Josh McCallen (03:26):
But from that point, I got back to the U.S. in 2005, 2006, which was the boom days, and was so grateful after some spit and grit to find my way into land development, which was a big pivot. I got there by doing business plans and pitching them on how to sell real estate better for new construction, how to kind of motivate people to be lifelong buyers, all this kind of strategy that I’d been writing while I was in Europe as kind of a thinker, thought leader thinker. But that worked, I got in front of the right developers who are really crushing it. And so busy back in those days, if you can remember how the boom was, that I ended up just kind of fitting right into this small, private family office who was just doing the most beautiful stuff in the world-building $5 million flips, and they were just out of staff.

Josh McCallen (04:11):
So this pivot happened where I was able to go from more of the theory of life into literally project managing, which in those days is a lot more like general contracting because there were no general contractors showing up, and here we are $5 million projects working for this family office as one of their delegates. I just stayed at the properties and directed everything from finished carpenters to structural engineers, to even the sales team on how to present.

Josh McCallen (04:37):
So really got baptized by fire into land development and loved it. I did about $50 million worth of houses for famous people. And from that, after the crash, there was this big change, it was called “the 08 crash” or recession. And there was a period of time there where I was very blessed to be part of a book called, Don’t Quit. Well, that was because I bought a business in 2009 and 2010 and lost it. And that’s a real positive experience for us, it wasn’t at the time. We bought a franchise because I thought, well I’m a Michael Gerber guy, E Myth right? Not only did I love land development, but I was very focused on creating a franchise prototype for our land development company, which of course was in the middle of doing the franchise prototype. We were going to do these mega beach flips up and down the affluent coast for New Yorkers and whatever. And of course, that ended, right? With the crash, we stopped all projects.

Josh McCallen (05:27):
So when I left that, I thought, “Well, what’s the best way to Michael Gerber your life?” Is to buy a franchise that’s in the formation, get to know the founders, get cash flow out of it and really become a future franchisor and not because I care so much about being a franchisor but because I love the power that process can create in business. We say process equals peace for our teams. Anyways, so I bought a franchise. I said, “I’m going to put my money where my mouth is.” And my wife and I bought a franchise and lost it. And that was chronicled in this little book we were part of called Don’t Quit, it’s still in Amazon. And it tells the story of putting everything we had into a franchise that does restaurant kitchen cleaning. I know, nothing sexy about it. As you and I agree, there’s a lot of money to be made in the non-sexy startups and businesses.

Josh McCallen (06:18):
This one I thought would make it through the recession because it was regulated by the fire department. And I thought, “Well, if you want to have a restaurant open, even if it’s the recession, you still have to have your legal certification.” So we lost it because of a failure to ramp up my sales process at first. And by the time we learned how to sell, value-based selling, true transparency, and numbers, selling at a premium, that strategy was developed by the fire of the forging iron. And at first, I thought I would sell on price and that did not work in that industry. I was trying to break into restaurant tours that I’m saying, “Look, I’ll cut $200 off your process. Use us and get to know us and we’ll be your hood cleaning business forever.” And boy was that a mistake. Nobody would give me the time of day. Then I doubled the price, sold on quality and got mega contracts. Well in the middle there, I had already depleted everything we had.

Josh McCallen (07:14):
So by the time we built a couple hundred thousand dollar revenue business, which is not much but is a lot from zero, the franchisor gave me an ultimatum, either pay us your back due to franchise fees or we’ll take the keys and your business. And I had to opt for the keys because we were out of cash at the time. What a killer, painful experience. And that helped us. We created a principle from that point on that sales are sacred. And I think that’s the real story of why we are doing really well in what we do today. Fast forward, we rejoined that family office, a phenomenal group of people, and now we’re saving a resort that they had bought. And it was 2012. They’re like, “What’d you do with this fleabag hotel we bought to tear down?” I said, “Well, it looks like the numbers are going to not make sense to tear it down and build houses. Let’s keep it a hotel on the beach. Let’s go for it. Let’s do the uncle Gerber franchise prototype and fix it up and buy” …

Josh McCallen (08:09):
And you and I are up here in the Northeast right now, and you know from Cape Cod down to the Carolinas, there’s just dumpy, dumpy properties sitting on grade A sand. And we said, “What if we could slowly but surely buy all those mom-and-pop beach fronts, turn them into our brand, spend a good bit of money positioning them for the 21st-century quality, really beautiful.” And we would have a hell of a business we thought. It turns out we were wrong. We thought it was about the building. And I’ll just tease it here and we can come back to it later, but in the second and third year after failed operating company, failed operating companies meaning hiring management companies, we struggled so much to deliver luxury seasonally. We created an optimized management company that was really focused on service.

Josh McCallen (08:59):
So at first we were all focused on land development and beautiful design and creating the best amenities. And then that only got us so far. Imagine going to a hotel that’s beautiful but you weren’t taken care of. You can’t really appreciate that hotel, even though it’s pretty. That changed our life. Three years later, after we learned how to manage hotels, we became the seventh-ranked hotel in America out of 55,000. And there’s a whole story in those three years that we’ll do on a later segment, but that changed our life. We realized our calling was service and we realized how spiritual and good for the soul service can be. And from that, we became a speaker on the topic of how to serve from the heart. And from that level of service, we built a phenomenal new management company that is just legendary called VIVAMEE Hospitality led by some of the best pros in the business. Led by our inspiration for soul-based service. And that’s how we do so well with resorts.

