Mike Cantu Joins Bruce Norris on the Real Estate Radio Show #360

Norris Bruce

Bruce Norris is an active investor, hard money lender, and real estate educator with over 30 years experience. Bruce has been involved in over 2,000 real estate transactions as a buyer, seller, builder and money partner.

Norris Bruce
December 13, 2013

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Bruce Norris is joined this week by Mike Cantu. Mike is an entrepreneur who made his fortune buying homes below market value. He would either hold them as rentals or flip them as profit. He also works out of his home and drives a truck with about 511,000 miles on it. Bruce jokingly asked him if he was getting a new truck for Christmas, to which he said it was on the list for next year. Bruce said he should just get one for free for advertising a truck that has lasted that long. The theory on his truck is that it runs fine, but he considers it like a hunting dog. It has sniffed out so many good deals for him. You take care of an old dog, you don’t just put it down. He put about 355,000 miles on his previous truck, and was reluctant to get rid of it since it too sniffed out a lot of good deals. On just the two vehicles he put on close to 900,000 miles. Bruce asked Mike what he would appraise the truck for if he could. Mike jokingly said crumbs. He traded the last truck he had for an inside/outside paint job on a 1,000 square foot house, and he has committed to the same thing for this one.

Bruce asked Mike many times what was non-negotiable in his day, and he answered that it is reading. This has always been his answer, and this will never change. He is an adamant reader with the philosophy that a standard education will get you standard results. Mike wants more than standard results, so he is an education fanatic. This kind of thinking hit him when he was 19 years old. He was in community college, and he took a study class on how to do your homework through reading. At this point he became an avid reader. The more he read, the more he realized he did not know. He concluded that there are wonderful things hidden between the front and back covers of the books.

When Mike met with Bruce, he had read out of three different books that morning. One was a book on quotes. He was reading a book by Charles Considine for the third time in three months called The Philosophy of Real Estate. He paid $100 for it on Amazon even though it was $6 new since it was in limited supply and high demand. He also read a little bit of Marcus Aurelius to round it off that morning. Charles Considine was Jack Miller’s CPA for a while, and he referred to him as his mentor several times. It was no financing or buying techniques, but rather a philosophy of real estate.

Bruce asked Mike if it is common for him to reread books. Mike said he will reread most of the good books he has bought. He is a big underliner, he highlights things. His attitude is if they were good the first time around, they will probably be better the second time. He has books that he has read 5-7 times. Bruce asked Mike if, despite being at a different spot in his life, there is something else that he gets. Mike said being at a different spot in life is always the reason. One of the books that came to mind was Marshall Silver’s Passion, Profit, Power. The three times he read it, he was at very different places in life. He underlined very strange things as he compared the yellow highlighter to the blue ink pen, then to the black ink pen.

Bruce did this for one of Jim Roan’s seminars. He had heard the same seminar 7 or 8 times. He went to each one with different colored pens; and he always found that he was adding notes on top of his notes with the things he caught the third or fourth time. When you are speaking live, there is supposed to be a story sometimes in certain places. If he did not tell that story, Bruce was not happy. One time he went up to Jim afterwards asking him to tell the story since he had not told it during the seminar.

When Mike reads, he usually does it in the morning. He will start off his day making the coffee, reads the paper, writes in journal, then goes back and forth between this and reading. Mike’s days have a lot of repetition with intent. He will wake up and do exactly the same thing, and it has worked well. He will also make his bed in the morning so he feels like he has accomplished something. It is a morning routine he has done for so long that he does it almost unconsciously.

Bruce asked Mike if he ever writes down new goals when entering a new year. He asked him what the journaling is for and how it is different from goal-setting. Mike said his goal book is actually behind his journal. He stacks the two of them next to his kitchen table on the floor, so the goal book and journal are usually open at the same time. The journal is just about life, things that are bugging him, and sharing thoughts with himself. His goal book is entirely different, and he spends about 10-15 minutes each morning in it. Usually this is the last thing he looks at before he goes to bed. He and his friend Mark meet every Tuesday night to talk about their goals.

Bruce asked Mike if he thinks 2014’s goals will be even feasible. Mike said no and that when he goes back to the original goal list, he sees some way out there goals where he figured he would pull out all the stops. He ran across the list about 20 years after he wrote it, and it was almost creepy because several of the things on there had come full circle beyond his medium goals. When he wrote his goal-setting book, his first goal he ever wrote was to get his four retread tires off of layaway. His first written goal was to pay off his other to $20s he owed after having already put down $20.

