SOTM 59: Unconventional Acquisitions: Buying Small Businesses with Codie Sanchez

October 8, 2020
When we talk about investing on this podcast, it’s usually in the realm of real estate. But on today’s show with Codie Sanchez, we’re going to do things a little differently. In addition to exploring several of Codie’s unconventional investment strategies, we discuss why she’s worried for real estate investors right now. Listen and learn about buying small businesses, purchasing land for passive income, and more.
Listen to today’s show and learn:
  • Codie’s brief bio [2:40]
  • Contrarian Thinking Newsletter [4:01]
  • The content tools Codie relies on [12:24]
  • Business-buying opportunities most investors miss [15:46]
  • The value in data [19:00]
  • How agents can leverage their communities [20:45]
  • The two different ways to own a small business [25:13]
  • Buying land as a passive investment [33:10]
  • Random side-hustle ideas [39:41]
  • Business opportunities in cannabis [49:07]
  • Codie’s real estate predictions [54:24]
  • Plus, so much more.
Codie Sanchez

Codie Sanchez is a reformed journalist, turned institutional investor to now a Managing Director and Partner at Entourage Effect Capital, a private equity firm focused specifically on investing in the legalized cannabis industry. Since its inception in the summer of 2014, EEC has deployed $100+ million into over 65 companies out of its two dedicated funds and co-investments.

Throughout her career, she has worked at the intersection of marketing and money, finding contrarian ways to invest. She’s always balanced her profession with non-profit service to empower women, veterans and Latinos.

She joined Vanguard ETFs in 2008 ($870B) to build out their ETF business, quite the time, then moved to Goldman Sachs Alternatives group. Following, she became an SVP at SSGA ($580B) in institutional investing tasked with a $3 billion region, finally coming to First Trust ($63B) to build the LatAm investment business from the ground up. Codie has led global teams in all asset classes, negotiating JV’s, product creation and market entry across the Americas.

She is a board member at The Arcview Group, Magma Partners Venture Fund, Texans for Veterans and a member of the free markets think tank, AEI’s Enterprise Club. She also sits on the policy board of the Marijuana Policy Project. She invests in women led startups through Plum Alley, WAVE and The Vinetta Project and cannabis companies through Cresco Capital Partners. She received her degree in PR & Journalism from ASU’s Honors School, MBA from Georgetown University and PHD from Fundacao Gestulio Vargas. She was awarded the JFK Award for Print Journalism and the Howard Buffett Grant.

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Real Estate Rockstars, this is Aaron Amuchastegui. This week, you guys are going to get a treat. Every week, I do a state of the market and I thought this week, I would do a super unique one, so I reached out to a friend of mine that I know, Codie Sanchez. Codie is doing so much content right now, whether it’s on social media, whether it’s on her newsletter. I’ve seen her speaking on multiple different stages about multiple different things. I’ve seen her speak at the One Life Conference about just inspiration and where we went to in GoBundance. A lot of you guys have heard us talk about her GoBundance mastermind.

She helps out a lot of the millionaires there about what to do. The fun ways to introduce Codie is she’s a reformed journalist, turned institutional investor. She helps do all sorts of different investments that we’re going to get into today. She has a bunch of fun little hustles, some are real estate related, some aren’t. My favorite thing that she’s working on right now that I reached out to her after getting one was this Contrarian Thinking blog. We’ve been talking about the news a lot. Real estate agents, you guys are entrepreneurs at heart, but Contrarian Thinking, when you just look at that, to me, that means looking at it from a different angle, or maybe the opposite angle.

I’m going to get into that with her, but Codie, how’s it going?

Codie: It’s going great. Thanks for having me. It’s lovely to get a chance to ask uncomfortable questions, that is why I love podcasts, so I’m going to harass you right back.

Aaron: Yes, that’s even more fun. People that run the podcasts aren’t used to the questions and also they’re like, “Oh my gosh.” A lot of guys like asking questions. I just like talking. I like getting to have fun conversations, we record it and everybody gets to be a fly on the wall. If we jump into Contrarian Thinking, what made you start doing that newsletter? I see it as Contrarian is like looking at from the total opposite way. Is that your plan with that?

Codie: Yes, what was interesting is I used to be a war correspondent and focusing particularly on issues along the US-Mexico border. I started off doing conflict journalism and asking a lot of really uncomfortable questions. As I progressed through investing, more traditional realms, like investment banking and asset management and private equity, I realized that the overarching theme for me in good investors and good business people is really one thing. That they know how to question correctly, that they question everything, that they’re not afraid to look stupid, that they don’t pretend like they know everything.

The people who do pretend like they know everything actually are the ones to watch out for. I didn’t get a lot of chances in my previous profession to ask the uncomfortable questions. With everything going on in the world today, I realized all of us are absolutely losing this ability to have constructive debate. I even think about like Ruth Bader Ginsburg. She just passed and that’s a tragedy, but one of the most amazing things about RBG, in my opinion, is that she was able to hold incredibly close relations with people who were her complete and utter intellectual opposite from the political spectrum.

Even though she disagreed with them on almost every standpoint, she could be very close friends with some of the other justices on the other side of the coin. I just reached out to a bunch of friends, and you were one of the people on the list and was like, we’ve lost the ability to communicate and debate and to question things. I think that is the biggest motivator for success, is your ability to do that, and so let’s stimulate a conversation that’s not clickbait and social media and pushing one side and allow for a space where everybody can ask uncomfortable questions. That’s how I got to Contrarian Thinking.

Aaron: Yes, I love that. I even get chills as you talk about RBG. I remember watching the documentary on that, and how she was close, she would go on vacations with the other justices that she was always arguing against, but she could be their friend. Wouldn’t that be an amazing world that we could live in? I’m trying to share the news all over social media, and email, with our newsletters and everything, and our podcast. There are still times when we get nervous. When we get worried if we’re actually–

Even by sharing pure news, you’re like, “Hey, I believe this to be a fact. I believe it should be news.” But still have to worry about the controversy around it to say, “Could I be sharing this right now?” Maybe it seems like a long time ago now, where people could have different opinions. You could debate back and forth, and afterward, you could shake hands and go golf together and things. It does feel like it’s a more– Everyone knows, a more polarized world, where some people are afraid to even share their opinion.

