A Gritty Investor - Rejecting the Rat Race and Finding Success, w Elijah Brown

There's something unique about the gritty real estate investor. 

They have experience, initiated by a distant vision, but the path is unclear. 

You can't buy that. You have to live it, and the best ones also learn from it. 

In their version, they have lived all the terrible stories you read about of bad tenants, deals going sideways, running out of money, contractors from hell, and more.

But there's redemption as well. Despite all of that, they are STILL succeeding. 

Elijah fused his passion for unique lifestyle choices and real estate, transitioning from a traditional life as an ROTC scholar at USC to an unconventional life as a full-time Sprinter van resident and real estate investor. 

Active investment struggles led him to appreciate the efficiency of passive investments.
 
From learning the ropes in property management to raising capital, Elijah's experiences have redefined his business model and approach to real estate investing. 

Get ready to challenge your perceptions about investment and lifestyle choices and discover how thinking outside the box can usher in massive opportunities.

Live free. Get Educated. Master Your Money.
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Transcript

Johnny Nelson: 0:02

Hey everyone here at the Investing Stuff You Should Know Podcast, where we bring you expert insights into the world of investing and beyond. My name is Johnny Nelson, your host, and today we're thrilled to have Elijah Brown as our special guest. Elijah, thanks for being with us today.

Elijah Brown: 0:18

Thanks so much for having me on, Johnny, and looking forward to our chat.

Johnny Nelson: 0:21

Amazing, amazing man Elijah has. We speak to all kinds of investors and, you know, syndicators I know it's kind of a fancy word for some of the audience, but we talk to a lot of people doing, you know, from flipping a doghouse to investing in really really large commercial properties. You know, oftentimes multifamily apartments. Here Elijah has kind of niched down to a specific spot in basically he raises capital for operators, really really top performing operators around the country. But before we get into that, elijah, I want to share with the audience a little bit of your background. I know you either are you spent time in the Army or you're currently in the Army and give us a little background there about where you grew up, what you're doing and kind of what led to this path.

Elijah Brown: 1:08

So I never thought that I would be in the Army growing up. Actually, I arrived at school, I went to the University of Southern California and I got there and I thought that my parents were going to help with the tuition. And I came to find out came to find out, you know, weirdly that that was not the case at all. And so I got the you know, the $30,000 bill for the first semester and was like what do I do? So actually my sister recommended that I check out the ROTC department. It's the Reserve Officer Training Corps and this is essentially a program that's open to almost anyone with a pulse, where you can essentially trade time and service with the military, you know, in exchange for college tuition. So I marched down to that office and they wrote me a check for my full tuition and I said great, sign me up. I ended up with an eight-year contract from that and I've served the entire time of that contract in the Reserve.

Elijah Brown: 2:06

So I never actually went on active duty, it's all been the one weekend a month plus, you know, two weeks in the summer doing training. I'm actually leaving for that in a few weeks. So that's the extent of the military. They paid for school so that I was able to essentially not have any debt, which was great. But back to my story with real estate. I originally thought I was going to go into banking. I was going through like investment banking recruitment pipelines through the school and everything. I ended up getting lucky and finding a summer internship with a hedge fund and quickly realized that I was not interested in that space.

Johnny Nelson: 2:47

Just to pause right there I want to say not interested in that space. We know that's like a lot of stuff. There's like the culture, like the office, like the career trajectory, but part of that was not appealing. Or did you not see alignment internally in your life?

Elijah Brown: 3:02

Trading public equities and stuff like that is a very high stress environment, and the part I didn't like was how many variables are involved With real estate.

Elijah Brown: 3:12

We're looking at maybe 20 or 30 variables, maybe like four or five of them being really lever movers, needle movers, whereas when you're picking equities and trading stocks and stuff, there could be thousands of reasons why the deal fails and so the risk adjusted returns within real estate are just a lot better, and so I found myself migrating more towards that, because I have more of a risk adverse type of strategy.

Elijah Brown: 3:41

I was watching a lot of YouTube videos while I was in college, started watching channels like Bigger Pockets, chris Cron, phil Pustajofsky, graham Stephan a few of these early real estate YouTubers and I realized that that was really the best way that I was going to be able to grow my wealth. It's not a get rich quick overnight type of thing. I realized it was going to be a more longer term strategy and I got really excited, decided to buy my first single family rental property. I was living in Los Angeles and realized that I could not afford anything there, and so I convinced my best friend and my cousin to go in with me on this cheap little $140,000 house in Orlando, florida and this is back in 2017. And we got that deal done. We put a tenant in and then we did that a bunch more times before scaling into the multi-family.

