Hard Lessons

Mike Hambright (00:00.674)
Hey everyone, welcome back to the show. I’m really excited to talk to Michael McDonald today, old friend of mine. We’re gonna be talking about really kind of a story of his struggle over the past few years and a struggle that a lot of you will resonate with. So kind of how to turn lemons into lemonade, how to turn those hard lessons into making you more bulletproof, a better business person, maybe a better overall person, husband, father, all those things when you go through the struggle. So you don’t wanna go around the struggle because you need some of those lessons. Nobody wants those lessons.

but they make you stronger. excited to share this with you today. Michael, welcome to the show, buddy. Yeah. Yeah, yeah. So, hey, before we jump into this, I know we’re gonna talk a little bit about your story of the last few years, and it’s not that different. you know, I have a lot of, I know a lot of kind of high level operators and it’s not taking anything away from you, but it’s a common, it’s been a trying couple of years. A lot of people have been through the shit, if you will.

Michael McDonald (00:33.051)
Mike, good to be here, man. Excited to dive in.

Mike Hambright (00:56.394)
And the reality is, is it makes you a better person. Like there’s things in my life that have happened to me over the years, whether it’s business or personal or whatever, that I thought my like, I thought this was the end. Like it’s like, this is the worst thing that’s ever happened to me. And then time goes by and you’re like, man, that’s one of the better things that happened to me because, you know, there’s always a silver lining that we never see when it’s happening. But I think a lot of people have been through that over the past couple of years and some have given up and moved on to other businesses or, and some.

Michael McDonald (00:56.487)
Mm-hmm.

Mike Hambright (01:24.494)
haven’t and it’s important to kind of you know learn those lessons along the way but before we jump into this I think it’s gonna be this can be a great show today tell us a little bit about your your backstory and a little bit more about you

Michael McDonald (01:35.645)
Yeah, 100 % man. So it’s definitely perspective is everything, right? And going real far back to the beginning, when I learned about Wholesale Real Estate, I attended that workshop, I put the 20,000 on credit that I didn’t have. And I found myself sitting at home with my wife after I made this investment, figuring how in the world am I gonna make back $20,000 when I’m making

$30,000 a year and barely affording my bills at the time. And that was a moment where we could have sat there and said, six months go by, I haven’t gotten a deal, I’m screwed. This isn’t for me, this isn’t gonna work, right? Or I could have said, hey, this is the attitude of I’ve gotta be better. I’m going to do this and I’m not gonna quit. If I don’t quit, I can’t fail. And so I say that to say,

And the seventh month after my wife started questioning is this going to work or not, I landed a $20,000 deal and I had a sigh of relief to say, wow, this actually works. This wholesale thing that people talk about, you can actually do and make money with. after that, I went on to wholesale 10, 15 properties to a guy who ended up becoming my business partner.

Shortly after that, I let him know I was in Nebraska at the time and I let him know, man, my wife wants to move to Las Vegas. So I know we just started business together, but would that be cool? Right? Like, that, is that something that you support? And you know, like looking back, he was like, who is this guy? Right? This crazy man. Like we just started a business. You just quit your job to go full time in real estate six months in, and you want to move to Vegas. You’re nuts. Right?

That’s what he was thinking. He didn’t tell me that until after the fact, but he supported it. And I moved from Nebraska in 2019. I quit my job. I sold my house, moved across the country and to a place I’ve never been and to be closer to her sister, my wife’s sister, and couldn’t have done it without like my wife’s support. We had one baby at the time. We now have three kids and

Michael McDonald (03:58.867)
Life is just a lot different, man. At that time when we moved here, we had no idea what was gonna happen. I learned virtual wholesaling. I learned that I can talk to sellers over the phone and I can buy their house. And you know what time it was, right? It was 2019, 2020, 2021, interest rates were really good. We were shooting fishes in barrels, right?

you know, it was hard to lose money in the real estate business at that time and We we had a good run right we went on to We learned about investor fuel I can’t remember what year was in 2020 We met some really high-level people and we started really leveling up and we got to the point where We just like my partner and I and one acquisitions guy

and like one lead manager and we started hiring like the team and stuff. We did $2.2 million in 2021. And that was starting from scratch with our own dollars, with the $500 a month marketing budget campaign up to a 55, $60,000 a month budget and just figuring it all out, right? So like that was up to the point of before

Mike Hambright (05:09.848)
you

Michael McDonald (05:22.471)
things got a little bit challenging. So I’ll kind of stop there just in case you have any questions.

