Grit vs. Risk: How to Tell if Your Real Estate Sponsor Is Built to Last | Ep 139

James
So our family recently returned from doing a mission trip in Mexico and it was a great trip. We learned about a whole lot of stuff and so and we challenged ourselves. And by my family, I mean it was our nine year old son, our eleven year old daughter, Jessi and myself.

It was good. So we're going to talk about that experience and what we learned on the Furlo Capital Real Estate podcast, where we dive into the intricacies of passive real estate and investing. And our mission is to equip Mexicans and Americans, uh, just all people.

All people to invest wisely in both property and people so that together we can build wealth. While improving housing. Again, I'm James.

This is my wife, Jessi.

Jessi
Yeah, it was a great trip. I love Mexico. Yeah.

I don't know. What do you love about it? I don't know.

I've just been there multiple times and I love the people. I love the weather.

James
Yeah. Yeah.

Jessi
I love the food. Like the hot, the heat. Yeah. It's just it's a cool country.

James
Yeah, it is cool country. Yeah. And like I said, it was uh we weren't just Going on vacation, we actually were um we were helping to put on a summer camp for orphans. There's an organization called Ranchogenesis or Henesis for those of you.

Jessi
Rancho Genesis.

James
Yeah. Um no. Um so anyways, they have this whole spot in this camp and And the whole premise is they invite orphanages and all the kids, and then they bring in other people to just spend some one-on-one time with those kids because they don't necessarily get that in. their everyday life.

And so it was uh it was a ton of fun. And again, I think there's there's some lessons. From that experience.

Jessi
A ton of lessons you can learn.

James
Yeah?

Jessi
I mean, I don't know if they're real estate related for all of them, but definitely people-centric.

James
Give me one of your lessons. Let's see if they overlap. Take a risk of going out of order on myself.

Jessi
Let's see.

James
I know I just put you on the spot.

Jessi
Oh, there's so many. One of the lessons is like Have higher expectations for yourself. Oh.

You know, because it's like, I don't know, I kind of went into it going like, I don't know, like our kids are still young, they might melt down. I might then uh we might have to like tap out and like take care of them instead of taking care of the niños and I was like, dude Our kids are awesome. Like they stepped up and they did they went above and beyond like taking care of people and themselves and doing hard things.

Like, man, watching Eleanor play mud games was like Wow.

James
Yeah.

Jessi
I I didn't expect that or anticipate that. And I I need to raise my expectations and be like, all right, like we can do this.

James
Gotcha. So maybe the the corollary to that, just to pull something out, is as an investor, if you're sitting on a fence or not sure, like no, you can do it. You can analyze the deal.

You can look into it. and figure out if it's a good investment or not. It's not a, oh, this is complicated or it's new or different.

Jessi
Right.

James
Therefore I know.

Jessi
Or even just like like counting yourself out ahead of time. You know, being like Oh, I don't I don't know if this is gonna work or there could be all these things that go wrong. And it's like, well, yes, but there could be a lot that goes right.

Yeah. Okay. Maybe having that mindset.

Yeah, yeah, yeah. I like it.

James
That's

Jessi
That's good. That's good. I was pleasantly surprised. It was still hard though. It was very it was very hot.

James
Some would say unglamorous, perhaps. Oh yeah. I I got very dirty.

Jessi
We were allowed. Three showers because they cause water's limited. It's precious.

It's a precious resource. Yeah, yeah, yeah. So we could drink as much as we wanted because that was important.

But for cleaning, it was like Rely on your baby wipes.

James
Yeah. Oh, totally. Yeah.

Um and so one of the things that I wanted that like one of the things that I saw was just that there's unglamorous work that happens, and that's the real signal. Yeah. Again, so um we we did some really fun things, right?

We went down a zip line, there were fireworks, we played human foosball tons of fun. Water slides. So much fun.

They look awesome on Instagram and those kind of things. But the real value was an in doing things that that you wouldn't see. Like for example, with these kids Uh when when it was mealtime, we would go and get their food and bring it to them.

And and we also did construction work um a couple of mornings. and just making the place look nice, right? Again, it's not that's not like the Instagram sizzle reel.

