In this episode of The Passive Income Attorney Podcast, Seth discusses with attorney and investor Jonathan Twombly, founder and managing member of Two Bridges Asset Management, about his transition from being a big law attorney to becoming a full time real estate investor. Jonathan focuses on how to play it safe on real estate investments for conservative people like attorneys or doctors sharing with us his transition. For him, the only risk is not investing and depending on one active source of income. Enjoy!
“I have a fiduciary approach to investors, because I was trained as a fiduciary, and I really believe that my investors come first, if I have a conflict between my interests and their interests, their interests come first, and I take it really, really seriously.”
HIGHLIGHTS:
2:19 – Jonathan talks about his background and transition from law into real estate.
7:32 – Seth asks how Jonathan’s interest in real estate started.
7:48 – Jonathan shares his passion for apartment buildings and investing in assets to generate cash flow.
11:24 – Jonathan and Seth discuss the importance of having a mental space to make your next move.
15:46 – Jonathan explains why people with great salaries are still poor.
19:31 – Seth asks Jonathan how being an attorney helped him on his venture into real estate investing.
19:37 – Jonathan explains how being an attorney trained him to be a fiduciary to his investors and to protect other people’s investments.
23:44 – Seth asks about active vs. passive real estate investment for people who want to transition or get started.
24:04 – Jonathan and Seth discuss the time and effort required to invest in real estate and whether or not syndications are 100% passive.
28:05 – Seth asks Jonathan about investing in traditional assets.
30:39 – Jonathan and Seth discuss how to get attorneys to change their mindset away from just depending on one active income stream.
31:01 – Jonathan and Seth talk about why commercial real estate investments for great for people with conservative mindsets.
35:14 – Seth and Jonathan debunk the misconception that real estate is too risky?
38:11 – It’s time for the Freedom 4.
38:16 – What’s the best thing you do to keep your mind and body healthy?
38:57 – In an alternative universe where you weren’t involved in real estate, what would you be doing?
39:16 – Where were you at five years ago and where do you see yourself five years from now?
40:11 – How has passive income made your life better?
FIND | JONATHAN TWOMBLY:
Website: www.twobridgesmgmt.com
FULL TRANSCRIPTION:
Seth:
What is going on law nation? Welcome to a new episode. Yet another great day to be alive. And I just want to thank you for joining us today. Before we get started, please I just want to invite you to go to escapethebillable.com and snag our free passive investing guide. Again, it’s absolutely free and it has some incredible insider content that I know you’ll find useful. Today we take a deep dive into our guest’s story as a former big law firm attorney. It’s a story that many of us can relate to, whether we are attorneys or not. Many of us have successful careers and earn a good income. But it comes at a price. It comes at the price of time, relationships, and perhaps even our health. And many times, there is this big gap between who we are in our professional life and who we really are in real life. Now, I’ve been told that the bigger that gap is, the more likely we are unhappy and the bigger the gap is the unhappier we are. If that sounds like something that you can relate to, then this episode is for you. Jonathan Twombly is a Columbia Law grad and former big law firm attorney. He’s the president of Two Bridges Asset Management LLC, a multifamily syndication firm in New York City specializing in assets in the South Eastern US. Jonathan is also the founder of the Multifamily Launchpad Coaching Platform. Alright, let’s jump in.
Seth:
Jonathan, what’s going on, man? Welcome to the show.
Jonathan:
Hey, thanks for having me.
Seth:
Yeah, absolutely. It’s a pleasure. Let’s dive right in, brother. So tell us a little bit about your story. And, you know, you’ve had a pretty illustrious career and transition out. So you know, feel free to brag a little bit.
