Title: “Unveiling the Path to Profitable Real Estate Entrepreneurship: From Shiny Objects to Financial Focus”
Episode: 192
What are the differences between an entrepreneur and an investor?
Tony Castronovo clarified the differences between the two, and he has more to share in this another CFO Series of Profit First for REI podcast!
Tony tells his stories on how he went from owning a single family to a multi-family, his journey in real estate investing, and the ups and downs of the entrepreneurial world.
Listen and enjoy! You might see where you are right now and the areas you are struggling in real estate investing!
Key Takeaways:
[00:56] Introducing Tony Castronovo
[02:58] Journey of becoming a CFO
[07:44] Difference between investor and entrepreneur
[13:58] How Simple CFO helps in financial clarity
[15:40] Tony’s Profit First Journey
[19:20] Best lesson/s he learned for decades
[21:07] Good first step in the real estate investing journey
Quotes:
[06:47] “Going full-time just gave me a bit of a supercharged boost to really go after it.”
[07:44] “An investor is someone looking long-term to build wealth, and an entrepreneur is very much into a day-to-day income to have a business that will eventually produce wealth.”
[13:41] “If you are not wise about how you buy and operate those deals, it is just chasing your tail.”
Connect with Tony:
Website: 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:
Speaker 1:
Revenue is obviously the driver in every business. So gotta look at really where to spend the time. And I think a lot of real estate entrepreneurs have that shiny object syndrome and just chase everything that looks like a deal. And you know, swinging hammers at nails everywhere and hope to hit one. And you really gotta focus on what you’re good at, what you’re passionate about, and what is most profitable.
Speaker 2:
If you’re a real estate investor who’s sick and tired of living deal to deal, then welcome home. Hear from everyday real estate investors just like you, and discover how they’ve completely transformed their business by taking a profit First approach. This is the Profit first for R e I podcast, where we believe revenue is vanity. Profit is sanity. It’s time to start making profit a habit in your business. So here’s your host, David Richter.
Speaker 3:
Thank you so much for twisting. We’re continuing the C F O series with Tony Castronova today. He has a crazy real estate background and he tells how he went from single family to multifamily. And yes, this is a C F O on our team, not just a real estate investor we’re working with or that I know of. This is someone that is working hard to make an impact on the people that want to get to where honestly where Tony is. He went from single family to multifamily, has lots of units and tells about his journey, but then also tells about a lot of the ups and downs that everyone faces in the entrepreneurial world and clarifies between entrepreneur and investor. And just gives a lot of great insight to where you might be right now and maybe some areas that you’re struggling. Thank you again for listening and this episode can definitely help you.
Thank you for being a faithful listener of the Prophet first r I podcast. Hey everyone, I am super excited because we’re continuing our C F O series and I have Tony cast Novo here with me and I’m really excited ’cause he’s got a crazy real estate background, which is incredible, but then also wants to help as a C F O too. Like he’s actively helping our clients and helping people there, but then has a big management consulting background as well too. And lots of good things. And I’m really excited for this episode because if you’ve listened to a lot of the ones in the past, it’s been about the potential people or the people that have been the profit first implementers or they’ve implemented in their business or it’s been clients or things like that, giving you hope. And I want you to also know there’s people here that care about you that wanna make an impact on your life, that want to be there for you if you need that accountability and guidance. So Tony, thank you so much for being on the show today.
Speaker 1:
Of course, this is exciting
Speaker 3:
And I’m excited too because I’m excited because I get to, I get to interview it a little differently now. It’s like, it’s not just all about the same questions and that it’s like, okay, like what got you into this side of the business because so many people have heard about the other side and why people got into real estate and then how profit versus helped them and all that. So I wanna hear like, what is your background from a high level, because I want them to know at least who we’re working with and dealing with here. And then we can go into more of like the what got you into being a C F O and that type of stuff and how you help people.
Speaker 1:
Yeah, of course, of course. You know, we all kind of have a journey and a pathway. Yeah. And you know, I always feel that there’s inflection points along the way and so I won’t go too far back, but I’ll say that I, I’ve got about 25 years of management consulting experience and I’ve worked for some large companies like Accenture, Ernst and Young, and I’ve also worked for smaller companies, more boutique boutique consulting firms. Along the way I got a little passion for what I call a side hustle in real estate. And so in 2014 I launched my first real estate company. I started working with buy and hold single family homes. I did a little bit of flipping in there and then in 2018 I decided I wanted to scale, I wanted to get bigger. And so I packaged everything up. I did a 10 31 exchange into my first multi-family.