But honestly like serving the kids and hanging out with them and just spending time with them, me fumbling through Spanish very awkwardly, like that's ultimately what build builds trust with them and what has them feel close and feel loved. Yeah. As opposed to we're going crazy on a zipline or going down the water slide.

Sure. Yeah, it's fun.

Jessi
But that's like it's like all the little moments in between Yeah. Where you're like you can you can have the the photograph moments or like the top of the mountain moments of like, man, this is super awesome.

James
I love. Yeah.

Jessi
But Like you're saying, in order to to build a deeper relationship or deeper trust, it's all the things in between. Yeah.

James
It's funny, I was uh earlier I had to um Had to grind grind down uh um not a sidewalk, but like a walk a walking path on a Mexico? No. Oh here. It's like okay what No, and it's funny, I I asked somebody, I was like, oh, would this make for intro like should I make a short video based on this?

Because it's a it's a visual thing. Yeah. And honestly the feedback's like, no, that's kind of lame.

Kind of boring. All right. Won't do it.

Right? But like had to get done. It was a thing and and I did it and it was watched that short.

Yeah, it was pretty

Jessi
Was there like a distinct change though? I mean people like that.

James
Which is where my head was at. But but again, my my biggest point is when I talked to other investors, they were like No I'm I'm good. I don't need to see that.

Jessi
Yeah, I it's a different audience.

James
Alright, alright. No, that's fair. Yeah.

No, that's good Uh so here's something that I have been telling everybody. Because like, how did it go? Yeah.

And what I tell them is it was the right amount of challenge for our kids. And again, case I did I say it earlier? So our yeah, I did.

Our son's nine, daughter's eleven. So going into sixth grade and then going into fourth grade. Yep.

It's kind of the the age range that they're at. And and yes, there were definitely there were definitely difficulties. Language barrier being one of them.

It's funny. If you don't speak the language and you're trying to communicate with adults, they will help you Yes, they're gonna work at kids and they might know a couple, they get the whole charades game.

Jessi
Kids are just like, what are you talking about?

James
I got nothing. And it's like and it's a weird Even because I experienced this one, even if I was like passively okay, they were kind of like, okay, whatever. Like they didn't appreciate that I was trying.

Right. Whereas like when you talked to them, because you're fluent, they were like, they would light up and have talks and comments. Like come on.

So it's like, and so for our kids who speak even less Spanish than I do, like it was it was hard.

Jessi
Yeah.

James
You know, but again, it wasn't overly hard.

Jessi
Yeah.

James
It was the right type of like how do you connect with them?

Jessi
That again was like part of those expectations going into it was like I know I speak Spanish, so I I tried to give the kids like some phrases or go-tos. And then we learned a memory verse in Spanish too. And it was like, oh, they could have learned so much more heading into it.

And that was one of the things Eleanor said. Which I think is a good takeaway from for other experiences is like once you do it, you can see the areas of growth that you're like, okay, I know how I could do this better. And she was like, I'm gonna learn some Spanish.

Yeah. Like I have the opportunity this year. We could come back next year and I could talk to this Nina.

You know, that's like, dude, that's so cool to like be setting goals for the future, reflecting back on the the work that you did and like seeing gaps.

James
That's yeah, cool. Yeah, I know, totally. And I think there's something about they talk about um you get your comfort zone.

We're like everything's easy, everything's fine. Um, we often had to give them there were not often, but there were a couple times where they had to take a break. So like, dude, it's okay.

Um, but then there's that that growth zone, right? Where yeah, they're being pushed just a little bit and having to think it through. And you and you could see their wheels turning and stuff.

And Um yeah, so it's like how do you as an investor find that point of it? Right. And so I I think like a great place to start is as like a private money.

lender. We're like, look, I'm putting capital in. It's a straight interest back.

It's relatively simple. The paperwork is pretty straightforward. The deals are usually also like, hey, we're have a crummy house.

We're going to make it less crummy. You know what I mean? It's pretty straightforward.

Yeah. That's good. As opposed to there are some really complicated structures that you can get into and and they're cool and sometimes the returns are more, sometimes not.

And and so there's finding that balance there. is uh and and finding like where are you at in terms of that understanding and and what you're doing. Um I'll give a preview of something.

