capacity is so simple. I go into companies, I’ve been paid a few times. Like, this might be a new business of mine that I’m not even intending to have, but it’s fun for the social media journey. We might come out with our first episode soon. I had a guy, a year and a half ago, and he was like, “I’m going to pay you 50 grand to fly out to my company for a week.” And I was like, “What?” I said, yes. And so…

Justin Donald: My curiosity has piqued at that, so…

Preston Brown: And I’ve done it three times, well, three times total, two times since. But I went out and the first thing I look at, so I’m going to give everybody 50 grand worth of free advice here. The first thing I look at in a company is their capacity. Your throughput’s going to tell me the whole story. Okay? Throughput is simple – leads, sales, delivery, cash. Cash is at the end. That’s where you get paid. Leads are at the beginning. It’s where you have interest or don’t, right? Sales, it’s your product promises. Delivery, it’s your fulfillment process. Leads, sales, delivery, cash.

And then I look at, if I hold up four fingers on my hand, these fingers may not all be the same thing, but they are all tethered to one another, aren’t they? Like, if I put a 10-pound weight on one finger, and then I lift my hand, that finger is going to have a lot of stress on that weight. If I put a 100-pound weight on that finger and I lift my hand, I’m going to break my finger. So, I’m looking for where is the weakest link? Is it leads, sales, delivery, cash? And then I’m going to go through that and I’m going to look at their business model and their team. And I have found that every owner works in all four. Why? Because they have this relationship to risk and reward where they can.

Employees don’t have the same relationship to risk and reward. Yet, we as owners, these generous, loving human beings that own our companies and believe in everybody, like we believe in ourselves, we’ll put people in all four areas. No employee outside with the rare exception of a C-suite executive. Okay? C-suite executives are higher level. They’re paid a lot of times with bonuses in the cent and the other. So, that is the exception of the rule that proves the rule. But no regular employee can work in more than two non-consecutive flows in every business I’ve found, whether coaching or paid to go out and book.

Justin Donald: That’s good.

Preston Brown: They have people in more than two non-consecutive flows. We go remove that. It pays the 50 grand and then some. And they love me. And it’s like, huh, what’s this? Like, so I look at their four flows of capacity as I call it. Like, how many leads are you getting in? How many of those turn into sales? How much do you have the ability to fulfill? You want to hear a fun story on this?

Justin Donald: Yeah, you bet.

Preston Brown: So, I had my home building company. We bought a small company. Like, in 2018, the company was so bad, I got paid 50 grand to take it. Okay? Bad brand, horrible. There’s a lot of stories around this company. But we fixed the brand and that’s another fun story. But we fixed a brand, solved that, like COVID starts hitting. We’re before COVID, selling 10 homes a month, 12 homes a month. And next thing I know, we’re starting to sell 10 homes a week.

Justin Donald: Wow.

Preston Brown: Twenty homes a week. Well, the demand spiked up. I mean, we all remember this. And it was like, this is after the two weeks to flatten the curve, but before lumber went through the roof and everything else went crazy, right? And so, all of the builders in my industry remembered 2008, and most people are like, hey, you know what’s going to happen this time? The same thing that happened last time. It’s going to be the exact same. Yeah, right, dude, where the epicenter was mortgage-backed securities and consumer debt obligations, I don’t think so. It’s not the same damn thing.

Justin Donald: Big difference.

Preston Brown: I always look for data. So, I went on the MLS and I’m like, wait, everybody’s pulled their homes off the market. There’s no resales.

Justin Donald: Yeah.

Preston Brown: I can’t live in all the homes I’m building. So, I was like, huh, the only way to solve for this sales problem is I’m going to raise the price. I do not have the ability to fulfill 10 sales a week, let alone 20. I have enough plumbers, electricians, sheet rockers, concrete guys, all the guys to build 10, 12 homes a month, maybe 15 if I push it.

Justin Donald: Okay.

Preston Brown: Other builders were, like, I’m going to raise my earnest money. Oh, I’m going to do this, I’m going to do that. But they were all prepping for another 2008. I just raised my price. I started raising my prices on everything 10 grand a week. I raised my prices within– actually, it was probably a month and a half, two months later. I was $150,000 to $200,000 in every neighborhood higher than my competitors.

