Okay, so my presentation today, guys, is called Sandman Empire. Last week, we did Unlimited Capital for those of us who are looking to do Joint Ventures. I’m real estate Joint Venture partner of the year for 2012. I did 12 deals in this last year with none of my own money. I have never put my money into any deal. I’ve only put $1200 down on my first deal. Everything after has been other people’s money. So I’m the guy to talk to if you want to know how to do joint ventures. Last week was unlimited capital, how to have unlimited capital to do all the deals you want to do.

How To Find Joint Venture Partners For Real Estate

If you missed that, sorry, we’re never doing it again. This week we’re doing Sandman Empire, how to build a joint venture empire while you sleep. There’s two sides to the coin, guys. You’re either gonna be doing real estate with none of your own money, in which you’re an active partner, or you’re going to be doing real estate with none of the work. How many people have money and are looking to do some deals? Okay, so you guys could be passive investors. How many people have no money and are looking for money? Everybody else. How many people have both? That’s a trick question. That’s very good. I’m starting to turn into both. As you accumulate money and you do deals, you start to turn into both. But you have to start with one or the other.

Okay, so how many of you guys have heard of this book title, How Come That Idiot’s Rich and I’m Not? How many of you guys have heard of that? That’s a New York Times best-selling book. This author says, “We have the notion in America that the lone ranger, batman type, someone who takes on the world alone, but in reality, all successful people need help. We need advisors, coaches, lenders, customers, and clients. True to ourselves, we have to do the work, but our team that we put together makes it all worthwhile. The sooner we realize this, the sooner we can reach our goals.” Real estate investing is a team sport.

Why You Need Joint Venture Partners For Real Estate

The problem that most people have is that we enter business alone, and we stay alone. That’s something in the room of novice investors, I know myself making the leap from single investor to a team of investors, that was a really big leap, because what happens is when you start making money, the natural tendency is to get greedy and keep it all to yourself. You actually make more money sharing, than you do by staying greedy and keeping it all to yourself. So we enter alone, but success in the field of investing is impossible without a team. So how many guys have heard the phrase “Lone rangers get squashed?” Anybody heard that before? Lone rangers always get crushed in business. We all know the mom-and-pop burger shop. You can take a VJ’s drive-in down the street. Legendary burgers, but have we ever seen a second VJ’s open? Not really. We’ve got the mom-and-pop hardware stores. Has anybody tried to ever get hardware for their rental property, and they’re in the core of Winnipeg? Has anybody ever tried to find hardware? It’s extremely hard to find hardware. All the mom-and-pop places are closed. How about a mom-and-pop department store? We had Eaton’s, which is no more. Now, all we have is Walmart.

What happens is these mom-and-pop style businesses end up getting completely crushed because they’re losing out to teams. It’s kind of like playing football, if you’re one person against 50 people. You’re never going to win. So the mom-and-pop businesses, they have a better burger, and in some ways, what Nelson was showing us was how to run a very nice mom-and-pop outfit. He’s going for a better burger, he’s going for better clients, and even in my business, I run it the same way. I like to have higher end clientele, it works very well on a small scale; like a boutique business. But what happens is when we want to expand, we run into a lot of troubles because mom-and-pop often have no employees, they have no systems, and to grow to that second location or third location, fourth location, is often impossible. So mom-and-pop usually has better service, they have more expertise, but this is the problem. Mom-and-pop have to sleep sometimes, and since they’re active investors, when they sleep, so does their money.

But the reality is, have you guys ever seen Wall Street? Anybody ever seen that movie Wall Street, Wall Street 2? What’s the title of Wall Street 2? Money Never Sleeps. Money never sleeps, Gordon Gekko. One of my favorite characters. Money has to work like a slave, guys, whether its master is awake or sleeping. So that’s what we want to talk about today, is how do you get your money working for you when you’re sleeping, or when you’re awake? If you’re an active investor, it’s very tough to make your money work when you’re sleeping because you’re hammering your own nails, and painting your own walls. Now most investors, like I said, hammer their own nails, paint their own walls, they lease their own suites, they pick their own deals. And the problem with this is most of these tasks are $10 an hour tasks. If you start doing these, and this year I ran into this problem. I did six deals, I did one deal a month. By the time I got to the sixth deal, I was doing everything myself. I almost wanted to shoot myself in the head because I was doing so much $10 an hour labor that there was no more hours in the day left.

