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Daniel Casey | Green Houses Convert into Red Hotels

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Hosted by
Mike Ayala

Today on Investing for Freedom, Mike brings on Daniel Casey as his guest. Daniel has done it right and his story is inspiring for everyone. Listen to the newest episode of Investing for Freedom to learn about Daniel’s journey to success.

“I have to find ways to temper my optimism sometimes.”

In this episode of The Investing for Freedom Podcast, Daniel shares his story on how he became successful and has more time with his family now and how he remains optimistic despite the hardships that he faced during his journey. He will give us a 30,000-foot view of his story so stay tuned and don’t miss out!

13:27 – Intro
15:10 – Who has had the greatest impact on your life?
18:13 – Even through the negative experiences and everything, Daniel turns it into something as a learning experience.
19:36 – The three-minute version.
26:26 – One of the things that newer investors constantly just talking through is making sure that if something happens, you can carry that asset through a downturn.
26:52 – No one can time the market
28:03 – There’s a lot of things that can go wrong before you actually get to the absolute worst-case scenario.
28:45 – There’s a lot of gray between raging success and dismal failure.
29:14 – When you said to have hard conversations, what did that look like?
30:46 – If you could narrow it down to one thing that has had the greatest impact on your success, what would that be?
31:36 – Joining the real estate guys mastermind
32:28 – Daniel always finds the best in everybody.
34:16 – What was your greatest setback? And what did you learn from it?
37:25 – Daniel learned some lessons that would allow him to avoid it better.
38:09 – They declared bankruptcy in 2011
45:55 – Running a real estate investment company
46:28 – Misunderstanding of what passive real estate investing
48:33 – Your active and your passive strategies don’t have to link
50:44 – What is your outlook?
53:32 – Build a life where there’s not a separation between work and life
54:55 – What is the piece of advice that you find yourself sharing the most
1:05:58 – If you just move slow and steady, as things get revealed to you, you can trust yourself to make the right decision

TRANSCRIPTION:

13:24
Thank you for joining me on the investing for freedom podcast. Today, I have the pleasure of having someone who’s actually become a great friend of mine. I think we met probably two years ago, I think it was at the Austin go abundance summer event. And it’s, it’s interesting, we’re gonna have a great conversation because as we were prepping for the show, I was I was talking to Daniel and it’s, it’s super cool, because this guy’s just done a lot. He’s He’s one of those guys that you really have to get to know before you really understand how successful he is. And I think you’re gonna learn so much today. Because he has really just done a lot in life. I mean, I’ve we’ve had plenty of dinners together. And I’ve just sat around and have drinks. And every time I’m with this guy, like I just get to hear some amazing story about, you know, flying around and trains and planes and automobiles, etc, and having amazing dinners all over the world. And more importantly, what I really appreciate about Daniel is he’s a family man, as he’s built out his success and the portfolio and a construction company and everything that he’s got going, you can just really tell that he keeps his family as a priority. And I’ve said this so many times, like, as we’re building out all this that we do, and we’re investing for our freedom and everything else. I’m just reminded of that scripture, what does it profit a man to gain the whole world but lose his soul? And I always think of it in terms of like, what does it profit us to build out an empire yet lose our family and when I look at Daniel and his wife and his children, they’ve done a lot of great things. And you know, as he’ll tell you, always hasn’t been perfect. But they’ve done a lot of great things and they’ve kept that in tact. And so I’m really I admire that and So Daniel Casey, thanks for being on the show. Yeah, it’s great to be here. Thanks for having me. Yeah. So let’s, let’s dive into the questions. And then we’ll get into, like, who you are and what you do and all the good stuff. So who has had the greatest impact on your life?

