Episode 113: From Wall Street Misery to Finding Purpose in Real Estate Daniil Kleyman
The Profit First REI Podcast
September 15, 2022
David Richter
Summary:
In this conversation with Daniil Kleyman, you’ll get a chance to learn how to master REI from a real estate developer expert. Daniil has mastered real estate from the ground up. He’s an owner/operator of a development company and established a management software that’s currently helping thousands of investors.
Today we hear from Daniil’s insights on how he’s been able to grow organically in this field. He’ll be sending us tips on what to do, what to avoid, and how to supersize our efforts and make a profit from them.
Key Takeaways:
[1:43] Daniil’s background in real estate
[6:11] How did he grow as a real estate investor?
[9:21] How did the “rehab valuator” help him in scaling up his process?
[13:24] What early lessons did he learn about money, and how does it compare with what he’s learned about money today?
[18:07] What are the biggest mistakes or hurdles that investors experience as they start their career in real estate?
[18:53] Become good at one market and strategy. Focus is incredibly important.
Quotes:
5:22 “I find real estate incredibly rewarding outside of the money that you make.”
13:49 “A lot of us learn how to manage money but don’t know what is going on.”
18:20 “Find one thing that you’re good at. Find one thing that you focus on. And find one thing that you become an expert on. “
Links:
Rehab Valuator Website-https://rehabvaluator.com/
Profit First Real Estate Investors FB Group-https://m.facebook.com/groups/ProfitFirstREI/
Simple CFO-https://simplecfo.com/
Tired of living deal to deal?
If you are a real estate investor or business owner who is tired of living deal to deal, and want to double your profits, head over here to book your no-obligation discovery call with me. Either myself or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David
Transcript:
Daniil Kleyman:
Again, my focus became building a cash flowing income producing real estate portfolio. That gives me predictable income every single month.
Intro:
Welcome to the Profit First REI podcast, where real estate investors, master financial management, eradicate entrepreneurial poverty, and learn to be profitable from day one. Now for your host David Richter.
David Richter:
Hey everyone. It’s David Richter again with a Profit First REI podcast here with another great guest Daniil Kleyman. And you might know him. I mean, I feel like I see his stuff everywhere. He’s got the rehab evaluator, he’s got inner circle mastermind. He’s got like a bunch of different things. He’s helped a lot of people in the real estate investing space. He’s got an incredible course that that has helped a lot of people as well too. And that they’ve had a huge, huge following there, and I know that he’s helping a ton. So you might already know him from that, but really excited to have him on here today. So Daniel, thanks for being on the Profit First. Our I podcast.
Daniil Kleyman:
Yeah. Happy, happy to be here, David. Thank you.
David Richter:
Yeah. So let’s just start with, if people don’t know you or don’t have that background, like what got you started in real estate? I know you’re doing some big deals now. Like you’re in like, you know, multi, multi, tens of millions of dollars of deals, you know, like big buildings and whatnot too. So I don’t have to hear your story. Where’d you get started and you know, how did you get started and where you ended up today?
Daniil Kleyman:
Sure. Well, I, you know, long story short, you know, my, my background is in, in finance, I had I had a corporate job. I, I worked on wall street as, as, as a bond trader. And then I was structuring deals for, for a couple of years for a few shops, bear stern, JP Morgan, all, all before the recession. So on, on, on paper and when my parents got to talk to their friends about me it looked really good. You know, my 20 25, 26 year old kid, I was a vice president at bear Stearns. There are a lot of vice presidents at bear Stearns. There was like thousands of vice presidents. So it’s not as impressive as it sounds, but on paper, it, it was, you know, I had a very good job. I made, made good money and, and I had a job that a lot of people would’ve given their, their left arm, probably two have.
Daniil Kleyman:
And I was miserable the entire time. You know, we, what we did was we, we packaged securities, right? So we, we mortgages were originated. We would package those mortgages up into mortgage backed securities. Then we, we package them again into collateralized data obligations. A lot of the stuff that actually end up, you know blow blowing up in 2008. Unfortunately I learned a lot of lessons. The point is I, I, I had a high paying prestigious job and I was miserable because it felt like we were not creating anything. We were just shuffling paper around. It, it, it, every day I had the skill and that I wasn’t building anything, I wasn’t helping anybody. We were just taking things, repackaging them, selling them, taking your profit, making your shareholders wealthy. And that’s it. And there, you know, I’ve always assumed there’s gotta be more to life and, and there’s gotta be more to, to what I can contribute to the world than just being a cog in a wheel that literally does. Like, if you really think about it, nothing.
David Richter:
Hmm. Yeah.