Mike Hambright (05:26.092)
Yeah, we can talk about, we’ll talk about kind of the past couple of years and some of the struggles that people have faced. you know, I think when you’ve been through a tough time, you’re more likely to throw yourself into a difficult decision because you get confident at like figuring stuff out. You’re like, I don’t know what to do, but here’s what we’re gonna do. Right. And you might be wrong, but you just get confident with making decisions. And so, you know, you would probably be more confident now to move across the country again because you’ve done it before, but you just kind of know.

Michael McDonald (05:55.165)
brainer.

Mike Hambright (05:55.968)
that it just it like toughened like all these things toughen you right they make you a better entrepreneur and it doesn’t mean that you won’t have challenges again I mean we tend to operate on the fringe so we always kind of push the limits on things like yeah I say on one hand you get you get better at it kind of falling it kind of like pushing yourself into uncertainty but we also tend to kind of push the limits of like

Michael McDonald (06:08.115)
Mm-hmm. Yeah.

Mike Hambright (06:21.198)
well, I’m gonna triple whatever. You you can just kind of like go way too far probably, I mean, I do. So anyway, but these things all make you stronger. mean, it’s like, how do you turn lemons into lemonade? And the reality is, is the very business we’re in is helping people through difficult situations. So we need to be good at solving difficult problems for other people and ourselves, right, ultimately. So.

Michael McDonald (06:47.123)
Yeah, you know and to your point I want to I want to touch on this because you know I say you know I say this is where we were you know it was it was hard and then you know we didn’t just get there with like a snap of a You know a drop of a pin right like there were hundreds of sellers helped there were some really big problems solved there was scrambling to get the money to buy the house there was

I don’t know if we accounted for this expense, like where’s that money gonna come from? Like there’s all of these questions or like, ooh, I didn’t realize we had a $25,000 media buyer bill to pay still. Like there’s all these things that, these are real challenges that we have to think about and solve for.

Mike Hambright (07:35.394)
Yeah. Yeah, for sure. So let’s talk a little bit about, you know, I guess a little bit about your story over the past couple of years. I know you’ve been through some struggles and a lot of people have. I think that it’s interesting because there’s, I’m not trying to take anything away from anybody. I’ve got a lot of friends that over the past couple of years have struggled a lot. People that have crushed it over the past couple of years. It’s just, that’s one of the things like as a student of the game, it’s always blown me away because

On some levels, that was my story. I came in in 2008 and everybody was running away. And I have some friends now that at the time we weren’t friends. Like we were just kind of new acquaintances that will say like, I thought you were an idiot. But it turns out that they weren’t. mean, he’ll say like, well, you weren’t, you were a genius. I don’t if I was a genius, probably somewhere in the middle there. But it’s all perspective, right? And I’ve seen people like.

where I had raging success for a few years and then I thought, man, things are getting tough. Things are really hard here. This is like 2015 or 2016, you know? And then I see somebody else come out of nowhere and just crush it.

I could say some names of people that you would know that just like they came out of nowhere and just crushed it for a couple of years. And so it’s a lot of it is perspective of how hard you’re willing to work, how much shit you’re willing to wade through or whatever it might be, like whatever your demons are, whatever your challenges are. Some of it is the market, some of it is interest rates, some of it’s a macro economy. A lot of it’s in between your ears, right? So, not.

Michael McDonald (09:07.047)
Most of it’s in between your ears.

