Zero to $350M: Private Equity Insider Secrets Revealed

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Welcome to another episode of Making Billions. Today I have my dear friend Jerome Maldonado.

Jerome is the Founder and CEO or J. Jacob Enterprises & Quad J Capital Holdings. Over the span of his 20-year career, Jerome has done over $380 million in in-house transactions, with $150 million in 2022 alone.

What this means is that Jerome is about to teach you the cheat codes on how to get started in making money in Private Equity and Real Estate deals so that you can master the art of Making Billions.

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[THE GUEST]:  Jerome Maldonado is the Founder and CEO or J. Jacob Enterprises & Quad J Capital Holdings.

[THE HOST]: Ryan Miller is an Angel investor in technology and energ

Transcript

Ryan Miller  
My name is Ryan Miller and for the past 15 years have helped hundreds of people to raise millions of dollars for their funds, and for their startups. If you're serious about raising money, launching your business or taking your life to the next level, in the show will give you the answers so that you too can enjoy your pursuit of making billions. Let's get into it.

Never take advice from someone you wouldn't trade places with. Well, at least that's how I operate. So my next guest is someone that we would all benefit from listening from when it comes to real estate and private equity, somewhere to the tune of over $300 million. So the question is, how are you going to use this information in your pursuit of making billions? Here we go. 

Hey, welcome to another episode of making billions. I'm your host, Ryan Miller. And today I have my dear friend Jerome Maldonado. Jerome is the founder and CEO of J. Jacob enterprises and quad J holdings. Over the span of his 20 year career Jerome has done over $380 million in in house transactions with 150 million in 2022. Alone. So what this means is that Jerome is about to teach you and I the Cheat Codes on how to get started in making money in private equity and real estate deals so that you too can master the art of making billions. So Jerome a man welcome to the show. Brother,

Jerome Maldonado  
Ryan, bro. It's great to be here. It's just been able to be here with you. And bro, I'll tell you, man, the making billions community hands down. They're just absolutely amazing. And I love your entire community. Everything that you're doing a guest you have on your show is absolutely incredible. I just I love the content, the people the information, just absolutely everything. Just such an incredible community, bro.

Ryan Miller  
Wow. Thank you, man. That is thanks for all the love. And yeah, you know what we've been fortunate to be in the top 2% in the world, we're in over 100 countries around the world, and all because of amazing guests like you. So I've done some research on your company. And all these things like that lead in is just as tiny taste of what this guy is capable of folks. So I'm sure our fans around the world would love to know, especially those starting out in real estate or private equity. Two questions. How do people who are getting started or even advanced? How do they win? And how do they not lose? 

Jerome Maldonado  
Well, a lot of it is staying consistent over the course of time, I'd say that my wins and accolades really have to do with my consistency. We all go through stuff, right? There's ups and downs, there's a there's there's peaks and valleys. And really those of us who really stay in the game and learn and continue to learn, we always tend to be the last ones that we're always the ones that tend to be at the finish line when the end of the day comes in. And it really just has to do with consistency more than anything.

Ryan Miller  
Awesome, man. I've seen some of the things you and I have talked about, and I'm sure working with say, you know this overused phrase OPM or other people's money. You know, that's a big part of getting started in in private equity, real estate or any private investment, especially anyone listen to the show called make billions is probably interested in realizing that in their life, a big part of that is working with other people's money for beginners out there. I mean, what piece of advice can you give as far as dealing with other people's money and just helping them win using other capital?

Jerome Maldonado  
It was our big pivot in 2016. It's what really allowed us to scale. And so for those people that are watching, one of the big things is we were able to run a very successful business that was doing seven figures a year, in fact, even even pushed into the eight figure a year mark. And it wasn't until we actually got to 2016 Wow, he's struggling a little bit older, goes through a massive recession, like 2008. And I felt stagnant. And I in spite of making money, I think for a lot of people, especially once you get to a certain level, you sit back and you go, Okay, what's next, right, because a lot of us are here for the challenge. And it's for that, that next level of an athlete that you haven't been able to hit the next milestone, one of the big things for me in 2016, when I was sitting back in my early 40s, let's get back into this. Okay, drum, I gotta have one more good run at this. And I really wanted to do something that was really gonna push the needle. And so I think at that time, we probably were someplace between 25 to 35 million depending on how you evaluated our assets in our investments. But I'll tell you, we've been able to grow to a portfolio now of in excess of $600 million. And it's all through the means of being able to utilize other people's money, and we wouldn't be able to do it otherwise, because we were always chasing our tail, working in making money. And then we take we take everything we make, we flush it into an investment, and then we go back and we make money again. And I was never using other people's money. So I tell people, you know, one of the biggest things that's been the largest contributing factor to our growth over the last five to six years, is really been utilizing other people's money.

Ryan Miller  
Brilliant. So we say yeah, I use other people's money. And most people understand that when you're doing asset based acquisitions, like in private equity, I guess you consider a company an asset, but also a real estate acquisition, all that requires that but it's not. It's not just enough to say, you know, as every potential guru high level says, Use OPM and then they leave it at that. Yeah, when it comes down to it, you really need to understand a certain language. Maybe you can walk us through a little bit of the importance of understanding the Language of Business. and how that has helped you in in raising capital and maybe just give some people. Let's, let's peel it back a little deeper on that.