Like we are doing this deal right now and we're gonna Have it scheduled for us to talk about in a couple weeks because I have other awesome topics. But I have a deal right now where what we've done is we're we're combining three different strategies. So we've done each of them individually.

Okay. And now this one has all three.

Jessi
On the same property.

James
On the same property. Same project, right? But it's also like, oh I've done them.

Jessi
Okay. Okay, I I think I know which one you're talking about.

James
Yeah, yeah. But it's this idea of it, yeah. There's your teaser.

Come back in a couple weeks. Yeah, yeah. But it's that's that idea.

Probably. Um it's that idea of at least for my own development. uh skills and learning.

Yeah. It was yeah, I had to do each of them individually because this wouldn would have been overwhelmed. Right.

This was a matter of fact. I had a deal that we looked at uh gosh, was that last year or not about two years? Okay.

Where actually it was like almost exactly the same as this. Yeah, but I couldn't figure it out. And ultimately backed out of the deal because I was like, I just I can't wrap my head around this.

Interesting. And now, a year, like a year and a half later, I'm like, oh yeah, no, I can totally do this

Jessi
Yeah.

James
I get it. So it's all about that. Finding that curve.

Um, yeah. And so I think again, as a as an investor, it's like, yeah, where am I on that stuff? And and it's okay to admit, like, yeah, no, I'm not I'm not ready to do these crazy other things yet.

And that's okay. Um, that makes sense?

Jessi
Yeah. Okay. I think another one that's in there That's in that's kind of embedded in what you were saying is ask for help. You know, like you you couldn't, you knew that there was a language barrier because you weren't gonna speak perfectly, but you were willing to try it. Yes, and you were willing to get some feedback.

James
Mm.

Jessi
You know, and and you're not sort of working with kids, thank goodness, and investing. Although I don't know, maybe they'd make good decisions.

James
There's a way with tenants sometimes.

Jessi
But nah, tenants are awesome.

James
I love them

Jessi
No, but but uh more often than not, people will help you. You know, if you're an investor and you're like, ah, I don't know. I I'm I'm not uncertain, reach out and be like, hey, I'm uncertain about this.

I don't know if I fully understand what's going on and whether this is a great idea or not, you know, and you'll hope. Yeah. You'll try to explain it and try to bridge the gap.

James
Totally true. That's good. I like that.

That is true. Uh this actually okay. This uh this is related, but going on is um an operator like myself, I have my own limits.

And and I need to Keep those in mind. I guess I was slightly jumping ahead of myself. Um, on what I'm doing them.

So when we were down there, um I I pushed it. Yeah. Like even even just getting there.

I drove to the airport. Yeah. When we got our van, I drove down to the camp and then did all that reversing stuff.

And I remember I was very tired that first day. And also just like, well, it's really hot here. I didn't drink enough water.

And then I I I pushed myself physically like I was younger again. Kept joking, like, man, I'm playing like I'm a twin. year old.

And um what was the oh I cannot remember the line. It's I'm not as good as I once was, but I'm good once as I ever was I don't know. I've heard that.

So basically what you're saying is I'm not as good, but I could do it once. Which is what I did on Monday.

Jessi
I could do the short sprint.

James
And then Tuesday came. And then Wednesday, Thursday, Friday. And I was like Oh my gosh.

So sore. And so like I'm still, I'm still recovering. Like I'm just like, oh, my knees aren't they're not what they used to be.

I've got scratches all over. I hurt my toe. I ended up hurting my ear and like it's like all the stuff, right?

Yeah, you were and and it was just yeah, I can't um I just I struggle with that personally

Jessi
to be like, no, like Yeah, like if you're gonna do it, go There's a soccer ball.

James
I'm going to chase it. Sure. There's an obstacle course.

I'm gonna get through it. Yeah. And I'll admit, there are certain things that I even did where I went, hey, what if I tried to do this obstacle course backwards?

Like Like not the like like I I'm going through a forward like I started at the start, right? But I personally like I'm running backwards, going through everything backwards, like that kind of thing. Which was fine up until the last obstacle, which was going up some tires.

And I did that backwards. Turns out the harder backwards than I need to be, but uh it was it was extremely difficult. Yeah.