Josh McCallen (09:56):
It wasn’t though until I learned about syndicated capital. And this concept of capital syndication is where regular good families can own trophy resorts and have all the mega upside of commercial real estate. It wasn’t until about four years ago that I realized you didn’t have to be a $100 million family office to buy resorts. You could be a family of accredited status they say, join groups like Accountable Equity, and we can own it together, and you can have access to probably one of the most lucrative real estate categories. It’s owned by all the billionaires, it’s owned by all a hundred millionaires. They all own some kind of amenity-rich resort experience. These things are very strong cash flow businesses, but they’re not accessible until now. You really couldn’t grab a portion, a direct partnership portion of these until we built our companies because they’re not usually available to the open public to own this type of real estate and all the benefits passively. Today, we are proud to say we have like 220 families that are invested with us from Europe. I mean, they found us on the internet. They found us doing shows like yours, great shows, and we share this passion for what we do. And we share how we treat our people and how we treat our guests. And boom, people are like, “I know that works.”

Josh McCallen (11:14):
So I have investors from Switzerland, all over, but mostly America. And then we have Canadians and of course, some people out in Hawaii, which is still America, but it covers like half the world, right? So super honored and humbled. And we do this in a very unique way. That’s our life story. I hope I didn’t overdo it.

Robert Leonard (11:31):
It’s interesting that you got into the cleaning restaurants business because I actually know some people that do that today and I can definitely see how it’s one of those un-sexy businesses but could be enticing because I know they do relatively well. And like you said, it seems on the surface to be potentially recession-proof or at least a service that’s still needed during times of crisis I guess you could say. Maybe not during COVID because restaurants are shut down, but in general, right? It’s something that restaurants need. You also mentioned Michael Gerber and The E Myth and I really like The E Myth as a book. So I want to dive into that for a second. For the audience who isn’t familiar with Michael Gerber and E Myth, also a little bit about who Michael Gerber is, what The E Myth is, what the story is behind it. Give us a little walk-through about that and how it’s impacted you.

Josh McCallen (12:17):
Well, I will absolutely do that. For you who are listening, this is like your Blinkist overview of The E Myth book, but also it’s an invitation to Michael Gerber to be on our podcast, Capital Hacking. Michael, if you’re listening to the show, please, we’d love to talk to you. So Michael Gerber, I don’t know, 25, 30 years ago really pioneered the idea that today you and I hear all the time, and that is an operating system for businesses. You and I probably know the people that have created things like EOS operating system, all these systematic business processes. Well, Michael, what he did is he took what the big businesses of McDonald’s and any big company that knows how to scale, and he dissected it down so that you and I can implement it at these first businesses we ever create. And he calls that process “the franchise prototype”.

Josh McCallen (13:02):
To summarize, here’s how I take it. He’s saying an entrepreneurial myth, which is what E Myth means, his name of the book, is when you think you’re the best baker. And actually, this is the paradigm of his whole story, a baker, a person who was the best cupcake and the pies and the best bit cakes. The best baker in her city opens a bakery. And what he says is that’s called an entrepreneurial seizure where you’re the best at something and you say, “Now I’m going to make a business.” And you sign a lease and buy equipment, and boom you’re in business. For a while, it works because you can work 115 hours a week and you can make a living until you can’t. And then you run out of adrenaline and you started hiring anybody that walks in off the street, and you have no system for training them. You have no system for selling better. And you have no system for teaching your recipes to 10 people to start scaling, and you have this breakdown.

Josh McCallen (13:58):
So the book starts with him explaining to that person, “Here’s you might have missed.” Being an expert and being an operator are two different skills. So an expert in the field and an operator of the business are two different fields. What if you could take a deep breath and realize that you have to transmute your skill for the quality of baking into a business that pays for wages, pays for consistency, pays for a service. And that is called the franchise prototype. And he does a masterful storytelling job. And there you go, that’s my Blinkist interview.

Robert Leonard (14:33):
How has it been impacted you and what you’re doing today and throughout your business life?

Josh McCallen (14:37):
Yeah, thanks for asking it that way. Boy, you are a great interviewer, Robert. I need to learn from you. I never see starting a company without seeing 100 units. So that is how we work. And we kind of stylized The E-Myth into our show called Capital Hacking, where we do explain a lot of this, but we do more there. We’re not here to do us a mom-and-pop business. And we have my wife involved. So we have a joke at our company, we have about 220 employees now, teammates, and we always say, “This is not a mom-and-pop. If you were hired to be the expert of chef and culinary, you’re the expert of chef and culinary. If you were hired to be the best at entertainment and events, you’re the best.” But I do say there is a mama and a papa because Melanie and I are let’s say the guardians of the core soul of what we’re trying to achieve in hospitality and real estate in a very large investor network. We guard the soul and the mission and the purpose, and we are here and we have a lot of driving force, we’re tenacious, but we are not a mom-and-pop. We are building a process-based, scalable business. So that’s how it changed us. We don’t really have any interest in buying something to lifestyle. We’re here to build something of value for the world. Michael told me that.