Codie: Yes, I totally agree. People think about it just in a political sphere today, but when I look at it, I think about it from your career, from the ability of you to look at investments and see if investments are good, bad, or otherwise. I see it shaking out across everything we do. There’s this feeling of conformity to whatever the national narrative is or whatever is seemingly politically correct or even what people think is the right way to do things in business. If you push back on that, people don’t like it. I think about that in investing a lot. I’m not sure about it in real estate, but in investing, what I do, having a blog that’s about Contrarian Thinking and posting and writing a lot is not very normal.

In private equity, it’s almost zero people do this. The person who broke that for a lot of us was Ray Dalio. Ray Dalio runs a hedge fund, but he went out there and started sharing how he invests and publicly before only venture capital firms did that. People think it’s weird, and I’m sure it’s the same for you. They’re like, “Aaron, aren’t you successful? Why are you doing this content thing?”

Codie: That’s exactly right, and you’re not innovating. That’s the other thing is. We tell people all the time how to invest, how to grow businesses, how to pick businesses, but the crazy thing is nobody listens. I was just ranting about this yesterday, because actually, my partner in one of the businesses, Ryan Snow, who you know, from Unconventional Acquisitions, we had one person that was like, “Yes, I really want to buy a business someday.” I was like, “Ugh, someday. That word is just the killer of dreams. You should take action on the things you want to do, even a little bit every day.”

Aaron: The rules change. The rules are so much different today than they were in February. Seven months later, maybe it’s six months later, the rules have completely changed. It’s like investing in stocks. Everybody goes, “Man, I wish I would have invested in that one last month or I wish I would have sold that one last month.” It’s really easy in hindsight when there’s just so much of, “I wish I would have,” but there’s a lot of big opportunities in the world right now, where it’s like, you know what, no matter what, if you look at the stock market, you can say, “I would bet almost no matter what, 20 years from now, it’ll be worth more than this today.”

Over time, there’s those law of averages, and so a lot of these different opportunities people have right now, there’s going to be some ups and downs, but jump in now, because in a few years, and probably no matter what, 5 to 10 years, just about everything goes up, but maybe there’s a different way of thinking with that. I love the blog and for listeners– It’s a blog, but it’s a newsletter. For listeners out there, looking to get some of these stop asking permission to profit. Make 1,900% more versus rental properties. Careful what you chase, income stacking, and attention arbitrage your at 180% returns, media 100% broken, so many cool things in there.

These aren’t small newsletters. For how often you’re pushing them out, I’m shocked because it’s not like a two-minute read. It’s not a five-minute read. It’s a two-minute read if I’m going to choose one of the sections, but you’ve got eight different sections and each of them with graphics and everything. I was like, “How does she put this together, and how does she keep coming up with this much content?” Are you always looking? Did you have this stack of stuff, like when you see something like, “I’m going to talk about this, this week.”?

Codie: Yes, there’s a couple of tools I use that are really cool. For content management, I use a tool called Notion, which I really like. It’s a content management software and essentially allows you to schedule everything out and have inspiration and mood boards. Not dissimilar to Pinterest, where I keep all my running ideas. Plus, I’m sure, you’re similar, but I can’t help but see the world through the lens of ideas for writing and ideas for making money. My fiance jokingly talks about it, like if it doesn’t make you money or make an impact, you’re uninterested in it. It’s actually very true.

The weather don’t care. What’s happening with Sally, the neighbor, couldn’t care less. If it’s not something that I think is going to make an impact or have monetary success, because I think money can make a huge impact, I’m not really that interested in it. Everything I see has that lens.

I joke with this about the students who work with us on buying businesses, that once you have the ability to see business buying opportunities or to see investment opportunities, it’s like, you know when you buy a new car, Aaron, and you get a Range Rover. When you buy the Range Rover, you don’t notice that many of them, and then you buy the Range Rover, and then they’re everywhere.

Everywhere you go, you see the car that you bought. That’s what I think happens once you flip your mindset to start questioning things, and then you walk into a business and you’re like, “Oh my god, they’re not optimizing this, this, and this. They could be making money here. Why don’t they have that advertisement down?” Or you’re talking to somebody like you and with you and David. You ask him questions and you can just tell, “I want to be part of that business and I’m going to make you. Let me be part of that deal,” because once your business and deal mind is flipped on, you see them everywhere.

I think it’s just that same thing about buying the car, where you notice them all the time. Once you get that in your mind, you can’t help it. I’m overwhelmed with stuff to write about and I don’t have enough time, to be honest.

Aaron: As long as you can not forget. It is like that. When you flip that switch to be an entrepreneur, it’s like seeing the green numbers behind the matrix. You start to see– My wife will give me a hard time about it too. If I’m in a restaurant, I’m doing numbers. I’m counting how much our meal is and how many people are in there. We’ve been on this RV trip, where we left Austin and we went all the way up through South Dakota and everywhere, and in every one of these, I’m doing the profit analysis to go. Because the RV vacation places right now, they’re all so booked.

I’m looking at that going, “So they bought this lot in the middle of nowhere, and then they get the sewer, the water, and the electrical in here, and then all of a sudden–” It’s everywhere you look at, you’re looking at businesses and what they could do or, “Why don’t they buy the lot next door?” It really is a mindset thinking. Right now, there’s just so much of it, because you also see a ton of innovation. One thing that COVID, I think brought more than anything, was a ton of innovation. My favorites at the beginning was these sit-down restaurants that had converted parking lots into drive-throughs or restaurants.

In Northern California, there’s this restaurant that completely closed, they weren’t allowed to open, but they became the grocery store because groceries didn’t have anything. The restaurant still had it supplies, and so they were selling flour and vegetables and the things people wanted.