Johnny Nelson: 4:37

Amazing man. Amazing Just as a just again to lay out the color of the kind of guests we bring on, and just because it's a unique part of your life. I believe you're also currently living in a Sprinter van, so is it true that you still never actually bought your own single family home? And then you're kind of a that's not true actually.

Elijah Brown: 4:56

Oh no, okay, sorry, sorry.

Johnny Nelson: 4:57

Correct me, get me wrong, get me right.

Elijah Brown: 5:02

Right out of school I ended up so I never wanted to work for money. So I ended up getting a job at a real estate fund because I wanted to learn, and so I found this large re in California. I ended up working there for four years and after a few of those years, I decided to buy a house, and this was when everybody started freaking out from COVID in 2020. And I went in and got a really good discount on a house that had a tax lien on it and renovated it, and I ended up selling it last year, and then we moved into the van full time and we've just been traveling ever since.

Johnny Nelson: 5:39

Benjamin, yeah, what part of that life. So my wife and I bought a. I know it's a little bit of a tangent here, but there's, as far as asset classes, people are looking more in alternative spaces. So, yes, there's a traditional existing apartments or new apartments development. There's ADUs I know there's some recent laws passed in California especially that's kind of taking people by storm and RVs we know there's hundreds of thousands of RVs that have been sold and, of course, rv parks is another investment class. So I mean, you and I are both you're full-time I just we just bought an RV, like I said last year. So that's something we're doing more of and a lot of people are doing more of. What is that life been like? And do you see like what do you see that trajectory about RV or the kind of that digital nomad life going for yourself?

Elijah Brown: 6:24

So this would never have been possible without Starlink Satellite. So you know, even just two years ago, we would not have been able to do this.

Johnny Nelson: 6:33

Okay, so that we have like this, we have this converging technology like a lot of things like you know, vaccines or the IC chip, something like that, and you like that the existence or the development of those things in the matured for an awful long allow this other kind of lifestyle, this other like population you know Americans to explode.

Elijah Brown: 6:54

We call that location freedom. So it's like we can literally be anywhere we want and still run our businesses. You know, just as fast, just as well. And so it's really nice about this lifestyle is being able to essentially park the van off grid in the wilderness, somewhere where there's, you know, no, no one else. And you know you wake up in the morning and you throw the back doors open and it's just like expansive views of mountains and lakes and it's very nice. And then you know, I pop my laptop open and I can send out a deal email. So it's a it's a good. It's a good balance. It allows me to like be out on these trips for a lot longer periods of time.

Elijah Brown: 7:33

But the lifestyle is not without, you know, setbacks. There are a lot of challenges. You know we lose half a day to a day every single week taking care of like maintenance items, like emptying water tanks, filling water tanks, getting fuel cleaning, just all kinds of different tasks you got to do to maintain the lifestyle, moving around, finding new places to sleep, and so it's it's not easy. I'd say the most difficult part is that my partner and I, my girlfriend we both run businesses out of the van, and so that's amazing. We can't all, we can't both be on phone calls at the same time, and you know it's there's only a few comfortable spaces to really work in there. You know, we have our passenger suite seat that swivels around and like a table pops up, and then we have the desk area in the back that converts into our bed, and it's not the most comfortable thing, and so it's that's a bit of a struggle, but we realized that we had to make certain sacrifices to be able to have the lifestyle.

Johnny Nelson: 8:38

Yeah, man, thank you for sharing that and I really do feel like I find it interesting, fascinating I think others would find that interesting and fascinating as well of how you know an actual couple is. You know, making this work and doing that and like there's some trades and sacrifices, there's, you know, pros and cons. So we know that We'll get into the what you, what you, what you kind of focus on now is in a very professional, high growth sense, you know, in raising funds for large sponsors, elijah. But give us a, give us the challenges, as you kind of went from, you know, yes, college, from college and then kind of stepped into a couple of different roles. Give us the what was the down point, what was the low point and did you think you were going to make it? What's your struggles there? And, yes, you haven't been doing it for like 20 years, but every entrepreneur and person anyone venturing into that space is experiences those challenges. Can you give us a couple of stories there?

