Brock Briggs  0:15  

Hello and welcome to the Scuttlebutt podcast. Our guest today, our guests, plural. We've got Frank Scappaticci and John Plumstead. Both are former West Point grads, college football players. And now both partners at their company, Gray Line Investments. John and Frank, welcome to the show. 

John Plumstead

Morning! 

Frank Scappaticci

Good morning!

Tim McCarthy  0:38  

Morning. Thanks for being here. We’re excited.

Frank Scappaticci  0:42  

Good morning.

Brock Briggs  0:47  

John, I will say I'm happy to have you on because you put Tim in the running. Or you and Tim are now in the running for best hair. So appreciate you showing up prepared.

Tim McCarthy

Yeah, yeah. 

John Plumstead  0:58  

I am transitioning off active duty now. So I'm like in that weird, you know, spot between active duty hair and veteran hair. It's like almost impossible to make it look normal. So I need a couple months. 

Brock Briggs

Oh, yeah. 

Tim McCarthy  1:12  

It's looking good, man. It's looking good. 

John Plumstead

Thanks.

Brock Briggs  1:16  

Yeah, I don't know how many times I got stopped in that last like two months before going on terminal leveler. You know, they're getting the ruler out. And they're like, this is really, really borderline and I'm like, “Come on, man. Just cut me some slack here.”

Tim McCarthy  1:30  

I have four weeks left. Leave me alone.

Brock Briggs  1:34  

Just short timers, big time. But we're happy to have you guys on the show. You guys are podcast veterans, you got your own podcast. And so I think we're gonna make for a good conversation today. You guys wanna start out giving us a little bit of backstory about how you guys met each other? And what brings you here today? 

John Plumstead

Sure, go ahead, Frank. 

Frank Scappaticci 1:53  

Oh, I'm taking it. Okay. Alright. So, John and I, we know each other, we played football together. We were recruited athletes for the Army football team. So I think we arrived at West Point at 2005. Actually, John was 2004, because he went to the US Military Academy prep school, so he was there earlier than me. We’re teammates, played the same position for a while. So we were in direct competition for a few years. Then we both started, got some reps, had a strong friendship there. We also both branched field artillery. So we're both FA officers and got to go to lovely Fort Sill together in Lawton, Oklahoma. 

If you've never been, you're lucky, right? It’s not the best duty station, if anyone is listening who's been there. But we went there. We both were stationed at Fort Carson, Colorado, which is an awesome duty station, in my opinion. And we went our separate ways, had families, kids. John stayed in the army for a little bit longer. I got out after five years and started a real estate investment company two years ago together when COVID hit because we had some extra time in our schedule. And we've been doing you know, working our ass off ever since. So that's our one minute elevator pitch, I guess.

Tim McCarthy  3:09  

The down and dirty, the nitty gritty.

Frank Scappaticci  3:11  

Yup

Brock Briggs

Since you guys have so much of the same story. Do we need to hear it from you too, John? Or?

John Plumstead  3:18  

All good. I think Frank hit the big points. You know, we're like, our friendship was kind of forged in like a locker room or on the gridiron. So like, you know, intense. Frank and I are very comfortable telling each other when we disagree, right? And in a passionate sense if we need to. So we've always been able to kind of cut through the bullshit and like, “Hey, this is what I think. This is what you think,” you know. How can we figure out the middle ground? So we're really good at kind of resolving conflict, and hopefully, you know, creating this culture between the two of us where the best idea wins. And I think that allows us to iterate our business all the time. And we're having a lot of fun doing it. So..

Brock Briggs  3:58  

Unbelievable how like good of friends you can build, I think just in the military in general. And I'm sure that the sports dynamic just kind of adds another layer to it. You talk about, or you hear people talk about the camaraderie of like a team or whatever. And I'm always like, “Well, you haven't been in the military, you wouldn't understand.” But I'm sure that, that like stacked on top of like a military experience, is just like another level. And I think one of the beauties of that is the quicker you can get to telling your best friend that they're full of shit, like, the better and the closer you kind of become and you kind of cut that curve out.

Frank Scappaticci  4:37  

Well, I'll add to it. I remember, I don't know if John remembers this, but it was over a year ago. And you know, we've fired people in our company like most companies before. And at one point John was like, “Hey, man, but there's no guarantees our friendship makes it out as this thing alive either.” You know, like, is it a business or is this gonna stress our friendship. Like if a married couple goes into business together, their marriage is at risk too, right? Like businesses put stress on relationships. 

And I think that's part of like the locker room, like, from 12 years ago coming back, because a sports team is a meritocracy, right? Like the best players play. And the worst players get cut, you know. And I think John and I, for better or for worse, got a little bit of that in our blood, and we can't shake it. And so we think there's something there. But I think we were a little bit wired differently. We're a little aggressive, I think, in how we treat each other, I guess. So..

Tim McCarthy  5:31  

Well, I think you have to be like that. It was almost the same exact thing, when we were interviewing the guys from the Dead Reckoning Collective. That's exactly what they said too, is like, there's no like, we're quick to like, fight each other. Like, if we lived next to each other, we'd be rebuilding the fence every couple of weeks. And that's like, especially if you're going into business with each other. Like you have to be able to kinda like brothers. You know, like, if you guys had brothers growing up, like you get into a fight with your brother. And then two hours later, you're like, you wanna play Mario Kart? Like, you know what I mean. Like, you just squash it and move on. 

Frank Scappaticci  6:09  

That's like our entire childhood right there. I like that. 

Brock Briggs  6:10  

Do you guys have any like notable disagreements or like points early on in your kind of relationship, either with football or school or whatever that like, kind of maybe tested you guys or like, really put your friendship on the line?

John Plumstead  6:29  

I would just say, when Frank and I started at West Point, we were both linebackers. And we were in a linebacker room that had 36 guys on it, and three of those players started, right? So you look at the depth chart. And you know, Frank and I are deep on the depth chart. And we looked at each other, and we looked at everyone else in the room. And it's like, I will punch you in the face to get out on that field. And I'm gonna punch everyone else out here, you know, everyone else in the face to get on that field. And you know, after a month, the room was smaller. 

After a year, the room was smaller. Yet, after four years, you know, Frank and I were sitting next to each other in the front of the room. And you know, there's a million little stories that took us to get to that point, right? But the story is a successful story. But if you were to zoom in, what you would see is a ton of failures, where we were at each other's throats, or we were at our teammates throats or, you know, we're fighting claw and scratch in everything we could to see the field and start contributing. 

So I think it's just that adversity that happened throughout those four years, and you go into the military, you know, as young officer. You know, young in the military get punched in the face every day. There you have all kinds of failures, and you get to the business world. And it's just as if you're doing it right, in my opinion, if you're doing business right, it's just as cutthroat as college athletics, and it's just as cutthroat as military.

Brock Briggs  7:55  

That's probably good advice. I think that everybody's taken a few of those punches. Probably anybody that's listening has had their fair share of those, that's for sure. So you guys said that before we started recording, you guys said that you were both stationed at the same place?

Frank Scappaticci  8:12  

Yeah, we were stationed at Fort Carson, Colorado, which is Colorado Springs, which is an amazing spot. I still fantasize about the breakfast spots on Taylan Street. It's like the best breakfast in the military is like downtown Colorado Springs. They have like three World Class breakfast spots, next to all the bars, really, really, really good duty station. But we didn't. We didn't actually spend a lot of time together when we were there.

John deployed to Afghanistan first. And then right after he came back, or maybe right before I deployed to RC West, we both went to RC West, which is also interesting. So our path has literally been exactly the same artillery officers, same duty station, deployed to the same area of operations just on separate timelines. So we didn't spend a lot of time with each other, actually, until we got back into real estate a couple of years ago. So during the military, we only hung out like a handful of times, I would say, while we were stationed there.

Brock Briggs  9:10  

And do you guys live in the same place now?

Frank Scappaticci  9:15  

No, I live about 20 minutes north of Manhattan in Westchester. And John has moved to Tampa.

Tim McCarthy  9:23  

So both East Coasters then, when you so, how does that work? Were you guys obviously, your good friends on the football field. While you were playing football together, and then you are in the army, and did like somebody reach out to the other person and say like, “Hey, let's go into this real estate investment company together,” or like how does that who reached out to who? Was it like a mutual thing? How does that work?

John Plumstead  9:51  

I think we're both investing in real estate and we had talked about it. Like we'd see each other at football games and talk on the phone here and there. We talked about it, it was like yeah, Frank was doing great stuff with real estate. I was doing great stuff with real estate. And then I think we kind of both had the same feeling at the same time, late 2019, early 2020, where we kind of wanted to go the next level, right? Like we weren't exactly sure what that meant. But we wanted to say, “Hey, what would happen if we were more deliberate about it?” 

We initially started talking not necessarily to join forces, but just like, “Hey, if you are gonna take it to the next level, what would you do,” right? And it just became clear that I think we're in a pretty similar place, in life was pretty similar goals. Maybe we should at least try to do some of this together. So we started looking at houses. We had some ideas of what we wanted to do. Our goal for 2020 was 10 houses. We thought we were basically gonna supplement retirement, right? Like, let's start picking up houses. 

And then things started going well, and we started kind of feeding off each other and the feedback mechanism and the iterations were going really well. And before you know it, in the first six months, we had bought 50 houses. So instead of 10, we did 50. And we're kind of looking at each other like, “Shit, man, like this is working. We are jive and we're learning really fast. Like, let's try to do 100 houses.” So that was our next one.

Frank Scappaticci  11:16  

Yeah, well, to be clear, we were wholesaling the majority of those, right? So just for anyone listening, we didn't keep most of those under management. Kept some but most of them, we flipped the contracts, as some people say. I'll add to it, though. At that time, I had already been out of the army. John was a major, I guess you're technically still a major.

John Plumstead  11:35  

I'm still on active duty. I'm transitioning off right now. But I'm still active duty right now. Yeah.

Frank Scappaticci  11:39  

Right. And I had gotten out as a captain. So I've been working in New York City for over five years at that point. And I was a consultant, worked at JPMorgan, after I left Ernst & Young, and I was coming to the conclusion, I was like, “I have been on this path for five years. And I don't like this path.” Like I don't like being in a large bureaucratic organization. Like the army has an excuse. They don't turn a profit. 

But in my opinion, when a private company that's supposed to turn a profit, or even a public one, like it has all that red tape, it just feels even stupider. I'm like, hey, the money's right there, like, let's go, right? So that's not their fault. Big organizations need to turn slow. They need to be more deliberate. And it just wasn't the right fit for me. 