Daniil Kleyman:
So recession happened luckily I finally got laid off and instead of looking for another job, which I knew I didn’t want, I didn’t wanna stay on wall street. I, I moved back to my hometown and they started buying a house at the time I wanted to be, I, I had an interest in real estate, but I, I moved back and they bought a shell of a house. It’s actually three bucks from where my is now, you know? And, and I spent six months rehabbing this house with, with my partner at the time, doing almost all the work that we could ourselves short of like doing HVAC and electrical. We did everything. And I spent six months like 16 hours a day swinging the hammer. So I went from like wearing a three piece suit making quarter of a million dollars a year to being like a nobody, and just swinging a hammer for 16 hours a day, rehabbing this shell of a house for six months.
Daniil Kleyman:
And I never felt better. I, it, it, that was that end of itself was more rewarding than all the multi-billion dollar transactions that I had the opportunity to work on in New York. And, you know, look, it was invaluable experience, but rehabbing that one house, I, I felt more accomplished and I could, you could, you know, why, why are we in real estate? You can touch it. You can feel it, you can see the result and the impact of your work. You can, you know, you can look at how, what you start off with and then look at the finished product. And then you can see people move into this house. And you’ve now changed the quality of life for, for whoever lives there for the next, you know, if you did a good job for the next, you know, 50, 70, or 80 years. And I was hooked since after that, I, I was hooked that it’s, I find real estate to be incredibly rewarding outside of just the money that you make from it. It’s, it’s, it’s much more tangible. So that’s what I should have been doing from the start.
David Richter:
Yeah, no, I, I love that. And I love what you said too, that it’s tangible, that it’s there, that it’s something that we could see. And so, you know, and I think that’s what we all at the end of the day, whether that’s a, whether that’s a building that we can see physically or a life, because I know that now on the education side, like a lot of people can probably point to you or point to a lot of other good people that have like pointed them to say, they’ve helped build where I am, you know, like, what am I as a human being, you know? And that’s a, that’s ultimately where we wanna get to. And can you speak to like how you went from, okay, from there, then to what you’re doing now and how you’re helping also with the education and how you grew into like the bigger, the bigger type deals too.
Daniil Kleyman:
Sure. It, you know, it, it was organic. I came from the, the land of big numbers, right. And I wanted to learn the business and I wanted to learn it organically and, and do it one deal at a time until I was ready to, to move into bigger stuff. So, you know, I, I spent probably the first five, six years doing historic gut renovations of single family houses than we did duplexes. We did a couple of quads, did a couple of commercial projects where I put a restaurant into a building. And then from there I started picking up some land. And at that time competition for rehab projects was intensifying. It was harder and harder to find deals at, at, at good prices, especially what we used to buy was far below replacement value, right? I mean, when we started off doing renovations in 2009, all the way through like 2014, you could still buy physical buildings and houses below what it would cost to build you the same structure ground up that math changed around 20 14, 20 15, because people were bidding things up.
Daniil Kleyman:
And at that time I started buying small lots, single family, lots. And my focus has always been, I’m not really a flipper. We, we have a home building division where we build houses to sell to other occupants. But my primary focus always was on, on building a, a rental portfolio building a recurring income stream. So my focus was always on, on growing, growing the units under management. So, you know, I started picking up lots and building ground up duplexes on them at the time when not many people were doing new construction yet. And there was a lot less competition for land than, than there certainly is now. So, you know, I started off building duplexes. Duplexes are easy to build. You can build them by residential building code. You end up having an attractive product. Well, laid out well built, easy to lease, easy to manage.
Daniil Kleyman:
And from there, I organically as I learn new construction because there’s a learning curve there, I, I started taking on bigger and bigger projects to the four unit, six unit to the mixed use building. Now, now we’re now we’re finishing a, like a 25 unit building. We have 130 unit building in permitting right now, some other projects that are kind of in between that, that range, 1630, so kind of organic growth. I didn’t wanna go out there immediately and raise a bunch of money before I knew what I was doing. And, and I see a lot of people doing that, you know, scaling scale to whether you’re syndicating apartments or whether you’re doing ground up. You can go out, you can raise a ton of capital and go and learn on other people’s dime. I primarily invest with my own money. I don’t actually raise capital at all. I have some partners on, on select deals, but I, I wanted to learn the business in inside and out and scale organically to where we can. Now, now we’re doing a hundred to a hundred unit projects in the pipeline.