15:14
Okay, so great. I actually thought about this cuz I know, I’ve heard enough of your podcast to know these questions. So I’d have to say this is sort of a three part answer. The quick and easy answer is my dad. So my dad is isn’t, is an amazing example of a servant leader. He’s probably one of the most humble people I know. And, and at the same time, one of the most successful. And so he is, you know, he’s been a big influence. And then I also have kind of the proverbial rich uncle, my, my wife’s uncle, Bob, who I’ve known my whole life, because we all grew up at the same church, and I don’t know him well, and I wouldn’t say he was a mentor. But it was kind of more of an example of, you know, what a very successful believers life can look like he was a, he was the kind of person that just everything he touched, turned to gold, he had, you know, dozens of different businesses, he, you know, made a lot of money, but he was also very generous with it. And he was really dedicated his family. And so he was, you know, he was kind of, you know, when I was young, looking up at him, it was he was kind of an example of somebody, you know, that I wanted to that I wanted to emulate. And then in a more practical sense that I might have told you the story before, I got tangled up with a con artist about 15 years ago. And although most of my interaction with this guy was negative, I would say that it probably had one of the most profound influences on my life, because he really showed me that you know, all the kinds of lies we tell ourselves about how you have to have resources to get by, and it was, you know, and he actually convinced me to buy one of my most significant pieces of real estate. And it’s because at the time, I wouldn’t have thought I didn’t think I deserved it, or I didn’t think I had the means to do it. And he basically, you know, convinced me that, you know, where there’s a will, there’s a way and, you know, thanks to him, you know, we’ve made quite a bit of money off of that particular building. But, you know, he just taught me a lot of life lessons. And even though he was a criminal, and a generally bad guy,

17:14
I think there was just a lot of, you know, kind of opened my eyes to a lot of things. You know, it’s such an interesting perspective. And I love that you could, you know, take a negative experience, and you have told me that story. And I think if we have some time I, I’d like to get just like the 30,000 foot view, because it is funny. I know, it wasn’t probably funny at that point in time. But I think it’s great the perspective that you take on it. Because even one of your, you know, probably most negative experiences in your life, like you learn so much. And, you know, I’ve thought about that for years, there was a guy that I actually, this was when Kara was pregnant with my third child, and I was working out of town, the construction Superintendent that was running that job was probably one of the worst people that I’ve ever worked for. And yet, he taught me so much like, he taught me so much about deadlines and things that were impossible. He’d be like, you got to have this done by tomorrow afternoon. And I’m like, there’s no way it’s impossible. And we would get it done. And so I love the perspective that you bring with that, that even through the negative experiences and everything, you know, you turn it to something a learning experience.

18:19
You Yeah, no, I mean, you know, being incredibly optimistic is, you know, my greatest strength and my greatest weakness, it is probably what makes me susceptible to fall for con artists in the first place. But, but you’re right. I mean, the thing is, you know, there’s, there’s kind of no point in getting to down on things, you know, stuff happens, and you know, you either you either wallow in it, or you learn from it and move on. So, you know, we definitely, I definitely look back and view the whole con artist chapter as a valuable learning experience. I’m not sure my wife has the same. Did she get to know him? And did she get to know him pretty well. She did. And I’ll tell you, she was she was on to him from day one. And I should have listened to her. You know, she was, you know, she was skeptical of him and thought something was off about him from the very beginning. And I kind of wanted to just blindly blindly believe that there was, you’d I kept on trying to, you know, you know, you know, make excuses and find that, you know, find a silver linings all the time, but uh, yeah, that’s I should have listened for early on.

19:20
I mean, I feel like after all this conversation, we have to dive in. Do you mind diving into this a little bit? So, just, I mean, I know we’ve talked about this many different times. And it can be a 30 minute story in itself, but give us like the give us like the three minute version.