So when John called me and was like, “Hey, let's experiment with this real estate stuff.” I was like, “Hey, maybe this could turn into something that's a real opportunity.” And thank God! I'm very thankful that it started to snowball. Because I left my job about a year ago, I'm doing this full time. So it was I say, I think it's kind of lucky that John called, which is good.

Brock Briggs 12:40  

What were you doing at Ernst & Young and JP Morgan?

Frank Scappaticci  12:44  

I was in like the digital, like, some people call it digital transformation type consulting, right? So we would go to, like we did a large project for Fannie and Freddie. They had to merge like their technology platforms. I worked on stuff like that, JP Morgan had a similar program pop up in 2017. Then I went over there, worked there for a couple of years. And that was my last job in financial services.

Brock Briggs  13:07  

But you were kind of working adjacent with the mortgage and like kind of real estate space already before and then also maybe doing stuff on the side before this kind of leading up to John calling.

Frank Scappaticci   13:21  

Yes, but I would say you don't learn anything about real estate investing, though in that environment. Like helping Fannie and Freddie, figure out how they pull mortgages and how they disclose information to investors doesn't make you a good single family or multifamily investor, right? It's a completely different skill set. I’m just fascinated by real estate, really. After I bought my primary residence, I was like, “Man, looking at, like single family houses is cool.” Like, which is not really like a good reason to get into single family investing. 

But it is the reason I started getting interested in it. I was like, damn, this thing, it was fun. I enjoyed it. And John, and I also probably noticed our rentals in the Colorado Springs area, appreciating like, 150% between 2013 and 2018 or 19. And we're like, “Damn, we should have bought more real estate, you know.” So there's a bunch of other different reasons.

Tim McCarthy  14:15  

So to break it down kind of like Barney style, if you will, when you started out you were buying these houses, ideally, to rent them out? Or were you buying them with the intentions of flipping them?

Frank Scappaticci  14:27  

We started with the intention to hold on to everything like, “Hey, let's just buy 10 houses or 10 units, maybe it's a couple quad, plexes whatever, and let's get some cash flow. And then 20 years from now, we're gonna be better off for it, right? That was the original thought process. But deals are very hard to come by, right? As a lot of people are aware of, single family, small multifamily is extremely competitive, more competitive than maybe it's ever been maybe. And it was competitive in 2019 and 22. 

So we're like, “Hey, if we're gonna do this, and we wanna get good deals, we gotta do direct to seller marketing,” which is what wholesalers and flippers who are professionals, that's what they do. So we started sending out text messages. We started making cold calls. We started hiring virtual assistants shortly after having some success. And we kept kind of iterating and snowballing that machine. 

And I think we got lucky. Our first two months, I think, we closed like six deals, and we made a good amount of money. And we were like, Oh, this is so easy. Like, it's gonna be the easiest thing of all time. We're gonna be so rich and like, a month, you know. Like, we thought it was gonna be really, really easy and really quick. And we learned later that it is hard, right? Like, we got a little bit of beginner's luck mixed in with that. But we did scale that business pretty fast.

Brock Briggs 15:44  

So you were originally buying houses thinking, “Hey, we'll get renters in these, will hold these for the long term and kind of juice our retirement. “ Were you outsourcing the property management to like a manager? Or were you guys dealing with that yourself?

Frank Scappaticci  16:02  

We tend to outsource all property management, dealing with tenants, and collecting the rents and the tax documents, all that stuff. I think if you're focused on finding deals, especially in single family and small multifamily, it's gonna make sense to outsource that work, right? Because 90% of the value in our business is found or it is realized from finding good deals, not squeezing out, you know, 10% of the monthly rent, by self managing, right? Or maybe 8%.

Brock Briggs  16:34  

So then there's that kind of lead up into the wholesaling. And will you kind of maybe for anybody listening that is unfamiliar with wholesaling, walk us through that process. What is wholesaling? Why is that work?

John Plumstead  16:47  

I think it started with the BRRRR Strategy, which is B,R,R,R,R, so four R's, it’s acronym, right? So B is Buy, and then it is Rehab, and then it is Rent, and then it is Refinance, and it's Repeat, right? So what that means is you buy a house, you fix it up, you put a renter in there, and then hopefully you can refinance your money out of there and do it again. 

But the trick of that, the math to make that process work, and it's an amazing strategy, but the math to make that work is you have to figure out how to buy properties at about 80% or less than what they're worth. If you can find deals that are 20% off, you can keep snowballing it over and over and over, okay? So we said, “Okay, well, to start the BRRRR Method, this refinancing method. We have to be able to find deals for 20% off.” So we found a deal at 20% off, we're like, “Oh great, right? Let's try to find another deal at 20% off.” 

But you start realizing if you're gonna do any of this marketing, you should do some volume of this marketing, right? Like if you're going to send text messages or cold calls or direct mail, if you send one email, you should probably send 1000 or 10,000, right? So we start sending all, if you're gonna do it, so we start marketing. And then before you know it, like we have more properties than we can buy. We don't have enough money. We don't have enough bandwidth, or like, we don't want to own all these properties. What should we do? We could say, “Hey, Mr. Seller, even though you'll sell us this house for 20% off, we're not interested in it, right?” But instead of doing that, we said, hey, why don't we try to team up with another investor and say, “Hey, other investor, do you want this deal?” 

And, you know, maybe we can get this deal at 75% of value, maybe you'll pay 80% of value. And we'll keep that 5% difference. Sellers happy to get rid of the property investors, happy we keep that 5% difference, right? Well, we did that once. And we're like, actually, when we do that, we get paid faster than if we do the BRRRR strategy. Oh, and by the way, we're pretty good at marketing. And we can go to multiple markets, and it's COVID. So people are comfortable selling their house over the phone now for the first time in the history of the United States. 

So it was kind of like the perfect storm of all those things that came together. And we're like, “Alright, let's hire, you know, 20 virtual assistants. Let's send 1000s and 1000s of text messages and phone calls. And let's try to do as many of these as we can.” And that's what we did. It was like the golden years of wholesaling, but it only lasted for about 18 months, and then everything changed.

Brock Briggs  19:28  

So wholesaling, you're essentially, you guys are putting in the work to find these deals that you can buy at a certain price and where you guys make the money is finding somebody that will buy it at a higher price, and you just keep whatever the differences of those. 

John Plumstead

Exactly 

Brock Briggs

Okay, so you see how volume would be that's everything and that 5% is, I guess, I don't know, what location are you guys working in? How much is that 5% or, at least in this example, or what I guess what value of homes are you looking at?

John Plumstead   20:05  

Like 100 to $150,000 homes, but think about a wholesale fee, your average wholesale fee is gonna be, you know, you call it 10 grand or 15 grand, right? Like, right in that sweet spot, you know. So as long as you can find deals for 3 to 5 grand, if you can find deals for 3 to 5 grand, and then you get paid 15 grand, 10 to 15 grand on the back end, you're probably gonna be okay. 

The problem is, as you start doing more and more, what happens to your margin, instead of that 5%, you're like, oh, 4% scared, oh actually 3%. Before you know it, you're like, you know, instead of making 10 grand, you're making 7 grand. Instead of costing you $3,000 to get a deal, now it's costing you $6,000 to get a deal. You're like, “Wait, what happened to all this money we are counting on?”

Brock Briggs  20:52  

What are you gonna say, Tim?

Tim McCarthy  20:53  

I was gonna say it sounds like in the car business, like a pass through essentially, like, you're just the middleman at that point. Like you're just kind of facilitating the deal, saying like, this is the seller, this is the buyer. Everybody works with me. And then, I will take that difference. Is that pretty accurate?

Frank Scappaticci  21:17  

Yeah. You're taking the spread. 

Tim McCarthy

Yeah, yeah, yup, got it.

Frank Scappaticci

There's more creative strategies you can use to be the middleman. Like there's seller financing and all this stuff. But generally, when people say wholesaling, the profits they're making is the spread. That is the profit.

John Plumstead  21:32  

It's the simplest process in real estate. It's not the easiest process in real estate, but it is the simplest, right? Like, if you can find a deal that someone else wants, you can keep that difference in theory.

Tim McCarthy  21:45  

I'm kinda like thinking, the person that's listening to the podcast that's transitioning out of military and then wanna get into this. My initial thought would be, I don't have $150,000 in the bank to like, go buy my first house. Did you guys have that money? Where I mean, where's the money coming from to start out?

Frank Scappaticci   22:10  

So I would say, I mean, we're older like, I'm 34, John's 35. And we have kids. We've, you know, we have some money to invest, right? Sure, of course, probably older than the average person getting on the military. So we don't have unlimited, right? We don't come from money either. So we're like John said, at some point, we're like, “Shit, we can't buy this stuff. So we gotta find another strategy.” 

So let's say that it’s you, right? Like, what options do you have? Well, if you're buying stuff at a discount, a lot of the times we'll be talking to sellers, and we'll say, “We'll buy it cash, right?” Cash as an incentive, people will drop their price to a cash buyer, because it usually ensures speed and assurance that it's gonna close. There's no lender involved, that can drop the deal for you, or screw up the deal. No appraisals, all that stuff. 

But we didn't have hundreds of $1,000 of cash, right? So how do we do that? There's lending instruments set up for that. There's lending products for these types of transactions. They're called hard money loans, and they're higher interest rate. And they're shorter duration. So if Tim, if you were like, “Hey, I wanna buy this house for 100 grand. I don't have 100 grand, but Frank, give me the $100,000.” I'm gonna say, “Okay, Tim, I'll do it for you. I'll close in two weeks, but I'm gonna charge you 10% interest, maybe a 1000 bucks at closing extra, and you gotta pay me back the full amount in a year.” Alright, so that means you got a year to sell that house or refinance that house. So you got pressure on you. And you gotta pay higher rates, but you can close. 

And so it only makes sense to do that loan, though. If you're gonna turn a nice profit, right? Like so you have to have some equity or a good price, right? So that's how that economy works. You can also ask your friends for that money and drop the documents like, “Hey, Brock, your uncle's got a $10 million. Can I borrow some money from him and you'll drop the documents and do the exact same thing,” with a private lender, they call it. So that's how you would do it, if you wanted to take stuff down but didn't have the cash.

