Is it possible for a middle-class American to become a millionaire? Imagine creating enough passive income to surpass your earned active income. Imagine living without worrying about current expenses or the next recession. Imagine securing your financial future decades before retirement.
What’s up everybody, welcome back to Author Hour Podcast, I’m Hussein Al-Baiaty and today, I’m very excited to be joined by the author of Middle Class to Millionaire, David Vernich, who will be dropping some crazy gems on us to make the leap into that millionaire class. Let’s get into it.
All right my friends, I am here with David Vernich and I’m so excited because we have a very special episode today. David, how’s it going? I’m super excited to talk about your book. But first, I really want to talk about a little bit about your personal background and sort of what led you to writing the book. If you can go ahead and give us a little bit of a story, I’d appreciate that.
David Vernich: Sure, no problem. I’m glad that I’m here with you. My story which caused me to write the book essentially is I was 45 years old at the time, working in corporate America for a bank and four sons. My wife was home, didn’t work at the time because she had plenty to do with four sons.
And kind of sitting back and looking at—I was at the halfway point, basically, of my career and I said, “I wonder if I’m going to be able to retire comfortably at 65, in 20 years?” And when I pulled up my retirement account and did some quick back-of-the-envelope math, I realized that if I kept doing what I was doing, the kids would be okay, they’d be out of the house with their jobs and stuff but my wife and I would have to go live in a van down by the river, eating government subsidized cheese like Chris Farley in that Saturday Night Live skit.
So, I had to figure out how to fix this problem and it’s a problem that’s facing a lot of people out there, which is the retirement crisis. A lot of the baby boomers do not have enough money saved for retirement and as a result, they’re going to have to take a pretty dramatic reduction in their standard of living when they do retire.
Hussein Al-Baiaty: Yeah, that is a big problem and so, when you were 45, sort of looking down this, I guess, what would seem like a barrel, right? Like, okay, how do I make the shifts necessary so that my wife and I have some sort of a comfort level when we reach that age. What did you decide to do in that moment in time?
How to Make the Changes
David Vernich: Well, I’m not a rocket scientist but I did have the access to people that were successfully navigating that same exact problem, since I was a loan officer for a bank. I simply looked at people that were business owners and said, “Who would I trade places with?” And really, the only ones that popped up to the top of the list that were living the kind of lifestyle that I would want to live, and not having the stress that a lot of businesses had, was the real estate investors.
But the issue with real estate investing for most people is, if you’ve got a day job and you’re working hard at that, you don’t really have the time and the skills to go out and learn how to do it. I mean, everything looks good on HGTV, flipping houses in 30 minutes and everything turns out at the end. But the reality is, it’s a lot of hard work and it’s a full-time job.
I had to figure out how to make that work while keeping my day job and the quick answer to that is forming a team, and you have a team where the people that do the work sharing the benefits of ownership, and the people that put up the capital don’t have to do the work.
So, we become partners with passive income and we all share in the upside. And that made all the difference in the world.
Hussein Al-Baiaty: What a system, what an amazing way to think through something, and obviously having access to people, just the idea of thinking of, “Who do I want to swap places with, who is living that life?” Asking those questions, it’s so vital, right?
When I think about my future retirement and all those kinds of things, I’ll be honest with you, I don’t think about who would I want to swap places with? And 100%, right? I owned a business for over 14 years, doing the apparel printing and all those kinds of things and as fun and as amazing as owning a business is, it is very stressful.
It’s time-consuming, it’s stressful, you’re always thinking about the next thing and how to grow this and how to grow that. But you’re always very much tied. And for me, being an emotional person, I was always worried about something. But it sounds like you made the decision that worked for you and then having a platform where you can see people.
They own things and they’re doing well in real estate but they’re not as stressed perhaps as the business counterparts. So, that’s a very interesting outlook and obviously, served you well. Who did you write this book for?
David Vernich: The book was written for people, basically, in my same situation. So, if they finished school, gotten established on their jobs or careers or started a business. But once you get a few years down the pike, you kind of look and say, “Am I making progress towards ultimately being able to retire or live the lifestyle that I want to live?”
And the problem most people have is the traditional path, is to get a job that has benefits and the retirement plan and then that’s it. They kind of stop at that. So, they contribute and of course, the financial planners will basically say, “You need to cut your expenses and save more” That’s the traditional financial planning advice.