They couldn’t get in the stores anymore. Do you have any favorite innovations that you’ve seen come out of the last six months?

Codie: This is maybe like a little bit of a downer in some way, but it’s just recency bias. I just got off a phone call actually with a good friend of mine. She runs a series of gyms in Dallas. It’s called GRIT by Brit. Actually, if you’ve seen any of that Chase commercials recently, she’s a really good-looking Black chick. She went to Stanford, and she’s in all these online Chase commercials. Anyway, Britney’s studios, we’re talking about how sad it is for all the other business owners and that they’re going out of business. She’s like, “I’ve bought some equipment from them, I’m doing some stuff with them.”

I’m like, “You need to be doing more with them.” She’s like, “What do you mean? I’m buying their stuff.” I’m like, “You’re missing the boat entirely. Think about this, for every business that goes under and 60% of businesses that were closed temporarily for COVID, have closed forever.” I was like, “For every one of those business that goes under, there’s a value to it and nobody is snapping up the closed business value.”

I was like, “Britney, get on the phone and call every single one of those gym owners that went under that you know, and say, Hey, I want to help you out. I realize that this must be a horrific time. I can’t imagine what you’re going through with your business going under, maybe there’s even a little relief because it’s you finally made the decision, but let’s make this a win. What I was thinking is, why don’t I buy your customer list? Why don’t we bring you into the GRIT by Brit family? We’ll do a rev share 50% for six months or 50% for a year on all the customers that come in. We’ll have you host like a week worth of classes of going away, and moving to a new family series of classes.”

“Also, why don’t we do that with your top employees? We can actually hire them because that must have been tough for you to let them go. Why don’t I acquire those employees. We’ll use the fact that those trainers probably have a client base. Whatever clients they bring over, I’ll give you and them a percentage of that too. If you even want to, you can say that you sold your business and you didn’t close it down. You can change your narrative entirely.” Brit’s now gone and done that and spoken to a bunch of these people. It’s the first time she’s ever done non-organic growth. Every other time, she was gritty.

She was out there just growing. I’m like, “Those innovations, you don’t have to be Mark Zuckerberg, you don’t have to be Elon Musk.” You just have to see an opportunity and be like, how is this thing that looks like a loss, how could it be a win, to your point on the grocery stores. How could this actually be a win for them? The win is, for those restaurants, curbside pickup’s much cheaper. You don’t have to have restaurant employees. The ability to sell liquor in California, at the front of the store, is pretty incredible. You can open carry liquor now in many places in California. Those small little wins are only there because there’s been a negative for a bad situation that you’ve got to make good.

Aaron: When you’re talking about buying a customer list from a failing company, I imagine so many of them are like, “You can just have it.

Codie: So true.

Aaron: How valuable is that list? For people in real estate, that could be the restaurant down the street going out of business that actually has emails and phone numbers from something and buying that list to help them buy a house in the neighborhood, or help them sell their house, or just keeping that in mind, just the idea of there’s physical assets that are in a business, but what about that other stuff? What about the data? Data is huge right now as we’re collecting so much data, mostly around housing, but it’s foreclosures and vacant houses and who’s about to refi.

Now people are selling these lists like, “Hey, these people, their kid is now in high school. They’re more likely to sell.” Or “They’re about to have a baby. They’re more likely to buy a bigger house.” There’s so much data out there. If you start looking at all the businesses out there as customers and talent, there will be a lot of good talent as it shifts around. That’s a big one of your ventures right now. You have like five or six ventures I want to talk about today, but we can jump into your business one really quick. You guys, it’s that idea of people wanting to buy and sell businesses.

I know there’s a pitch behind it right now that– Before COVID, back in February, there was X amount of people planning to retire in the next four to five years. I don’t know which age class it was, but people that were entrepreneurs they were to the point in the next four or five years, they were going to sell anyway or they were just going to close shop. Most of them didn’t. There was an opportunity before COVID. Now that’s been amplified. What are you guys doing to try to capitalize on that and help people get into that?

Because I think I love that all of our listeners are real estate agents, but lately, what I’ve been trying to teach them over the last six months and share is ways to not just be a real estate agent. Use that for your income, but now you need to invest. Whether that’s investing in a rental, invest in flipping properties, starting a construction company, or could even be investing in one of these other businesses, COVID taught us to have a well-rounded backup plan because you never know what business is going to shut down. All you listeners, I think this will be really impactful for you. What are you guys doing in that space?

Codie: It’s such a good point. For real estate agents in particular, to me, and I’m an outsider. I have a few investment properties, but nothing crazy. You guys are all about community. You sell inside of communities and neighborhoods and you’re pretty geographically dense usually unless you’re somebody like you and you can have a wider plethora of areas because you have people underneath you. For individual real estate agents, you have a community that you serve. What we talk about at unconventional acquisitions is how do you leverage your local community in order to buy businesses?

If I was a real estate agent, I was applying our theory, I’ll give you some ideas on how I would do it, but essentially, I’m in private equity. We run a fund called Entourage Effect Capital. That’s a cannabis fund and we invest in the cannabis landscape. What I realized from doing, I don’t know, a decade-plus of private equity and alternatives investing is that we do something called an LBO, leverage buyout purchasing, where we use debt from banks typically, in order to buy companies and we use that leverage to give us a really high rate of return. We don’t have enough capital to buy billions of dollars in companies, but we might have enough capital to have a bank back us on it.

What was fascinating is I did this for years and the partners in these firms are billionaires. They’re on the Forbes 100 list. All the top private equity firms in the world have the richest people in the world in them. What I realized is, “Man, I’m doing all of this to make our LPs, which is what we call our investors a lot of money, and to make the firm a lot of money and I’m a partner at it. I make money too, but why am I not applying this to my own life and to businesses and community?” Private equity firms usually buy businesses that are billions or hundreds of millions of dollars all the way down to $10 million in revenue.

