The Mark Perlberg CPA Podcast
The Mark Perlberg CPA Podcast
EP 65 - Healthier Homes and Success in RE Development w/ Daniel Brown
Ready to transform your real estate game? Today, we’re joined by Daniel Brown, a British entrepreneur who left behind a successful chain of jewelry stores in the UK to make his mark as a real estate developer in the US. Gain valuable insights as Daniel recounts his transition from rental properties and house flipping to new construction, sharing the rewards and pitfalls of each investment type. Learn about the tax implications specific to these ventures and the importance of maintaining liquidity and a robust tax strategy to ensure long-term success.
Continuous learning is crucial in evolving industries, and we dive into the importance of investing in educational opportunities and effective networking. Hear about the transformational impact of joining networks like the Genius Network, which led to a 10x return on investment. We cover practical techniques for applying acquired knowledge efficiently—avoiding the traps of intellectual overstimulation—and leveraging tools like ChatGPT for summarizing key points. Discover the benefits of team book clubs and revisiting impactful books for ongoing growth.
Finally, we tackle the complexities of real estate investment funding strategies and efficient inventory tracking. Daniel shares how he leveraged capital from his previous business and attracted private investors, emphasizing the balance between sufficient working capital and avoiding idle money. We discuss the role of modern tools like QuickBooks for streamlined bookkeeping and highlight a special investment opportunity with Brownstone Capital Investments' 506C fund. Offering a diversified and agile approach to real estate investment, this fund aims for promising returns while spreading risk. Tune in for a practical, insightful, and actionable episode that could significantly boost your real estate ventures!
Welcome everybody. I'm so glad to have you guys on the show here and where we talk about taxes and real estate and businesses, and I'm excited to have our guest, daniel Brown, here. We're going to talk about his journey to navigating the world, for starting in rentals and flipping and development and some of the things that he's learned along the way and the tax implications of what he's doing. Dan, can you introduce yourself in 60 seconds or less?
Daniel Brown:Thank you, my friend. I live in Texas but the accent may give away it's not my original home, so I'm a Brit. My old business was a chain of jewelry stores in the UK, sold that 11, 12 years ago and then my wife and I and our five kids decided to emigrate. Follow the cheesy American dream, but I do believe it's alive and well. We lived in California initially, moved to Austin just over five years ago. Austin is home. I fell into real estate because I had to put money somewhere, so I bought a bunch of rentals around the US and then over time turned into my real business where I moved into fix and flips and eventually new construction. And our business now in Austin is focused on building high quality, spec homes all around the Central Texas area, selling them on just buy, build, sell, and that's kind of our journey. I'm a health geek, I'm a personal development geek. I can go off all sorts of interesting tangents. So let's see what you take me today, things we're going to summarize real quick uh, something to dan about.
Mark Perlberg:Uh, you know he started off with doing rentals and flips and what you know, to us we, one of the things we talked about was the rentals got kind of boring and the flips didn't really allow you to create your envision. Can you just retell you the journey of what got you sure into pivoting into doing what you do now and what's the advantage of what you're doing?
Daniel Brown:Yeah Well, rental as a starting point was purely I've got cash from selling my old business and where am I supposed to put it? And everyone says you should own real estate. So I did. It was a very simplified version of it Ended up with a bunch of rentals, started in the UK and then heavily in my new country, right here, and once you've got them, you've got a property management company looking after everything. Nothing else happens.
Daniel Brown:So my entrepreneurial brain then was bored and looking for things to do and looking to be more aggressive and I just followed what seemed like a natural next step. Okay, flipping houses. I've seen it on TV. I know some people now that do that because I've got rentals. Let's try flipping houses. It was great, it was horrible, it was a mixture of both, because some went really well, some I lost a fortune on, but it was great. Learnings along the way Then fell into the next step.
Daniel Brown:I was living in LA, california, at the time and did some high end new construction, which I really liked, because I got to create what I wanted and, other than the limitations or the challenges you might have dealing with the bureaucracy of whichever city or county or whatever that you're in, you're kind of in control.
Daniel Brown:With a flip you've got a base that's already there. It's like this is the size of the house, this is the footprint, these are the ceilings, this is what's there, and you also don't always know what you're going to get, even with the best due diligence that you've bought it. And I like new construction because I can say I have a vision for the home I want to create and no one else is going to control that but me, and that made sense to me. And then we moved to Austin for lifestyle reasons and this was then exaggerated because Austin is really not a fix and flip kind of city. It's a heavy new construction city and that became our core and now that's our key focus, like right now. Today we have 13 homes on the go at various stages, a few on the market, a few about to hit the market. All different elements, but that's our heartland.