Funny thing is I had no idea how to buy a multifamily property. I just opened my checkbook and figured that’s how everybody does it. But it took me about a year to learn that there’s another method, which is pretty much what I do now around syndication and raising capital, bringing on investors into my deals. I did my first syndication in 2019 and that’s really what I’ve done ever since. Today actually looking at the calendar here, five days we’ll be closing on my ninth multifamily property and we’ll have been invested in about 1,150 units.
Speaker 3:
Yeah. Wow. That’s awesome. Because I, and if you are, if you’re just tuning into this podcast or like you skip the first part because you never liked the first part or whatever, it’s you’ve got your own quirks or what whatnot. That’s where Tony is actually one of the team members here that takes on clients with simple C F O. And he has the investing background as well too. That’s why we’re always looking for people that wanna make an impact, wanna make an impact on your life as the listener, but also if you wanna work with us too, that these people know what the heck they’re doing and what the heck they’re talking about. Because I mean, <laugh>, he’s done something that most investors aspire to going from the single family game to the multifamily game. And that’s where too, that’s where you could have someone like this on your team and potentially helping you get from that one level to the other.
You go, okay, let me ask this, Tony, let’s dig a little deeper there with your, because you said 20 14, 20 18, and then now you’re on your like 1,150 units. Like that’s what you’re gonna have. I’m wondering did it have, did it help that you had some of that management consultant experience or like, did you face any obstacles during that real estate investing time? And I love that you were open and were like, didn’t even know how to buy the multifamily. So it was like, how was that journey? You know, because I feel like you said it was that side hustle, but to turn into like a massive opportunity.
Speaker 1:
Yeah. I mean so many things to unpack there, but yes is the short answer to did I hit any challenges along the way? <Laugh> Okay. Still hitting challenges along the way. They’re just different. You’re always learning something. Right. Right. But I think a couple, a couple things that maybe made a difference. One was that in 2021 I decided to go full-time in the real estate business mm-hmm. <Affirmative>. And then in 2022 I added a coaching business on top of that just because I was finding that I was, I was in a mastermind and I was really working with so many people in a, in a large community and that’s a big part of my day. I was, I was on the phone working with other investors and entrepreneurs and I spent a lot of time coaching them and that was where I drew a lot of energy. Yeah. And I still do today, which is why I work with simple C F O because I love helping clients in the real estate space. But I think going full-time just gave me a bit of a supercharge boost to really go after it and kind of burn the, the boats a little bit as they say, or Yep. I think that’s the phrase, <laugh>, but basically saying, I gotta make this work. Yeah.
Speaker 3:
That’s awesome. No, I love that. And yeah, it sounds like you were able to be successful in this endeavor where a lot of people, I feel like they don’t make that switch from single family to multifamily or they don’t go as fast as they want to, but this was a pretty, a pretty cool journey that you’ve taken. I also want, because you mentioned working with simple C F O and helping people on that side too. Like let’s dive into a little bit. In your experience in the small business world, do you see that a lot of people struggle on the financial side of their business?
Speaker 1:
Totally. Totally. I mean, I, I wanna make a little bit of a bifurcation here Yeah. In that, you know, we talk about the word investor a lot. Yeah. And, and I want to introduce the word entrepreneur into the conversation because to me, an investor is somebody who’s looking long-term to build wealth. And an entrepreneur is very much in the day-to-day trying to drive income to have a business that will eventually produce wealth. Mm. Right? Yeah. And so you have to do both, right? Because you don’t wanna just trade time for money and never have anything to show for the day you decide to stop working. So that’s the investing part. But you also can’t just dump all your money into investments and not generate any cash off of it. You won’t have much of a runway there.
Speaker 3:
Yeah. Nah, that’s so good. That is so good. Because most people don’t make that distinction, especially in the real estate investing world because we call it real estate investing. And that’s a very broad term for a wholesaler flipper where most of those people are just like, you categorize them as an entrepreneur, they’re more just, okay, we get the income in, but do they turn it into investment money of long term? Like you were doing the buy and holds, it sounds like you started in a single family game and did some of the maybe wholesaling or flipping or something like that and turned that active income into the passive or the buy and hold type strategy. Was that correct too?