19:37
Well, so So the three minute version is, is I had a business partner in my in my construction company. And this guy was introduced to my business partner at his church. And the in the story was that he was a contractor who was moving back to the Seattle area from Alaska, and that he had gotten himself entangled in some sort of massive loss. With some large, you know, large telecommunications companies, because his business was he installed, you know, cable lines like utility lines. And and so basically, these lot the fighting these lawsuits had bled him dry, but that he had, you know, this multi 100 million dollar settlement that was just, you know, days or weeks or months away from landing in his lap, but he just basically needed a little help to get by. And then he, you know, he was a very kind of gregarious, friendly, outgoing person, he seemed very well connected, he knew lots of people. And, you know, he was also just kind of a business guy. So he was excited about hearing about our business and all the things and, you know, he basically, you know, acted as if he was really interested in investing with us or partnering with us, or, you know, connecting us up, that was kind of like, he just needed, you know, a few 1000 bucks to make ends meet, or this or that. And over the course of, I don’t even know what the total timeframe was maybe 18 months, I think he probably bled us for about $200,000 in total, I mean, it was all he got a little more complicated than just 2000 bucks here and there, but yeah, that’s it. And, and in the end, you know, he didn’t turn out to have it. I mean, in the end, it turned out, I think, be 100% just a complete scam. But he had a bunch of there was us, and probably another, at least half a dozen sort of major players in his M. And part of part of what made his scam work was that he was using each of us to make him look credible to the next guy. So, you know, he would take me along with him on on, you know, business trips, and he would introduce me as his partner. And so I have credibility. And you know, you could, you could look me up and find a background, you know, my company was real, you could see jobs we were doing, and so I think other people would figure well, Daniels real than Ron must be real, you know, and I was doing the same thing with other people that he was introducing me to, and it turns out, we were all just being kind of strung along. That’s interesting. Is this the same guy that you’d get on jets with? Or was that? Yeah, so one of the while there was there was two different people that he was trying to work this scam with that were in the private jet business, one of them was actually in the yacht manufacturing business. And one of those guys, you know, Ron basically told him his whole story, and explain and he acted as if he was shopping for a jet, you know, as soon as the as soon as the money you know, as soon as the settlement cleared, and the money came in, he was looking to buy a jet and he acted like he was particularly interested in this guy’s and he was looking to sell it. So he basically let us demo the jet for, you know, over the course of I don’t even know what it you know, six or eight weeks, I think I logged something like 45 hours on this guy’s jet. Theoretically on on the con artists time, you know, who was supposed to be paying the guy and you know, that guy never got paid anything for it? It was he just got totally, totally stiffed for the jet time, you know, but, you know, that was kind of, you know, he was just one of the casualties.

23:12
Yeah. Well, and, again, I think, you know, your outlook on it the way you even you know, have explained that story and everything else, it just, there’s bad actors out there, right. But you’ve got so many more positive stories. I think sometimes people would let us situation or a circumstance like that, you know, I’m never going to trust anybody again. But obviously, you know, we’ve got to have partnerships and work together in life and everything else. And unfortunately, there’s bad actors, but you just move on, right?

23:40
Yeah, no, exactly. And I mentioned at the beginning, you know, he did, he did encourage me to, you know, to purchase our office building. So when when I met him, when we first met each other, we were leasing an office, just in some, you know, some big building in, you know, the town we live in. And, you know, he was the one who has a Why are you wasting your money on on a lease, just go buy a building? And I’m like, well, we don’t have money to buy a building, right? Like, I mean, I’m just assuming you have to have millions of dollars to buy office buildings. And he was kind of the, you know, person who sort of pushed through those beliefs and just was like, No, no, no, you just go, just go call the banker. Tell him tell him all your big plans, tell him what you’re gonna do. You know, and it really, I mean, he was really the catalyst for, you know, for us going and buying an office building. And so we actually we bought an office building, in some respects, horrible timing. But again, it worked out. We bought it in 2008. So right before the whole real estate collapse, and then the plan was that we were going to it was a it was a health club. It was its current use of the health club, we were going to convert it to an office building and then our company was going to occupy the upstairs and we were going to rent out the downstairs to tenants. So the upside of buying a building in 2008 was we were doing all those renovations in that little window of time, but when all of the You know, when all the residential and commercial contractors hadn’t quite accepted that the world was coming to an end, and so they were still trying to keep all their guys employed. And so we basically got all of our renovations done at a fraction of the cost, because people were, we’re just bidding cost to do things to keep their guys busy. So we got a really, really nice, we got a lot of really, really nice work done for a really affordable price. And then the downside was, we couldn’t get any tenants in there. And it sat vacant for the next couple of years. And so it was, it was pretty rough at one point in time. But you know, at one point in time, we were, you know, definitely upside down in the building. But then, as things started coming back, the building went up in value, we were eventually able to get at least out, started cash flowing. And then the big benefit of that was, as we were in growth mode, again, in 2013. And 2014. Having that asset on our books gave us a lot of credibility. And so, you know, it was kind of, even though it had been a big hardship, and at some point in time, and probably seemed like a big mistake, but it was, you know, upside down by a few $100,000. You know, having that, you know, kind of multimillion dollar assets sitting on our balance sheet was a big was a big benefit when we were trying to, you know, borrow money for other things or buy other buildings, it gave us that, you know, that kind of credibility. So it was, you know, in the end, I think it was a real positive.

