Whether you have been investing in real estate for 6 months or 20 years, you can always get better by studying those who’ve been in the game longer than you. I did that several years ago when I attended a seminar taught by Pete Fortunato, a veteran investor with over 51 years of experience!
Pete is also friends with fellow Florida real estate investors John Schaub and Jack Miller (deceased), who have been two of the most influential real estate teachers during my real estate career.
I took pages of notes at the 1-day seminar, but I narrowed the lessons down to my 3 favorites. I’ll explain each of these top lessons in the rest of this article.
Lesson #1: Commerce Is About People
You can have everything in life you want,
if you will just help other people get what they want.”– Zig Ziglar
It’s easy to be fooled into thinking that success in real estate or business is primarily about buildings, numbers, or paperwork.
It’s not.
Everything in our business starts and ends with real people. And just like you and me, these people have needs, problems, frustrations, desires, goals, and hopes.
By focusing FIRST on people, the rest of the business works much better.
One Relationship, MANY Positive Transactions
Pete told us a story about one of the first deals he did, back when he was just 20 years old. He bought a triplex from a burned out landlord. This landlord took a leap of faith with Pete by seller financing part of the purchase price to him.
Pete made money on this deal over the long run. But MOST importantly, Pete demonstrated his competence and his trustworthiness to this person.
How did that pay off for Pete over the years? That one happy seller did over 27 other transactions with Pete and gave him countless referrals for other deals. The seller also gave Pete a positive introduction to his banker who made Pete many other loans over the years.
How valuable was that one positive relationship to Pete?! The impact was enormous!
And that result is not a unique to Pete. I’ve had almost the exact same experience with multiple people in my business.
Pete reminded us that some of the important people in our business include our tenants, buyers, investors, sellers, referral sources, contractors, and vendors.
When you make people and relationships your focus, Pete says it changes everything in your business. And this isn’t just a fuzzy, feel-good philosophy. It’s also the most profitable.
Lesson #2: Use Multiple Currencies To Solve Problems
We can not solve our problems with the same level of thinking that created them”
– Albert Einstein
I see my primary real estate investor role as a creative problem solver. So I loved that Pete emphasizes being creative and stepping outside of artificial boxes and limitations created by our society, our industry, and our own minds.
The key paradigm Pete taught is the concept of currencies.
We all know the most popular currency: money. What we call money is just a piece of paper printed with fancy green ink by the Federal Reserve Bank.
Are the fancy green pieces of paper what we really want?
Pete told a funny story about a conversation with one person trying to sell his house. The person said,
I just want cash for my house.”
Pete responded,
Cash? That’s what you really want? So if I brought a suitcase with $100,000 in Federal Reserve Notes, what would you do with them? Decorate the walls? Use them for insulation? Take a bath in them?”
His story makes the point obvious. Money is just a currency or a medium of exchange to get something else that we really want.
So the key issue to solve isn’t the currency. It’s the problem that we think the currency will solve.
So your job as a creative deal maker is to:
- Figure out the real problems to be solved (this is usually related to real estate, but dig deeper ).
- Come up with solutions that are win-win.
The solution part of this equation may or may not just be giving someone cash. Most people in the real estate business today are creatively lazy from years of easy money markets awash in cash.
When you’re willing to step back and think about the whole problem, many alternative solutions arise that may be much better than the standard cookie cutter approach.
Here’s an example from my investing experience.
An Older Seller Who Just Wants to Cash Out
One day I got a call from a property owner. The person on the other end of the phone was a man in his 70s. He owned a rental property that was now vacant. The previous tenant had skipped payments and then trashed the place. After this experience, the owner “didn’t want to fool with it anymore.”
We met, walked through the house, and talked. He was a man of few words, but he did tell me what he thought the house was worth. And he also said he wanted to get his cash and move on.
What if I stopped there? The price was a little too high given the condition of the property. I was not willing to pay him cash at that price.
Is this deal dead? Not at all. I just need to learn more about his true problem.
Ask More Questions and Get to the Root of Problems
Instead of walking away, I asked more questions. For example, I asked what he would do next. Would he buy another rental? Or just put the cash in the bank?
It turns out he had liked the financial part of being a landlord. The regular monthly income served him well over the years. And he wasn’t exactly excited about 1% CD rates in the bank. He just “didn’t want to fool with tenants, vacancies, and maintenance.”
