#343: Becoming Desensitized To $$ As You Grow Your Portfolio Is Important… Until It’s Not

In this Multifamily Minute episode, Axel gets introspective on a concept he's been wrestling with personally: the psychological relationship investors have with money as their portfolio grows — and why the skill that helps you scale can quietly become the thing that costs you the most.

Using poker as a framework, Axel maps the psychological arc of the growing investor — from the early-stage necessity of emotional detachment, to the mid-stage risk of becoming too numb, to the mature-stage discipline of swinging the pendulum back and reassigning real dollar value to every line item in the business.

This episode is essential listening for any investor who has started delegating, doing more deals, and moving faster — and who wants an honest gut-check on whether their relationship with spending in the business has quietly drifted in the wrong direction.

Join us as we dive into:

• The Hawaii vacation story: a routine electrical bid that came in $1,500 high nearly got approved on autopilot — and what that moment revealed about how Axel thinks about money in the business today.
• Why developing emotional detachment from dollar variance is a necessary skill for any investor growing from 5 to 15 to 50 units — and how holding onto stress about every water heater replacement prevents delegation and scale.
• The poker analogy: why elite poker players must strip emotion from their decision-making at the table, and why the same psychology applies to real estate investors managing day-to-day swings.
• Why detachment needs to apply to the upswings too — staying disciplined when a cash-out refi returns more than expected, or a deal comes in under budget.
• How the pendulum swings too far: as businesses grow, faster decision-making and more line items on more P&Ls make it easy to approve lump sum quotes without analyzing what's inside them.
• The Silicon Valley startup parallel: when you have a war chest and are running with urgency, individual cost line items stop feeling material — the same dynamic happens in real estate as portfolios scale.
• Why this episode speaks most directly to investors with 15–50+ units who are actively running a business, managing teams, and moving fast across multiple deals simultaneously.