What we want to do with our business, if we’re an active investor or a passive investor, is get out of the $10 an hour jobs and get into the thousand dollar an hour CEO jobs. That’s where we want to be. But to do this, we have to break the link between time and money. Has anyone ever thought of that concept, breaking the link between time and money? Between time and money, so your time is no longer correlated to your earnings. Working on it, okay. So in order to get ourselves to the CEO level, guys, we have to break that conditioning that time is equal to money. In reality, time does not equal money at all. What equals money is sales. Sales equals money, assets equals money. I think that’s why we’re all here. We’re all here for assets. Brand equals money, press equals money. That magazine that Nelson and I are publishing goes to 300,000 investors across Canada. I think Troy and I were just talking there, and what’s four pages worth in a magazine that goes to 300,000 investors? What’s that worth in dollars, does anybody have an idea? Probably 15 to $30,000.

Audience: A full page advisor would be at least eight to 10K.

Stefan Aarnio: Yeah, and we’ve got four pages each. So press equals money, and information equals money. This is what you guys should be focusing on if you’re an active investor, because this is where you actually make money. Time doesn’t equal money. I blog every day, which category does that go into?

Audience: Brand.

Stefan Aarnio: It actually kind of goes into all of them. I was saying to Troy, in my business, what I’m trying to do now is a lot of people wake up and they have actions. Who has an actual business plan written out for their business? Okay, a few of us. I was saying to Troy, we were out for lunch last week, and I said every action I do has to do one of two things. It either has to make me brand equity, or it has to make me brand equity and money. So either way, I get the brand equity, and I win. So the blogging, you’re right, it gets me sales, it gets me assets, it gets me brand, it gets me press, and it also creates information. This presentation I’m doing here is actually just a blog article expanded into a presentation.

Stefan Aarnio: It was yesterday’s actually. You guys get yesterday’s breakfast. So when time equals money, guys, we’re stuck in an advanced form of slavery. I don’t care if you’re a doctor or a CEO, or the guy at the top of the food chain. We’re stuck trading time for dollars, and we have a limited number of hours to sell. That’s where the problems happen. We need to make money while we sleep. So I came up with this term called the Sandman Empire, and that’s what we need to create. We want to create an empire, a business or real estate created passively through joint venture partnerships. This partnership is going to be between a passive partner and an active working partner. The active working partner handles all aspects of the business, and the money partner is only responsible for financial backing. The passive partner is removed from all operations, and can essentially sleep, hence the word Sandman.

So if you’re an active partner, you’re going to be selling the concept of Sandman Empire to someone, and if you have some money, you’re looking for someone to create a Sandman Empire for you. Either way, you’re either doing no work, or you’re putting in no money. Does that sound okay? Okay, we’re still here, good. So investors who make money while they’re sleeping are free from the limits of time, focus, management, skills, and capabilities. I often get approached by, right now I have a gentlemen who invests with me, he’s a doctor. What is a doctor’s problem if they want to do real estate investing?

Audience: Time.

Stefan Aarnio: They have no time. They have lots of money, but they have no time. What else are they lacking?

Audience: Experience.

Audience: Knowledge.

Audience: Skills.

Audience: Everything on that one.

Stefan Aarnio: Experience, knowledge, management. Just about everything, so that’s what you need to offer to them if you’re active. And if you’re passive, you’re looking for somebody with these skills. Has anybody ever been to a party, and you’re ordering pizza or Chinese food, and nobody wants to pick up the phone to order the pizza? Phone and orders the pizza if you’re the active partner, and if you’re the passive partner, you’re going to say to your friend, “Hey, can you order the pizza?” Because people don’t like to actually talk on the phone to people. They don’t like that. If you’re active, you’re going to make all your money by talking on the phone to people. Okay so there’s two types of investors, active and passive.

