Dragon's Gold: The Magic of Mindset

Losing It All, Learning the Hard Way: Million-Dollar Lessons from Stewart Heath

• Justin Mills • Season 1 • Episode 39

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Episode Summary:

What do you do when you lose everything?

In this powerful episode, Stewart Heath shares the raw truth about building too fast, collapsing too hard, and rising again with a deeper mission. From a $10M portfolio lost in the 2008 crash to a life rebuilt with purpose, this conversation is a masterclass in humility, patience, and legacy.

What You’ll Learn:

  • Why he left the CPA path to get “in the game” of real estate
  • The 2AM infomercial that changed his life
  • How he went from $10M net worth to $5M underwater in 90 days
  • Why he gave himself one week to grieve, and then got back up
  • How 8 children and a deeper “why” fueled his comeback

Tools & Weapons Mentioned

  • Rich Dad Poor Dad - The mindset that started it all
  • Traction - Running Harvard Grace Capital with EOS principles
  • Who Not How - The go-to delegation guide for visionaries
  • The Power of Reserves - “You don’t know what you don’t know”
  • Legacy Mindset - Wealth that matures when his kids do

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About Gold Dragon Investments:

At Gold Dragon Investments, our mission is to bring joy to others by helping them win the game of investing. Helping every client become the hero of their financial journey. We believe that wealth is a tool, but joy is the ultimate outcome.

Through meaningful partnerships, we strive to empower our investors to create freedom, and build lasting legacies of purpose, fulfillment, and wealth.

Join Us on the Adventure:

