Financial Freedom From Day One – EP 1 – OLD

We want to help you become a better business owner, not just a better real estate investor…


Welcome to Our VERY FIRST episode!

My name is David Richter and my biggest passion is to help real estate investors learn how to manage their business finances.

I know, sounds boring right?

But let’s be real for a moment – most investors know how to make money… but they don’t know how to keep it!

For most of us, it feels like all the money that comes in, somehow always finds a way to go back out… and I can change that for you.

I’m a certified Profit First Professional and I’m one of the few that specializes in teaching the Profit First system to real estate investors.

For those who might not know, Profit First is a financial movement started by Mike Michalowicz.

It’s a revolutionary financial management system that automates profitability.

Yes, you read that right – The Profit First system makes you profitable from DAY ONE!

It’s also a system that can be managed simply and works with the way us real estate investors are wired.

I’m so passionate about this system and what I’ve seen it do for clients that I’m actually in contract to write the book on Profit First for Real Estate Investors.

I am on a mission to change the real estate investing world and how it thinks about finances.

In today’s episode I have the honor and privilege of having Jaren Barnes join our show where we discuss:

  • Implementing Profit First Principles
  • Cash Flow System
  • Managing Your Finances
  • And more!

Notable Links


David: Hey, this is David Richter, with the Profit First REI podcast excited to be here. Especially on this first podcast because we’ve got a great one for you, and I wanted to actually jump right into a story first, so let me dive into that. Mario called me in a panic. I’m so frustrated, I don’t know where I stand financially, I don’t think I have enough money to cover all the expenses this month but don’t know for sure I have a couple of deals closing and rent coming in, but I need more cash in my account now to make me feel better. How many of you have been there? How many of you have ever had periods of time where you didn’t have enough money or didn’t even know how to check if you had enough money to keep the business going? Does that sound you- like you as a real estate investor? There is so many people I’ve talked to that are in that situation, and you are definitely not alone; real estate cash flow can be very, very cyclical. Does that sound familiar too? Where you’ve got those up and down you’re going deal-to-deal, month-to-month, the other month where you have way more than enough money coming in because you’ve done too flips and clips, and they just sold, or then you’ve gone two or three months without a fix and flip selling or without anything coming in and what about that? How- have you ever sat there and said the cash flow just isn’t there, so this is what I want to help you with, this is what this podcast is all of that because Mario and I met and after we realized that he had the information he needed and once he actually got that information and once he had the power to implement a cash flow system into his business, he was a lot more secure in that being able to go from flip-to-flip or have those- those times in between and that was from him looking at his book gaining that confidence, and that’s what we want to do with this podcast .We want to make sure you have that confidence, and I keep saying we because I’m going to have several co-hosts on the show and I have Jaren Barnes with me today, so I just wanted to introduce Jaren, and I wanted to at least tell you that story up front because I- so many Real Estate Investors where we talk, and we work with them, and that’s how they are but- Jaren do you want to say something to our group?

Jaren: Yeah, man, I’m excited to be here. I’m really excited about this podcast because I actually have been an active real estate investor on and off pretty much my entire adult life and when I first discovered Profit First I literally cried. I’ve had- this material has radically changed my life because like, David, was saying you know, we all know when- behind that- the curtain that a lot of the times the last day of the month is going to be the deciding factor whether this month is going to be our best month or our worst month and it’s never in between it feels like. It’s like- you know the stakes are always super high and if we get a bunch of closings in and it’s going to be great and then if we don’t then we’re going to be at a loss this month you know. And I just know it’s- a lot of people in real estate go around toting this like hey I’m doing x amount of deals or I am you know doing x amount of gross profit every month or every year but that doesn’t really tell the full story. A lot of us are actually living paycheck-to-paycheck and deal-by-deal and praying that we don’t- we don’t go under and there’s a better way and David and me actually I joined his team are trained in helping people that are Real Estate Investors implement the principles of- of profit first so I’m excited to be here. I’m really excited that we’re going to be putting out this material in the world and yeah I’m excited for it all, man. Do you want to kind of go over a little bit about what exactly like Profit First is? Maybe that would be a good direction, and then we can talk about SimpleCFO, and then how everything came to be while we are on the show today?