Elijah Brown: 9:36

Every single deal I have done and, by the way, I did the first six years as like an active operator of these properties, like finding the properties, managing the contractors and the property managers, finding the debt and the equity in the whole nine yards and every single deal had these massive, massive hurdles that I had to overcome. It was definitely not the passive investment that I thought it was going to be, and just an example on the first sixplex that I did. So I did four single families first and then I convinced my coworkers to invest alongside me in a sixplex deal in Orlando and I only had to raise $112,000 for this deal and it was just. Everything went wrong. The inspection was bad, there was foundational issues, I had to negotiate credits and the seller was not having it. So I had to go meet up with them a few times and then I came up $20,000 short on the raise, which was just devastating because I was calling literally everyone I knew and it was only like $112,000, nothing.

Johnny Nelson: 10:40

But then the percentage of that, like it's all about just a ratio of the money, so like whether you're ready to raise like $20 million and you're, like you know, $20 million short, or whether it's $100,000 in your life you know, $1000 short. It's like that's still not going to work right, like we still need that whatever that is right.

Elijah Brown: 10:56

Meanwhile, earnest money had gone hard and I had pledged additional earnest money, so, yeah, so what I ended up doing was I got an in-person meeting with the seller, who happened to be in California for that week because he was at a seminar or something, and I convinced him to seller finance me the last $20,000. Amazing. And we figured out how to get the deal done. We closed on the property and then, you know, obviously there was a million other issues after that, just dealing with, like we went through three property managers on that property within three years. The contractor was horrible, every little thing went wrong. We had flooding, it was just like a horrible property, but we ended up managing through it.

Elijah Brown: 11:42

The market was kind to us and we got out of that with, you know, like a 60% IRR over those three years, which was incredible, allowed me to, you know, make my first promote check as the sponsor and also reinvest all those investors' money into another deal. So that was a pretty awesome experience, but definitely like something I wouldn't wish upon anyone who's, you know, wants to maintain their sanity. So what I tell people is like, yes, you can make like I probably made over a hundred percent return. I probably made 200% return on my money just by doing that deal, but the amount of time and headaches and stress and gray hairs that it gave me was just like outrageous. It was like a full-time job, and so I honestly would have rather just had my capital invested passively with one of these large sponsors and made my you know, 20, 30% or, in Rise 48's case, 70% average IRR within a year and a half and not do any of the work.

Johnny Nelson: 12:40

So it's that's a beautiful segue, elijah, right there. That's kind of this crux, but I want to just linger, if you would just a little bit more on that. What do you think from what the investors you've seen that have gone full-time into the real estate space? So there's the ones that start out. Maybe they have a professional and they have a highly paid professional, and then they're like hey, just take, you know, here's 20,000 or 50 or 100, just invest this for me, and that's super clean.

Johnny Nelson: 13:06

Because others, because they're ambitious and they hear about it real estate, or maybe they're even doing some themselves they're like, oh, I want to deal with a bit more myself. And then there's people that are straddling the line. And then there's others that like, leave the professional space and go full-time into the real estate space, professional meeting, like bankers, lawyers, doctors, engineers, whatever that is stepping in. And so there's like these different categories of people how do you know what? Just for this is actually a real question, because people have students and whatnot that they come to me like so how do I decide if this is right for me? What have you seen to guide people, whether it's full-time real estate or they should just do passive? What's some tips or some guidance that you've seen over the years interacting with other investors or professionals at the stage. Just want to passfully invest.

Elijah Brown: 13:53

Having been the guy that started Active, I would say no matter what for everyone, start off with a small passive position to learn how it works, what to do? Because when you have no experience and you're just getting started, going out and spearheading your own Active deal, especially in a market like this, is risky. It's very risky and you're going to have a ton of roadblocks. You might as well just partner with someone or watch someone do it the first time around so that you can learn.

Elijah Brown: 14:24

I'd say there's a lot of people who get into this space and they think, oh, I can triple or quadruple my returns by just being an Active operator or even a fund-to-funds manager. They don't really realize what it takes to get that business off the ground. I've got seven years of track record with 12 full cycle deals and I'm still in an early growth stage of getting to a point where I can consistently raise a certain amount of money every month. Most people who get in 95% of them end up stopping within six months. And the other group they're raising maybe $100,000 or $200,000 a year and it's just not enough to provide any kind of income For most people. I'd say just stay out of it, let the professionals deal with it, people who already have the experience track record. And if you're extremely ambitious and you really want to go for it and you have the time to do it, which is rare, then start by partnering with people so that you can learn the ropes.