Brock Briggs  24:06  

That all sounds like a super appealing process. But to me, like as somebody who's never done this before and like a normally very risk averse person, I see a lot of like factors going into play, you know. You're borrowing money from somebody at like a notably higher, you know, yield or whatever interest rate that you're paying, kind of guaranteeing that you can do something in the future. 

Whereas like, and then you also have the economy over the last like couple of years, it’s all over the place. Its website, you know, you got people, nobody wants to sell, then all of a sudden everybody wants to sell. How are you balancing that type of like, that would just like, I feel like I'd wake up in a panic every day thinking that I wasn't gonna be able to like get out from under something.

Frank Scappaticci  24:57  

I mean, let's just call the elephant in the room is this like, single family flippers when the economies tend to go into recessions, tend to get their ass kicked for a period of time, right? So like, the risk you're alluding to, is a real risk, right? If you had a hard money loan out in late 2007, or late 2008, when the markets crashed on those particular weeks, and the housing market stalled, I mean, you probably were in a tough spot. 

So I think the only way you can be sure you're hedging your risk is to not overpay on your purchase price. Like that's the best way to protect yourself is to get the best deal possible, because every dollar that you overpay is risk you just inherited, right? Which is why it's so hard to acquire properties at a discount. That's why in the long run, it's a challenging business.

Tim McCarthy  25:45  

And I would assume too, like, my mind immediately goes to like, “Okay, I'm starting out. I have 50 grand in the bank, so let me use this financing tactic that you're talking about. I'll do that two, maybe three times, make enough money where I don't even need the financing,” then now I'm just like, my own lender said, like, I'm using my liquid cash. Because I would assume that you do a handful of houses. Well, now you've made enough money where you can just go and like now you're able to call people and say, “Hey, I got cash. I'll buy your house for X amount. Let's get this going.”

Frank Scappaticci  26:23  

Right, right. I think what you can do to make sure you're not overexposed is, banks will call it like a pressure test, right? They'll say, okay, let's look at my portfolio and how much exposure I have to single family. How much, what's my total debt amount? What's my total interest payments that I make every month? Let's assume assets dropped 20%. What is my picture look like now? What if assets drop 40 percent? I'm talking about houses in this case. What does it look like? At what number am I in trouble, right? 

Like I think on a quarterly basis, you just look at that stuff and be like, am I taking on too much like about 10 grand in the bank account. I shouldn't have $2 million in loans, right? There's like, your wealth, and your liquidity should influence how much debt you take on. So if it's your first rodeo, and you only have a little bit of money, just do one deal at a time, you know. Like, you know, and plus the lender is gonna make require that of you anyway. Lenders might ask for your bank account balances. You're gonna run your credit, all that stuff. So there's systems in place to prevent people from going nuts, although they're not always perfectly executed.

John Plumstead  27:26  

One of the other things I would say is, one is, proceed at your own caution, right? Like this is a dangerous, dangerous business where lots of people have done stupid stuff and lost all their money. A few other things that we do in our business to try to curb that downside risk is one, we always play in the middle of the market. What does that mean? That means that we don't do, you know, really crappy houses. And we don't do really nice houses. We do houses that are in the middle, right? 

So if you think of, you know, whatever city you live in, you have like the area where the doctors and the lawyers live, like we never flipped those houses. We don't mess with those at all. We do houses where the plumber lives and teacher lives in where middle America lives. Why because when prices drop, when the bottom falls out, the middle market is gonna do a lot better than the top market, right? So we try to stay away from top market. 

The other thing we try to do is we try to make sure all the flips that we have, if the bottom fell out, and we had to hold on to them as rentals. We can hold on to them as rentals again. What would this house rent for if we can't sell it and we just have to hold it for two years as a rental. What do those numbers look like? So we, you know, we take risk, and we use hard money loans, and we're aggressive guys. But we say hey, if everything goes to hell in the market does drop 20% and we can't sell it, how do we make sure that we don't lose money?

Brock Briggs  28:48  

It’s good having that backstop in mind and kind of like your safety net, you can always kind of revert to cash later versus cash now, you know. You're getting your wholesale fee versus you know, you get it in rent over the coming couple of years. You mentioned..

John Plumstead  29:04  

It's one of those things Warren Buffett says and it's so simple, it's stupid, but people forget about it. Like rule number one, don't lose money. Rule number two, don't forget rule number one, right? There's so many people that forget that though, right? It's like in a real estate transaction, it's so easy to lose money. So if you're just thinking about like the high side, right? Like what if this goes well, like you're gonna get screwed eventually. 

So, you know, I'm naturally a very optimistic person. But Frank and I had built our system to spend a lot of time saying what can go wrong with this deal. Because we know if we don't lose money, chances are, we're gonna make money. So I didn't mean to cut you off, Brock, but I thought it was an important point.

Brock Briggs  29:42  

No, that is good. Frank, you said something earlier, you guys really try to focus on you know, the money to be made is by buying houses at a discount. How do you guys think about looking at houses and other than saying, “Hey, I can walk up to you with cash. Give us a 20% discount.” What kinds of things are you guys looking for that would maybe lead to a house being available at a discounted price? Or you said you guys are using virtual assistants and doing cold calls. Are you getting 20% discounts from people who aren't advertising that they're selling their house? Are you really focusing on markets that you know really well? And you just can personally say, “Oh, that house isn't worth that,” you know. What kind of approach are you guys taking?

Frank Scappaticci  30:33  

Well, it's you're looking for a homeowner, or maybe a landlord that has a problem to solve in most cases. People don't give their homes away for 80% of what it's worth, unless there's usually something wrong, right? So that comes back to your data, right? So who do you send the messages to? And there's lists that you can pull that help you send your messaging to the right person, right? So a landlord that's owned a home for more than five years, for example, is a decent prospect because there's a lot of landlords that don't keep up maintenance on their properties, as you guys are probably aware. 

So there's a lot of landlords out there with really crappy houses that won't appraise if someone tries to buy it with a bank loan, right? Like a bank just won't lend on the house because it has so much deferred maintenance. So landlords tend to, it's funny, you think landlords are all like really savvy investors. But ironically, they make some of the best people to buy houses from because they are not emotionally attached to the property. And a lot of us are not good at it, right? So that's one demographic. 

And then what a lot of other people do to identify distress is people with foreclosure tax liens. We bought houses from people. I remember one of our first deals. I was the acquisitions person. This is back when all of us were doing everything. Like there was no structure in the company. I was on the phone with the guy. He was like, “Yeah, if I don't sell the house in the next three weeks, the bank’s taking it.” I'm like, three weeks and like, you haven't even listed the property. Because like, now I just didn't take care of, it slipped my mind. I'm like, “Woah, like, I can buy it,” you know, like he was screwed. 

Brock Briggs

Like, flood the water right there. 

Frank Scappaticci

Yeah, I mean, if honestly, if we didn't buy the house, he wasn't gonna make any money at all, right? So get almost no options, unfortunately for that person. And sounds a little like, even more cutthroat than our opening, right? Like this business, but that actually is what happens, right? Like 5 to 10% of the houses in the United States are in distress at any given moment in time. And those houses are moved on the secondary market, right? And they're bought cash. And that's how this market works.

Brock Briggs  32:37  

I imagine that there were amidst like a very large transition, in terms of like, who is owning these houses to because and we can talk about this a little bit later. We had mentioned it before we started recording about buying businesses that are for sale, something that Tim and I have been talking a bunch about and like taking over businesses slash in this case rentals from older people looking to retire. I would imagine that there's a lot of people in that position that are just like, ready to kind of cut the ties and you know, go enjoy their retirement. Has that been your guys' experience that you've seen so far?

John Plumstead  33:17  

It was until 2021. And then what happened in 2021, every newspaper in the country said the real estate markets on fire. So even grandma who doesn't know anything about real estate she wrote read in the newspaper every day for a couple months that the real estate market was on fire. So now everyone thinks their house is worth a ton of money. Whether it is or it isn't, doesn't matter, right? 

So what does that mean? That means if you're trying to find a distressed seller, even someone that is distressed, they don't look at themselves in the mirror and see themselves as being distressed. They think they're rich. So that's why a lot of investors are really struggling right now. Because the only way we can make money flippers, wholesalers to make money is if you don't pay retail, if you find a deal. And when the market is really hot, it's really hard to find deals.

Frank Scappaticci  34:08  

Yeah

Brock Briggs

Has rent deferment impacted what you guys do at all? I know just with the COVID thing, they've I don't know exactly what the laws have been, but know several people that have rentals and tenants have been able to claim like inability to pay, and that like pushes that out and they you know, you can't evict them. Has that impacted what you guys do at all?

Frank Scappaticci  34:35  

Not as much for us, but it definitely has affected a lot of others. We started this business when COVID was already underway. So like the moratoriums, the eviction rules that we've laid out, that was all happening like real time as we started the company. So we very naturally started just gravitating towards markets where it was more friendly towards landlords because at the beginning, our best buyers we're also landlords, just like our best seller was landlords. 

And then our best buyers were landlords right on the wholesaling business. So naturally, we went to states where, if it was already tenant occupied and we're selling that house, a landlord would still wanna buy it. Meaning that the eviction laws were not as adverse to landlords, so it hasn't affected us as much. Although I know in New York, where I live, this is a really big deal, right? Landlords are getting crushed over here. So it is just, it's state dependent, I guess what I'm saying.

John Plumstead  35:29  

The other thing is we're virtual real estate investors, so we could pick anywhere to invest. So we wanted to pick states that had favorable landlord tenant laws. And we also wanted to pick states that had strong real estate markets. And it just so happens that, you know, Texas, Florida, Georgia, North Carolina, Tennessee, they tend to be red states. They tend to have favorable landlord laws, and they also happen to have really strong real estate markets.

Frank Scappaticci

Yeah

Brock Briggs  35:56  

You guys hire a bunch of virtual assistants. You're sending out mail, sending text messages, calling people left and right, and basically just asking who wants to sell their home. Is that kind of long and the short of it, at least on the wholesaling side?

John Plumstead  36:15  

Yeah, that's it, right? Like Frank said, how we try to get the best list, right? Like, ultimately, though, you know, you could just open the phonebook and start calling people, you would just probably have to call a lot more people. But it's still the same concept is, even with a distressed list, we're gonna call 1000 people, until we find someone that wants to sell their house or some ratio, depending on the list and depending on the time of year and stuff, right? But it's a whole lot of knows. I would like to say from a high character, moral standpoint, if you know, some people may infer, like, “Hey, are you guys taking advantage of these guys, right?” 