David: Yeah, so I would love to talk about Profit First because that definitely changed my life too. When I first read that book is- first of all, it’s a book by Mike Michalowicz, and if you haven’t read it, I highly recommend going to Amazon or wherever you can find that book and buying it. Because it has principles in there, It’s basically a cash flow system if you’ve ever heard of the envelope system that your grandparents might have used or you might have used or if you’ve heard of Dave Ramsey he preaches that for your personal finances but the envelope system where you basically take the money, and you stick cash into little envelopes for the different expenses that you have in a month. It’s basically doing that for your business that’s what the Profit First system is: it’s setting up different bank accounts, making sure that you have the cash for those bank accounts that you have for your business so you can know like, okay you’re already checking your bank account every single day. So, you might as well see the different types of expenses that you have, those main ones that you can save up for your taxes, you can save up for your operating expenses and we’ll dive into this- this isn’t the podcast- we’re going to dive deep into it but we are at least wanted to give you the framework of what Profit First is and why we’re starting this podcast and why we want to get that information out to you. Because we’re going to be diving into later episodes about really The Profit first- the basics of Profit First, Advanced Profit First, Profit First specifically for Real Estate Investors where there’s a whole different breed of Real Estate Investors whether you’re landlord or flipper or you’re wholesaler so we’re going to dive into a lot of those different nuances of the Real Estate Investing world and that’s what the basic principles of Profit First are. So, Jaren, I think right now I’d like to kind of give our backgrounds a little bit, you gave your background a little bit. But I’d like to give my background a little bit and why you would even want to listen to Jaren and I, and I’m going to just dive into that where my background is in real estate. I’ve been in the real estate world probably for the last 8 to 10 years. I bought my first house when I was 19, it was a great deal for me because I fixed and flipped it, I- you know I did all the work, had it all done it was a foreclosure and when that was done I actually lived in the house for 2 years and then I sold it on- I actually lease optioned it when I moved out of there. Because I wanted to not just do a rental but the option to buy a program too, so I actually did that with a tenant. That tenant was a super tenant he paid early on time and then he cashed me out 6 months later with that option so I was put from then and since I had lived in the house for 2 years out of the last five years for that first house I actually didn’t pay any capital gains tax on that increase which was even- which was even a better tale so like he paid early I was cash flowing and then he cashed me out. Which I was then working at a company where we had about 80 lease options and I think the only two people that ever cashed this out I knew that I had something pretty cool there when he did that. So I said I got to keep doing this so then I bought rentals on the side while I was working and I had my own little portfolio and so I want you to know that this is not just someone who’s- I’m not a CPA I’m not just this person who is going to spit financial jargon at you. I’ve sat there where you sit as a real estate investor, I’ve actually fixed and flipped houses, I’ve done the rentals. I’ve done the different areas like that too, so you’re not listening to someone who hasn’t sat where you sit, I definitely have sat where you sit. I’ve also been a part of big real estate companies too, like real estate investing companies, and when I say big you know like, we were doing I think that are highest point 30 deals of months between wholesaling, fix and flipping, lease optioning, rental, strait rentals, owner finance deals, subject too. We were doing everything and in between which I’m probably going to get into that more on different episodes in or whatnot. But that’s just a little bit about what I did and in that company, I’ve actually sat in all the different seats from acquisitions, dispositions to the sales, to the marketing, to the actual finance sit so the closing transactions and a transaction coordinator position so I actually got to see every single seat inside of a real estate company. So this podcast hopefully will be a help to you because I’ve sat where you sit and I know how important the finance keys of the real estate investing component is and how many times it’s neglected in the real estate world so that’s why we started this podcast. That’s why I started SimpleCFO solutions, my company and that’s why we’re doing this for you. Because we know how important it is that you’re making all that money you’re going out there you’re doing deals. And then that money just seems to go away; you have no idea what your real cash flow is; you don’t have any idea like if you’re going to be able to make it from a deal to deal, and that’s what you want to help you.