Ladies and gentlemen, welcome once again to another episode of Dragon's Gold, the magic of mindset. Today we have the pleasure of having Stewart Heath, founder and CEO of Harvard Grace Capital, also a professional CPA and through Harvard Grace Capital, currently $42 million in assets under management in only three and a half years. Amazing. Stewart, welcome to the show. Thank you, Justin. It's a pleasure to be here. It's an honor for you to have me. Thank you, my friend. Well, let's as I love to do, let's dive right in. Let's go to the origin story. Where did it all begin for Stewart Heath? Yeah, as you said, I'm a CPA. I started my own practice at the wise old age of 25 and are just cranking away and making good money. I'm in the middle of tax season one day. It's the year 2000 actually. And you Y2K and all that hysteria going around. And like I said, I'm making good money. but it's two o'clock in the morning in the middle of tax season and I'm just like, this sucks. Cause I knew I was making money, but I was not building wealth. my dad, who was also a CPA, had told me years before, you can't get rich selling your own time. You can get rich selling other people's time if you build a big business. And it sort of dawned on me in that moment. And I came a little bit through, so I graduate college in 85. 18 months later is the 1986 Tax Act, which kind of destroyed investment real estate for several years, for about five years. And so I'm a baby in business and all I hear is real estate equals bad, that's bad. And I would go to these conferences and you hear bankers get up and say, We don't lend on real estate anymore. And the inference to that is we prefer our collateral to have wheels which can leave the state and stuff like that. And it's just nonsense. And of course, the banks continue to lend on real estate and real estate is the foundation of all economies. I'm sorry, big tech guys, but that's still the truth. um But it took me a while to really understand this in the business world. And as I left Pricewaterhouse, who I went to work for right out of college, and started my own firm, I immediately picked up a bunch of clients, all of whom had some connection to real estate. They're either contractors, they're fixers and flippers, they're real estate people who buy small apartment buildings on their own, and I'm doing their taxes, I'm doing my thing, I'm not really paying them. whole lot of attention to the bigger picture. And finally, at this two o'clock in the morning moment, I realized they're not paying any taxes. They're making good money. They have these big capital gains. They're not paying any taxes because I'm doing their tax returns, I know. And the IRS isn't coming after them, so it's all being legal. And on comes the TV as an info commercial from Carlton Sheets. He was the original no money down guy. And we'd seen his commercials for years. And anyway, I sit there and. It's $149, money back guarantee. So I bought the course and it was surprisingly professional, well done, lots of good resources. This is back when the stuff came on VHS tapes and not CDs and stuff like that. I got the manual too because they gave you a lot of forms. And sure enough, within about six weeks, I went out and bought a duplex, my first duplex. for very little money down, I talked the seller into taking back a note, and uh and I was in the business and I absolutely loved it. I liked meeting my tenants. I liked piddling around and improving the properties and very quickly realized that my nature would not allow me to uh let a property be in disrepair for any period of time, there's a leak in the roof, by God, we were there working on it and that kind of stuff. So, and I enjoyed that and the tenants appreciated it. So from there, I just began to buy more and more. My next deal was a package of 14 duplexes for like a million two or something like that, which is probably my nature. I generally don't do anything small and because what's the point? You know, if you could... If you can figure out how to do it for one duplex, why not do 14? So anyway, got that deal done with some creative financing, you know, that was the, that got the idea from a mortgage broker friend of mine. And from there, bought a started, I bought a package of 15 condos in one building. And we eventually bought every other condo in that complex. and rehabbed those. And then there was 2008. Oh, by the way, started, I got a contractor's license and I started building houses along the way. And then there was 2008 and just to be completely blunt, I didn't make it out of 2008, 2009 in whole. mean, I had over $10 million of assets and you know, 2008, the world just sort of crashed down and even though I was making payments and stuff like that, banks still called notes or they closed off lines of credit or whatnot and it was just, it was just bad situation. Now, I'm not gonna stand here and tell you I wasn't over leveraged, but based upon appraised values, but appraised values actually changed in 2008. So just as an example, so, A personal financial statement I did in June 30, 2008 showed my net worth uh over $10 million uh based upon appraised values. Very little cash though, very little cash. 90 days later after uh the banking crisis that occurred and John McCain and uh Barack Obama were on the campaign trail uh and McCain left the campaign trail to go back to Congress and and to try to fix the problem. you know, it didn't give, you know, that's the year that, you know, Bear Stearns and I forget who else crashed and Countrywide Mortgage couldn't fund their mortgages. It was bad time. And I figured 90 days later, I was probably $5 million underwater. So, and that sort of was the end of, you know, phase one of my real estate career. I, you know, go, go, go, go, go, go, but I didn't do it smart. Matter of fact, it was kind of stupid. ah I love everything that you've said. I that sounds rough when I say that. Let me clarify. I'm sorry that you went through that. Right, I know, and I'm sorry that you went through that. When I hear, oh my gosh, there's so much that I wanna touch on with what you said there. I want to take this back a little ways