Jonathan:
to brag about really, but I thank you for the for the kind words I was a practicing attorney the commercial litigation for about 12 years, in different kind of big firms. Here in New York, and also in Boston and in London for a while, you know, some pretty high profile litigation, but I was really, you know, kind of, would you say really run down by the grind of it. Right? And, that kind of now, you know, tiny Eye of the Needle for partnership and it just overtired, I started out all kind of full of piss and vinegar, and was really into it. But then after about the third year, so when I started hitting that mid level status, it just started to become a real grind. And, you know, just realize it really wasn’t for me, I found that I was really too entrepreneurial for big law, there really wasn’t any opportunity to, you know, do something new, right. You know, and especially in litigation, it’s just like, you just, you just do the litigation, right. But there wasn’t, I always wanted to be in a position where it’s like, Hey, you know, there’s like a gazillion green widgets out there. But nobody’s ever made a blue one. Why don’t I make a blue one. And it’s like, not the way, you know, not the way that law works. And I wasn’t interested enough in, law to, like, go out and hang my own shingle or something. So I had been looking for a bunch of ways to get out, I kind of quit a couple times, I always wound up coming back in I felt like, you know, like, you know, in The Godfather, like, every time I get out, they just pulled me back and you know, sort of like that kind of, you know, that kind of situation and finally in 2011. So in 2009 2008 2009, we had the financial crisis, and it was kind of a weird experience because I’ve been through the dotcom crash, and the dot during the dotcom crash, we just got busier right in litigation, like everybody was looking for somebody to blame. And there was like, plenty of fighting going on. The great financial crisis was so bad, nobody wants to sue anybody. They didn’t want to spend them for legal bills, like take a chance to collect money. So we were gearing up for this big wave of litigation that just never came. And so after about two years of me just sitting around doing nothing, and like I was literally like surfing the internet looking at real estate deals, trying to try to figure out how I could escape my job. As a real estate investor, after two years of that, that my firm finally decided, like, they really didn’t want to pay me 300,000 bucks a year to sit around surfing the internet. So they, they let me go. And, you know, it’s funny as I remember that meeting where they, if anybody’s ever been through being terminated, but they, they, they always do it with two people, like they never terminate you on one because they need they want to have this there. And I just remember, like, the two guys who, whose job it was to let me go, they were just like so morose, and like, they were so like, you know, this is terrible, we feel really bad about and I was like, you’re firing me. This is great. I’m getting four months of severance out of this. And like, I’m out of this job that I’ve been trying to quit, I’d actually tried to quit before and they talked me out of it, even though I had no work to do. And then so finally they they let me go. I was like, Okay, finally I’m out. And at that point, I wasn’t really wasn’t interested in in trying to find another law job. I was kind of in this situation was like, How on earth am I going to hire, convince somebody to hire me for a job, I don’t want, you know. And so I was fortunate enough, I had, I’d always lived really well with like, well, within my means I had money saved up. And I started doing a lot of networking about real estate, because I decided that’s what I wanted to do, and met somebody too, who wanted to start up a real estate business. And, you know once your lawyer can’t escape it, right? So I have that kind of like need to do due diligence, like need to check all the boxes kind of thing. And so rather than just jump into the offer of like, hey, let’s be partners, I tried to turn around to a bunch of people and said, What do you think about this, you know, some people I trusted to kind of do due diligence. And the effect of that was they all said, you know, we think she’s really good. She knows what she’s talking about. And if you decide to join up with her, we’ll give you money to invest. So I actually wound up with like a partner and investors all at the same time decided to jump into it. And that’s how I got my start. Now, there’s like, a lot more that happened after that. But that’s basically how I made the transition from, from being a lawyer into real estate was, you know, got myself fired from step one, get yourself fired. And then step two, like to a lot of networking until they find somebody to partner up with. But yeah, it was, it was a lot like lots of lucky happenstances I’d say,.
Seth:
Gotcha, easy two step process there, right?
Jonathan:
It’s just a different anybody can anybody can repeat this process. It’s very easy.
Seth:
There it is, you got the keys to the castle, right? So what kind of turned you on to real estate, you said, you’re kind of sitting around twiddling your thumbs and didn’t have anything to do with respect to your law practice. And you started looking at real estate deals there? And what kind of turned you on to?
Jonathan:
Well, I mean, I’d always been interested in it, right. I mean, it, it seemed like, a way to make money without killing myself. Right. And, and, of course, I think when I first started out and didn’t know, anything, you know, I thought of it as being passive, right? And yeah, which, you know, I didn’t realize it’s passive, if, like, you’re the owner, you can make it passive if you hire someone like me to do it for you, but it’s not passive, if you’re doing it yourself, but it’s not, but it’s also not like, high effort, right? It’s not a lot of a whole, it’s not like being a lawyer where you’re working 14 hours a day, like, you know, this is a, there’s some bursts of activity and things you got to stay on top of, but it’s not like it’s not a career that is going to kill you from overwork. Even if you’re doing it yourself, but I had been just really interested in the idea of like, owning assets that produce cash flow. And, and I always liked buildings anyway. So I, my dad is an architectural historian, and he spent a lot of time as a kid, like, looking at buildings, talking about buildings, you know, helped my dad restore his house, which was like a 200 year old farmhouse, like I just really liked building. So the opportunity to try to make money from buildings just was kind of a no brainer for me. So, you know, I just always really liked the idea. And now it’s what I had been, as I’ve been really trying to think about. So before all that happened with the financial crisis and stuff, I’d really been planning my transition out. And I had just always been invested interested in different kinds of investing. And my I guess, my thought originally was, I’d really like to become an equities investor and go work for like a fund or something. And then what I found with that was, like, I was just basically too old to transition into that. And you know, that’s, that’s what people were telling me. They’re just like, look, you got a great resume, but no, like, you know, you’re like, in your late 30s you’ve got kids like no 27 year old manager be is going to feel able to tell You to work late, right? And so you’re gonna have to be working for and like, it’s gonna be really hard to break in. So then I started shifting my focus to real estate. So I’d actually been kind of like, talking about it to a lot of people before I actually got terminated, because I was still trying to figure out how do I get out of this, but as long as you know, even in 2011, that the economy wasn’t great. I mean, we were officially in a recovery, but it wasn’t like, you know, all like happy times. Right. And so I, I was, you know, grateful to have a job and have a salary at that time. And trying to bank every cent I could, because I didn’t know how long it was gonna last. So it wasn’t like getting terminated was a shock. I mean, I was I was more surprised they hadn’t done it earlier. Right. Things were slow. Yeah, yeah, things were slow. And frankly, like, I was kind of, I think that, you know, law firms are there, like, so conservative and scared of everything. I think they might have even held off because like, we just had a baby. And they were like, afraid of getting, like sued for some kind of like, you know, who knows what they could get sued for? So they, Yeah, it probably it took them longer than it would have taken me to fire me. Yes.