26:19
Yeah, and I don’t, you know, I can’t answer this for you. But looking, you know, maybe you weren’t thinking about this then. But, you know, one of the things that newer investors, constantly just talking through is just making sure that if something happens, you can carry that asset through a downturn, right, because there’s ups and downs. And I don’t think that any of us can time that, in fact, we’re getting ready to sell our house. And I remember in 2018, telling my wife, yes, as long as we’re gonna keep that house for 10 years, I’m fine. Because we’re at the top of the market, I was thinking 2018 was the top of the market. So my point is, I don’t think that any of us can time the market. And so you, I think you dropped a valuable lesson there. And I don’t know exactly what you had to do. But you were able to carry that building through, you know, through all that, and through the vacancy and everything else. And I think that’s a real key for, for newer investors is making sure that, you know, we don’t get over our skis because we’re always like, Oh, yeah, well, it’s cash flowing $100 a month or whatever, well, that’s fine. But if that building’s empty, or that house is empty, can you can you carry it through a downturn?

27:19
Yeah, well, in this case, I mean, this might be not the ideal example of what you were just describing. But, you know, we actually were, you know, it wasn’t we didn’t have the cash flow to maintain it. I mean, we actually went a number of months unable to make the, you know, interest payments on the building. But it did, it did really open my eyes to the idea that we tend to think of the world in black and white sort of terms, right? It’s either going to succeed, or it’s going to fail, you know, you’re looking at a project and you tend to have that mindset of, Okay, well, here’s all the numbers is how it works out. And you tend to think that it’s either going to be a success, or it’s going to be a complete failure. And the reality is, is almost everything falls in the gray area in between. And I think what it opened my eyes to was that there’s, there’s a lot of things that can go wrong, before you actually get to the absolute worst case scenario. And in this case, you know, we were certainly not the only real estate owner in Washington that had a distressed asset. And certainly the banks didn’t want anything to do with putting more distressed assets on their books. So even though it was painful, and even though it was very, you know, it was, there was some hard moments, and it was very upside down, you know, there was a path through and we just had to be willing to have some hard conversations, and, you know, put in the effort and have some patience. And in the end, it paid off. And it certainly didn’t pay off the way we thought it was gonna when we bought it. But it kind of illustrates that there’s a lot of, you know, there’s a lot of gray between, you know, raging success and dismal failure. Yeah. Well, and

28:50
you said, you said something in there, you said, you know, having a lot of hard conversations. And I think that’s one thing that, you know, even recently going through COVID, last year, like, I think, I think every time you take those knocks, you get a little bit more seasoned. And immediately when something like COVID hits, like we go talk to our bankers, we talk to our lenders, we talk to everybody, right? And just have the communication piece. And so when you said have have hard conversations, what did that look like?

29:20
Well, so at that point in time, I mean, not just on that building, but just we had a handful of other, you know, other financial problems related to you know, related to the you know, we’d love that like, you know, we shut down we shut down our construction company in that same time period. So we there was a lot of conversations and my experience was I always worried about them and you know, much more ahead of time then they were never as bad I guess as I thought they might be. But you know, it was calling calling creditors and letting them know that hey, we’re not going to be able to pay this as agreed, you know, we’re gonna need we’re gonna need to work out a plan we’re gonna need to figure something out, you know, calling calling the bank and just saying hey, look like, you know, we’re not going to be able to make the mortgage Payment this month, and frankly, I’m not sure if we’ll be able to make it, you know, for the next several months. And, you know, this is what we’re, this is what we’re hoping to do we want to, you know, we’re trying to get tenants in these spaces downstairs, as soon as we get those filled, we’ll start having enough money to make the payments. And then, you know, it just kind of whatever the workout plan is, and some of those, some of those conversations were awkward. And they didn’t all go exactly how I would hope. But for the most part, they were almost always, they were almost always better than I expected. And I always felt better after having them than I did, you know, then than I did beforehand,

30:32
it’s so valuable, you know, everybody always wants to talk about the wins. And we got all the real estate gurus talking about how amazing real estate is. And it’s painful, sometimes not just real estate, but business in general. Right. And so, I appreciate the openness. So if you could narrow it down to one thing that has had the greatest impact on your success, what would that be?