when you were talking about the idea about getting into this, where it started, where you stepped into this role, like recognizing as a professional CPA, doing the, the, the taxes for all of these different people in different areas, right? None of them doing the same thing, but each with their fingers and hands in real estate, recognizing that they're, that they're making money on it. And on the other end, it's not just what you make, it's what you keep. And with your help, they were able to keep a significant amount of that, right? With write-offs, expenses, et cetera, and then being able to utilize the existing tax code to their benefit in a proper way. But the idea being that you saw this was possible. And while you weren't then a part of that, recognizing, I love the idea about the two in the morning, right? Having this epiphany, suddenly you realize, wait a minute, I can do more. And the idea about not playing small, about playing big, you saw, and I love this part of what you said. You saw that infomercial, you signed up for 150 bucks, which may not sound like a lot to people now, but again, take us back 30 years. Like it's a lot or almost 40 years, right? So like it's, it's a lot of freaking money. Uh, point you invest that money in yourself and six weeks later, you own your own duplex six weeks, a month and a half. People can't make a decision very quickly, unfortunately, today's day and age, especially not one of that kind of significant impact and expense, right? That took a lot of effort, time, energy. You were going outside your comfort zone. It was something that you may have seen and had a little taste of, but it wasn't your profession. It wasn't what you specialized in, right? And then so to that idea, fast forward, then you come around and you get into 14 units and you start scaling, right? You're like, if I'm going to do it here, I can do it even bigger. You take the... the time, effort, energy, the care, the passion to try and support and build these properties up, taking care of the tenants, building value for them, giving them a home that they can be proud of, where the ceiling's not dripping on their head, their faucets work, their toilets flush. They have a place where they feel comfortable to raise their children and lay their head at night. So there's multiple pieces to that. But from you on a business standpoint, you're acquiring, you're generating this wealth. And again, on paper, it looks like you're rich. you know, cash poor, but asset positive and rich and in 30, 45 days to literally have a swing of positive $10 million to go into negative $5 million like in the blink of an eye, right? Talk about a gut punch and an incredible, and I love. An incredibly painful experience is what I want to say there. And the idea that you even acknowledge that, yeah, I was over leveraged, right? But you weren't the only one. So that's a reason. But recognizing that and despite that, to be able to come back stronger with all the knowledge that you've gained over that time, the wisdom, the relationships, the connections and networking that you had done in that time frame. Because even though that situation happened and many other people were in a similar boat, you could have let that crush you. You could have quit. But obviously you're here now today and so you didn't. We've already spoke of a couple. was very personal and painful. And you know, honestly, for a season, I did quit. But I couldn't quit, I and I say for a season, know, about a week, week and a half, you know, I had kids, had obligations, you know, I things, you know, I had to get a job, you know, I had no, you know, so anyway, I don't want to get into all of that, but let's just, and this is true. I was busted down to my last 20 bucks, you know, and drove for a job interview and wasn't sure how I'd get gas to get back home. So, you know, because I had faith in that job interview, basically. And so, yeah, it got as as it could be. having, I love the idea about that faith, right? You having faith and belief, but you can only control you, right? The opportunities as they present themselves, whether it's a job opportunity, a potential property buy, uh whatever the case is, those opportunities will present themselves, but you have to believe yourself that you're capable of doing it and doing that job and doing it well, right? You've got to believe in you before anybody else ever will. And I think that that That's an incredibly powerful lesson to touch on Stewart. Thank you for that. We've touched on several, think, some trials and tribulations. And I also talk about the darkest hour. there's oftentimes things, hurdles that come about, rocks or boulders in our path that we have to circumvent and find a way to get around or through. Stewart, I know we've spoken of several trials and tribulations that you've overcome in this timeframe. Are any of these or is something else, something you might call what we call the darkest hour, a moment where you were going to quit and you were going to throw in the towel, but you chose not to. Maybe it was during that one week, that one season, and I love how it was only a week long. It's amazing. But is there a time that you would cite as your darkest hour? would say there were after that, after you come to the, because I spent a year trying to save everything, you know, and eventually you get to a point where there is no more help financially, there is nothing left to do and and it took me that week to realize uh it's over. there's nothing, everything you've been working for is gone, both financially uh and personally and things like that. And so once you get to that point that it's over, then there's a bit of, uh you go through the stages of grief. uh But then, you know, like I I gave myself about a week because I still had things to do. I still had to provide for my children. I still had to do this thing. And I, you know, still a CPA. Still had jobs to do. I still had skills. And so I set out about doing that. Now, in the next three to four years after that, there were still many more moments, you know, kids college tuitions, you know, 16 year old birthdays and you want to provide