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From Evicted & Poor to MILLIONS in Small Biz Investing

This week, how one person overcame the proverbial 'rock bottom' to make millions in the boring.

Do you really need money to make money? Nah. You just need to know how the game is played. This newsletter covers how one guy used seller financing to pay for some of his deals. With methods like this you can actually build streams of income using OPM, and pay the seller as you stack cash. Our Cashflow members are using tactics like this to collectively add over $3m+ in new income. Let’s go to school...

Today in 10 minutes or less, you’ll get:

• 1 framework on how to make smart investing decisions without getting lucky
• Advice from a guy who got evicted from his childhood home at age 6…
• Who never spent a second in a college classroom…
• And went on to flip houses and do deals with the dude who evicted him…
• And later is making MILLIONS from carwashes, laundromats, vending machines, and other boring businesses

A CONTRARIAN FRAME

How to Make Smart Investment Decisions Without Getting Lucky

If you’ve ever felt like you don’t know what to do with your money, welcome to the club. More important than any deal we do is the ability to make better decisions. Decisions compound. The way you create compounding? By having the right tools. The things that crusty old finance professor should have taught us instead of ya know.. the Pythagorean Theorem…

One formula that’s actually useful? Accretive acquisition models.

Alright, the word is big but the outcome is even bigger. Usually, accretive acquisition means that you buy a company to boost the value of your company publicly. Think Fortune 500 CEO’s trying to make themselves look like geniuses on their quarterly board calls. But for us peasants what it really means is you buy a company and you layer it into your company and the value of the two together increases your profitability and value. The whole is greater than the sum of its parts.

If you want to feel sexy… just tell people you’re looking for accretive acquisitions. The Patagonia vests and Gucci loafers will just slide right off any finance nerds in the room. Not that anyone would want that, God help us.

You are looking for one thing, smart ways to increase your profits by buying businesses. And if you think this is too hard, I got a story for you about a guy who grew up dirt poor in the "middle of nowhere" Ohio. His dad was a truck driver, his mom sold Avon and he became a small, sweaty business tycoon through accretive M&A. Let’s do this…

CONTRARIAN CASHFLOW

Here’s the story…

At age 6, his family was evicted from their childhood home.

At 18, his dad dies of a heart attack, leaving him to be the man of the house (and the breadwinner). What’s a boy to do?

For Brandon of Investment Joy—college wasn’t an answer. He needed cashflow.

“I’ll go into real estate because everyone’s rich in real estate.” - 18-year-old Brandon

Brandon didn’t have money, but he had that priceless thing called relentless work ethic and complete disregard for Netflix and chilling.

He used other people’s money and his sweat to buy his first duplex. A year later he had nearly a dozen units. That he doubled (and doubled…and doubled again). Eventually, he had 141 units in his portfolio.

After a while, Brandon’s brain went into overdrive on how the whole real estate investing thing worked. Then he realized, wait for a second, “If I can buy real estate that cashflows me some, why couldn’t I buy businesses that cashflow me more?”

What would it look like if he branched out into more commercial real estate? Like, say…a car wash?

That’s when things got a little sudsy, to say the least. Brandon realized math is math, so he went carwash scouting and this was his first deal:

• Total deal size = $675k, but 94% was seller financed: Brandon put in $40k for his own $$ for the down payment and the other $635k was negotiated as seller financing with 3% interest.
• No private investors: he only had two main ways of sourcing funding (himself and the OG seller), making it a mostly hassle-free due diligence process.
• 2-3Xing his revenue every year and +10% profit margin: by making cost-cutting measures like using 35% less water, adding automatic services, vending machines, and smart signage to increase traffic. Brandon and his operator did some research on their car wash machines—specifically the manufacturer’s notes around water pressure and output—and discovered that they could adjust the machine settings to use less water. A simple flick of a switch resulted in a 10% increase in profit margin.

Then, he got into laundromats.

One of his first laundromat deals was financed at 17% down and a purchase price of $85k.

Before acquiring his first laundromat, their location was only covering about $1k/month in revenue. After renovations and optimizing their expenses, they bring in closer to $7k every month, and the net is around $3.5k-$4k.

I’ve seen laundromats before and own a few of them, but Brandon’s done something kind of interesting…

He looks at the real estate, not just the business on the ground floor.

One of his laundromats had two apartment buildings directly above the laundromat business. It’s a way to add a couple of thousand in revenue, without needing an operator to actually run the dang thing.