Justin Donald: Wow.

Preston Brown: My margin checks, at that point, the average margin of the market was probably like 50 grand, 80 grand, like whatever. My margin checks were 200, 180, 250 on a high. I was hearing everything under the sun, corporate greed, this, that, the other, look at Zia until what happened? Until next thing you know, lumber goes through the roof. Sheet rock goes through the roof. Everything started popping like little popcorn kennels.

Justin Donald: Harder to find trades as well.

Preston Brown: The cost to build a house doubled. The land developers wanted twice as much money. It went nuts. And how is a home valued? Based on the last appraisal, right? So, what did all my competitors that were talking sh*t have to do then? They had to cancel all their contracts because they could no longer afford to build the homes. They had to dishonor their clients and the a*shole with corporate greed that literally just followed a market and surfed it like a surfer on a board, on a wave, became the largest home builder in my city because I understood, leads, sales, delivery, cash, the four flows of capacity. You understand these things? You’re going to be successful.

And then like when you get to cash, like you ask about the returns, right? Like, the returns are so simple. Everybody talks ROI, return on investment. And that’s cool. You should talk about that until your investment’s returned. After your investment’s returned, if say you and I go in on a deal, say like, “Hey Preston, I’ve got this great investment, like it’s going to cost a million dollars and you put in half a million and I put in half a million.” Once we get our money back, we should not talk about ROI.

Justin Donald: That’s fair.

Preston Brown: Because the return is infinite at that point. Everything after that, like we’ve already gotten our investment back. Well, in a business, you’re going to seed it with some capital. So, what happens when you get your capital back? You need to move to ROM, return on marketing, or what other people call cost of customer acquisition. Marry that to this computation of lifetime value of customer and you know what every customer’s worth. Then you go figure out, okay, well, how much can I arbitrage this? And that’s how you scale and you can grow and build any business of any size. So, ROI becomes ROM. It’s a little paradox of returns. Then you got return on balance sheet equity and return on debt. You want to know the perfect way to scale a business?

Justin Donald: Yes. You know I do.

Preston Brown: With debt, like, and I don’t want to knock Dave Ramsey because there’s a lot of people that love him and he has a big podcast and hopefully, he puts me on his show one day, la, la, la. Hi Dave. It’s the cheapest money. I disagree with his approach that debt is– I think debt is good. I think when the Federal Reserve Bank in like the 1970s came out and said, well, you know what? We know they’ve changed the dollar. That’s like saying, hey, we used to have a nail, right? We used to have a nail and we’d hit it with a hammer and fasten wood. We’re going to change the nail to a screw, but we’re still going to use a hammer the same way. Does that even make sense?

Justin Donald: No.

Preston Brown: Like, we should get a drill. The Fed didn’t change, the dollar did. We moved to an arbitrage economy. So, it’s no longer cash as king. It changed everything to cash flow as king. So, the perfect way to scale is when you balance return on debt and return on balance sheet equity. Now, when you’re small, your opportunity might be like, hey, I’m going to have a little more debt than balance sheet equity, but what you need to get is to a balanced trajectory. If you have 10 million in debt and 10 million in balance sheet equity, you are safe. And that is the industry standard for the trajectory of scaling you should do. And all of your competitors that are off on that, there’s going to be people with too much debt, too low equity, they’re the ones at risk. There’s going to be people with too much equity, too little debt, they’re going to be the ones not growing. That’s another set of returns.

What about personally? I always hear people like, well, the business is not my passion, or this is not. What about your return on emotion or your return on time, ROE/ROT? So, culture, clarity, capacity, cash, I mean we could spend days talking about these, but capacity is probably the most important. And cash is why a lot of your people are listening if they’re good investors and good business people, right? So, let’s look at those two first, and anybody that needs any of this information since I’ve been a guest on your podcast, they can message me. I’ll give it to them for free. We’ll put a link in the show notes if you want.

Justin Donald: Love it. I think it’s awesome. Thank you.

Preston Brown: So, we can get into more cool stuff.

Justin Donald: Thank you very much. People are going to love that. So, this has been just an amazing masterclass. You’re spitting gold on just some fundamental things that most people don’t see as fundamental, right? So, I love that. I love that you can dissect it the way you have.