Jerome Maldonado  
All right, let's go back, I'll take you guys way back, you know, I got started in multilevel marketing. And then in the early 90s, and I read a little book called Thinking Grow Rich, I read it multiple times. And in that book, it talks about utilizing other people's money. So I thought I was using other people's money. You know, I thought that what it really meant was taking money from clients and customers and pulling that money in into your own proximity. And utilizing that within your own business, I didn't realize that I had the ability just like any large acquisition company, like a lot of the big syndications and stuff I didn't know that stuff was available to me, I think there's a lot of business owners out there that are very successful. And they just don't even know where to go to even get started on private sector capital. And it's huge right now. In fact, one of the victims and I was just talking to my to my stock guy today, as he said, private equity is one of the largest, most available ways for small business owners and medium sized business owners, and even large business owners to get capital these days. And right now, with the market and interest rates going up, these guys are able to leverage their capital and make larger returns, you know, obviously, when interest rates get lower, the private equity funds and stuff won't be as lucrative. But you can actually place your money in a lot of these funds. And they're even back even institutions are doing it now like Goldman Sachs. And some of the big guys are actually going in, and they're raising private sector capital, their institution back. And what's cool about it is this. And most people don't know this is that if there's ever a loss, and there's ever a bankruptcy, on any of the funds, it's the first thing that gets private equity is the first thing that gets paid back before all other debts in all of their equity is the number one first thing that gets paid back. Well, I didn't know any of this stuff. Obviously, since 2016, my financial literacy has expanded. And it was it was a personal choice, because I sat back and said, Okay, I've been doing this since the late 90s. And I've only grown this much to 2016. So I had 20 years in almost at that time, it was like 18 years into my professional career as an entrepreneur and in business, and I sat back and I go, I only got here 20 years. So if I keep doing what I'm doing, I'm gonna get, I'm just gonna multiply that times two, or maybe not, because I'm getting older. And that would be where I would foresee myself being in 20 years, I thought, not acceptable. And so we really got into figuring out how to go after private sector money, people that have done well, there's there's a fluency all over the world. And one thing that there's no lack of is money out there. And I do this to my kids, Ryan, but we drive down the road, I come look, Gary owns the I'll show my apartment complexes, and I'll show him our warehouses, and I'll show him the retail and das stuff that we own. But I'll tell him, when we look at that building right there, that one building is worth over $70 million. And it's one little property in this mass of wealth that surrounds us every single day. And so when I started wrapping my head around utilizing other people's money nationally how to do it, I was able to pull in, I was able to raise capital, which is called the equity side of the investment and leveraged debt from the banks in order to go in and build large assets. So I could go in and and raise a raise equity of like 20 or 30%, and then get the bank to lend me 70 to 80%. Now in today's world, it's a little flip. Now we're raising 40% of the equity through private sector, money, family office in other ways. And then the debt that we're getting in today's real world is closer to about 60% loan to cost or loan to value depending whether we're building or whether we're actually buying something

Ryan Miller  
Awesome man. And so you know, a big part of that there's this word called underwriting in in the private investment space. And I remember in my early days when I was a beginner, and I was like, I kept hearing this term underwriting and I was like, I have no idea what that is, but just smile and pretend like you know what's going on. And that was a long time ago. And so basically, it just means you want to build the models and you just like doing the due diligence research on the deal. How have you found you know, how important is having good quality underwriter been as far as raising capital when when you're starting out?

Jerome Maldonado  
Yeah, I'll tell you that. Anybody watching whether they're bad at math or anything? It's simple math. It's right. It's just addition and subtraction, and a little bit of arithmetic and division. That's it. There's no algebraic equations. There's no fancy geometry, there's no fancy trigonometry, there's no, you know, no calculus involved in this stuff. It's just simple math. Right? So you go back to like, just regular or seventh grade math. It's the biggest thing is spending time learning that stuff. I mean, how many hours we spent in school, right? We spent 14,000 hours from the time when kindergarten all the way to we graduate high school, and 14,000 hours, how many how much time we spent teaching how to balance a checkbook or teaching you how to buy a house and understand like what your tax write off is going to be on your house and like is it a good investment? Or is it a bad investment? 99% of people that buy homes don't even know that or I should say 99 C's close about 95% of people, they don't even know that and so underwriting is super important because it will keep you from going bankrupt or going into foreclosure or at least decrease the risk factor in doing so. And what I mean by that is this in 2008, when I went through the recession, I was building retail ground up, I had single family residential subdivisions going, we had restaurants, all kinds of different stuff. I didn't know what a cap rate was on real estate. I didn't know what it was. And I knew I knew that it was the amount of money I made back from my investment, but I didn't know how to figure it out. I didn't know how to figure out values, like how that correlates to value. I didn't understand that stuff. And so one of the things that I really hyper focused on in 2016, was I said, if I'm going to take other people's money, I need to know this stuff inside and out. And underwriting will keep you safe, so much. So by 2018, I stood up in front of rooms, and I started talking about this stuff. And he said, Look, ladies and gentlemen, we're coming to a place economically, where we're going to hit a recession, I had no idea that the pandemic was going to artificially stimulate things to the magnitude that it did no one everybody's crystal ball was was, was fogged at that point in time. But one thing that I didn't know is that we couldn't continue going up in value. Anybody who's anybody when the market is going up, even though you have to have is heartbeat and a pulse. That's it. If you've got a heartbeat and a pulse when the markets going up, you can make money. And what happens is people think that they're strategically amazing. They're like, I'm an investor. And I can go out and make a ton of money. And I did X, Y, and Z. Now, the true investor, the true investors, the true entrepreneurs, the true business people right now, their colors will shine. And the reason why is because they do understand how to underwrite stuff, because now the market is, is starting to falter. And prices are going down on not just real estate, but stocks, and companies and so forth. Now, what you can underwrite where your profitability will be in 510 years from now, based on on information, historical information, knowing knowledge, how to be able to take cap rates, reverse them, and see how Capris can positively or negatively affect values, and be able to go in and purchase correctly, so that you have a business plan and a business model with strategic real numbers to back what you're doing. That ladies and gentlemen, that is how you protect yourself financially. When the market falters, it's not when markets going up that you're an amazing person is how can you make money when the markets on a decline and profit vast what an amazing and amazing investment amazing business people are building that all comes from the basis of underwriting?

