Real Estate Investing Mindset: How to Avoid Bad Deals, Bad Partners & Costly Mistakes

James Miller (00:00)
That car is worth three grand. Some people pay that in a monthly payment. So when I assess my business partners, just by looking at that truck, that payment has to be made, or he’s not gonna be able to make it to the job site. So all of those parts of my assessment is: hey, if I’m gonna get into business with a person, if they’re walking around with the big Rolex on the wrists and the chains and they got the nice suits, that’s fine.

But if we’re at the ground floor of building something successful, he is he’s a liability. He or she may be a liability because of those things. So that’s a quick way to assess it.

Dylan Silver (02:05)
Hey folks, welcome back to the show. Today we’re joined by James Miller, speaker, coach, and former corrections officer based out of New York. James, thanks for joining us here today.

James Miller (02:16)
Thank you. Thank you, Dylan. Thank you so much for your time and energy. I appreciate the opportunity of coming on your show.

Dylan Silver (02:22)
What are the biggest mindset bottlenecks that you see investors facing these days?

James Miller (02:29)
Well, I would say that there’s it’s something of the outward look and the inward look. A lot of times when we we’re looking to develop ourselves, we look inward to find things that are going to help us grow and build. But a lot of times in real estate, we’re looking outward and we’re playing mental catch up. So if we see somebody that owns fifty units, we see somebody that owns twenty units, thirty units, now we feel like tomorrow we gotta have that. We don’t

Go through the baby steps of properly structuring business, making sure that, we’re taking the adequate steps to protect ourselves. Because real estate is one thing, but protection, whether it be through business structure, whether it be through tax, there has to be a level of protection. And because we’re rushing, because we want the glitz and glams, we want the nice car, we want the beautiful people around us.

We can’t miss those steps and go straight to buying real estate without a background understanding of the true business.

Dylan Silver (03:27)
This is a great point. And I like to say that oftentimes people don’t think about their taxes until they’ve made a bunch of money and they’ve got a big tax bill to pay. Because the initial cash outlay when you’re just getting started feels like, well, I need this money in other places, but it’s avoiding future pain, right? That’s the idea of it.

James Miller (03:46)
Yeah. Ultimately a lot of times what we do in life is we rush for the happiness, but in every bit of happiness there’s a little bit of pain. It’s we call it the it’s almost like the yin and the yang. And in the yin there’s a little bit of yang and in the in the yang there’s a little bit of yin. So you have to understand that in order to truly have a successful life, it’s really about balance. You have to understand that yes, there’s gonna be happy times, the money, the people.

But then there’s gonna be the taxes and the accounting and the auditing of yourself because not only is it important to manage your business, but to self audit, to make sure that you’re doing the right things to make yourself successful.

Dylan Silver (04:26)
Now you also mentioned business structure and I think again this is another area where people may just throw something up to have something in place rather than nothing at all. Walk us through what right looks like when it comes to business structure.

James Miller (04:41)
Well, I’m not professional and I don’t want you guys to even assume that I’m, one of the greats at this. But there’s a lot of things that can be done. You can put trust in place, irrevocable trust, you can put LLCs in place, you can put management companies in place and holding companies in place. These things can be structured and stacked in different ways that are essential. I would tell anybody, don’t listen to the guy on online, go to your CPA, someone who you trust, and someone you’ve read you’ve vetted.

And ask them for a better perspective because they’ll be able to give you more insight than I would.

Dylan Silver (05:12)
I want to ask you about working with real estate investors and then folks who may be involved in the real estate space. There’s oftentimes a reluctancy for investors to look inward at their processes and they may, especially if they’re getting started, they may be like cowboys, like, hey, I’m just gonna make this happen and just get after it. And so when you’re interfacing with these investors, at what

Point in the process are they? Are they getting started? Have they scaled a substantial portfolio? Are they somewhere in between?