Mike Hambright (09:08.598)
years, a lot of it is, right? so, but just talk, let’s, can I keep talking about like what you’ve gone through over the past two or three years?

Michael McDonald (09:16.765)
Yeah, for sure. So I’ll never forget this, And I share with you, I had to kind of, because when you have that successful of a year in the eyes of most people, And the reason I say it like that is because social media is fooling, right? Sometimes somebody looks like, if you’ve got this big team, right? When we had a team that was a medium sized team,

and we were all on the same page and we were all running the same route, if you will, we were just crushing it. We had a dial-in thing, we didn’t stray from that, we kept laser focus. It’s when we took our, we started getting like shiny object syndrome and looking at other things. So for me, it was coaching and a podcast and hey, we crushed this market, why don’t we go do five other markets? It’ll be easy, right? And like the reality was that was a distraction.

because we had to hire more staff. We didn’t know the market, things broke. There was a diminishing return on marketing. so all while we’re growing this team, at one point we got up to 15 employees and our overhead was $150,000 a month. we’re like, okay, well, if we did 2 million like this, well, we should be able to do four, right? Like, we’ll double. Like that was the logic.

I’ll never forget, like one of my mentors in 2022, I think it was the end of 2022 when the interest rates were already up, he said, the play that you ran to get to this point is not gonna be the same play that you run for the next three years or the next four years during this cycle. And I have chills right now because

The partnership that I was in at that time, we weren’t clear on our roles and we weren’t clear on who was calling the shots and who was making the decisions. so what that led to was indecision. And it costs us probably a million dollars over the next few years. And what I mean by that is we didn’t make the changes that our mentor suggested us to make. He said, you’re gonna have to make some hard decisions. What does that mean? You’re gonna have to

Michael McDonald (11:39.411)
you don’t need an underwriter. Who are you? You know what I mean? Like you’re running a small business. You don’t need an underwriter. You need all these people. Get lean, fire them. And we just held on. We said, ah, we’ll get through it, you know? But getting through three years of high interest rate environment wasn’t just like a easy thing to do. So what ended up happening is our 2.5 million or 2. whatever million of revenue,

previous year ended up becoming one million the next year of rev. So we lost half of our profit or a rev and our overhead was the same. So we lost the variance of all of the payroll, right? And so that was painful. And at the end of that year, I got help. I started getting totally burnt out because you you imagine this.

You’re shooting fish in a barrel, you’re helping a lot of people, you’re making a lot of money, and you’re working like half part-time, right? Traveling, having fun, living life, not really. It’s not even that hard, right? But then, but when it is hard, but you’re not making money, and it feels like a grind every single day, and you’re not making any money, and it feels like there’s no light at the end of the tunnel, you start to look inward. And I think that’s what’s important is I did, and thank God I did, because

I had to figure out who I was, right? And why did I create this situation? This was my fault. And what attracted me to this situation? And why am I here? And what is this all for, right? Like these are some very deep questions, right, that I had to ask myself. And ultimately what it led me to realizing is I stuck a bandaid on the problem. And I decided that

it didn’t make sense to continue on with my business partner at the time. And so we decided to part ways, right? And hired an operator, you know, made some changes in the business and let go of some people that, you know, were kind of like nice to have staff at the time. And just…

Michael McDonald (14:06.641)
got focused, we looked back at what was working when we got to that point and eliminated all distractions. And it forced us to get better. And like I said, I think there’s no pain, no gain, right? You’ve heard that. But I think you have to find some love for the pain. obviously losing, like we lost.

you know, few hundred grand, right? And we wouldn’t have been able to even survive that like two years in a row. We wouldn’t have been able to survive that had we not made some good decisions leading up to that point, like buying some rental properties, having lines of credit, having some liquidity, right? And so that helped us really survive that challenging time. But as I reflect back on it,

the last two years when I was in the midst of that, I felt like, like you said, know, I feel like you’re dying. Like you feel like, I don’t know how I’m ever gonna get out of this situation. And, you know, now that I’ve, now that I can see the light, right? And like this year is just a ups, like we flipped that bad year on its head and we’re on pace to probably double, if not two and a half times that. And I look at those,

those times and my wife, you know, I share with her what’s going on, but like I don’t give her all the details. You know what I mean? And she was like, now that I’ve shared with her that we’ve kind of made it through that, she’s like, how did you deal with all of that? How did you manage to get through that? And, you know, our life just continued to go on like everything was just fine. Like we still would, we still got to go on vacation. Like we made the best memories.