Seth:
But they did it. Yeah. Let’s say they ended up doing you a favor. Cuz you know, you were wanted out anyways. And you’re like, oh, you just sigh of relief?
Jonathan:
Yeah. And the thing is, look, I mean, it’s, it’s the golden handcuffs problem was definitely there too, right. I mean, I spent, I spent a lot of time thinking about, how can I get out, but what would pay me as much as this? And yeah, I’m kind of stuck here. And honestly, what I found was sort of like an interesting phenomenon. Like, when I was still in the job, my ideas of what I could do next, were very limited, because I was saying, Well, what else is going to pay me this much? Like, what can I step into, that’s going to pay the same salary right off the bat. And I was like, well, I could become a management consultant, maybe I try, I looked at jobs like that. Or I could go try to work for a private equity fund or a hedge fund. And sort of like, that’s it, there were like, like, two jobs I could do, right, that I could think of, and, that made it very difficult for me to try to find the next thing, after I got terminated suddenly, like, the world is my oyster, because my income now is not I didn’t have the golden handcuffs anymore. So I remember, like sitting home. And, like in, in New York, they, they, I don’t know if they still do what they used to have these ads on TV in the middle of the day for this place called Apex Technical School, where they teach you how to like, you know, service, like air conditioners, and build engines. And okay, and so like, I went from, like thinking, like, I could only be a management consultant to like sitting home watching, like, TV in the middle of the day, and Apex tech, or commercial comes on and like, Oh, I could do that. Like, I could. Suddenly, like, everything was a possibility. Right? So yeah. So sometimes, I mean, like my advice to people who are, who are like in, in a law job that they, they really don’t like, and they feel themselves really constrained, like, I understand totally, if you’ve got a family and you’ve got a mortgage, you can’t just quit your job. But if you’re in a position where you can, sometimes that is the thing that you need to do to get yourself like the mental space, where you can actually start being creative about what you’re going to do next. So you know, it’s something if you’re really unhappy, walking away is an option. I mean, I did it. And it, it’s, you know, I, before I got fired, I walked away previously, like I said, I went back because I couldn’t figure out what to do at the time. But like, you know, it’s, it’s an option. And it could actually work in your favor, if you’re really, really just miserable. So
Seth:
Yeah, if you’re, if you kind of have an entrepreneurial mindset, it’s tough to kind of let that mindset out. When you’re working, you know, 60 hours a week, or work in a big law job or being a doctor or something like that. You don’t you just don’t have time to think creatively and think about, well, how else can I make money? Well, how can I do this? How can I do that? You don’t have time to even think about those things.
Jonathan:
It’s very hard. And if you’re an even if you’re thinking like, hey, we’ll all go and buy, you know, some real estate on the side, it’s like really hard to find the time to go find the properties and do the due diligence and arrange for the financing and everything. And that’s, that’s why if you’re kind of if you’re the kind of person who’s thinking like, well, I want to create a glide path for myself of alternate streams of income, then, you know, going to passive route is could be really a way to accomplish that. It’s going to take a bit longer, but you could start if you’re kind of diligent, and investing, you know, your spare cash every year into other deals, you could create enough passive income, so that maybe you can’t quite replace your income yet, but you can give yourself enough of a cushion that you’ve got your basic expenses covered, right? And then that gives you know, after, say, five years or so, That diligently. You know, you could you could wind up being able to, at that point, say, Okay, I’ve got enough to keep the lights on at home. And now I can go do something else.