Robert Leonard (15:52):
You mentioned that what you’re building historically hasn’t been accessible for most people. And I would say that being an accredited investor still makes it not super accessible for everybody, for a lot of people. So I’m wondering, is there a model maybe it’s with you, maybe it’s through Accountable Equity, maybe it’s through what you’re doing, maybe it’s through somebody else, but is there a possibility do you see in the resort and hospitality industry for non-accredited investors to get involved. Maybe it’s through equity crowdfunding, you’re seeing a lot of platforms like Fundrise and things like that, offer access to these commercial properties and platforms and portfolios through crowdfunding. Do you see that potentially being an access point for non-accredited investors to get into resorts and hospitality?

Josh McCallen (16:40):
Yeah. You’ve opened up the door to our listeners to the other focus that we as a company have to think like, and that’s why we have an expert in each area. We have an expert in construction, an expert in hotel management, and then we lead the team of experts at the capital group. So that’s called Accountable Equity. And one of our efforts this year is to explore crowdfunding components to what we do, which would be available to non-accredited. So it’s okay if you’re not accredited at this time, feel free to get on our list so we know if there’s a real interest in that. Because yes, we’ve actually, about six months ago, started talking to one crowdsourcing group, crowdfunding group, and just listen, there’s a good bit of expense to add these levels of sophistication to your operating agreements and then to your compliance.

Josh McCallen (17:27):
So we think it is the future actually. You know why? Because our resorts attract hundreds and hundreds of thousands of guests a year. And they fall in love with what we’re doing and why wouldn’t they want to own a piece and maybe they’re not all accredited. So we think we’ve created a what I call, “the virtuous cycle.” Guests become investors eventually, or you start as investors and you bring guests. It’s this kind of magic that we’ve kind of created in the resort world because unlike everything else you and I invest in commercially, it’s hard to actually take a secondary benefit of personal enjoyment, right? It’s hard to personally enjoy self-storage as an investor. It’s hard to personally enjoy multi-families investor. But it’s extremely easy to enjoy a resort that you own with a glass of wine and your friends or golf round or whatever we have for them. So I do think the future is crowdfunding for us, but today it’s still limited to accredited.

Robert Leonard (18:19):
This is going to be a big question, so feel free to break it down into different parts if you need to. But how do you apply a Warren Buffett model to purchasing and repositioning distressed resort and luxury properties?

Josh McCallen (18:32):
Yes, this is where I fell in love with you and the whole Investor’s Podcast Network was because of your Warren Buffett principles. We had a whole education on Warren Buffett and resort investing. In the corona where we have scaled tremendously through corona was the ultimate Warren Buffett moment in what we do. Everybody, if we could have all joined forces faster, could have probably taken down several more resorts because it was the most pop-culture maligned asset in all of the world, right? It was hospitality during the corona. And there was a good reason. The government’s shut most of our businesses down for a period of time. But that almost … What I try to explain what we did, we did raise about $10 million from investors during corona because they saw what we were seeing. Warren Buffett says, “Buy what is intrinsically valuable, a value invest. And that really has stayed in power with cash flow.” I mean, I’m not paraphrasing.

Josh McCallen (19:26):
So what was the best thing to buy? Resorts when they were on sale that had been around, most of our resorts have been around decades and decades. There are some that we’ve owned that are 150 years old. Another we own is 200 years old, and guess what? They’ve made it through all the cycles. So that means they’re probably in the right physical geography for enjoyment. They’re probably in the right physical geography for travelers. Oh, and guess what? They probably are in a drive-to destination. And if Warren was on the phone with us now, he would echo that the federal reserve, [Daniella 00:20:00], I’ll have to look up her name. It was just on a big story about her talking about how hospitality was clearly bifurcated during the corona. There was the corporate travel, which is Marriott Hilton, it’s where all the conferences are. They are maligned for the next three years and are underperforming at a drastic level. And then there are drive-to lifestyle resort experiences, which are on the highest growth pattern they’ve ever been in history.

Josh McCallen (20:25):
So why are they both called hospitality? They’re both called hospitality. They’re both maligned in the media, but we knew because we were in it that we were surging through corona. And we knew that we were in a value buy, and the good news is we’re still in a value buy, probably for a while. And then on top of that, before the pandemic, we were buying value because we were buying “business plan arbitrage” is what I call it. We’re buying from a family that bought their little resort or misplaced resort, maybe it doesn’t have enough rooms or maybe it has more golf courses than hotel rooms, which one of our resorts does. And we knew it was not a perfect fit for a private equity, BlackRock, and all that stuff.

Josh McCallen (21:03):
So since it wasn’t a perfect fit for them, it allowed this void of buyers. Then what we did is we said, “How are they running it today? Are they making some money or breaking even? Well that’s because they’re only using four of the eight levers of wealth building. I mean, I’m paraphrasing. They might’ve been using two, rooms and breakfast. Rooms and a bar. We’re saying, “What about weddings? What about corporate? What about tourism on a whole nother scale because of festivals that are ticketed and attract TV media and get on the morning shows and ice rings for winter fest?” what if you add layers of cashflow and exponentially just add layers. And now what you’re doing is you’re arbitraging from a really underperforming asset to a massively performing asset.

Josh McCallen (21:47):
So that’s what is the value buy of our company. We’re buying limited business plan resorts and scaling with our expertise in very lucrative additions to the revenue. And you know from the world of commercial real estate, all we have to do is get that profit up, at NOI. And we do that by top-line growth and then great management. But we do focus on top-line growth, meaning sell more, go faster, which is what I learned 12 years ago from losing a company is sell, sell now, sell forever sell because you love them. Don’t stop selling. We just radically changed the value of these properties. Within five years, we pay all the investors back and they stay our partners forever. It’s magical.