Now, active investors are entrepreneurs. If you guys are thinking about doing joint ventures, you should probably write this down because when you’re explaining this to somebody who says, “What do you mean you’re taking half my deal and you’re not putting any money in?” You have to be able to explain this. Active investors are entrepreneurs who pick their own deals. They manage the operations, they manage the contractors, and they run the empire. Active investors, this is a fact, guys. Active investors always get the highest returns possible. This is where you get your infinity returns, you get your 16,000% returns, your 10,000% returns. You are getting some big, fat returns when you’re an active investor. Now, active investors take a risk on themselves to run the empire, and you’re investing something much more important than money. You’re investing your life into this deal. This is everything, so don’t mess it up. This is very, very important. You’re investing your life. You’re putting it all on the line to run the empire. Because you’re investing your life, you don’t often invest money into your own deals.

Now passive investors are the opposite. These people are silent partners. They park their money with active investors. These passive investors trust the entrepreneur to run the enterprise smoothly. They must be proficient in analyzing people and deals. Do you guys remember Money, People, Deal from, was it last month? It’s been a while. They have to be good at analyzing people and deals, and passive investors reap the full benefits of the Sandman Empire if they can choose the right active partner. If we’re looking at the active partner and the passive partner, which one’s more important right now to success?

Audience: Both.

Stefan Aarnio: They both are, but the active partner is actually where the whole thing’s running on it. So passive versus active. Passive investments, by nature, have lower returns than active investments. Can anybody name me a passive investment? If you walk into the bank, you get a …

Stefan Aarnio: Okay, is that passive or active?

Audience: Passive.

Stefan Aarnio: That’s a passive investment, low return. What else? Let’s name some more.

Audience: Savings account.

Stefan Aarnio: Savings account, woo hoo. How about mutual funds? I’m getting into the problem right now where tax season comes around, and of course, you do everything you can to get rid of your tax liability. If you buy a RSP loan, or you get RSPs, what do you have the choices of? You have, what, mutual funds, GIC, straight up cash.

Audience: Stocks.

Stefan Aarnio: Stocks. You can do a mortgage if you want to get more creative, but that’s not the simplest thing to do. You can maybe do some [inaudible 00:12:24] private equity. It’s very, very hard to find a good place to put your money. If I could, I would loan it to myself, and that’s something I’m looking at doing right now. So passive investors can get much higher returns by partnering with an active investor. Essentially, what happens is when you can find someone to partner with, that’s when you get some crazy returns. I’m doing a deal right now with a gentleman. He’s putting $28,000 in the deal, and we’re going to make $28,000 on the deal. So after we split it, he’s going to make a 50% return in 60 to 90 days. That’s a nice deal for him because he’s passive, I’m active, and we both do very well. But you need a very high skill set to do that. You can’t just do that if you don’t have a skill set.

So when financial backing is paired with time and talent, tremendous value and profits are created. Now, I want you guys to beware. If the active partner is chosen incorrectly, massive financial destruction can occur, and the passive partner might lose part or all their money. Proper due diligence is required when choosing an active partner before you take a leap of faith. Okay, so this is 13 questions I want you to ask before selecting an active partner. That’s if you’re a passive partner selecting an active partner. If you are an active partner who’s looking to raise money, you should write these down anyway because you should be prepared to answer every one of these questions when you’re taking somebody’s money. And when I say taking somebody’s money, I mean to invest.

So 13 questions. The first one, it’s funny, this kind of sounds like a job interview. What experience do you have with this asset? If you have a guy coming to you saying, “Hello, I’d like to invest in an apartment building,” and he’s only done single family homes, how do you feel about that? Are you nervous? What if he’s going to run a trailer park, and he’s never run anything before? Again, are you nervous? Number two, what experience do you have with this strategy? What do I mean by strategy, can anybody help me on that?

Stefan Aarnio: Rental or a flip, right. If you have a guy who’s never done a flip before say, “Hi, I want to flip something,” how does that sound? It’s a little scary. Something I did on my second deal on my entire career, I added a floor to a house. It’s a very stupid thing to do. A very stupid thing to do with no experience, and realistically, you don’t even want the experience of adding a floor to a house. It’s a very tough thing to do, and my investor should’ve kicked me in the head and said, “Put that deal away. That’s a crazy deal.” Number three, this is a very important question. How do we recover if things don’t go according to plan? Now for the investors in the room who have done some deals, do things ever go according to plan? No. They actually rarely go according to plan, so you want to know what are we going to do if things don’t go according to plan.

Number four, a very seasoned investor asked me this once when I asked him for money. He said, “Have you ever lost money before?” Has anybody ever lost money before on a deal? No? Nobody’s lost money. I’ve come close, I haven’t lost money yet. How did you handle the loss? That’s another question. Are these kind of fun questions, guys? I see a lot of long faces in the room.