Ryan Miller  
Wow. So you know, I heard it once. And we'll use this analogy. You and I talked about this. But there was an analogy that in the will say the medieval times there was the certain religion that was you can only read the at the time the word of God and was in his particular language. And it was only available to the wealthy people and the clergy and all this stuff. And so for the quote unquote peasants who weren't allowed to learn the language and couldn't do that they had to rely on the wealthy people. And it wasn't until Latin and all these translations of these holy books, were able to roll out that people were able to be self sustaining in that area. And you know, this concept was similar to today. But the language is different. And that language is accounting. It's the Language of Business. And there was a time where and so that's also the the billionaires and people who really understand it folks like this is what's drones talking about is saying, you really need to understand the language, right? Just like any other thing, you got to know what's going on. If anyone's ever spoken a foreign language around you, and you're like, I'm not sure what's happening right now. And so learning the language, it unlocks a level of freedom just by understanding accounting, understanding, underwriting and really protecting yourself and your investors. And on this final note, there was a moment where I was fortunate enough to have lunch with Warren Buffett, and he said a lot of things and good quality underwriting ties into what he taught me personally, which he said, Ryan, I make money when I buy, not when I sell now, I'm sure he said it in other circles as well. And you know, I was still in college. And I was like, what does that even mean? And I realized that good quality underwriting will help you to uncover the golden nuggets, the good valuation where the money is at. And so if you can find a company, understand the language of business, you can really look at this thing and unpack it. Now you're in a position to say this is a good deal, or this is not a good deal. In other words, back to my original question of how to win and how not to lose starts with what Jerome saying is understand the language. Now I mentioned how not to lose. What are some of those things in the early days that you can advise people who are just starting out on how not to lose?

Jerome Maldonado  
Yeah, I the shiny object syndrome is huge. When I started making money in the mid 90s. And I was doing like making like 20 grand a month, I started buying Range Rovers, Lake houses, jet skis, I still had offices, and I had I was affording expansion and trying to afford expansion while still buying a bunch of junk I didn't need and it wasn't till 97, we grew too fast. And we were shut down by the FTC, is because we scaled too big too quick. And I was just a subcontractor for the company and multilevel marketing. But I was subjected to the same downturn that the company experienced. And it was in that moment that I sat back and said, Man, if I would have just held on to a little bit of that cash, invested it differently. I'd be at a different place in my life, and it's kind of what got me into real estate was in 98. I start investing real estate because I didn't I just want to have some tangible, right. The shiny object syndrome doesn't just go with things it goes with opportunities to because We live in a world that is instant everything right instant food, instant, instant gratification, instant everything. And so on world that we live in. It offers instant everything, especially as you is people scrolling up through Instagram right now or Facebook right now. And they're watching everybody in their Lamborghinis and their big yachts and their airplanes and helicopters and all this stuff. They're they're saying, Okay, what is that person doing that I'm not doing. And then they start focusing on that. And then they pull their foot off the pedal, and then they go focus on something different. One of the things that kept me going, Ryan is I can't tell you how many times I turned to my wife and said, one more summer, you know, because I want a concrete company, I started in 98 that I got, that's how I got into construction, real estate. As I started pouring concrete, we still own that company today. We've been in business for 26 years. And that company has made us multiple, you know, eight figures every single year of year over year over year over a year for many years now. And I'll tell you that there's times that I saw buddies that got into fracking, fracking plants, and I wanted to migrate to it. There was times I had other buddies that have opened up like debt consolidation companies. And I wanted to focus on that. I had buddies that went in went to China with like Mark Spitz and the swimmer. And we're opening up other companies out in China, and I always came home, and in spite of Haiti, dishonors, and in spite of Haiti, having to get out there pouring concrete, the one thing that I hated most produce for me year after year, month after month, continuously decade over decade, and has given me the ability to invest in real estate and continue feeding me. And I tell people that don't have the shiny object syndrome, where you're all over the place, just find something that is profitable. I told people, you know, that will say that when you do what you love, you never work a day in your life, I think it's bullshit. Because when the second what you start doing for work, whether it's something you love, and it becomes work, it becomes work, it's just work. So don't do what you love, do what bears you profits, focus on what makes you money, and then streamlining and never severed an artery that holds cash flow, and an income source. Never get rid of it. And that that is truly been our saving grace through the 2008 recession, going through the pandemic even going to voice and now. Not definitely lifelines of financial gains is always protected us. And it's because in spite of me wanting out, I always stayed in. And I, if I look at the buddies that were making millions of dollars more than me a year, and we added up all the years, I don't think that there's one of them, that mass has amassed a fortune larger than ours and has a net worth larger than ours. And the only variance between what they did and I did is I never got this nice shiny object syndrome, I focused on my business. And I'm still the last man standing