Robert Leonard (22:28):
You raised a good point about the net operating income and for those who don’t know commercial properties, so when you get over five units, anything higher than that, your properties are no longer really valued on comps or similar properties in the area. Now they’re based on what does that property generate and what’s called net operating income. So, Josh, I’m curious, if you were to go sell a property like this and you look at net operating income, the way I view it as kind of you have the real estate piece, and then you really have a hospitality business. And how does that play into the value of the real estate? Because I almost see them as two separate things, so how does that play into the value of the real estate itself?

Josh McCallen (23:08):
Well, what you’re describing is since you guys have as a network, have always been phenomenal at public markets as well, take a look at Marriott and their evolution over the last 34, 40 years. They transitioned from owning their buildings and running them to just running them, no longer owning them. What they did is they took all their equity in resort ownership and put it in a REIT or sold it out to high net worth people. And they did that because you’re right, they are in the operating business. Their brand is all about operations. So what we did is for the last eight, nine years, even before I built the companies we have today, this is iteration two, meaning now we’ve capitalized on the ultimate business model in our opinion because it took us eight years to figure it out. We really do have three different managements. We have capital real estate ownership with asset management called Accountable Equity. And then we have VIVAMEE Hospitality, which runs resorts but does not own the resort. It’s a hired gun just like Marriott.

Josh McCallen (24:07):
So you could choose to hire Marriott or you could choose to hire VIVAMEE. Now we are not out for hire. We only work vertically integrated way, which Warren would also say is one of the most magic ways to change the control and wealth of these assets is to make sure we have vested interest in the operation. So we do. So when you’re a real estate investor with us, you’re truly only buying the real estate. You don’t have the real challenge of management. Obviously, we bring that with an expertise group and we’ve done it now in four or five properties in our team’s leadership. So my point is we do [inaudible 00:24:43], just like Marriott does, and VIVAMEE runs these properties, but you and I can own these properties.

Josh McCallen (24:48):
And as an owner, you do need to do due diligence. You probably don’t know this, but maybe you do, you and I, and the group of listeners could go buy a Marriott. We could go buy a Marriott right this minute and be the real estate owners of the Marriott. We would have no say over the operations of the building. It would have to be done by Marriott. And Marriott would take their 10 to 12% management fees plus other fees embedded and they would run it. And they would do what they do, which is corporate meetings and corporate travel. And depending on the economy, they would do great. Maybe a seven, eight, 9% yield to you and I, we’re happy enough with that let’s say, we own a Marriott. Whereas what we’re buying … Let’s use an example, we’re buying a $5 million property, the first one we bought which was a steal, it’ll probably appraise for $30 million in its third year, and the owners are going to pick up that benefit. Now we spent money on it to turn it around, but they now own a much more valuable piece of real estate. And over here, the company that runs it has continued to improve their processes. You don’t have to actually kind of get involved, just like you don’t have to get involved with Marriott.

Josh McCallen (25:55):
So there really are two businesses, but what we’re doing is Marriott, then Hilton moved to this model. And I believe pretty much every major brand you know, IHG is done this way now. And they really create a bifurcation between real estate ownership and management. And we do the same, however, we’re vertically integrated, so you have a lot more upside.

Robert Leonard (26:15):
So let’s take that Marriott example, how does that property get valued? If that owner wanted to sell it, does it get valued based on the net operating income that Marriott is able to produce for that property?

Josh McCallen (26:29):
Yes, but it’s a three-part appraisal in our world. It’s a cost to what would it cost to build that square footage again, they create a three-part comp or a three-part appraisal. You’re asking a tough question that I’m glad the listeners are going to get it, this deep dive. The second is a comps assessment, how many Marriotts sold in the area and what do they sell for? But that one gets weighted low, kind of like you said at the beginning. And then the ultimate valuation is based on the NOI, which is called a capitalization rate evaluation, and that’s the most important one to the bankers. So yes, the piece of real estate is looked at all three ways. So there is a dollar value for how much real estate and building you own. Absolutely. There is value on what’s going on in the market. Are they selling well? Are they not selling well?

Josh McCallen (27:11):
And then ultimately, it gets trumped by what are they producing for the owner. And in the way, they kind of evaluate as rent, even though it’s hospitality. They don’t necessarily call it that, but it’s NOI and you’re right. So really the NOI, which is the capitalization model is truly the most important thing. So we focus on that because we can control that. You and I may or may not be able to control the square footage we bought, but we can control the revenue we pushed through that square footage.

Robert Leonard (27:38):
How do resorts, hotels, anybody really in the hospitality industry compete against Airbnb in today’s world? Is Airbnb a major factor for your business model?

Josh McCallen (27:51):
Yeah. I wrote a book and we’re going to give it to you guys, the Seven Reasons Resort Investing is Thriving After COVID, part of them is Airbnb. I wrote a whole section on Airbnb and our thesis is it’s almost like they’re … I remember Airbnb [inaudible 00:28:08], I heard of it early on and I thought, “Wow, you’re sleeping on somebody’s bed or somebody’s room.” And then I learned it was metamorphosizing into the whole apartment you could rent. And I thought, “Oh, this must be an economy play. I’m a kid, I’m young, I’m traveling the world and I don’t want to spend $400 a night in Manhattan, I might spend $150 for a bed.” I don’t know, whatever I thought it was a value for the consumer. I don’t think it’s that anymore. I mean, if you and I thought of Airbnb today, would you think it’s still that which is still there? Or do you think it’s an experience play?