30:54
Oh, I, like, I’d have to say that the probably the biggest impact on my success would just be, you know, kind of sheer optimism. And, you know, I like I think my, I think my number one kind of value add skill is that I, I can see opportunities and things that sometimes other people don’t see the opportunity in. And so, you know, some some intentional creativity and you know, just kind of a willingness to, to, to find a path forward and stick it out. I mean, I think that’s ultimately been our, you know, been kind of our biggest key to success. I love it.

31:35
When I joined the real estate guys mastermind, which was actually the first mastermind that I ever was really in, there was a questionnaire and it said, you know, what is your greatest weakness? And I’ve said the same thing you did. My greatest strength is also my greatest weakness, and it’s, I’m the eternal optimist. And, you know, but I would take it all day long, just even listening to you. Because, you know, every once while gets me in trouble, sometimes I, you know, the whole theory of loss constraints and sunk costs, that kind of stuff. Like, I just think no matter what, at the end of the day, like there’s, there’s no like we can we can make this work and a couple times, you know, I’ve drugged some things out further than what I probably should have. But for the most part, I think that optimism really serves me and so I can totally relate to that.

32:22
Yeah, no, I mean, I have the exact same, you know, I can, I can, you know, I try to always find the see the best in everybody. And so, like, where it’s really bit me in between before is, you know, with personnel decisions, I tend to always, you know, see the potential in people. And so, I’ve definitely hung on to people longer than I should have, you know, even though I probably had good indicators early on, that I should have cut them loose. You know, I kept on wanting to believe that we could make it work or that, you know, that’s probably where it’s really hurt me the most. But But yeah, I totally relate to that. I, you know, I have to, I have to find ways to temper my optimism sometimes.

32:59
Yeah, it’s so true. And when it comes to pm, the same when it comes to people to but and I think part of that is because like, you can recognize potential, right? But sometimes I think people, number one, values and morals don’t align with their potential. But number two, I think sometimes people can’t see it in themselves, like you recognize it more than they do. Does that resonate?

33:22
Yeah, no, I think that that’s true. And I thought it there’s a little bit that this goes hand in hand with the whole optimist thing. But there’s also a little bit of that gambler mentality, where for some reason, the same return is a little more fun, if everybody else didn’t see it coming. You know, so like, I kind of always, um, especially when it comes to people, I have this desire to find that diamond in the rough, like, it’s gonna make me feel that, you know, if I hire the person who’s a sure thing, and they work out, then it’s like, oh, yeah, you know, you hire a great person, and they were great. But if you hire that person who had no track record, did you just, you know, saw them on the sidelines and realize that they’d be a good fit, then they turn out great, that just feels like so much more of a win. And that’s kind of on one hand, that’s probably that’s probably a mindset that really works against me in a lot of ways. But, but yeah, there is that kind of, you know, I’m always looking for I’m always I’m always intrigued by the possibility of finding those diamonds in the rough. I love it. That’s great. What was your greatest setback? And what did you learn from it? My greatest setback? So, you know, so when we, when our construction company failed in 2010, it led to us personally declaring bankruptcy in 2011. So, you know, there was probably a lot of different things that led up to that, that setback and, and I think it taught us a handful of things I’m gonna say asked me and my wife and I, you know, one, one big thing is now that when we started over and kind of built a business back from scratch, we knew a lot of the things we didn’t like about the way our lifestyle was set up with the first business and so now I’ve got I’ve got a business that I I love what I do. And you know, I love the success we have with it, but it’s very much on my on my terms, and it’s kind of like I’m not, I’m not willing to compromise, you know, our priorities in terms of family and relationships and just sort of the lifestyle we want to live. So that’s probably a big one. The other thing is, I think, having actually gone through, you know, sort of that rock bottom kind of experience, I think, the I think the big lesson we learned was, it wasn’t as bad as we thought it would be. I think I remember I can remember conversations in, in 2010, you know, between me and my wife, and between me and my business partner, and, you know, just kind of a fear of not knowing what was gonna happen, I was I really didn’t know what was gonna happen, I think I thought, you know, people were gonna, you know, show up with a moving van and start hauling away all my stuff. And, you know, it’s like, I didn’t, I didn’t know what was gonna happen. I was, there’s so much fear. And, and I didn’t think I’d ever be able to start another business, I had all this, I had all these misconceptions, and then going through it and realizing that, you know, at the end of the day, I mean, we were healthy, our kids were healthy, we had a strong, we had a, you know, solid marriage, happy family, like, we live in America, you know, there’s like, a lot of, you know, it wasn’t that we were never without food, or, you know, it was that like, the whole thing was significantly less painful than I feared it would be. And so I think that gives me a lot of confidence now, where, I don’t know, even at the beginning of COVID, I feel like I have a lot of friends who maybe they got through the last recession, kind of like white knuckling it, but they never actually hit rock bottom. And so I don’t think they realize how, you know, they have a different perspective. And I feel like there was a lot of people at the beginning of COVID Lin, you know, the market was crashing. And everyone, you know, people were concerned, I think that there was a lot of people who, you know, were afraid of, you know, failing or afraid of a collapse and having kind of gone through it once, it doesn’t seem nearly as scary to me.