cars and whatever you know that they need. I gotta bring perspective to this. How many children do you have? That's right. So I just wanna make sure when people are listening to this, they understand when you talk about tuition and buying these things for these kids, that it's not one, two or three, right? We've got eight children. So that's momentous. Yeah, so, but you know, life continues to go on and there were many, many, many moments that, you know, you just get angry and you say WTF and I quit and all these things, you know, and most of those are over within an hour, but it just, you know, life continued to be very hard for the next several years, uh but you got to keep going because of who you're doing it for. you know, my main goal, even when I was a young parent, is just, I just want more for my kids than I've got. And real estate plays into that game, because it's a get rich slow scheme. And about the time many of these investments will mature, uh you know, they'll be able to enjoy it and stuff like that. I don't think there's one more, not another uh darkest hour moment, but but the, I would say for several years, 2009, 10, 11, even uh 12, uh had many dark moments in it. um I had job during that time and was able to meet my obligations. in 2013, I basically came back out. I got a CFO level job at a media company, which ran for. uh several more years. And that's when I really began was able to get back up on my feet and uh start to rebuild. it was several years of just sort of surviving. So right, I think it's raw and it's real. And I think the idea about it taking literally years to come back. Mentally, you may have made the decision to bounce back and not quit quickly. But the reality is, that time is required in many things, right? The best meal, right? All the best ingredients and recipe of items put together often take time for the prep, time to cook. Right. And I use that only as an analogy because it takes time for these things to come to fruition. Right. But you're constantly making effort and moving forward. The other part that I think is so important about what you talked about is your why. Now, great. Eight children is not a small number. I think it's a beautiful thing. It's a lot of mouths to feed. And so making sure that you understand what your why is and that in those dark moments that you don't quit because it's not just you relying on it. Right. It's all the people. that you provide for and support for. And I think that when your why is strong enough, the how takes care of itself, right? You start taking those steps and pushing yourself and doing the things that are incredibly uncomfortable, but it pales in comparison to the alternative, right? Yeah, agreed. Yeah, spot on. So when we talk uh about these journeys that we go on, Stewart, they're very often not done alone. There's a lot of people to go along with us. Now, whether it's people that help us along or friends that support us along the way, or even someone that you aspire to be like, perhaps a mentor or someone that even that you may not know, but someone that you want to emulate. Are there any people that you would including your fellowship. Yeah, there would be several. uh When I first, going back to the beginning and I had about two o'clock in the morning, I had been unhappy and I was talking with a friend of mine that we were on a board together and I just said, Jim, I'm really busy, but I'm not building any well. And he'd have been a successful developer, builder, real estate guy. he just said, Stewart, you're not in the game. mean, so you're just. You're watching the game. You got to get into the game. And he was the first person that told me about Rich Dad, Poor Dad. And that was an impactful book. know, thousands of people say that now. But it was an impactful book. You know, after my crash and burn, I went to work for a guy who uh had had a similar experience to me, you know, 20 years prior. So he was very open. recognized me for what I was. came in and started working with him as an accountant. And then I ended up being his general manager running several stores. And I learned so much from that man. And this was transformational for me because as a CPA, I had only worked with the classes. You you hear the classes and the masses. But when I went to work for him and you know, and I started managing people really for the first time in my life. I learned how to work with everybody else and understand about their real problems and dealing with, you know, young ladies who might already have two or three kids and, you know, realizing that that job that they have with me is priority number three to them when they, you know, they're really beholding to the government agencies and the benefits and you can shun that and talk about how bad it is. That's another discussion. The fact of the matter is as employer, that was the reality that I had to deal with. And he taught me how to do that because he had come from a professional background before. So when you're just used to dealing with the 1%, you don't understand the 99%. And now I think I do and that changed me. And, you know, I treat people with more respect now. And I think I'm a nicer person because I'm a very different person because I went through all of this. These days, the other people uh that I want to interview are on my board. And so we have a board at Harvard Grace Capital. And one of them is a former employer. Several of them are just become dear friends and all of them very astute real estate investors. And so that's who I've surrounded myself with people that make me better, that have different perspectives than I do. Because I'm the one running things and I say, hey, how about this great deal? And I send it to my board and it's like, they're like over my dead body. know, and sure enough, it's, yeah, yeah, I didn't think about that. But you got to surround yourself with people that will hold you accountable and that think differently than you. Yeah. Oh, Stewart, that's so powerful. I love both of those two things you said are so relevant in regards to one, them thinking differently from you from getting that different perspective because