Bruce asked what the different would be for him to start out a year without a goal list. Mike said he could not imagine how you could aim for something if you do not have a target. One of the things he does when he consults is tell them the first step is to figure out what they are out to accomplish. You have to have specifics before you even go into action. For Mike, it has always been a lifestyle. He has always done what he wanted to do, never being afraid of work. He realized that work has a lot to do with it, but he has always wanted to live life on his terms. This is where the real estate came in and has allowed him to do this.

Bruce asked if his goals have changed from financial to other priorities. Mike said they absolutely have. He had discussed with his friend Mark how our goals, values, and philosophies change in the ten-year periods of life. Once you get past the money part of it, then the question is how you want to spend your days. This is what it has always been about, but money has always been the challenge. He always wanted to get up and design his own days, never afraid of an honest day’s work. He wanted to work on his own terms. He loves measurable progress at sundown and knowing he accomplished something. Every work day is about looking back over his day and seeing how he made measurable progress.

Jim Roane said the same thing about measurable progress in measurable time, leading Bruce to ask Mike if he was his mentor. Mike said when he refers to his Jim Roane materials, his attitude goes south. He has several Jim Roane cds in his truck as well as everything the man has ever written, and he refers to it all the time. He was given a book earlier in the year he surprised he did not have. It was a leather-bound copy of a book from a student for whom he did some consulting. The book was Jim Roane’s leading and inspired life. He had read the book four times this year, and he handed it to his daughter to read over a period of ten days. Mike likes to share anything with her he reads that he finds really good. If she doesn’t read it, then they will go on to having a discussion about it. If all else fails, he is not above bribing her to read it.

Bruce asked Mike when his daughter got the bug for the business. Mike said it was when she was about 14, although at the time it was not necessarily for the real estate business. It was for the business in general as she became aware of trading an hour of your life for a certain amount of dollars or buying something and reselling it. This involves figuring out that there is a whole lot more to be made and trading hours of your life. The product for her was not necessarily houses at this point since houses did not even come into play in her life until she was 19 years old when she got her first rental house. She buys and sells horses, dogs, saddles. It is all the same skill, it just has different zeros attached to it. Bruce asked about her day in the real estate business and if she works in the office with him. Mike said she is 7 months pregnant right now, so her time in the office is limited. She will most likely not be working in the office in the next couple weeks.

Bruce asked Mike about his goals that are real estate related. He said he has several properties on what he calls his hit list. They are good houses, but they are houses he picked out that he wants to upgrade. He does not want them anymore, and he really likes the concept of taking two or three of those houses and trading them for beach property. He bought a house in Huntington Beach that was only a couple blocks from the ocean, and he is selling two Ontario houses in which the proceeds will wash each other out. Bruce also asked him about his non-real estate goals. Mike said this involves surfing three times a week and overall enjoying life.

Bruce asked him if he sometimes finds himself writing goals that are somebody else’s. He finds people have goals, and he wonders if it is their list or somebody else’s list. Mike said he questions people on their goals because he has found that if you make a whole lot of goals and analyze them all, a lot of them conflict with each other. They are the opposite of a magnetic pull in that they are pushing each other away. He likes goals that are slightly out of reach but also somewhat realistic. He would rather aim for the moon and hit a star than aim for the mountaintop and hit the side of it.

Regarding the consulting, he had met with someone and they talked about their goals. This was the main focus, and they did not have any goals. When they met a second time, she came with her goal notebook all opened up and the first picture inside was a leer jet. This was somebody who was fighting off bankruptcy; so Mike thought if he was in her shoes his first thought would be focusing on zero air, to come above ground zero and have his head above water. If she earned that much money, the last thing she would do is spend gas on that thing.

Bruce remembered one goal that was a big deal was to own ten properties free and clear. Mike said this was a huge goal for the longest time that was realized in the later part of the 90s. This is a lot of free and clear houses for most people to even contemplate. Bruce asked Mike what it meant to him when he reached this goal. Mike said it was both an accomplishment and a letdown. He was really disappointed by what the net income from what ten free and clear houses would not buy him monthly.