37:05
It kind of it kind of moves the risk barrier. I guess not not, not that it’s any further away, but that I’m okay. The worst case scenario is I’ve already been there, and I’ll get back faster.

37:19
Right, exactly. That’s exactly it. It’s not, it’s not that I have any desire to go through that again. And hopefully, I’ve learned some lessons that would allow me to avoid it better, you know, a second time around, but it’s just that idea that, you know, even it even at rock bottom life still pretty good. Yeah.

37:35
So let’s dissect this a little bit. Because, you know, obviously, we’re in go abundance together. I, we don’t need to talk about your net worth and everything, like we would go abundance, but obviously, you’re, you know, you’re you’re worth a million because that’s the barrier to entry. And, and I happen to know, you know, you’re doing quite a bit better than that. So you went from bankruptcy. Tell, tell me the other side of that. Because, I mean, obviously, that wasn’t that long ago. So what that looked like.

38:05
So, you know, so all kind of the quick timeline was we declare bankruptcy in 2011. We sort of scratched around doing various things, basically trying to pay the bills, you know, for a couple of years, 20 2011 2012, I was, you know, my background was as a contractor. And so we were doing small construction projects as a subcontractor on on kind of commercial work, which is really the only thing going on at that time of in the economy, the big, the big thing, then was a lot of those, there was a lot of retail spaces that had been vacated by some big bankruptcies that happened in the downturn. And so there was a lot of different, you know, businesses that were kind of scooping up those vacant spots. So there was a lot of work in our area doing these commercial tenant improvements. So we did a lot of, we just did the stuff we knew how to do. We did demo, we did concrete cutting, we actually hung some acoustical ceilings, we were just basically anything we could do to pay the bills. And it was basically myself and I had one key employee who had stuck with me through the whole thing. And, and then we kind of hired a few other people here and there, but it was really small for a couple years. And then we started to gain some traction 2013 2014 we started to do work as a general contractor. By 2015, and 2016. We were doing some larger projects, we are starting to do some, you know, four or $500,000 general contracting projects where we were subbing out most of the work when we were just self performing bits of it. And by that time, you know, I probably crossed the million dollar threshold somewhere. I don’t I don’t know. Exactly. So I wasn’t actually measuring it really, you know, on a regular basis back then, but probably somewhere around 2016 mainly because some real estate we had had had appreciated enough that we were kind of back in the black and we probably crossed the million dollar mark and then that’s when so then 2016 2017 we started doing some much larger construction projects, we kind of for the first time started putting a little money in the bank. And and then in 2018, we made a complete shift and decided that we wanted to get into real estate investing full time and wanted to stop, stop being a contractor for other people. And so bought our first eight Plex, we bought it at eight unit apartment building. And using that that little bit of money that we had kind of socked away in 2017 and 2018, we were able to use that for the down payment on an eight unit building. And then went from there, we bought an eight unit building, and then a 12 unit building and a 10 unit building and then a 30 unit building. And then, as we were talking about earlier, we just closed last week on a 52 room hotel, and I’m closing on Tuesday on a 64 unit apartment community, which is actually our first real full size apartment community. It’s multiple buildings with a clubhouse and a pool. And, you know, it’s actually kind of a whole community as opposed to one standalone building. So, and we don’t really gotten completely out of the customer construction world, we kind of we worked off our backlog. And somewhere around the end of 2019, we did our last completed our last customer construction project. And now all of the construction work we do is on our own properties. Wow.

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