Audience: These are the tough questions.

Stefan Aarnio: These are the tough questions. You sit down and you say, “Hello, you want to date my daughter? Answer these 13 questions.” Okay, number five. What is your track record? Does your track record show success? And this is my favorite one, is your track record hiding anything? How many of you have gone into a job interview and you sit down and they say, “Oh, wonderful. You worked at McDonald’s, you worked at Tim Horton’s. And what did you do between 2006 and 2008? You took some jobs off there, what were you doing for those two years?” People who do that are hiding a job that they didn’t do well on. So when you look at someone’s track record, you’ve got to figure out what were you doing at all the points in time. Did you just take a deal off that track record that didn’t go well? You really want to find out if this person has any skeletons, and if you’re an active partner, you gotta know how to say, “Hey, look. This one didn’t work out, and this is how we’re going to make it different in the future.”

Number six, have you built an adequate team? Can the team handle the additional business that we’re funding? I think this is a really big question because what happens often in investing is people get money, and this happened to me before, I get money, and I don’t have the proper team built. How many of us have had problems with contractors and renovations? Always, that’s always a problem. I know, it’s like managing a jail sometimes. Always have problems with contractors. So how do you handle that if your contractor is not performing? That’s a realistic question. We’ve got a time frame, how are we going to handle that? Number seven, how do you handle yourself when things go wrong? That’s an emotional question. When things start going wrong, do you see the best in people, or the worst in people?

Audience: The worst.

Stefan Aarnio: The worst, okay. Robert Kiyosaki has a phrase where he says, “People turn into crooks or clowns. Crooks steal, and clowns just don’t know what they’re doing.” So you want to make sure that you are not a crook or a clown, or if you’re about to invest your money in someone, he isn’t a crook or a clown. Number seven, we already did number seven. Number eight, what transparency and reporting is offered? How many people love numbers? There’s always some number guys here. I did a presentation last month, and there was a bunch of people who were mad that there was no numbers. Here’s a numbers question for you. What reporting is required? If you’re giving your money to somebody, what do you want to see?

Audience: Numbers.

Stefan Aarnio: You want to see numbers, reporting. You probably want to see maybe a professional bookkeeper. You want to make sure that the receipts are being book kept. Depending on the size of the deal, you may or may not need auditing. Depending on the size. It might make no sense to audit because it might cost more than you’re even making. I make most of my money when people have liquidation problems, when people phone and they’re like, “Hi, we’re divorcing right now. Can we sell our house right now?” And the answer is no, you probably can’t. You have to wait however long it takes to liquidate. So it’s an illiquid asset. How do you deal with it? What liquidity options are there? Number 10, this is another personal question. Do you have good personal relationships? When you partner with somebody, guys, that’s a monetized relationship. The only difference between somebody who does a lot of business and a person who doesn’t do a lot of business is the person who does business is monetizing relationships. The other person has relationships, they’re just not monetized. Do you guys understand the difference between that? Some faces, kind of no. Yes. Should I elaborate? Okay.

So let’s say I’m friends with Troy. Troy and I are friends. Actually, I’ll use a real example. I have a friend … We’re friends, guys. Really, we are. No, I’ll use a real example. I’ll use my doctor. My doctor, he’s actually a med student. He and I play StarCraft together. Do you guys know what StarCraft is? Did I just show everyone how nerdy I am? We were playing StarCraft together, and he asked me, “Hey, how’s that real estate investing you’re doing? How’s that doing?” I said, “Oh, it’s doing well.” This was all texting. We’re playing over StarCraft. I said, “Oh, it’s doing well.” He said, “I’d be interested in taking a look at some of that, or getting into that in the future.” I said, “Sure.” So we went for lunch, and then we monetized the relationship and we did a deal. That’s just a good relationship that just became monetized.