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Transcript

SPEAKER_00 0:00

What's going on, everybody? Welcome back to another multifamily minutes episode here on the Multifamily Hour Podcast. First of all, just want to give a little heads up, you know, before we get into the topic of this episode, we're going to be recording some guest episodes here over the next 30 days, 45 days. So we'll be returning to a little bit more of a normalized cadence here in regards to posting a combination of guest episodes and these solo multifamily minutes episodes. That said, it's been a very busy, you know, last three, four weeks in the business, and I've had a lot that I wanted to talk about in regards to just recording some of these quick multifamily minutes episodes. So another couple coming in the next couple of weeks, and then we're going to be looking to return to a little bit more of a normalized schedule with guests coming on the show more frequently. This episode is brought to you by our investment firm, Aligned Real Estate Partners. You can invest in real estate without all the headaches and stress of finding deals, arranging financing, managing tenants and construction, and all of the other work that comes with active real estate ownership. At Aligned, we provide investors the opportunity to co-invest alongside us in our diligently vetted and professionally operated multifamily deals. We help investors directly invest into real estate without needing to do all of the work that I just mentioned, and then I talk about on this podcast every week. Join the hundred plus investors who have already invested in our offerings and get on our investor list today if you'd like to see our upcoming opportunities. Link is down in the show notes. Now, back to the podcast. That said, let's get to the topic of this episode. So to set the stage a little bit in regards to what we're going to be talking about, because this is this is going to be an interesting one. You know, I think this is going to be an episode that really speaks to the investors who have been in the business for a while, who have been investing for a long period of time, you know, maybe the ones who are a little farther down the road from a business growth standpoint, portfolio growth standpoint, the folks who own 15, 20, 50 plus units. But generally speaking, I think it's an interesting concept and it's applicable across really any business. And I do think it's applicable to new investors as well. But it's been something that I've been thinking much more about in my business recently, what we're going to talk about here in this episode. But to kind of set the stage here a little bit, I was recently on a vacation to Hawaii, of which I tried my best not to work. As we all know, you can't always succeed in that objective as a business owner, real estate investor, you know, when you're going on a trip. But something happened that really made me start thinking about this concept. We're in the middle of a very simple project at one of our properties where we are trying to convert a small three-unit building from being on one electric panel to being on four electric panels. And, you know, basically adding three additional electric meters to the property so that each unit in the building has their own electric panel and electric meter, and then we have a house panel and a house meter for the common area electric. You know, very straightforward project that allows us to require the tenants to pay their own electric bill, you know, and to just separate the service into two additional panels. This is a job we've done many times before. My property management company, of which I'm an owner of, someone else got a bid from our you know, electrician that we do a ton of work with. And it came back and it just felt a little high, you know, and it didn't, it wasn't like something that was completely out of the out of the ordinary. It just felt a little high. But I I was on vacation, I didn't really want to spend a ton of time talking to my team about it. I quickly just texted back saying, you know, if you can get another vendor out to get another bid, you know, tomorrow, do it. If not, just go with the first guy who we've done a bunch of work with. We got a second bid from a new vendor in our network, and they came in like $1,500 lower. And obviously, we went with that vendor and we proceeded with the job. But the highlight here is that you know, on vacation, I normally would have just to keep a project moving to not spend a lot of time, I normally would have just approved something like that, you know, that first bid. And just in general, something that I've been working on much more so in my business. And I look around and I see a lot of real estate investors and business owners struggle with this as they grow their business and their time gets spread across multiple different components of the business, and they just fundamentally get busier, is becoming numb to what a dollar really is. And that sounds insane, but I'm gonna unpack that here a little bit. An analogy that I want to use for this, and it's applicable for me because throughout college and after college, I played a whole bunch of Texas Hold and poker, you know, at local card rooms to make money, right? I was an avid card player. It's funny, a lot of business owners are card players, a lot of card players turn into business owners, but that was you know how I put together a side income when I was in college and after college, and you know, also played a bunch online. And in the high-level poker communities, there's a big challenge amongst elite players or players who play for a living fundamentally, you know, who are full-time card players, where when you're sitting at the table and you're making a big bet, maybe you're playing $2, $5, no limit, and you know, you're making an all-in bet of 100 big blinds and you're betting a thousand dollars on a hand, right? And odds are in your favor, it's a positive expected value outcome. But like you fundamentally become detached to the dollars that you're actually betting when you're at the table, and it's a requirement for you to do so. You know, in order to be a successful poker player, you need to strip emotion from your decision-making process and you need to become detached to the actual dollar value of the chips on the table, and you need to make decisions where the odds are fundamentally in your favor, where you have a positive expected outcome. And it can be hard to do that, for example, if you're a poker player and you're leveling up and you're, you know, you're sitting down at a bigger table where everybody's got more money and has deeper pockets, and you might make suboptimal decisions because you actually become scared of what the money means to you, right? And that's a challenge that a lot of poker players face. And a symptom of that is of becoming numb to the dollars that you're betting is that you start to separate yourself from the actual value of a dollar as it relates to what's sitting on the table. And this is a challenge that a lot of poker players face. And coincidentally, it's a challenge I think that a lot of real estate investors and business owners face, especially as you scale a real estate business, right? Because part of the challenge in scaling a business is you have to become somewhat numb to the dollar variance on a day-to-day basis, whether that's revenue, whether that's capex issues on a property, whatever it is, right? You have to become somewhat numb to what's happening in order to detach from the stress and the volatility from an emotional standpoint of the day-to-day in business. And this only becomes more and more true as the numbers get bigger and the business gets larger or the portfolio gets larger. So it's a skill that's essential for investors to develop early is to try to detach yourself emotionally from the dollars in the business so that you can just maintain an emotional equilibrium on a day-to-day basis. Right? Like every time you have to evict a tenant and you're losing rent, or every time you have to, you know, replace a water heater, if you if you spend so much time thinking, oh my god, that's two thousand dollars, like that's so much money. Geez, X, Y, and Z, right? If you never adjust your emotional reaction to events like that in the business, as you go from five to fifteen to fifty units, you're just gonna live a very stressful life. And and a lot of investors do, right? And it also prevents them from delegating the key components of the