And um, because I just like that how I like to push myself and it's fun, but I'm paying for it. And so the point here is there's there's probably two points. It's number one, recognizing, okay, for this person I'm investing in, where that and their limits and what they're able to do.

And I think there's another one there, which is oftentimes a key person risk can hide behind a hands-on reputation, which is something I've need to be. aware of.

Jessi
Explain that more.

James
So let's say like, hey, I'm a hands like for example, I was out there grinding a sidewalk. Yeah. You know, like that's I'm doing that.

Now what happens if I get sick? Or I get hurt. Who's gonna grind that sidewalk?

Jessi
Yeah.

James
You know what I mean? Yeah. And so um so there's just things like that that are worth things.

Now for a lot of our investments, like got partners and other people who will help. So it, you know, or I've hired a property management team, or that's my sub my own company or someone else's. Sure. So I I try to put things in there to help out with that.

But that's something I'm I gotta be aware of. Like, oh no, this is like this is highly dependent upon me and and I enjoy grinding sidewalks and doing stuff like that so so I'll do it. But I but recognizing yeah that was a choice.

I could hire it but I'm choosing not to. Yeah. And so um, but it's just something you gotta be aware of if someone is talking about, oh yeah, I did this and I did that.

Um I know like there's some guys Often developer builder types of people where it's like, yeah, no, they do well of the building. They might have a guy or two who come in and help them out, but they're doing most of the work. Which again, could be awesome.

And part of it is did they price it in such a way where if whatever reason they can't swing the hammer, right? They can afford to bring someone else in and they're choosing to swing the hammer and just keep the savings themselves. Totally cool with that.

So anyways, that's uh just gotta know your own limits.

Jessi
Yeah, knowing knowing your limits. It's so funny because it's like I am not the kind of person who's like, all in, I'm gonna go. I'm like, oh yeah, I'll try that.

And like I'm fairly decent. I hung I hung in there. Like I did all the activities.

Was I the best at all of them? No, absolutely not. And did I have to rest?

Yes. I had to rest after every single one. So pathetic.

And did I have to have so much water? Yes. And did I have to get electrolytes from someone midway through the week because I used all mine?

Yes.

James
Oh man.

Jessi
But it was like I knew that. Like I knew going into it, I was gonna be tired, exhausted. I couldn't play all the games 100% because I I would have had to lay down.

James
Yeah.

Jessi
So it was like, okay, I know, I know where those limits are. I've kind of learned them. So like I feel like over time too, like you do learn that. You do realize Yeah, I do want to go do all these things. But I need to have a plan so that yeah, I can pick and choose what I do and afford to be able to hire someone to help with that if I need it.

James
Yeah, that's fair.

Jessi
You know.

James
I did also appreciate just side note, like the kids all want to play soccer that first day and play it hard. And then it very quickly dropped off. The middle of the week, no kids were playing. And then it was like at the end of the week, there were a few more little games. But like, no, even the kids were like, dang.

Jessi
Like, oh, we're tired.

James
They are pushing it. Which is fine. Um And again, I think uh my last my last big point here was just understanding that Yes, we did a bunch of stuff and there was a lot of activity and a lot of fun stuff.

But again, the real product of that week. was building trust with the kids, showing them that they're loved and um and just having them feel like kids again Like that was that was the real thing that was being built. Yeah, we got crazy stories and sure I might have kicked a wall while playing human foods bowl, and I'm still paying for that one.

Um mostly because the guy opposite me. was very competitive and bigger than me and I wasn't gonna let that stay in. So I I went all in.

Um but again that like and they're fun stories to tell and people like them and you can see the the scratches and all, but that's not what we were really there to do. And I think it's just keeping that North Star in mind, I think is really important. And so the question, like ask yourself, like, well, why am I investing?

Right? Is it to do a cool project? And sometimes it is.

Is it to make a ton of money? Sometimes it is. Sometimes is it to just help the community and create affordable housing?

Like, yeah, sometimes it is. And sometimes it's a combination of all of them. There are definitely properties I'm trying to sell a property right now, which is on i5, highly visible, and it's got one really cool feature where you go, look for the whatever it is, look for the American flag with the Eagle.