Ryan Miller  
man, brilliant. So Holy cow. So avoid that shiny object syndrome. And sometimes, you know, you start with something that's curiosity and all that. Sure, that's fine. But according to Jerome like, man, like you're saying, Well, let's not forget why we're actually here. What keeps us here, which is profit. And so being profitable, obviously, is what gets us to making billions now with that, so that's for the beginners listening. Let's let's, let's punch it up a little bit. Let's talk about the market. Yeah. You know, specifically the markets that you're in. We mentioned real estate, private equity, you can go anywhere with this. But I'm curious where as far as the markets that you operate in, where's the market at? And the second question is, where is it going? Maybe you can walk us through a little bit of what you're seeing.

Jerome Maldonado  
Yeah. So right now in the market, I think that people feel like we're getting beat up with it with high interest rates. I keep hearing all this stuff about high interest rates and inflation. And yes, we've experienced massive inflation. But you gotta remember that we also printed 9 billion $9 trillion worth of money that came into the market during the pandemic. So obviously, when there's money printed, it devalues our dollar bill, there's going to be automatic inflation. Now, interest rates when you look at this stuff, Ryan, this is why I tell people, we have had some of the most incredible markets ever with interest rates when they were higher than they are right now. And what happened with the market is that people people found this one time that we have this this amazing historical low interest rates, where the government, the federal government actually stimulated the market and artificially helped stimulate things for us. And then we sit back going to 3% interest rates. And then we started leveraging real estate investments at 3% cap rates, and everything's getting compressed, right? Cap rates are getting compressed values are going up exponentially. And all of a sudden, people are just making astronomical amounts of money. But if you look back historically, we've never had 3% interest rates. We've never had 4% interest rates. There's been there's been private sector, banks, local municipal credit unions that have offered 4% rates, but we haven't seen this to the public sector for a long period of time, like we did in 2002 22,021. And so what happens we hit these historical low rates, right? And now all of a sudden, we start those rates go up to 3%. And the world goes into a frenzy and I sit back and I go look guys, we were I was at a point in 2018. When I was buying multifamily real estate in 2016. I saw cap rates go from an 8% cap rate to a 6% cap rate and I started seeing cap rates get compressed. I met a guy Gainey ranch in Scottsdale Arizona and these guys were selling off the 300 mil million dollar storage portfolio at that time. And at that time, I couldn't fathom owning a $300 million portfolio. And he goes, and I asked him, Why are you? Why are you guys selling? Why do you decide to sell? Why would you guys just keep it, he goes, we'll cap rates right now or compressed. And because cap rates are a good place right now, we're gonna sell because our portfolio will change in value if the cap rates go back up. At that time, that's when I really started understanding this stuff. And at that time, interest rates were right around 6%, I think cap rates were sitting right around five and a half 6%. And that's where I thought that the market was over leveraged. And so I sat back and said, You know what, this is crazy, I'm not going to buy real estate, I'm going to build it, because if I build it, I can walk into this stuff with like a 12% cap rate, double what that stuff is selling for it. To me, it just made more sense. And that's where I got back into the ground up game instead of value add game, because I've been construction anyways. And so it was my saving grace, it was my protection against the market compression, and not even knowing that it was gonna happen. I already thought the market was getting compressed, I was comparing it to 2008, I was comparing to the late 1990s, I was comparing it to the market crashed in the 1980s. During the Reagan administration, I was preparing to all this stuff. And so I had no idea. So everybody else was living through this artificial stimulated market. While I was sitting up on stage in 2018, telling people, the market won't stay like this, ladies and gentlemen, and we are barely back to where we were at when I was talking about that in 2018. And Ryan, I believe that we'll have some of the strongest economies moving forward. But I don't believe that interest rates are gonna go down too much. And if they do, and they stabilize, those gonna be slightly more stabilized. People just have to understand how to migrate through this market. And now moving forward into the reality of what the world is going to bear over the next few years.