In your community around you, there’s all these micro PE businesses, which are businesses that do anywhere from, let’s call it $100,000 in revenue to, I like to look up to $5 million in revenue. You can go up to $10 million in revenue. These are companies like your HPAC, your plumber, your laundromat, your accounting firm, landscaping, blue-collar businesses. These businesses, you can use the same exact model that private equity does with something called seller financing. Essentially, Aaron, if you’re going to sell me your landscaping company and you say, “Hey, my landscaping company does, let’s make it easy, $100,000 a year in profit.”

I take home 100K at the end of the year for my landscaping company. Any business below $5 million in sales, they trade at two to three times their profits. Your company, Aaron, would be worth, let’s say, $200,000. Now, I might not have $200,000 to buy your business right now, nor might I want to put that much money into one business.

What I would do is I would go to Aaron and say, “I want to buy your business, I’ll give you some money down, but for the rest of it, I’m going to use the future sales from the business to pay you out.” This seller financing, I know used to be a thing in real estate. From what I’ve heard, it’s not as common and it’s harder to get, but it’s very normal in small business world because only 1 in 10 to 11 small businesses sell within a year. There are hundreds of thousands of small businesses that will never sell and you can immediately come into profit from these businesses.

Now, all of this stuff is not rocket science, but it is work. There’s no such thing as truly, truly passive income. You got to do some work to do stuff. What I find fascinating is for a real estate agent, why wouldn’t you have your real estate business and then also own, let’s say, I don’t know, the mortgage company that goes along with it. Why wouldn’t you also be able to service if you do like multi-family real estate? Why wouldn’t you be able to service your multi-family units with landscaping or HPAC? You just look at your list of top expenses, pick a few that you use frequently, and do a deal with those companies.

Might not even need to use seller financing. You could just say, “I’m going to switch all of my business to you. I want a portion of your business for that, and I’ll help you grow with all these other realtors.” There’s all the fun ways for you to become a business owner as opposed to W2 or always in the sales hustle. I got annoyed that nobody taught that. We created a course to do that. That’s been fun.

Aaron: There’s two different ways. You’re going to buy a business and you’re going to keep the people in place like what Brit’s doing in Dallas. You could buy a business, keep that spot, and keep all those employees and the location. Sometimes it’s about saying, ‘Hey, we don’t need three locations in the same town. Let’s wrap up the companies and move to one location.” Then what about like the landscape company because the guy selling his landscape company is probably the one that’s been mowing the lawn forever, and he’s like, “Part of why I want to sell is because I don’t want to mow the lawn anymore.” What do you do when you buy up one of those businesses?

Codie: It depends. There’s two different types of ways to be an owner of a small business. You can be an owner-operator. In your instance, if maybe right now, what you do is you sit behind a desk and you make, 50 or 60K a year and you don’t want to be behind a desk and you’re in California and it’s beautiful outside and you love plants and you want to go do landscaping for people. You want to do plants and you want to, yes, you got to mow grass, but you want to do some other stuff, then you could be an owner-operator. You operate the business. You’d say, “I’m going to buy your business because I’m buying a job.”

That’s one way to do it. A lot of people will do that these days instead of startups because so many startups fail and it’s really hard to find product-market fit. They’ll buy their job. They’ll say, “I want to go operate this bakery,” or “I want to go operate this company. Instead of starting it, why don’t I buy it? Then I have immediate profit to me and I get to replace my income.” But the way that I do it typically because I can’t operate any more businesses I got enough, it’s called an owner investor. If you’re an owner investor, that means that landscaping company.

If all it makes is $50,000 a year and that’s not enough for somebody to hire somebody, then I’d probably pass on that deal, but what I might look for is a landscaping company that does $100,000, $200,000 a year. The guy might still be operating and doing some of it, but instead of him staying in, I might hire somebody else to do it. My model’s always been my fiance’s in the military. We hire a lot of military operators or we hire people in our network to go and run these businesses for us or you can just invest in a business. Maybe there’s a landscaping business. These people never think that they can sell.

It’s not like a house. There’s not a set process where you know you buy and you sell and you’re buying yourself. Most businesses just get shut down. They don’t even sell them. If there’s a great landscaping company that’s doing a couple 100K a year, you see the guy’s really busy, you just start getting curious. You get that range Rover mentality again, and you say like, “Hey man, it looks like you’re killing it. Can we talk about what your business is doing and how much? Maybe this is something that I want to invest in.”

Then what you do is you go out and you buy those little landscaping services and you combine them into his and you don’t have to operate it. You just do the M&A, or you just get passive income from it, or like some of the deals that you and I both have. I have a podcast production business, actually, that sets up this right for people every single time they want to do a podcast. I don’t know anything about podcasting, but I invested in the guy. I gave him 10K for the business it was a steal, sorry, Jonathan. It makes about 130k in profit right now. We’ll ramp that up to probably 250, 300. I don’t know if it’ll be a 500k profit a year business, but it’ll be a couple 100K, and I just take 40% of those profits. He runs it, but I feed him clients. That’s how I would structure those deals.

Aaron: There’s some really fun stuff out there as you guys start thinking about businesses. We used to always see ads of, “Hey, this pool maintenance company is selling their route, or these people are selling that.” It’s really easy for other companies to buy it. It could be an owner-operator or someone will say, “I’m tired of what I’m doing. I want to go wash cars now. I want to go be the detailer, I want to go do the pool route.” Or it could be somebody that has a pool company right now and they say, “Hey, we’re just going to buy the route.”

We bought a company down in San Antonio that we sell foreclosure lists. There was another company that was selling foreclosure lists. We would do the same work, go through the same research, do all the same things, go to the same auction location and have booths set up next to each other selling the same product for the same price. We ended up buying that other company because they as our competitor, it didn’t make any sense.