Jaren: it feels- it feels like there’s a hole in your pocket you know, like that’s how I describe it, it’s like I mean like I run a land business and this year we’ve like been on pace to I think triple the amount of deal flow that I mean, now that a coronavirus is hit so things a little bit different. But the first quarter I mean it was- it was awesome but it was like, every little penny that came in just went right out the door and I see- like oh wow, there’s like a lot of money in the bank today and then tomorrow is like poop because I didn’t understand that when it comes to the way you allocate funds it doesn’t have to be on a monthly basis. And something that we teach our clients with David being our- our head honcho that the team- team lead at Simple CFO one of the things that we teach that is so mind-blowing is that hey, like when you’re a beginning real estate investor you don’t have to spend out on marketing every single month, you can wait until deals actually sell and then allocate funds specific to marketing and have your cycle be from a deal-by-deal basis instead of you know, I’m going to just commit to spending $4,000 a month in marketing or whatever it is and yeah so I really wish that I met David and I met and- I learned about Profit first about like four years ago cuz I be sitting really fat right now. Because really the bottom line- Profit First is a behavioral-based approach to managing money and in the book- I like how Mike calls the- the CPA accountant types spocks because they are like not really human like the way that they think that, like huh I’m going to go into Quickbooks and I am going to geek on QuickBooks when the most real estate investors are like I hate QuickBooks, QuickBooks suck, I hate this. I just want to go and just log into my account and say, hmm there’s money there, that means I can spend money on marketing or oh no, there’s not a lot of money there I got to figure out a sale, you know, like it’s just the way that human beings are wired, and when you allocate funds into separate accounts, it’s like budgeting without budgeting because I hate budgeting my personality is not somebody who gets all excited about where like oh yeah I only want to spend $500 a month on food and blah, blah, blah. I want to be able to be like all right here’s the food bucket so like you know, this percentage of money goes to groceries or this percentage of whatever goes to operating expenses or you know even setting up like an OPM account that- you know for people who might not know that’s other people’s money. But if you’re listening to this podcast you should know what that is, but having a fund set up where I can actually park deposits or park private money loans or whatever and say okay, I know that I can not touch this money until this particular time and having that in place is going to like a revolution- I’m just- I cannot speak more highly about this system because it actually works with the way my brain works. I think that we’re representative of a lot of Real Estate Investors who fly by night, just go after their dreams, kind of people that don’t have time to like read a balance sheet you know.

David: Yup, I- I agree with that totally and the other- the other aspect of it is it’s a system for managing your finances because if you want to be a real estate investor full time for the rest of your life. And this is what you want to do and you want to own a company, you have to have some sort of system around your finances that can’t be the neglected part that’s one of the most important parts but one of the most neglected parts that I see when working with people. They just don’t- they don’t understand it so they shy away from it. But having a framework like profit first puts an actual system around your finances and makes you more of a business owner and not just an investor, you now have the makings of actually being a business owner where one day you might be able to walk away from the business for a week, 2 weeks, a month. Where it’s still coming, you still have the money in the bank, you have people that have a system built around the finances now because they know the appropriate scene or the appropriate percentages to put into the accounts or whatnot. So you have an actual system around your finances so that’s where it gets exciting for me because you go from being a real estate investor like Jaren was saying deal-to-deal just going like crazy because your cash is still crazy and you don’t know where it is and you go from that to being like okay I know where it is I know where we are staying and we can make these decisions and I know on this next deal we need to allocate this- these funds to these different areas and you’re actually putting- you’re putting a system around it without having to dive into- your like Jaren was saying being a numbers geek and into QuickBooks.
No, you just need to know this is what I need per month, this is what I need to make sure that this account has this, so that way I can spend it on- on this area so that way it’s putting that system around it and that’s what we really want to help with this podcast and at SimpleCFOsolutions. It’s helping people realize that you can do it no matter your background no matter what you’ve done in the past you don’t have to have a numbers degree or anything you can be a real estate investor and you could be 20 years old and not have gone to college you know, and not completed college or done anything and you can use this system or you could use this system. If you’ve been in real estate for 20 years and you- you’re still live in deal-to-deal or paycheck to paycheck this is for anyone and everyone in between where if you want a better system for managing your finances or if you have no system for managing the finances in your real estate business. This is where it becomes- you’re going to be an actual business owner and that’s what the end result is I don’t want you just knowing where your money is. I want you to have less stress, I want you to be able to say I can take a vacation and I can do this or that without having to always be in my business just working and grinding it out we want you to be able to not just grind it out and be working in the business but taking those steps back and saying I’m a business owner now. I can manage the finances with this system that simple to use and I can make sure that when I’m gone and I can go on a vacation that I don’t have to be worried or I don’t have to be stressed about okay what’s going to happen is there going to be enough money when I come back? So that’s really our goal is to help you be able to know that there is a way to manage your finances and there are people out here that actually can help that and we want that- that’s the whole goal of this podcast. We want to make you not only help make you more profit that helps you keep more profit too. Because a lot of people can make the profit a lot of people can go out there and sell sell sell but a lot of people just don’t know how to keep that like Jaren was saying it’s a hole in your pocket that hole in your- your cash bucket where you’re pouring in a bunch of deals but then it’s all falling out that hole we want to help plug up that hole and make sure you have a system around those finances.