David Richter:
That’s awesome. And I love where you scale two and you’ve gotta, and I, I wanna promote it on here. The rehab evaluator, has that been a part of the process of scaling up and helping you cuz like, was that organic where you were like, I need a tool. So I might as well create one and then it was like, Hey, this is good for other people too. And you know, I, I just wondered if, how that was a part of your journey as well. And if you wanna just speak on what that is a little bit. Yeah.
Daniil Kleyman:
So you know, that, that was a tool that I started off basically building for myself. My, my expertise in my past life was in building financial models. When I started investing in real estate, I, I started putting together at the time and there were Excel spreadsheets and I built valuation models to literally evaluate deals, to do deal analysis. And from there, you know, I, I made available to <inaudible>. They said, you should sell it. I say, oh, I don’t know anything about running an internet business, but from there, it, it, it grew into a cloud based software platform that does a lot more than deal analysis. And we, we, at this point had, I mean, hundreds of thousands of free users sign up, there’s a free version. We’ve, we’ve served 10 tens of thousands of paid users, but it’s morphed than through a, you know, deal research deal analysis, deal, marketing fundraising, and project management platform.
Daniil Kleyman:
So I’m using it. You know, we have wholesalers that use the platform to pull up comparable sales, through research on deals, market their deals to their buyers, but I’m using it. And we have clients using it on ground up development projects because it gives you full deal analysis on purchase of land, short term construction, loan, takeout, into permanent financing. When you’ve got the property leased out, you can create funding presentations for your banks, put together construction budgets. I mean, there’s a lot, it’s evolved like any good software should, and it continues to evolve based on really like my, my experience. I mean, there is a lot of things that we don’t do because that’s not the sandbox that I play in. So we’re not a CRM, we’re not a lead sourcing platform, right. There’s lots of other people that do data and do seller leads.
Daniil Kleyman:
This software has kind of revolved around how my business evolves, but it’s been a very rewarding, that’s been a real, really rewarding business because we’ve literally, I mean, we’ve touched I mean, hundreds of thousands of investors at this point, then we have educational products that we’ve put out and we have a monthly inner circle mentoring group. That’s very affordable because it’s not really there to make money. It’s there to, to help, to help out people. And so we’ve been able to impact. And again, it goes back to, to, to the, the whole feeling that I had when I was making a bunch of money and had a prestigious job. And I literally felt like I was doing nothing. I was not helping anybody. I was not building anything. I was not creating anything. Now I, I get to build real things. I get to impact and help real people. I get to, you know, we have, we have full-time employees in both of the businesses and they get to grow those people as well. And it’s incredibly rewarding beyond, you know, beyond the money. There’s, there’s a lot more tangible rewards to what I’m lucky enough to do on a daily basis now than whatever, whatever money comes out of it, which you know, that doesn’t suck either.
David Richter:
Right? Yeah, no kidding. But that’s, that’s awesome. I love that because now, like you said, it’s not, it’s not just going and getting that big paycheck and not feeling that impact it is that impact. And being able to help people and from big deals that you’re doing now, you know, like all those units that you’re, you know, either investing in or whatnot, or, you know, they have lives that you’ve touched with the systems and the softwares and, you know, the different different education things that you do. So I absolutely love that. So that was kind of like the internal process too, of how you went from like you wanting to make that impact. And then seeing it come to fruition on this show, we like to talk about money too, you know, and just like the foundational, like how we think about it a little bit. And what, so during that journey too, did you, what early lessons did you learn about money? And then how does that compare to where you are today with how you think about money?
Daniil Kleyman:
So I learned a very important lesson when I was still on wall street. Which is the people that you think know about money. The people that you often, a lot of us allow to manage money. Most of ’em don’t know what the hell is going on. I mean, again, it’s, it’s it, I I’ll, I’ll make this a short story. We structured deals on wall street that we sold off to insurance funds, banks, pension funds, and investment managers bought pieces of those deals. And everything was fine until things stopped paying. When things stopped paying, we started on the trading desk, getting calls from a lot of those investment managers saying, where’s my money. The bonds that I own are no longer paying and they did not have a fi. And I was, I was a relatively junior guy, but they, they would be transferred to me because I under, I understood the structure of how these bond deals were put together.