Because, again, both of us had the same expenses of profits were low for both of us in those areas. As soon as we were able to purchase it, and we were the best purchaser for it because we could essentially buy it for more than it was worth because we could buy it based on gross instead of net. Because when we bought that company, we didn’t have to buy any expenses. We just got to buy the customers and no longer had a competitor. It didn’t cost us any more to operate, we were already operating. Those are some unique partnerships that people will see.

If you already have a pool company, you’re going to be the best person to buy the pool maintenance company that has a similar route because you might be able to offer them a little bit more. For you, it’s more profitable because you already have a guy that does three pools on that street. Really fun stuff. Let’s jump to another thing that I’ve seen you talk about it a couple of times.

You have this thing going with land. Land it’s the same like RV rental space. Somebody told you about this new opportunity out there, you jumped in with both feet and said well, let me just try this and see how the experiment is working. Tell us about that experiment and is it working?

Codie: Yes. It’s funny. It was my friend Kate Hancock. She’s always these business ideas. She owns a hotel in Thailand or the Philippines. I can’t remember. Anyway, we were on a podcast like this. I’m always curious, what are other ways I could diversify that have some cross-pollination between my interests and desires, and some ability to get passive income and/or just try a fun experiment? Once you do a bunch of these deals, even if you only are making a couple of $1,000 in profit a month or something like that, it’s still fun to try. You start to see business as a game.

She told me that she started buying land near national parks. The land was $10,000 on average for an acre. With this $10,000, she was making about $1,500 a month because she put campers on this land. She doesn’t even have RV hookups. Actually, she might now, but she didn’t then. What she would do is, on an acre, it’s like the RV plot, you can have about 10 campsites per acre is about the norm. For every campsite, you get a $50 on average charge.

She was basically saying that she had one of her 10 sites booked for every day of the year and so was making about $1,500 a month profit on this. Then she’s like, “What’s amazing is you don’t have to clean up in the same way, she just sent somebody weekly to check on the trash and to make sure there’s no vagrants, or nobody’s staying that they shouldn’t be, you don’t have to have the cleaning fee. You don’t have to have people breaking stuff and a bunch of property and the cost of entry is so low.”

I just said, “Well, that sounds like fun, I’m going to do that because it’d be fun to just own acres by all the national parks. For my kids or something one day I’d give them land, that’d be a great gift, I never got that.” Anyway, so I went and we started looking at land. I’m from Arizona. We looked at land by national parks in Arizona and by hunting sites, my dad’s a big hunter. There’s a market for people that want to be able to camp next to the hunting sites prior to when they’re allowed to camp.

We looked at those, we looked at Joshua Tree, so we’re actually going there, I think Sunday to look at another site. We just have a friend that is in the military, and his spouse is there so they can manage the property. The moral of the story is, for me, we’ve bought the land. We haven’t monetized it yet. That’s the next goal. I don’t want to operate them. I’m going to have in Joshua Tree, I have an individual that will operate these sites. In Arizona, I have another individual that will operate these sites because I don’t want to do the day-to-day. I just want to set it up, play around with it, and then let them run with it and I’ll do a profit share with them.

Aaron: When I first heard this, I thought it was such a new fun thing. I added in my notes to look for land this week. That was something that became on my to-do list to go all the favorite places I go. To start venturing around in RVs I see even more of that demand. I thought it was also really perfect for real estate agents. Because when you talk about a $10,000 investment into this fun new entrepreneur thing, and then when they’re listing them, it’s sites like Airbnb and other things where you can post them on there and it’s I have to imagine so much lower risk than anything else. If it makes $1,000 a year, it’s a good investment.

You pay 10,000 bucks on something, if you make $1,000 a year it’s a good investment. Your friend is making over that in a month. It feels like a very low-risk fun thing not a huge barrier to entry for somebody with investing. I wanted the real estate agents out there they hear this as a fun idea. Somebody needs to check out those national parks near you. The funny thing was it I think you said it in your blog and I did it too is like are lots really 10,000 bucks in your Joshua Tree? Are lots really 10,000 bucks? Yes, because not all of them are very easy to build on.

The inherent value in these is what would it take to put a house there and not all of them have electricity, or not all of them have water. Some of them do now so maybe it’s $100 a night for those. There really is lots out there near these places where it’s in the middle of nowhere which is perfect for camping. Such a fun quirky new thing. One of your blog posts or newsletters talked about a bunch of different hustle ideas. It was like, “Hey, if you’re looking for some extra cash out there, here’s 20 ideas.” Can you think of one or two of those that are your favorite random ones or as many as you want? Just talk about that for a second.

Codie: A couple of things. First on the camping thing too, check out which is where you can go and it’s a camping-only site. Then if you don’t believe that this is a massive trend because a lot of people are like, “No, people don’t want to camp anymore.” Just Google search, camping today and you’ll see the first 15 articles are camping and outdoor stores are at all-time highs for sales. Going really really deep where no one is around is a huge camping trend. You can post your location on a bunch of these nomading sites. There’s all these fun ways to play it too. There’s also camping sites I was looking at next to Vineyards. For your next RV trip, Aaron, there’s a site, I can’t remember the name, but if you Googled it, I’m sure it would tell you where it just lists all of the RV camping locations on Vineyards you can go to. If you don’t want to go to normal RV hookups, you can go camp only at Vineyards, which I thought was really cool.

Then the other one that I thought was so fun is just yesterday, I was looking at a– I really should write down the names, but if you Google “rural land for sale”, there’s a bunch of these sites where you can buy land for $100 and $200 bucks. Now, I haven’t done much diligence in that. There’s got to be something super flawed if that’s what they’re selling them for, but I think there’s a lot of sites that sell land for much less than $10,000. I think you can get creative and have some fun with these. In the blog post, you’ll see everything always has downsides. You’ll see, you’ve got to make sure it’s licensed right, you got to make sure zoning is okay. There’s got to be some way for them to drive to it. If it’s in the middle of a canyon, not very helpful for campers, probably. There are some different things to think about.

