All Things Real Estate: Getting Started, Scaling Your Team, And Living The Dream With Jason Mcdougall

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Finding opportunities in the market has always been hyped and encouraged—but it is actually as challenging as it is dreamy. In this episode, Jason McDougall shares with us his financial journey and all the gold nuggets he got in real estate from learning the hard way! Jason is a DFW All-Star, real estate investor, and founder of Next Era Home Buyers. How do you pick a market to focus on? Why is success in social media not as perfect as it seems? How do you gain freedom from real estate? Tune in and learn all about getting started in real estate, scaling your team, and ultimately, living the dream!

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All Things Real Estate: Getting Started, Scaling Your Team, And Living The Dream With Jason Mcdougall

I’m here with a good friend of mine, Jason McDougall. Jason, thanks for stopping by.

Thanks for having me on again.

Jason is a DFW all-star real estate investor. I’ve known him for about a decade now. Jason, why don’t you tell everybody a little bit about yourself?

I got into real estate in 2016. I had a W-2 job that I felt like somebody wanted way more than I did. I fired my boss in 2016. My wife was a few months pregnant. I started out wholesaling and flipping and then got into the rentals. That’s where I am now, stacking up the rentals.

That’s a good time, 2016. I’m not sure about the whole pregnant wife part being a good time.

It was fun.

We don’t know what we don’t know. We forget what we did know. I like to start every week with a segment I call the Bottom Line Up Front, the BLUF. When I was in the Marine Corps, I was an intelligence guy. We had to brief the generals. They would always say, “Don’t bury the lead.” You have to say the most important thing up front in case there’s a mortar attack or people have to get up and leave or whatever. Bottom Line Up Front, up to two minutes, anything you think people should be thinking about now, maybe focusing on, maybe avoiding, monitoring in their business or the economy. Take it away.

The most important thing to look for right now is opportunities. Back when I got started in 2016 is when I started buying houses. I was in real estate in 2011 trying to learn the business. Those were the best buying opportunities of most people’s careers. We’re about to get into the same situation now. Don’t be fearful of the market. Buy them, but buy the houses responsibly. Make sure you’re buying them deep enough to account for any drop in value in the future or something like that. Also, stack up some cash to make sure that you’re staying liquid during that time too. Both those things are super important. A lot of the people that are on the sidelines right now are going to miss some great opportunities to buy some good deals to hang onto for many years to come. That’s my advice.

You said some things that are important that we have to peel back the onion. Buying deep. Why do you say buy deep right now?

We all don’t know what’s going to happen with the market. It could go down by 10% or 20%. I personally don’t think that’s going to happen, but you never know. Buying deep where you have enough equity portion to always make sure you’re not upside down, and there’s enough juice in that deal. Maybe if you have to refinance it in a few months after your rehab and the market’s changed, you’re still good. You’re not going to be stuck with something in a bad loan or whatever.

Buy deep where you have enough equity portion to always make sure you're not upside down. Always make sure there's enough juice in that deal. Click To Tweet

At RCN, to do well over $1 billion in loans, and as I shared with you at lunch, trying to do another $500 million or so by the end of the year, we’ve always got to have cash. When you’re funding hundreds of loans a week, you have to have cash. There are some people that say cash is trash. It rhymes and it makes a good little meme. You said during the BLUF to sit on cash or conserve cash. What is your business or investing thesis on how much cash to keep at any point in time?

I don’t know that there’s a number. For each person, it’s probably different. For me, I want to have enough where I can maintain if there are no rents for six months across my portfolio. I want to make sure I’m not going to have to give those properties back. I want to make sure I can cover the debt on those. Also, for opportunities. There are some opportunities that might come up where maybe a lender isn’t available or maybe you can’t get funds fast enough or something, but it’s a great deal. You want to have cash available for that too. Cash is trash. I’ve heard that. I know it is because of inflation and stuff, but it also makes you feel good to be sitting on some cash. You can’t put a number on that investing-wise. There’s no return on how you feel.

A great mentor of mine used to say that real estate can make a millionaire out of a multimillionaire quickly. You can get real estate rich and cash poor. You can’t service your obligations, but you also can’t take advantage of opportunities. That opportunity cost is huge.

Real estate isn’t completely liquid. It’s pretty liquid. You can sell a house, but that takes time. If you have an event where you need some liquidity and all your liquidity is tied up in equity, then you’re stuck.

What amount of cash these days can buy a house? You hear everyone complaining about how affordable homes are. You hear everyone complaining that you can’t get started in this. What’s the cheapest house you’ve bought in the last few years?