If these people are in distress, if they can't make their payment, are you guys predatory? Are you going, “Hey, grandma, give me your house before the bank takes it.” One is, there's no way for you to know what we're saying on our phone calls. But we try to be a company that has high character and does the right thing, right? But here's the big thing of it. And this is how I look at it is without wholesalers or flippers or investors, these houses don't get sold, right? Like what do you do that house that is getting ready to go into foreclosure, who buys that if it's not an investor, no one, right? 

Real estate agents are not equipped to handle that. Real estate agents are not equipped to list properties on the MLS that won't pass appraisal, they can do that. But most of them won't because they're not comfortable doing that, right? So this little piece, this little niche that Frank and I and other investors fit for helping these distressed sellers. There's no one else that's coming to the call, right? So it's really easy to be like, hey, these investors are taking advantage of people that are in distressed situation. 

We've had the phone calls on where we've had many phone calls with people where, you know, they think it's because of God that we've called and we're helping them you know. We're through this situation, so just understand that it's really easy being outside this world to be like, you know, these guys might be scumbags. And hey, maybe we aren't, you can be your own judge. But I would say that if investors aren't helping this part of the ecosystem, there's no one else there that's gonna help

Tim McCarthy  38:19  

Well and trust me nobody understands what it's like to be seen as a scumbag. Like me, I sell cars for a living so I'm a car salesman.

Brock Briggs  38:29  

Tim, literally is a scumbag, so.

Tim McCarthy

Yeah, big scumbag. Yeah, no, but it's a fine line between like, I'm, at least in my case, I'm sure in your case in any other business, like you're there to make money. Like people have to understand too, like, just to put it into perspective for my own world. Like when I take a truck in on trade or whatever. Of course, you're gonna get the people that are like, well, I could sell this for $5,000 more and I will just tell people like, “Absolutely, so can I. That's why I'm offering you this is because I need to make money on it.”

Or you know, people will get mad that their payments so high. I'm not there to be somebody's financial adviser. This is a car you said you wanted, this is the payment on it. You know, so I think that people need to look at it in a business lens too. And realize like, you're not doing this for fun, like you're there to make money on it. But there's also the difference between like, being a scumbag and like, making money, you know, so. I totally get what you're saying.

Frank Scappaticci  39:41  

Well, there's also like, there's the ethics of dealing with the outside world, right? Like any business controls some level of pricing, right? As a car salesman, you wanna sell at probably the highest price you possibly can, right? If you're a plumber, sometimes you might charge a customer more than another customer, right? We all know plumbers that do stuff like that. Extraordinarily, people are like mad, pricings are really opaque. That's really messed up. 

The business owners do that type of stuff, right? Like, that's the attitude the public has. Here's the other attitude the business owner has though. I got employees, right? They use the funds that I pay them to feed their kids, right? Which is probably has a bigger impact to them than any of your customers outside the company, right? Those are actually the most important people you have. They're depending on you to turn a profit. If you’re not gonna turn a profit, you can't keep them around, right? 

Business owners can't work for free. So like, I look at it like this, like, hey, yes, sometimes we increase prices in our storage business, for example. Sometimes we do this, but hey, like these 6 to 8 people that depend on Gray Line, to go home and get their bonuses and make their car payments, like that's got to get done, you know. So businesses have to increase prices and be aggressive with marketing to make this shit work. And that's just the way the world operates.

Brock Briggs  40:52  

Sales is a very hard business as it is. And like it said, Tim, I think it gets a bad rap in a lot of ways. But there are so many things that just modern consumers take advantage or take for granted. You know, just being able to go to the grocery store and buy literally whatever you want. But, you know, the supply chain has been like such a big thing in the news. The last couple of years, like you know, there are hundreds of boats just sitting outside of the pier, like somebody's paying those people to be there. And like, you know, just because you paid $1 for this item, you know, six weeks ago, doesn't mean it costs the same than it does now. And so yeah, it's finding that balance. 

And I think in the long run, it will work itself out. But short term blips like this cause a huge impact. I'm curious, you guys talked about how you have some rentals. And I think that, that is a place that is very attractive for military members, like really go-getter people that are active, still really talk about like, oh, getting all these rentals going and whatever. Talk to us about the property management aspect piece. When should somebody consider having a property manager? When should they not? What kinds of things should they look for? Walk us through kind of what you guys think about that piece and how that might apply to some of our poor folks still on active duty out there grinding. 

Frank Scappaticci  42:24  

And I think you should have a property manager, no matter what. Like if you're active duty, hire property manager. Yeah, like, if you've ever been through an eviction, like duty, you don't wanna deal with that. Someone who has repetitions, that process seven times is gonna be way less stressed than you do in your first time, and it costs a couple 1000 bucks. So like, it only costs like 8 to 10% of the monthly rent. Like if you're in a military base, that usually means like, you're paying that property manager like 90 to 120 bucks a month, right? 

To take that work off your plate. Like, I would say this, make sure you're charging the right rent, like the higher rent to make room for the property manager. Don't under rent, and pay them that fee no matter what. Honestly, like some people like to self manage. But imagine you had more than three rentals. Like that starts to become a full time job real quick. It's just really hard to scale that. So I would say do it right away. It's my opinion, my opinion.

Brock Briggs  43:26  

I like the way you think. Yeah, I think I am of the similar mindset and about to kind of go through this process myself. So kind of a selfish question, Tim and I both bought homes just last year, not together, like separately, and

Tim McCarthy  43:41  

We live together.

Brock Briggs  43:44  

Oh yeah, I wish. I really wish

Frank Scappaticci  43:47  

Where were the houses?

Brock Briggs  43:50  

Tim lives in Boise, Idaho, and I live in Norfolk, Virginia.

Frank Scappaticci  43:55  

Nice. Boise is blowing up

Tim McCarthy  43:56  

It's getting crazy man. It's actually like to the point now we have so many. I don't wanna just say Californians, but that's like the majority of it. So many people from California moving here that it's like getting to the point now, where it almost doesn't make sense for people financially to move from California to here. Because a year and a half, two years ago, they're selling their house in California for 1.5 million coming out here buying a beautiful home for 400,000. 

And now they're pocketing a million bucks. And it's like to the point where the money that they're making by moving out here is like almost not worth it. That's crazy. Well, I think it's like the fastest growing area in the country, or at least top five I think.

Frank Scappaticci  44:44  

Yeah, I read that. 

Brock Briggs

I’m from Boise

Tim McCarthy  44:48  

Oh, it's very good because we get these people that are not used to snow or mountains or camping and they come in with their BMW, their Mustangs and they’re like, I need a truck. And I'm like, “Yeah, you're in Idaho now. You do need a truck. Let me show you.”

Brock Briggs  45:07  

They sold the house for one and a half million. 400,000 went to the house and the rest went to a boat and a truck to pull it. 

Tim McCarthy

That's right. That's right. 

Brock Briggs

I'm from Boise, originally. And it’s just been insane to watch how that development just kind of exploded overnight. That areas kind of unique in that the supply is very limited just due to the geographics of like, where the kind of how the valley sits. But yeah, the rest of the city has not caught up with that and not really had able to handle the infrastructure and minimum wage is still 725 there. So a lot of locals are not gonna be able to afford to live there for much longer, that's for sure.

Tim McCarthy  45:55  

Let's get into the kind of the start of the business and that story like the turbulence that you guys hit. And yeah, you had said before we were recording, you kind of expanded too quick. And you had to re-shrink down and reevaluate. How does, I guess, tell me about that. 

Frank Scappaticci  46:17  

Well, I think I'll go first. And John, I'm sure, have a different perspective. We started as a side hustle in reality, right? I think which we alluded to before, we didn't plan for this to become our full time job. So it just so happened that way. And we had other team members that worked with us on the side hustle at the beginning. And we were like, “Hey, like, you still gotta drop legal documents and have an LLC to have the bank account set up.” So our operating agreements, and everything was like, “Hey, we're all partners, equal partners in the business.” 

And we just started going, starting to make money. And we had virtual assistants hired. We started building systems and processes, but we really didn't outline the roles and responsibilities of the partners that will. And we should have done that earlier. Because we started to evolve into a real company. But then our partnership was still behaving as like a side hustle, right? Like there was no, there's no hierarchy. 

There was no like expectation of like when the people are gonna quit their jobs and become full time. Contributions were not equal amongst all the partners, right? And you start running into these, you know, this is a story that's probably been told a million times, right? Like people that have went through this type of journey, and so we went through this tough period where we, you know, bought out some partners, right? We have to, you know, we're like, “Hey, we're gonna move forward with this team, this subset of the team.” So we bought some people out. And that was tough, right? Like, that was really, really hard. 

One of the partners is my best friend. I still talk to him all the time, you know, and it wasn't really his fault. But he just had a medical device job that was taking up a lot of his time. And he's a smart guy. He's still doing well. But John and I, I think our level of commitment just kept going up and up and up and up. And our other partners, we're not gonna keep up with us. So we had to, we had some tough decisions to make about seven months into our business.

Brock Briggs  48:02  

What is that conversation like that look like? You know, you said something earlier about getting into business with like, your family or friends. That's gotta be a hard conversation to have.

Tim McCarthy  48:15  

Yeah, I have to assume, it's uncomfortable, like, that's gotta be an uncomfortable conversation. 

Frank Scappaticci  48:21  

Terrible. That whole month was miserable, like John and I were like, up till 10pm, 11pm. Like that whole week of making those calls be like, “Shit, this is terrible.” You know, I honestly don't think I'll ever be able to work with a family or friend again. I think John and my relationship’s a little different, because we can yell at each other and still be okay, right? But most friendships, I don't find it like that. And it was very painful. 

So I think I'll avoid it, to be totally honest, in the future. But I think the right way to do it is like, hey, is you say exactly what's going on. Okay, I think our level of commitments of the business are going to go in different directions over time. And I don't think it's fair to our employees to have an untenable situation perpetuate for too much longer. So this is what I'd like to do. It sounds really direct, but I think that's the only way to get through that conversation. Like eventually that has to come out. 

Tim McCarthy

Yeah

Frank Scappaticci

Because if you leave any ambiguity there, you're doing both persons a disservice because you just lead them along. So eventually, that got out and sucked, like firing people and moving on from partnerships is, it's painful, man. It sucks.

Brock Briggs  49:27  

But I think it says something. It speaks highly of you guys, your ability to like, still be involved with those people and still be friends with them. That, to me, seems like you probably handled it with as much grace as possible. And, you know, respectful or as much as you could.