Johnny Nelson: 15:30

I love that man. Thank you for that Again. Just to your perspective on that, it's very unique how people see themselves, what they see themselves doing or want to do or they want to grow into. But also, we both have gone down this road. It is extremely time consuming. It can be very rewarding, but also is that cost. Some people just need to get it out of their system and they have to go through that cycle of doing a flip or that deep turn and then come on the other side like holy crap, I never want to do that again. I've yet to meet someone that says that lifestyle is so me. I want to do that again and again, and again.

Elijah Brown: 16:14

If you're an active operator, you have to be a masochist. You have to love the struggle and the pain of it, because it's going to be constant struggle, pain and surprises that almost ruin you every single day.

Johnny Nelson: 16:27

Absolutely. Now, like I said, that was really long a detour but still hovering around that transition of the very active investor hands-on it's your own mainly. You're leading the deal to then this other methodology where you're focused on raising capital from fellow investors. You're performing a lot of the due diligence, finding amazing deals, amazing sponsors, making sure that all of that squares up and then presenting that to your investors. Tell us what that life looks like now and how does that kind of typically work and go? How would someone participate?

Elijah Brown: 17:05

Yeah.

Johnny Nelson: 17:06

Just give us some insight there.

Elijah Brown: 17:08

So, you know, I had all those deals go full cycle within the last few years and that really made me start thinking about like, where do I want to spend my time, what I want to do? Part of that was like I want to go travel and live out of a van, and so, you know, my business had to become more passive. But also I wanted to be more passive from my own lifestyle and for my own freedom, and so I became an expert passive investor and I realized that I could juice my returns as a passive investor if I, if I write much larger checks to these sponsors. And let me explain how that works essentially. You know, I'll get together with my friends, family investors, whoever, and we'll all pool our capital in a completely separate LLC we call this fund of funds, so it's a completely separate LLC and then we'll take that money and we'll write one million, two, three million dollar Check to a sponsor who is putting a deal together and we'll say, in exchange for writing a large check, you know I'm not gonna be okay with your 50 50 profit splitter, your 70 30. I want an 80, 20 or 90, 10. I want to keep 80 or 90 percent of the profits at the end of the deal, because I'm writing this large check and most of the time the sponsors will either have a separate share class that that allows you to do that, or they will Negotiate with you to give you those terms, and so you know, I can go from, you know, only keeping 50% of the profit as a passive investor to keeping like 80 to 90% of the profit. Meanwhile I can also charge fees to those investors in my fund as well, and so that allows me to be, you know, both a passive investor and also juice my returns as a passive investor by Allowing other people in.

Elijah Brown: 18:53

On my special negotiation, I will have to say, you know it's funny because I go from Working, you know, extremely hard within the active real estate business to now it's like it's very little real estate and it's more like sales, marketing and investor relations, because my whole business is Generating leads of potential investors, nurturing those leads, educating them, showing them what I do, and then, you know, presenting them with opportunities and Coaching them, and it's pretty much the same as what you do. You know, it's a, it's a lot of, it's a lot of. You know investor relations, sales and marketing and very little active property management, and so it's. It's definitely For me. I like it a lot better, but it's still a full-time job. I would.

Johnny Nelson: 19:40

I would like to add to that, elijah, I really this is my own bias because you know, we like, we like people like ourselves.

Johnny Nelson: 19:47

But there is something unique about guys like ourselves that have gone through the trenches and have bought properties, managed properties, turn properties. You know they could be single family, you know smaller multifamily, you know doesn't really matter, because there's a lot of the basics are the same and you build from that and that really there's other people out there. They, they have just perhaps raised money and they don't know intimately the how to run, how to manage property. Had a, you know screen Tennis, had a run a cat that you know like a rehab project. There is something very, very deep and a very solid knowledge base that you know guys like us build from. And then, yes, there is a transition into you know presenting opportunities and you know managing that piece as a full-time business. But also there's this background information of deep, deep foundation of knowledge of how the back end, the actual operations, work, which is so important because if you have a bad operator, you're gonna, you will do, you as a fund manager or a capraiser will lose investors money.

Elijah Brown: 20:46

Absolutely. Couldn't agree more with that. I think there are two things that kind of helps me with my ability to raise capital. It's one it's that fairly large track record of all those full cycle deals that I was actively managing. So like I have that experience, just like you were talking about. But also I came from the corporate world. You know I spent four years working for a large real estate fund. You know being an analyst, calculating. You know cash flows, underwriting, presenting to investment committees, doing the whole corporate thing, which I think is extremely valuable. I'd recommend for anyone who's looking to get into the space like, go find a job for a little while with a, an established company, so that you can learn what you need to do to be, you know professional and present opportunities. You know it's just jumping in. You know going to a $30,000 course. That's not really going to be enough. You need to be doing deals at a high level to gain that experience I love that man.