they bring things to light that you didn't consider, right? Just as you do for them. But then also the accountability aspect, right? Working with a team and having someone hold you accountable and you hold them accountable in such a way where you support the idea of a rising tide lifts all boats. Right? You're all working together with the same common goal in an aligned structure with different viewpoints, perhaps, but the same intention. You help each other to get there faster, right? With a better outcome. So I think that that's an incredible lesson and very, important. um I appreciate you making that comment. Stewart, we talk about dragons gold, the things that have come about after these many years that whether it be an accolade or a reward or award or even just a mindset shift that you've experienced because of everything that you've gone through, what would you consider as the dragons gold of your journey? um You kind of touched on it. So there are many pieces of Dragon's Gold, but um personally, it's the patience. know, a lot of the reason that I got over leveraged and not that I got over leveraged by myself, I would add, you know, we had a lot of bank participants in that, but still, you know, um and I'm not trying to say it wasn't my fault because it was, I'm CPA. I knew better, just the thought that assets would never, that the things would keep going up and to the right forever, just foolishness. But the patience, you can get there, just be a little bit more wiser and patient. So that's something that's been uh added to my life and that is gold. The wisdom. uh that has been added, you know, because one of the lessons I've learned is you got to build reserves. Yeah, I talked about, you know, had all this wealth on paper, very little cash. had no insurance. I had no ability to uh weather any storm whatsoever. So we build reserves into every deal that we do. I built back personal reserves because here's the truth of life. You don't know what you don't know. What happens if the Fed does not cut interest rates in September? I, for one, think the whole market's gonna melt down for a period. It's actually just gonna create a buying opportunity for those of us that have built reserves. But we don't know what we don't know. I mean, let's face it, the Federal Reserve and President Trump are in a fight right now. And they might not lower rates just because. And not to go there, but mean, patience. always be in a position that uh you can weather the storm. there's that. And the other unexpected uh dragon's gold is as I've gotten out and been able to get back in the real estate business, um I just enjoy meeting the people. I love my tenants, most of them. Hahaha And it becomes a platform for me to not only share my story, but share my faith. And not in any kind of an offensive way, but it's just, uh it's the relationships you collect along the way. mean, what if you get to where you just have massive success and then nobody likes you and wants to spend any time with you at the end? I mean, it's gonna be pretty lonely. And some people are okay with that, but. uh but you know it is about the journey not necessarily the end goal. So that's how I would say that. good Stewart, so good. I love that. And really that point too about you can acquire or amass all the wealth and the stuff, but at the end, who do you share it with? And if there's no one there because your character or along the way you burn those bridges, what true value is that? How wealthy do you really feel in your heart in that moment? and see you next time. Yeah, I love that perspective and I completely agree. And regardless of whether I do or not, it's your perspective. But I do align with that. I respect, appreciate it and I'm glad that you shared that point. Thank you. Stewart, the next thing I want to touch on is, this is like the legacy, if you would, and I like to call it the Hall of Heroes. If you were to have a massive statue of Stewart Heath and it had a plaque that could say anything you want, what would you want it to say? I think I would want it to say something like, he did it right. Maybe they'd have to add the word eventually. Hey, good things take time. Yeah, but I would hope that it would say something about integrity. Even if I die broke or whatnot, that it would speak to how I conducted myself in business and in life with integrity. Stewart, Stewart, I love that. And I want to just acknowledge for myself knowing you personally, I absolutely agree with that. I think your level of integrity unquestioned. In my experiences, it's been an amazing experience to know you and you have consistently in our interactions and the ones that I've seen, with others that you've done, you've always carried yourself with that level of grace and character. And I wanna say, it's my pleasure to know you, my friend. Thank you. Yeah, absolutely. I don't say it lightly, I don't. So what's the next quest? What's the next adventure for Stewart Heath and Harvard Grace Capital? Yeah, we have sort of formal strategic goals. As you said at the beginning, we're currently at a little bit more than 40 million in assets under management. We have a goal to get to 250 million assets under management. um By the end of 26, so that's an aggressive goal. um you know, a few little bumps in the road, we might sell one of our assets, which would reduce the deal, but it would be a major home run if the deal that we're negotiating occurs. And I'm sure that we could redeploy those oh resources somewhere else. So that would actually, you know, take a major hit to the assets under management. That's okay. The investors come first. But that's kind of a major goal. And I really think we are in for the next several years of huge, what I'm calling generational opportunities to get great assets and great properties. But what we're coming to realize is that the investing public is moving fairly aggressively. They're coming out of public markets and going into alternatives. And many of them are doing that through their wealth advisors, their stock brokers, whatnot. And just estimating that 60 % of the investable wealth out there runs through investment advisors