James Miller (06:35)
Well, I have friends of all spectrums. I have friends that own hundreds of thousands of dollars in real estate. I have friends who are just starting out and own one property. I’m actually working with a friend of mine’s who just owns one property right now and I’m helping them out. it it’s

I would say it’s a everyone has to go on their own speed. Everybody, like I said, back in back then, the outward look, when we’re looking at everyone else, we assume that at this age and at this time we should have this amount of money, we should be married, we should have the picket fence, the dog, 60 houses, 50 doors, whatever it is. We feel like we mentally should have it. But if we truly believe in the most high, everything comes.

At its own pace. You make the right decisions and then things will come together. You have to be diligent, you have to be cautious, but you also have to be willing to step out there on faith. And things will come in time.

Dylan Silver (07:27)
This is a big pain point potentially for some people, right? Because they want to have a deal now. And we see this often when we’re starting something new or when we’re on the on-ramp, if you will, to becoming a real estate investor. Hey, I’ve gotten into this network. I have the these connections in place and I’m looking at deals. When is that first deal gonna come? How long is it gonna take? And some of it is faith, right? And

There’s plenty of investors who may not have their first deal for months or a year or more. And if they had given up in those early stages, they wouldn’t have gotten to the next level. But then if you look at the bigger picture, the macro, there’s investors who’ve been sitting on the sidelines for years, literally, and they’re waiting for market conditions to change. So if folks are jumping in,

When folks are on the sidelines, it may actually, benefit them potentially, depending on how the market looks.

James Miller (08:25)
Yeah, well, I would always tell anyone to survey the market to understand what’s happening. At some points when the real estate market is on fire, there’s a lot of people in a rush to make money. So they’re slapping houses together at very low quality just to make money. We can see that now, that some places they’re selling houses that are literally a fifty thousand dollar house for three hundred and fifty thousand because

No one is building houses that are high quality. Like they’re just putting things together. This is

Dylan Silver (08:55)
True. Yeah.

James Miller (08:57)
So based on the market, you have to know that now that I’m stepping into a market like that, I have to be extra cautious in inspecting these properties. I have to make sure I trust my home inspector. I have to make sure that I have insight on the building process and understanding the layers of real estate. Not just I own a property and I have the deed to this property. No.

I understand the foundation. I understand what plumbing is. I understand a general understanding of these things. The furnace, the heating systems, knowing what these things are and how they work should be the first step. I would tell anyone to go even to a place like Home Depot. They have these at home trainings where they can teach you how to do sheetrocking and so at least you can have some understanding of the real estate.

Building process so that when your inspector tells you something’s wrong, you can really see that, yeah, I know based on my, previous understanding that this is this shouldn’t be this way, or this should be straight, or this should be crooked, or this should be this thick versus thin,

Dylan Silver (09:57)
I agree completely. And actually, this is something that goes underspoken to, I believe. There’s a lot of folks that I see who are investing, but they can’t swing a hammer or don’t know how to or wouldn’t know how to direct someone else to. I’m not saying you need to know how to lay a foundation, but you should be able to be comfortable understanding like the components of a home, for instance, and understanding, what

a demo job might look like in the in the least I think. And where this comes to a head is you might have a network and you might have a support group behind you where you don’t necessarily need to know it yourself. You’ve got that, but other people don’t. So if you’re out here teaching folks or mentoring folks on how to do flips, for example, and that person doesn’t have the finances or the network around them.

or the peer group of contractors, then they’re putting themselves in a kind of defensive position because now they have to trust carte blanche, a third party professional with without any insight of their own how this process may play out.

James Miller (11:05)
Well, that’s true. And one of the biggest things is especially in real estate is that once you once you buy a property and the focus is to make a profit, every dollar should be accounted for. So now if something could be done for a thousand dollars and you’re being charged five thousand dollars, that’s chewing away at your bottom line. So that insight of knowing the cost of things, knowing what should be done and what shouldn’t be done, effectively is gonna

Help your success in business long term. Because if you have, let’s say you’re working with a hard money guy and he says, Hey, well, I’m gonna give you X amount of money because he knows what the deal is worth, but you have a contractor that’s doubling and tripling the price on things, that’s gonna destroy not only your business, but your relationship with your hard money guy. Because he’s not gonna trust you because he’s like, Hey, you don’t even know that a sink is fifty dollars versus a sink being seventy-five hundred dollars.