Jaren: Yeah, you know I was telling somebody the other day that when it comes to real estate investing there is kind of two sides to becoming a successful real estate investor. There’s the craftive knowing how to do your strategy like for me, for example I buy and sell vacant land so I have to know how to send out direct mail,I need to know how to do due diligence on land and all of that, that’s one piece of it but the other piece and the piece that not a lot of people actually talk about is how to run a business like how to read a profit and loss statement even knowing what that is and I feel like there’s two heads of the same coin and a lot of people are like really good at doing deals they got that down like that’s their thing but they don’t understand this piece and I’m really hoping that not only what the services we provide at SImpleCFO but through our content here on the podcast and in our Facebook group and in all that we can help you master that second head to that coin of- of financial management, of running a business and because it’s important if you don’t have a managed money you’re not telling your money what to do, it really will disappear and something that I love about profit first is that profit has to be baked in the equation on day one you know like the traditional counting formula is revenue minus (REVENUE-EXPENSES= PROFIT)expenses equals profit well profit first flips that on its head and it says (REVENUE-PROFIT=EXPENSES)revenue minus profit expenses and I love that so much because it really- it makes it a very clear picture like I’m in business to make money and my number one priority is to make money even if it’s like ten bucks it doesn’t matter. I’m going to make money because that’s the function of my business and then whatever is leftover from what I just declare as profit, I’m going to figure out how to run my business off of and if I have to like work the magic and go knock on doors instead of doing direct mail or whatever and you know I have to like figure out how to become creative and getting what I need to get done accomplished I’ll get creative and I’ll do it but I’m going to make profit my number one priority and I’m actually going to keep the money that I make. That shift was so mind-blowing for me because like I was born in California and I’ve spent half of my life in Georgia half my life in- in the San Francisco Bay area and I think like coming off the coat-tails of the tech industry where like nobody’s profitable and they don’t even care about profitability because their- because their objective is growth at all cost I thought like hey like the idea of the business is to grow, grow, grow, grow and then eventually you are going to be so big, you’re going to have all this money and you’re going to be super happy but when you’re first starting off it’s like you reinvest everything and you like- you’re crazy and you like cylinders on all- all blast you know, you’re going after it and it’s not the case. Unless your objective is to grow a business to the point where you can sell it one day, you really need to be baking profit into- into the equation from day one and that’s what we teach and it’s pretty amazing. So, David, I wanted to ask you how did you transition from Real Estate into SImpleCFO like what was that whole process like?