Bruce asked if he still has a goal for gathering properties or if he is still in the exchange business and getting into the right place. Mike said every time he gets past that 50 rent collecting market, it seems to be a job and he does have a comfort level of less than that. Right now that level is to upgrade and keep upgrading. They are all good, but he figures he will pair them up and take them to the next level. John Schaub’s theory he mentions every year is to take your worst house out and replace it with a better one. He watched him go from close to 100 down to about 24. However, he went from regular houses to most of his properties being gates. This includes a golf course, ocean front, and half acre. He likes the consolidation since it is less tenants, better houses, and better quality of tenants. In other words, more freedom but better net result.

Before the market tanked, Mike held everything he had and went through the downturn. Bruce asked him if, looking back, he would have made the same decision. Bruce asked Mike several times if he was bummed he did not sell out, and he told him no. Looking back, the answer is still no. It has always been the income that he is after, not the value. It is the income that created the freedom. This year was interesting because he did have a welcome home party for several million dollars in equity. The cash flow was not changed, but he did have a welcome home barbecue with some friends, good food, and new-found equity. Every time a check returns, he will barbecue up boneless pork chops.

Bruce asked Mike if his properties still have assignments when he buys them. Mike said they do and that when he buys a house, he does three things. He will fix them up and retail them, wholesale them to other investors, or he fixes them up and keeps them. This is the first stop; and if anything is going to be kept then it too has a job assignment. It is either a part or a tool. Mike said the tools were what he used to get the parts free and clear. A tool has a purpose, and a parts job is to eventually be debt free. Once it gets debt free, it will have a very specific assignment. All of life’s reoccurring expenses have a house allocated to cover that recurring expense. All of the basic stuff was covered long ago. The bad habit houses are in place, and at this point there are quite a lot of leftover houses. Since he has a house for everything, he figured he would cover the bad habits too.

Bruce asked Mike if he has seen cases where investors had a lot of free and clear properties and then did something aggressive either outside of the field of real estate, either inside or out, thus wiping it out. He said he has seen this more than he would care to admit, and he has watched more good close friends do it. He has seen a lot of acquaintances do it as well. It really is human nature; and he thinks the first time around when you make a lot of money and want to show it off, you may end up with a lot of lifestyle upgrades that are not necessary. He has always been a big fan of words, and one of his favorite words is sustainable. The question is whether or not it is sustainable. Real estate is a moving target, and every year from playing field rule numbers you have to figure out your game. He always asks if the business model is sustainable since if you have a business model right now of REOs and short sales, that is not going to be sustainable much longer.

Mike really likes covering both ends of things. Using two properties he owns as examples, the residence he lives is on ¾ of an acre and there are two houses. The second house is farther away than most track homes are by about 50 feet. However, there is no doubt on the house, and the second house generates about $1500 a month in income. This covers all the expenses and leaves about $1,000 left over. His existence in his house is very sustainable when he is at a positive cash flow standpoint. The property he has at the beach is very similar as well as there are a couple duplexes. One rent from one of the duplexes covers everything and is very sustainable. It is when you get yourself into a position where he sees people take on huge mortgages with $10,000 a month payments as if their income is going to go on forever. However, if they have a permanent income setup, then that is great. If they are out there earning that money and running on the treadmill of life to pay that mortgage payment every month, then that is not sustainable. He has seen a lot of people fall down in this business, not get back up, and wander off to do something else in life.

Bruce said it seemed to him that during the crisis of 07-08, the people who made the wisest decisions really have the leftover luxury of not making any decision. This was because they had set themselves up to be sustainable. Mike said when he first got into real estate, all he ever wanted was enough cash flow that he could depend on to do life on his terms. He spent the last 30 years building, nurturing, cleaning it up, and trying to make it sustainable. Bruce asked Mike about the three things he does with a property and how this has changed over the years. He wondered if it has shifted mostly from buy/sells to wholesale or a combination of all. Mike said right now he is doing some retail deals, a lot less than he used to do. However, he did go for a several year period without doing any retail deals. He got tired of doing everything right and then the appraiser giving him a $20,000 haircut consistently. He realized this was a lot of work for not so much money.

Bruce asked Mike what kind of volume he is expecting going into 2014. Mike thinks it will be about a couple houses a month. He is doing a part-time effort right now, this year especially. Last year was the least amount of time he spent in his office since he had one. He has two secretaries involved in his office, both his daughter Jordyn and Kim who has been with him for 17 years. Kim works mostly with direct mail and computer-related tasks. He does not get more complex since there was a time he had several employees and made the conscious decision to remain small.

Check us out on our website at www.thenorrisgroup.com and be sure to tune in next week as Bruce continues his interview with Mike Cantu.