Aha! Now I see the problem more clearly.
So, I decided to make him multiple offers (aka solutions).
Offer Multiple Solutions to a Problem
First, I offered the owner all cash at a lower price that I was more comfortable with.
Second, I offered him a scenario where I paid him his asking price, put some cash down, and paid the rest in installments over time (aka seller financing). The interest rate was higher than he could get with a bank CD but lower than I could get from my lenders. And I loved that I could cash flow a quality property from day #1.
He didn’t like my cash offer. And initially, he didn’t like the seller financing offer.
But I explained that he’d get a steady monthly income on the first of each month while I handled everything with tenants and headaches. Also, I planned to spend thousands of dollars improving the property, so if something happened to me he’d get the property back in much better condition.
After feeling me out and getting to know me better, the man agreed to the seller financing offer. Unfortunately eight years later he passed away. But we both helped each other while he lived, and his heirs continue to get an income stream from me today.
Solving problems creatively requires a larger toolbox of “currencies” than ordinary real estate investors. You must become an expert with those tools and then LISTEN carefully to people. But if you do, you and your customers can be rewarded handsomely.
Lesson #3: Don’t Forget Why You Do This!
The most important kind of freedom is to be what you really are.”
– Jim Morrison
Pete shared an amazing story that demonstrates why we really do the real estate business. I’ve since borrowed this story many times during my own talks and articles!
Pete had three friends who were all real estate investors, and they decided to go on a trip together to Europe. Each of these three investors was successful in their own right.
The first had 18 houses that he owned free and clear (no debt owed).
The second had 48 apartment units, and he also owned his free and clear.
The third had 1,500 houses (!!), and he ALSO owned them free and clear.
Given their investments, isn’t it likely that all three of them had enough money to pay for a nice trip?
One person in the seminar audience even blurted out to Pete, “The guy with 1,500 houses could probably buy part of Europe!”
So after one week together, the three friends had a wonderful time. In fact, it was so much fun that the one with 18 houses said to the others, “Why don’t we just stay another week. I heard about some other great tours we could go on.”
The second investor with 48 apartments said, “Sure. Sounds great!”
But the third investor with 1,500 houses said “I’m sorry. I’ve got to go back to take care of some business problems.”
Hmmmmm …
The lesson?
Why do you really invest in real estate? To own a bunch of properties? Or freedom?
Freedom to Do What Matters
If personal freedom is your why for investing, be careful of the trap that more is always better. You can always continue justifying new growth, new goals, and new mountains to climb.
Pete reminded us to get only as big as is necessary to meet our personal goals. After that, stop, slow down, and reconnect to your reason for investing in the first place. At some point, bigger businesses and portfolios bring more hassles and layers of management headaches. You may earn more money, but each additional dollar will bring less and less personal freedom.
The people I look up to, like Pete, have chosen to grow their personal portfolio to a manageable size. They then use their extra time, money, and energy to teach and invest in other entrepreneurs. They help others do what matters by helping them also become financially successful.
In case you haven’t noticed, that’s my own motivation here at CoachCarson.com!
What matters to you may be totally different. And that’s wonderful! But the important part is to stay clear on YOUR reason for investing. Then you can use your “why” like a compass to steer your business and investing decisions over time.
What do you think about the top 3 lessons I picked up from Pete Fortunato? Have you found any of these lessons to be true in your life or real estate investing business? I’d love to hear from you in the comments below.
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Blake says
Incredibly informative.
Chad Carson says
Thanks Blake!
Tim King says
Pete is a friend of mine and a National Treasure, Great Article!
Chad Carson says
Thanks for reading and commenting, Tim! I agree – Pete is awesome! Learned so much from him, both from what he teaches and the way he carries himself.
Michael says
Out of curiosity, what happened with the note on the rental property once the seller passed away after 8 years?
Roxanna says
His heirs continued to get the payments.
“Unfortunately eight years later he passed away. But we both helped each other while he lived, and his heirs continue to get an income stream from me today.”
Chad Carson says
Good question, Michael. The contract was for 25+ years and the heirs just inherit that existing contract and take the place of the seller. So, nothing happens other than they now own the note/mortgage and receive my payments instead of the original seller.
Divnomics says
These are some great lessons. We have found out the power of relationships as well. Which is the first thing we did before when we got into real estate. We know now several other investors that share deals sometimes, a solid property manager we trust and so on. We learned the most by listening to experiences from more seasoned RE investors.