Ryan Miller  
So wonderful. So where it's at is elevated, but not high interest rates. What are you seeing as far like you do you move a lot of weight on the on the real estate front? What's What's the sentiment out there? You know, how are people see in the market? What are they thinking,

Jerome Maldonado  
Oh, they're scared. It's like a, I talk about the market right now being almost like an addict. Going through rehabilitation, right, until an attic wants to be rehabilitated. They're in denial. And they live in denial until they're ready until they have it until they go through acceptance. And then they go through acceptance, and they only go to a healing space right now. We'll have a lot of investors in denial, there's going to be honest people that, that take a beating through this on his hard working people. And it's unfortunate, but I think that there's people that really over leveraged themselves. And there's a lot of people like syndicators out there, that their business model, they don't make much money in the actual cash on cash return, because most of them don't have much money in it, they give away 70% of the of the equity to investors, and they hold the rest in debt. And then they make a small management fee where they make their money on their internal rate of return. When they go in and they actually sell the property, that's where they make the money. So they usually do this every three to five years. So a lot of them to be able to keep costs down and make a little bit more of a higher return to their investors so that their investors are cheering for them and loving them. They do these these five one RS where they do a five year set rate, and then it becomes an adjustable rate mortgage. And so this is just one, one example. But when those loans get called, and that five one ARM, it's a fluctuating rate, and you bought on a 3% cap rate. And now you're bearing a 6% or better interest rate. How do you service the debt on that stuff you can do? And so there's just not enough meat on the bone to service that. Yeah. So what happens is there's now the banks are in a position where they either they take back the keys and either have to reposition that debt with somebody else that's qualified, or it goes into foreclosure becomes an REO bank owned property. So there's gonna be a lot of that out there. There's a lot I can go on on this subject, Ryan for the next day, I could do a full weekend training.

Ryan Miller  
I bet you came in with your background. So it was, you know, it's more of a humorous thing. I think, again, we were talking to Warren Buffett all day today for some reason, but I think it was him or his partner that said the three L's that bring down any or beat up an investor's leverage liquor and ladies if you ever heard that saying, right, I mean, they're funny guys, and they're just telling the jokes or saying hey, like we're in our 90s we've been in this game for a while we could say those three for sure you count on never been a Berkshire Hathaway

Jerome Maldonado  
you ever watch those guys during their annual media? So I have left three times? Just it was it was fun.

Ryan Miller  
Yeah, they absolutely certainly have a mountain of wisdom and sorrow to you. So you know, we're looking at okay, so almost blood in the streets or people are starting to feel it a little bit. Interest rates we can bring in a new market are elevated, but not high. That's where it's at. Now curious. The second question is, where do you see it going? I mean, we've got a lot of things, whether it's problems, whether it's solutions, whatever those are, I'd love to know your sentiment as far as from your perspective and opinion, not financial advice, folks, but just your opinion. Where do you see the market going?

Jerome Maldonado  
Yeah, you know, I've been classified as a real estate guy but I truly believe that I'm just a business entrepreneur. I've learned all kinds of stuff and I've invest in all kinds of stuff and in the reason I don't think that I'm just a straight real estate guy is because most real estate guys don't know stocks, no investments outside of real estate, they believe I am holding hold diversified. So I have cryptocurrencies, you know, not a lot that's probably my my downfall right now. And I underwater stocks. And now we're even buying bonds in the bond market because the bond market is kicking ass right now. You know. And so there's a lot of opportunity there. And so I think what people aren't paying attention to right now, they really need to electronic currencies, and they really need to pay attention to commodities. People aren't paying attention to commodities and not paying attention to, well, a good segment of the world is paying attention to electronic currencies, but commodities, this is how the world actually functions, right? Is, is a volatility in the market, and you're talking about energy. And I'm not just talking like wind turbines and solar, but oil, you know, oil transport logistics, you know, and it's not just about the commodities, but how are these? How are they moving? Right? You take a look at some of the biggest companies out there that most people think are like retailers, you take a look at companies like Amazon, okay, you take a look at companies like Walmart, you take a look at companies like Home Depot, those three companies are leading the world in logistics right now. It's all about transport is how do I get it's not just about how you get information, but how do you get goods and services, right? Because the tech industry is all about, okay, we're in an information age, and attack age where information is shifting, right. But logistics and getting things places from overseas to the end user, and doing it in a monetary fashion where you get it yesterday, right. And we live in that instantaneous world. And I was talking about earlier, logistics and commodities are huge right now. And I think the oil industry, when you start pumping oil, I believe it's the Keystone pipeline, you see it opened up, I think that will fix a lot of our inflationary problems that we've been seeing. It'll help even our unemployment rate, which is still good right now, it's not bad, or unemployment is still just over 3%, which anything under 6% is considered good. Most recessionary markets, unemployment has to go up to 6%. But it will still help all those things. And we would savor being the world's power as far as financial power if we started drilling oil again. So I take a look at all this stuff. And I'm looking at electronic currency, we're going to be in a world where we're living under a world currency, not a nation's currency. And we're not living under the US currency being the strongest currency or the Chinese yen being the second strongest currency, we're going to look at electronic currencies being one of the dominant and only currencies as life continues to evolve. And I think that's where the world is really going. And unless emoted Ryan, I know, that's right. And I'm kind of, I'm kind of going like big patients, and I'm talking to macro, large macro scale, right. And then there's real estate, right? Like the real estate sector, you have to have an affordability factor to whatever you're doing right now, or it has to support logistics, warehouse distribution, or multifamily with affordable components. Because Ryan is incredible as your community is, is incredible of entrepreneurs that we have on here, we assume will never change the statistics, 97% of our population will be working class professionals. 3% of the population controls 95% of the world's wealth, and the other 5% of the world, but the other 3% of the world shares 5% of the world's wealth. It's absolutely crazy. So I'm just telling people focus on these areas, because this is where we're evolving, at least while we're here on Earth. 