David: So, that whole process is- it was a- I’ve always wanted to have a business and I’d even started a side business before when I was working as a real estate you know, like, in the real estate companies that I had- where we build Podio systems for Real Estate Investors, and we built about 24 of them, different ones for different companies over about a year-and-a-half when I did that kind of on the side, and so I’d always wanted to start another business, and I think just after working with Real Estate Investors and seeing the actual like- having my own deals and whatnot. There was just a big gap where a lot of Real Estate investors like I said didn’t know their numbers and when they taught- when they have your CPA or accountant they’re not a real estate investor so they don’t know how to speak that language, they don’t know how to speak the language of real estate investor. So I was like there is has to be kind of an in-between person who can help people really know that what important about the numbers and how is really relevant to the rest of their business and that’s why I jumped into SImpleCFO and that’s why I started it. Because I want it- I knew that I knew how to speak real estate and I knew that I knew what numbers were important to a real estate investor to make sure that their business could keep operating and have those- be able to put the power in the business owner’s hands to be able to make those decisions to say we need to either start doing this or you know start marketing harder in this area or we need to cut this expenses or we need to do this better than the other thing in order to actually be profitable. So that’s why I started it because I saw there really wasn’t a lot of people out there that knew how to speak real estate investor and could also talk finances with the Real Estate Investors where I’ve always been- I’ve kind of been geared towards to- I wanted to help people with finances like in the past too. I’ve been a part of you know, like, helping people with their personal finances and what not to- so when- after being in this business for about eight-nine years I wanted to be like okay, well there is a huge gap here where people just don’t know how to- how to really track their finances or what’s important to them and they don’t have a system around it. So that’s why I started SimpleCFO and that’s why- that’s why simple CFO is a little bit different than most other companies. We don’t do tax preparation, we don’t do even bookkeeping, we refer out with some of our bookkeeping or whatnot, but we literally just help people know where you stand, we help people get- get their picture of where they stand and make sure that they know where they stand, and then we implemented profit first system. So that’s really what SimpleCFO is all about. I wanted to give just a little bit of a breakdown here of like why SimpleCFO? And why is this podcast just some like bullet points so that if you don’t listen- if you don’t listen to our stories and don’t listen to anything you’ve at least got something there that you can take from this podcast. So, why SimpleCFO? Because everyone in SimpleCFO has to have been- has to have done a real estate deal or worked a real estate company and so that way we can speak the language there’s not going to be that training curve of oh yeah, we need to learn this that or the other thing in real estate you know everyone in there has done a fair amount of deals and worked with big companies and knows real estate inside and out. So, we have worked with all types of deals and transactions, I personally have been apart of over rising 850 transactions or actual sales I should say, so like those are deals done not just bought and sold but like- I mean bought and sold not just bought and not just sold so that’s- I’ve seen over 850 deals done. So that’s where we have that unique advantage of being able to see the whole bunch of different types of real estate transactions being done, as we speak real estate investor that is so paramount that you can’t work in this business and with SimpleCFO or on our team without speaking real estate investor and really knowing that. And we’re currently helping investors manage their cash flow and keep making more profit so we do what we’re saying and not just- we don’t just speak it, we actually do it too. So we’re doing this for the actual investors right now and then we use the profit first principles so that is core to what we teach and that is that system that we’ve adopted that you see that- that works with Real Estate Investors also and I know that there’s some people who say well profit first might not work for real estate investing because of this that and I just say you’re dead wrong because they- it is totally relevant and it’s not like there- might be nuances to it and there might be for specific situations or whatnot and that’s where you work through it. It’s a management system to where you might go to a store and some stores are set up differently but they still have the same processes or whatnot. And it’s the same thing here you go- with profit first you might have a different bank account than someone else, or you might this, that or the other thing but at the end of the day, the principles are still going to help you because that’s what it’s really about. It’s about those principles and that’s what SimpleCFO really takes and makes sure that in your business you have that. So that’s why Simple CFO and why this podcast? Why would you even want to keep listening? Well, we’ve already given some of those reasons away. We want to help you become a better business owner, not just a better real estate investor but a better business owner. So that way you can have that less stress, more profit, be able to take vacations, be able to know where your cash is sitting, know what the cash flow in your- your company’s doing so that’s what this podcast is about. We’re going to teach the profit first principles on his podcast. We’re going to help you figure out the finance side of your business in a simple way. We’re going to make sure that you can use your bank account as a cash flow tool and not just like- not just that- that one big pot of money where there’s a lot of money and you’re feeling good, and if there’s not a lot of money then you’re going in a panic mode. so we’re going to help you with that too. We want to help those investors and business owners that have gone to the struggles that you’re going through and actually interview them. We’re going to have- sometimes when it’s not just us talking, me and Jaren and then sometimes Tim the other person that’s going to be co-hosting. It’s not just- always going to be us sometimes, we’re going to interview Real Estate Investors, and if you want to be considered for that, we’re going to have an actual place where you can sign up to see if- if you have a good story about your finances in your real estate company. So that’s where we’re going to be interviewing some people, and then we’re always going to strive to have one main takeaway, and we’re going to get to the point quickly so like this podcast- this specific episode is all about why this podcast and why simple CFO solution so we wanted to at least to built everything around this episode of around that. So every single episode that we do that we talk and that we’re giving information we want one central theme on that podcast episode, and we want to make sure that that helps you so that way you could go back through and really get those nuggets that you need and that it’s very practical to you. So, Jaren, I wanted to give that just as kind of just- as we’re closing out here why this podcast. Why SimpleCFOSolutions and kind of just tell about that. Is there anything else that you want to add there before we’re wrapping up here?