Dylan Silver (11:58)
We talk about partnerships often, and I’ve seen partnerships create a fair degree of distress for investors. They may need a capital partner, or they may need a partner who’s a contractor, or a partner who’s going to manage the deal. And this can create distress long term. And sometimes the deal itself is good, but the partnership decays. If I were coming to you,

with a specific deal and I’m saying, Hey, I’ve got a potential capital partner that I’m thinking of bringing along with me, what would be your immediate feedback, your knee jerk reaction to me asking, is this person a good fit? Well

James Miller (12:36)
I usually reserve my opinions on others. If I don’t know them, I don’t give an opinion until I can physically see them at work. Because there’s always going to be certain tells in advance. Like, are they on time? What’s their appearance? How do they support their team? Those things, when you see them behaving in a certain manner, it gives you a little insight. Now, that’s not 100% concrete, but that’s my method.

I know that people, good people, take care of others. And when they’re around a team and their team is fresh uniforms, because they provided uniforms and boots for their team. They’re making sure that they’re on time. They’re focused on their team being on time. They’re very big on keeping the place clean and the appearance of their job sites. Things like that give me a lot of insight on an individual, not just

he said he was trustworthy. No, I like to see a person in action because I believe the actions will tell the most.

Dylan Silver (13:29)
Pivoting here. This is an interesting conversation. I want to dive in and get a little granular here. It seems like jobs, the job market in general, is a little bit more transient. People are having multiple jobs. There’s not necessarily this idea of you’re gonna have one job for 30 or 35 years and retire. That’s less common. And so we’re seeing people have more jobs. We’re see I think we’re seeing less loyalty on all sides than we’ve seen in

previous generations and decades. But on the flip side of this, we also see employers and hiring processes be more cautious. And you’re seeing multiple rounds of interviews and an in-person interview. And as I’m hearing you talk about this, I’m getting insight into well, maybe that actually makes sense for a hiring process perspective because you want to see the consistency of this person

Not just day to day, but even week to week. So I may talk to you this day. I’m gonna talk to you next week. I’m gonna have you in for an in-person interview, and then there might be a final interview. And then once you’re hired, there’s gonna be a probationary period or a trial period. Well we’ll see how this works out.

James Miller (14:39)
Well, I’ll say this, right? Social media is a beautiful thing. It allowed us to access places, things and environments that we wouldn’t have been able to contact just as freely through our cell phones. But on the flip side of that, it has made the world antisocial and we have less tolerance of others. And in the job market, or fully interacting with others is about tolerance.

Working in a work environment, you have to be tolerant of others because we all grow up, even if we’re the same age, you can have a brother that lived in the same house as you, same parents, over the same time and have polar opposite lifestyles. Why? Because it it’s a individual’s willingness to tolerate and or learn from lessons that are given. So in the job field or job market, I would say.

The assessment has to be, has this person worked on their social skills or has this person been an introvert for the last 10, 15 years? We’ve made we’ve created an environment of people that are absolute introverts that don’t know how to socialize. And they may rise to levels of success because, they were at home and streaming and now they’re a millionaire. But when they go out in public, they can’t have a conversation. They can’t work through a difficult situation because

They haven’t honed those skills. So I think that’s the downside to social media. Even though I use it as a means to get to my clients and get to my friends, we have to also step away and go into the real world and shake hands and actually learn what it’s like to socialize again. I think that’s something that should be a big push for us to reacclimate to the world of socialization.

Dylan Silver (16:19)
Yeah, there’s no question about that. I think everyone agrees on that. Where people I think somewhat start to disagree is what role should education have in this? What role should parenting have in this? if your kid wants to be at home and they may be more introverted, do you compel them to be more extroverted and attend, social gatherings, church, sports, etc.? One of the areas where this is most apparent.