Seth:
Right. And that’s sage advice. I mean, everybody always says like, and you should if you have a really good job, even if you hate it, maybe invest passively. First, see how it goes, get your feet wet, see if you like it, and then replace your income little by little. And then if you really start loving it, and you want to get into the active side, then get into the active side. But for now, you know, it’s tough to just kind of just stop because of those golden handcuffs like you talked about. It’s tough. And it sounds like from your position, though, at least you didn’t have, you know, multiple mortgages, and you know, all these different bills that you had to pay. So it was like, Hey, I’m actually okay.
Jonathan:
Yeah, I mean, listen, I was, you know, I remember having conversations with my colleagues. And, you know, I was, I was the sole breadwinner for my family, my wife didn’t work, she was home with the kids. And we were living on like, half of my income, and we’re perfectly happy. And just banking money. And, and I remember talking with my colleagues who were, like, complaining about not having any money, and I was like, Well, I know, you make the same amount of money as me. And I also know that your wife is also a lawyer, or a doctor, or whatever it is. So basically making twice as much money as I am. And so how could you possibly not have, like, if I were in your shoes, I’d be banking, like three quarters of our salary and like, living on one quarter of it, like, what do you get, you know, what’s going on? And when you talk to them, it was like, well, they know they both have an Audi. Right? Right. They’ve got, they’ve also got the house in the Hamptons, right? And all the kids are in private school. And like, they basically just, and they were taking really expensive vacations when they went out and they ate out all the time. And it was like, well, no wonder you don’t have any money, right? I mean, you’re spending every cent that comes in, you know, and you think you’re, you think you’re doing something because you know, when you max out your 401k. Right. And that’s it. And that’s it, you’re just not, you have, you’re not living beyond your means. But if you’re spending every cent, you’re not putting yourself in a position to, you know, like not putting himself in a position to save and to be able to escape, you know, I was just always, like, I’ve had the benefit of like, my entire life, just being like a real cheapskate, when it comes to certain things. Like I just never wanted to pay a lot of rent. Because I always thought like, this just doesn’t make any sense to me. So I was always looking for, like, the cheapest place that I could live in. And, and even after I got married to I mean, you know, we were, but that was, that was good. We just never, we just weren’t throwing money down the drain for rent. So that allowed us then to, we bought our house, we have like, practically no mortgage, you know, like, so those are the and I never felt like I was sacrificing. I mean, just, especially if you’re if you’re looking at a big law firm, you should be able to do that. But you have to make certain choices that are, you know, paying yourself rather than paying other people.
Seth:
Right. And most of us don’t do that. I mean, just maxing out your 401k is not enough. I mean, that’s for later, that’s for when you’re 65 years old. And I don’t know if most people still think about it that way, like, Hey, 65 I’m gonna work till then or not. But if you get tired of it, you know, early in your 30s. And you’re like, whoa, I made a mistake. I’ve got to figure out a way out, then you’re like, Whoa, like, you know, you’re kind of stuck.
Jonathan:
Yeah, and I just remember, like, being in my 30s and thinking about retirement every single day. And I realized, like, I’m wishing the rest of my life away, like I’m wishing away the next 30 days, 30 years of my life. That’s crazy. You know, like, it’s short. And I might I might not make it like I could get hit by a bus at any moment. So like, why am I living my life thinking for 30 years from now. So you gotta, you know, you got to live your life for today and then set your life up so that you’re able to enjoy it. Now, obviously, we enjoy being a lawyer, you don’t have any of these problems. But if you’re not happy, you know, really don’t make excuses to be stuck in a job. That’s like sucking your soul away.
Seth:
Right? And even if you enjoy, you might not enjoy it. 20/30 years from now, you know? Yeah. I mean, you know, when you’re young and you, you know, get started at a big law firm or something. It’s all kind of new, and it’s all like, okay, you’re kind of in this whirlwind. You’re like, Alright, well, I can do this. And then that grind hits and those 200 billable hour, months start piling up and you’re like, Ah, I don’t know about this.
Jonathan:
Yeah, absolutely.
Seth:
So how has being an attorney kind of helped you on your venture into real estate investing?