Mark Perlberg:And another thing we were talking about here, but that's our so you know. And another thing we were talking about here now I have seen hgtv birth some pretty unprofitable, you know, house flipper side hustle folks where. And I I don't get it because I'll see these guys on hgtv and they have a whole episode about a house that nets them like forty thousand dollars and and like which is, I guess, all right. But you know you have a lot of volatility. You don't really know what's going to go down in these properties until you actually work on it. And also, when we talk about tax advantages of real estate investing with flipping, it's like the opposite of what we see with rentals, because with rentals you have cash losses with depreciation and you accelerate that depreciation with cost segregation studies.
Mark Perlberg:We have instances where clients, especially back in the good old days of 100% bonus, where a client would put 10% down on a second home mortgage and write off like 35% of the property. So imagine getting a tax deduction with leverage that's in excess of the cash that leaves your pocket. We love that. We love when we're getting a deduction greater than the cost to create it. But we kind of see the opposite here, where cash leaves your pocket, you're rolling your profits into inventory and you can't write off any of the inventory on your taxes until the property is sold.
Mark Perlberg:So liquidity and also budgeting for taxes becomes a challenge here, especially for new folks that haven't had the opportunity to really build up a nest of cash in order to collaborate with the tax advisor and have a really solid game plan here. Collaborate with the tax advisor and have a really solid game plan here. And so tell me about. So how you, in the early or in current stages, how do you navigate this path of making sure liquidity is not a concern and you always have enough cash to reinvest into these vehicles as the projects are being completed and you're not being hindered?
Daniel Brown:And that whole tax piece is so interesting are being completed and you're not being hindered and that whole tax piece is so interesting. This, for me, is about dog wagging tail or tail wagging dog kind of thing. So for you and all your tax-based listeners, the next thing I say I don't intend to offend, I don't care about the tax. What I care about is the end result, whether that comes from more profitability or lower taxes or whatever it might be. It's all ultimately different inputs to get a result. And I think and this is only just hitting me kind of as we're talking I think that rentals are more in that passive investment world, so it can be a side piece of your normal life. So you've got your job or your role, your entrepreneur, your business, whatever else, and you have some capital. Can putting a bunch of that capital into rentals make sense? It can absolutely. It's just my opinion, but it can be a steady source of income. You're owning a real, tangible asset. And then people like you can do all sorts of clever things to create all sorts of tax advantages and that's great, because if that's me in my entrepreneurial business, which is selling a widget of some other sort, this sits very separately and doesn't distract me very much, so I can see the potential. As long as I will say, people can take on enough different rentals to diversify. So you can never guarantee success If you decide to take on a single rental home. If you're unlucky that's the one that doesn't work out well, and then everything was in that and that becomes a distraction as well. So I've often said to you know, friends, if you're going to get into that, you want to own your own rentals. Potentially create a situation where you get into a few quickly at the same time or close behind each other to spread the risk, and then that's when a tax expert like you comes into play.
Daniel Brown:Flipping houses and new construction for me is different. I think I apologize to anybody, and so that should be left to the professionals. Now, for many years I wasn't one, so I lost a fortune on some of these. I also made a fortune on some, and when I had my aha a few years ago, I really started to reflect on it. It was the learnings from the ones that went wrong that were probably even more powerful than the ones that didn't, and luckily I had enough capital behind me to keep going, because they always say you know, the journey towards success is just a long journey and lots of the paths off that are failure. You just have to keep going long enough to get to success. Now I was able to to get to that point.
Daniel Brown:But to take on a flip, like one of the TV shows you see or a new construction piece, can take over your life because you know nothing about it. You're going to outsource to a GC who unfortunately often won't do a great job, will go over budget, will be slow to communicate, will run late and everything will cost you more and more and more. And you're trying to live your normal life, working 40 or 50 hours a week and doing this in the evenings and in the weekends. And it's horror story time and that's why it makes good TV shows, because then someone can swoop in and save the day. But I think it's realistic that that can be a problem. Now there'll be somebody out there listening who is an amateur, so to speak, who's had great success with new construction. Great. I'm just generalizing, intentionally generalizing, and saying be cautious if something's going to occupy a huge amount of your time and focus and you've got to be the professional.
Daniel Brown:I lost a fortune over the years by being too trusting of general contractors. You know they make the promises they're going to come in the right way, but you don't really know how they're going to be until you start working with them. I don't have that problem anymore because we're the GC. I don't rely on anybody else in that way. We run it ourselves and that gives a lot more power and control. But it's a lot of danger along the way. So in some ways it's like well, which is the least distracting, best tax advantage thing? It'd be taking on a few rentals at the same time and turning to you or someone like you and saying make this work even better for me. That's great for the passive investor. I think, unless you're going to turn pro, be really careful with flips and new construction.