John Plumstead  49:48  

I definitely think it's one of those things where like, if you kick someone out of the boat, it doesn't matter how you do it. Like they're out of the boat and they're gonna be pissed, right? But then in that moment, you know, you can, you know, to kind of hijack Michelle Obama's quote, right? Of like trying to stay high when the shit hits the fan, right? Like trying to take the high road, you know. And I think in those situations, there's all this emotion, things that we wanted to say. 

We could have said things that we would have regretted. We could have said things that were emotional and showed our frustration. But Frank and I tried really hard to be like, “Hey, we fucked up, man. And this is where we are today. And this is how we're gonna move forward and understand that, you know, you probably not happy about it, but that's how we're gonna move forward.” How do we move forward within those conditions, right? But it sucks, like, it really sucks.

Frank Scappaticci  50:45  

Yeah, I think we fumbled the communications more than we're leading on. Like, it was just one of those things the first time you go through something like this, like you're gonna not do it perfect. Like, right? I think right now we sound like, yeah, we handled this transition super well. And I look back on and I'm like, “I don't think it was that clean.” Like, it's messy. It's hard to deliver something that clean. So let's not give ourselves too much credit. It was not awesome. 

Tim McCarthy  51:06  

Well, it sounds like you guys at least separated business from your emotions, like your own personal feelings on it.

John Plumstead

Maybe

Frank Scappaticci  51:15  

Now, we have. I think now we have. It took a couple months.

Brock Briggs  51:20  

Everybody voice towards at the time.

Frank Scappaticci  51:23  

Yeah, I think we've all overcome. And I think our friendships are where they need to be. But it took a little bit.

John Plumstead   51:29  

We've also, though had to, we've probably fired in probably close to 20 people since then, lots of virtual assistants, and stateside people that, you know, our business went a different direction. Or they weren't keeping up with the business, or they were hired for one job, and then we need them to do another job. So Frank, and I now look at this business, like it's our baby, and we care about it to a very high degree. 

And if people can't keep up, we're gonna have a tough decision, or a tough discussion and tell them, “Hey, you're not meeting the standard, and you either need to meet the standard, or you're no longer be on our team.” And because of that, we've had lots of people quit, and we've had to fire quite a few people.

Brock Briggs  52:12  

Do you think any of that is for lack of the job being laid out beforehand? And I'm not saying that this is your guys' fault. But we had another gentleman, Nate Lenahan. Shout out to Twitter, Nate's great. He was talking about hiring people, and like how difficult it is to like, find good people to hire for your organization. And he was talking about like, how he's trying to implement transparency into like, the job description and like, really lay out. These are the KPIs that I'm wanting you to hit. This is exactly what the job is. And like, this is how we're gonna measure you. How are you guys thinking about that? And are any of your past like firings, were any of those a result of lack of kind of putting that out there on your guys' part?

John Plumstead   53:06  

Many of them were because of Frank and I's poor leadership, straight up, right? 

Brock Briggs

Humble, I like it.

John Plumstead

If you don't tell someone what you expect of them, and then they're not living up to it, it is the leader's fault, right? But another way to look at it is when you're in a firefight, you know. Like, sometimes you just gotta be like, shut the fuck up and move, right? 

Tim McCarthy

Yeah, yeah.

John Plumstead

And a startup world is like a firefight, right? Like, it'd be a lot easier if we had an unlimited bank role. And, you know, we could have KPIs, and we had all these business coaches that told us how to set everything up. But sometimes you're in a firefight. That is crazy. And you're trying your best. And sometimes, you know, you're an asshole as a leader.

Frank Scappaticci  53:48  

Yeah, I think we also learn that, when you have more employees that you got, you have to also slow down how much you iterate to, right? Like, when you have three guys, when we started out, right? Just working, just calling people and trying to buy houses and sell houses. You can be so flexible, right? Like, “Hey, John, you know what? I'll do acquisitions this week. You manage assets.” You could switch roles. And it's not a big deal with three people, you can do anything, you know. But when you have 20, and you shift business goals or strategies, just a little bit left to right, their goals might change. And then the expectations change. And it takes people time to go through those mental cycles to understand where you're going. 

And I think we were definitely susceptible early on to pivoting and like turning up the aggression too much, right? So like, we'd have a virtual assistant, be like, “Hey, this is your responsibility.” And then the next month, it's like, “Hey, you're responsible, you're gonna lead a day.” You know, we want one qualified lead every day. And like, that's a big shift for that employee, right? That's a big mental shift in terms of their hustle and their daily output. And I think John and I learned that we gotta slow down like we're super aggressive and you can do that with yourself. But there's no way to run other people's lives or the business. So I think that's part of the root cause why we've had run where we've had a lot of turnover, which is our fault. So..

Tim McCarthy   55:06  

Well, and my father-in-law runs his own business. He's a trim carpenter. So he has his own company where he does finish work and stuff like that. And when I worked with him for a few months, while I was transitioning out of the military and I needed some extra cash, and we were talking about how he has such a hard time finding qualified employees. He's just like, I can't like I can't find work. 

And seeing him, you know, I was watching him kind of interact with some of the guys that he was thinking about bringing on and I eventually, like, had to tell him like, “Nobody's gonna care about your business as much as you are.” Like, you're trying to find an employee that says, dedicated to this job as you are. You own the company, some employee, like you'll never find that unless they are financially and emotionally invested into it. And it's not gonna happen. So that's I think that was a big eye opener for him like, “Oh, no, you're right on. Like, you're right on that part. Because that's what I'm looking for. And I'm not gonna find it.” 

You guys, just because, you know, obviously, we follow you on Twitter and stuff like that. One thing I wanna kind of jump into is the Self Storage business. When did you kind of jump into that? And this is one of those businesses that I was telling Brock before we'd started, before you guys had jumped on. I was like, this is something that really interests me, and I've kind of been looking into it. So when did you get into that? How did you start, that kind of thing?

John Plumstead   56:45  

Alright, yeah, so we're doing well in single family. And we had this idea that we wanted to do more, right? Like Frank and I, you could call it ego, you can call it drive, you can call it goal setting and call it whatever you want. But we don't wanna be the next, you know, chump down the street, right? Like, we wanna build an awesome company. We wanna, you know, have pride in what we're building. Okay. So we're doing single family deals, and it was a lot of fun. 

And we said, we wanna do more. Let's look at Opendoor. Let's look at Zillow. And let's look at what they're doing. And let's see if we can compete with them, right? Like understand it's a different playing field. But maybe we could get to the point where they would wanna acquire us or something like that, right? So we spent, you know, the early part of 2021 going, “Hey, let's try to do as many houses as we can.” 

And what we realized is the more houses we did, the thinner our margins got, the more fragile our business got. It wasn't a good business strategy. A couple months later, we realized well, Zillow, and Opendoor weren't making any money either, because they almost lost their entire business. They almost went bankrupt, right? We didn't know that at the time, though. We're trying to emulate them. 

And we realized it wasn't working for us. Okay, so we said, well, what the hell, we're good at marketing. We're good at real estate. We know how to do all this stuff with technology and virtual assistants. What are we gonna do? We decided to start looking at commercial real estate. Commercial real estate can mean lots of different things. But ultimately, you know, not a house, some piece of real estate, that's not a house. So most people go to apartments, and it's really easy to understand apartments. But there's reasons why we didn't want to go to apartments.

Number one, because they're really expensive. Number two is, they're hard to manage because people aren't living there. Okay. So we basically looked at two asset classes, one of them being mobile home parks. And one of them being storage facilities, right? Because Frank and I kind of pride ourself in being, you know, somewhat blue collar, right? Maybe that's our veteran roots, right? But this idea of like, the blue collar, grittiness, sweaty business, where is the best place for us to insert into commercial real estate in one of those avenues and we thought mobile home parks, or self storage. And we ultimately picked self storage because it's not someone's primary residence. 

And we liked the idea of that if we were going to manage remotely, manage across the country without living there. It'd be nice if it wasn't someone's primary residence. So we said, “Okay, let's get started in storage, okay.” We're looking at facilities, took some courses, paid for some consulting phone calls to try to get smart and we found a facility in Lawton, Oklahoma last summer for 1.4. We ended up buying it for $1.4 million. We closed it and things went well. And sometime in late 2021, we started kind of identifying as a real estate private equity company, right? I didn't even know what that meant a year ago, but real estate private equity is just a fancy way of saying investing in real estate full time, you know, probably in commercial real estate, right? 

So right now what Frank and I spend most of our time out on is trying to buy storage facilities. We're getting ready to close our second, or actually our third storage facility on Friday. And we're looking for more all the time and happy kind of go through what our business strategy is, and why we think we have an opportunity and advantage. But that was the genesis of, hey, we feel like we're good at real estate. We're good at technology. We're good at marketing and sales. 

But trying to play that single family game where you're doing 100 houses a year, it's so much work and the margins getting smaller and smaller, that we got to audible. And I think, you know, what we're like nine months into real estate private equity. And I would say we are very happy we made the switch. All signs indicate that it was a great decision for our business. And for us personally and our families.

Brock Briggs  1:00:47  

That's awesome. I think that knowing when you kind of need to change and like implementing the change quickly, it sounds like the learning curve was very, very short, for you guys getting into that. And it sounds like you guys have had some success in that already, which is fantastic. $1.4 million is a big price tag, were you guys sourced that money from yourself? How did you go about getting all that cash to make the purchase?

Frank Scappaticci  1:01:13  

So we raised the money through what they call a syndication, which is basically a fancy word for crowdfunding, I guess you could say. So let's say we use a combination of bank debt, and investor money, right? The bank on the first transaction provided 70% of the funds. So right around a million bucks, we had a bank agreed to give us a loan, assuming we make the down payment, which is, in this case, like 400 something $1,000. John, and I didn't have 40 grand lying around. We have some money. We invested some of our cash in the deal. 

But we needed investors for the rest. So we'll go to people that worked with us in our single family business. And people within our network, those were the primary investors in our first deal. And we said, “Hey, if you give us X amount of dollars, these are the terms we're gonna give you.” On that deal, we said, we're gonna give you an 8% preferred return, meaning Gray Line doesn't get paid profits until they get an 8% return. That's what that means. There's more nuance to it than that. But that's basically what it means. 