$4,000.

That was a lot.

It was a livable house. It had a central AC and the roofs were a couple of years old. I did a $20,000 rehab on it. It appraised at $70,000 after rehab. It’s a lower-priced house, but there are opportunities out there that are maybe not inside a metropolitan area.

How does one pick the market and sub-market focus area when they’re looking at either today’s market or markets in general?

For me, it was like what is a market that is stable. There are Walmarts available nearby and a Home Depot. It has a good employment base and is within an hour of me. That’s what I picked. I picked Wichita Falls for that reason. I was investing in DFW, but Wichita Falls drew me for those reasons. The prices were cheaper. There’s more inventory available. There are markets like that around Texas.

I wasn’t going to throw your market out there, but you did it. There’s an Air Force base there and there’s a regional hospital. I’ve played around with that, looking on Google Maps and typing in regional hospitals. That’s a good idea. You find these in Wichita Falls, Greenville, Brownwood, and Abilene. You find these population centers where the big money probably isn’t going to go, but they do have a Walmart, a Home Depot, a Buffalo Wild Wings, and a regional hospital

Also, a Sam’s Club.

Wichita Falls, aren’t you worried if there’s a recession and everyone will abandon the town and move to Dallas?

Not really. Wichita Falls, if you look at the population there, and this is like a lot of these smaller Texas towns with 100,000 people. They tug along for population. They don’t increase and decrease. They go straight along. It’s been that way forever. I’m not worried about an economic crisis in Wichita Falls. I don’t think that’s a risk up there.

What we saw in 2008 and 2009, when you go back and look, it was the rural farm towns that suffered population declines. In towns like Wichita Falls, Brownwood, and Greenville, people that aren’t from DFW are like, “What are these places?” They gain population because the worst the economy gets, people have to move into city centers to population centers. That’s where the housing authority is. Our government is there in times of need. I’d call Wichita Falls almost a tertiary city, but it’s a secondary city. That’s where people have to go when they’re in need of jobs or housing or money from the government.

A lot of these houses are still affordable. That $4,000 house is an anomaly. Most houses are $120,000 or $130,000 ARV there. There are markets like Tyler, Texas, Longview, and Greenville, all those are the same way. As people start to get priced out of DFW, because it’s getting expensive here, and they can work remotely, they’re going to move to some of these other markets where housing is a lot more affordable. They still have their quality of life with all their Sam’s Club and stuff like that.

I had a friend that did the same thing in Atlanta. He was flipping a lot in Atlanta. With the institutional competition, he had gotten to where he was fed up. He did the same thing. He looked for these regional medical centers. In Texas, we have Raytheon way out in Greenville. He looked for big job centers, military bases, and that kind of thing. He found a market where there wasn’t a whole lot of people. He’s been crushing it. I wanted to now flip back to, what does your business look like now?

I had the team in the office. I had employees. I had an office I had to go to. I had this job that I created for myself. I hated it. I’m a terrible manager of people. I did not enjoy it. COVID hit and I had an opportunity to start over the way I wanted to. I started over with a one-man shop and a couple of virtual assistants. Now, my days are whatever I want to do. I have complete freedom of my time. I’m okay with not having huge stacks of cash, flipping tons of houses, and wholesaling tons of houses. I’m focusing on building my rental portfolio and wholesaling some stuff on the side. I’m taking it easy.

Up before COVID, you were fairly active in the DFW real estate investor scene, doing a lot of volumes, growing your team, getting offices, and hiring full-time personnel. I remember one time you had made a post about someone that you had hired that was smoking pot in the break room or something. Why don’t you spend some time talking to the audience about that journey from 2016 to 2020, what led you on that path, what put you on the reset, and how that worked out for you?

In 2016, I started wholesaling and flipping houses. I thought that was the path. I scale that up and do more of that. I realized I made another job for myself and I was trapped. I’m like, “Where do I go from here? This is what you’re supposed to do.” COVID hit and everybody was forced to shut down. I closed my office. I let my employees go. I spent a lot of time with my family. We went on walks and hung out all the time.

I was like, “This is amazing. I love this. I don’t want to give this feeling up. I want more of this. This is what I’m after. This is why I quit my job.” I had to figure out how to make that happen. I had to do something to stay active to produce income, but it didn’t have to be like the grind of transactional volume with wholesaling and flipping houses. I was like, “If I could do a couple of wholesale and stack up rentals, that would meet my cashflow needs and help me grow my wealth at the same time and do whatever I want with my time.”