Ryan Miller  
Wow, brilliant. interest rates, digital currencies, commodities. I mean, we've we've got a lot of things now on the more advanced side, and folks, you'd be surprised that advanced data or advanced cheat codes actually come in a very simplistic way as those who follow the show. I've been saying this for years, the two most valuable assets is r&r, you know, reputation relationships. But, you know, we're not here to ask about my cheat codes. Everybody knows what those are curious about you, what have you found to certain things that have given you let's say, three to five things that you've considered to be the cheat codes?

Jerome Maldonado  
Yeah, relationships are huge. Networking is big. I'll tell you that in early years, I think some of the hardest things when you're 1819 2021 22 years old, right? I'll tell all you young people out there that don't want to go to college, go to some of the hardest colleges, in most strategic colleges with wealthy people. Because it doesn't matter if you fail, just go in there and just get by, I don't care if you get Ds and C's or whatever, just get by, go take art, go take, go take history, or go take salsa dancing, and go take whatever doesn't even matter. Because you're not the information you're getting there is going to be pushed, it is not going to help you in life, right? Like world history all as it's not gonna help you. Maybe economics, macro, micro, maybe some of the maths, you know, that stuff will help you, you know, English helped me, I became a good document reader and I became a good writer, to a certain point, but relationships, ladies and gentlemen, relationships, get yourselves to some of the most strategic universities where there's wealthy people, because when you put yourself in proximity with people that have money, you all of a sudden start to think like them, you walk like them, you talk like them, you think like them, and all of a sudden, if you do what they do, and you're around them, guess what automatically happens to your bank account and everything that you do in life, it starts to grow. And so I tell people, I tell my kids, you know, be strategic when you go to college, go to college, and we go to college. The reason we go to college is yes, you want to learn like I don't want encourage my kids to go and fail or go and take, you know, classes that are not worth their time. But whole point being I'm going to I'm exaggerating it a little bit Ryan just to be a little bit facetious on the you know, on one end, but I really want to just tell people like relationships are huge, and as you grow and evolve and your business, my relationships are so valuable to me. And so as long as you never compromise your ethics, Don't lie, don't cheat, don't steal, and exercise those relationships with with care, make sure that you always exercising relationships, because they'll pay dividends forever. You know, that's one big, big piece of advice that I give young people you know, is networking relationships, because you never know who you don't know, but somebody else knows who you do need to know. And when you position yourself correctly with right relationships, they will introduce you to people that will open doors for you, as you move or migrate through your entire career.

Ryan Miller  
Now, I love that, you know, when it reminds me of something that I've you know, I've taught probably over 1000 people how to start their own investment fund and, and to that point of really nice, you know, you've heard me say repetition relationships are kind of the two most valuable assets people have. But if we if we unpack that, just to echo your point a little further, is I say this a little facetiously, however, I say, look, millionaires collect things, billionaires, collect people. So depending on how you're doing, what game you're playing, like you make a few bucks, what do you do next? Right, like you said, in the early days, you just went shopping and you started collecting things that's wrong with that. Absolutely. I encourage that you make money, reward yourself, celebrate, that's okay. But if that's your end game, you're not thinking big enough. And so we're Jerome and I are trying to help you understand is some of these cheat codes, as I warned you before they come very simple terms is some of the greatest competitive advantage is your network, right? And there's all the network is your net worth, and all these people find these catchy phrases to throw around. But at the end of the day, you want to be the guy who picks up the phone raises $100 million, while he's standing in line with his kids at Disneyland. So by collecting people, you can start making things happen not only for yourself, but for people you care about, which again, further strengthens your relationships. Would you agree?

Jerome Maldonado  
Yeah, 100%. 

Ryan Miller  
Awesome. We see a lot of unaffordability in housing, right? You're a real estate guy or many things. You're an entrepreneur, but you definitely understand real estate. Now affordability is one issue. And that's a hot topic you're hearing it in, in political conversations and all over the place. But we look at the asset that's built on the land, but you still need land. And so if some people are saying, let's just build more homes, okay, well, then that requires to unlock more land. What's your opinion, as far as land investing or anything like that, as far as giving yourself a competitive advantage? I'd love to hear what you think about land.