Mark Perlberg:I may have gone off a tangent. Let me know how well I'm answering your question. Yeah, so you know I and thinking about this. You know, obviously we love the tax advantages of rentals. But that's only one equation here and even if the rental is going to appreciate in in cash flow and all those beautiful things, it still may not be the best way, resource for way, for you to deploy your resources, because you know what is likely better than any rental is a really good assistant. You know, uh, you know a staff member who can deliver, who can drive profitability year after year and empower other staff members. So as a business owner, it's easy to get carried away and obsessed when you hear about all these cool things with Reynolds. But the tax savings and profitability is only part of the equation here. And when people ask me, where are you investing? And I said, well, my best investment is in my staff, because that's all we are. You know, especially in the service industry, that's all we can really stand by. You know processes and staff.
Daniel Brown:I so agree with you. I'm a huge fan of a number of great books and authors and Instagram personalities, but the standout that you're making me think of right now is Dan Martell and his wonderful Buy a Backy Time, which I'd recommend to any business owner, leader, etc. And it's exactly that principle. Part two have an executive assistant and develop your team further and so on, and free up your time and your focus and improve your own skill to go do more of the thing you already do well, and let that be where you get the biggest return. Now, obviously, if you get to a point where I've done a lot of that now and I've still got excess, go you now. Go find ways to invest it, and it might be that a rental portfolio is the way to go. I can almost guarantee it's not going and doing side hustles or flipping houses or building new ones. That would just create destruction.
Mark Perlberg:So I think we're very much in the same way of saving time. I just purchased his book on um kindle and I pasted out the section on emails and gave it to my va and I said do what this guy does, so. So we just took a page out of his playbook there and, uh, the, when it comes to buying back your time, I mean, I'll always say the best investment you can always make it is in yourself and your education. Um, and I'm now wondering to you were there any one any particular times, times where you you had cash and invested it in something, or time and invested it into something where you know, maybe you you could have done another project, you could have done another rental you could have, but maybe you had a coach or a resource or even a book or a course or something that that was trained.
Daniel Brown:Yeah, I mean, look, you and I met through genius network. Um, I'm a huge fan of that. That's a serious expenditure and it's been transformational for me, like my life has changed. My health, my self-belief, my connections, my business in general has rocketed and they're big. They talk a lot about 10x in your investment. So whatever you're spending on genius network, we would like you to think that you're getting at least a 10 times return on that, and I actually am. I could prove I have had a 10x return on what I've spent so far. So that's an amazing thing.
Daniel Brown:I'm going to the right courses or conferences or whatever it might be. I've had a number of those inputs over the years. Now the challenge, I think, for anyone is you know there's that phrase, quote knowledge is power, and I chat with my COO and co-founder, henry, often. We say we disagree. We actually think applied knowledge is power because you can learn stuff all day long. You don't do anything different.
Daniel Brown:And what's the point and the greatest challenge whilst reading a book or being at some great conference or an entrepreneurial mastermind, is the actions you take away, actually really doing things. Um, so when I read a nonfictionfiction book, I've always got my highlighter with me and I'm highlighting every page or phrase or section that seems important, and when I'm finished I go back through and take a photo of every page that has that and put it in a folder in my phone and then I read through all those photos and work out right, that's the thing I need to go and do, and that's the thing I need to tell somebody about, and so on, and try and force some actions or something is different. So it's almost like telling people how to suck eggs, how to read a book, but now I'm saying how to actually apply something that comes from that.
Mark Perlberg:Oh, it's amazing how many books I have on Audible and it's really easy to fall into the trap of before you implement this book. You get this kind of you get this shiny object syndrome. Oh, this book, this is the one that does it for me. And when you look back at all these books, I've realized it's easy to you know you'll often realize is, had you just taken each of those books and just applied the knowledge like just thoroughly digested and implemented what you learned in that one book, you probably would have been far further along than you know, rushing ahead and jumping to all these new concepts and just trying to internalize everything, assuming you're just going to have it all downloaded into your brain.
Daniel Brown:And what I've called this the phrase I call this is intellectual masturbation, which sounds like so much you know you're just getting all stimulated but nothing comes out of it well, yeah, you're just seeking short-term pleasure rather than long-term happiness and peace.
Mark Perlberg:That we know that's not a good idea the joy of learning and and you're like, oh, this is cool, this is so interesting, I gotta do this. But at the end of the day, if, if actions aren't being created by it, then you're missing out on a lot. So what I've done as well is, while I love audio and I will listen to audio books in my car, I'll write myself some key takeaways in the car. I'll send a voice message to myself. But also, if you find a really good book, like you said, sit down and really make some SOPs out of this book, like with Dan Martell's book, which actually I didn't even read. Actually, I think I listened to it. But that's really where the beauty is is if you can really turn this back.