Robert Leonard (28:39):
Both. I think it’s both, the thing is it depends and I think that’s part of the dynamic of that model and why it’s so powerful because you can work for those college students who don’t have a lot of money that want to travel and just take a bed instead of a hostel, but you can also have these super high-end experiences. So it’s weird. You can kind of cater to both.

Josh McCallen (28:56):
So think about what we are in the business. We are the original Airbnb. So everything we buy is experience-based and it is the alternative to the big box Marriott. So what we’re really saying is two things about Airbnb. One, this is new to me this year, we can actually join Airbnb with our unique assets. A lot of our stuff comes with cottage buildings and cute little stuff that it’s all very Airbnb-est or penthouse suites that overlook the water, all these kinds of cool, unique experiences we can actually now, and we will in the next few months, start using Airbnb as one of our third-party platforms. So that’s interesting that I did not know that until this year, but I’ve always been pro Airbnb because of what it’s doing. It’s almost driving attention to groups like us. You could say we’re small hotels, big resorts, or you could say we’re the world’s biggest Airbnb asset.

Josh McCallen (29:47):
And that’s the way we kind of look at it. Everything we want to do on their property is bougie and unique and experience-based, we want you inside the gardens in a botanical experience. We want you overlooking your vineyard, all the things you might get from buying or renting a house on Airbnb. And we have houses now, and we’re starting to investigate an Airstream community of [inaudible 00:30:10]. We’d like to have that, all brand new Airstreams, really cool. Oh, and then it gets even better. We’re sold out, our properties because of wedding contracts. Our rooms are sold out for two years, every single weekend. It’s very hard to get in here unless there’s some wiggle way I can get in there, but otherwise, you can’t even book a room with us for years. So we have a problem. So I’ve been out buying neighborhoods around our properties and using them as Airbnb feeders into our own resort.

Josh McCallen (30:36):
So Airbnb to us, we just opened our horizon, what do they call that, aperture on your camera? And remember, years ago, people were like, “Is it a threat to hotels?” Perhaps it is to Marriott, but to us, it’s a huge win. Huge. Because we’re now having the access point through Airbnb into our beautiful resorts. Our resorts are speaking to the same yearning of your soul for something unique and experiential, we’re just doing it with professional service. And by the way, Airbnb is moving a lot towards hospitality, right? A lot more amenities and things like that. Well, we’re rich with amenities. So what we’re doing is kind of creating this new world order of how Airbnb and unique experiential drive to resorts come together. And I think we’re going to be the leader in that whole space.

Robert Leonard (31:19):
You mentioned before that you guys have actually thrived during COVID and that was not actually what I expected you to say coming into this conversation, but I’m curious to learn what you learned from COVID. And it sounds like you didn’t necessarily have a struggle that taught you things, but I’m sure that there were still things about this opportunity that you learned. So what was it that you took away from it?

Josh McCallen (31:40):
One is drive-to helped us a lot, right? Airplanes were a mess. It’s still frustrating if you take an airplane even today to a resort area, they’re very serious about masks on airplanes. They’re still very mean to you. They still have the COVID angry service model instead of the joyful service medal. But my point is drive-to became obviously important. We did get closed. We did have emergency layoffs and we kept in touch with our team so we can bring them right back. We brought most of them back by the summer. And what we did was the biggest thing we realized as an entrepreneurial group is that the only thing that the government was letting us do was outside. So with our resorts and we have hundreds of acres, we ended up building a five-acre outdoor garden experience dining room. And it’s out of a movie, you can look us up. You’ll be like, holy [inaudible 00:32:31], that looks like something out of a romantic comedy.” I mean, it’s so pretty over there. You can imagine two people kissing, but then they have a fight. Whatever.

Josh McCallen (32:38):
My point is it’s really beautiful. And we ended up being able to seat using all the government restrictions and still seat hundreds of people, and still have them be compliant, and still have them spend thousands of dollars a table on wine and food. And we started that in the summer last year. So it was kicking [ASCII 00:32:59], as they say, it was really kicking butt. And the winter was coming, we had blown our proforma for outdoor dining or any dining like tripled it. We built our business models usually around weddings and rooms. And then of course, food and beverage as an amenity, well, food and beverage were doing the most revenue because everybody needed a beautiful outdoor space.

Josh McCallen (33:20):
Then we added entertainment. So we were now becoming a real thriving, fun, outdoor space. And then winter came. Now we had always had a vision, picture this, listeners, if you’ve ever been to the Bavaria area of Germany or seen it on a movie, they always had these winter festivals. There are like big fire pits and people are drinking hot wine and buying crafts and cool stuff, they call them winter villages in Europe. Well, we’ve been to a lot of those. We actually lived right next to one for years and it was magical. Temperatures could get to the twenties and people would still be outside having fun for three hours because they’re drinking hot wine and eating food. So we built America’s probably most robust outdoor winter village. We built that in November, we put in a professional NHL ice rink, we got a Zamboni, had it professionally managed. And we were on every morning show you can think of, and we were in The Wall Street Journal and we did over $2 million worth of winter business that was never in the performer.