Preston Brown: I like to put the FU in fundamental.

Justin Donald: That’s good. That’s good. You like to put the FU in fun as well?

Preston Brown: I do. Fun is in fundamental as well.

Justin Donald: All right, I like that. So, I’d love for you to tell the story of what happened when things didn’t go as planned. You recently had a lawsuit. You had a dirty player kind of in the industry that kind of got– you got upside down with him, but he basically was a con artist. Tell that, and I’d love to hear the finality because this did end up being a good situation for you, but I remember, we talked in the heat of the moment, and this is a stressful situation for you.

Preston Brown: Oh, God, yeah, it was probably one of my most stressful situations. And the funny thing is whenever you’re riding high, and I mean, every business owner and every entrepreneur’s had challenges, but whenever you’re riding high, there’s this point where you’re a genius. Maybe you’ve had it, maybe not, I hope not. But if not, maybe one day you will, maybe some of your listeners have had it. And you just become a genius. And there’s a beautiful thing about geniuses is they know everything because they’re perfect. And when you’re riding high, you’re a genius and you’re perfect and you know everything. And that’s right about the time that God’s about to teach you a giant lesson.

And I trusted a friend, a mentor who had gotten in bed with a con artist and I even kind of knew that the con artist didn’t have a great reputation. So, there were red flags, there were signs. I should have avoided this. And I overlooked it and absolutely, like hurt myself. But I bought 60 home lots in a neighborhood called Village at Westside Crossing. And there was this con artist dude named Jose Gonzalez, and I mean just crook, salesy guy. Like, he conned to the city of El Paso. He conned 13 builders that bought lots. A lot of us trusted that mentor friend of mine that I guess he had probably also conned. And so, we all bought lots and we all built homes. And of course, when you can’t get your certificates of occupancy, those homes are not homes. They’re just sticks and bricks.

Justin Donald: And empty shells, yeah.

Preston Brown: And worse than that, there’s sticks and bricks because no builder out there, like, or not no, but there’s the exceptions to prove the rule. Very few builders, especially in El Paso, are all cash. Like, we’re using debt, and debt to build homes is short-term construction loans. So, I’m sitting there as relatively new money. Okay? And I’ve got $12 million in debt on these 60 homes in there. And I don’t have the cash to pay it off. And my cash flow is good. I’m making money. I know I can solve the problem in a few years.

Justin Donald: In time, yeah.

Preston Brown: But on a 12-month construction loan that maybe you can negotiate six months’ worth of extensions, you don’t have years. And so…

Justin Donald: That’s a tough situation.

Preston Brown: Oh, man, it was.

Justin Donald: That’s stressful because you have debt service chipping away at you every single month.

Preston Brown: $200,000 a month was our nut that we had to crack on that. I remember it was August, I was with some friends and we were on their little house yacht on Lake Powell and they were teaching us how to surf. And I got the call, and they’re like, “Hey, the city’s shutting down the neighborhood.” And that was August, two years ago.

Justin Donald: Oh, my goodness. I was on that same trip. We’re one week apart on that Lake Powell trip. That was a blast.

Preston Brown: It was– well, for you.

Justin Donald: True, true.

Preston Brown: I mean it was a blast.

Justin Donald: Sorry to hear that.

Preston Brown: No, it was a blast for me too. I got to thankfully on the second to last day, but I mean, you can imagine, I didn’t sleep that next two days.

Justin Donald: Oh, yeah, it’s rough.

Preston Brown: And I’m a problem solver. Like, I believe, fundamentally, in life, that problems are gifts. Okay? There are gifts, there are guides. Like, your problems are what’s going to grow you. It’s what God is sending you to show you who you’re supposed to be tomorrow. And so, I took action. I went into problem-solving mode. I tried to fix the problem. I tried to work with the guy. Of course, that didn’t work. He just spat more lies. Like, the guy can’t talk without lying.

And it eventually went to where, I mean, there were 13 builders, me and 12 others that had bought lots. And it was interesting because what I’ve found in business people, entrepreneurs, especially builders, big egos, but everybody talked big and they were willing to play the threat game and the leverage game verbally. But nobody put up, like, I went ahead and sued the guy and there was one other builder that joined me in the lawsuit.