Daniel Brown:You can even play with something like Chat Now, chat, gpt, and I sometimes take take. Well, here are the 10 favorite pages I took photos of of that book and I just quickly upload them and say chat, look at what I highlighted, which it can now tell. It can actually see the yellow highlight on the the image and make me a summary of what I've got up here and I'll read that summary and then maybe make I make a calendar reminder to myself for a month time to reread that summary because I feel like it might be relevant. There's always ways and, um, I haven't done this much and I'm going to do it more.
Daniel Brown:Some people talk a lot about reading the great books as opposed to reading new ones, and the reason I battled it is because of my own little self-talk around I want to read more new books. It's that same thing. It's like I want to get through. Last year I and I felt like an achievement. Now it actually was because I did change many things in my life by reading those 65, but I could have just been driven by the number. I got through 65 and changed nothing.
Daniel Brown:It would have been a complete waste of time and I look back at certain books and think that's really beneficial. And as a team in our business we actually have our little book club now, where we read a book, not together but over the course of a month, and then we get back together and share it at our monthly meeting. And what's great is it's forcing me to. I only want to recommend a book to my team that I've read already and think will be a good fit, so I at least reread it once. So it's fresh in my head when we get back together and the number of enlightened moments I've had by rereading these books has been so interesting to me. So now I'm much more relaxed and focused about going back over the winners and reading them again and going deeper.
Mark Perlberg:You know I have a alex hermosi's um 100 million dollar leads listen to in my car. I was like, wow, this stuff is good. I didn't do anything with the book. And my client sent me the physical copy of the book and I've sat down and read it and marked it up like crazy and and it's like I was like man, why didn't I? I I actually do anything in this book the first time, like there was so much gold here and uh, you know, some of my favorite books that I've re-listened and or read were Obstacle is the Way. It's just the most amazing book Every.
Daniel Brown:Ryan Holiday book is wonderful.
Mark Perlberg:Yeah, I love his stuff, and that one in particular. Just whenever I was not feeling great, that was my book. And then Think and Grow Rich another classic that you can will always have a new meaning based on where you are when you read. It will always have a new meaning based on where you are when you read it. And another thing I've learned that is really valuable as best I can, is to carve out an hour. If you can carve out a half hour to an hour of every morning for deliberate learning and studying, it's amazing, because it's so easy to get caught up in the whirlwind of tasks as an entrepreneur or even a W2 guy in the whirlwind of tasks as an entrepreneur or even a w2 guy.
Daniel Brown:Um, in you, for me, you're really talking about. Funnily enough, you're talking about one of the great books I think everyone should read, which is atomic habits, james clinton. There's a reason he sold 20 million or something. It's it's justified and creating those habits is so important. So my morning habit will be I get up, I have my electrolytes, I get my red light on and I read as part of my daily habit. No matter what, I've got a minimum number of pages, no matter what is happening. Even if I was getting a 6 am flight so I've got to be up at 3 or whatever it is, I am still going to make sure I do my minimum number of pages that morning.
Daniel Brown:It's become a habit for about four years now. Um, and that's vital to my mental health, my growth, that sense of achievement. Um, starting the day in the right way, not to faff around and drag out the morning when I could be doing some real work, but good, powerful, um, inspirational stuff. So there we go read atomic habits. To learn how to create the habits. To read more books could be a good way to go.
Mark Perlberg:That's interesting and you know I it's easy, especially in, I think, in any profession. But you know, we have all these urgent tasks, we have things that are behind schedule, so it's easy to say, well, oh, I'm not going to read, because this should have been done yesterday and this waiting for me. So this takes priority and this and this. But when you look back at all those things that you put ahead of your development, when you look back three years, five years from now, those things really didn't matter as much as you thought it did so yeah, playing with, um, urgent versus important can be, oh, such a challenge.
Daniel Brown:So that sense of urgent, of the thing that comes up, the email at the top of the inbox, the little fire that needs fighting can overtake. And then the important, which could be that long-term growth. What would happen if you read 30 pages every morning for the next year? Well, you would have read 30 books or whatever it is, by the end of the year. And what that will do long-term for your business and yourself and your family, whatever it might be.
Daniel Brown:It takes an effort to say I'm willing to ignore the fire, I'm willing to ignore the instant gratification of responding to my emails and my texts and so on, to take that long-term view.