One of Brandon’s laundromats after one of the largest cash collection days they’ve ever done at a location. Image source: Instagram​

Next stop, vending machines.

After he figured out real estate…then car washes…then laundromats…Brandon did something kind of genius.

He didn’t try to learn an all-new industry, he just found something that he could add to his other businesses on top of what he was already doing. This is called revenue line expansion. Essentially how can he take his current business and operations and diversify their income streams?

Vending machines only cost about $55k to get into (cheaper than car washes) and you’re already leveraging your existing customer base.

Plus, if you’ve got an operator who is already on-site at your other place of business, you can add this on without a lot of other logistics.

If you only get one thing out of this week’s article, I want you to see that investing COMPOUNDS your knowledge and skills over time (not just your money).

The deals you did five years ago will be what keeps you in the game today.

My favorite part, Brandon was evicted at age 6 and is now flipping houses with the guy who kicked him out.

Turns out that the same guy who evicted him had been a long-lost Facebook friend and also was following Brandon’s work… for YEARS.

So one day, Brandon gets a Facebook notification. It was from the evictor, giving Brandon an open invite to ask for whatever amount he needed in funding if (and when) he’d need it for his next deal.

If you’re reading this and you’re new to investing, or you’ve got some debt, or you’re just generally unsure of this whole M&A world, please know this, you can truly start from anywhere—even rock bottom—once you figure out the game.

P.S. here are a few pointers on what I’d focus on if I were new to investing or trying to acquire a new vertical I wasn’t familiar with:

1. Create a debt management plan: I love seller financing on an (almost) spiritual level, but the biggest setback is debt. It just comes with the territory. As soon as you can, create a debt management plan—including the minimum amount of revenue you need to secure each month. Then, try to find small operational improvements versus doing any major renovations or process overhauls. Perfect example? How Brandon saved 35% on water costs just by doing some research and tweaking a setting on a machine.
2. Know what breaks down in your biz (and why), and how much it’ll cost to fix: This needs to also be part of the due diligence process. It’s one thing to own a car wash, but if your machine breaks, do you know how much it'll cost to fix it? Know your options so you’re not caught by surprise. The two things that kill businesses are not enough cashflow and unexpected expenses.
3. You just need to be above average, nothing crazy. Sometimes it’s ok to be average. No one is looking for the Ritz Carlton of laundromats as far as I know:
   1. For a car wash…it’s decent water that doesn’t leave spots, plenty of soap, and bays that are clean-ish
   2. For a laundromat…it’s well-lit and in a safe area, slightly above average operations, and some good marketing

TLDR

There are a million and one ways for you to make your millions. Brandon even owns the local newspaper now. The question becomes, will you let the eviction haunt you? Or will you come back and make that MFer fund your next deal?

I kind of prefer the second option.

P.S. I’m heading up to Ohio to pay Brandon a visit and ask him your questions for a future YouTube video. What should I ask him?

Hit reply and let me know so I can add your Q to the list.

CONTRARIAN EXTRAS

Contrarian Finds - F*** mainstream media, read this instead:

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How John bought a $5M per year business for $0 (ZERO experience)

He bought a garage business for $0 upfront that makes $5,000,000 a year! If you’re looking to buy or start your own business, Jon’s advice is GOLD.

This week’s YouTube is brought to you by our friends over at Bench, where you can save up to 30% on balanced bookkeeping.

Put on those deal boots, and stack that cash.

Codie & Contrarian Crew

Written by Kendall Cherry, Codie Sanchez. Edited by the Contrarian team.

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​Disclaimer – This is the “Be an adult” section. Everything mentioned above isn’t advice, just a recount of what I did. That said: This article is presented for informational purposes only. The opinions stated here are not intended to recommend any investment or provide tax advice. Neither are they an offer to sell or the solicitation of an offer to purchase an interest in any current or future investment vehicle managed or sponsored by Codie Ventures, LLC or its affiliates. All material presented in this newsletter is not to be regarded as investment advice, but for general informational purposes only. Day trading and investing do involve risk, so caution must always be utilized. We cannot guarantee profits or freedom from loss. You assume the entire cost and risk. You are solely responsible for making your own investment decisions. We recommend consulting with a registered investment advisor, broker-dealer, and/or financial advisor. If you choose to invest with or without seeking advice from such an advisor or entity, then any consequences resulting from your investments are your sole responsibility. By reading/sharing this newsletter or consuming our content on our other channels, you are indicating your consent and agreement to our disclaimer.

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