Speaker 1:
So if, if I’ll unpack a little bit of the finances here. Yeah. And I don’t necessarily advise this one step that I did, but maybe it was a little bit bold. In 2013, before I went full on into trying to build a real estate business, I made a decision with my wife to cash out my 4 0 1 k. Oh wow. And for some people who, you know, built up a 4 0 1 k after decades of working a, a corporate job, you know, thinking, wait a minute, I’m gonna pay taxes on that. I’m gonna pay the, the penalty on that. You know, why would I do that? But to me, I wanted to have a significant amount of money to just go for it. And I said, I’m gonna bet on myself. And I put the accountability on me to say, I’m gonna make that back up. I have to make that back up the penalty and the taxes that I paid.
And so it gave me enough capital that I didn’t have to go borrow capital. So maybe that’s one way to look at it. Yeah. But it gave me enough capital to get started and within four years I had already doubled and surpassed what my 4 0 1 K had in it. And so I just started putting pieces together to build not only a business, but to also build for retirement. And there’s a lot of strategies that, that I’ve incorporated and especially as kind of a solopreneur where you start thinking about, okay, I want to, I wanna launch a solo 4 0 1 k, I had some IRAs along the way and I, I moved money in there. But also thinking about health insurance, I have a, a health insurance plan that’s a high deductible plan on purpose so that I can actually move money into an H s A that’s self-directed that I can also put into real estate. Yeah. I bought a whole life insurance policy, so I can do what’s called the dual asset strategy, where I can basically borrow from the cash value in my account and go invest that into real estate. When you take the money out, you’re still earning dividends as if you never took it out. And you’re also able to, to earn profits in real estate. These are the things I started putting in place and still putting in place to kind of map out what my short term and long term looks like.
Speaker 3:
Yeah. <laugh>, that’s, that’s pretty cool. ’cause No, I love it. And then you wanted to then help and make an impact on other people to get them to this position as well too. So what appealed to you about Simple C F O and becoming a C F O and helping people on the financial side get their financial house in order?
Speaker 1:
I, I think the biggest thing is you see so many people out there, social media and, and other places where just talking about growing, growing, growing. Mm-Hmm. They don’t really talk about profitability. Right. Right. And so you can grow to be, you know, incredible size, but, but then what happens when you’ve got really thin margins and, and you can’t keep things going and you’ve just got this huge machine that needs to continue to get fed. Yep. And so I wanted to help clients to, to get time freedom first of all, because at some point, I mean, we all as entrepreneurs got into being an entrepreneur because we didn’t wanna work for the man. We wanted to control our time, spend some time with family, all those things. And a lot of us, you know, have been working the grindstone. And so I want to help clients to free some of that up to have more profitable businesses so they’re not always having to do one more deal, one more deal. They have better deals.
Speaker 3:
Yeah. Why do you think a lot of people live like that one deal at a time or like deal to deal or that, you know, the paycheck to paycheck lifestyle basically,
Speaker 1:
Because that, that’s what they know. They, they see that, you know, kind of looking like a gross margin perspective. Like, Hey, I could go buy this for X and, you know, add value to it and then sell it for y and that differential is, is ingrained in somebody’s head that, that that’s profit, not necessarily. Right. Right. There’s a lot of other things to account for there. You’ve got a lot of, unless you’re doing all the work yourself, you’ve got partners and vendors, contractors, there’s interest to pay unless you’ve got your own cash that you’re using to, to fully fund these deals, you know, maybe investors, there’s so many draws on, on that cash. So at the end of the day, if you’re not wise about how you, how you buy those deals, how you operate those deals, it it’s, it’s just chasing your tail.
Speaker 3:
Yeah. Yeah. That’s, that’s very true. And that’s where what you would say A C F O comes into play and to help them on that path. Correct.