Though is when you’re trying to convey your own value and the importance of your message, your business, right? And people sometimes think this is, one conversation. And we hear this again, going back to the job analogy, you hear you have to have one good interview. Well, I think this is now a lengthier process. And it’s not just about that interview, it’s also about your reputation, which precedes you. And so if people aren’t

quote unquote getting their reps in and going to these types of events and even going on, interviews, so to speak, or talking with people who might have job availability, then that one opportunity that they have is going to overwhelm them. You do really have to approach this as like, hey, I’m getting my reps in. I’m going to this networking event. I’m going to this opportunity where I’m going to be in a room with different type of

people in this job market that I might not be or this industry that I might not be familiar with.

James Miller (18:23)
Correct. Absolutely correct. And I go far I I’ve done a lot of thinking and researching on this topic. Like I’ve gone back as far as the video game era. the video game era was put in place for parents to have an alternative for their children so they don’t they won’t be at first it was for fun, but then it was used as basically like a babysitter for the children. We gave them

the N64s, we gave them the Sega, we gave them the Nintendo. And then it became the iPad and then the cell phone. And what has happened is we’ve allowed the cell phones and the iPads to indoctrinate our children. This, 20, 30 years in the making. Now you have individuals who only take information off social media. So they don’t have a lot of real world experience.

They know how to replicate things. They know how to make things sound like they know what they’re talking about, but they don’t have the real world experience of understanding what life is about. So the biggest problem we have here is as a business owner, you don’t know who’s pretending and who’s actually real-world experience. But for those who are real-world experience, you’ll be able to weed through it. But most people,

aren’t real world experience. They are they have what’s called secondary experience through social media.

Dylan Silver (19:41)
Yeah. And, this brings up an interesting point. And as you were talking, I was thinking about this. When folks are trying to create a career path for themselves or launch a business, one of the things that they may encounter is setting expectations and not just with those around them and their peer group and people that they may employ, but also those above them. And when we’re in school as

Kids, we’re not thinking about like managing up. That’s almost never talked about. You’re not managing your teacher or your coach or so to speak. But then when you’re out here dealing, especially real estate investors, dealing with contractors and investors and people who you may feel like you’re having to punch above your pay grade, so to speak, or punch above your weight, you do have to set expectations. And if you’re in the workforce, W-2 and you’re dealing with

higher-ups and managers and executives, there is a form of it that is also managing the manager. And how do you set those expectations? How do you represent yourself? What’s your cadence? Even just in small talk with these people. These are things, these are skills that, when people talk about feeling undervalued, this is sometimes how you create your value, is through that expectation set and through those almost

innoculous conversations that you would not otherwise think have such significance.

James Miller (21:01)
Well, these things start young. They don’t start at the business table. They start in relationships. When you’re a young man and you’re speaking to a young lady and you’re trying to articulate to her what your needs are as far as a relationship. This is when we learn how to negotiate. When we’re toddlers and we’re negotiating my red crayon for your orange crayon, that’s a part of the socialization that starts at the bottom.

Most people think that you get into the real estate game and now all of a sudden, because you’re in real estate, you have the skill set to negotiate. No, no, no. These are learned skills, just like relationships. This is why most people fail at relationships, most people fail at business, because they don’t know how to articulate for themselves. They don’t know how to speak up and say, hey, this is my position and this is what I need, and this is what I require to be successful. And if you can provide that for me, we can work together as a team. But if you can’t.

I can walk away understanding that I didn’t lose value. Because ultimately it’s not about working with everyone. It’s about working with the people that are right fit for your success.

Dylan Silver (22:04)
This idea of being able to get those reps in and starting early, one of the beautiful things about real estate is that it forces you to engage in these types of interactions. And I would say to the credit of the real estate industry, more so than any other industry that I’ve been exposed to, because you need you need clients, right? And so whether you’re in the residential side or whether you’re

A commercial investor and you need accredited investors who could be folks that are outside of the real estate space. These could be, retirees and high net worth people, but also the HENRYs, the high earner not rich yet, right? Your executives, your young executives, and your doctors. And so people in the real estate space are constantly attending networking events or constantly hosting, open houses if they’re on the brokerage side or meeting with

lenders and investors. There’s just no end to that. Whereas if you look at other industries, it can be very much secluded, right? You’re not regularly going outside of your niche or outside of your industry or talking with folks from an entirely different sphere as you would in real estate.