Justin Donald: I can’t believe there are only two out of that many people.

Preston Brown: Of 13. Everybody else like kind of capitulated, put their head in the sand, did the dodo bird thing.

Justin Donald: Unbelievable.

Preston Brown: And it was amazing that nobody was willing to fight. Like, there was one other builder and they kind of went the route of like, trying to help the guy and all this, but I mean, I think they probably got conned more. I don’t know. It wound up getting to the point like, I wrote articles with the city of El Paso’s newspaper, El Paso Times and shared– I didn’t write them. I shared all the information with a reporter, and I made sure it got into the news. I went straight to all my banks and lenders and did the thing that felt like what you should never do. I told them the entire truth. And that was maybe the scariest part because you’re going to somebody and saying, look, I can’t pay you off. I know we’re supposed to be here in 12 months and thank you for the extension to 18 or whatever, but there’s no way I can pay you the $12 million.

And what was cool is my honesty with them actually enticed them to give me more time. I mean, they were still going to pressure me and they did, they pressured me hard. It wasn’t like there was no pressure. But they really appreciated the integrity that I came and told them the facts when no one else did. Or at least, that’s kind of what they communicated to me is like, really, they started all calling me for updates on what was going on. So, I was the guy fighting, I was the guy communicating to the partners. I mean, but it was big enough that I was worried, like, could this compromise my relationship with my lenders? Could they not want to loan me money on the next deal?

Justin Donald: Well, if it didn’t go well, that’s exactly what would’ve happened.

Preston Brown: Right. And then…

Justin Donald: You could have been screwed.

Preston Brown: All of a sudden, here’s this business I built, this company I’ve created. That is my largest company, and if they’re going to stop loaning me on the next deal, I can’t afford to keep carrying this. I mean, that’s how this thing could spiral out of control.

Justin Donald: Yeah, you can’t grow it. You can’t grow it after that.

Preston Brown: You can imagine the fear will. Long story short, I was able to litigate it. And we won. And then I was able to fund the completion of the development. Like, we actually got dirt work contractors out there and asphalt guys out there to finish the neighborhood. And of course, the developer said he was doing it, but we were paying the guys under the table because he wasn’t paying them either.

Justin Donald: Oh, my goodness.

Preston Brown: And at the end of the day, we did get our COO. This was probably September, October of last year. We got out of the situation.

Justin Donald: So, this is two years later, a year and a half later?

Preston Brown: About a year and a half later. No, about a year from August, but I had already been in it about six months at that point. So, it was 12 months longer than it should have been. But I mean, you add up $200,000 a month for 12 months, it’s a lot. That’s not a cheap amount of money. And it was cool. We still made money that year. Like, we still made record profits that year, so you know…

Justin Donald: That’s amazing.

Preston Brown: And what came from it was all of my lenders in a mar– like we’re not in the greatest market for home building. Okay? My company’s never made more money than it is making now, which is strange because the market is not beautiful for home builders.

Justin Donald: It’s not strong right now. Yeah, that’s incredible.

Preston Brown: Like, we’re making more than we’ve ever made even with the high interest rates, even that, and all of our lenders came after we solved the problem and they all increased our lines and they all wanted to do more for us. So, we went from nothing to biggest builder to biggest risks to the community and the industry because we could have cost all the banks and all the title companies a ton of money to back to biggest again. And now, not just biggest, but maybe one of the most respected.

Justin Donald: Most reputable, yeah.

Preston Brown: Because they appreciate that we just did the right thing when we didn’t have to and nobody was looking. Does that make sense?

Justin Donald: Yeah. And it’s tough to do the right thing when you know you can be penalized by it, when you know that the banks have these strict covenants that you have to abide by and they technically can foreclose or they can call the loan or they can– I mean, there are things that they can do that are built into the contract that by you being honest, sometimes, oftentimes that can really hurt, which it sucks to even be in a world where it’s set up that way.

Preston Brown: You know what I found? I had done the right thing. Like, I mean, being a builder, especially over the last 10 years, you could borrow from anyone. I borrowed from local banks and I mean, I had loans with different folks in there. But if you’re dealing with your local lenders that understand your community and you’re not dealing with the big corporate fat cats…

Justin Donald: And have a relationship.