business that allow them to scale at a higher level, right? That's that's also a challenge that many investors face as well. So I think generally speaking, it's an important skill to develop up front, but at the same time, as you grow the business, you need to try to recapture that and prevent yourself from becoming too numb to it, right? You can over-index to one side of that equation. You can, you know, the pendulum can swing too far in that direction. So the whole idea here is as you grow your business, become a little numb to this so that you aren't so emotionally, you know, wrapped up in the day-to-day events of the business, right? If you have to drop a deal and you wasted $3,000 on an appraisal and a phase one report, or you know, you just bought this property and you're turning over the second unit and you're gonna have to spend $12,000 versus 10. Or, you know, and this goes the other way too at the end of the day, too. You come in under budget, the property appraises far more. You pull out a bunch of money on a cash out refi, you have to become numb to the winds as well because you have to maintain some emotional equilibrium both on the downswings and on the upswings. You know, again, that's that's me using my poker terminology, right? You have to become immune from a decision-making standpoint when things aren't going well, but you have to maintain a disciplined approach when things are going well and to not gamble with the money that you feel like you made in the short term at the table. All of these things that it's a very important skill to develop. That said, as you grow and you grow and you grow, you then need to train yourself to swing that pendulum back and to start thinking about the actual value of a dollar now that you've grown the business. And this is something that I think I'm personally working on right now. This is something that I see a lot of other business owners and real estate professionals working on who grow a large business, right? For example, now that you know the business is larger and we've become a little bit more accustomed to living with the swings on a day-to-day basis, I now am training myself to be much more diligent about shopping the cost of vendor reports, like phase one or appraisal reports, right? And remembering that, you know, if one report's too great and the other one's $2,500, that $500 difference is material, right? And starting to think about the $500 in context of what that actually pays for, whether it's within the business or in quote unquote real life, like that's really important, right? And I think a skill that a lot of investors also need to develop as well from a transactional standpoint is not to think of quote unquote transaction costs or quote unquote renovation costs as one big lump sum, but a collection of individual line items that each need to be analyzed in the, you know, in the minutiae in the grand scheme, right? If you open up an Excel sheet, an investor is probably gonna underwrite 2% for closing costs on the buy side of a deal. That said, that 2% includes, you know, maybe it's 0.75% for transfer taxes, maybe it's 0.25.5% uh for the lender, right? Points paid at closing. Maybe that's you know, the actual real dollar amount of $2,500 for an appraisal, two grand for, you know, a property condition report, $2,500 for a phase one, you know, five grand in in legal fees on the buyer side, $1,000 in entity formation fees, like all of that stuff, right? And I've now entered the mindset of like I'm not as emotionally tied to the swings in the business from a dollar standpoint. Now I need to really focus on trimming and developing a lean approach to how we actually run the numbers on a day-to-day basis from a transaction standpoint, itemizing each line item when we're renovating, actually breaking down a quote from a GC into each line item so that we can start to pull out and determine where you know the dollars are higher than the rest versus just getting a lump sum for the job and just rolling with it because it kind of it's within our underwriting. So the general the general, I guess, theme of what I'm trying to communicate here is understand the stage of the business you're at and understand what's called of you as it relates to your mindset around this. As you're growing, it's obviously important to still be diligent about costs, right? I don't want anyone listening to this episode to be like, oh, who cares what shit costs as we're trying to grow. That's not that's not what I'm trying to say, right? I'm trying to say that early in the business or the growth of your portfolio, you have to develop a thick emotional wall around what's happening within the business while being diligent. However, as you grow, it can be easy for that wall to become too thick. As you hire more people, as you do more deals and your focus is spread across multiple different deals and you make faster and quicker decisions, as you spend more money on marketing and software and you invest in the business to you know to help it grow, and you have more and more line items on both your operating company PL and then also the PLs for each individual property. As all of that happens, it can become easy to lose sight of what's actually happening. And as you grow and as you develop a bigger business and you grow a larger portfolio, you then need to swing that pendulum back and you need to become very diligent about actually analyzing each line item and really assigning the value of the cost differences in each of these things in real nominal dollar terms, because it's easy to lose that when you start growing. You know, like the the big massive example of this, for example, is like VC funded Silicon Valley companies, where when you know you have a young team that's starting a software company and they're raising money to go invest in you know staff and headcount to continue developing the product, to invest in marketing spend and growth spend and sales, all this stuff. When you have this all this money in the bank, which you know, as real estate investors, we hardly ever have money in the bank. I think we all get that. So it's not quite the same analogy, but it's it's similar in concept. The actual cost of of what they're you know, the actual dollar amount of what they're spending it on becomes less important because they have this war chest and because they're trying to make extremely quick decisions as they grow the business, right? They're running with speed, they're operating with urgency, and they have these dollars. So whether they're paying the sales guy 85 grand base or 95 grand base, it's like we just need sales guys, and and you lose sight of the individual line items in the PL. Same thing happens in real estate, just in a slightly different manner, right? The 85 versus 95 base in the VC funded startup company in the real estate world is you know, we've got 35 grand to spend on a roof, we have 15 grand a unit to spend on rentos, we got five grand a unit. Like, let's just get some GC quotes here. We're trying to run with urgency, we're trying to get into this project because we have an earnest money deposit done on this other deal, and we're going through DD, we're trying to refi this other deal, we're trying to sell this one, we're we're buying, you know, we just bought this other one. Oh, that GC's quotes within our budget, great, just do it. Versus let's diligently get three quotes, break out each of the quotes, analyze each line item, etc. And this whole episode might be for like a very small segment of the audience, but I think it's an interesting commentary on the psychology as you grow your business, and something that I spent a lot of time reflecting on. One as it relates to this very little simple electric panel decision, but something that we're spending much more time being diligent on now as well. Hopefully, you guys found this episode insightful and or valuable. And if you did, please consider sharing this with somebody in your network. It's very easy to just quickly text podcast episodes on whether it's the Apple Podcast app or Spotify to somebody in your network, or just quickly email it if you think they'd find some value. Appreciate everybody continuing to listen through the rebrand here and looking forward to bringing some episodes out with guests here in the next 30, you know, 60 days, next couple of months. But have some great solo multifamily minutes episodes coming in the next couple of weeks as well. But again, thank you all for listening, and I'll catch you guys next week.