James Miller (23:14)
That is correct. But the also the downside is when you’re when you’re exposed to so many different people, it’s so much harder to take inventory of who you’re interacting with because not everyone is successful, but everyone pretends to be. people hide the fact that they’re going through hardships. And when they jump into these conversations with multimillionaire, multi billionaire, everybody pretends that they’re billionaire.

And then you, as the business owner and or broker or real estate professional, have to now sort through those people. Because it’s not just whether I want to do business. Is it safe to do business with this person? Is this person the type of person who is operating out of desperation versus out of calm, relaxed business mind, logic versus emotion? Because

When we’re operating just this emotional space of how are how am I gonna get the bills paid? I need to hurry up. I’m gonna do any and any everything possible to get these bills paid versus let me take my time and let me take the logical approach to success.

Dylan Silver (24:21)
You mentioned operating out of desperation. this is something where everyone can relate to this. But if you’re looking at this in real estate terms, it’s almost a it’s a sure sign of worse things to come. Because if you have to get the next deal done and you don’t have an option, unless you are in a highly transactional business like brokerage, right? Or lending, for instance. But if you’re an investor and you’re looking for your next

Flip and you have to have this opportunity, unless you have a track record of doing lots and lots and lots of flips, that next flip could be the one that buries you. And so when we’re looking for partners and teams and alliances to form, one of the things that we should look for, it should be one of our filtering or screening criteria is how good is this person? And by good I don’t mean, their character, so to speak, but

How desperate are they? If we don’t get this next deal done, this next flip done, is this gonna put them in a frenzy, in a panic?

James Miller (25:20)
Well, also I like to, this is why I love the opportunity of self-assessment and assessing the person personally. Because, when you see someone and they’re driving around in a big, M6 or a Ferrari, and they’re driving around these big, Chevrolet trucks, those have payments. I’ve always learned that the guy you want to go into business with.

Is the guy with the least amount of expenses. The old beat up car, the guy who’s not about the outward look. They don’t care about what the world thinks because success is it starts inward. I’ll drive around a 2000 Honda. Most reliable car, Honda Accord, one of the most reliable cars that there is. It’ll take you from point A to B a thousand times. You can get four or five hundred thousand miles out of it. Guess what?

Dylan Silver (26:07)
Right.

James Miller (26:08)
That car is worth three grand. Some people pay that in a monthly payment. So when I when I assess my business partners, just by looking at that truck, that payment has to be made, or he’s not gonna be able to make it to the job site. So all of those parts of my assessment is: hey, if I’m gonna get into business with a person, if they’re walking around with the big Rolex on the wrists and the chains and they got the nice suits, yeah, that’s fine.

Dylan Silver (26:32)
At time.

James Miller (26:33)
But if we’re at the ground floor of building something successful, he he is he’s a liability. He or she may be a liability because of those things. So that’s a quick way to assess it.

Dylan Silver (26:43)
This is another interesting conversation ’cause it kind of hearkens back to on some level, the these are these are broad generalizations, but the idea of new money versus old money, right? And, in many cases, old money doesn’t want to be found, right? You don’t want to know who’s got the money because it puts a target on your back. Of course. and so when we think also about

Who we’re partnering with and what those partnerships look like. It’s also this idea of like the millionaire next door. You really don’t know who’s got it until right? And until they open up their books and their bank statements. And then you’ll know for sure. But it it’s not like you can go up to a new partnership and be like, hey, let me see six months of bank statements, even though that’s what a let

James Miller (27:25)
And

then first it would be, right?

Absolutely. That’s usually what they ask for when you you’re starting a hard money relationship. They want to know what your money’s looking like. They want to know how is your ability to pay your bills right now? Or are you in desperation? Because usually that’s a sign for them to take advantage of you. Now you got a high interest rate. Now you got to pay a higher rate of return because you can’t you don’t have good financial sense.

Dylan Silver (27:46)
I wanna pivot here, James, and talk about the types of deals that the investors that you’re working with are looking at. I know that there’s so many folks who are building portfolios and sometimes real estate investors get a little bit of shiny object syndrome. They’ll be starting with flips or wholesale and then next thing they’ll be looking at, commercial syndication and going from one area to another and it

there is this tendency for folks to have that shiny object syndrome. With the investors that you work with specifically, do you see any one asset class or deal structure in particular that people seem to be focused on or more passionate about?