The blog post, I think is called 29 Passive Income Ideas. I had a rant yesterday actually about side hustles because I got annoyed. This very prominent person that I’m actually friends with wrote an article that was like, “Side hustles are now king, and they’re going to take us out of this recession.” Then proceeded to list things like dog walking. Listed literally, Aaron, I don’t know if I could say this on here, but sperm donation.

Aaron: Yes, that’s a side hustle.

Codie: Yes, I was like, “Hey, I bet organ donations is great too, but not sustainable.” Come on.

Aaron: How scalable is that?

Codie: It’s not scalable. It’s a terrible idea. Then there are some fun statistics on it where it’s like, in fine print at the bottom, you are only allowed to donate sperm if you’re 5’7 and have a college degree.

Aaron: Oh my gosh.

Codie: It was so inappropriate. This is on the California donation site for the state. Anyway, I got mad about this. I tried a bunch of these side hustles, and I literally signed up for Rover, I think, which is like a dog walking site. There’s so many little pictures on there. I have a puppy, so I thought, “Hey, we’re–” I signed up for the thing where they could bring the dog over, and it could stay. Of course, I left it on there for like a week, I think, I had my assistant check it out and nobody responded. It’s like, “Of course not. Nobody’s traveling. This is a terrible side hustle.” I get mad about this idea that people say like, “Side hustling will be great.” Most side hustles are terrible.

They’re terrible because they don’t scale, to your point, they’re super low-paying, they get more low-paying as the competition goes up, and they don’t give you new skills. I don’t learn anything very applicable if I’m on Rover watching little fluffball, but the side hustles that I put out there were ones that leveraged 21st-century technology. A perfect example is what we talked about first, Unconventional Acquisitions. The course, everybody, I truly think courses are the new books. You know how lots of people have books now or lots of people have blogs? Books really don’t make you any money. Even if you’re a best-selling author, they really don’t, but courses can.

Everybody has some weird niche that they’re super good at. I put on there how we launched our course so that other people can do it too on whatever you want to do. I think we did $30,000 or $50,000 in the pre-launch in that sale. Now, I have a little bit bigger network, so maybe that’s not super fair, but that’s zero ad spend. It’s zero focus on it from a marketing perspective yet, just using the people we know. I think if you got to Thinkific,, that’s where you can create a course. You can check that out. I think you can do that on many different subjects, how to cook. Marie Kondo made millions off of telling you how to throw away stuff. It’s everywhere.

That’s one, and then the other one I’ll say, and then I’ll shut up and then we can go into any others would be, there’s a couple of different ways to do this, but there are sites that will do all of your back office logistics for you, like Amazon Sellers, is a site where if you have a graphic tee idea inside of you or really any clothing graphic idea, they will take the shirt, make the shirt, put it all together, send it out to people, package it, handle returns and everything, and all you do is take the link and post it wherever you want to. You just do the marketing, they took care of all the backend logistics. I think that’s cool.

I have that same thing on there for notebooks. I don’t know about you, but if I look around my office right now, I have like 37 notebooks of different varieties. There is a site that will do it all for you. That’s in the blog, too. You come up with a notebook idea, like I have the first, actually, this one. This notebook was what they gave us at Goldman Sachs. I don’t know if you can see that. This is back when we were smiling and dialing for dollars, but it has the date and then it has numbers 1 through 60 that are tick marks for all the calls you do, and then 1 through 20 for the people that you’re going to call, you’re supposed to fill it out the night before, and then follow-up emails, the people that you get in some notes sections. I just created this, again, for myself, because I wanted it at Kinko’s, but I’m going to create it and post it on my website because I think there’s a lot of people that are in sales that probably should have the same thing, so I don’t have to do any of that. They handle all the creation, logistics, and returns, and selling, and I just create it and post it somewhere.

Aaron: You’re focusing mostly on the idea that everyone is great at something. Everyone is great at something and for as many people there are that are great at it, there are other people that aren’t that wish they were. The idea of a journal and a notebook, all of us organize our journals and notebooks our own way. We get to a new page and we number it a certain way and we do it just like that and being able to say, “Hey, somebody else might want this,” and scale it. My wife right now, she’s getting ready to release our five-hour school week journal. Five hours a week is her brand, which is just blowing up right now with all the homeschoolers that are out there. She would write down how she organizes her week and people kept asking for it. Right now she’s about to release her journal, which is just all those ideas in her head using a notebook company, like what you said.

My daughter does this. That design one reminded me. She designs these vinyl stickers, and she’s way into Broadway. She’s 13 years old, so she’s way into Broadway. She’s way into Hamilton and Beetlejuice. She creates these stickers where she opens them up in Adobe and turns the picture from the thing into this fun art, like splotches the characters, so you can easily recognize like, “Oh, this is the three sisters from Hamilton.” There’s no brand impersonation. She puts it on this website. Every time someone buys a vinyl stickers, she makes a buck. She’s making $40 or $50 a month right now on stuff that she designed six months ago. It’s a totally horizontal business for her and she’s 13. She’ll do way better than I will.

My favorite part about all your hustles, your idea of you wanted to see if the dog walking one was good, so you just signed up, just tried for a week. Anyone that wants to think about anything, reading any of those blog posts, just get into action and try it. You can sample these things pretty easily to see if they’re going to work for you or not. You can pick 10 side hustles and actually get into action this week and realize that only one of them works the way that you want it to for you.

I remember my Northern California house, when I got into Airbnb up here, it was like an accident. I’ve been trying to sell it, we want to sell our house, we’re getting ready to move. It’s a 6,500-square-foot house on 10 acres. What we learned pretty quickly was people either wanted a 6,000- square-foot house that was big a nice or they wanted 10 acres where you felt like a farmer, but very few people wanted both because it’s a whole lot of maintenance for the outside. If you want to keep a big, nice house big and nice on that, but the one thing we had was everybody loved partying here. I was just, at a random thought, I was like, “I’m just going to take these for-sale pictures, and I’m going to put it on Airbnb at $500 a night and see just as a sample.” I’d heard about Airbnb, this was a few years ago, and I had never tried it and I just uploaded some pictures. The next day I woke up, I had 30 emails. I had to take the posting down really quick and be like, “Okay, I obviously priced it wrong.” Now it’s a $1,500-a-night place.