So they get told, hey, you get 8%, before Gray Line starts taking profit sharing, and then you get this percentage of the proceeds upon sale, right? And here are our financial projections for this facility. This is what we think you'll make based on our best efforts, best guesses, assuming we're good operators, and we run this place correctly, right? Investors look at all that stuff. And they're like, I'm in or I'm out. You know, like, I'm in or I'm out. And you basically raise funds until you have the gap funding required to close. You wire the money, you know, and bank funds. And that's it. That's how it's done.

Brock Briggs  1:02:51  

You guys look and find this facility, seeing it as an opportunity for, like value add, or is that something that you had the idea that like, we'll hold on to this and cashflow it. What did you guys see about this specific property that you thought that you would make a good return on?

Frank Scappaticci  1:03:14  

We like all of our, the number one thing we look for, John actually does most of this work is making sure there's room to increase rents. We look, we really wanna find facilities where the owner is not realizing all the revenue they can, because they're undercharging by 20%, 30%, sometimes 40 something percent, which is what we think the case is with are the deal closing on Friday. 

So that is number one, because storage is very expensive now too, right? They're trading at very, very high prices, which makes cash flow pretty tight, based on the price you're paying typically, and what the current owner’s making. So you really wanna look for opportunities where there's a delta, there's a gap that they're not covering, because that's how you're gonna increase the value of that property after you buy it. And really what drives the returns for your investors. 

So you have to find spots where you know, this stuff's not on Zillow, or LoopNet, or these websites like doesn't, it's not there. John has to go through and look at comps or comparable facilities for all the ones we underwrite, like check all their rents, and see like, is this owner charging enough, right? And we wanna find out that delta other opportunities are like low occupancy. Any commercial real estate with low occupancy, it's like, what's going on over there, right? Is this run properly? So that's an opportunity. People spending too much on insurance or spending too much on labor. Those are other opportunities we look for.

Brock Briggs  1:04:41  

Just mess around and like trying to automate places like making electronic access, like older outdated facilities that need some modern day 2022 electronics to get into.

Frank Scappaticci  1:04:56  

Yes, every facility we own, our goal is customers can sign up online, which is another big opportunity. I'd say most mom and pops, their business is not set up so people can rent online and show up and get to their unit. I would say like 60% of them, you can't do that. So our business is, you go to our website, you order a unit, you pay, you get a code to your gate. It's sent to your phone, you go to our facility, you type the code in, you put a lock on the unit, or there's a lock waiting for you. And you put your stuff in there and you leave. So you know, it’s contactless moving is the phrase being thrown around in the facility. So we offer contactless moving for that's a goal of ours for all our facilities.

Brock Briggs  1:05:41  

You said that self storage is really expensive right now. Is that a byproduct of real estate and interest rates as a whole? Is it that sweaty startup guy on Twitter, like telling everybody they need to get into self storage like the tomato guy? I know, you know who I'm talking about. Why is it so expensive?

John Plumstead  1:06:05  

It's just a booming economy, right? The economy has been booming for a long time, interest rates are super low. A lot of people have money. So what happens when a lot of people have money? Well, at a certain point people wanna take money off the table and take it out of the stock market and put it into real estate, right? Well, you know, they start with multifamily big apartment complexes, right? They go to maybe, you know, big shopping malls and stuff, right? 

But eventually, if there's a ton of money out there, it starts trickling down. And what's like, what's the redheaded stepchild of commercial real estate, mobile home parks and self storage, right? So when self storage prices are going up, what's that mean? That means there's a lot of money in the economy. Interest rates are low, the economy is booming so much that even at the very bottom, the redheaded stepchild, storage prices are starting to go up quite a bit.

Tim McCarthy  1:06:59  

What does the, sound like a typical storage self storage unit. What is the return look like on something like that?

John Plumstead

I think..

Frank Scappaticci  1:07:10  

Go ahead. Sorry.

John Plumstead  1:07:12  

I think it would look like you know, you could do the math just like you would on any other commercial real estate asset, right? Like, if we were gonna say a $5 million dollar storage facility for a $5 million apartment complex, like the return potentially could be the exact same, it's just like that maybe the $5 million apartment complex has 50 units, and the $5 million storage facility has 500, right? 

But ultimately, what you're trying to do is you're trying to get, you know, for that money, the most return possible. So I don't think you could say, hey, in multifamily, you're gonna get excellent storage. You're gonna get why I think the differences are, one, the loan products are different. So we're right around 4.25% or so for a loan, where if you were gonna get it with multifamily or multifamily product, you could probably get in the twos right now, right?. So what does that mean? That means that the price will probably be higher for the multifamily because you can get cheaper debt on it. 

Another big thing is, with storage, we can change prices on a month to month basis. We usually change it quarterly. But what that means is with inflation and prices going crazy, we can hit those projections faster, where a multifamily facility is gonna have to wait usually 12 months to turn that stuff over. So I wouldn't say hey, if you're comparing a multifamily and a storage, you should go one way or the other. I think they're both unique. And you'd have to really dig into both of them to figure out that opportunity.

Frank Scappaticci  1:08:48  

Yeah, I mean, they both have aspects of being a small business like there's a leasing operation with multifamily development is all this stuff. But storage feels more like a small business to me than other commercial real estate assets. In my brief experience, like you're running Google ads for pay sign up and come to my facility, right? Like you're, you're doing a Google My Business page, like you get Google reviews, you try to get testimonials, you got a website that's customer facing and that matter. 

Some people do retail sales out of their storage facility. They sell boxes, packaging, whatever. So storage to me feels like it's got real estate financing and it's valued like real estate, but it's got this little like small business feel to it. And sometimes you can take advantage of that for profit, right? Like you can sell insurance with your units. Some people do sell U hauls out of their facilities. So there's a little bit of like, small business added revenue, you can realize but like John said, I agree with everything else he said.

John Plumstead  1:09:44  

One thing I would add to that I really like about storage, is if you look at a 10 by 10 storage facility at our complex versus a 10 by 10 storage facility across the street, chances are, those are gonna rent or those should rent for almost the exact same price, like almost the exact same price, because it's a commodity, it's a metal box, right? 

When you start looking at apartment complexes, it's really easy to be like, “Well, this one, you know, this one's got granite countertops. And this one, you know, it's got a different color. It's been updated.” So what does that mean? If you're going to invest in one of these assets, in my opinion, right? I think it's really easy for investors to bullshit people. It's really easy for investors to be like, you know, “Hey, it's running for 800 now, but we're gonna put $10,000 into it.” 

And then it's gonna rent for 1400. And then if an investor goes, “Well, why do you think that?” Oftentimes, I think you end up getting some bullshit answer. Whereas storage, if someone is looking at one of our underwriting deals, we like, “How are you gonna raise it from $70 a unit to $100 a unit?” We're gonna be like, “Hey, this is why, here are three facilities by us that are charging more than 100. And we're just underwriting it at 100.” But if you look at that, yeah, there's probably even more meat on the bone here, right? So it doesn't mean everyone in multifamily is an idiot or an asshole. But it means what we're doing, I think, it's simple. And we can prove out kind of our projections in a more clear manner, in my opinion.

Brock Briggs  1:11:14  

Yeah, much easier to compare, like you said, they're comparing literally a box to another box, rather than, you know, this one's got two parking spaces versus one, it's not apples and oranges. According to you guys’ website, you guys do take third party money. Is that right?

Frank Scappaticci  1:11:34  

Well, that's referring to the limited partners of the investors I mentioned earlier. So that's, you know, we are always constantly looking for people to invest in our deals. And there's, you know, that benefits investors, but that helps us scale, right? Like, John, and I don't come from money. So like, I can't ask an uncle for 2 million bucks if we come across an awesome $6 million facility. 

And I know, neither can John, right? So in order for us to scale and reach our goals, a capital raising is part of our business. It's actually one of the core functions. So it's on us to deliver good returns. But it's also on us to network and find people that wanna place money in alternative assets. Because that's how businesses like ours grow.

Brock Briggs  1:12:18  

Yeah. What? And this may be part of like the pitch that you give people that are interested in being limited partners or LPs. What kind of time horizon do you guys advertise that you'd like to take when you're looking for deals? Do you have like a hurdle rate or like, we're gonna target things that are gonna make over X amount for non finance listeners a hurdle rate. Walk us through that kind of like pitch to somebody that may be interested in investing with you guys. And if there's, I'm assuming you guys might have a minimum of what you're willing to take on for people.

Frank Scappaticci  1:12:59  

Yeah, we take 25 grand as our minimum right now. I don't think we have plans to change it. Our first deal, we had a preferred return of 8. But we had a higher promote or a profit share on the back end. And our most recent deal, we did a 6% with a lower profit share in the back end, and I think we're going to stick with that model going forward. We're only what? Seven, eight months into this business. So I never wanna say that we're never gonna change again, right? It's still early, but that's the model I think we're gonna go forward with. 

But to your point, bringing up preferred return, some people don't offer a pref. Some people offer like just a bigger profit share to the investors and no pref. But I think it is important nowadays, to have a hurdle. Like I think investors in my experience, they wanna hurdle in there, at least in the seven months or so that I've been doing it. So we do offer one.

John Plumstead  1:13:49  

And then I would say our every project can be different. But last project we did is projected to be a five year hold, right? But we definitely tell investors that we have long term debt. So if we have a softening of the economy, and we have to hold it longer, in order to make it a great investment, that's what we'll do, right? So it's not locked in for five years. 

But generally we're looking at five years, right? And then we say, you know, we try our best to have a conservative risk adjusted return. And for our last deals, what we've told investors is somewhere between 15 and 20%, internal rate of return, when it's all said and done. And we’re happy to talk through all the math and all the assumptions we made with our investors to do that. And I would also you know, if any of the stuff we're talking about, about how to structure a deal confuses anyone. 

But they wanna invest in a deal, if you talk to someone like me, ask all those questions, right? Like, what does this mean? What does this mean? How do I get paid? How do I? What if I want out? Just ask all those questions and any syndicator investor that can't answer those questions or won't answer those questions, in my opinion, you probably shouldn't do business with them anyways.

Brock Briggs 1:14:58  

Yeah, that's probably good advice. Does the profit share, is that something that comes on the back half? And does that come from like at the point of like selling? Or where does that come from?

Frank Scappaticci  1:15:13  

Let's use the 8% preferred return example. So let's say the investor in our business, we were doing quarterly distributions, right? So that would mean, hey, Q1, you're getting 2%. And you get 2%, every quarter to hit eight, that's your 8% preferred return for that calendar year. When John and I meet that or start hitting those returns, which we are on the first facility, we then can start taking profit sharing once the investor is on track to hit their pref, right? On sale, let's say we sell five years from now, right? You basically have to look at how much money you've made, and how much you distributed to investors over that five year time horizon. 