Transactional volume. If you didn’t read the episode with Eddie Speed that we did, you go back and read that. He said that you have to always take a look at your transactional growth and your wealth growth. If one is growing faster than the other, you’ve got to slow it down and increase the other. You’ve got transactional income and wealth income. There are a lot of people out there, and I’m not throwing shade at anyone, that do hundreds and hundreds of transactions a year, but they have low margins and high overhead. That’s one of those things that I’ve been guilty of.

Sometimes the dance is all fast music and everyone is having a good time, but then there’s that slow dance and you realize you don’t have a partner. You feel like you’re standing there alone. That’s the economic slowdowns and the ebbs and flows. Talk a little bit about why you went down the road of getting the office, building the team and scaling. It’s what you felt like the industry told you should do. I spend will some time there because there are a lot of people that are either in that trap or will get into that trap. We can help them avoid it.

One hundred percent, it was social media. I was starting in real estate by myself. I did a good amount of volume by myself. I saw people on Facebook or wherever hiring teams and scaling. I was like, “That’s what I got to do too. I need to scale because these guys are crushing it.” I tried that. I realized I’m a terrible manager. I shouldn’t have done that. Those other people that are doing it, either they’re smart people and doing a great job, which a lot of them are, and we need those people, but there are a lot of people that were doing it and not having much success with it.

I see people getting burned out on that stuff. I took a pause from the whole social media thing, the whole Facebook thing because I feel like a lot of those people were full of it. I don’t think that all the successes that people are posting all over Facebook are real. I’ve tried that and I know it’s super hard to attain that level of success. I’m not the smartest guy. I also tried to figure it out and it’s super hard. The peer pressure is what got me started and also got me off.

There’s a lot of peer pressure in social media and masterminds. I love masterminds. I’m part of several. You have to make sure you’re in the right one, the one where people are up there being raw and truthful. My old thing and the question I ask every investor that presents their business to me is to say, “How much do you keep?” Ultimately, if you’re doing $300,000 a year at $5,000 a pop, you’re doing $1.5 million in volume. If your monthly overhead’s $50,000, now you’re down to $900,000 in volume. That’s all ordinary income. By the time you pay taxes, you’re down to $600,000. That’s typically the numbers you see people sharing, but before commissions and splits. I don’t think I’ve ever posted a check or a HUD because I’ve had enough checks and HUDs to know that that number is never accurate.

That is not your net profit.

I look at the percent retained revenue. I still run a wholesale business, but I manage it to 55%. If we make $1, I know that 55% of that is gone between advertising, the calling software, the CRM and all that, and then commissions. That’s the only number I look at. It may do $1 million in volume this year, but I know I’m only making $450,000, and I’m paying 20%-plus of that to the IRS. It makes me $350,000. It’s a decent business, but people get lost in the true net number and the effort it takes to do it.

A couple of years ago, you said, “Keep it small and keep it all.” That’s not just for keeping all the money, it’s also for keeping all the time. As I get older, time has become valuable to me. Being able to do whatever I want and not have a team to manage, not have processes to manage, and making sure people are doing this or this or this are important to me.

Keep it small and keep it all. Click To Tweet

I feel like in the real estate investment game or business, ultimately, the guys in the middle get crushed. It’s like if you’re small, you make a lot of money and enjoy your life. If you get big, I mean hundreds of transactions a year, then you get to where you’ve got some consistency and some scale. That middle ground though or that $50,000 to $100,000 is tough sledging. Too many people in this industry judge their own successes by what they see on social media instead of what’s in their bank accounts. What made you shift to buying more rental property?

I want to quit working as soon as possible. I want to enjoy my time. Buying rental properties allows me to buy some of my time back where I can do that. As quickly as I can stack up rental properties, I’m doing it. I probably won’t stop that. I’ll just trade to a different asset or something at some point.

You may be the fourth or fifth guest that has said the exact phrase, “Buying back my time.” Not buying back time, buying back my time. I find it interesting. If you go to my personal website, TimHerriage.com, the header says, “The business is the vehicle, not the dream.” I wrote that as a reflection upon myself because there have been many times in my business when I didn’t have time for my family and my kids. I would neglect my wife because I was busy growing the business and creating the dream.

One day this, one day that. Now, out of age and wisdom being a 40-year-old, not a 30-year-old or not a 20-year-old, you can look back and you can say, “What if you didn’t have to wait for one day?” That’s what I was telling you that day we had a barbecue at Ten50. I remember that day. I saw how you were building your team. There’s something about it, and maybe we can reach out. It’s a highway to nowhere at times.