COVID made it to where it was crazy. June, July, and August, it was booked 87 out of 90 days because everyone from San Francisco, they’re like, “The hotels are closed. We just want to go swim in a pool, us and another family.” It used to be company retreats and things like that, and it’d be a couple of weekends a month. With COVID, everybody wanted to come and get away. You’re camping idea and everything else changed, but I randomly threw it on there as a test. I love that idea that you’re like, “No, I’ll see if anybody wants me to walk their dog.”

Aaron: Now, it would have been a funnier story to me if eight people had dropped their dog off and you were like, “Okay, it worked, but it’s a lot of work. I’m not going to be a dog walker anymore.” As you run around there. You were talking about businesses. One of your biggest businesses right now is cannabis. It’s a huge business. It’s been changing all the time. You talked about evaluations of normal companies. Two to three times profit is their valuation. Is that the same for cannabis?

There’s a funny story. Up in Southern Oregon, half the state has legalized it a long time ago and some of the cities hadn’t. About a year ago, one of the new cities said they were going to finally legalize it. My brother was able to get somebody to sell or finance him a lot in an area where it was approved. He got in line first. He got approved to have a dispensary without coming out of any money in his pocket. Then they gave him the license. By doing that, no one else could get one within so many miles and then he had 30 days. Then he got an investor to bring in a building, and then he got somebody to supply it. Now he’s got a huge dispensary, and he’s just rocking. He’s expanding and he’s putting in a couple more dispensaries right now. I’m probably going to buy another one. You look at the business and say, some of the states are tapped, but others there’s so much opportunity. Other states are like voting on it now. I guess I have a bunch of questions in one, like, what are valuations like? Are people trying to expand into new states ahead of time? Do people have on their radar like, “Hey, this town might legalize someday, let’s buy the lot now”? How big is this business going to get?

Codie: Yes, such a good question. Here’s the difference in cannabis versus these blue-collar businesses in my opinion. When we talk about buying small businesses, you’re buying them for their profits that they have today. You are not looking into the future at all from a valuation standpoint, and trying to say, “This business is doing $100,000, but I think that it can do $300,000 or $500,000, so I’m going to buy it at a premium.” The real goal with the small business buying is you’re buying that profit stream. When you’re investing in these small businesses, you’re not usually investing with them with the idea to sell, you’re investing with them with the idea that one day you’ll be able to reap the profits, but not necessarily with an exit. The cannabis valuations are higher, is a long way of saying that. You pay more for these businesses because they have a massive growth opportunity.

It’s not that dissimilar to tech, except tech is infinitely scalable, and cannabis is not, like farms and lots of equipment. There’s lots of people in my space that invest, but the way that we do it is we invest in companies that do $10 million to $20 million in revenue, at least. Now, sometimes these are $50 million, $75 million. We’re investing way later stage. We don’t always buy out the companies. Sometimes we just invest alongside other investors. What we’re looking for is for operators to run them and return our capital to us in five to seven years, times three to five X of our initial investment. That’s how we do it. Then, yes, there are lots of people following the industry and making sure that as new states come on board, that we’re looking at what’s the opportunity there. I mean, we were just talking to New Mexico yesterday, some dispensary’s there, my home state of Arizona, I think that’ll legalize shortly. We’re looking at all those varying states. We have 65 companies that we’ve invested in. Let’s call them like 40 are still active, meaning we haven’t sold them or sold out of them. They’re across the US and one in Europe and one in Canada.

Aaron: Really, cannabis now feels so much like alcohol with the way that it’s regulated with how big of a business it is with what it’s turning into. Now you see giant grow facilities and manufacturing and people whose businesses that their sole job is for testing and businesses that are their sole job is like a distributor. The grow warehouses can’t sell directly to a dispensary, there’s distributors and stuff in the way. If people haven’t been researching it, this business isn’t like a– I don’t know. It isn’t a bunch of hippies. It is a giant business that is getting– or if you think how big is Budweiser, that’s how the biggest cannabis companies may be. Maybe even bigger because right now they’re getting to scale at a time where tech does some amazing things.

There’s only so many things you can do with alcohol. There seems like there’s an infinite number of things right now that people are figuring out to do with cannabis. It is an exciting business to see what’s happening. Every state is treating it different. I think along the way, somebody– and there’s just so much about money. Colorado when they were one of the first, they’re like, “Yes, we brought an X amount of dollars.” Then as all these other States are following, it’s going to be really hard for States to say no, especially States that are struggling financially. Now, if a state isn’t– there’s plenty of dry cities out there that are like, “No, we don’t let anyone buy alcohol here.” There will still be places that aren’t, but now it’s like this business opportunity, and it’s like, if we don’t, somebody else will.

Codie: Yes. I agree with that. The only thing I would say as a note of caution is like, I don’t go around telling people you should become an entrepreneur in cannabis because it’s really hard. If your brother knows this, more red tape and regulations than ever. It’s the opposite of a super open industry. It’s a super complex industry, and it’s really hard to build a business in it. It is called weed, but it doesn’t always grow like one. There’s lots of problems with cultivation and growing and processing and manufacturing. Tech is complex. Not everyone, for good, bad, or otherwise can go and build the backend technology that you need to do and have all the APIs that connect everywhere in order to do well in tech. In cannabis, not everybody can handle complex logistics, complex agriculture farming, complex regulatory and licensing. It’s not rocket science, but it’s not easy. A lot of people underestimate it, and candidly, that’s when we take advantage. We take advantage when somebody is distressed because they have not hit the expectations that they thought that they were going to, and we can come in and get deals at lower valuations.

Aaron: Yes, it is complex. It is not simple. When you start to see all those different levels of requirement and licensing and things like that, it sure is different. Last couple of questions. The world is really interesting. You study lots of different markets, there’s interest rates, things like that.