That's mine. I love that. My ego is like, this is an amazing thing, you know?

But it's at a point where like financially I'm like, eh, it's middling. It's not great. It's time to move on and find something that's actually great.

or I can leverage in a different way or whatever. And and I think that it's just being honest about why you're doing stuff. Yeah.

I think is important.

Jessi
Yeah, I mean the the fundamental principle behind all of this like financial investment is essentially stewarding in a gift that's not ours to begin with.

James
And it's like, okay, yeah, we have

Jessi
this opportunity both to invest money and time, but also relationship. Yeah. You know, and it's like, yeah, you could do all this by yourself and figure it out.

And Make a little stack of cash or whatever. But it's better if you're with people and you're doing things. It's more complicated.

James
It's harder.

Jessi
But yeah. It's sometimes super frustrating. But But fundamentally it's better. You know, and like reminding yourself.

James
It's like that old quote, right? Go fast, go lone, go far, go with many. Yeah. Something like that.

Jessi
That's a good one.

James
Go friends.

Jessi
Yeah, I mean I you didn't get to hear this part, but when we came back, I was helping to edit a video that was interviewing one of the niñas who had gone to the camp several different times and then came back and is on staff now.

James
Okay.

Jessi
And and it was super intriguing like being a first time person going down and realizing like oh man like we connected with this kid super quickly And, you know, both our kids were like, We wanna go back. We w we wanna see them. We wanna write letters.

Like they made this instant connection. And to hear her story of realizing like when she very first went to the camp, she was like, This doesn't mean anything. Like these people are just coming down to feel great about themselves and do a good work Whatever, like they don't come back.

And then they came back.

James
Oh. And then they came back.

Jessi
And then they came back. And she was like, after four or five years of having these same People, she was like, I realized they loved me, they were invested, they were committed to to being a part of my life, which I had never had before. I had never experienced that.

And so it was just like, oh Okay, yeah, you can do all the fun things and play and there's tons of games and it's great, but the investment in the people is so much Deeper and bigger that it's like, oh, like you can't forget that. Yeah. You know, so it was a great reminder, even in day-to-day stuff, that you're like, yeah, I'm doing these investments, but There's tenants and there's investors and there's me and there's my family and like it's very people-centric.

Yeah.

James
Like so it's good. Good word That's a good word. Awesome.

So just to recap, uh, I think number one, you gotta ask your sponsor, hey, what's your unglamorous weekly task? Which I think is important ask. Uh also, like who does it when you can't?

I think is important. Um, and then uh you want to you just want to calibrate for that uh or You want to look for calibrated stress where it's like, yeah, it's hard, but they can do it. And like that's the right path for them to be on.

Because you also don't want to be like, oh yeah, board have done this a thousand times. I mean That could work too, but yeah. Um and then um and then yeah, like you were just talking about, like you gotta make your judge like why am I doing this?

Am I doing it for legacy? Am I doing it for the returns? Whatever, right?

There's there's all those types of questions. Um so do you I don't know kind of walking through this, does that change how you might think about or evaluate a deal or a sponsor?

Jessi
Yeah, I think so. I mean, I you know my evaluation of property is usually like, no, it needs to be a super good deal, make a ton of money, and have no downside. I'm like, well Okay, and that when I look at it from this perspective, I'm like, no, there's a ton of downside.

It's really hard to get there. It's hard work. It's emotionally exhausting.

But it's so worth it. And it's like, okay, I I can apply that to real estate and be like, hey, no, that this is hard work. There's decisions that have to be made.

You have to do the math. You have to figure it out. You have to ask for help.

But it's worth it. Yeah. Man, that's good.

There's a good, yeah, there's a reason behind it all.

James
Okay. Cool. There you go.

Awesome. Appreciate that. Well, my question to you would be, what's one hard thing that your operator hasn't told you about?

Yeah, maybe talk to them about it, see where it's at. And if you would like to ask me that question, feel free to. You can learn more about us and what we do, both the easy and the hard stuff, at Furlo.com. We've got all of our stuff there. And we'd love to connect and just have a conversation about your like where you're at in challenges in life and and how we can work together to accomplish goals.

That would be awesome. So with that, thanks for listening. Have a great day.