Daniel Brown:And to me it's the same stuff that says why am I going to not eat the dorito right now, which should be very tasty and lovely? Um, and instead pace myself, eat the healthy food, go in the gym, which will benefit me in a month, in a year and, please god, in 50 years, whatever it might be. And it's it's being able to let go of short-term pleasures, which is, to be honest, I think most people would say often fighting the fire and replying to the email. It's a short-term pleasure thing. It's the dopamine here. I did something, I did something, it was useful and being able to step back and go, I'm going to suffer the pain, the discomfort of not doing the quick response things and I'm not going to get that dopamine here. I'm going to take my time and take the long-term view, because I'm thinking about a big picture here and I'm going to take satisfaction from that. Just like I'm not going to have the dorito, I'm going to work out instead.
Mark Perlberg:I think it's so powerful and I'm not saying it's easy, but I'm saying that we all have I um, and it is so easy to rationalize yourself out of doing those things. So you know the consistent discipline and you, if you decide beforehand you're going to help. I've found preventing it with the habits just embedded in yourself. Tell me about um. So let's talk about raising capital, because I know last time we were talking we were chatting about raising capital. How has that journey been for you?
Daniel Brown:it's interesting, it's it. Everything seems to take longer than I expect. Maybe that's just me and my nature. I'm like well, if I don't want to do a thing, let's go on and do a thing. That's not how most people operate. Um, going back to actually something you you asked me I probably didn't answer it right at the beginning around the capital needs for doing new construction and could be the same for fix and flips and so on.
Daniel Brown:I was blessed to have money from selling my old business. It gave me a great place to start and then, once the business got developing and really got going, we had brought a few private investors in as well. But having enough capital upfront for flips or new construction is vital. They tend to all work in the same way. Unless you're going to do everything for cash and you know you've got enough cash to start that You've probably got a construction loan or a fix and flip construction loan or a new construction loan, and the way those loans usually work is the lender goes sure, I'm going to lend you $900,000 to build those two houses on that lot there. I don't want to give you any of the money. You need to go and do some work. Prove to me you've done it and then we'll give you the money back. Cool, so I need 150 grand to go and demo some old house, pour the foundation, begin framing, and then you'll give me that 150 back. Yep, Okay, so I needed that 150 as well.
Daniel Brown:That working capital piece. That's been one of the hardest things and we're getting better all the time. The more projects we do, in some ways easier it gets, because they kind of support one another. But you've got to make sure you've got a ton of working capital just sat there, easy access. You don't want too much of it because you don't want to get to the end of the year and go. Damn, there was so much money permanently in our bank account. We left potential profit on the table because we could have taken more profits on more projects on. But there has to be enough and we've been there. We've got to the end of the year and gone. We could have made more money. That's a shame. We've also been there when it's got really, really low.
Daniel Brown:We had to find ways of pulling more capital in short term because we're running behind and the money's all available and they go. Sure, I'll give you the money for the roof and the kitchen and the cabinetry, but just go do the work first it's like, oh well, I haven't got that money, so I need that money. It's tough. I don't want to sugarcoat it. It takes a lot of planning and it takes experience because you have to have gone through a number of projects to see what those low points are. We know that at five months in we could be up to 300 grand behind or out of pocket in working capital, behind the draws from that lender or whatever the number might be, and we have to have that money and know for sure we'll have that money either at the beginning of a project or we know it's coming when the time is necessary. So that is not fun but a necessary part of the game.
Daniel Brown:Um, what was your original question? I'm sure I don't go too too far off a tangent yeah. So then I'm raising it. So for us, because we use leverage like this, we use construction loans where they'll put something towards the purchase of the land and then 90 or 100% of the construction cost. If we're doing a half a million dollar piece of land and a million dollar bills, we don't need one and a half million dollars. We need half a million dollars because we're borrowing the rest and that half a million dollars basically gets us an entire project with working capital and everything else. So we've done that with a few private investors. We actually have a fund open.
Daniel Brown:Now it sounds like a sales pitch, but the fact it's a 506C fund and I'm sure even many listeners know I can't say much about it anyway because I don't want to be selling the thing too much but we've got a fund going right now that people could invest in and it's a growth play and it means, like I said before, if you want to be the amateur and it's the side thing to have some rentals, if that's right for you, great. My recommendation is don't go build houses yourself, don't go flip houses yourself. If it was a sales pitch, be like hey, just come to brownstone, we'll do it for you. You know we're building 10, 20, 30, 40 houses. What we're working towards at a time. We spread the risk, we have the experience, we look after all those problems and you just invest in that and hopefully enjoy some nice returns. So that's what we've got going on at the moment.