You know, we did a lot of things that were just very joyful and memorable during that time period when we could look at it and say, that was the worst two years of my life. But I look at it I say, those were the best two years of my life because I learned so much from them. And I’m a way better investor. I’m a way better husband. I’m a way better dad. I’m more present. Right. There’s just a lot of things that.

Mike Hambright (16:17.55)
Yeah.

Michael McDonald (16:32.335)
I learned through those challenging times where I look back and I say I grew a lot.

Mike Hambright (16:37.59)
Yeah, you know, thanks for sharing that. So one of the things that a lot of people do is they move to the sidelines or, and I’m not here to knock any of those people, but what I can tell you is when you face that adversity and you go through it instead of around it, you can’t quite equate.

the benefits that that’ll have over time. when the market, because it is a cyclical market, right? There’s gonna be another cycle. There’s gonna be another easy time. But what happens is the people that get in on the cycle the earliest and stay the latest tend to do, now if you overstay, you’re welcome.

You know, what happens for most people is most people won’t get off the sidelines until the market is kind of hot again, but they missed out on an opportunity. And then on the tail end, they’ll be nervous that something bad is going to happen probably way sooner than it does. And they just pull back out because they’re just timid. But after you’ve been through it, you’re willing to face it. Right. And so what happens is the next time there are cycles, which there will be, you can plow right through it and never pull back because you’ve, you’ve essentially

your skin is tougher than it was, right? And you just know, I’m not gonna pull out, like you never stop, but you use, you pull different tools out of your tool belt to kind of weather that storm. you just, and a lot of times it’s different exit strategies, it’s buying a little more conservatively, whatever it might be, but you just kind of use the plays that you’ve been through before because you’ve been through it before and you know what not to do.

Michael McDonald (18:15.507)
100 % and that is what happened is we started, had to call different plays and cause the wholesale market, it got squeezed a little bit, right? And so it was either we bought houses and we bought deals to keep going or we were to be left with the bag essentially. And so this year, what’s been a huge game changer for us is we’ve taken a lot of risk off the table by buying less deals and

even though we closed out 100 deals already this year, I say we’re buying less, but we’re wholesaling almost everything. And that’s been really good for our cash flow for the business. And it’s allowed me to really slow down the amount of activity that goes on in your brain, the amount of thinking that happens when you’re managing 25 flips at a time. And really just like,

dial in the business, like really dial things in again and cherry pick. And so I started a brand where we’re holding more properties and it’s really specific to the, I would say more so the Hispanic community, but primarily because they can’t get regular financing. So we’re offering financing for those folks. And that’s been awesome to watch.

My spreadsheet of how much income could I make to get rich before has moved over to a spreadsheet of how much cash flow can I create and how much net worth can I build from just being smarter about buying these investments. And so that’s what I’m up to right now.

Mike Hambright (19:59.342)
I mean, that’s part of the lesson, right? Is like to be less transactional and buy assets that are either rentals or owner finance or I think you’re doing rent to own type stuff. Like assets that are gonna pay you over a long period of time, which that was one of my early lessons too. I, know, everybody looks back and wishes that they had kept more of the deals that they had done as rentals, but, and I do as well, but.

there was a point where I’m like, because when you’re keeping rentals or when you’re doing a long-term strategy like that, you generally are sacrificing some revenue today, right? You’re like, well, I could wholesale this or could fix and flip this and make 20, $30,000, but I’m just gonna keep it. you know.

keep that equity for now and harvest it down the road, right? So it’s a hard decision then. In hindsight, I wish I had done more of them, but of course everybody does. But it makes your business stronger too, because now you’ve got essentially another stream of income, or it could be an insurance policy, like something that you could sell off if you really needed to, where if you’re just very transactional, you don’t have that to lean on.