and stuff like that. And those guys are never gonna do a single asset deal like we do. uh And so we feel like we're investigating, but we're pretty far down the path. we're probably going to launch our first fund in Q1. And so that will probably help our first goal. But I've sort of fought against doing a fund because I don't to have this pool of money that I'm responsible for investing and feel pressure to go do a deal that might end up being a stupid deal. But the other side of that is, well, okay, you go get a deal and then you're doing the race. you know, to raise your capital every time. And we would continue to do that. Our fund would likely just be an investor in each of our deals and we would still bring in third party capital going forward. But anyway, that'll be a new adventure in fund management. always tried, I'm always a big believer in the KISS principle and keeping things simple because I have a tendency to be stupid sometimes. but. Hopefully we learn from those lessons, right? Yeah, I am capable of learning. So, you know, we're moving forward slowly and a little trepidatiously. But I think there's a whole world of capital out there that will never tap unless we have a fund and then we work through IRA networks and get on their platforms and stuff like that. So we're working that in, but we're certainly not putting all of our chips on that. soon. No, absolutely. And I think that actually is a wonderful point and example as well as the idea about not putting everything right. The idea about diversification, right? Whether you're diversifying in your own asset allocation or whether you're diversifying from the source of funding, whether you're diversifying the workload of managing that asset, right? Not doing it all in one, because the problem very commonly is when there's one singular keystone, if it's removed, the whole house comes crumbling. Right, so it's understanding and finding a way to be able to spread that weight appropriately across. So that should one pillar fall, the foundation stands and so too does your investment, right? The investors are protected, you're protected, right? The bank, all the people that live in the home that you own, right? uh Because there's no guarantee that should it go and fall under the ownership of someone else, they're gonna manage it with the same level of heart and care that you do, right? So I think that's powerful. You touched on uh a book earlier, and I like to call this tools and weapons, the things that we have found along our journey that have helped us along the way. And while you spoke of rich dad, poor dad, I'm curious, are there any other tools and weapons that you... might share with the listeners that inspired you. Yeah, probably won't be any surprises here. uh they're just, and the reason they're so popular and well known is because they're really so effective. So traction, we tried to follow those principles in running. It's really hard when you're a single operator with one employee. I now have four people and we're trying to get more serious about following traction principles. But the other one, As a classic entrepreneur, which means I've got, I likely have a 50 % chance of having ADD, know, who, not how, it's just, you got to delegate, stupid. mean, you know, I try, my nature is I try to become the expert in every new thing we have to do and, and I'm out of bandwidth. You know, I've got to understand it, but we got to, we got to figure out who's going to do these jobs. not how to do the job. And you know the book, it's very popular. And my favorite part, it's also fairly short, to the point, and directed directly at people like me and you. So, you know, who are entrepreneurial in nature. it. Fantastic recommendations. Yes, I own both. I read both and you're totally right. I completely agree. um Really valuable insight. Stewart, I've got one last question and my friend I will tell you this is hands down my favorite question to ask. If you could be any mythical creature, what would you be and why? Um I have to say I'm probably not familiar with the entire universe of mythical creatures, but I've always desired the power of invisibility. um Just, you know, sort of the desire to be rich, not famous, um but to be able to be invisible. Not that you can sneak up on people, but that you can just sort of move through life without drawing too much attention to yourself. ah But if I have, if you're to make me name a creature, I would say it would probably be the Leviathan. Because I do love the oceans and to be able to go down and take a look at depths that man has never been to and see things that have never been seen with the naked eye. So that would be my choice. love that. I love that. That's amazing, Stewart. You are definitely the first to say that. And I love the, yeah, no, but it's great, right? I love the idea about going to new depths and seeing things that are completely undiscovered that are there now, but we don't know it. Right. And as the deeper that you go, the more that you uncover, the more knowledge that you have. Right. And then you can make better decisions with whatever. And I mean, quite frankly, to be able to have that, that while there is never a right or wrong answer to that, I just love your answers so much with what it makes me think of as well. The idea about the that undiscovered treasure, right? And to me, granted treasure gold, like these are things in my mind that that hit for me. uh But I think that that's a common theme for everyone in their own life. Everybody likes some treasure or that discovery or that excitement. Well, Stewart, thank you so much for taking the time today, my friend. It was really a pleasure chatting with you. I really appreciate you having me. It's been a lot of fun. My friends, thank you for joining us once again on our quest to inspire, educate, and empower you to turn your dreams into reality, one mindset shift at a time. We'll see you next time.

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Justin Mills

Host
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Aaron Iler

Producer
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Stewart Heath, CPA

Guest