Cut your expenses, save more, put it in the market and let compounding work over time. That’s fine if it works for you and if you’re putting a ton of money in there and that market is going up, it can work for some people. But it’s not working for the majority of the people. So, what I’m trying to do with this book is to open people’s eyes that can continue to do what they’re doing because even today, I’m still contributing to my retirement plan, okay? So, I didn’t change from one thing to another. What I did was I added one thing to it.
And the additional part was essentially, doing real estate investing with a competent team that can do the work so that I can keep working my day job. When I added that up, the results were pretty amazing. So, I just turned 60 last month. So, I’ve been doing this for 15 years now and the results are essentially, if I look at my retirement account balance, not even discussing what’s going on in the market today with market being down.
I’ve been contributing for 38 straight years until retirement plan. I started in real estate 15 years ago. When I compare the balance in my retirement plan versus the equity that I’ve built in real estate, the real estate is four times more in half the time. That’s the lesson I want to teach people, and how to do that.
Hussein Al-Baiaty: That is incredible. So, you talk about building a team or when you started like looking around and realizing that, “Okay, I got to stick to my day job, do my thing, but on the side, I’m going to go ahead and add this one other aspect.” What all did you have to go out and learn in order to make that team possible?
For our audience out there, for our listeners out there, whether they’re generalists, right? Some of them own businesses, some of them are working in those businesses. Some of them, maybe in real estate as well but just in a different kind of real estate.
What kind of talent do you need to have in that team, to be able to produce the results in which you were able to get to?
Building a Team
David Vernich: It comes down to having good partners and using the concept called “Who, not how.” A lot of the programs out there in classes and things are teaching people or trying to teach people how to do the whole process themselves. And the problem with that is, very few people have all the ingredients necessary.
I mean, to be able to hold down a full-time job, and I call it the four F’s, you got to find the house, you got to finance it, you got to fix it up and then you got to cashflow it with the renter.
And when I looked at the whole concept of what needed to be done. I realized, I was bad at virtually every single one of them except one. And that was financing. Since that was my day job. So, essentially, it’s like, “Okay, what do I need to do, what am I good at and what can—what’s my super power?”
And essentially, my super power was, I knew the people that could do the work, I knew the people in my community that I could bring on as investors through with capital, or the ability to borrow money who had day jobs, and I could essentially put those two pieces of the puzzle together and form the team, and then the team worked where everybody enjoyed the passive income from the properties once they’re completed.
So, it really come down to leveraging your skillset on what you can do and then, all the other gaps need to be filled with other team members so they’re doing their part, but you all enjoy the profit from the venture, if that makes sense.
Hussein Al-Baiaty: Yeah, definitely. That makes a whole lot of sense and I love the concept, there’s a whole book out there that I’ve read, the “Who not How” process and thinking. It’s a shift in thinking. You don’t need to do all aspects of the business or the team orientation, whatever it is.
It’s like, the idea of know what you’re amazing at and bring that value to the table and then get to know other people who can fill in those voids, fill in those pieces, those components. And all of you can share in that, instead of being competitors, you’re also sharing in the profit like you said. I love that idea, I love that concept.
David Vernich: Yeah, I kind of use this in my own mind’s eye but you could be the best business as a team sport, and I think what happens is, we get in our mindset that it’s all our responsibility to do all aspects of everything. And so, I liken that to somebody that wants to play football and one, the best football player in the world can never beat a mediocre football team that they’re playing against.
You can’t cover every single position. But that’s what people are trying to do out there. They’re trying to do it all by themselves. Potentially with the help of a financial planner which is fine. But at the end of the day, if you’re going to have true success at achieving financial freedom, you need a team with your interests are 100% in alignment.
You make money when they make money. And so, when you are in alignment with your team and everybody does their job, it is so much easier than trying to do all the heavy lifting by yourself and trying to figure it out from scratch.
Hussein Al-Baiaty: Right, I mean, it just makes so much sense, right? You’re taking the edge off and you’re sticking to – and improving yourself in the thing that you know the best, right? And bringing that to the table. I love that you knew your finances, you’re a loan officer. But even with that, reading through your book, it sounds like when you first made that first initial investment, you went out to a different type of bank and secured your loan and everything like that.
Can you tell me—because let’s be honest, adding things like that and taking that leap of faith, it’s also facing a fear. So, “What if this works out, what if this does and what if that person gives me a snake bite?” There’s always these thoughts because we’re human, right?