Michael McDonald (21:10.675)
100%. I think it’s just like the reason why people go to mastermind is to get around smarter people and learn from things that, the mistakes that they didn’t have to learn essentially. Or if you have too shiny of object, can be a problem too, right? So you gotta, for me, it’s keeping the blinders on and just doing what I know is gonna get me closer to what I ultimately want, which,

Financial freedom is the goal, right? And that’s what we’re up to. I would say, kind of reflecting back to on the journey, why I think it’s so important to who you’re listening to, who you’re talking to is because there’s always gonna be news, right? You don’t have to listen to it though. So what I mean is,

the interest rates are high, the sky is falling, right? Like that’s been the news for a while, but the people who are crushing it right now, don’t, that doesn’t mean anything. That’s somebody else’s economy. I want to pay attention to my, yeah, I want to pay attention to my economy, what’s in between my ears and what I’m feeding my brain every day, right? And so.

Mike Hambright (22:23.608)
You can make your own economy. That’s right.

Michael McDonald (22:34.867)
I would just challenge anybody. Obviously, I went through a tough time. do not accept that happening again. Thankfully, every investor was paid back. I was able to pay my bills. Nothing deathly happened. It felt like it was going to be really hard. But my point is, what you focus on is going to get there. You’re going to get closer if you focus on what more of you want.

So stop focusing on the things that you don’t want and that don’t serve you.

Mike Hambright (23:07.832)
Yeah, let’s talk about, I wanna make sure we don’t run out of time, but a couple other things that we talked about up front is, what happens is a lot of people, again, not to knock anybody here, but in a tough market, they just sometimes, if they had a bigger team, they’ll go down to essentially being a solo entrepreneur, just doing everything themselves. I’m gonna get so lean that it’s me doing everything. And you didn’t do that. And I think that’s, everybody has their own goals, but nobody’s goal is to work more.

Right. And so I think it’s easy to get in the process of getting lean and kind of making this work to just rely on just you. But I know I’m sure you leaned out and you talked about that a bit. But I think the important thing is when you go through a market like this is to keep a core team around you because you don’t want to be self-employed. You want to be a business owner that you have some flexibility with your time. Like you said, if you had gone down to just you and you talked about over the past couple of years.

you were able to still spend time with your kids, take some little vacations, do some things like that. If you were doing everything, it’s a lot harder to do that, and that’s not really the life that you got into this for in the first place.

Michael McDonald (24:18.003)
I’m so happy you said that. what it also does is for the ones who stuck around, like, I’ll be honest, we didn’t know if it was gonna work out. It was to the point where I don’t know. I have faith and I’m not gonna quit, but just because I don’t quit doesn’t mean that I’m a machine that can somehow pull off a miracle, right? And the reason I say that is because I have

incredible people around me. have an operator who, you know, who rode out this storm essentially, who is an absolute stud. And we’re working on a project together that I think is going to make buying houses look like a kindergarten thing. And because it’s going to be so exponential, and I can’t share anything about it yet, because it’s too early. But I will say that the team

that stuck around, it just goes to show you how much they believe in the mission, right? And the impact that we can make, the amount of sellers that we’ve helped, we’ve helped 100 people, sellers. That doesn’t account for all the contractors, all the title companies, all the lenders that, you know, there’s just so many people. And so, not to mention, here’s the biggest thing, right?

the freedom. Like I’m going to take my family to Disney in two weeks. And I asked my team before I left, like, hey guys, you know, what would need to happen over the next two weeks for me to, you know, go away for 30 days, right? And things to not fall apart, right? Because it would be easy for me to sit here and say that everything would run perfectly. We’d come back with more money. But like, that’s just not quite the reality.