Daniel Brown:So our fund is starting to bring money in now as we start to create sales agreements with some broker dealers and they put it in front of their clients. We've got some cool tax break opportunities within ours which were a good Ira Roth conversion play, so people can do some clever stuff there and that's a big part of how we raise and it's just a case of showing people our track record, being honest about the fact we don't get it right all the time. But we protect you as an investor because you're not invested in a single home. You're invested in the whole company or the whole fund of 5, 10, 15, 20 homes and ultimately, you don't care and I'm saying it in a flippant way you as an investor don't care that I'll lose a fortune on one of those houses. You care how do I do across 15 houses and if two are awful and five are okay and five are good and three are amazing, then the overall story is very positive and that's what you really need, so you can go out and do your normal job.
Mark Perlberg:I've seen folks because the returns here are far greater than putting your money passively in the stock market or in savings accounts and obviously there's a limit on if you were to look at the heavy regulations that you can't really promise or guarantee and obviously there may be instances of deferred returns. But what we've seen here is when folks get this up and running and have a proven success record, there's a. There will often be like a waiting list to be one of those partners in these deals because the returns are so high and when it gets consistent enough, it's like you can't sell it fast enough, which is pretty cool.
Daniel Brown:Yeah, I'd like to get to that place where we have that reputation. As far as funds go, we're new to the funds world, we're not new to the real estate, we're not new to the new construction, we're new to funds and I like that. I have that vision in my mind. In a few years' time, people will be like okay, when's the next one? We're ready, I've got more capital and I'm going. I've got nowhere, to put it right now, but give me a couple of months. There's a new fund coming. I would obviously like to move towards that stage eventually.
Mark Perlberg:Here's another question for you With all these projects going because we've seen this in our line of work as well is that, from an accounting perspective, this is intensive here because you have to maintain and track the inventory for each separate property. So we know how to calculate what's the inventory for each separate property, so we know how to calculate what's the cost of goods sold here. And your profitability is far different. It doesn't quite reflect what's in your bank account because so much may be going into these other funds. So how do you maintain a strong system for tracking your inventory and being confident in your numbers and having a team that's taking care of all this?
Daniel Brown:yeah, that's a good question. We've got a great team who've developed a great system in-house for how we manage that and, yeah, you can imagine how messy it gets. There could be six different projects with nine, ten homes being built across those six, because often we build two homes on one lot and you know, you've got your handyman guy doing some work across four of those different projects across six different houses, with all these different little bills here and there. You get to keep track that that $400 was for this and that's $1,200 for that and so on and so forth. And obviously, with the likes of some of the great apps these days where you can just take a shot of an invoice and you can apply it to something, and then with the likes of quickbooks and so on, and we've got a great bookkeeper and obviously a bookkeeper is more cost efficient than an accountant, um, for that basic work and managing it. And we make sure that we're keeping our great records in house that every single invoice, every single bill, is going through a double check system a it was on budget, it was what we were meant to be spending, and B it matches the bid that we received at a previous point from that vendor. So, yes, this is right, pay the thing and then we make sure it's well noted which property.
Daniel Brown:It's property number seven that applies against, to make sure we've got a really clear picture of how each home is performing. There's lots of automation in that and lots of manual in that. We are actually working on some AI and database stuff to make it significantly more automated. Because you talked about where should you invest your money. Well, for us, investing it into good automation and good AI can actually mean that we can save and become much more efficient as we grow. We don't need to take on as many people as you would think, because all that stuff gets taken care of in the background, but it's very important and it's complicated. We're trying to make it simple.
Mark Perlberg:So is this bookkeeper full-time for you, or is it someone who serves?
Daniel Brown:The person we work with at the moment's superb. She's independent, she has her own business, but she personally is working on our stuff most of the time. Um, she has a team as well, but she does a lot of our stuff. We've got a great relationship with her. And then our team. We have one person particularly in our team who has that direct relationship with her on a day-to-day basis and they're constantly communicating daily, weekly, monthly, piecing it all together and trying to keep it as clean as possible that's a very important relationship to have and you really want to, yeah, make sure.
Mark Perlberg:You know we've had clients in the past with good bookkeeping relationships and they say, hey, can you take over our books? We just want to see what you charge or what you do. I said are you kidding me? Like we've had no problems with your bookkeeper, like you know how hard it is to build that relationship and establish that, that alignment with your bookkeeper, like yes, and where maybe they understand your business and they understand the quirks, and then something comes through.
Daniel Brown:It doesn't seem to make sense, but they sort of go hang on. I remember this. We had a situation like this three months ago. I'll just check with you, but I think I know what this is all about. And you gain that efficiency because you get to understand like a quarterback wide receiver relationship.
Mark Perlberg:Whatever I mean, just so so critical I'm sorry if that was an american sports reference.
Daniel Brown:I have no idea what you're talking about.
Mark Perlberg:I'll try to come up with something else.
Daniel Brown:Something that I call football, that you call soccer. No, I think I know what you're talking about.