And depending on our past experiences of how we’ve been able to navigate our world, there’s those experiences that sometimes, feels like they’re pushing us away from those potential opportunities. But I think, for me, they’re just stories, right? They’re stories in my mind, they’re fears that may or may not really be there. So, how are you able to navigate those waters? Be comfortable with being uncomfortable and testing things out.
David Vernich: It comes to—when you try to do anything for the first time, it is a daunting task just because you’ve never done it before and you don’t know what you don’t know. And that’s why I feel like, teaming up with a mentor who has done it before, they can guide you so that you’re not going to be making, basically, the rookie mistakes that so many people do make by trying to do it on their own.
And so, when you really think about real estate, the one cardinal sin you cannot break is, do not overpay for the property. You have to really know what the value of the property is. And that generally comes with experience and over time and knowing the market that you’re in. But if you don’t overpay for a property, and better yet, if you get a deal on a property so you’re buying it for less than market value, which is what we typically try to do.
Because the houses that we’re buying needs some work. They’re not move in ready houses. So, if you can get a bargain on the house and you have the ability to get that house back to where it should be, then the worst-case scenario would be, you sell the house for what you got into it and you haven’t lost a dime.
That will be the worst-case scenario. But the best-case scenario, obviously, is to put a renter in there and have them pay you a sufficient rent to be able to pay the mortgage payment plus the profit. So, that’s what we try to achieve and once you’ve done one, two, three, four of these, you just see that it’s kind of like a baseball player who never hits a homerun but he always gets on first base.
Hussein Al-Baiaty: I love that. What a great analogy. So then, when you have that little bit of profit and you have your team of three, four, five, whatever it is, investors, and you divvy up that profit. But then you go on and move another unit or another house or another, say, apartment complex or whatever it is.
I’m assuming those deals, as the more experienced you become, the more profit you generate, all that good stuff you’re able to sort of, in a way, grow the potential. So, you go to duplexes or triplexes or things like that. Like, how do you then scale? I guess is my question.
Scaling the Business
David Vernich: You scale by building your team. Again, the only way this thing is going to work is one house is not going to make your whole retirement plan. The goal is to leverage other people’s time and their experience and their skills, and other people’s money or other sources of money like bank financing.
So at the end of the day, you should have very little money left in the house once it’s completed and that the tenant is paying market rent for that house that covers the bills. So, you scale it by doing more houses and you can scale it by just increasing the number that you buy or you can increase the number of units that you buy, like you said, you can go to a duplex, a quad.
You can go to small apartments or big apartments, so there’s a stepping stone to get to bigger – to scale this thing but ultimately, everything comes down to the same thing. Who is your team in place and what value do they bring to the equation to make this thing work? And then you get paid for the value you bring.
Hussein Al-Baiaty: See, I love that. I love that thinking, right? I was thinking like, okay, more houses, more duplexes. You know like, no-no-no, you got to have develop your team further because the more refined the team is, the more value they can bring to the table. Then, you can go in search of XY or Z, the more you scale. So, I love that approach, what a great idea.
And man, your book sounds amazing. For a person like me, I’m 37 years old, bought my first house last year with my wife. For me, that was a huge blessing man. I mean, I came from a refugee camp, man. When I was a kid, we spent four years in the middle of the desert. So, to me, now, I own a piece of property here in Arizona, is, honestly man, I pinch myself sometimes, right? It’s a blessing.
Seriously, I’m like, am I dreaming? What happened? It took a lot of hard work, all that good stuff. And now, I’ve been brewing the idea of, my wife and I, like, “Okay, in a couple of years, we should invest in something else.” And exactly what you’re saying, build up a way to create a passive income. I’m loving this conversation because really, for me, it’s just adding so much value to my knowledge.
I think, for me, it’s always been like, I may not have the money or I may not have the right finances right now or the right team or people, but I can always start by just learning about this and just educating myself on what are the ways to go about doing this.
This is what I love about doing this podcast, is that I get to meet people like you who are doing it in a way you are mentoring me, and in another way, your book is doing that same thing. Which is so powerful. So, it took you, what, about a year or so, a year and a half to put this book together.
But the reality is, this is 15 years of experience, jam-packed into a book, which is so powerful. So, kudos to you man, for putting that knowledge together for all of us youngsters who are looking into the future and saying, “Okay, how can we make the best of our investments, how can I make my lifestyle in a way that it’s comfortable when I get older, right?”
I know you were just telling me how you just got back from Greece. Tell me now, like how—now you’re 60, right? You made the investments, you worked really hard, what’s a day in the life now for David? What’s it look like now for you?