If you’re not intentional and you don’t know why or what you’re building, then it’s transactional revenue. It’s widgets. You will build a manufacturing business, which is cool, but let’s be honest, you manufacture a product for someone. You’re a dealer. That’s it. You’re not an investor. Let’s stop calling it investing. I don’t want to be too negative. Let’s refocus on rental property. What have you found in a rental property that makes you happy?

To be completely honest, rental properties are a pain. They don’t make me happy as far as the day-to-day stuff. Fixing up a property and bringing something back to life is fun. Seeing the equity capture on that property is fun. Knowing that no matter what, I’ve got some security there. My rental properties will take care of my family if I pass away or whatever. That’s important to me too. All those things that unlock freedom are important to me and are appealing for rental properties. That’s mailbox money.

The cashflow, that’s the thing that you’re saying could take care of your family. You’ve got that equity captured. What about the tax advantages? We had lunch, you and I. I was sharing with you some of my successes on cost segregation and bonus appreciation. You were smiling because this is where the teacher becomes a pupil or whatever. You’re like, “I’ve been doing that for a while. Isn’t that great?”

It’s good stuff.

It’s amazing. It does put you in a position where you’re living the dream while you’re creating the dream, versus creating the dream to one day live it. You’re living in it while you create it.

I don’t want to wait. I want to do it right now.

Your wife’s name is Miranda. You all work together-ish.

She lets me do my thing. She takes care of the house, which is a great partnership.

She’s probably more trying to push you out of the house these days than trying to wonder where you are. It’s an adjustment. It is time for the Money Minute. Imagine there’s an entrepreneur out there just getting into real estate. Maybe they’ve been in real estate for a while and maybe they feel alone, they’re struggling, or they’re successful and not finding fulfillment. This is the only 60 seconds of advice they’re going to get all month. That’s it. All they get to do is read this.

I’ll take this from the perspective of talking to my younger self, but this is also advice I try to give people that probably don’t want to hear it. We’re all going to die one day. We’re all going to die, unfortunately. No one has figured out how to pass that. You have to spend your time doing what you love. You cannot spend a moment doing something you’re not passionate about and that you don’t love. Whether that’s real estate or writing a book or whatever, my advice to my younger self would be to follow your heart and do what you love.

Don’t chase the dollars. Chase the dream and the security that’s going to bring you and your family. I wish I would’ve started sooner. I wish I would’ve been scared to take the action that was needed to get into real estate and do whatever I want with my time. I wish I would’ve done this when I was 20 instead of 34. That’s my best advice. Don’t give up on your dreams. If you fail, that is okay. You have to change your course and try again and again. I fail every day, but I try to change my course and get better every day too. That’s my advice.

I’m going to pretend like you’re a huge fan of my show because you said something else everyone talks about, passion. I have a 21-year-old son. He’s studying to be a commercial aviation professional pilot at Oklahoma State. I shared with you that I don’t want my kids in real estate. I want them to invest in something, assets, real estate or whatever. I want them to spend their days and time doing what they love. I’ve spent too much of my time doing things that I don’t love.

That’s why I’m fortunate to do what I do now because I get to do what I love every day, help investors and share twenty years of mistakes and a couple of things I did right. Let’s get into the rapid fire. I have a lot of questions for you. You drive a hybrid. You used to have a truck. You used to post all this stuff at Home Depot. Now, I see your little hybrid car leaving Home Depot with a 20-foot 2X6 hanging out of the back of it. That’s something important to you.

I’m waiting for the Cybertruck to come out. My other car got totaled and I was like, “I need something right away.” I got that car because I am a hippie. I like to take care of the planet and stuff. I got this hybrid. I thought it stopped me from hauling a lot of stuff to job sites. It did not stop me. I bought the wrong car. That car is universal. I can fold seats down. It’s a problem.

Now that you’re not as active in the local real estate scene, do you miss it?

No, I don’t. I did those presentations and stuff like that. It was a lot for ego. It didn’t have any other purpose. I got to meet some cool people, whom I’m still friends with. I’m grateful for that. I don’t miss the rah-rah ego side of things.

One of the hardest things about the real estate investing business when you’re getting started is you are alone. You’re sitting there in your house by yourself, cold calling or talking to your VA in some other country, but you don’t want to get into the, “Let’s try to show off,” and all that. What should investors do to maybe network with like-minded peers, but not get sucked into some of the traps that are out?