And you have to see, did I catch? Did I deliver an 8% return every single year? Has the investor gotten that amount of money, right? That is equal to 8% per year, you have to hit that and then you start taking profit sharing, right? So they have to have an average annual rate of return of 8%, for you to start taking that promote on the sale of that property, right? If you fall behind, let's say you fall behind $20,000, right? And you sell it and you make $100,000 on the sale, you gotta catch the investors up before you start taking profit sharing. So when you start falling behind in the pref, that starts to turn into a debt really, on the part of the sponsor that has to be fulfilled before you make any money. So that's how it works.

Brock Briggs  1:16:33  

Well, and I think that the preferred way is a nice way to do business for both sides. And I think primarily because it aligns incentives, you know. They have preferred stock and publicly traded companies for a reason. Because people wanna be higher up on the capitalization table, you know. They wanna be paid first, if something goes wrong. And you know, that debt holders get paid first, and then kind of slowly move down. So you guys have a goal of reaching 20 million this year. He wanna walk us through where he came up with that number, how far you are? And what's next for Gray Line?

John Plumstead  1:17:14  

Yeah, let me first just on the preferred return and stuff, I would just say, Frank, and I tried to keep it simple. It's really easy to make it very complicated. So we try to keep it super simple. And then the other thing we try to do is align incentives, which means we want to be incentivized, in as close of a manner as the investors are incentivized. So we're always motivated to act in our investor best interest, right? And it's really hard to have those incentives be perfect. But that's what we try to do. 

And then you know, when in doubt, we try to say, “Hey, what is the going standard for fees and how much profit share we should take?” And then we try to back it up just a little bit, because we wanna make sure we're always being fair to our investments, right? And then, yeah, going into this year, our goal is to buy $20 million worth of storage. We just had an appraisal come back today, which means we should close a facility on Friday, that should put us, you know, right around five and a half million dollars. So we're gonna be on.. 

Brock Briggs  1:18:25  

Five and a half mid February, it sounds like you guys weren't crazy enough in that goal. We’re gonna bump this up a little bit.

Frank Scappaticci  1:18:32  

We started out with 1.4, right? Because we had already closed one. 

Brock Briggs

Okay

Frank Scappaticci

So I guess, technically 18 and a half for the year. You know, the 20 sounds much cooler, I guess. So we were just gonna rock 20. But yeah, it'd be 5.6 hopefully, at the end of this week. So we're on track, I guess, is where we're at.

John Plumstead  1:18:56  

But I think that goal motivator, like is it a motivator? Yes. But I'm relatively top, like, if we don't hit 20 million, it's because we decided not to hit 20 million because we couldn't find enough deals like we're confident we can find the deals. You know, we can partner with investors. We can get the debt. We feel good about that. I think a 20 million, although it's a big number, and a year ago would have blown my mind, I'm really comfortable with the number 20 million. I like the number 20 million, because it's not 40 million. And it's not 100 million. And Frank and I really, if you've listened this podcast at all, you hear a theme of us just hitting the throttle and being like, “Let's fucking go baby,” right? 

And we said, hey, we wanna be a great real estate private equity company. And we feel like we can absolutely grow to $20 million this year, while staying within ourselves by growing, you know, a very resilient company. And if we tried to go to 40 million, we felt like we would have stressed our systems too much and potentially put capital or assets at risk. So 20 million is a big exciting number, and we're super pumped about it. But it's also a little bit of a throttle gauge for us to say, hey, we wanna be on that glide path. It's okay to beat a little above it or a little below it. But if we're doubling that, we need to look at our team and make sure we're actually resourced because right now, we are not resourced to buy $50 million worth of storage this year. We are resourced to buy $20 million.

Brock Briggs  1:20:28  

Well, and I think that, that's the right way to look at it, because you don't want to, we don't wanna buy $20 million, just at any cost, you know. If you're losing money on buying $20 million real estate like, so what? Like, you know, that's not a good thing. And it also sounds like you guys have, I don't wanna say learn your lesson. I'm not here to poopoo you guys, but like, that sounds like direct implementation of this past lesson that you guys have learned with like maybe growing too quickly, taking on too many employees and like people that aren't exactly all aligned on the team. You know, and causing a problem for your employees, working yourselves extra, all of that.

Frank Scappaticci  1:21:12  

I think we learned a lesson that I think you're correct. I think we also learned like, obviously, we're not the first storage owners that ever lived. There's 1000s before us, there'll be millions after us. There's other people that have invested in single family for the last 150 years, whatever. However, people have been doing this stuff. And I think John, I probably came in and we're like, “Those idiots. They don't know what they're doing. We're gonna completely transform how this is done.” 

And like the mature business owners, like, hey, there's a reason people grew their businesses and the way they did it, you know, we're not. This isn't some transform formative tech startup, right? We're replicating existing businesses. And I think it's probably some arrogance in our part, right? Like, hey, we'll do single family, like, no one's ever done it before, right? Like, in our heads, and we look at storage. 

And we're like, hey, like, there's a reason you have to build this thing slowly, right? You can't take investor money, and then have one person managing like seven different facilities, right? It's just not, you can't have your business outpace operations that much. And you start looking at other business owners how they grew their companies. And I think we realize we have to replicate some of those steps before we take bigger risks, right? We gotta like do with the things that the smart people do, and then branch off from there. So, we got humbled. I think we're learning that lesson.

John Plumstead  1:22:28  

It's a great, great point. I don't know if this is one of you, guys’ final questions. But if you were gonna ask, what advice would I have for a veteran, right? I think that's something that veterans get wrong. I got wrong. Frank got wrong, right? It's like veterans that have this entrepreneurial spirit. I feel like they're told they need to create something that's never existed before. And I just like, you can do that. 

But the odds are so much against you, like, you're gonna create a new kind of sunglasses, right? Or like, some new restaurant concept of this, that and the other. I would much rather advise veterans out there that wanna be entrepreneurs, like, what businesses in your town are good? And how can you copy them, right? It might not be as sexy and you might not be on the cover of Fortune magazine next year. But the odds of that being successful are gonna be so much higher than creating something new in my opinion. It might sound negative to say that, but I think it needs to be said by lots of people.

Brock Briggs  1:23:27  

Hey, you keep going, man. I'm right there with you. I think that, and this is, I'm not speaking bad about anybody else. I'm speaking because I have like experienced this, but like, have that same sort of entrepreneurial drive and like, this desire to kind of like, have the next great thing that's never existed before. 

And like you said, I think that the pace of innovation, what we see on as like consumers differs vary greatly than what the reality is, you know. It just there might be new terms for things, but there's really not a lot that's new. I got into it with somebody on Twitter a couple of weeks ago. They're like, everybody's all about Dows now, you know, in Web3. These decentralized autonomous organizations or whatever they're like, what if we just set up a dow, you know. We all just buy a house and then different people can use it. And it was like, so a timeshare? Like that literally already exists for a really long time. Like, everything doesn't need to be more complicated than it is but I think you're right. 

There's a ton of opportunity and just really simple businesses for people and you can kind of buy yourself a job in a way if you're really not sure what you wanna do. You really can go out and get a small business loan and buy yourself a full time job if you want. And if you've got some a little bit of business acumen, I think veterans are fantastic entrepreneurs and entrepreneurs in the sense not of like creating something necessarily, but just operators in general.

Frank Scappaticci  1:25:05  

Yeah. And the financing to buy businesses is like, as you guys said, you're looking at businesses too, is pretty cool. Like you can acquire businesses on seller financing just like you can a house. You can do an SBA loan, the leverage on those things is like crazy high. You can do like almost 90% loan to value, I think on those, which is kind of like a VA loan. 

Tim McCarthy

Yeah

Frank Scappaticci

But it's like for a business. So like, yeah, like if a business is struggling, and you get a good deal. I agree 100%, man, 100%. I actually meant to ask what businesses are you guys looking at?

Brock Briggs  1:25:35  

Go ahead, Tim.

Tim McCarthy  1:25:39  

Well, okay, I'll take it. Self storage. 

Brock Briggs

I thought you were starting to talk, sorry. 

Tim McCarthy

No, no, you're good. Self storage was one that really interests me. For me personally, something that's a little bit more hands off. Like I would want it to be my full time gig but like, self storage, carwash, something like that, where there's not a, like a ton of overhead. But it's like pretty self sufficient, so to speak. That type of thing, those types of things, that would be what interests me the most.

Brock Briggs  1:26:19  

Yeah, I have similar feelings and kind of ran into the wall of like, understanding the time commitment required for doing something like that, as I'm sure that you guys can speak to like, not every deal is right. And sometimes you have to combat that, like excitement of like seeing something so good. And that doesn't mean that it's just right for you, you know.

John Plumstead  1:26:43  

I think it's really easy. I bought an ice cream shop one time and on the ice cream shop for a couple years.

Brock Briggs  1:26:50  

Okay, now we're getting into the juicy stories here.

John Plumstead  1:26:53  

It was a great learning experience. But one of the lessons there that I think everyone needs to learn is when you look at a business, you can think like, you know, whatever, I sold the 1000 ice cream cones last year, and this year, I'm gonna sell 1500 ice cream cones, right? Well, anyone who's been in the ice cream business is gonna be like, “Dude, you're gonna increase your ice cream sales by 50%. How are you gonna do that?” 

And you're like, I've gotta do stuff on social media. I'm gonna have a cool sign. They're gonna be like, “Hey, that might give you 5% but you're not gonna sell 50% more ice cream this year, right? But so many people going into a business are just like, I think I can do it. And, you know, many of us coming on the military are confident enough, right? And we got the hutzpah to believe we can do it. But the bottom line is you're probably not gonna be able to.

Frank Scappaticci  1:27:46  

Yeah, right. Yeah, like we veterans, I think they can do more operational value add to a business than what is reality, right? And reality, what are the primary determinants of pricing and how well that small business small town USA is it's probably the health of the town and the location of the asset itself, right? If it's like an ice cream shop, like if the location is bad for an ice cream shop and the town's doing really well and there's people walking, dude you're gonna crush it, right? 

If not, like no one's there's no social media account that's gonna make people go to like the most dangerous part of Lawton Oklahoma to get ice cream. It shouldn't happen, you know. Like I think that's have to be careful like don't think the previous owner is that stupid. They’re probably not that dumb, right? They’re probably pretty sharp. So just gotta respect them and be like, how much can I really improve this thing?