Johnny Nelson: 21:48

I love that. So, yeah, as we kind of turn that's our, as we kind of turn the last into the last chapter here, where, where do you see yourself going with the kind of with your so a gold-hawk capital and what, what kind of investors Investors is a good profile for you and maybe even speaks up like three things here and speak to also like the unique personalities or profiles of investors that are attracted to you, because the people that are attracted to you might not be the people that are attracted to me and that's what actually makes this kind of special and fun is like, hey, this is how I think, this is my philosophy, how to preserve capital, grow capital and my own, just how, who I am, those things attract certain kinds of investors. So could you speak to that place?

Elijah Brown: 22:32

Yeah, so right now, gold-hawk capital. So we've always been multifamily. People were focused on the value add, large multifamily deals. So 100 plus units in Phoenix and Dallas right now, properties that have a value add component. That means that we can go in and increase the income through renovations and management and things like that so that we can essentially double the value of the property within a two to five year period.

Elijah Brown: 22:59

So we're very focused on those types of opportunities and our you know, our goal is to be able to bring one of those opportunities to our investors every single month and raise a consistent amount of capital. You know, I think right now, for my you know, my one year goal, I'd like to be raising two million a month, maybe even three million a month for these opportunities and I would like to essentially hone down on maybe three or four sponsors and that's it. Because you know, once you dial in and you find a sponsor that works really well for you and they're performing like just just hit it over and over and over again, it's like you've you've found the opportunity, use it. Once you get to spread out with like eight or nine, 10 different operators, that's a lot of data and due diligence to track and so it's much easier to just focus in terms of who we're looking for. So obviously, you know, real estate investors are a special breed. You know we're way more risk averse, we're more conservative. We also, you know, we realize that the risk adjusted returns are just a lot better than in the stock market. We tend to not not like the options available to us in retirement counts and secondary you know, public markets and we realize that real estate offers a ton of, you know, tax benefits. We can use leverage. There's just a lot of things that are built into multifamily transactions that just make it way better.

Elijah Brown: 24:32

You know, I, going back to the discussion about why I didn't want to work in the hedge fund space, why I, like, went to multifamily, it's like I understand it's such a simple investment I can literally put my hand on the wall of the building and know it's not going to disappear. It's like it's insane. And so you know we're looking for people who you know have a more conservative risk tolerance. They're probably, you know, within their, you know, late thirties to early sixties. Yeah, you know they're. They're earning a significant income at their, at their job, you know. So they're. They have enough cash or net worth to be able to invest in a lot of these deals. And then, you know, just just generally, since I have great networks from my school that I went to and the military and the various jobs that I had, you know, I like to connect, you know, first with those people and then I also get a lot of referral from current investors.

Johnny Nelson: 25:31

Amazing man, amazing here. What's the for the final, the final chunk of the show? What is a, what is one of your favorite books that you've read, or what's on your books, your books, your table side right now, new, your bed presuming Leadership strategy and tactics.

Elijah Brown: 25:49

Yeah, so I'm reading leadership leadership strategy and tactics from Jocko Willink. Oh, that's a good book. That's a good book. You know I'm in the army, so it's the language you know speaks to me more. It's essentially you know how to you know be a leader and approach situations and motivate people to do things for you, and so that's important. What I'm trying to do in my business is be less of like the doer and the implementer and more of the visionary. Like I am really good at pulling different people together and getting you know, motivating them to accomplish tasks, and I think that's what I need to be doing, rather than you know drafting all the emails and crunching the numbers in the Excel model and responding to the questions. Like I need to be bringing in the right people to do those things so that I can focus on actually growing the business.

Johnny Nelson: 26:37

Awesome. And what's the best way for people to get in contact with you?

Elijah Brown: 26:42

Definitely add me on LinkedIn. So LinkedIncom slash in slash. Elijah W Brown. I post three to four times a week and I usually have a link that will either provide you with some type of you know ebook or free educational thing or just access to my list so that you can start receiving deals. You can also check us out on our website, goldhawkus, and you can find out more about this there.

Johnny Nelson: 27:09

Amazing. Well, everyone thanks for listening to another episode of the Investing Stuff you Should Know podcast. We are delighted and privileged to bring people like Elijah Brown on and share his knowledge and the things he's doing. Until next time, give us, give the show a like, spread the word, and so on.