Jaren: Yeah, I just wanted to clarify why that was such a big deal to you. I thought it was- so I thought it’s pure gold, man. When we’re brainstorming the podcast- you are really- you are a fan of like short and to-the-point because you’re busy, and I feel like that resonates with so many Real Estate Investors like they got to go so much fluff in order to extract the gold out of a lot of the content stuff that’s out there. And we want to be a kind of gold at front heavy so like you listen to like 10-15 minutes of our show and you can get that one nugget that you need for the day, and then you can go, take care of your tenants or go take care of what you’ve got to take care of, contractors or what have you. So, I just really appreciate your heart behind that and I just wanted to like clarify why that’s such a big deal is that you want this thing to be efficient and you want it to be high-value, and so yeah we’re very open to feedback. We’re really excited to see what the future holds.

David: Yeah, I totally agree, and that was my whole reason behind it. I know as a real estate investor, you have things to do, high-level things you have things to work on your business and in your business. And I want to make sure that you, as a business owner, can take snippets of these podcasts or even though the shows main central theme on the podcast episode title and just be like, oh, that’s where I need help. I know that if I listen to this if I just listen for 10-15 minutes, 20 minutes. I’m going to get something out of that I can use or that I can replay and use over and over again that’s what we really want to strive for like, Jaren said give us feedback we want your feedback we want you to be able to tell us where- if you there something that you want us to go over and that’s why we set up we have- we are setting up That site- we’re going to have where you can fill out an application to be on the- the actual podcast so that way if you have a story or something that you have on the financial side of your business or that you could help other investors you can actually apply there. We’re going to have a feedback of page on there too. So that way you can at least give us some feedback on the actual podcast, we’re going to set up a couple of pages like that too. So we want to hear from you so that’s So that’s where we’re going to be housing those- those different applications and forms, so we want to make sure you give us feedback and because like I said and like Jaren so we want to get that one idea crossed and make sure that there’s the actual value to each and every episode.

Jaren: Love it, so is there anything else we need to touch base on regarding this show, man? I think we’ve pretty much hammered it. We were like paw- paw-paw. it was great!

David: Right? So I think- I think now the next theme is we’re going to be recording more podcast episodes for you, and we want to make sure you as a business owner really know where you stand financially. We really appreciate you listening to this podcast. I have just, so you know too if you want just a very short book, I wrote a very short book called Westchester more profit for the serious real estate investor, which it’s on my site if you go to the recession prove page. There is at the top- there’s a building recession-proof businesses say that recession proofing on there if you click that link you can get the book that I wrote and it’s a very short book. And that’s just another thing that I can provide value for you just a little bit of my thoughts on the financial side. We’re actually going to be writing more books too, so that way we can get the information out there. We want to help as many investors as we can on the financial side of their business because we want to make sure you can keep going. So we really appreciate you being on this podcast. We really appreciate you listening to us, and we hope that this podcast was a help to you and Jaren; thanks for co-hosting today, and we look forward to the next podcast episode.

Jaren: Yup, and so guys, every episode is going to be posted on Tuesday morning. I believe six a.m.eastern standard times, so iTunes, any major podcast outlet, you’re going to be able to find us. Tuesday’s new episodes every morning so.

David: Well, thank you so much, Jaren; we appreciate you as a co-host, and we appreciate you as our listeners, and we look forward to having you on the next episode.