Tim McCarthy  1:28:37  

Rainbow sprinkles hold the stabbing please.

Frank Scappaticci  1:28:42  

Marky gets a vote.

John Plumstead  1:28:44  

Analyze the business on how it's currently performing. Like is it a good deal on how it's currently performing? Because if it's only a good deal if you sell 50% more ice cream cones that means it's not a good deal.

Tim McCarthy  1:28:57  

Right, makes sense. 

Brock Briggs

Go ahead. 

Tim McCarthy

I was gonna say that was the interesting thing with talking with Nate is, Frank you were talking about like how the financing on buying small businesses is so cool, that I never even like considered that until we had done that interview with Nate. And I feel like weeks after that, I was like, “Oh, this is like really plausible.” Like this is not something you need to have millions of dollars in the bank to do like your normal blue collar worker with a little bit of money in the bank. And like most definitely buy a business and I really liked what you said, Brock about like you're buying your own job essentially, which is like a super interesting way to think about it.

Brock Briggs  1:29:44  

I've said a bunch of times before like I got out and I was like, I knew in that moment that I long term wanted to work for myself and I have a hard time thinking that there's not other people that think that way. Or, yeah, I know that there are other people that feel the same and kind of like want to build something for themselves. And it sounds like you guys have that same kind of drive.

Frank Scappaticci  1:30:16  

Yeah, maybe we're too difficult to work for somebody else too, you know, that might be it. But yeah, I think, you know, it's probably a lot of us that, you know. I mean, every veteran officer NCO or non-commissioned, you know, have been told to like shuffle shit at some point, right? Like, hey, go shuffle some shit. And a lot of people don't like that, you know. 

So it's natural for you to do that for five to seven years, or maybe longer. And be like, hey, like, I wanna try to create some upside in my life and create my own thing, right? And that upside is either through making a lot of money or earning back a lot of time. So I think vets have that perspective. And when they leave, they're like, I'm gonna try to make this work for me now, you know. I work for the man for a while, I'm gonna try to make this economy work for me. And I think a lot of vets do well, because of that.

Brock Briggs  1:31:04  

Yeah. And I think it's not necessarily that it shouldn't be taken with the perception that you're not gonna have to do hard work. You're still gonna have to shell shit. But there's a difference when you're talking about like, I want more of the upside. 

Frank Scappaticci

It's your shit. That's your own shit.

Tim McCarthy  1:31:24  

Yes. Yeah, exactly. That’s just what I was about to say.

Brock Briggs  1:31:28  

Well, you take away the upside. You're really only limited as much as you wanna work or you wanna acquire new locations, or whatever it is, like there, that upside kind of boundary is taken away much. I think that that's unique and motivating to the types of people we're talking about.

Tim McCarthy  1:31:49  

You can also like kind of gives you like, this weird chip on your shoulder too, for like, when you do work with somebody, like obviously, I went from being in the Navy to selling cars. And like, we were skirting around one day at work, and they were like, “Okay, I need everybody to like go outside,” and like, reset the radio, or like something stupid. Like, it was like most definitely busy work. 

And everybody's like, bitching and complaining about it. I'm like, I've literally mopped rain. Like, this is not hard. You know what I mean? Like this isn't and people are like, this is bullshit. And I'm like, “Dude, I've literally mopped rain in the middle of a monsoon, like, get over it.” You know what I mean? Like, whatever. That gives you a little bit of an edge, I think when you do work for somebody as well.

Frank Scappaticci  1:32:41  

Yeah. Take your bags and move it from this container to this other container. 

Tim McCarthy

Yes, yes. 

Brock Briggs 1:32:50  

Well cool. I wanna kind of wrap up here. Want to get some parting advice from you guys. John, you kind of dropped some wisdom a little bit earlier. So maybe Frank, you might just be on the hook now. What are some opportunities maybe that you guys have seen in your line of work that maybe isn't totally in your line of work? Or some kind of advice for other veterans that are maybe looking to get into the small and medium business space, get into real estate. What should people be doing?

Frank Scappaticci  1:33:24  

Well, there's one thought I've had recently as to complement our existing business. We're not doing this yet, but we could. Is this thought around when people are in a gold rush. Like, it's good to hand out shovels, right? Like that phrase, I'm not saying it correctly. But when there's a gold rush handed, be the one handing out the shovels, right? And I thought about our direct mail that we send out to storage owners and John, too. And a lot of our communications like we wanna buy our facility, right? We're doing marketing to buy the facility. 

But I think when asset prices are really high, people are gonna be willing to pay prices for consultative services on their assets, right? So what does that look like? We message the storage owner, like hey, we'll help you run a better facility and charge you for our services. We're gonna increase your top line revenue and based on our performance, because you'll be able to sell it at a higher price and we'll take some share of profits or a flat fee or something like that. So I think a big opportunity right now is like consulting, right? 

There's so many people with assets that are worth so much money, carwashes, storage facilities, all this crap, property management companies, whatever. And the multiples are so good that if you could help them increase the value of their assets, your services are worth a shit ton of money. There's a guy that makes millions of dollars increasing revenue for gyms, so he was on the My First million podcast last week and I listened to it. He just goes to gyms, increases their revenue, takes a share of the profits that he gives them by following his process and moves on to the next gym. That's his whole business. 

Brock Briggs

That’s such a good episode. Yeah, yeah, Alex Hormozi.

Frank Scappaticci

I forgot his name.

Brock Briggs

I started listening to some of his old podcasts. He's the real deal. He's like a cold blooded salesman for sure. 

Frank Scappaticci  1:35:05  

Yeah, he's smooth. He's very smooth.

Brock Briggs  1:35:07  

Yeah. No, I think that that's good advice and a way to leverage kind of some knowledge that you have about like a pre existing business or whatever into kind of more of a, I guess, service based business rather than just a traditional brick and mortar. John, anything from you? Any parting thoughts?

John Plumstead  1:35:29  

Yeah, I think my advice for any veteran out there is to take care of themselves. I maybe in the touchy feely guy, right? But I see too many veterans that they get out and they gain a bunch of weight, and they don't work out and they treat their body like shit. And, you know, the military gets a lot of things wrong. But one of the things they get right is trying to do physical fitness every day, right? So you don't have to be crazy. But I think it's so sad to see so many young veterans that are, you know, 25, 35 years old, and they look like they're like 45 or 55, right? 

So, you know, my advice to any veteran out there is if you want all the financial goals, I'm a big believer in how you do anything, is how you do everything, right? So if you wanna be an awesome dad, you know, be an awesome business professional. If you wanna be an awesome business professional, like, wake up early workout, eat right, take care of yourself. To me, it's all interconnected. 

And you know, in too many veterans circles, we're all talking about being badasses and you know, super macho, and I'm like, “Hey, take care of yourself, man.” Like, make sure you're getting sleep. Make sure you're staying hydrated. Make sure you're working out, that's gonna help you in every facet of life. Like I said, maybe I'm the touchy feely guy by saying that, but I think it's a message that as veterans we don't talk about enough.

Brock Briggs  1:36:52  

Gotta be getting good sleep, eat right and be physically there to kind of show up every day. So I agree with you 100%. Where can people go to find and follow along with you guys? I know we've got people blowing us up asking how they can get invested with Gray Line. If you guys wanna plug the business. Yeah, where can people find you?

Frank Scappaticci  1:37:16  

Our website is graylineinvestments.com. If you go with Gray, if you're confused on how to spell Gray, some people think it's EY. And you go there to sign up to get access to our deals, and then on Twitter is Frank @frankscapp. And he's @johnplumstead. That's it.

Brock Briggs  1:37:36  

You guys drop good content on Twitter. Happy to be following you guys. And here for finding out weird things that our wives dream about us.

Frank Scappaticci  1:37:47  

I don't, let's move on from Twitter and close it out because I got destroyed on Twitter last night. 

Brock Briggs

Oh, boy!

Frank Scappaticci

I had a marriage tweet. I went out of my comfort zone with a tweet. And it did not go well. And I took it down. Because I started going viral in a bad way, hate mail coming in. 

Brock Briggs

Oh, no!

Frank Scappaticci

And honestly, the way I wrote it, reflecting on it, I shouldn't have wrote it. It was partly my fault, you know.

Brock Briggs  1:38:09  

You can you tell us what it is? We can cut this if you want but

Frank Scappaticci

You don't have to cut it. But I wrote something like about marriage being a production based business like with the thought in my head is like, “Hey, you gotta show up to work every day.” And like, be a good dad, like, try to improve yourself as a human. And I've just seen a lot of mostly men, like, let it go and slip. And then they're upset when their wife isn't happy with them. And they leave and I'm like, no, that's you're, in my head I'm like, that's your fucking fault. 

Tim McCarthy

Yeah

Frank Scappaticci

That's my attitude. And I think that way for myself too. But the way people took it is like, you must be really hard on your wife, right? Or like, not a very compassionate human. So people call me worse than that. And you can and then religious people who believe you should never get divorced. They started going like no, like, you took a vow. God! You're breaking the sacrament. I got that crowd coming after me, which I probably should have expected but I did not. 

And then also the way I wrote it was just not very, like tactful. So then some other peers were like, take the shit down, you dummy, you know. So like, that was my first time I went viral in a bad way ever. And it sucks, it was not cool. Like I realized like the risks of social media now and it was not fun.

Brock Briggs  1:39:20  

Yeah, sometimes you wanna get out there and like get seen and whatever. But it's always like you kind of like let your guard down on like some verbiage or something and it will come back to bite you.

Frank Scappaticci  1:39:33  

You didn’t even pay attention to it, man. I put zero thought into it and it fucking occupied my entire night.

John Plumstead  1:39:39  

Also one of those things, I like Twitter, but it's also such a terrible place, right? Like, you tweet like 200 tweets and none of them do any good. And then you just have some random one that you never think is gonna get good and then you check two hours later and you've got 47 notifications. You're like, wait a second, what is going on? 

Brock Briggs  1:40:00  

Yeah it's a weird platform but deep down the rabbit hole with it for sure. I pumped it on like every single episode that we do here. So yeah, there's a ton of value there to be had. John, Frank, thank you guys so much. This has been fantastic. Thank you so much for your time. 

John Plumstead

Brock, Tim, really appreciate it. 

Tim McCarthy

Thanks, man!