Preston Brown: And have a relationship, they care about you and they see the value of you tomorrow. They’re not looking at you as just numbers. I never missed an interest payment. I mean, they got their money, but they extended my loans. They took care of me. So, just make sure that the people you’re doing business with, doing life with are the people that want to be there, not just for today, but for tomorrow, in the next decade.

Justin Donald: That’s good. That’s really good. You are a huge proponent of masterminds. You’ve been in a mastermind from early years. You got involved with Tony Robbins Platinum Partners. You eventually started your own mastermind that has since kind of gone away. I’d love to hear some of the story. Number one, why do you value mastermind so much? And then number two, I’d love to hear the story of kind of like your evolution in masterminds.

Preston Brown: Oh, man, mastermind journey. Okay, let’s see. There’s probably a few things I can’t talk about. Some of it was litigation stuff. So, masterminds for me, I’ll give you my brief story. I started as a broke kid in El Paso, Texas. My dad got cheated when we were real young. He quit his job, opened a business, and I got to be there and see the guy cheat him. And like, I got to see what hate was when I was seven, eight years old. I really hated that guy. So, funny enough, hate is actually my favorite emotion because it’s always my trigger that I need to learn something and on that day…

Justin Donald: That’s good. I like that.

Preston Brown: I learned love is not the meaning of life. Like, what this great family, I mean, we’re poor, but we had a lot of love. Love is not the meaning of life. Money is the meaning of life. So, at seven, eight years old, like I made money my God, I turned it into a corporate piece of sh*t at seven, eight years old. I mean, probably, it wasn’t a piece of sh*t, but I was a salesman. Like I was out hustling. I would go and sell the little house numbers on the driveway and tell people that I was doing it for a charity and then pocket all the cash. I would steal lemon juices from Grandy’s, the little chicken joint in El Paso, and I would sell them for 10 cents to everybody. Everything was about money and I was pretty ruthless. Like all the folks that didn’t like Trump, they would’ve hated me. I was your fired guy. He just got all the credit.

But that went on for many years. I was ruthless. I built some decent sized companies. I was formulaic, thanks to my mom. She would always say, figure out the game, learn how to win, figure out the game, learn how to win. And so, I wrote down formulas. I learned the rules to the game. But 2019, I was ruthless, I built some big companies and all this. And the guy I wanted to be, the guy who’d accidentally taught me money is the meaning of life because he was a beautiful man, sat down in his favorite chair, went to sleep, and didn’t wake up. And that was my dad and…

Justin Donald: That’s tough. How old?

Preston Brown: He was 73.

Justin Donald: And you were?

Preston Brown: This was 2019. So, I’m 42 now. So, I’m not much of a math guy, but we’ll calculate that back and leave that in the show notes if they need it. But I was already doing the Tony Robbins Platinum Partnership thing. And I was already like, being a pattern guy and looking for formulas, I was already noticing like everybody in that group had made enough money to be able to afford the group, but we were all craving something more important than business or money. And it was the connection we had with each other. Like, the first year I was there, I learned a lot and I was there taking copious notes, but the second year, I would skip half the events and just go hang out with the people. Like, I needed the people and I was like, oh, wow, there’s some to this. And I loved it. I would’ve never left. But I mean, something happened and well, I guess we can go into it some.

Justin Donald: We might as well. This is where it gets interesting. I wasn’t sure if we’d for sure get into it or not, but this is the good stuff.

Preston Brown: I’m an open book. COVID hit and for one reason or another, like, Tony’s group is a very big group, so I don’t think he could travel the same way he could have during COVID. And so, they started doing Zoom events and all this and I wanted to travel more. And to my credit, like Tony has said from stage, like, if you can’t afford my group, open your other group. So, I kind of took that and thought, well, like, I’m still going to be part of his group, but he is not traveling and it’s a recession. Recessions are great places to hire. And it’s a recession to the travel world, the hotel world, the restaurant world, so it’s the best time to rent hotels. It’s the best time to hire travel people.