Daniil Kleyman:
And I would find myself speaking to presidents of banks and insurance company, investment managers, people that were responsible for managing hundreds of millions of dollars in people’s retirement savings, investment funds. And they had absolutely no clue how the things that they, they invested tens of millions of dollars into, you know, these bonds. This is not like a hundred dollars bond. They bought pieces of these deals. There were tens of millions of dollars. They, a lot of ’em did not understand how these deals were structured at all, or what impacted whether they get paid or not. You know, that that was incredibly eye opening to me because oftentimes we trust our retirement. You know, we’ve become now a country of you know, defined contribution plans and putting our money into 401ks and, and, and trusting, you know, investment managers. If we have, if we’re lucky enough to have funds to invest, we often trust investment managers to, to manage our money. And, you know, man, I, I, I trust very few people. So, so that was, that was an eye opening lesson for me, you know, that I, I, I need to become responsible for my own wealth planning. I need to become responsible for my own retirement. I need to become responsible for my own, you know, financial wellbeing because blindly trusting other people, like what’s the same, the, the, the, the wizard behind the curtain. Right,
David Richter:
Right.
Daniil Kleyman:
Yeah. I forget what the saying is. Right. But the wizard behind the curtain is often like a giant disappointment, right?
David Richter:
Yeah.
Daniil Kleyman:
That that’s not the same, but you understand what, what I’m saying. Right. Like the, the people that we hold as authorities on a lot of subjects that put themselves out there to be authorities and a lot of subjects, you know, they, they they’re, they’re, they’re fake. So how that relates to, to real estate, you know, I, I, again, my focus became building a cash flowing income producing real estate portfolio. That gives me predictable income every single month. I, I, I don’t need a job. I don’t need to go out and do more deals. I don’t need to go out to do more flips. I don’t need to wait for my retirement and hope that my retirement funds are, are enough to start taking money out so I can retire comfortably. I, I, you know, my financial wellbeing is insured by the physical hard assets that I’m building and adding onto every single month. And I don’t know of another way to ensure that my wealth grows a better way other than real estate, you know, I just don’t. So,
David Richter:
Yeah, I totally totally understand that. And that’s awesome. I, I love the journey there that you took, you know, getting to that point. And then, yeah, I think there are, there’s just so many people that we trust that, you know, like we need to do our due diligence. I think it’s the same in a lot of arenas, you know, it’s, we’re very much bite size info people like, oh, I see this headline. And so that’s what I’m going to think instead of like us digging in deep and like really getting into what’s going on behind the scenes or whatnot too. And it’s the same thing with the people that we trust with our education. So you need to be, if you’re listening right now, you need to be listening to people like Daniel. Who’ve done this in the past, who have been there, done that for a long time and doing that still in helping people get there. So, absolutely love that you work with a lot of people, you work with a lot of investors. What would you say to an investor? You know, like what is one of the biggest mistakes or hurdles that they have when, as they’re starting, they’re investing career and, you know, getting onto, you know, getting into real estate investing,
Daniil Kleyman:
You know, I, I would say find one thing, find one thing that you’re good at find one thing to focus on, find, you know, find, find one thing to become an expert on. I see. And, and this is advice. Say, I find myself giving to people often is I see a lot of newer people jump into real estate and they’re saying, you know, this is awesome. I’m excited. You know, I’m gonna, I’m gonna do wholesale. I’m gonna do, I’m gonna do some fix and flips. I’m gonna do some rentals. I’m gonna do, you know, I’m gonna in, in the next six months, I’m gonna, no, that’s, that’s not gonna happen. Become good at one market. One strategy become known for one thing, expand from there. So focus is incredibly important. Focus, finding good mentors. You know, I, when I started, I did not understand the power of mentors.
Daniil Kleyman:
I, and I’ve always been kind of hardheaded and, and, and will never admit to it, but a little arrogant. And, and I, when I started, I was like, I don’t need mentors. I don’t, you know, I can figure this out on my own. And, and I would’ve gotten to where I am much faster. Had I surrounded myself with good smart people, because there, there are always people out there smarter than you who have been where you are a few years ago, that can guide you. So, you know, focus, surround yourself with, with good mentors, people that truly care about your wellbeing, right. People that have people that walk the walk, there’s a lot of mentors out there. Again, you’ve gotta vet people carefully, you know, the, the interwebs, now everybody’s an influencer. Everybody’s, everybody’s a coach.
David Richter:
Yeah.
Daniil Kleyman:
You know, you, you, you need to be careful and surround yourself with people that are actually doing the business that, that walk the walk, they don’t just talk the talk because there are a lot of people out there that they’re pretty good at talking the talk, you know, but are they doing right now? What you’re trying to do, do they have experience in, in what you want to get better at? So, you know, vet carefully who you surround yourself with, but you know, the, the peer group, whether it’s your peer group or, or, or mentors, they’re incredibly important.
