Part 3 of 3 from the Big Mike Fund Podcast with Steven Arita. Watch the full episode on YouTube
In Parts 1 and 2, Steven Arita explained why tech professionals need cash flow and how their engineering mindset shapes the way they invest. The final piece is the hardest one for many high achievers to accept: passive real estate investing works best when you stop trying to do everything yourself.
Investing in people, not tickers
Mike Zlotnik framed the core difference between public and private markets. When you buy a stock, you invest in a company and rarely need to know the people running it. In private real estate, results depend heavily on a few key people. So the most important question isn’t how to invest. It’s who to invest with.
Steven pointed to Who Not How, the idea from entrepreneur coach Dan Sullivan: do what you do best, and partner with people who are great at the rest. If you don’t have 10 or 20 years of experience operating commercial real estate through multiple cycles, find the operators who do, and invest in their deals as a limited partner.
The question every sponsor should answer
Trust should be built slowly, Steven said. Ask sponsors what they’ve done before, how it went, what they’ve learned and where they’ve failed.
Mike called that last question one of the most important an investor can ask: Have you ever lost money on a deal? If the answer is no, there are only a few explanations. They haven’t done enough deals to learn, or they’re not telling the truth. “Even Warren Buffett has lost money,” Mike said.
From competition to collaboration
Steven admitted the who-not-how principle was a learning curve for him too. He has invested as a limited partner and has bought and sold single-family homes himself. But coming from the competitive culture of big tech, his instinct was to go it alone.
“Why would I partner with other people? I’m smart. I can go learn these things and do them myself,” he recalled thinking. He learned that others have far more experience, and that real progress comes from joining teams.
“If you are going to try to do everything yourself, you will always play a small game,” Steven said. Mike agreed: collaboration is where leverage happens. Try to be a jack of all trades, and you’ll be master of none.
Passive real estate investing as a hedge against concentration
The conversation turned to a risk many tech workers carry without thinking about it: a large share of their net worth tied up in their employer’s stock or in other volatile assets.
The episode was recorded on February 5, a rough day for markets. Steven noted that Bitcoin had fallen to roughly $68,000 that day after trading near $120,000. Mike shared a conversation with a real estate friend who found a projected doubling of his money over five years in an industrial deal “so freaking boring” compared with hoping Bitcoin would rise 20 times. Mike’s point wasn’t that crypto is bad. It was that concentration and the assumption that things will only go up can wipe out a lot of net worth quickly.
Steven’s answer was diversification. Thinking of Nassim Taleb’s work on black swan events, he suggested a mix:
- Keep some money in stocks.
- Put a meaningful share into real estate for cash flow and lower volatility.
- If you want exposure to something exciting like crypto, limit it to a small slice, perhaps 3% to 5% of your investable cash.
The goal is a portfolio of different risk and return profiles, so no single drop can wipe you out. Mike pointed to Ray Dalio’s principle of holding many uncorrelated return streams.
A word on leverage
Mike added a caution. Real estate is supposed to be steady and predictable, but it usually uses leverage, and leverage cuts both ways. Investors lost money in real estate during the last downturn. Still, he believes real estate looks attractive on a relative basis today, sitting near the bottom of its cycle while other assets sit near their peaks.
As Steven put it: “You can’t eat net worth. You can’t eat your stock. So convert some of that to something that will give you cash flow.”
New to this series? Meet our guest, Steven Arita →
Connect with Steven Arita
Steven is happy to talk with tech professionals about real estate, and about how he thinks through decisions like what to do with vesting RSUs. He’s not a tax professional, but he will share his own experience.
Connect with Steven Arita
- Website: aritacapital.com
- LinkedIn: @aritasteven
- Facebook: @MrArita
- Podcast: Path to Passive on YouTube
Read the full series: Part 1: You Can’t Eat Your Stock [Read Now] · Part 2: The Engineering Mindset Meets Passive Investing [Read Now]