The reality is they said, well, we pretty much have everything going except for maybe the marketing. I’m like, hey, I’ve got good news. The marketing is now automated. So that’s why we do it though, right? Is so we can have that ability to do it. Now, does somebody who has these bigger goals always probably take enough time for themselves or to take a sabbatical? I’ve never done it. A week, I think.

Michael McDonald (26:41.713)
in Hawaii at the beginning of this year was probably the longest that I’ve done. I think we should. You know what mean? think we build these things, we go through these things to have the freedom so we should take more advantage of the fruits of that labor.

Mike Hambright (26:57.454)
Yeah, I know a few of the things that you did too is just get laser focused on the one thing, right? I mean, I know you and I have talked a lot over the years and you’ve done coaching and you started a podcast. You’ve done a lot of things. You started to operate in multiple markets and you really kind of just got super focused on one market. You know, no coaching, stop the podcast, things like that that just go all in on on the one thing. Talk about that a bit.

Michael McDonald (27:25.393)
Yeah, well, I I look back at what got me to this, what got me to what I considered the first pinnacle for me was cash flow was good, you know, the finances were like extremely dialed. And when that consistent cash flow went away, I had to reflect and ask myself what happened, why, right? And it was a lot of the things that we’ve talked about already.

But I would say most importantly, it was the wholesale. was, I learned how to get really good at creating a marketing machine, finding good deals, sales to close those deals, and then a good selling process to be able to sell them to investors to extract the most amount of profit out of them. I just said, hey, this year we’re gonna focus.

almost entirely on wholesale. The wholesale needs to be able to sustain the business. If we take down a flip, it’s gonna be really profitable and we’re gonna be very selective on those because I have a guy who’s able to manage that and we have contractors who are good. with that being said, it was just laser focus on, it’s like the 80-20 rule, right? 80 % of our income is based off of the wholesale.

And that’s the shift. That’s the focus.

Mike Hambright (28:53.324)
Yeah, I think it’s important to have like a stable foundation. mean, I’ve, you know, I do coaching, I do a lot of other things, but when I look back now, like.

you really have to have a base of what you do that pays all your bills. And then, I hate to use the analogy of like casino, but you’re kind of playing with the house’s money. Like you’ve got a part of your business that you can take some risks, try some things. It could be even in your core business, trying new marketing channels, right? But you’ve got this base that just works and you know it. And then dabble with the other things. And then honestly, a lot of the things that you dabble with are not gonna work out.

Some are, some might. And so then if it takes hold, then you can like lean into that and figure out how to kind of grow that. But the mothership, you know, has to be stable before you go do a bunch of other things.

Michael McDonald (29:44.047)
Indeed, yeah. That’s so true, for sure.

Mike Hambright (29:49.12)
Well, Michael, thanks for sharing your story with us. If folks want to connect with you one way or another, where do they go?

Michael McDonald (29:57.233)
Yeah, so you can just follow me on Instagram. That’d be awesome. I post most of what I’m up to on there. It’s Michael McDonald REI.

Mike Hambright (30:07.374)
Okay, we’ll add a link down below. So thanks again for sharing your story today.

Michael McDonald (30:11.987)
Thanks for having me, Mike. It’s good to catch up, man. Love to hear what you’re up to.

Mike Hambright (30:13.25)
Yeah. Yeah. Yeah. Always. So guys,

Thanks for joining us today. If you’re going through the struggle, just know, don’t try to go around it, just go through it at the end of the day. It’s harder, it’s gonna feel painful at the time. Someday you’re gonna be glad you did it because if you went around it, you’re gonna have regrets. If you go through it, you’re gonna have some regrets too, but you’re gonna have the, I guess the pride of knowing that you faced adversity head on, went through it, and are stronger because of it. So hope you guys enjoyed today’s show. We’ll see you next time.