Jonathan:
So in ways I didn’t expect, so like people always ask me like, oh, you’re a lawyer. So do your own legal work? Like no way like, I want to do my legal work when I was a lawyer, there’s no way I want to do it now. Plus, the thing is, I’m not qualified to do it. Like, you know, I was a commercial litigator. I wasn’t, you know, a real estate closing lawyer. I wasn’t an SCC lawyer for doing private offerings. Right. So I know enough to know that I don’t know anything about those things, and I hand them off to the, to the professionals who really understand them, you know, because I don’t want to have them come, you know, bite me in the ass later. So I hand them off to the people who know what they’re doing. But the ways that it has helped me are things like, with marketing, right, like, and things like putting together documents, and what I’m talking about is like, you know, not the legal offering materials for my deals, but the, the marketing offering materials from ideals tend to be a lot more thorough, and, and kind of thought out than most of what you see out there. It also, I have a different attitude to like, I think a lot of people, unfortunately, in this business, really think of their investors as just sort of a means to an end, it’s just like it’s like somebody’s face got a big dollar sign on it. And that’s all they’re really thinking of, you know, okay, this guy is going to write me a check for x. And then that means I can do this deal. I really have like a fiduciary approach to investors, because I was trained as a fiduciary, and I really believe that my investors come first their interests come first, if I have a conflict between my interests and their interests, their interests come first, and I take it really, really seriously. You know, I like to really believe in it. So I think that and that’s not something that like, I’m not sure that people can tell when, when they’re when they’re dealing with me, or they even know, because it’s not like I share my private thoughts with investors about these choices that I make, but I hope that somehow it comes through in the way that people feel when they when they deal with me, or just the general, you know, sort of attitude, but it’s not. No, I don’t view people just as like, you know, as cogs in my wheel. And I think there’s a lot of people who, in the business who do that’s just, it’s just, they’re just on this kind of money raising, you know, machine. And, you know, it’s all about raising money and getting fees. And I feel like, this is about taking somebody’s money into my trust, and making sure that it’s protected, and that it does as well as possible. And yes, I just have a different attitude, I think because of being a lawyer.
Seth:
Yeah. I love that explanation of your approach, man, that makes a lot of sense. I mean, you’ve got to take care of other people’s money more so than your own. I mean, yeah, if you’re taking responsibility for their money that’s hiding above even yourself. I mean, you’re not putting yourself at risk, you’re putting somebody else’s retirement money, and you know, their savings at risk. And that’s it. It’s under your control.
Jonathan:
Yeah, I mean, I remember one of the partners that I worked for here in New York that I really liked. I remember him talking about his law practice the same way. He’s like, this is a sacred trust, if somebody comes to me with a big problem with their business. And maybe it’s, you know, this could be like a bet the company case for that. Yeah. Right. And they’ve come to me out of everybody they could have come to, to say, Hey, you know, Larry helped me, that’s a sacred trust. And I feel the same way with people who come to me with their, with their money to invest, like they’ve worked hard for that money. You know, they may need that money later for their kids education or for retirement or whatever, it doesn’t matter what they needed for. The fact is, it’s their money, they worked hard for it. And if they’re coming to me with it, to say, hey, Jonathan, I want to invest with you, then. That’s a sacred trust. So, you know, that’s how I treat it.
Seth:
Yeah, absolutely, man. Absolutely. I know, we touched on a little bit earlier, but you know, what are kind of your thoughts about active versus passive real estate investing, and how it might apply to, you know, other attorneys or doctors or dentists that are busy, even if they may or may not want to transition out? But just to get started?
Jonathan:
Well, I guess so there’s, there’s a lot of things to think about here. I think that one of the mistakes that, like highly educated, highly qualified professionals make is to think that real estate is really easy, or that because they’re so smart, and educated and professional, they can handle it without really making a lot of effort. Like I think they kind of look down on it. As you know, I certainly like I did, too. When I thought when I was a lawyer, I thought about like, the guy, the real estate guys, like I never thought they were as smart as us, you know. But the fact of the matter is, it doesn’t mean that it isn’t hard and it isn’t and it doesn’t have moving parts and it doesn’t have things that you have to think about. So, one I, I always think of sort of the classic and I’m not I don’t mean to pick on dentists but I mean, this is just, I just always think of it this way. It’s like the four dentists, partnership, right where you have like four dentists who get together, and they put in, they pull together a couple of million bucks and they buy a real estate asset and they think this is going to be great because it’s so easy, you know, it’s easy, it’s a lot less complicated than running a dental practice, like, you know, will just, it’ll just run itself and then the property gets run into the ground, because they’re not really either focused on it, or competent enough to run it at. And, you know, I mean, I’ve seen this happen I, someone I used to know, here in the city with a real estate business, one of the best deals that she and her husband, her husband used to buy multifamily and rehab it. And so one of the best deals they ever got, was a deal that was owned by a, like a wall street guy, right. And she had, he bought this property, it was like in Jersey City. First year, it did great second year did okay, third year was breaking even fourth years losing money. And, and they bought it when it was losing money. What they were told was, you know, the, it couldn’t be rented, like nobody wanted to live there, right. Turned out, that was just a complete lie, the place was full, when they started doing their due diligence, they found that the place was full, the property manager had been just pocketing the rent, and telling the owner I can’t rent this place is that you bought a dump nobody wants to live in. And that’s because, you know, he was convinced that it was easy. And he didn’t have to do anything. And he had a property manager in place. So everything was fine. And, and he wound up like not only losing, you know, he lost a lot of money on that deal, because he sold it probably for less than what he bought it because he was convinced that it wasn’t worth anything, because that’s what his property manager was telling him. So those are the kinds of things that you have to look out for, if you are trying to do it actively, right, you have to you have to understand that there’s more to it than just having people send you checks, there’s, there’s more you have to be on top of your asset, you have to be focused, and that takes some time. And it may not be as complicated as practicing law, but it is still has its own complications. So if you want to do it actively, you have to really be sure that you’re going to be on top of it. That’s, that’s my advice, if you don’t want the headache, right? If you don’t want the headache of being on top of it, then you should invest with someone else whose job it is to be on top of it and take care of the headaches. So the only way that this that this business, people think of real estate is as passive, but the only way that it is passive is if you hire somebody else to take to do the work that’s involved, then it can be truly passive. So go work with a syndicator, you know, or go invest in a, you know, a reach, you know, or a fund or something and then it’s then surely past that. But the minute that you own it in your own name, it ceases to be passive, even if you have a property manager because you still have to manage the manager. So that’s my advice on that kind of which way you should go. really depends on what you what you want to do.