And so, all the travel people that were the best on earth that were getting laid off, I was having my pick of the litter, so I hired a few of them and I said, look, there’s going to be like 5 or 10 of us that just want to travel. You’re going to coordinate events, you’re going to put on these epic things. I’ll coach people because I’d build a little social media brand and somehow, I triggered Tony Robbins, like I triggered the abundance guy. And maybe I didn’t trigger Tony. Maybe I triggered somebody in his staff, I don’t know. But I start getting these letters and they’re from this really high-powered law firm in San Diego, California. Like, I’m little real estate guy in El Paso, Texas. And they’re like, oh, you’ve done this and you’ve done this and you’ve stolen our business model. And I was like, “What is going on here?”

And of course, Tony teaches this too and it’s really funny, what you resist persists, and maybe whoever it was in his firm because I have trouble believing it was Tony himself. Whoever it was in his office that decided to sue us and resist us for– I mean, if they’d have called me, I just would’ve stopped. Like that’s how much of a fan I was. When my dad passed, I had delegated all of my daddy energy to Tony. Like, he was my mentor. He was my hero. He was my guru. He was my everything. When my dad passed, I joined his Lions group. Like, I went to the highest-level membership and I was a guy with daddy issues. And so, you can imagine what that lawsuit did to me. It was like a level of betrayal, but when I get betrayed, I fight.

And while now, I don’t even look at it as betrayal. I look at it as God’s providence because I mean, to Tony’s credit, he even made a fricking video and put it on Netflix way before this happened that said, I’m not your guru, and what did my dumb ass do? Went and guru’d him. Okay? And so, it was God’s providence that happened to me because as we got through the lawsuit, as we– I mean, it ended well. We settled it. I promised not to talk about the outcome. But I can say I’m happy with the outcome and I think probably they are too.

But the real ending was I no longer need to guru anyone. I no longer need a person who’s my– you’re my fitness guy and my faith guy and my business guy and my family guy. I mean, I don’t need that sh*t from anyone. In fact, you probably shouldn’t get that from anyone. You should probably go find lots of different people. Like, there’s a lot of fitness people that I think are probably way better than Tony. There’s a lot of family people that are probably way better. Like, he’s kind of the best introduction maybe to everything, but I’ve now looked at masterminds differently and partly because of the one I had that was what triggered them and they sued us for. And because of that lawsuit, I kind of got well known in the community beyond what I was.

And what you resist persists turned into that little 5, 10-person mastermind turning into 100 people and their spouses over like a few months. So, it blew up and we made money. Now, I made some partnership mistakes and brought in people that weren’t necessarily the right aligned partners for the long term for me, right? And so, later, I have young kids. Coaching 10 people would’ve been fine. Coaching 100 people with an unlimited coaching offer turned into like, I don’t get to be dad anymore. And so, I backed out and said, “Hey, guys, you take it, you run with it. I’m not going to do it.” And I don’t know that it’s doing well today. I think it’s probably falling down. But what I did notice about that mastermind, what I noticed about Plat, what I noticed about all the other masterminds I’ve been in is all the people there, you don’t need to guru anyone because you have these like, it’s better than coaching. It’s better than anything.

Justin Donald: Way better.

Preston Brown: Because you have an equal next to you who is your greater at something.

Justin Donald: That’s right.

Preston Brown: You are so much better at investing than me. I can sit with you as two dudes being equals. Like, I don’t have to be like, yes, he’s my guru. And like, I can learn stuff that I wouldn’t get anywhere else on earth. And we met in a mastermind and like…

Justin Donald: We did. That’s the power of masterminds.

Preston Brown: It’s beautiful, man. And I’m still a member of masterminds. I want to hear about yours more like after this, but I don’t think, if somebody can’t afford a mastermind, they can’t afford not to mastermind.

Justin Donald: That’s exactly right there. At whatever level you’re at, you find a way to get into community with people playing the game of life and business and wealth creation at a higher level than you. You just make it happen. And there’s a lot of different groups, lot of different price points.

But you got to find it. You got to find those people, mentors and peer group. And what I will say, I say this all the time because people, when they join the Lifestyle Investor Mastermind, they’re always like, oh, I’m so excited, I’ve been learning from you for a while. And I let them know. You might think you’re here for me, but what you’re really here for is the community because the community dwarfs anything I can ever provide. Like, there’s value I can provide. But if you look at the collective hole, it is way wiser, way smarter, way better at virtually everything, if not actually everything, than me.