David Richter:
Yeah. No, I love that. That’s great advice. So if you’re listening to this, no matter where you are, I don’t care if you’re starting out or if you’re down the road focus. And I think that’s, you know, the authenticity, you know, like it’s around people who are authentic and, you know, know that’s where some of the groups, we’re a part of, that’s where you can see a lot of those authentic people in there. The people that are really doing things that are really moving and shaking in, you get to really, if you get around some of these groups, you know, you know, there’s people that are up there that are doing it, that you want to model and emulate. And then there’s some, you know, that way you’re, you can kind of protect yourself to make sure that you’re not around the people that aren’t doing that. So get a good tribe of tribe of mentors around you get that one mentor. That’s gonna get you and to where you want to be. And then that focus.
Daniil Kleyman:
Yeah. And, and masterminds, you know, I’m a part of three or four masterminds. Now, some cost money, some are free, but that was one thing that I got when I got into the internet world. When I tried to figure out how to build software company, how to build an education business, you know, I, I, I joined the mastermind of, of people that were running similar businesses that was just unbelievably impactful, unbelievably impactful, because there’s so much that we don’t know. And being able to sit in a room with a couple of people that are on the same path and trajectory as you, but have completely different perspectives on, on tackling certain issues in your business. And, and then you can help each other. You can join venture. You can, you know, I mean, masterminds are, are unbelievably powerful. Yeah. And I, I have masterminds now that I pay a lot of money for, and it’s worth every penny, every
David Richter:
Penny. Yeah. I, a hundred percent agree with that. I think that is, that is so important that you get around the right people and those masterminds, a lot of ’em, you know, there’s good people make sure you vet those too, that you’re going to, and once you know that this is a good group, I mean, that’s where you can get around a lot of good people that can help you point you in the right direction. And then also just making sure that, you know, following people like Daniel, like the people that are been in this for a while, doing what you want to do and, and are where you want to be, and really, really seeing what took them there and then getting around them too, you know, you providing value back to them, which is always my last question here, which you provided a ton of value here today. Daniel and I always like asking, you know, since you provided value, how can they provide value back to you? And so is there connections or a rehab evaluator, like whatever you want to, you know, how you would wanna connect with people or the course, or, you know, whatever to mention that.
Daniil Kleyman:
Yeah, no, I, I usually say, if anybody wants to connect with me, go sign up for the free version of Rehab Valuator, it’s a tremendous resource. And you start getting emails directly from me. If you reply to those emails, they usually read them. And if it’s not total nonsense, I always reply. So 95% of the time I’ll, I’ll reply to, to the incoming emails. So if you go to rehabvaluator.com, you can sign up for, for a free count of the software. It lets you do a lot. There are some paid features that keep the lights on, which is always nice, but the free version is, is very powerful. And so if you are wholesaling real estate, if you’re doing fixed and flips, if you’re buying rentals, if you’re doing ground of development, go, go check out the software. And it’s also a good way to kind of enter our tribe, get on our email list, see what, what we have going on, join some of our Facebook groups and and go from there.
David Richter:
Yeah. Then I can’t recommend Daniel enough. So make sure you are following him on the social media platforms. Make sure you do sign up for rehab evaluator. And so that way you can get into that world and he’s doing a lot of great things and helps a lot of people. So can’t endorse him enough. So Daniel, thank you so much being on today. Thank you for sharing the wisdom. Remember to focus. If you’re listening, get that one thing, get good at it. Get that tribe of mentors around you, Daniel. Thanks again for being on
Daniil Kleyman:
My pleasure. Thank you for having me.
David Richter:
Thank you so much for listening to today’s show. If you found this episode valuable, could you do me a quick favor? Could you give us an honest rating within iTunes and be honest, you could say whether you liked it or not. And obviously with iTunes, the more reviews and ratings we have, the better it is for other people that are searching for Profit First and a podcast. So we’d love to be ranked on there and that’s thanks to your help. So we would really appreciate that if you would like to go give us a rating. Also, if you’re looking to connect with us further, I would highly recommend checking out our Facebook group Profit First for real estate investors. And that’s literally what it’s called. So you can type in Profit First for real estate investors, and you’ll be able to find <laugh>, you’ll be able to find our Facebook group right there.
David Richter:
So come join active real estate investors who are supporting each other and growing their businesses and profits together. That’s what that group is all about. The link should be in the description below. And if you’re interested in working with us and implementing Profit First in your real estate business, we offer coaching and guidance. So if you wanna work with someone who’s actually Profit First certified and who works right now, currently with real estate businesses, you can actually go start your application process by going to simpleCFO.com/apply, or just go right to simpleCFO.com. And there’s an applied button right on there. If you wanna actually start your Profit First journey with someone who can actually walk you through those step by step and help, you know, and grow your cash flow. Thanks again for joining us for another episode of the Profit First REI podcast. See you next episode.
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