Seth:
Yeah, what you want to do and what you have time for. I mean, it’s not you know, it’s not open heart surgery is not bet the farm litigation is not that complicated, but it does have intricacies that you need to learn. And there are experts that already know how to do it, and it’s better to learn from them first before you kind of dive in and, and lose your farm. You know.
Jonathan:
Yeah, you just have to stay on top of stuff. That’s the important thing. And sometimes, you know, if you’re in the middle of a, you know, bet the company litigation, and you’re going to trial in six weeks, you know, you things can slip, and you don’t really want to be in that situation.
Seth:
Yeah, yeah. So did you ever get kind of pigeon holed into investing into traditional assets? Rather than, you know, looking at alternative assets like real estate? Or did you never even kind of venture into that kind of stuff?
Jonathan:
You mean for my own portfolio? Or?
Seth:
Yeah, yeah, I guess. Well, when you were working at a big firm, and then even now?
Jonathan:
Yeah, I mean, well, when I was working at a big firm, it just never really occurred to me that I could invest in real estate, right? It just, I just was just like, okay, 401k there, you know, that’s what you invest. Gotcha. Yeah. And I never, I never knew about this whole world of like syndication, syndicated real estate deals, said never heard of it. I didn’t actually hear about it till after, ironically, not many told you the story about finding my first partner in the business. I was so you know, living in New York, living in Brooklyn, talking with other attorneys about the kind of stuff that they were doing. I just kind of thought that we were just going to be buying brownstones in Brooklyn and like rehabbing them or something. I started cutting. I mean, it’s amazing. I got into business with her without actually knowing what we were talking about. So we started, we started we started up and She was like, No, no, we’re gonna buy these, you know, 150 unit properties in the south, you know, through this syndication model and use other people’s money and stuff. And I was like, really, we can do that, you know, so. But that’s how I got started in it. So, but I didn’t know about the whole world of like, the syndication deals or some of those are called club deals or private deals until I actually started in the business myself, then I found out that they existed. And, you know, would have been a great thing to invest in previously, I wish I had, you know, been doing that in 2001/2002. And, you know, when I was a new lawyer.
Seth:
Yeah. And so we kind of talked about this before the call, but you know, attorneys are relatively conservative by nature, and how do we get them to kind of overcome that, mindset of just invest in traditional stocks and bonds and kind of put your head down and work and just depend on one, one active income stream? I mean, how do we how do we kind of get them over that hump?