Mark Perlberg:But, yeah, super important. Well, it's great that you have that established, because I've seen where it isn't established and it can really cripple the functionalities of the business and all sorts of chaos can ensue when you don't have right, reliable records. So tell me, dan, as we wrap this up. Tell me about. What I'm interested to know is if you could say what's one thing that you do or one thing that makes you different, that's unique, that is attributable to your success. That may not be common among people doing land development.
Daniel Brown:You really going to make me just pick one you?
Mark Perlberg:can pick two if you're stuck between the two.
Daniel Brown:As a business, there's a couple of things that make us different, I think that stand out to me. One is our focus on three key pillars in terms of what our homes are about. So we are high design, so we're trying to create the nicest home. It's very subjective, but the nicest home on the market within its price point. But we found a way of doing that without spending any more money. That's a clever little hack. It's pretty important. Um high quality, because I want and people can come and buy the house. I want them to be happy in their house a year later and five years later and so on. And a third pillar of that is, um healthier. So we're actually making our homes healthier and healthier these days, because I think it's the right thing to do, because our homes are made in a way these days that are not very good for us. So we're trying to do our little part to address that. So the homes we're building are different, a little more special, because of that.
Daniel Brown:The second piece is probably how we treat people. So we've got on the wall I'm actually looking at it now the Brownstone way, inspired by Hewlett Packard's HP way. They were the first company 60 odd years ago, I think, to kind of put their values and beliefs up on the wall, and lots of companies have this these days the piece of paper on the wall and it's often just a piece of paper on the wall. But I came from a business. 30 years plus of my life, from when I was 17, 18, 19 and first night working my old business um, there has always been values led and the piece of paper on the wall is actually a guiding light. Now everyone's got a different way of explaining all of that and I'm sure every company basically says the same thing. It all says be nice't not be nice and there's a lot of detail beyond it and that's what all says. But we actually genuinely and it can sound cheesy, but we put that stuff first. So it's about how we treat people, how our people have to act, and if you don't want to act in the right way and treat people the right way, then don't be here. And I think suppliers see is differently than the subcontractors see is differently, and how we operate is different, because you can actually be nice and do the right thing and have a successful business. It's not one or the other. I think that is really significant. And actually you said two and I'm going with the third. It's connected to this.
Daniel Brown:I really believe that most people, maybe every person on the planet, is capable of achieving even more than they think they are. I think we're the most amazing beings and we're trying to do our little bit within our own team to encourage that. So we do a lot of personal development, a lot of training in-house, but we also get out of people's way and trust them to go and achieve amazing things, and the more you can empower people to work out their own best way of having success, the better. So we have a results-oriented work environment where we have no fixed hours, no fixed vacation, very few fixed rules. Basically, you work for us in such and such a role and we pay you X amount a year to achieve Y, whatever that thing is. As long as you treat people right, you go, find your best way of doing that and people grow, because autonomy is such an important driver. People grow, they feel they have control, agency over what they do in life and they do better work and they're happy because of it. So there you go. I squeezed three.
Mark Perlberg:I got away with it also have to tell us now because now I know there are some restrictions here on what you can say because of you know what Joe would call the sales prevention department. But if someone's interested in learning more about what you do and maybe even being an investor in some of your projects and I know you can't solicit and there's all that stuff there- Sure, what can I say?
Mark Perlberg:a little more about what it means to have a healthier investment, a healthier home, and, and how can someone learn a little more about this and connect with you and and learn more about what you're doing here?
Daniel Brown:cool, okay, so healthier home. I'll pick out a few things that are top of mind because they're easy. Um, whole house water filtration. The quality of the water in the world these days is awful, so you put a system in to filter it before it enters your home at all, and they remove all sorts of contaminants. There shouldn't be that. Um paint, internal paint it's toxic. It tends to be made with all sorts of plastics and metals these days which get into the air. They seep into your home, and there's mineral-based paints you can use.
Daniel Brown:We have an issue now where we must make these airtight boxes in our homes where there's no natural airflow, and there's ways of creating more natural airflow to pull more of the outside in. Whether it's winter, summer, doesn doesn't matter, and actually letting that air flow also minimizes how much moisture gets caught in the walls, reduces the chance of mold, and mold toxicities are really bad for us. And the list goes on and on and on. And yeah, we're not the place where I would put a stamp on it and say Daniel Brown approved healthy home, because my standard is really high. Three to five years from now, I want to be at that place. So what we do is we just keep adding on new elements, little things we can tweak and change to make the home healthier and healthier and healthier. The insulation that you use, the blown insulation that goes between the walls a lot of it has nasty materials in it, sneaks into your air conditioning and then you're blowing it into your home and breathing that in. Not great. So we're doing what we can within what's affordable and achievable, piece by piece, every few months to keep adding in another element and another element so eventually I can give it my daniel brown stamp. That's really, that's really cool.