Speaker 1:
Absolutely. Yeah. Absolutely. And I think the beginning part is always getting that, that financial clarity and try to really understand, you know, is my business profitable and maybe I have multiple businesses, maybe I have a wholesaling business, a flipping business, maybe a rental business, which one’s most, most profitable? And, and then you start going deeper and start to analyze the expenses and can we make some improvements over here? Revenue’s obviously the driver in, in every business. So gotta look at, you know, really where to spend the time. And I think a lot of, a lot of real estate entrepreneurs have that shiny object syndrome and just chase everything that looks like a deal. And, you know, swinging hammers at nails everywhere and hope to hit one. And I think you really gotta focus on what you’re good at, what you’re passionate about, and what is most profitable.
Speaker 3:
Yeah. Man, he knows this, doesn’t, he, if you’re listening to this, that describes the real estate investing community, just going out there, just running and gunning it, getting the deals under contract, swinging the hammers, just just one more deal and it’ll be all. Okay. So no, this is, this is good stuff. And you can tell Tony’s actually been out there and he’s actually been doing the real estate and that he is actually going out there and then now helping people on the other side, keeping more of what they make, which is incredible. So talk about too, because I believe a big component of success is getting a good framework for managing the dollars that come in. ’cause A lot of people don’t have that. And that’s where Profit First comes into play. And that’s why I wrote the book for real estate investors. And I guess just tell about your, you know, your journey there too, reading the book and then reading mine and some of the things that you were telling me beforehand.
Speaker 1:
Oh, yeah. Yeah. I mean, it’s always made sense and Profit First actually puts it into a method that can be repeated and, and you can build a business around. And, you know, just thinking about the basic concept that, that we have revenue that’s coming in and, you know, we talk about pass through revenue and and Profit First, and that really accounts for all those demands on, on the income that we talked about. Right. Right. The, the contractors and just all, everything that, some people might call it cost of goods sold. Right. And then we end up with, with a net from that. And, and really we need to start thinking about paying ourselves as owners. So profit first. That’s where that comes in. And that kind of comes in multiple flavors. You’ve got what we call owner’s benefit. So you’re, you’re saving for profit in the business, of course that is your time working on the business to grow the business, but then there’s compensation for the owner and that’s your, your benefit for working in the business.
’cause I don’t know too many entrepreneurs that don’t spend any time in the business. And then there’s this little thing called taxes that Uncle Sam wants his piece. And even though there are many strategies to reduce your tax liability as a real estate investor, there could be a chance that you’re still gonna pay some taxes. Yeah. Right. And so you don’t wanna be surprised at the end of the year. And so being able to save for that and your business should help you save for your taxes as the person running the business. So that is all what we call the owner’s benefit. And then we start talking about opex, operational expenses. And a lot of people kind of think the other way, right? They, they get the income, they pay all the bills, and then whatever’s left over is profit. But if we reverse that, then we can start looking at fine tuning and optimizing the operations of the business to have expenses that are in line with the profitability that we’re actually looking for in our business and the whole reason why we started our business.
Speaker 3:
Yeah, that’s good stuff. That’s, because that’s where I believe what you hit the nail on the head, it’s put a system around. It’s like something that we feel like, we feel like we’ve known this or that we’ve heard this, and then it’s just like this is a good package to be able to say, okay, this is how we actually put more money in our pocket and make sure that there is owner’s benefit. And that there, I like how you clarified that too, on versus in where like the profit account’s more like this is working on the business and the reward for that. And then the, in the owner’s comp is more like the, in the business, like you’re working in the business, you should be compensated for the time in there, which was, I I think that’s, that’s great. That’s a really good way of putting that.
So this has been awesome. I think that you’re doing a great job of helping the people along the way and on the journey. And I wanted to say thank you for helping and simple c F O and the clients that you work with there. Then also just wanting to make an impact. ’cause There’s a lot of people that are listening, and if you’re listening now, there’s a lot of people, and if you’re struggling on that side, a lot of people are there and like, they need someone, like a Tony in their life to hold, not only just hold them accountable, to make sure that they know where you’re, they’re going. Like, what does a win like look like to you? And like, are we actually getting there? So I guess to wrap up just a few final questions. What would you say is one of the, let’s just do a general question then I’ll narrow it down to real estate, but what’s a general business lesson, the hardest one or the best one you’ve learned in your experience over the last couple decades?