Jonathan:
Well, I mean, first of all, I think they should be diversified across different things, right? They, I’m not saying like, don’t invest in stocks and bonds and stuff like you should keep on doing that. But I think people should be open to other things. And I think they should understand that real estate is, is a pretty conservative investment. Actually, what makes it conservative is that it’s based on cash flows that are existing. Now, there’s all kinds of different ways you can invest, you can invest in more speculative things like flipping houses. You know, you can, I don’t advise this. But a lot of people think that this is real estate investing, like, go try to buy a place you think is going to gentrify so it’s going to go up. That’s, that’s very speculative. That’s not what I’m talking about. If you’re investing for, for cash flow, with somebody who’s experienced at managing these assets, it’s a very conservative play, relatively speaking. And, you know, there’s a, there was a great study, it’s a little outdated now, but I think it’s still valid. It was, like 2013/2014, JPMorgan put out a study of commercial real estate over a 35-year period. So it’s like from 1977 to 2012. So it actually included the great crash, you know, the real estate crash of the Great Recession, including the crash of the 1980s. And what they concluded was that commercial real estate, cash flow and commercial real estate was almost as secure as bonds, but had the upside of equities. So it kind of was the best of both worlds because of being secured by a physical asset. And physical assets, like real estate don’t tend to go out of business the way that like businesses do, right? So the chances if you’re dealing with somebody who’s experienced, and who is has a conservative frame of mind, the chances of you losing your money here are pretty slim compared to other things out there. Not that it couldn’t happen. But it’s pretty slim, because you’re always secured by that underlying real estate, and then having to invest for cash flow kind of baked in a level of conservatism to your asset, because you have to evaluate it based on how much return do I want to get out of this asset. So that kind of gives you an our range of operations. But it’s paying your cash every month or every quarter, like a like a bond would. And it has the upside, appreciation potential. When in commercial real estate, that’s not speculative the way it is, like if you’re saying, Oh, I’m gonna just go buy a brownstone in Brooklyn, like, you know, a mile past where it’s been gentrified already, because I think it’s gonna get there may never get there, or it may take a lot longer than you think, to get there. Commercial real estate appreciation is based on rent growth over time. And we know that rents grow over time. It’s not based on like a single family house where it’s dependent on, you know, your the value of your house is dependent on what somebody paid for the house next door. But that’s not the case. In commercial real estate, the value is dependent on how much rent people will pay. And we know that rents tend, they rise over time with inflation. So values rise, according to GE rent growth. It’s a lot less speculative and uncertain, then, like, you know, hoping the gentrification gets there or hoping that your neighbor sells their house for a lot more money, or whatever it is. So I think it’s I think it is a conservative investment for conservative minded people.
Seth:
Yeah, I agree. I mean, I think that there’s a common general misconception that real estate is risky. And that’s just simply not true. I mean, some sorts of real estate are risky, just like anything else. But you know, having one stream of income to me is the riskiest thing you can do. I mean, you experienced it yourself. I’ve experienced it. I mean, you’ve experienced, you know, layoffs and you know, industry shifts and things like that, where you’re just left with nothing, because you only have one stream of income.
Jonathan:
Right. And I want to kind of like make an analogy here. The reason why I think a lot of people think that real estate is is risky and speculative. Like every lawyer who’s listening to this has, you know, gotten the lawyer jokes, right? Or they have the, they understand the bad perception of lawyers and in general society, right? Even when you’re like working at a big firm, and you’ve been to like, top school, and you have like, the highest ethical standards, and you’re working on the most complex stuff. And it’s really sophisticated people, you know, you go to Thanksgiving with your cousins, and they’re like, oh, you’re a lawyer, you know, they make stupid jokes. You know, they, they think all lawyers are, you know, shysters and the problem. The reason is, because 99% of people, when they deal with a lawyer, they’re not dealing with someone like you, they’re dealing with, like, the ambulance chasers, and you know, those people who like, Don’t who give the industry a bad name, right. So what they what those guys have to do and what you’re doing, like just signing day, there’s nothing, they don’t have anything to do with each other, but you get all wrapped up into it. It’s the same thing with real estate, what most people think of as real estate is what they see on TV, like an HGTV or whatever, they see these flipping shows, right? And they, they see stuff like that. So they think it’s like, you’ve got to go and spend, like, you know, $500,000 to buy something, and you’re gonna sink another $200,000 into it to rehab it. And then, you know, you hope somebody buys it. And like, that’s not so of course, it seems risky, right? And I’m sure everybody has heard the story of like, their colleague who like bought a building, and they lost money on it. If they don’t know what they’re doing, your chances of losing money are very high. Right. And but and the reason that they, the reason that that happens is because people think it’s easy, and it’s not right. And then so then they think it’s risky. So it’s like either they think it’s really easy, or they think it’s really risky, and like both of those things are wrong. But it’s because of the because of what they’re exposed to. And they’re not exposed to commercial property, whether it’s multifamily, like I do, or whether it’s, you know, hotels or whether it’s industrial property, or whether it’s, you know, triple net leases, or whatever the case may be, they’re just not exposed to the more sophisticated variety, the investment grade real estate. So, if they understood that better, I think they would have a better understanding of the risk profile, and they’d have a different perception of the risk.
Seth:
Yeah, for sure. I mean, if you invest with experts who have a track record, have done it before, you know what you’re doing, and don’t just go out on a limb and do it yourself. Then you know, that mitigates that risk, you know, tenfold?
Jonathan:
Yeah, absolutely.
Seth:
All right, man. Well, let’s jump into the Freedom 4.
Seth:
So what’s the best thing you do to keep your mind and body healthy?
Jonathan:
Well, before COVID, I was going to the gym regularly. That was, you know, I have not been to the gym since this hit, unfortunately. But it’s tough. Yeah, it’s very tough. So it’s been a little it’s been a tough year, I have to say, for the health piece of it, but, you know, try to eat healthy and try not to, I don’t eat a lot of junk food and stuff. So that’s, that’s one thing there.