Daniel Brown:And as far as, as far as investing, um, so what am I allowed to say? So I'm allowed to say that, separate from our fund, we do private investments where people come in and do a fixed rate thing for us. So somebody comes along and says I love what you guys are about, I'd like to invest with you and it's not tied to any particular home, it's an investment in Brownstone and it's like a fixed rate thing and we usually do growth plays. So I'd love to come up with 100 grand in for three years and we pre-agree the three-year term and the interest rate and it's a cumulative compounding thing. So I'm making this number up. It's not a commitment of anything, but somebody agrees a rate with us of 12% or 12% a year for three years isn't 36%. If it's compounding it's actually about 43%. I'd need to work it out, but you know how it works and somebody knows that on that day in that year that's when they receive that back and that's great. And it's protected in the sense that once nothing's ever guaranteed, it's spread across our whole company and again, you don't care about the performance of an individual home, you just care that Brownstone is still around in three years and doing okay, that you see a return. So that's something we've done on and off for years.
Daniel Brown:The fund I can tell you a teeny bit about it because it's a 506C and C allows you to solicit a little bit. It's accredited investors only. It's also a growth play. We're looking to raise around $10 million this year play. We're looking to raise around $10 million this year and the idea is that will allow us to take on 15 plus new lots in and around Austin, which means building maybe 25, 30 new homes, because we often do two on one lot, sometimes one, sometimes three, and it's a growth play. The idea is we design the homes in-house, build the houses, we sell them, we reinvest all the proceeds and hopefully lots of profits as well and we do it again. And then we do it again.
Daniel Brown:We do three rounds of this. So over like three to four years, we go through three rounds of that investment. Maybe we'll go through a hundred houses, give or take. And if somebody's invested with us, um, there'd be a preferential return at the end. So, assuming we've made a profit, they get a piece first, and that preferential return is based on uh 10 per year. So let's just say the fund takes three and a half years to come to a close.
Daniel Brown:Well, there's 35 return, assuming we've made enough, and we keep saying it, so I could never have missold. If we've made enough, there's your 35 return over those three years. It's very nice. Three and a've made enough, there's your 35% return over those three years. It's very nice, three and a half years. And then there's a profit share, where a significant percentage of the profits of the fund are split towards the investors and we take a chunk as well.
Daniel Brown:I can't say what the forecasted returns are, but to me, in my opinion, they're pretty sexy, and the idea is it's we're diversifying for you, because I'm not against multifamily investments, I'm not against um a commercial. I just worry a little bit at the moment If it was me and my money. It makes me nervous when you're going to invest in some big apartment building and it's kind of all the money is going into one big decision for how that particular piece of land, that particular area, that particular part of that town is going to perform in, let's say, five years' time. It's kind of all or nothing and we're in a world that seems to be changing ever more quickly. It's very volatile at the moment.
Daniel Brown:What I like? The idea of I'm going to have to make 50, 60, 70, 80 little decisions over the three, four years and each one's only going to be pretty good a year out, because I'm going to sell that house and move on to another one, another one and I can keep tweaking and being agile. And if a few of them aren't very good, no problem. If a particular price point or area starts to perform more weakly and we need to move 10 miles down the road or 50 miles down the road, no problem, we can and we can keep shifting and that gives me peace of mind. That's how I sleep at night and I'm hoping that gives investors peace of mind, that that's a great opportunity for them to know that we're doing that kind of on their behalf. That's why I like it and I'm pretty sure that if finra or the sec is listening they'd go yeah, daniel, you did okay there. You didn't oversell it, you didn't promise anything.
Mark Perlberg:Awesome, so where was the website or profile?
Daniel Brown:Our website is easy. It's brownstonecicom capital investments. Brownstonecicom. Check out our Instagram because it's very live and you're getting a sense of what's going on all the time. So it's brownstonecapitalinvestments, and if anybody wants to reach out more, then they can contact us directly. I'm Daniel at brownstonecicom and we can, you know, share information. We can check people are credited investors. We can send them PPMs, the whole shebang or we can connect through their financial advisor whoever it might be.
Mark Perlberg:Well, I got to run into another meeting, but I really enjoy our conversation and this is my first time learning about healthy homes and it also makes me feel a little uncomfortable by all these things in my home, but yeah, Get outside more. Hey Dan, wonderful talking to you. We'll be keeping in touch. If you guys enjoyed the show, give a like and follow. And also if you want to learn more about us and using our services or joining our team we're always hiring go to markperlbergcpacom. Have a wonderful day, everyone, and take care.