Speaker 1:
Man, great question. Great question. I, I have to admit, and this is maybe a little less of entrepreneurial, it’s more corporate, but yeah, it was for years, it was always a little less about where I worked, what I did, and more about who I was working with mm-hmm. <Affirmative>. And to me it’s always the people and, and I draw a lot of energy from people that I enjoy working with, whether that’s my peers or maybe a boss or maybe it’s clients. But the nice thing is as an entrepreneur, I get to choose my clients. Right. So that, that’s always good. And, and I don’t have a boss other than my wife, <laugh>. Right.
Speaker 3:
<Laugh>.
Speaker 1:
But you know, to me it’s, it’s just always about the people. And if you’re just chasing after a dollar, there’s always somebody who’s gonna wave a, a bigger dollar, you know, a higher salary or, or you know, right. Something like that. Yeah, right.
Speaker 3:
There you go. So there’s, that’s a good one. The people you work with, because you spend, I, it’s like that statistic, you spend more time with them, with your family, especially during the early working years, you’re worth, you’re with them a lot with that working family and those people that you’re with. And the, it’s really about the people that you align with culturally, values, you know, the values that you have, your beliefs. It’s just a lot of different things there. And make your life more full too. It’s not that one is right and one is wrong, it’s more just like, how do you, how do you know what’s right for you? I think that’s a great, a great point. Then the other one I wanna ask before we jump off here is, for a real estate investor who’s wanting to get started with the Profit First Journey, what would you say is a good first step? Or like, how would they start to set that up?
Speaker 1:
I think a good first step is, is really to start looking at your financials. Look at your books and, and just see if it makes sense. And a lot of times, you know, we’re, we’re so transactional and we’re recording something one way and just moving on close the books. Okay, I got work to do. We don’t really take the time to look at the story that our financials are telling us about the business. And every p and l every balance sheet tells a story. Mm-Hmm. <affirmative>. And so read it because it, it’s gonna, if you don’t get that story by reading your financials that says your financials need a little work and we’ve gotta get those organized and transactions recategorized so that it does tell you the story and you might be shocked at what it tells you. Yeah. And could be in a good way, but, but it also could be a little bit of a wake up call to say, okay, I’ve gotta gotta get my button gear and, and make some changes.
Speaker 3:
Yeah. No, that’s good. It’s like, can you even read your story and, or is there any story at all? I, I’ve heard someone put it for like you open the storybook and it’s blank, well you got nothing set up. It’s like, that’s gonna be hard to read that story. So make sure you have something in place. And if you don’t, if it’s a mess, and if you don’t know it’s a mess, you might need someone like Tony in your life to help make sure that it gets to where it needs to be. But now this has been awesome, Tony. Thank you so much. I also wanted to say, if you’re listening to this and you do feel stuck and you’re living deal to deal and you’re, you, you’ve heard some of the things that Tony’s talked about and you’re like, I, I a hundred percent agree with where he is coming from and that I’ve felt that, or I’m feeling that now and you want outta that rat race and outta that cycle, go to simple cfo.com and just book a call with us.
It doesn’t mean that you’ll work with us, we’ll just point you in the right direction. We’re here to make an impact. Whether that’s to make sure that you get the first steps right or whether that’s like you need someone like Tony in your life holding you accountable and helping you play the money game to win and making sure that you know the rules and that you know that this is how you set up profit first. This is how you go and get clarity and how you make sure the books are in order. Like all that. And since Tony came on and volunteered to be one of the people on here, if you wanna request Tony too, you could request him to be your C F O. Once you go through that process, once you get on that call and if you want to move forward, you can request Tony as your C F O if he has availability after this episode.
He might not have availability ’cause he told you his background in the real estate investing world. And people will probably be clamoring to work with him because he is a wealth of knowledge, not only in real estate, but then the money game and really winning. And he is doing it in his personal life and he is also done it in the business world. So Tony, again, this has been incredible. Thank you so much for being here today. I just wanted to say this has been an awesome episode. Oh, thanks for having me, David. It’s been a pleasure. Awesome. And remember, if you’re listening, make Profit a habit in your life and win that money game. Thank you so much.
Speaker 2:
This episode of The Profit First for R e I podcast is over, but there are plenty more where that came from. Are you ready to learn how David and his team can help implement the Profit First system in your business? Schedule a discovery call@simplecfo.com right now. We’ll see you next time on the Profit First for r e I podcast with David Richter.