This is just crystal ball stuff. What do you think is going to happen with real estate? Do you think that there’s going to continue to be– Right now people are like, “Hey, prices are going up like crazy.” They’ve gained 15% in six months. What do you think is next?

Codie: Man, like you said, I don’t have a crystal ball, otherwise we’d be on my yacht.

Aaron: Next year.

Codie: Although these days I just rent it like a jet. I don’t think I’d buy one. Here’s what I think. First of all, we’ve been in a decades-long bull run. As you well know, and people listening, real estate is a lagging indicator. Things have to go kind of sideways, and the economy first, typically, and then real estate follows. Even 2008 people could say, “Well, that was a trigger.” Not really. It was a trigger from financial levers that were pulled that had a trickle-down effect to real estate across the board. What I get concerned about is we are really in real estate right now, we’ve had a very, very long bull market and we have incredibly low rates and we haven’t really felt the economic effects of the pandemic.

Why? Because we’ve infused billions and billions of dollars into the system and we’ve actually paid people for not working. We have a massive amount of PPP loans out there. There’s a lot of juice in the system right now that at some point we got to pay the piper. I worry about real estate because I worry about anything that’s at all-time highs. I said the same thing in 2008 in cannabis. I came into cannabis publicly in the end of 2017, and I said, “The cannabis market is going to come down. There will be a crash at some point, and I think it’s coming this year.” I was right. I’m not always for sure, but the cannabis market devalued. We’ve been able to pick up a lot of deals in that space, but a lot of people were massively burned.

I think you’re going to have the same thing in real estate. The good part is whenever there’s a downturn, there’s two good things. One, if you’re not over-levered and you can keep your real estate, to your first point in the beginning, who cares? If you have a 10- or 20-year time horizon, maybe you bought at the high, but that’ll shake out as the market continues to grow over the long-term. If you over-leverage yourself and if you don’t have enough cash or enough income to protect yourself, you can get underwater quick, especially with an asset like real estate that requires a lot of cash or debt. I worry about that.

I also worry about– I did a Google search. I think you saw this at the event for real estate. I tried to find a market that was doing poorly in real estate. This was pre-riots in San Francisco. Now, San Francisco is actually not doing very well in real estate, neither is Portland or Minneapolis, but everywhere else across the country, real estate is at all-time highs. I literally couldn’t find somewhere that wasn’t, and even here in San Diego, we were looking at buy-in and each week the properties will get sold without anybody looking at the place. These are multi-million dollar houses along the coast. I worry about real estate. You would know more than I do, but from a broad-based economic perspective, I try to stay away from things that are at all-time highs.

Aaron: Well, it’s the same as the whole stock market analogy. If you’re going to be in this thing for 20 years, then buying it an all-time high maybe not that big of a deal, but you never know. I know there’s going to be times where we have corrections. Real estate has been for the last 10 years, it’s been going up all the time. If you look back 50 years, it’s never just continued to go up. We do the same stock market wave where it’s up and down as it continues to climb. We’re waiting to see that. Yet there’s a Gary Keller talks about it this week. There’s like two different economies so far where there’s a 4% unemployment in the finance industry but at 20-something unemployment in the service industry. People are like, “Well, why is it still strong?” Well, the people that are at 4% unemployment they’re still making plenty of money, and they’re not going out and eating every night, they have plenty of extra savings, and they want to buy a bigger house. We’re going to continue to see interesting changes like that in real estate as it impacts a lot of different things. You are right we haven’t paid the piper yet. The can has been kicked for a while, and eventually when you’re paying people not to work, whether it’s good or bad, it’s just affecting the economy.

Non-politically on whether it’s a good idea or a bad idea, it is a fact a ton of money has been dumped in to keep things going and it changes the way– The economic model is meant to be a certain way, but if all of a sudden a bunch of cash gets thrown in, it changes everything. This was so much fun, Codie. I knew it would be a lot of fun just to be able to talk to you about a whole bunch of different things. Real Estate Rockstar listeners, I know that you guys got a tonne of value out of this. Codie, if people want to come find you for any of that stuff, for your business boot camps, your newsletters, all that stuff, what’s the best way they can find you?

Codie: Probably the best way is which is my newsletter. It’s on this funky platform called Substack. It’s really cool if you haven’t checked it out for newsletters. I nerd out on that. Then if you want the business stuff that’s at

Aaron: Unconventional Acquisitions and Contrarian Thinking, we’ll have both of those links in the show notes. Codie, thanks for joining me to talk about stuff. I’ll have to have you come back in a few months because right now, like we said at the beginning, the rules are changing like every 60, 90 days right now. I think it’s going to be a fun year to be able to– Fun is maybe the wrong word, but I’ve said before, I am a history buff. I love history and right now we are living through something that’s going to be written in history books forever so watch while you can.

Codie: I couldn’t agree more. You know what I should do to Aaron, we should do– I’m supposed to do code, Ryan’s going to yell at me, to do like Rockstar20 or something. If you plug into Unconventional Acquisitions that’ll give you 20% off. What I always tell people about the business buying stuff, if you’re on your last $1,000 or $500, don’t do this, stabilize yourself. You come into something like a business-buying course or a mastermind when you want to figure out how to add additional layers of income. It’s not like a last salvation.

I always give that sort of disclaimer upfront, but if you want the code it’s Rockstar20, and I’ll make sure that hooks you up with a discount for your people. I get so excited if I can answer any questions, let me know. I answer the comments on social media and everywhere else. I think if we all figure out how to make more money, then that just helps the economy overall and our country.

Aaron: Yes, I love it. Unconventional Acquisitions she gave me the code Rockstar20, we’ll put that in there. It is great. She said at the beginning, “Don’t go jumping into this right now, but I’m trying to help you guys diversify.” Many of our listeners are doing great so what can we do to make sure that we protect ourselves to the future again. Codie, thanks for coming we’ll have you on again soon.

Codie: My pleasure.

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