Now, most people will play StarCraft, or they’ll go to a movie, or they’ll have lunch with someone, and they won’t be able to monetize a relationship that’s already there. Realistically, we have about a million dollars each, depending on … Well, no matter how broke you are, everyone has access to a million dollars. If you have 100 people you know, pretty much everybody can put together 10 grand, and you have access to a million dollars. We all have access to a million dollars. The question is, how are you monetizing? And the process of monetizing is much like dating. How many of you guys have gone to meet someone, or you get that phone call that says, “Hey, Garrett, how are you doing?” And Garrett says, “Fine.” “Garrett, I just really want to hang out with you on Friday. Why don’t you come over?” Then you go, “Sure, I’ll come over. We’ll talk real estate.”

And you show up, and you get down to the basement, and then you notice there’s a shrimp ring waiting for you, and there’s a white board with a big triangle on it, and then you go, oh no. Are you jumping an MLM presentation on me? How many of you guys have been stuck in that situation? Or come to my ACN thing, how often do you hear that? Come to ACN, no. That’s the wrong way to monetize a relationship. The other way would be to just build the relationship, have them take interest in you, and then you can monetize. You let them approach you, you don’t go out there and, excuse me, date rape people with, “Hey come over for real estate, and we’ll give you a shrimp ring, and ACN.” That’s wrong, don’t do that. The investor is going to want to know what’s your brand. What do you stand for, and how do they feel about you? I blog every day so that people are familiar with me, and they understand my brand and my ideas, and it builds me up as an expert in the field. That’s something I’m doing for my brand. The question is, what are you doing for your brand?

Number 12, this is where we’re going to have a whole bunch of disagreements. Are you 100% focused and committed to the venture at hand, or do you have a day job? Do you want a weekend warrior managing your money? Now let’s play this game. Who here has a day job, and they invest on the side? Probably most of us, right? Don’t lie. Most of us have our hands up. Here’s the second question, if you had money to invest, would you want to invest it with a weekend warrior? Is that interesting? That’s very, very interesting. Nobody puts up their hand. Oh, one guy. One guy’s okay with it, okay so that’s a minority. It’s very interesting, I was at an event in LA last week, and they said, “How many of you have gone to a networking event to sell something?” Everybody puts up their hand. And then they said, “How many of you have gone to a networking event to buy something?” Nobody put up their hand. Okay, think about it. It’s actually a very interesting thing.

Now, Nelson says don’t take the leap, build it up, do it slowly. I’m the opposite. I say, cut it, live in the basement, live in someone else’s basement, live in your car, make it happen. Two totally opposite ways, neither one is right. They’re just two different ways. There’s the weekend warrior thing. Personally, I am a professional, I don’t like to mix with weekend warriors, but there’s many ways to slice the pie, okay, so we’ll just leave that belief system out before we have an argument. Number 13, what is your X-factor? What is the thing that takes you over the top? What makes you have a better experience, or are you just another real estate guy? This goes back to brand a little bit, but it’s a little bit more specific. Nelson, going back to Nelson, he has a really great X-factor. He does ultra-clean suites, he is doing better clientele. That’s a good X-factor. That makes me want to invest in a guy like Nelson. That’s sounds really good. I could tell my friends, “Oh yeah, I invest in cleaner suites, I invest in top quality people.” The X-factor, I think this is a really big thing for you to establish before you go out to raise money, or if you’re going to invest money.

Okay, so out of the 13 questions, guys, think back to yourself. How did you do relative to the 13 questions? If you’re an active investor and you can provide satisfactory answers somewhere in your presentation, all these questions, there’s no question you’ll be raising money every time, because those are 13 things that people just want to know. Now, if you’re the passive investor and you’re asking these questions, you obviously need to trust and verify the answers. How many people know that people lie when they ask them hard questions? Okay, only a few people actually know that. Everybody talks a talk, but can you walk the walk? Have you heard the expression, “Talk is cheap, but it takes money to buy the whiskey”? Do your due diligence, make sure you actually can verify the answers that people are giving you. Don’t be a victim of bad due diligence. Myself, I’ve got into problems with contractors. I have problems with contractors, but I have good contractors now. When you don’t do proper due diligence on someone, whether it’s a contractor or an investor that’s going to manage your money, that’s where things get really tough.

So put your partner through some really tough scrutiny on the front end. Ask them some hard questions, be okay with that, and make sure he’s competent and trustworthy so that you can sleep like a baby at night, and not have nightmares when you’re creating your Sandman Empire, okay? So with that being said, that’s everything I’ve got for you today, guys. Thanks for listening, and please visit my daily blog,, okay. Thank you.