Preston Brown: I mean, amen. I will tell you the closest friendships I have in life are not people in my city. I mean, I travel to see my friends. They travel to see me. I bought a house in New Braunfels because I have so many damn friends in Austin.

Justin Donald: I love it.

Preston Brown: Thank God. Governor Newsom, if you listen to this podcast, I just want to say thank you for what you’ve done. I will go to California and vote for you because I know you guys don’t ideate your elections every few years just so you’ll keep sending people to Austin because it’s so much closer to me in El Paso than LA is. Thank you so much, Governor Newsom.

Justin Donald: Yeah, it is, I mean, Austin’s a really special place. There’s no doubt. And I’m excited for you to be spending more time here. I think that’s…

Preston Brown: Amen.

Justin Donald: We’re going to have some fun. I was actually texting with my friend Brad who co-owns this studio with me and this building with me. And I’ve had him on my show. Easy Pay Direct is his company. He works with bigwigs and just does great job with credit card processing. But I was texting him, like, if and when Preston moves here, we’re all going to hang out a lot. Like, this guy’s so much fun.

Preston Brown: Done and done.

Justin Donald: So, yeah, well, this has been just an awesome show, an awesome episode. Where can people learn more about you and your podcast and all the cool things you’re up to?

Preston Brown: So, me, all my social medias are the Preston Brown. I wanted to get Preston Brown, but there’s this really handsome African American football player with way bigger muscles than me. So, I had to go the douche bag way and go to the Preston Brown. So, follow me there. My podcast is Problems to Profit and I mean, please follow it, like, subscribe, whatever. I mean, we launched one episode, we hit like top four in Apple. So, I was so excited. So, please follow us there and maybe for any of your folks that I would love to give a free gift, can I do that?

Justin Donald: Please do. Yes.

Preston Brown: For any of your folks that are in business, like entrepreneurs or people that run companies, one thing I didn’t, I’m a nerd, like anybody not watching this, you can’t see, but I have a giant head and tiny shoulders. I look like I was on Bobby’s world. Okay? So, I embody nerd.

Justin Donald: Bobby’s world. I forgot about that.

Preston Brown: Right?

Justin Donald: Great, great show.

Preston Brown: But when I did my coaching, I kept an Excel sheet. And I love data and I logged every single coaching session that I did. Like, our group had super high net worth people. I mean, like, probably our average net worth was $10 or $11 million, like in this relatively small, intimate group. And so, every type of entrepreneur, and I had this set of formulas for my own businesses. And as I went through and coached all these people, I developed formulas that weren’t just for my businesses, but they were universal to all businesses. And they measured the stages entrepreneurs were in and what you needed to do. And what I found was all of the coaching calls that were around business, we’re like 14 topics. All of it. Now, there were a thousand different topics if somebody was going through a divorce or if somebody like had some health challenge or whatever. You can go a thousand ways in mindset.

Justin Donald: Ways to distill them down, 14.

Preston Brown: But there were only 14 business relevant topics. And so, I made videos about all of them. Because I decided I don’t want to coach anymore, I’d rather just democratize entrepreneurship because people don’t realize, dude, people don’t realize what AI quantum computing, robotics is going to do to the world. If you do not learn entrepreneurship now, get ready for the unemployment line. Like, heart-to-heart entrepreneurship is coming back by force. So, I made all of these videos and I would love to give them away for free to all of your listeners. Anyone who wants it, please go on. Just maybe give us a review and say, “Hey, this was great.” Or, “Hey, add this,” or whatever. Like, we’d just love to hear your feedback. But yeah, like, go to ThePrestonBrown.com and/or what is it called? Let me get my website name BFS.ThePrestonBrown.com. And yeah, like, we’ll put a link in the show notes for awesome stuff.

Justin Donald: Hey, that is amazing. What a great gift. Thank you so much for being on the show, for flying out here, spending some time today with me. This has been a blast.

Preston Brown: Dude, thanks for having me. This is so much fun.

Justin Donald: Well, I love wrapping it up with a question to the audience. I ask this every week, but what is one step you can take today to move towards passive income and move towards a life that you desire, so a life that is on your terms, so not by default, but by design with intentionality? What’s something that you learned from Preston today that you can put into action today? Thanks, and we’ll catch you next week.