Implementing the Lessons and Mentorship
David Vernich: It’s kind of boring.
Hussein Al-Baiaty: All that hard work for boredom. Come on, David.
David Vernich: No, I’m not bored. I’ve kept my day job so, even though I’ve done all of this mostly.
Hussein Al-Baiaty: So you’re still a banker?
David Vernich: I’m still a banker.
Hussein Al-Baiaty: That’s awesome.
David Vernich: So I still have my day job. So, I’m living proof that you can hold on to a nine-to-five job and do the real estate investing on the side without giving up your weekends, without knowing how to hammer a nail on the wall. I mean, frankly, I used my free time to write the book and to kind of put this – I look back at my life and say, “What value can I bring to the world of things that I’ve learned over my life that I wish I knew when I was your age?”
I got into banking not because I wanted to be a banker, my wife actually, had worked at this bank and said, “Hey, I think you would do good in this particular area.” And I said, I know nothing about it but I do know I’m not happy where I’m at. So, if they pay me more money, I’ll come over. And they did and I learned what I’ve learned but essentially, one of the perks of being at a bank is, you get exposed to tons of different people and their businesses, their headaches.
You see the good, the bad, the ugly and so I thought, well, surely, one day I’ll find the perfect business by maybe being their loan officer and saying yeah, that’s the kind of business I would want to run myself.
And when I realized that most of the headaches that they had were worse than when I was dealing with it, and I said, “I think I’ll just stick in the bank.” At least I can go home within a day and not worry about making payroll or having enough revenue or enough cash in the bank and dealing with regulations, all those things that are headaches, big, major headaches for business owners.
And so, that’s good that I was able to enjoy my job enough to stick around for this long, but it was also bad because “Hey, if I keep doing what I’m doing, I’m not going to get what I want.” And what I wanted was, I did not want to take a cut in my standard of living. I wanted to have the exact same or even a higher income than I have when I was working.
So, I knew I had to work on my passive income on the side, and that’s what I’ve been doing for the last 15 years so that now, my passive income is actually greater than my job income. So, I could retire at any time and I get asked all the time, “Why don’t you retire? You have enough money.” And I said, “Yes, but it’s about what I’m going to do with my time”.
I still want to feel useful and I think the most useful thing I can do with the world is help people understand this concept and help them achieve it themselves.
Hussein Al-Baiaty: Wow, that’s so powerful and commendable, man. Like, I’ll be honest with you, like I said, I’m the target audience of your book, right? Let’s be honest, right? Someone that is looking out in saying, “Okay, how can I add more value to the world, use my time wisely, do things?”
My thing right now is like, “How many seeds can I plant?” Because not all seeds are going to turn into a tree, right? Like, writing my book, I’m doing my speaking engagements, I have my regular work with Scribe which is amazing. I get to have opportunities to meet all kinds of people like yourself who are all teaching me. So, I grew up very much like the world is my school and the people I get to meet can be my teachers.
Sometimes you meet people who aren’t teaching you the right lesson. But even then, there’s lesson in that, right? And so, it sounds like to me, in a way, like you approached your life in that manner, right? You were always questioning.
And I think that’s the most beautiful thing about growing up in America for me. This freedom to question where I’m at, where I want to be, how can I get there, and people have always been so generous with their knowledge and wisdom. But you have to ask and that’s just so powerful.
So, my question to you is, are you doing any mentoring? I mean, are you just kind of providing this book out into this world and sharing it with the people that you come across at work. What’s your intention behind the book, how do you intend to get it out there so that people can really get the value out of it?
David Vernich: Yeah, I think the intention was first and foremost, just to get that knowledge out there. It was hard fought and took me a long time to put the pieces of the puzzle together. So, I wanted to put it into as succinct as the book as I can and this isn’t even a hundred pages, so it’s a pretty succinct little book.
Hussein Al-Baiaty: It’s amazing. Yeah, I was a hundred pages [in], I could read this this afternoon, you know what I mean?
David Vernich: Exactly, so, essentially, it’s going to either tell somebody, “Yeah, this is exactly the itch I need scratched” or they’re going to look at the book and say, “This is high in the sky dreams, I don’t want anything to do with that.” Regardless, that’s going to do one of the two.
I give them enough information and the appendix to at least start on the journey on their own, wherever they are locally in their lives, to give them some different podcasts, different books and resources, different groups that I recommend.