Jerome Maldonado  
Yeah, a great question, Ryan. Our whole business model behind what we do is about buying land and building houses. And there's two, there's two different sides to this whole story. There's a caveat to it. So I'm going to contradict myself slightly as I as I explain this, because I want people to understand that we have an affordability issue across the world right now. Okay, I tell people buy things for me, Ryan, buying a piece of land and building houses has been my saving grace. I wasn't I wasn't born with wealth. And I. And even now, you know, I still work on like today. I mean, I was still I was checking on concrete guys. And I was out, checking levels of forums for this big massive port that my guys have tomorrow morning. So I'm humbled to that stuff, because that's where I come from, right. But I'll tell you guys, land is important to understand, like, I tell people be careful with land. Because if you buy too much land, it doesn't hold any long term value in regards to return on investment, and a cash flow basis. Long term, it will give you a return on investment if you sell it and your position in the strategically correct area. But if you just want to buy a little parcel of land and build a house, I tell people, there's a business model behind it, where you service, the upper demographics, the upper 24%, which is the upper middle class, that constitutes for 24% of homebuyers, and these folks when the market gets compressed Ryan, they're not struggling to pay their mortgage. They're not sitting back trying to steal from Peter to pay Paul, they have a fluency they've worked a 30 year career, most of them that are that are a full time employees they've they've done well, you know, some of these might be our parents or grandparents or people have have strategically positioned themselves. And it's a time where a pension was the way to go for most Americans that were living just in a good middle class life. Those are the folks that are constituting for the 16% of homes that are being purchased in cash right now. It's them, folks, it's not the lower median that I mean, there's a little trickle down there, but the vast majority of them are in the upper middle class. And so I tell people, why compete with the masses, why compete with the big builders like Dr. Horton polti, and Renard owns and KB homes and all these guys, they're working on volume, like I don't want to build a volume, I get that at one point in time, I'll never do that, again. I made as much money building 12 homes a year as I did making building 70 a year. And it's because I was servicing payroll, and I was serving, I was feeding the beast. So I tell people, you can go out and build four homes a year. And if right now, if you focus methodically on homes that are reselling, for between 600,000 and a million dollars, and you kind of stay in that sweet spot of 700 to like 100 150,000 you'll you'll pass 200 $250,000 net profits. If you do it correctly in beautiful homes you're making you're netting a million dollars a year you're in the top 1/10 of 1% of all money years since the history of Adam and Eve doing that. You can do it part time, you know, so I love that business model. I think that somebody isn't listeners in here and they're just getting started, they're sitting back going, I just want to make some money, I sit back and go get a set of plans, a set of plans, it looks like this, you know, and this is funny, because you could take this to a bank, get it appraised, get a loan, and go build it. And there's $200,000 profit, you know, I did it with no experience. I didn't know anything about construction. So it was just kind of my little gift to the listeners. I think it's a great gift. And I think, you know, it's different kind of off of the path of things. But and the reason I say I was gonna contradict myself is because I tell people, okay, you have a million dollars, you're gonna pay 400,000 Back in taxes. So now you have $600,000. So instead, why don't you go invest in tangible assets that you can depreciate, and mitigate away from capital gains taxes, this is actually active income. So any capital gains, this is active income, it's not even capital gains. So you can write off everything you do. Like the office, I'm standing in my car, everything, like the dinners and lunches that I go, the food I buy from my my staff, whatever it is, I write it all off. Now, you take that money, and you invest it into an asset, an asset that is cash producing, and I tell people, the number one asset class you should be looking at right now is housing, multiple roofs. So multifamily has been our go to, but not just traditional multifamily is where the business model chips, right, we're building and taking money from the upper middle class, but we're positioning strategically that money focusing on multifamily that has an affordability component to it that services, the lower demographics of people that can afford those homes. And that's the vast majority of population. Now that'll give you passive income. That's where you'll make money long term. Brilliant, man,

Ryan Miller  
brilliant, I threaten you with three to five. So what's what's the third thing that you would say for people starting out looking for a competitive advantage? And really, how do we speed them up and compress your decades? And today's for people? What's something else that you can leave behind?