Possibly all 3 of these lessons are easily been overlooked when it comes to RE.
Chad Carson says
Thanks for sharing your story, Divnomics! That was very smart of you to begin building those relationships and listening to others from the very beginning. Glad to see it’s paid off well for you!
Robert says
Great info…..I’m about to make an offer on a tract of land to develop and the first thing I am asking the owner is what are his goals with this land…..ie, maximize sales price, income stream (owner financing), co-op in the development, 1031 Exchange, etc…..not everyone wants to cash out on their property right away.
Chad Carson says
Great point, Robert. I think so many people forget about these options because the status-quo for transactions is the seller never meeting the buyer. The agent is in the middle, and no one ever gets to know or trust one another. So many more possibilities open up when we take that extra step (like you did). Thanks for sharing.
fierymillennials says
Excellent lessons in this post, Chad! I’m inspired to make a few phone calls to some long time landlords in the area and see what they have to say about the area.
Chad Carson says
Good idea, Gwen! I have found experienced landlords to be very open to sharing when they get requests from sincere, enthusiastic younger investors. Let me know how that goes!
guyonfirea says
What a great lesson and person to learn from. Especially the ‘why’ part. I’ve seen people overcome with greed and buy too many properties to where it runs their lives.
Everyone should know their ‘why’ and what’s ‘enough’. Sounds like a great seminar.
Chad Carson says
Yeah, Pete is a wonderful teacher with a wealth of experience. Sometimes he goes down some creative-deal-making rabbit holes that have everyone’s head spinning. Lol. But he usually brings it back.
Definitely agree on the importance of your ‘why.’ Everything makes more sense in that contexts.
centsiblyrich says
Love this! I’m learning, firsthand, the incredible value of those relationships. Since we’ve purchased our first property (in June), one local investor has helped us so, so much. I honestly don’t know what we would have done without him. And, since we’ve built that trust, we are using his business to get some of the work done on our house. Win-win!
Chad Carson says
That’s great to hear! Yeah, I can’t think of ANYTHING more valuable than trusting relationships in your business. If you haven’t already, check out a book called “The Speed of Trust” by Stephen MR Covey (the son of the 7 Habits guy). It explains the power of trusting relationships in even more detail.
Dan Herz says
Pete & John Schaub are my investing heroes. Long term buy & hold of SFH’s may not be super sexy and exciting but thanks to both of them I know of no better way to build wealth.
Chad Carson says
I agree, Dan! I think it’s John who always says look for excitement and sexiness somewhere else – NOT in your investments. Lol. So true!
Karl says
The power of relationships is huge. I don’t do real estate investing at this point, but I’m trying to build my tax prep and contract Controller services business. I interned one summer with a small firm 12 years ago back in college, and I’ve stayed in touch with the lead partner over the years. He called me up and is giving me first right of refusal on buying out a piece of his practice that is profitable but doesn’t fit his core business market that he wants to focus on. I’m amazed that the meager work I did back then put in line for this opportunity now!
Chad Carson says
Wow! That’s such a cool story, Karl! I am constantly amazed how powerful the simple premise of building honest, helpful relationships can be for us. I think that’s why Warren Buffett tells all of his managers that he’ll forgive them if they lose money, but he’ll be ruthless if they damage one shred of his reputation or relationship with others. It’s more valuable than anything money can buy. Good luck with your new biz! sounds cool.
Nina says
I love these three lessons and I love the focus on utilizing creativity to solve problems. I really appreciate this aspect of your methodology. You use all the tools you’ve gleaned from your research and experience to not only become more successful but as you said, help others with their dilemmas. It’s like psychology, finance, science, and art all rolled up into real estate deals.
Chad Carson says
Thanks Nina! I love that way of thinking about it – psychology, finance, science, and art all rolled into one. In college I was always resistant to specializing and wanted to take a little from many disciplines (liberal arts at it’s best), so maybe this is the same:) But no matter what we bring to the table, PEOPLE are certainly at the center of it. So the more you care about them and earnestly seek to help them, the better you’ll do.
Thanks for commenting!
Patsy Waldron says
Great column, as usual.
What resonates the most is knowing my “WHY” for doing real estate- it’s reaching financial independence from the uncertainty of the job market and the tyranny of a job, rather than creating astounding wealth. I was reading a thread on BiggerPockets the other day by a guy who started out with a certain idea of what constituted financial freedom, but then increased his goal to amassing lots of wealth (and doors)- it just seems to me that in the process he created a LOT of work for himself…. I want to always remember what ENOUGH is.