Josh McCallen (34:22):
And now I think it became another specialty that we’re adding to all our properties. I think it will change the future of our business. So corona helped us spike. At the same time, we bought a resort, while we were doing all that we bought a second resort. And we got, as you want to ask me later, a creative financing, we learned how to do that. We bought it and got started. So corona also, we sold a ton of weddings, even though the weddings were paused. For some reason, the [inaudible 00:34:50] went on and we picked up millions of dollars of deposits and ended up corona with an extremely large cash position, and actually, we are current on our distributions and dividends to investors because of that.

Josh McCallen (35:01):
So it was a turning point, but it was a turning point because we were more of an Airbnb company. We were never going to be a big box Marriott, which could never have pivoted like we pivoted because we were always experience-based. And just to finish up this experience-based culture, our whole culture is based on a unique type of intimate caring for our guests, which we’ll talk about some other time, but we’re also really into what we call primordial experiences. You know what the most unique, most achievable primordial experiences are? Nature, fire pits, water, agriculture, gardens, the things that our bodies have always craved before we all lived in cities. So that just spoke to everybody’s heart and soul during the pandemic so we crushed it.

Robert Leonard (35:47):
I’m sure when the pandemic initially hit that your investors were probably a little bit on edge, it sounds like you guys were able to navigate and manage it okay. It sounds like you probably raised some more money for buying more deals, etc. but I’m guessing at first, like everybody was, I’m sure they were a little bit on edge. So how did you manage the expectations and the emotions of your investors during that time?

Josh McCallen (36:08):
We’re built in the modern era as a company, so we were never trying to go out and raise family office money, even though family offices do look at us, we like just talking straight to families. So just like what’s going on in your world Robert, where you’re one of the most successful podcasters in the world because you speak directly and honestly to people, so that’s how we run our business. We named it Accountable Equity for a reason. So we do transparent webinars. We do transparent phone calls. We do emails and we were in touch with our investors probably throughout the entire switch of the economy and the shutdown temporary, and then the prolonged rules. So they were actually following the journey and we always say, “Listen, we’re going to do our best. Here are the best three things we can do based on prudence. Here’s what we’re going to do, we’re going to hold on to things for a while.” My point is we just told them what we were doing.

Josh McCallen (36:59):
Now, part of the reason that works well is because the investors we’re attracting are real people. They’re not a hedge fund as they say in the business. I don’t want to be so polite, but that’s probably the politest way. People that actually control money, but don’t know how to run a business, which is how most major real estate pieces are owned could never do what we did. We just went right to our investors, treated them like great people like they are, showed infinite dignity and respect to them. And we just said, “Here’s how we’re going to navigate through this. And this is why you hired us to be your investment manager.” And they were part of the ride. So it was a home run, and I think we grew from 120 investors to 220 investors during the pandemic because people liked the way we treat people.

Robert Leonard (37:41):
In addition to being the successful real estate investor that you are, entrepreneur, hospitality, turnaround extravaganza, you could say, you mentioned you host a podcast called Capital Hackers. We mentioned that I was on the podcast, honestly, one of my favorite names for a podcast. Before I knew you even I saw Capital Hackers and I was super intrigued by it. I really do truly love the name. As Josh mentioned before, he had mentioned the episode number, I’ll also put a link to the show that I was on below in the show notes if anybody’s interested in going to check out Josh’s show. But I’m curious, what have been the biggest things that you’ve learned from being a host of a podcast? I think that’s an indirect benefit that we get of being able to learn so much from these people. So what have you learned from your guests on your podcast?

Josh McCallen (38:29):
Well, to compliment you and I have to, you’re honestly a very good interviewer because you’re a true student and you have a certain humility. Clearly, you’re off the charts smart, but you’d never shy away from learning something new on each show, so we do the same. Our show, do mind if I just modify the name you said, you said hackers, it’s actually hacking, Capital Hacking. It’s an active strategy, and all it just means is that you already have the human capital you need to transform your wealth position. So we’re going to show you that through different strategies and people. We’ve had people like Robert Kiyosaki, Hal Elrod, everybody you can think of on the show. So like you, we’ve attracted wonderful people. What we’re learning is a couple of things. And I would say the most salient, single thing we’ve learned, if you don’t mind, I’m going to cheat and give you two.

Josh McCallen (39:15):
Number one is it seems like the capital code like if you were in The Matrix, that’s why we use hackers a little bit like The matrix Neo. There actually is a pattern to the X’s and O’s. And the people we get to interview have seen through the code like Neo does and misses bullets and picks up on kicks and stuff. There’s a bit of a code and it’s actually not as complicated as Wharton or MIT say it is. It’s pretty straightforward. That’s why the people that own normal businesses are 10 times more likely to be wealthy than the people that are high-skilled, high-tech people because they just see the code of how money flows to the people for value. Anyway, so you can break that down in a hundred ways, but the second most surprising thing I’ve learned, and I think I probably knew it, wanted to believe it, but I believe it’s very true is that wealth is, and this is a little scandalous, our premise, my premise is wealth is not created in the public markets. Public markets mean anything you can trade on your iPhone. Public markets are sometimes used for some appreciation, sometimes used for day trading, sometimes used for technical analysis, sometimes used for wealth preservation, but I haven’t met anybody that truly built their wealth in the public market.