Jerome Maldonado  
Yeah, you know, I think buying businesses is a great place. Right now, it seems like there's a ton of people that are promoting this now. And I'll tell you guys in your own backyard, there's people like me, and I use myself as an example right now, we kind of talked about this briefly. And I use myself as a perfect example, ladies and gentlemen. So I know that there are sellers out there that aren't exactly like I am to sell a business strategically, you got to build the EBI, you got to build the profits, you got to build that business to a point where you can maximize its true potential to maximize its values. Most people most business owners don't know how to do that their mom and pop shops 85% of the world is employed by by Mom and Pop employers, and they're all over the place millions and millions of small business owners all over the place. And if most of them, they get to a point, like the pandemic was a great place where people just said they were in their 60s 70s 80s. They're like, You know what I've had good, my run, I'm done, I'm gonna sell my business, close my business down without even selling it. Most people, a lot of people do that, as people like me, I've had a 26 year run my company company, for sake of example. And obviously, people have granted in Brian Dawson, these guys are doing this stuff. Now, whether we're doing it with our tax ventures, or taking like heating and cooling companies and landscape companies and all these guys that if they're there to go out and teach them how to buy these businesses, and then accelerator or people that own these business and teach them how to really scale, you can go buy companies like mine, like a concrete company, I'll tell you guys, when I sell my concrete company, I'm not going to sell it for the highest probability I'm going to sell at the highest profitability that I can in the current seat that it's in. And it's a great business we're doing, you know, we're doing solid eight figures and I say figures, you know, we're a $14 million a year company. So when you do when you come in, and you take a look at that it's a very lucrative company. So we get calls Ryan, for people every single day that they call and say, Hey, do you need more business? That's the phone call that comes into our office to add more business. And we tell him, nope, we sure don't, we don't want no more business, we don't want to grow no more, we're happy exactly the way it is. Because if I grow my business, guess what I have to do, Ryan, I have to manage it, I got to manage more employees, I got to I got to grow it, I got to hire more middle management and executives, I got I got a I gotta be a bigger beast to feed. And we were there at one point time, we scaled down in 2008. Not by choice, but it actually worked out very strategically. And I can take the brilliance and try to pat my back. But it didn't, it wasn't my idea at all. But buying businesses great people find a drone Maldonado out there the rent of 26 year company, I soaked the capital of all that business, I put it into real estate. Now my big holdings are in real estate, and in another stuff, but predominantly real estate, and I have no desire to get the EBIT da to its maximum. So come by the business for three times multiplier, then take that thing to with 20 3040 $50 million, your business and then go sell that thing through for three or four times multiplier. That's how you go do it. Or you get you can go in and get owner financing. If you're brand new getting started, you can go in to a business owner that owns a mom and pop shop, maybe not a $14 million, your company, but a company that's doing a solid 650 to a million dollars a year and maybe they're taking home with 25 30% profit they're making a quarter million dollars take home, that's a great living. You know, you're in the you're in the top money earners across the world doing that you're in the upper middle class and you're doing extremely well. You can go in and ask them to do owner financing where they hold a percentage of the company and to pay it off. And if you don't pay it off, they get the business back and you work your ass off to go in and make that business work and in the benefits to it is their systems and processes that already put in place. All you have to do is go in there and duplicate them and prove them and I think that's it Don't wait for small business owners or people that are looking to get into the market to get in and start bearing profits with very little money out of pocket,

Ryan Miller  
man, brilliant. So relationships land and buying a business man. So these are some of those cheat codes to just help accelerate. Notice how everything he said didn't involve a paycheck did it? So doing private deals, which is all we talked about on the show, you know, before as we round through his base, and we look to wrap things up, is there anything at all that you would like to mention to to our followers, anything at all? You know,

Jerome Maldonado  
I guess in summary, you know, there's free resources out there for you guys, and I don't have anything to sell you guys. I don't have anything to give you guys other than their wisdom, knowledge. You know, I tell you guys follow some of our content. You know, a lot of what you guys are getting right here from from Ryan is absolutely priceless. The people I watch this podcast, I go in and I watch his podcasts. I listen to the people that Ryan has on here. And it's just free information, guys. It's tough. It's free information. And it's it's something that you can't get anywhere. One thing that that I tell you guys is that the big things, Ryan and I'll just kind of go organic on this stuff that you come onto, and you watch shows like this, you're trying you're trying to gravitate and get one thing I tell people, you can't get a PhD overnight. It's impossible. You can't do it in one show. And so in summary, ladies and gentlemen, position yourself to be a lifelong learner. I'm almost 50 years old, I've been learning my whole life. Every Saturday morning, I'm still listening to stuff, I'm still trying to figure things out. The markets migrating right now. And we're in uncharted territories, it's always going to be like this, there's always going to be uncharted territories, never stop learning. And if I can give anybody the reason we do our educational platform, and we give so much content out on YouTube, and all the other social media platforms, is if we can change the lives of one person, we can improve the life of one person and it's worth its weight in gold. You know, we get a lot of deal flow from that stuff. But I'll tell you, it's really cool to be in the airport. I was coming out of Vegas the other day and gentleman ran up to me and he goes, he goes are you draw Maldonado and not that many people? Like I'm not a celebrity. I don't have that many people coming up. He's like, it's one guy. I'm like, I'm like yams row Maldonado, right. Then he goes, Man, he changed my life. He goes, I watched all your videos on YouTube. And I built a house and I'm on my fourth one now. And you know, I my first one I didn't do as good. I only made $130,000. But this last house, I made over $280,000 and I'm on my fourth house and you know, that makes me feel I'm like going and I'm like people around looking around. My dad was like last week home I want this testimony to be for everybody here. You know, it was only one person. What is that one person is you

Ryan Miller  
brilliantly said, you know, thank you for that. And you know, just to summarize, you know, some of the tips are relationships, right? So make sure you nurture them, you understand, right? You hang out with nine millionaires become the 10th you hang out with nine, troublemakers you become the tent. The other thing that he mentioned was land raw land right now people are you know, a lot of politicians. Everybody's saying hey, man, if we're gonna bring it down, we got to start building a lot to increase the supply to reduce the cost Great. whoever's holding land, you're in a good place, you know, but whether you buy raw land, get entitlements and make a few bucks off that and resell it up to you. And then the third thing is learn how to buy a business. And that ties to the earlier point is in order to do that, either you learn the language of business, which is accounting, or you find people who do you do these things, and YouTube will be well on your way in your pursuit of making billions.

Wow, what a show. I hope you enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes awhile, you get to know your guests even better. And make sure to come back for our next episode where we dive even deeper into the people the process and the perspectives of both investors and founders. Until then, my friends, stay hungry. Focus on your goals and keep grinding towards your dream of making billions