But the last resource is mentorship or partnership program where I can talk to people. I am at that point in my life where I don’t want to work super hard. So I thought long and hard about this and I said, how many people do I think I could actually one-on-one help? So, it wasn’t going to be one of these, “Let me throw you into a class, a zoom class of 500 people and teach you what I know and then you go out and try to figure it out.”
Because that’s not the—that’s a do-it-yourself attitude. And my thing is, if the target market that I’m working with is people that are too busy, they don’t really want me to say, “Hey, okay, so here is how you go find a house A, B, C, D, E, F, G. Here’s how you go get financing for that house A, B, C, D, E, F, G. Here’s how you fix up that house.” Number one, I don’t know how to do all that stuff because I don’t need to, I’ve got the team.
And number two, to me, the best thing you can do is have a system that works. So, in reality, when I figured that out and I became a part of a team where I didn’t have to know how to do everything, the part that I actually have to do, which is, “Okay, David, here’s the value you bring. Bring it to the table.” Takes me 15 minutes. 15 minutes is all it takes.
So, what I looked at and what I told Scribe when we were doing the book, I essentially said, my goal is to work with a hundred people and those hundred people. And those hundred people want to each own as a partnership with me in 10 houses. That will be a thousand houses and a hundred people.
And that’s about as hard as I want to work after that if it gets to that point and people are still hungry for this then I probably need to bring on some people because I still don’t want to work that hard.
Hussein Al-Baiaty: That’s amazing man, we have these defined goals, this very innate way of seeing what you can offer and what others can offer you that’s so powerful. All right, so, writing a book is huge, so congratulations to you on that.
If you were to give one piece of advice from your book to someone like me, what would that be? What would be my next step in I guess, developing a team, would it be like signing up to your mentorship program, would it be like, reach out to someone local, like, what would be the number one step that I would need to take to start heading in that direction?
David Vernich: Yeah, I would say, and I have this in the back of the book as well. It’s basically an inventory sheet to fill out. That would be the first step. Because essentially what you’re trying to figure out. If you’re truly a busy individual W2, in the title of the book is Middle Class to Millionaire. So, essentially, if you are in a middle class and you have the desire to become a millionaire.
Not because you’re looking to have Lifestyles of the Rich and Famous and being on private planes and yachts, but you just want to live a comfortable standard of living and frankly, it takes a lot of money to live comfortably these days. Even if you’re able to save up a million dollars in retirement account, which is a big goal for a lot of people.
Most financial planners use a rule of thumb called the 4% rule, because that’s all you can really afford to pull out of that if you want that money to last. While 4% of a million dollars is $40,000 a year, that’s not even in the middle class. Now, you can add social security to that, you’re still not replacing your income.
So, the best plan out there is basically, you’re going to take maybe a 50% pay cut. That’s not a good plan. My plan is I want to maintain income on the lifestyle I have and preferably even increase it to a point. And so, filling out that inventory on the back of the book is the best place to get started because if you’re a W2 employee, you don’t have the time to find the houses, you don’t have time to fix them up.
You don’t want to be a property manager. So, that pretty much leads you into the financing part which is the part that I do, and that’s the part that I will partner with people on and show them how I did what I did to build a large portfolio of rental houses, so that they can bring in passive income.
Hussein Al-Baiaty: Absolutely incredible. Thank you for that insight. David. I learned so much today, seriously. I’m so eager to dive back into your book and devour it later today. This has been such a pleasure just meeting you. You sound like someone who—for me, I learned so much from my father growing up but unfortunately like I said, ended up in a refugee camp. He grew up in Iraq and things were different. So coming up in America, learning credit and how to buy a house, these things were almost beyond me until I started really educating myself and reading.
And so, I’m really excited for your book, again, congratulations. The book is called, Middle Class to Millionaire: Make the Leap to the Next Level. If you’re out there listening, this is a book that you must get. It’s out already. David, this has been an incredible show, thank you so much for joining me today.
Besides checking out the book, where can people find you?
David Vernich: Probably the best place to hook up with me, since we’re targeting W2 people, is LinkedIn. So, I’m the only David Vernich on LinkedIn as far as I know so I’m not that hard to find.
Hussein Al-Baiaty: I love it. Just look up David Vernich on LinkedIn and you’ll be able to connect with someone that can give you some insights and obviously, we’re hoping to point you to his incredible book. On that note, thank you all for joining us today on this episode.
David Vernich: Thank you, I appreciate it.