James Miller (28:29)
Well, it’s it all depends on where they are in their real estate career based on, some guys who are just jumping in, they’re looking at, like they have these programs where you can you can do what’s called a sober living where, you may have four or five units, but now you can fit twelve people in there because it’s three persons to a room. It’s a different type of ball game in the beginning.

And then, you have people that move up to like move from C class real estate to A-class, something that’s a little bit more expensive based on how much money they’ve created and how much backing they’ve put away. And how prepared are you? Because, to be in a C-class real estate environment, you can, it may cost you a

Flip may cost you $50,000 or $40,000. But then when you move to A now, you gotta kick out, $500,000. Because you wanna offer the same quality as the market. You don’t wanna be offering the value that’s below market because then no one wants your real estate. They’ll prefer someone else’s. Because once you get to those really expensive properties, people want the glitz and glams. They want the shiny things,

So you have to make sure that you keep on the market. So I don’t I don’t say that there’s a p a specific type of real estate. It’s usually where they are in their journey. Once you got a couple million dollars sitting in bank and now you can go and buy apartment units as 40 and 50 units at a time, then they jump into that. I’ve never seen where there was a specific real estate niche that anyone would just go in.

It’s based on where you are financially.

Dylan Silver (30:04)
I think people need to hear that, right? Because when they’re looking at, well, what works for me, you need to look at, what’s gonna put me in a position of where I’m operating still out of surplus and not out of deficit and desperation, right? If I’m at a point where I can do, a multifamily deal, let’s say, but this is gonna put me in a position where I’m down on my last thousand dollars. I’ve heard this very often. Real estate investors who who’ve got

A sizable portfolio, but no money in the bank. Ideally, we don’t want to be in that position, right? We want to have both. So we want to look at not biting off more than we can chew, but still being able to may maybe build a portfolio or at least in this sphere, investing with others or active in some capacity, even if that means smaller deals.

James Miller (30:50)
Mm-hmm. Yeah, a lot of people, it’s ego. It’s like I said, it’s the outward look. You feel like if the property is only fifty thousand dollars and it’s only bringing you $1,000 a month, based on what the out-of-pocket cost on that property is, that $1,000 a month might actually work for you. Right. Based on how you invest, based on who’s funding the deal, that may work for you.

can’t look at how someone else would do real estate. You have to look at the logic of math. What there might be some special offering at your bank where they give you a couple points off on your interest rate. So now that $50,000 house, instead of it being $800 a month, it might be $300 a month. And now you got, you have ways of putting like maybe a sign or something on the property that brings you in an extra two grand.

Or you have some way that property could be rented out, whether it’s a parking garage or parking spaces that you can rent out. That fifty thousand dollar property may only look like a thousand dollars a month, but then you have all of these other things. When you use your brain, you can use those creative means to come up with new ways of making income from that same property. So it’s it the only thing that limits you is your imagination.

Dylan Silver (32:00)
Yeah, being able to split up the property. I’ve seen more and more of this. And I actually had a guest on the podcast talking about splitting up homes and envisioning a property use in creative ways. And I think I’ve even heard people talking about portion of their home being a studio and then multiple short term units and then them living in a portion of it and then even dividing the home with temporary barriers which can be removed. Very, very interesting.

We are coming up on time here though, James. Any new projects or activities that you’re working on? And then also anything you’d like to mention directly to our audience.

James Miller (32:34)
Well, first and foremost, I just want to thank you guys for the opportunity. But right now I’m just doing my social media, The Real Cigar Champ. You also could check me at [email protected]. If you have any questions, you have any insight, feel free to contact me. The Real Cigar Champ. I’m always putting out content, motivating, coaching content to help others.

I’ve decided that I’m gonna use my life to be of service to others, not only with my words, but with my actions.

Dylan Silver (33:04)
Amen to that. James, thank you so much for joining us here. Thank you for your time.