Seth:
Gotcha. Yeah. And I’m actually a gym owner myself. So we’ve been open, close inside outside just trying to stay flexible. It’s just you know, it’s been a crazy year.
Jonathan:
I’m sure it’s been tough.
Seth:
Yeah. So in an alternative universe where you weren’t involved in real estate, what would you be doing?
Jonathan:
I think I’d be a behavioral economist. Okay. I really am interested in behavioral economy. I think it’s behavioral economics. I think it’s really, really, really interesting.
Seth:
Nice, nice. You wouldn’t be a big law firm litigator. No. Nice. So where were you at five years ago? And where do you see yourself and your business five years from now?
Jonathan:
Yeah, well, five years ago, let’s see, I was that’s 2015, I was kind of getting going in this business. So I was still sort of in startup mode. Five years from now. I think where I’d like to be is really, you know, have a couple 1000 units under management and have more of a team that I can delegate stuff to. So I can really be focused on the kind of high level thinking, strategic thinking, and not as much in the day to day.
Seth:
Sounds like a plan, sounds like a plan. How has passive income made your life better?
Jonathan:
Well, gosh, I mean, I have, it’s, well, it’s not exactly passive for me, because I’m doing it actively. But let’s put it so let’s just make sure that, you know, kind of make that clear. However, the real estate, as I said, is not once you own the assets, it’s just not very time intensive. So what that has allowed me to do is really have pretty much complete freedom over my time, which is really the thing that I craved most, I mean, more than more than money, I think the long term upside of this business is probably at least as good if not better than being in law and being a law partner. In the short term, it hasn’t been a definitely took a step back and income. But, you know, that doesn’t actually mean I’m not motivated by money. I’m really motivated by the time and the freedom. So the just being able to, like, for example, last week, the New York City Schools were shut down because of COVID. And we’ve been planning to go to our house upstate for Thanksgiving, anyway. But we’re like, oh, well, we’ll just go early then. Right. And so because I don’t have any place to be, I can, I can do this business from anywhere. And frankly, there’s not so much keeping me busy, that I can’t just take a couple days off and not think about business for a couple days. If I don’t if I feel like it. Nothing else. Nothing can stop me from doing that. So I really have just tremendous flexibility to do what I want, what I want where I want. The downside of that is that my wife also knows that so she’s asking me that stuff. And I’m like, well, honey, I really should be working. But you know, sometimes it’s a little hard to be like, well, I should be working. But I don’t actually have to be working right now. So yes, I can do the thing you asked me to do.
Seth:
Yeah, but I get the same thing, man. She’s like, Well, you know, you’re working from home. Do you have time to do this?
Jonathan:
Yeah. Well, you know, when I was a lawyer, that was never, never a possibility, you know, so because it was just working work work all the time. But so it’s, it’s that’s the biggest and best life change for me.
Seth:
Yeah, it’s really about freedom with your time. Yeah. Yeah. All right, Jonathan, I really appreciate you coming on today, man. Where can our listeners find out more about you?
Jonathan:
Yeah, so if you are interested in learning more about investments with us, my company has called Two Bridges Asset Management. Probably the easiest way to find us is just googling us. But the URL if you want to go https://twobridgesmgmt.com/. So two bridges management com if you go to the website, you’ll see a place where investors can click on and fill out a qualification form and then we can schedule a call if you’re interested. So hopefully, I’ll hear from some of you and if not, you guys always reach out and ask me questions about real estate too. That’s just fun as well.
Jonathan:
Yeah. Thanks. Thanks for having me on the show. I appreciate the invitation.
Seth:
For sure, man. Yes, sir. Coming from a large law firm, Jonathan’s story hits near and dear to my heart. He just kept getting pulled back into a career that he knew was not the right fit for him. But through a shift in mindset and display of perseverance, to discover his true calling, he fought his way out and is now on a rocket ship. Now, I know this isn’t everyone and to a certain degree, it’s not me either. I didn’t love the big law firm life, but I do enjoy practicing law. And I think some of us can relate to that. And I’m not trying to talk you out of continuing your successful career. Instead, my hope is that you listen to this show, and it motivates you to stop investing for retirement when you’re 65. But instead, start investing with the goal to live life now. You’ve worked hard to get where you are, you probably make a good income. Use that success and that income to buy cash flowing alternative assets that pay out today and in the near future. Give yourself the option to be free to live life on your own terms to work when you want to. Alright, get over to www.escapetobillable.com right now and download the absolutely free guide to passive investing in alternative assets to get the ball rolling today, signing off, celebrate the journey.