You hit it earlier, masterminds are great. A lot of the free networking events are a lot of the same thing that’s on social media. A lot of people are fake. When you get into something that’s a good mastermind group where people are vulnerable and tell their story, that’s important. Networking is great. Some people say your network is your net worth, but I think it’s who knows you more than who.

That has been the closing line of several speeches of mine. If you know me but I don’t know you and you call me for help, I’m probably going to push you off on someone else. If you haven’t added value to me or you’re not memorable or you haven’t made yourself stand out, it’s going to be hard to get someone else’s attention. I know who Joe Biden is, but I probably cannot call him and get some help.

He doesn’t know you.

Jason, your perfect day in this business, what does it look like?

A perfect day would be waking up in the morning, playing with my kids before they go to school, working out after they all leave the house and mama takes them to school, and then getting onto some to-do list stuff, doing a little bit of cold calling, and walking the dog. I enjoy my days doing what I want while also sprinkling in some responsibilities.

There’s a big push in larger shops with KPIs. In RCN, we have KPIs. You have to when you’re managing a big team. How do you hold yourself accountable as a solopreneur and make sure that you’re being responsible with your money, investments, and time?

Every entrepreneur has to be super responsible with those things, time and money especially. For me, it’s never been a problem to be responsible with my money because I’m cheap. My time, that is important to make sure I’m using my time wisely. If I have something, I need to knock out a time block to knock out those things that are important to get done. I always make sure that I’m hitting my personal goals. If I need to add two rentals this month, I make sure that’s one of my goals that I’m hitting out and taking consistent action every week to do that.

I’m hearing time blocking and a to-do list, almost goal planning. I know a lot of successful people do that on Sunday nights. They’ll write out what their week is going to look like, what they’re going to be focused on, some personal accomplishments, and that kind of thing. Any tips on that type of front that you can share?

That’s great. Mine is Monday. Mondays are my admin day. All the stuff I don’t want to do that has to be done for running a business and maintaining a portfolio, I do that stuff on Mondays. The rest of the week I take Thursdays off for hanging out at my kids’ school or golfing or whatever. Fridays are the day that I go to Wichita Falls and check on all the projects. Tuesdays and Wednesdays, I’m trying to make some money. I’m trying to find some houses to buy.

Thursday is a day off. Monday is almost your Eat That Frog! day. Have you ever read that book?

Yeah.

The worst thing you had to do every day when you woke up was eating a big slimy frog. The concept is to eat it first. I’m telling my salespeople all the time at RCN, “If you have bad news to deliver to someone or an appraisal doesn’t come in or their credit score dropped 100 points overnight and they didn’t know it or whatever, make that call first.” You know this from being in sales. Every time that phone rings, it’s like, “No.” You’re afraid it’s the person that you have bad news for. You eat the frog on Monday, you’re productive on Tuesday and Wednesday, intentionally take time for the family on Thursday, and then Friday, I’m guessing you’re probably verifying that the contractors did what they were supposed to do.

Project management.

You’re watching your money. You’re making sure that your money is about to go to what it’s supposed to go to. Any parting thoughts or parting shots?

My biggest parting advice would be if you are going to scale a team, make sure you have all your systems and KPIs that Tim was talking about in place to do that. Make sure you’re watching those people. Stack up some cash right now.

This is where I often ask people if someone wants to get ahold of you, how do they? It sounds like you’re saying you don’t want them to reach out to you.

I would like to make it difficult. I’m on Facebook sometimes. Hit me up on Facebook.

You can follow Jason McDougall, real estate investor. I appreciate you doing this. I know you don’t get out of your Northwest DFW area of responsibility often. It means a lot to me that you took the time to come here. Thank you. That’s it for this episode. We’ll see you next episode. Remember, your network is your net worth. Today, you’ve been growing both. We’ll see you next time.

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About Jason McDougall

My name is Jason McDougall. I am primarily a Single-family investor based out of the Colleyville, TX area. I am looking to connect with Investment properties. Make sure to Friend me and Like my Connected Investors profile.

The following podcast program is furnished by RCN Capital LLC. The information provided is for general educational purposes only and does not constitute any legal, tax, financial, investment or other professional advice. The views, thoughts, and opinions expressed of any speaker are the speaker’s own opinion and do not represent the views, thoughts, and opinions of RCN Capital LLC. No information contained in this episode should be construed as financial, investment or legal advice from RCN or any individual, author, host or guest. You should always consult a financial advisor before investing.