I have to say that, so far, I’ve found the “people” part the most challenging. Not that I don’t like people, but there seems to be SO MANY FLAKES in all parts of the real estate industry, lol. From contractors to (prospective) tenants to lenders…. I’ve found it hard to find people to trust. Slowly getting there, but in my 10 months of investing, there has already been a lot of ERROR in the trial! I am sure they will make for good stories someday (once the burn subsides!)
Chad Carson says
Thanks for your insight, Patsy! You had me laughing on the many flakes you’ve run into in the real estate industry. I felt the same way my first couple of years in real estate. So, you’re not alone! That makes those relationships with great lenders, tenants, contractors, etc even more valuable after having those experiences!
Here’s to continuing to move closer to that true “why” behind all of our efforts!
Mary Beth Harris says
Great story and lesson. Thanks for sharing Chad. keep posting!
Chad Carson says
Thank you Mary Beth! More to come in the pipeline!
Four Pillar Freedom says
You bring up a great point about the idea that “more is not always better”. It’s almost like there’s a tipping point – more and more money brings more and more freedom up to a certain point, but it’s possible to have so many assets that it becomes time consuming to manage them all. The key is to use financial assets (like real estate) to provide the cash flow to live how you want, not to let your assets become a headache to manage.
Great article Chad!
Chad Carson says
Thanks for the comment! It’s exactly like there is a tipping point. And the funny thing is that the point is different for each of us. But if we don’t find it for ourselves, we’ll go down a slippery slope of being controlled by our growing business instead of having the freedom we originally wanted.
Brent Sutherland says
The story of the 3 investors at the end really resonates. Growing too big is not my objective. It’s all about lifestyle design for me, in a way that is manageable but still effective in the end result (financial flexibility and freedom). Great read, Chad. Thanks for sharing!
Chad Carson says
financial flexibility and freedom … yes and yes! Thanks for listening and for giving some feedback, Brent. Always good to hear from you.
Redd Gardner says
Chad , there is a book I read a LONG time ago , it is titled the Peter Principle. It helped me a lot . As of now I just want out of dealing with people and real estate . I used to have 18 rental props and I had to take care of all the repairs as there was not enough cash flow and profit to be able to hire help on a consistent basis. I was always running here and there to do up keep. I did not have a ‘ life’… Fortunately I sold / owner financed most of the rentals and only have a couple left to deal with.I’m a LOT better off now . Right now I’m having to foreclose on ONE. Anyone know how to set up a recurring Option to Purchase wherein I can avoid a foreclosure action ?….Thing is I dont know what my life will be like in 8 to 12 years when the money stops coming in and I’m 73 to 78 years old and prolly a lot more decrepit . I can be found on FB if anyone has advice , Redd Gardner , Seneca.
Chad Carson says
I’d never heard of the Peter Principle, but I looked at the summary. I can definitely see how that applies to all sorts of entrepreneurial situations as well. You’ve found a real estate strategy that fits your lifestyle with the owner financing. I don’t know any silver bullets on avoiding foreclosure, other than just renting. Thanks for sharing, Redd.
Raul Vargas says
Wow Chad, this was a good podcast. Your emphasis that this business is about relationships and people is so true. RE just happens to be the medium by which these relationships are formed, exist, and can last for years. Chad I thought that you were the end all and be all of finding the creative solution to REI. But I’m in the midst of a Pete Fortunato interview on a another podcast and the creative deals he pulled together totally blew my mind. A higher paradigm and a greater way to approach REI with the F2F relationship at the center. It just so happens that I’m attending a local REIA gathering tonight. Guess who the keynote is? Yup. Pete Forunato.
Your account of bringing three different options to the table with the older gentleman who was done with tenants was very insightful. I’ve learned that strategy from another source. It puts the decision making and control in the seller’s hands. Another point for relationship. Thank you for putting this out there Chad. Keep up the great work!
Chad Carson says
Thank you for the feedback, Raul! How lucky that you get to hear Pete at your local REIA group. He is one of the most creative real estate minds out there. Sometimes you have to slow him down to explain all the steps in between that he just assumes we “got”. Lol. I appreciate you listening. Best of luck with your own REI projects.