Josh McCallen (40:28):
However, we’re almost on 200 shows and I’ve met 200 people that have built their wealth on private investing. And what Wall Street is where private investing goes to cash out. I hate to say it, but that’s what an IPO is. That’s where a whole bunch of people bought the business before it was worth anything and now they’re going to sell it for a billion dollars. But by the time they sell for a billion dollars, there’s not much more wealth to be built. So we are major advocates of owning private deals and owning private real estate is one of the easiest ways to build wealth because there’s a leverage factor. We can teach that some other time. And honestly, I’ve met people from every walk of life, usually, they’re business owners, and usually, they do blocking and tackling and become wealthy, financially independent. Nobody’s worried about buying Lamborghini’s or jets, they’re worried about passively living with all their expenses covered so that they can be more passionate about what they were called to do in this life.

Robert Leonard (41:25):
As we get towards the end of the show, I want to jump into a segment that I call the action plan, where I like to ask the guests three questions or for three recommendations that can create an action plan for listeners of the show for when they’re done in this episode. So for the first question, what habit or principle do you follow in your life that has had a big impact on your success that not enough people do, but should?

Josh McCallen (41:51):
Reading books. Reading books, using Audible. These shows, one of the best things about listening to your show Robert, there’s probably a lot of great book recommendations. And I would encourage you, like me, I do. Every time I hear one, I kind of grab my iPhone and write it down, and I have a book of who recommended it and why. So I think number one is books. Did you tell me I have to come up with three?

Robert Leonard (42:13):
Nope. Just one.

Josh McCallen (42:14):
One reading books. I had a mentor once who said, “Books, think of it this way. Whoever took the time to write that book, say you respect them for their skill. They’ve poured everything they’ve got into that book.” So you really get an entire relationship of a person. And these people are the ones that have broken through the Capital Hacking code, and now they’re just going to share it with you in that book. So please let that impact you.

Robert Leonard (42:36):
That brings me perfectly to my second question in the action plan, and that is what has been the most influential book in your life. It doesn’t necessarily have to be your favorite, but what has had the most impact on you?

Josh McCallen (42:49):
You said one, so I’m going to have to start with the number one for me, it’s an oldie but a goodie, 100 plus-year-old book called Dale Carnegie’s How to Win Friends and Influence People. If your ears have ever heard that name, How to Win Friends and Influence People, and it sounded like fingers on chalkboard, then you’re like me. I always hated the name of that book, but it was written 100 years ago. And it’s more like an academic PhD thesis on how the mind and personality works. And his whole story and my wife is a terrible skeptic of books written with titles like that and she says she fell in love with the book around chapter eight when he says, “If you think I was teaching you a bag of ‘tricks’ on how to influence or persuade or trick people” … Actually, he said trick, “If you think I’m teaching you a bag of tricks, you have misread the previous eight chapters. It is never to be like that. So if you to deserve a leadership role with someone in front of you, you must seek to understand where they’re at and what the need of the other.”

Josh McCallen (43:50):
So his whole point is the only way to be in relationship with someone is to be humble enough to be open to their need and then to respond in kind with an offer. So it’s very much a listening-oriented ethos, and this is how we try to run our companies. So I would say How to Win Friends is probably one of the most recommended by billionaires books, and there’s a reason for that because it’s extremely true. It’s extremely true, when you read it. You’ll be shocked because it was written truthfully like a PhD dissertation. It is not a joke. This is a real great book.

Robert Leonard (44:25):
I completely agree with your wife on being skeptical of these books with these titles, that’s one of them. There’s another one called The 4-Hour Workweek. It’s a great book, but I didn’t read it for a very long time solely because of the title. There is another one from a guy named Ramit Sethi called I Will Teach You to Be Rich. There’s all these books, so I completely agree with your wife that I’ve actually been hesitant to read some very good books solely because of the title, but that’s a great book recommendation and a fun little story is that Warren Buffett actually doesn’t hang his degrees. He has an MBA, I believe, from Columbia Business School and he doesn’t even hang any of his degrees in his office. The only thing that he hangs is a certification from Dale Carnegie’s course in his office. That’s the only thing he has hung. So just a testimonial that you can’t argue with for Dale Carnegie and all the things that he’s done.

Josh McCallen (45:16):
Yeah. And since you did that which by the way, you’ve taught me something, I’m going to write that down I never knew that. Think of it this way, and if someday I have the privilege of writing this book, I’d love to either rewrite or retell the story of Dale Carnegie, but change the name. And here’s the name that a modern reader would have understood it as. So it was written literally in 1920, so over 100 years ago. You and I can’t put ourselves back 100 years ago and think about how this is the dawn, there really is no such thing as a self-help book. So that title worked for them at that time, by an academic, right? But today, you know what I think he would have written the title to be with the exact same words throughout the whole book? He would have called it “How to Seek the Good of the Other and Lead by Service”.

Josh McCallen (45:59):
So it would have been a whole different focus with the same words after the jacket, How to Seek the Good of the Other and Lead by Service. My point is he is about persuasion and leading, but his whole point is you do not even worry about it if you’re not seeking their good, which is truly beautiful, right? I mean, listen, nothing happens unless we persuade someone. And that’s why we say sales are sacred. First of all, sales are sacred because everybody in the company is depending on Jimmy and Jenny to make that sale, and we count on you. We’re counting on you. Your job feeds our maintenance team. So it’s sacred. There’s a family here. But there’s a stale is the influence of showing the good for the other and that how your product and service can enhance that. If it doesn’t seek the good of the other, do not do it. But if it does, then it’s your job to influence them, to let them see how it does. So, man, I’m so glad that Warren sees it too. I’m so glad. He has a deep emotional intelligence as well as intelligence.

Robert Leonard (46:58):
When this episode is over, before the listener quickly jumps to the next podcast queued up in their podcast player, what is one action they should take after listening to this episode that can help them improve their life, career, or business? We have a habit or principle that we already talked about that they can implement. We have a book that they can read. What’s another actionable thing that they could do to improve their life, career, or business?

Josh McCallen (47:22):
Close your eyes for just a second and realize if you liked the movie Matrix, there is a code of X’s and O’s floating through the sky and they’re related to capital. And at the key to it all is your human capital. It’s already ready for you, but you do have to learn how to apply the X’s and O’s so that you can dodge the bullets and pick up the wins. But that’s the number one thing I would help you to realize is you already have tremendous power. You know how they always say, “No two people are born the same, that we all have different talents and gifts.” That’s truly what I mean by capital syndication when I talk about our company, we capitalize on great people and people who want to invest in it. We don’t see capitalists, the people who put the money in, we see the capitalists, the people that help us run these companies and envision a new future. And envision a new way to love people and do that with profitability, of course. And then the people who have the cash get to join the human capital, financial and human capital coming together is transformative.

Josh McCallen (48:20):
And that’s how the world of creating the good can be done. And guess what? Everybody listening here now is like in the top one percentile, because this is the type of show, Robert is leading the type of show in The Investor’s Podcast Network that will transform the world, if you let it, because you have to realize you already have what I call human capital, human power.

Robert Leonard (48:42):
I really do appreciate all the kind words. Before we give a hand-off to where people can find you, I like to wrap up the show by turning the tables a bit and letting the guest ask me a question. So what question do you have for me, Josh?

Josh McCallen (48:55):
Well, I was going to ask you a question about when you design your own personal investing philosophy, how do you break it down? Do you have categories of what you’d like to own? I’m very curious because you’ve spoken to some of the best guests in the world, now that I even know Robert Cialdini. But in general, investing, how are you designing your portfolio?

Robert Leonard (49:14):
I have to admit that it was quite a bit easier when I was a W-2 employee. And the reason for that was just because I had this really easy way to distinguish money. So for me, anything that was W-2 went into the stock market. It was just super easy to have an automatic contribution through my 401(k) so that all just went into my retirement accounts and my stocks. And then anything that I generated outside of my W-2, so side hustles, side businesses that I had, anything else, real estate, anything like that, would just be funneled into more real estate. So that was really the only way I distinguished it. I didn’t really care so much about percentages in terms of allocation and things like that. It was really just that clear split. It was easy to manage and it was simple. Now I don’t have that luxury as much because I’m not a W-2 employee anymore.

Robert Leonard (49:57):
So it’s a little bit harder in terms of how I split it. So now if I have a dollar to invest, I think more along the lines of, do I want this dollar to go out and appreciate, or do I want this dollar to go out and bring back more dollars that I can spend? And so the difference there is appreciation and cash flow. So if I’m looking for more appreciation, I look to things like the stock market. I do have a holding in Bitcoin. I do a little bit of equity crowdfunding investing in some private companies. But if I’m looking for cash flow, that money all goes into real estate. So right now, the majority of my personal focus on investing is cash flow. So the majority of my money is going into real estate, but I still have all the money that I had from my W-2 job and saved in the stock market, in Bitcoin, in some private companies. So that’s kind of how I think about my portfolio allocation today.

Josh McCallen (50:47):
I’ve actually met a lot of people that say something similar, so very wise. And by the way, the other great thing about the stock market is liquidity. So while you’re working to buy the next resort or property, or in your case, any houses or commercial buildings, at least you have access to it. So those are some good pros and cons and well said, well said.

Robert Leonard (51:07):
I appreciate it, Josh, thanks so much for joining me on the show. Where can the audience go to connect with you and find you on the internet?

Josh McCallen (51:13):
Yeah, I mean, look, hey, we’ve talked a lot about Capital Hacking because I think you guys will love it there. We have Robert on, we’ll hopefully get him back on. He’s great. His whole story is awesome. He talks about how he reverse-engineered his dream life. And I think maybe we might’ve captured the best audio version of that on our show, telling Robert’s story. The other thing is Accountable Equity. What an easy, clear mission. We are just here to be accountable with your equity, our equity, and the buildings and the properties we do. So check us out, the book is there, right on the homepage I believe. The Seven Reasons Hospitality is primed for post-COVID. In general, there’s a lot of free content coming, we do courses, all things are free. I think you’ll like it there.

Robert Leonard (51:51):
I’ll be sure to put links to Accountable Equity, Capital Hacking, any other thing that Josh and I talked about throughout the episode. That’ll all be in the show notes below for anybody that’s interested. Josh, thanks so much for joining me.

Josh McCallen (52:02):
No, it’s a pleasure. Thanks for everything.

Robert Leonard (52:04):
All right, guys. That’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

Outro (52:10):
Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only, before making any decision consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.